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Archive for the ‘Transmission & Distribution’ Category

Linemen

The online magazine Transmission & Distribution World today re-ran an earlier article on the dangers faced by electric utility workers. Though it describes a really brutal accident, it merits reading if only to be reminded about the danger that some workers face every day as part of their job — more dangerous than police and fire. You can read the full article here.

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Tax Reform

The GOP-passed tax reform law, a/k/a the Tax Cuts and Jobs Act of 2017, lowered the corporate federal income tax from a maximum of 35% to a flat rate of 21%.

Numerous transmission utilities file tariffs with the Federal Energy Regulatory Commission that are based on a cost of service revenue requirement. The expense of federal corporate income tax is one of those costs of service. When a corporation’s tax rate goes down from a maximum of 35% to a flat 21%, its income tax expense goes down, and thus its cost of service revenue requirement goes down. So, one would think that when transmission utilities’ tax rates go down, as they have, that benefit might flow through (or is that trickle down) to ratepayers.

Nope.

No transmission utility filed any amendments to its tariffs to reflect the new, lowered tax rate. Maybe they thought nobody would notice it, and they could pocket that 14% difference. (“Oh boy!!!).

So on March 15, 2018, FERC opened a series of new proceedings requiring that these transmission utilities either lower their rates to reflect the tax cut, or show cause why they should not be required to do so.

Your tax dollars at work.

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NYC Substation

The New York Times today reported that Russian hackers had gained access to nuclear plants and electricity grid controls, and would have been able to shut off the power in the United States at will.

That is deadly serious stuff.

More amazing still, it was the Trump Administration, that leveled the accusation against Russia. Putin may regard that as an act of disloyalty by Trump, perhaps triggering his release of kompromat on the Donald.

Perhaps he’ll announce a 25% tariff on Steele dossiers.

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Putin - exasperated

Yes Vlad, oil prices are all the way down there.

About this time last year, the Sparkspread pointed out that Vladimir Putin had overlooked Energy Rule Numero Uno when he re-annexed Crimea to Russia sixty years after Khruschev gave it back to Ukraine. That rule is that energy is all about infrastructure. So, before you invade a country with the ultimate goal of ruling it (and therefore, of necessity, administering it in one fashion or another), you should make sure you understand the target territory’s energy infrastructure.

This is something Putin notably forgot to do. Crimea has four power plants that aggregate to a rather puny 327MW in nameplate capacity, but demand in Crimea ranges from 850MW to 1250MW in winter, depending on the severity of the season.

The math is easy. More than 80% of Crimea’s commodity electricity supply is under the control of Kiev, and Kiev, being the capital of Ukraine, takes a rather dim view of Volodya’s revanchism.

The maps are pretty easy too. The little Isthmus of Perekop, which connects Crimea to Ukraine, is a chokepoint with two main transmission lines that supply the Crimean peninsula.

Crimea-electricity--638x539

Electric transmission lines into Crimea

Wait… Did we say that Kiev controls the electricity supply? Not so fast. Over the past week or so, saboteurs have blown up power lines in southern Ukraine, which have plunged Russian-annexed Crimea into an energy crisis. About 2 million Crimeans are now relying on emergency generators. This proves the point the Sparkspread made last November: Crimea depends almost entirely on Ukraine for energy.

And that’s not Putin’s only headache. Under Russian law, using drafted Russian soldiers outside the borders of Russia requires the soldiers’ consent. (Of course, “Russian law,” along with “moderate rebel” and “limited nuclear war,” enters the language as one of the 21st Century’s new oxymorons.) The fighting in Ukraine produced about 2000 dead and 3200 wounded Russian soldiers. Hmmm… How to explain that? Injured in training? That’s a tough sell. That many dead and disabled soldiers in a war of choice presents a fundamental question of political sustainability of the conflict at home, even if home is a totalitarian state. Vlad might give a call to Dubbaya if he has any doubts.

