In the State of Hockey - Solar Faces Off With Natural Gas

Solar will face off with natural gas for additional power generation in Minnesota.  The Public Utilities Commission (PUC) is scheduled to make a decision on March 27, 2014.  In a  nutshell, Xcel Energy Inc., who serves 1.2 million customers, will be put to the test of whether its customers will be better off with $250 million in solar arrays or by adding natural gas electrical generators to one or more existing power plants.  

Here are the options:
Calpine Corp.: expand an existing natural-gas fired power plant with a second combined-cycle turbine rate at 290 megawatts,
Invenergy Thermal Development: expand an existing facility with a 179-megawatt natural gas-fired turbine,
Xcel Energy: expand/add an existing facility with a 215-megawatt natural gas-fired turbine,
Geronimo Energy: build up to 100 megawatts of solar generation using photovoltaic panels on up to 20 sites next to substations, or lastly,
Great River Energy: sell excess its capacity to Xcel.

The first question to be asked is, do we need more power generation to meet demand?  The follow up question should be does Great River Energy have enough excess power to sell?  The third question to be asked is, does that excess power meet the growth needs that Xcel and PUC envision?  The fourth question to be asked is, what function is the PUC permitted to play?  The fifth question to be asked is, what will it cost the taxpayer?

Here is a table of Xcel Energy's 2013 owned generating plants.

				Summer Net Dependable Capacity
Type	Plants	Units		Megawatts		%/Total
Coal	13	27		7,597.00		45.3%
Natural gas	27	69		6,758.00		40.3%
Nuclear	2	3		1,594.00		9.5%
Hydro	26	79		377.00		2.2%
Diesel/Oil	2	14		383.00		2.3%
Refuse-derived fuel	3	6		52.00		0.3%
Wind	3	238		42.00		0.3%
Solar	4	4		0.01		0.0%
Total	77	440		16,785.00		100.1%
Note: Net generating capcity is 327 MW for Xcel Energy owned wind energy facilities.
Summer net dependable capacity is determined to be lower because wind generation is
an intermittment resource and is only available when ambient wind conditions exist.

As can be seen by the above note on wind, a similar note is warranted for solar.  The 100 megawatts of Geronimo Energy PV solar panels would have to be calculated on the summer net dependable capacity.  That would result in a much smaller output than the nameplate.  

As the PUC are taxpayer funded and I am the tax payer, I know how I would lean on this issue and decision.  If there is excess power to be sold by Great River Energy and no capital expenditures are required, I would lean toward that solution.  Because it is already sunken costs, it would be the least expensive to the Xcel customer for dependable summer capacity.  Should Great River Energy's excess capacity be readily absorbed, then additional power generation capacity would have to be funded and constructed.  Then the decision tree analysis would point to the best bang for the buck project that meets Minnesota demand growth.

I think that as solar PV panels move towards grid parity - I am hearing that it is achievable in the next 24 months, it would work best at the residential level versus at the Xcel level.  We need Xcel to provide dependable and reliable energy, not intermittent.  The PUC should let Xcel make the optimal decision for the rate payer, but help guide policy and make it easy for residential customers to move into PV solar through tax breaks, some sort of subsidy (though at grid parity that becomes moot), or providing assistance with finding the most cost beneficial systems and installation.  

Russia Turns the Price of NatGas Up

In my last blog, I finished by saying that I thought that Russia would use its natural gas leverage on Ukraine.  That is being born out.  Russia has used natural gas leverage on Ukraine twice - 2006 and 2009.  According to NYT today, Russia is now asking approximately $500 per 1,000 cubic meters of gas, which is about one-third higher than what Gazprom charges clients elsewhere.  This is just the beginning of economic pressure on Ukraine.  

Why Crimea Is First and Ukraine Potentially Second

Russia, Putin, Crimea, Ukraine, oil and gas.  The secession of Crimea from Ukraine is potentially a two-step process - Crimea and then Ukraine.  With Russia's Black Sea navy now safely ensconced in the only Russian warm water port, Sevastopol, they may look to the east at the remainder of Ukraine.  Why? Natural gas pipelines and economic/energy leverage.  The below map, World Energy Atlas 2004, shows the number of natural gas pipelines traversing through the country (on the right side of the map) along with gas fields (red blobs) and oil fields (green blobs).  

