Archive for February, 2014

Hurricane Sandy continues its impact on the energy and utility sector.

The Columbia Climate Law Blog reports that the New York State Public Service Commission unanimously approved a settlement requiring Con Edison, New York City’s major electric utility, to implement measures to protect its electric, gas and steam systems from the effects of climate change.

Climate Law Blog » Blog Archive » Public Service Commission Approves Con Ed Rate Case and Climate Change Adaptation Settlement.

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Melanie Neilan and Tim Hopper in Steppenwolf's Russian Transport.

Melanie Neilan and Tim Hopper in Steppenwolf’s Russian Transport.

The Chicago Reader reviews Russian Transport:

In Russian Transport, something viral this way comes | Theater Review | Chicago.

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Giving new meaning to the term “final exam,” the Boston Globe reports that a suicide bomb instructor accidentally killed 22 of his pupils in Iraq. Now we understand what it means to bomb an examination.

No word on whether there will be any tuition refunds.

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Crain’s reports that Exelon will decide whether to axe some of its nuke plants by the end of this year. The Sparkspread previously cited news stories about Exelon seeking corporate welfare for its nuke plants (with payments to be provided by either ratepayers or taxpayers). This all grew out of persistently low prices in wholesale electricity markets and, according to Exelon’s CEO Chris Crane, the production tax credit for wind generation. As Crain’s reported yesterday:

Asked whether Exelon was ruling out eventual negotiations with Illinois politicians on a state-enacted deal that would have ratepayers covering those plants’ costs over the long haul, the company responded, “Exelon is not seeking long-term contracts with the state of Illinois for energy produced at the Clinton or Quad Cities power plants and has no plans to do so.”

via Tick tock: Exelon to decide by year’s end on Illinois nuke closures – Utilities News – Crain’s Chicago Business.

If Exelon changes plans and does seek a subsidy, one might ask how Exelon would be able to condemn the PTC as a subsidy on one hand, while holding its other hand out for “free stuff” (to borrow a Fox News term) courtesy of the government.  Consistency might be the hobgoblin of both little minds and ratepayers. If Exelon does change its mind, get ready for a massive bombardment by Exelon’s heavy advertising artillery. They’ll have to sell this plea for corporate welfare to a public that includes many whose unemployment benefits have been cut off because they’re just too much of a subsidy. Then they can pay Exelon’s nuke surcharge with the extra money they make selling apples and pencils on streetcorners.

The amount of money Exelon is allegedly losing should be analyzed carefully. Most likely the losses are occurring during off-peak (i.e., low-demand) hours on the grid, such as the small hours of the morning. The nature of the nuke plant beast is such that Exelon can’t just flip a switch to turn the thing off between 12:00 midnight and 5:00 a.m., and then turn everything back on when Northern Illinois wakes up and starts to get ready to go to work, causing hourly market prices to pick up. They have to run the nuke plant all the time, full blast, except for scheduled maintenance or refueling. Coal plants are generally in the same boat, but of course fueling is much less complicated. Exelon’s nukes have to offload their power no matter what. Natural gas-fired generation is different, and because it can go on and off much more quickly it’s often used for “peaker” plants that are called on during high demand periods.

At the risk of oversimplification, here’s a high altitude view of Exelon’s complaint, which is based, at least in part, on how wind generators participate in the wholesale real time markets. Just like nukes and coal, a wind farm can run whenever the wind is blowing, including those off-peak morning hours. For example, if a wind farm gets a 2.3 cent/kWh federal income tax credit, then it can “go negative,” e.g., pay the grid operator, say, 2.1 c/kWh to take the power. Let’s say that’s the lowest price for the hour in question. Because of the tax credit, the wind generator is still making 0.2 c/kWh. The market for that particular hour clears at that negative price, and that’s what the nuke operator has to pay to offload its power.

But as Paul Harvey might say, “and now for the rest of the story,” because Exelon is definitely not giving the public the full megillah, especially with regard to how the electricity market works. Exelon’s half-story creates the misleading impression that prices are negative around the clock, and that the PTC causes this problem.

In fact, Exelon has been facing this issue as long as the PTC’s been around, which is a long time. What Exelon’s not saying is that, ordinarily, it would make money, even lots of money, during other hours of the day because its nuke production costs are essentially fixed. Those other hours would ordinarily more than make up for the negative pricing in the wee hours of the morning. Let’s assume that Exelon generates nuke power at 2 cents/kWh, which is probably not far off the mark. During the other hours of the day, real time market prices don’t stay negative.  They increase, sometimes by a lot. On a hot summer day, for example, the hourly price could spike up to, say, 27 cents/kWh, or more. Remember the California power market debacle in 2000-01? 27 cents is cheap by those measures.  Exelon’s nuke generating costs stay the same at 2 cents/kWh, so its gross margin would be 25 cents/kWh for those hours. On an ordinary day, real time prices might be 5 or 6 cents/kWh. That still beats Exelon’s 2 cent cost-of-goods-sold.

But the “ordinary” days have been radically changed by the natural gas “glut” because just as the wind generator can set the margin at 2:00 a.m., the cheap natural gas-fired generation generally sets the margin for other hours. If natural gas pushes the hourly price down to 3 cents/kWh, Exelon’s not making as much money during those other hours of the day.

Exelon’s real problem has never been the PTC, which is just a whipping boy conveniently tied to the wind turbine’s tower, nor is it the “flawed market” that Exelon and other power industry CEO’s like to complain about, even though they sang its praises only a few years ago. (How quickly they fall out of love!)

It’s really about natural gas.

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WSJ: Congressional leaders in both parties are pushing to impose federal standards for protecting the electric grid from physical attacks in the wake of a Wall Street Journal report detailing a sophisticated attack on a California transmission substation last year.

U.S. Moves to Protect Electric Grid – WSJ.com.

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Now this IS a scary thought: an apparently organized sniper attack on transformers in a transmission substation.

The WSJ reports that shell casings found in the area were from AK-47’s, and that there were piles of rocks in the surrounding area that were probably set there by an advance party scouting for shooting positions.

Assault on California Power Station Raises Alarm on Potential for Terrorism – WSJ.com.


The snipers fired into the transformers, which are in an oil-containing structure for cooling. More than 50,000 gallons of oil leaked out of the bullet holes, causing the transformers to fail. Power was re-routed, so a major disruption was avoided.

When the Allies planned bombing raids on Germany in 1942, at first electrical generating facilities were at the top of the targeting list.  But generating stations later were pushed back to a lower priority, behind aircraft manufacturing facilities. This reflected both a change in strategic emphasis from degrading German civilian morale to ensuring air superiority in a planned invasion, as well as the recognition of the Luftwaffe’s poor results in targeting England’s power generating facilities during the Battle of Britain.

As the Sparkspread has noted before, energy sources have long been targets in war. During the English Civil War, the Scots Covenanter army under Alexander Leslie, Lord Leven, crossed the Tweed and invaded England in 1643-44. Leslie, one of the better commanders in an era when every general was an amateur who learned on the job, marched not on London, Charles I’s political center, but to Newcastle-on-Tyne, where London got all of its coal.

The attack on the California substation is, in the Sparkspread’s view, a terrorist attack.

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