Oil prices stayed low. U.S. and European sanctions started to affect the Russian economy. Just as von Schrotter described Prussia as an army with a country, Russia can be imagined as an army with oil fields and natural gas reserves. But under sanctions, drilling for new reserves and maintaining the production equipment on existing fields became far more difficult. Putin’s oil oligarchs and their apparatchiks have had their hands full trying to maintain Russian oil production in both quantity and quality.

Vladimir had to weigh the costs and benefits of his Crimean campaign. Better to cut his losses on Crimea, leaving matters to the resident separatists, and focus on a new adventure.

Like Syria, maybe.

This past February, Putin and Peroshenko, Ukraine’s president, inked the Minsk II accord, which at least implemented a cease-fire, more or less. Peroshenko had to recognize his country’s loss of certain territory in Ukraine to pro-Russian separatists, and the deal allowed Putin to pull the Russian army out without too much loss of face. Putin’s proxy war through Russian-leaning separatists continued in full swing, of course, but since the Russian pull-out the separatists’ battles have not yielded any significant territorial gains beyond what was already obtained through Minsk II.

Kiev is not in control of rebuilding the transmission lines in Ukraine. Ethnic Tatars, whose parents and grandparents were forcibly deported by Stalin at the end of WWII, and Ukrainian nationalists have blocked repair teams. So far, authorities in Kiev have not tried to force the issue.

Putin is now accusing Ukraine of “torturing” Crimeans with the power cuts. Russia has responded by cutting coal deliveries to Ukraine. Coal sales are one thing, but he hasn’t shut off natural gas yet. Russia needs the natural gas revenues as much as it ever did, but escalation is always possible. But if Putin presses too hard on Ukraine, he’ll just unite Ukrainians against him politically.

As the winter sets in, this should provide some great political theater.

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Volodya Putin in deep thought

Volodya Putin in deep thought

Putin seized Crimea, but lately he hasn’t been banging his pots and pans too much about cutting off the natural gas supply to Ukraine, even though Russia claims Ukraine owes it up to $38.4 billion for previous purchases. While the figure varies, it seems only to have increased after the EU and the International Monetary Fund confirmed they would assist Ukraine in paying the debt. Still, Czar Vladimir has sent his troops and tanks rumbling back and forth across eastern Ukraine.  Crimea has become Putin’s 21st century version of the Sudetenland, with Russian speakers standing in for Hitler’s Sudeten Germans, or “Volksdeutsche.”

Czar Vladimir is not in a position to threaten Ukraine with a natural gas shutoff because he overlooked Energy Rule Numero Uno before seizing Crimea. For a rule so easily stated, it’s surprising how many decision-makers forget to consider it:

Energy Rule #1: Energy is all about infrastructure.

From electric transmission lines to natural gas pipelines or railroads, if you can’t get the energy from the source to the load, you can’t use or control the energy.

To see what dear Volodya (the Ukrainian variant of “Vladimir” is “Volodimyr,” from which both Russian and Ukrainian derive the masculine diminutive “Volodya”) missed, let’s take a look at some maps. The first shows the natural gas supply lines from Russian into Ukraine:

Gas pipelines in Ukraine

Gas pipelines in Ukraine

Two things are worth noting. First, a vast amount of Russia’s natural gas pipelines to Europe flow through Ukraine. Threatening Ukraine with a natural gas shutoff would impede flows to European customers, reducing much needed revenues. Russia depends on the sale of oil and natural gas to fund itself. European customers might resell to Kiev, or Kiev could tap into the lines. Second, Crimea’s natural gas supply comes in from Ukraine, not Russia, so cutting off Ukraine would only hurt Putin’s Volksdeutsche.

Now let’s take a look at electricity transmission lines serving Crimea:

 

Electricity transmission in Ukraine and Crimea

Electricity transmission in Ukraine and Crimea

 

The Crimean peninsula has four thermal power plants with an aggregate nameplate capacity of 327 MW. But these were built during the Soviet era and their functional capacity is in the range of 100-110 MW.  Crimea also has substantial wind and solar generation facilities, but these are intermittent and seasonal. Demand on the peninsula ranges from 850MW to 1,200MW in winter. Net, Crimea depends for more than 80% of its electricity requirements on transmission from Kiev.