The number of gas pipelines and gas fields are numerous.  The northern set of pipelines run through Kiev and continue to Delina, Ukraine.  The central set of pipelines run from Kursk to Ivano-Frankovsk, Ukraine, just south of Delina, Ukraine. The southern set of pipelines run north of Crimea to Tiraspol, Moldova.  There is a large set of pipelines that run through Belarus and then bifurcates.  The northern bifurcation, Yamal Europe, goes from Minsk to just north of Warsaw.  The southern bifurcation, Northern Lights, leaves Minsk and heads south towards Delina, Ukraine.  There it meets up with the Brotherhood pipeline from Kiev.  As the pipelines exit Delina and surroundings, they continue on to Slovak Republic, Czech Republic and into Germany.

The Nord Stream pipelines, the newest gas pipelines, are not shown on the map, but would be roughly the red line at the top of the map and left of the fold.  It is an offshore natural gas pipeline from Vyborg in Russia to Greifswald in Germany.  The first line was inaugurated on November 8, 2011 and the second was inaugurated on October 8, 2012.  They are 1,222 kilometers in length with the capacity of 27.5 billion cubic meters (970 billion cubic feet).  Gas from Greifswald, then moves throughout Europe, through a network of pipelines  that split off these major arteries.  Together, these pipelines provide the dominant supply of natural gas to Germany and then Europe.

Germany is especially vulnerable because of their nuclear power changes after the Fukushima Daiichi nuclear accident in March 2011.  There was a quick German political decision to phase out its nuclear fleet by 2022, starting with the immediate closure of the eight oldest nuclear plants, representing 8.4 gigawatts of capacity or roughly half of their nuclear production (or 10% of electrical output).  Part of their energy plan is to phase-out subsidies for domestic production of hard coal and to decommission all hard coal mines by 2018, with substantial volumes of coal-fired capacity likely to be decommissioned.  Coal-fired electrical generation accounts for 45% of the total.  However, they are currently constructing several large new coal-fired power plants, representing one of the biggest investment waves into domestic coal capacities since the post-war reconstruction, according to the IEA.  However, the slack between the shutting down of the nuclear power electrical generators and the commencement of the new coal-fired electrical generators, will be made up with natural gas.  

So what has that got to do with this map?  With nuclear cut back by 10% (total) and coal being cut back during the same time, but before the currently under-construction new coal-fired power plants can be commissioned, the country is just above the break-even of supply and demand.  Any changes to the natural gas supply, immediately impacts gas-fired electrical generation.  

Should Germany and the rest of the EU get too demanding about Russian sanctions, Russia could shut down the Nord Stream immediately followed by the pipelines flowing through Ukraine.  This would place Germany into an immediate natural gas shortage and impact electricity generation.  Shutting down those pipelines running through Ukraine would further impact Germany and Europe.  Would Russia do this?  Maybe.  They twice shut-down natural gas entering Ukraine in the past 10 years (in 2006 and 2009).  I am not saying that Russia will shut-down the gas pipelines, but should the Western World impose too great a sanction against Russia, then all bets are off. 

Battery development or arrested development?

If any of you have been watching some of the fuel cell stocks move, you might think that they just revolutionized the battery storage space.  Rightly, you would be asking what on earth is going on?  I put together a whiteboard diagram, you know, one of those dry marker white boards that you and your colleagues sit down to at a kumbaya retreat and team build.

I am an energy analyst and like to think “big picture.”  With the Obama administration and the EPA are clearly pointing towards a renewable energy path versus conventional energy one, I started laying out all of the energy sources that I could think about.  Once you put them down on the white board, you start connecting one to another as it relates to substitutions, production, consumption, alternatives, evolution, etc.  You also lay down the industries that would participate the most.  After a few days of laying down the ideas and allowing them to percolate, a clearer picture begins to emerge.

