IF YOU’RE LOOKING FOR AN EDGE IN THE GLOBAL MARKETPLACE, WE’VE GOT 6 ENERGY TRENDS TO WATCH.
By the end of the 1990s, Ohioans had seen enough plant closings to recognize the warning signs: reduced overtimes, shift cutbacks, and increased use of part-timers. So when Dietrich Industries announced in 2004 that it was shutting its 300,000-square-foot plant in Hicksville, a smallish city in the state’s northwest, no one was caught by surprise, least of all the 150 employees suddenly left jobless. In the years that followed, Jill Petrillo, a business development agent of Indiana Michigan Power, the company that provided electricity to Dietrich Industries, passed the empty building often. When she learned that American Electric Power, her utility’s parent company, was discussing site selection with a Texas manufacturer and a major vendor, she immediately thought of the vacant building. She figured the property could be quickly prepared for the new occupant, a manufacturer of products for telecommunications companies and utilities. “I knew the building well,” she says. “I suggested it to the company, and they ended up deciding to relocate here.” She and her team worked closely with the Ohio Department of Development and county and regional economic development agencies to arrange $7 million in loans to buy and renovate the building, located on 92 acres. She also helped guide the company through rebates available because the building had been vacant for such a long period. Officials said the company plans to hire 200 employees when they are fully operational. Says Petrillo: “This is a definite win for the regional economy.” Utilities enjoy success stories like Petrillo’s, where the power company plays a key role connecting customers with opportunities and strengthening the manufacturing base. At the same time, utilities have their hands full dealing with the unknowns that come with the territory, all those x-factors that complicate planning. Continuing unpredictability in such key areas as regulatory oversight, government mandates, natural gas prices, market acceptance of green technology, and the pace of economic recovery add to the uncertainty, determining the utility sector outlook through the second half of this year and beyond.
Here are six trends to watch for as you plan to grow your manufacturing capacity:
The Impact of Shale
The Energy Information Administration in Washington predicts the country will add about 220 gigawatts of power-generating capacity by 2035. That expands our current capacity by about a fifth, more than half of which will come from natural gas. The impact of natural gas on today’s energy industry is nothing less than transformative. Recent technological advances, foremost among them horizontal drilling and hydraulic fracturing, have slashed the massive upstream expenses of exploration and production, making the cost of opening and operating a natural gas plant about one-fifth the cost of a nuclear plant. Consequently, natural gas has effectively dislodged coal and nuclear as fuel sources.
Where just a year ago over 200 nuclear plants were proposed, today only two have moved forward.
“Shale has changed everything,” says Bob Agnew, executive director of the Utility Economic Development Association in Larchmont, NY. “Natural gas is on everyone’s mind right now.”
Even utilities have to obey the natural law of supply and demand. “We have more natural gas at this point than we know what to do with,” says Rick Nicholson, a vice president and senior analyst at IDC Energy Insights. “And prices have dropped to the lowest level they’ve been in many years.” He adds, “It’s made manufacturers pretty happy.”
Yes it has. Declining electricity prices are an often-overlooked reason behind rising manufacturing exports. Yet what goes down inevitably comes up: Nicholson and his colleagues at IDC Energy Insights see natural gas and other fuel prices rising in the long term, reflecting increased capital investments and supply-side costs.
Utilities continue to engage customers with technologies enabling self-tracking of energy use, working hard to assuage user fears about first-generation monitoring products. Those concerns range from vulnerability to hacking to unreliable measuring equipment. Driving the trend toward so-called “smart metering” are government mandates to expand energy availability and utilities’ need to integrate renewable energy resources including solar energy and electric vehicles.
Regional, Not Federal, Oversight
Regulated by a patchwork quilt of state and regional oversight boards, utilities face diverse mandates across such platforms as renewable fuel pipelines, capital construction requirements, clean energy laws and more. California paces the field, with the nation’s most aggressive renewable-fuel mandate: utilities in that state must increase their use of renewable fuel sources by 33 percent by the year 2020.