So, if Volodya were to cut off natural gas supplies to Ukraine, he would simultaneously shut off electricity to the Crimean Volksdeutsche he purports to love so much.

Transporting natural gas overland to Crimea is no easy matter either, completely apart from the economics of building the requisite facilities and the losses on LNG conversion and reconversion:

530 km from Rostov to Dzhankoy

The route from from Rostov-on-Don (A) to Dzhankoy (B)

 

It’s about 530 kilometers from Rostov-on-Don (A), through Mariupol, to Dzhankoy (B), the nearest large town on the Crimean peninsula. About 400 of those kilometers are inside Ukraine. So let’s take a look at our next map, which shows the concentration of Russian-speakers in the areas en route between these two points:

Blue means more Russian speakers, gray means fewer

Blue means more Russian speakers, gray means fewer

The concentration of Russian speakers (and those who voted for Yanukovic) thins out as one approaches the isthmus connecting Crimea to the Ukrainian mainland, and it doesn’t rebound until one is on the peninsula itself. So if Volodya did want to supply Crimea with energy resources trucked overland, he would have to organize convoys and defend them from potential guerilla attacks and sabotage in hostile territory, just at the U.S. did in Iraq and Afghanistan. This would require Russian troops to secure the route, and those are long-term, not short-term deployments. This presents at least two additional problems for Volodya. First, if he has to move Russian troops from other posts, those areas (think Russian frontier with Chechnya) become less safe. Second, he has to contend with the potential reaction of Russian families whose sons/daughters will be coming home in body bags in order to satisfy his territorial ambitions.

Why wouldn’t Volodya build a natural gas pipeline across the Kerch Strait, which connects the Black Sea with the Sea of Azov and separates Crimea from the Russian mainland by a mere 1.9 kilometers at its narrowest point? This can be done, but the area is seismically active, which presents difficulties for any infrastructure (the Nazis tried but failed to bridge it during the Battle of the Kerch Peninsula in WWII). An even greater difficulty is the shallowness of the strait. At 59 feet maximum depth, any subaqueous pipeline is vulnerable to attack, with the explosive impact of a charge inversely proportional to the depth at which it detonates. Further, that would take money, and given Russia’s economic travails and the impact of sanctions, a pipeline to Crimea would be a tough sell even for Volodya.

Next time, Volodya, a leader who likes to use energy as a weapon, may want to think a little further ahead before he annexes territory, especially regarding energy infrastructure.

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Little solar house on the prairie.

A little solar house on the prairie.

The wind will still come sweeping down the plain in Oklahoma, but it will be less favorable for utility customers with distributed generation such as small wind turbines and rooftop solar. Oklahoma has passed a bill that provides for a utility surcharge on these types of small generation facilities. The bill passed with no debate in the Oklahoma House of Representatives and by a margin of 83-5 in the Oklahoma Senate. It now heads to the governor’s desk for signature.

This is the issue about which I wrote in the current issue of the International Energy Law Review, a copy of which is available on the Links page of my website.

Read the story here:

Oklahoma House passes solar surcharge bill | News OK.

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Goldman Sachs

European Union antitrust regulators have hit Goldman Sachs, the world’s top electric power cablemaker Prysmian, Nexans and eight other cable firms with a total fine of 302 million euros ($416 million) for running a power cable cartel between 1999 and 2009. The EU authority said the companies agreed to share markets and allocate customers among themselves.

Goldman Sachs acquired cable maker Prysmian through one of its PE funds in 2005, but since then disposed of its interest.

The EU stated that “[p]art of [the cartel’s] plan was to allocate important high voltage power cable projects in the European Economic Area…including large infrastructure and renewable energy projects such as offshore wind farms.”

"Just doing God's work..."

“Just doing God’s work…”

Read the story here:

EU regulators fine Goldman Sachs, Prysmian for cable cartel | Reuters.

 

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