For me, this is neither a brilliant idea nor a novel one, the missing link to renewable energy was the battery.  Too many of the producer, consumer, evolutionary, and revolutionary data points were connecting to battery/energy storage.  When I looked at the equity universe for ideas, I started with the venture capitalists.  I thought that they would be invested in the latest and greatest of electrical storage technology.  There were some interesting ideas, but none investable for me.  As you know, venture capital is only available to the accredited investor and more than likely a very high-net worth accredited investor.

That roadblock led me back to those companies that are the current fuel cell “battery players.”  I have followed these companies as an energy and renewable energy analyst and portfolio manager and eventually sold them and dropped them from coverage, due to their inabilities to advance technologically.  After several quarterly conference calls of reduced earnings guidance, it was clear to me that these companies were “before their time.”

Here we are ten years later from their previous peaks and maybe it is their time. They are on a tear.  What sparked this run?  TESLA.  With Tesla moving from their small, multi-battery, battery (6,831 batteries to be exact) to a single large lithium ion battery, the company did not have enough test miles to understand the potential liabilities.  Their lithium ion battery caught fire from a collision.  Then came the NYT articles and potential calls for a recall of the car.  The Tesla stock imploded.  Elon Musk who also founded X.com (later Paypal), Zip2 and SpaceX, clearly would resolve this issue.  That got me thinking about the battery space.  When you look at solar, sure the cost per kwh is moving rapidly toward grid parity, but it only works when the sun shines, which is during most people’s work day.  Wind, which seems to be heading towards the setting sun mainly due to NIMBI, long transmissions lines (and significant line loss), and heavier than expected repair and maintenance costs, also needs storage.  Electric cars, in order from them to move forward, need better battery solutions.

But something may make it different this time for these battery stocks, while Musk presses for better lithium ion results or other battery solutions.  Let me turn to Hyundai.  They are introducing into the California market this spring, the Tucson Fuel Cell CUV.  Why California?  It has 8 of the 9 hydrogen stations in the US, so it makes sense to start there.  Initially, they will only be available on a lease basis.  Keep an eye on this vehicle (and their videos - Hyundai has a couple of cool videos on the vehicle and refueling stations) for it will tell us if these battery stocks usher in a new era.  While they are not suppliers to the Hyundai, they are fuel cell component manufacturers.   But buyers beware, hedge funds will be looking to short these stocks as hard and as fast as possible.  I like the battery space - it is the linchpin to solar, wind and electric vehicle growth and earth's renewal.

To Wind or Not To Wind - a very negative wind energy decision

I find that we, the United States, are at cross roads and cross currents.  On Sunday, the New York Times reported, that Duke Energy has agreed to pay $1 million in fines as part of the Justice Department’s first criminal case against a wind power company for the deaths of protected birds.  That’s right a criminal case for the death of birds, golden eagles in this case, which is a tragedy.  But how is Duke Energy Renewables or any other utility to comply with the Renewable Portfolio Standard (RPS) mandate of increasing the percentage of electricity produced from wind, solar, geothermal or other, when they can be found criminally guilty of avian deaths. 

Birds are killed by everything from cars, trains, planes, stationary meteorological towers, cell phone towers, trees, windows of homes (we have had two in 14 years), other birds, chemicals, hunters, and on and on.  The $1 million fined was paid to several conservation groups, including the North American Wetlands Conservation Fund, the Wyoming Game and Fish Department and the National Fish and Wildlife Foundation.  These are the very groups that have pushed for the RPS.

The company must now put into place a plan to prevent the deaths of the birds.  Duke Energy said that it had been working with federal officials to limit the bird deaths.  “The company is installing new radar technology to detect birds and using field biologists to look for eagles and determine when turbines need to be shut down.”  This clearly is a negative for wind power and will be more expensive and interruptible. 

How is a country supposed to grow?  If the aim is to reduce energy consumed, then say so and provide the incentives that make sense (not the passing of a compact fluorescence lights law with no appropriate way of disposing them because the contain mercury and no competitive substitute).  This is why rate hikes are being proposed by the energy companies and the rate payers are being forced to foot the bills. 

