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NEWS & TRENDS
Debunking the Overbuild Theory Forecasts of an electricity glut have had an impact on the prices of industry stocks. But no such glut is likely, according to a study by Friedman, Billings, Ramsey & Company (FBR), a financial holding company based in Washington, DC. Just how much capacity will come online depends on whom you ask. Estimates range from 166,285 megawatts (MW) from the Energy Information Administration (EIA) to 288,845 MW predicted by the Electric Power Supply Association (EPSA). The reality is that the number of announced projects can deviate considerably from the number of projects actually constructed. (Power generators rarely issue a press release announcing the cancellation of a previously announced project, FBR points out.) For example, 7,965 MW of new capacity were announced for 2001, but only 5,625 MW are now under construction. Considering that it takes at least two years to complete construction of a powerplant, most likely the amount of generation coming online in 2001 will be less than predicted. Again, 18,041 MW of new capacity were announced for 2002, but only 3,372 MW are presently under construction. FBR estimates that no more than 60 percent of announced generation for the next five years will actually be built, which would amount to 175,000 MW. Not only is it likely that supply will be less than expected, but demand for more efficient and cleaner electricity likely will be greater. FBR estimates that the United States will need a total of 225,691 MW of new capacity by 2005. This is due, in part at least, to the fact that many older, less efficient powerplants need to be replaced with more modern technologies. For example, FBR's review of 429 gas-fired plants in operation during 1998 reveals that 313 of them are prime candidates for technological displacement by plants that operate on combined-cycle gas turbine (CCGT) technology. CCGT plants consume about 30 percent less natural gas and have fewer environmental emissions. The plants facing displacement amount to 112,613 MW of power. Coal-fired plants also may become targets for displacement as concerns about the environment increase. Also, reserve margins need rebuilding. According to FBR, 19 percent excess capacity over peak demand is necessary to serve as a safety margin in case of unplanned system outages and to prevent the abuse of market power by suppliers in competitive markets. Yet, after a full decade of little new generation development, reserve capacity margins in most NERC regions have shrunk to 10-15 percent. To ensure a 19-percent reserve margin in those regions alone, additional capacity of 45,372 MW is necessary. The third variable driving the demand for new generation capacity is, of course, growth in electricity consumption. Assuming that electricity consumption grew at a compounded growth rate of 2.3 percent during the past 10 years, and assuming that demand for electricity continues to grow at the same rate, FBR estimates that an additional 67,706 MW of capacity will be needed through 2005. In summary, FBR predicts the United States could safely add at least 225,000 MW of additional capacity and still maintain a balance of supply and demand—that coincidentally splits the difference between the EIA and EPSA estimates. Cold Facts During the winter of 2000-2001, colder-than-normal temperatures contributed to close to 20 percent of the average low-income family's monthly income spent on home energy bills, according to a new report. (See Table 1.) In some cases levels reached as high as 70 percent. The average middle-income family, on the other hand, spent less than 5 percent of its monthly income on home heating and electricity costs.  The report, The Cold Facts: The First Annual Report on the Effect of Home Energy Costs on Low-Income Americans, was issued by three organizations that help low-income families and seniors pay their energy bills: the National Low Income Energy Consortium (NLIEC), the National Energy Directors' Association (NEADA), and the National Fuel Funds Network."Think of it this way," said Al Guyant, NLIEC board member. "If a middle-class household—earning about $50,000 a year—faced the same home energy burden as a low-income household, they would pay about $10,000 a year just to heat their home and cook their meals." A recent NEADA report also found that at least 4.3 million low-income households surveyed in 19 states and the District of Columbia either have been or are at risk of having their power shut off. These figures represent a dramatic increase from recent years, according to the report, and can be attributed to the fact that natural gas and heating oil prices last winter were 42 percent and 36 percent higher, respectively, than the winter before. Electricity prices were only slightly higher last winter than during the winter of 1999-2000. On a warmer note, the report points out that the federal Low Income Home Energy Assistance Program (LIHEAP) provides assistance to 4.9 million American low-income homes (a household that earn less than $21,000 for a family of three meets the federal definition of "low income"). However, even LIHEAP funds meet the needs of only 17 percent of eligible households. For that reason, fuel funds, funded by corporate and individual donor dollars, are necessary to help fill the gaps in public support. Nationally last year, fuel funds provided over $102 million in heating and cooling assistance to homes across the United States. The ongoing support provided by federal and state energy assistance programs and corporate fuel funds, combined with longer-term solutions like weatherization assistance to improve the energy efficiency of homes, continue to help needy households stave off high energy costs. The federal Weatherization Assistance Program, for example, has weatherized more than 5 million homes since its inception. Entergy New Orleans and KeySpan Energy are just two examples of corporations that made significant contributions to fuel funds during the winter of 2000-2001. Entergy made a $3-million energy assistance donation to the Elderly and Handicapped Emergency