One result of this fractionalized field is that utilities are unsure which horse to ride, so to speak.
“We have to build more power generators in this country, and the smart money is going to gas-fired plants and, to a degree, renewables,” says Nicholson. In renewables, wind power has surpassed solar in terms of generating financial backing. Find out where your current or prospective utility company is placing its bets.
Demand Drops, For Now
Utilities have been talking up conservation for a long time. That may be one reason electricity use is down in some markets and flat overall at just 0.2 percent growth, according to the U.S. Energy Information Administration. Certainly, the falloff in manufacturing, affecting some of the country’s biggest power users, contributed to the decline. As the U.S. sloughs off the recession and manufacturing continues its comeback, usage will almost surely rebound.
North Carolina Electric Cooperatives Drive Growth
Since 2011, North Carolina’s electric cooperatives have spurred over $21 million dollars in economic development funds, creating nearly 500 jobs, according to Eddie Miller, economic development director for North Carolina’s Electrical Coop system.
Top funded recent projects include a $792,000 project to air-condition the Robeson County Detention Center; a $14.6 million sewage treatment plant in Red Springs; a $1.7 million biogas generation plant in Edgecombe County; and a $1.3 million weatherization project in Shallotte. The projects were initiatives of the Lumbee River Electric Membership Cooperative, the Edgecombe-Martin County Electric Membership Corporation, and the Brunswick Electric Membership Cooperative. Grants, matching funds and zero-interest loans were also obtained from the United States Department of Agriculture, the North Carolina Department of Energy, the Sanford-Lee County Airport Authority and other sources.
North Carolina’s electric cooperatives provide energy to 2.5 million people in 93 of the state’s 100 counties, primarily in rural areas. They own and maintain 97,000 miles of power lines, the most of any electric utility in North Carolina.
Check for Rebates
In order to encourage some of its highest power-using customers to switch to more efficient lighting, the Long Island Power Authority (LIPA) is offering to reimburse business owners and household customers in the region’s South Fork communities up to 75 percent of the cost of replacement lighting.
This spring, LIPA has contracted North Carolina-based Lime Energy to go door-to-door pitching the rebates, seeking on-the-spot commitments. They’ll also plug the deals using traditional direct marketing, mailing and advertising.
The South Fork, better known as The Hamptons, is a 35-mile stretch of Suffolk County south shore spanning the Shinnecock Canal to Montauk, New York’s most easterly point. The region quadruples in population every summer as celebrity second-home owners such as Steven Spielberg, Paul McCartney and Alec Baldwin hold a series of A-list move-in days. Local businesses rev up to meet their needs, ranging from A-List restaurants like Nick & Toni’s, to movie production facilities like Wainscott Studios. Apparently, energy-efficient lighting is not among their priorities.
After this summer, they’ll have no excuses. “We are using this program to try to decrease the growth rate of electric usage, so we can avoid the cost to customers of building new substations,” says Michael Hervey, LIPA’s chief operating officer.
No Retirement in the Search for Alternative Fuels
In April, a group of visiting Korean executives and engineers strode across Stony Brook University towards the Advanced Energy Research and Technology Center. The visitors were scheduled to introduce their new sensor-based power-monitoring technology, a method developed—and used exclusively until now—on a small island off the coast of South Korea. Might there be a place to develop the technology here in this research-oriented branch of New York State’s university system?
Rising to greet the visitors was Robert B. Catell, a well-coiffed and well-known septuagenarian.
Throughout the 1990s and ’00s, Catell ranked among the most recognizable utility execs in the world, helming KeySpan Corporation and then National Grid through years of upheaval, as debate raged nationally over fossil fuels and energy policy. He retired from National Grid in 2009—and said yes when Stony Brook came calling.
Housed in an award-winning two-story building abounding with windows, the center has one major task: to identify and champion emerging promising alternative energy technologies. To do this Catell can tap over five decades of high-level relationships in government and industry. Enthuses Catell: “There could be enormous potential in these technologies. Utilities have an obligation to do more for customers in terms of helping them reduce and manage their energy costs.”
State of Emergence