This country needs an energy plan and what we have, is a terribly impractical one.  We deserve better.

Did you know that landfills and septic leach fields lie on top of your water supply?

Which would you prefer?  Landfills and septic leach fields lying hundreds of feet above your water tables and aquifers or hydraulic fractures thousands of feet below your water tables and aquifers?  Clue: gravity moves to the core of the planet.

I am a pragmatist.  I think that we can have good paying jobs, good taxable revenues and be environmental.  I believe that hydraulic fracturing provides those jobs, revenues and can be environmental.  The companies are working diligently and quickly to develop fracturing fluids that are environmentally safe.  But before we can have that discussion, we must first know about our water supply.

So, let us start with water tables and depth limits to potable water supplies, i.e. aquifers.  Across the US, the average depth of a fresh water aquifer, from which communities drill into and pump water from, is 400 feet below the surface.  The potable deep water limit approaches 600 feet, as the water begins to have increasing concentrations of metals and minerals.  I logged onto the City of Plymouth: Sewer and Water Services website to see what minerals were in my water.  The front page of the website (fact sheet, if you will) informs me that our aquifers are the Prairie Du Chien-Jordan and Prairie Du Chien Group and that the water wells are 302 to 473 feet deep.  The water is hard due to the presence of both iron and manganese.  There are 24 grains per gallon, requiring treatment by the city to improve quality.  The minerals are removed through filtering.  A corrosion inhibitor is also added to the water to protect home pipes.  The water is disinfected using chlorine and fluoride is added for dental protection.  Hold on – a corrosion inhibitor, what’s that? and that can’t be good.

So, I dug a little deeper and downloaded the 2012 Plymouth Water Report.  In my water there are the following (bold are the “contaminants” and in parentheses are typical sources of “contaminants”): alpha emitters (erosion of natural deposits), arsenic (erosion of natural deposits; runoff from orchards; runoff from glass and production wastes), barium (discharge of drilling wastes; discharge from metal refineries; erosion of natural deposits), combined radium (erosion of natural deposits) fluoride (added by the state to promote strong teeth; erosion of natural deposits; discharge from fertilizer and aluminum factories), haloacetic acids (by-product of drinking water disinfection), TTHM – total trihalomethanes (by-product of drinking water disinfection), chlorine (water additive used to control microbes), copper (corrosion of household plumbing systems; erosion of natural deposits), lead (corrosion of household plumbing systems; erosion of natural deposits), iron and manganese already mentioned in the above paragraph.  WOW.  That is a lot of bad stuff. 

Please notice that almost every “contaminant” is sourced from the erosion of natural deposits, except for Haloacetic acids, trihalomethanes, fluoride and chlorine, which are introduced by the city/county/state.

You might ask what are trihalomethanes?  They are chemical compounds in which three of the four hydrogen atoms of methane (CH4) are replaced by halogen atoms.  Many trihalomethanes find uses in industry as solvents or refrigerants.  They are also environmental pollutants, and many are considered carcinogenic.  WOW.  This is what is in my water and it is introduced by our local sewer and water utility.

There you have it.  That’s what in the water and most of the contaminants occurs through natural erosion of deposits and some is introduced by the sewer and water utility. 

Now let’s address what is above your water tables and aquifers.  I will begin with the cartoon cross-section of a septic system.  This is a rendition of a septic leach field/drainfield.  When you flush the toilet, the fluids pass through the septic tank, where most of the solids are captured.  The lighter solids and liquids are transported to the drainfield.  The soil absorbs the lighter solids and some of the liquids, with the balance of the effluent being purified by the deeper soil layers.  The water then enters as theoretically purified groundwater.  All of this relies on GRAVITY and SOIL ABSORPTION to purify the effluent.  Remember that.

Source: Google Images

Next move to landfills, which is one of my biggest pet peeves.  Below is the second cartoon of a cross-section of a landfill.  Environmentalists are so preoccupied with the hydraulic fracturing issues, that they have completely ignored many other more pressing issues.  Landfill waste should be at the top of that list.