Assistance Fund and the Helping Hands program. KeySpan Energy contributed $3 million to fuel funds serving its markets in Brooklyn, Queens, and Long Island (NY), and New England. EFFICIENCY SAVES AND PAYS More efficient clothes washers and dryers, dishwashers, and other appliances can cut energy and water bills dramatically, especially in older homes, according to a study performed as part of the Department of Energy's (DOE) national energy conservation initiative. (See Table 2.) The Save Water and Energy Education Program (SWEEP) was conducted by installing various newer, energy-efficient appliances in 50 volunteer homes in Wilsonville and Lafayette, OR. All the test homes were representative of their communities and were built before passage of the Energy Policy Act of 1992, when the use of some water- and energy-efficient equipment became mandatory. The SWEEP study found that the test installations had aggregated annual savings of 840 kilowatt-hours (KWH) and 7,080 gallons of water. Each year, these savings would provide the average SWEEP home with 250 additional clothes washings, 110 extra dishwashings, and enough electricity savings left over to run an energy-efficient refrigerator all year. On a regional scale, the study showed that if energy- and water-efficient appliances were installed in 1,000 homes built before 1992, more than 18.5 million gallons of water and 890,000 kWh of energy would be saved each year.  DOE's Pacific Northwest National Laboratory recorded and compared the end-use energy and water savings of the homes for the study before the new appliances were installed and then again after the retrofit period. Several manufacturers—including Electrolux Home Products, Caroma USA, Portland General Electric, and Energy Technology Laboratories—donated the new efficient appliances to the SWEEP program. What's a Fog Watt? What use could powerplants possibly have for fog? In fact, powerplants are using fog to produce more energy with less fuel and fewer emissions. Because gas turbines produce less energy as the ambient temperature rises, generators look for ways to cool intake air to boost gas turbine power. Fog cooling systems have been shown to work better than refrigeration or other traditional evaporative media cooling systems. Fog technology works through a system of high-pressure pumps that pressurize demineralized water as it flows through a network of stainless steel tubes to nozzles located in the inlet ducts of gas turbines. Each nozzle atomizes the water into trillions of ultra-fine fog droplets per second. The droplets evaporate quickly and cool the inlet air. Mee Industries, which developed fog technology and since has cornered 80 percent of the market, says it has completed 325 installations at electric utilities to date. According to Mee, these installations account for an estimated 2.5 gigawatts of added capacity. The company's customers include Florida Power, Cinergy, Duke Energy, Entergy, Madison Gas and Electric, and Utilicorp. The benefits of fog power, users say, are increased efficiency, reduced nitrogen oxide (NOx) emissions, and lower costs. Cooling the inlet air of a 100-MW turbine by 20€€ F can produce about 10 MW more power—called "fog watts"—thereby increasing the overall efficiency of the turbine by about 3 percent. Each extra fog watt is produced using about 30 percent less fuel than "non-fog watts." Because fog cooling increases humidity, it also reduces NOx emissions, the most significant emission from gas turbines. For instance, using fog cooling to cool the inlet air by 20€€ F results in 10 percent fewer NOx emissions produced by the turbine than by the non-fogged turbine. The technology also lowers costs. While a new turbine costs around $750 per kilowatt (KW) and requires up to three years for installation, a fog system often costs less than $20 per added KW and typically can be ordered and installed within three months, according to Mee Industries. YOU BUILT IT, BUT ARE THEY COMING? A report by AMR Research found that reasons for companies to invest in e-business center on reducing and controlling costs, improving customer relations and satisfaction, and increasing company revenue. Only seven percent of companies said they actually invested in e-business because their customers demanded it. (See Figure 1.) But will a website pay for itself by reducing customer-service costs, attracting new customers, and generating sales? Maybe, but it's not likely to happen in the near term, according to a Primen study.  In fact, while most electricity companies have built expensive websites, their residential customers are not logging on. Primen, an energy market intelligence company, recently surveyed almost 7,000 electricity and natural gas consumers and found that almost none of them had used their utilities' websites. Only one web-based transaction is likely to yield returns from the residential market in the near future: electronic billing and payment. Although few customers currently use online billing for their energy services, this number could grow to 25 percent in a few years. That could save companies $300,000 per year per 100,000 customers. However, the consumers Primen surveyed indicated that they would rather pay all their bills through one portal than individually. To make this possible, a company would have to use third-party consolidators to distribute bills, reducing savings. One reason for customers not using electric company websites is that only about 60 percent of residential energy customers have access to the internet. And even those that do have access say that on the rare occasion they contact their energy company, they find it easier to place a phone call than go online. A company still may invest in Internet services for residential customers for strategic reasons, Primen says. Through an attractive website, a company can position itself to its investors and customers as a modern, 21st-century company. Energy providers also may find that investing in e-commerce in the near-term will help them to prepare for a new generation of web-enabled platforms to come in the future. |
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