Source: Google Images

The following is from the EPA website.  Municipal solid waste landfills (MSWLFs) receive household waste. MSWLFs can also receive non-hazardous sludge, industrial solid waste, and construction and demolition debris. All MSWLFs must comply with the federal regulations in 40 CFR Part 258 (Subtitle D of RCRA), or equivalent state regulations. Federal MSWLF standards include:

•   Location restrictions—ensure that landfills are built in suitable geological areas away from faults, wetlands, flood plains, or other restricted areas.

•   Composite liners requirements—include a flexible membrane (geomembrane) overlaying two feet of compacted clay soil lining the bottom and sides of the landfill, protect groundwater and the underlying soil from leachate releases.

•   Leachate collection and removal systems—sit on top of the composite liner and removes leachate from the landfill for treatment and disposal.

•   Operating practices—include compacting and covering waste frequently with several inches of soil help reduce odor; control litter, insects, and rodents; and protect public health.

•   Groundwater monitoring requirements—requires testing groundwater wells to determine whether waste materials have escaped from the landfill.

•   Closure and postclosure care requirements—include covering landfills and providing long-term care of closed landfills.

•   Corrective action provisions—control and clean up landfill releases and achieves groundwater protection standards.

•   Financial assurance—provides funding for environmental protection during and after landfill closure (i.e., closure and postclosure care).

What’s not listed by the EPA in this description of what a landfill is supposed to have, are the contaminants.  For decades all kinds of things went into the waste stream: batteries (lead, zinc, lithium, acid, etc.), electronics (with cadmium and other deleterious metals), light bulbs (CFL with mercury), rotting food (noxious microbes, and other biological hazards), medical wastes from home (to numerous and deleterious to include), oil-based paints, turpentines, all kinds of cosmetics, and the list is end-list.   We are told that the liners and detection systems must be in place and that they work.  Do they?  As your surface waters, lakes, ponds and oceans, get polluted, the reliance and dependence on water tables and aquifers increases.  Do you want this junk sitting above your drinking water supply?

Remember that I said above, “All of this relies on GRAVITY and SOIL ABSORPTION to purify the effluent.”  How is it that it does not apply to hydraulic fracturing?  If gravity and soil absorption work for septic leach fields effluent, why would it not work in reverse?  Sediments would purify drilling fluid effluent, which I know is much less toxic (hydraulic fracturing fluids are 99% water with the 1% being non-water; I wish that the landfills and septic systems were 99% water and 1% non-water) than what is sitting on top of my water tables and aquifers and gravity is impacting them every second, of every minute, of every hour, of every day, of ever year; pulling those cadium, lead, terpentines, medical wastes closer to your water source.  Now, let’s put some more perspective on this.  While the landfills and septic leach fields are within several hundred feet of your water source, with gravity constantly acting on them, hydraulically fractured holes are thousands of feet below your water source, with the same gravity constantly acting on them.  

As the below cartoon shows, the oil and gas companies are required, through state regulations, to run casing, well below the water table and aquifers.  The casing is cemented (using natural resources) in place.  The cemented steel casing can be from 1,000 feet to over 3,000 feet long in order to protect water tables and aquifers from the production of oil and gas from below.  Next, most hydraulic fracturing occurs several thousands of feet to 15,000 feet below the water tables and aquifers.  Frac fluids rise only during hydraulic fracturing, once the fracturing is complete, the pressure drops and the fluids flow back into the pipe and are pumped back to the surface, where it is recovered.  The companies know volumetrically how much is sent down the hole and how much is recovered. 

Gas does rise, but many forget or simply don’t know that shales are typically impervious and impermeable.  They act as road blocks to migrating gas.  Shales are ductile at heat and temperature.  What does that mean?  It means that as the geothermal gradient (different in each depositional basin) increases, temperature increases.  As depth increases, so does pressure.  Temperature and pressure impact shales by making them ductile, or slightly plastic, thereby healing fractures.  The hydraulic pressure needed to fracture the overlying lithostatic pressure to the surface, is not possible with current technology.  But does anyone tell you this.  No, it is not in their interest.  

Sources: Google Images