2013 -- A look ahead

As we head into 2013, let's take a look at 2012 in the rear view mirror...

It’s been an exciting year in the energy sector driven by the promise of abundant natural gas and challenged by the potential end of production tax credits for renewables and a nuclear industry still recovering from the impacts of Fukushima. 

Power Gen 2012 in Orlando, FL in December, provided a bird’s eye view of key trends -- namely, flexibility and efficiency. I got to hear some top keynote speakers speak on these points. Here’s my take on the “themes from Power Gen” and their impact on the industry going forward --

Low load growth in the North American power sector has been blamed not only on the economic slowdown, but also, quite interestingly, on the more efficient devices we are using to connect us. For example, an iPad uses $1.36 of power per year -- a desktop computer, $26 bucks (see link). More efficiency in devices, means the power industry must find its own means of creating efficiency through improved software products to allow more load control and customer demand analysis. 

Efficiency extends to homes and businesses, too. The expanded use of the internet to control home and business power loads is shaving peaks for users and reducing the need for payments to generators for standby power. 

For the nuclear and coal industries, growth possibilities have moved out of the U.S. to China and India. The U.S. will only provide diversification at this point. The funding news for SMR nuclear technology is positive but will take some time to lead to actual plant builds and jobs. SMRs are also jumping on the flexibility bandwagon by emphasizing their load following capabilities. 

The U.S. will see growth in gas of course, and renewables. Solar, hydro and wind will continue to gain momentum, albeit slowly. And, flexibility will be the buzz word for those integrating gas turbines with renewables to keep that source of power viable. 

With the low economic growth in the U.S. and Europe, continued excitement about expanding into Latin America and Asia, should be at the top of the game plan list for all energy business players. I’ve recently been working with companies from Asia looking to expand into the U.S. -- an interesting twist I’lll write about in a later blog. 

I am excited and upbeat about the new year -- out of change and challenge comes innovation and growth. See you in 2013. 

The shale gas wave – the story keeps getting better

Recent developments continue to support the reality that shale gas is a game changer for the energy sector in North America, putting the region ahead of the rest of the world in production by at least a decade.

North America has several inherent advantages when it comes to shale gas production. Because oil and gas exploration has been around for over 100 years, there is plenty of geological data to help companies pinpoint where to drill.

Secondly, the fact that most land is privately-owned in North America motivates land owners -- who can financially benefit from gas drilling -- to address challenges dealing with local regulations and accelerate production.

Other countries with considerable gas reserves like China and Poland -- and without private land ownership in gas reserves areas or enough water to support exploration -- have found it challenging to get at potential resources.

A recent government study supports shipping some of U.S. natural gas overseas, thus making the market even more attractive for U.S. investors and landowners. Click here.

For the power generation business, this means:

• More headwinds for nuclear generation driving more single plant closures and delayed investment in power uprates and new build.
• Increased pressure on Wind and Solar development, especially with waning support on production tax credits.

And finally, for consumers and industrial users an increase in shale gas production points to something we all want to hear, lower energy costs.

For more details check out this article in the WSJ, click here:

SMRs and the “All-of-the-Above" strategy”

As part of the Obama Administration’s “All-of-the-Above" strategy, this week the U.S. Department of Energy announced an award to support a new project to design, license and help commercialize small modular reactors (SMR) in the United States.  The project supported by the award will be led by Babcock & Wilcox (B&W) in partnership with the Tennessee Valley Authority and Bechtel.  Click here: 

The Obama administration’s strategy is a breath of fresh air for the nuclear industry which has most recently been competing against low gas prices. It’s also a step in the right direction not only for the U.S. but for the world's energy programs. This opens up an option for other countries that have limited natural resources and growing populations, such as China and India.

The administration is showing good foresight to fund nuclear when gas prices continue to stay low. It’s too easy to jump on board with the “fad of the day” and take your eyes off other energy production options. 

The jobs to be created by this award are far reaching as other companies and manufacturers focus on furthering small modular reactor efficiency, operations and design.  

There are still challenges to be resolved to make the SMR concept a valid option in the energy arena:   

• Construction costs need to stay competitive with large nuclear and gas plants. 
• The value proposition of the SMRs is a shorter construction time. Getting these plants built in less than three years will be critical for success. 
• O&M costs need to be kept low as well with staffing and overhead costs optimized to match the lower megawatt output.

This announcement is exciting for the nuclear industry as it supports the Energy Department’s professed position that it is, “Committed to supporting research and development that will advance efficient, safe and cost-effective small modular reactor technologies.” 

The fostering of this innovative technology adds another arrow in the quiver of the U.S. as it aims for energy independence.

Hurricane Sandy got me thinking about how knowledge gained in the nuclear industry can be applied to improve the robustness of data center back up power. 

 In contrast to 100 years ago, an important measure of a company’s worth is now in megabytes; this "worth" is housed in data centers. Thus, an uninterrupted power supply for a company’s data center is THE critical component for doing business in the world today.

A lot of progress has been made in improving the uptime for data center power, but as seen this past week, there is room for improvement. 

In addition to tragic loss of life, Hurricane Sandy exposed weaknesses in the power supply to these data centers across the board. From clothing companies to financial services businesses, none appear to have come through unscathed from this event, even those with well-rehearsed continuity plans. Click here to see data center damages. 

It’s pretty well-known that the Fukushima event of 2011 made the nuclear industry -- an industry that stakes its reputation on safety, reliability and protecting the public -- take a hard look at itself. 

Since Fukushima, the nuclear industry has focused rigorously on cataloging knowledge gained -- what the industry is calling “lessons learned” -- to better protect back up power supply and ensure the Fukushima scenario will not play out elsewhere.

The nuclear industry also has a head start in this having started to "bunkerize" its power supply as far back as 9-11 to protect against terrorist attacks. 

Lessons learned from these events have contributed to a program developed to implement the Fukushima task force recommendations, a program called the FLEX Protection Strategy. So my thought is, why not take a page from the FLEX playbook and apply these tools to data center back up power -- with better ways to keep business' data centers up and running when terrible events such at Hurricane Sandy hit.

The basics of FLEX include:

PREPARE YOUR PEOPLE: Rehearse and review emergency plans on a regular basis. Provide satellite communication systems for workers. Expanded your maintenance and testing of equipment.

MULTIPLE LAYERS: Protect fuel supply for back up generators. Generator positioning should be above flood levels.

REGIONAL CENTERS: Use regional centers to provide additional emergency equipment in off site support centers to provide another layer of safety and ensure prolonged reliable operation. 

There's more good information in the details. Click here for the FLEX protection strategy, click here. 

Nuclear plants in Hurricane Sandy’s path came through well as a result of these new procedures showing us that the nuclear industry is a great resource for those charged with preserving and protecting our power.

Timing is Everything When Doing Business in Latin America

A book I started recently has really grabbed my attention. The book, “No Lost Causes,” by the former president of Colombia, Alvaro Uribe Velez, provides fascinating first hand stories about the challenges Uribe faced as he took on the task of clearing the country of terrorists and returning the nation to a state of economic growth.

Having a Latin American bent to my personal history makes reading this book interesting and reminds me of a challenge I took on to help GE Energy return to Colombia.

When Uribe took office in 2002, several paramilitary groups and Marxist terrorist organizations controlled half the country's territory. Every year, an average of 3,000 citizens were kidnapped and 28,000 killed.  Drug traffickers generated $3 billion annually. Unemployment was close to 16%.

In the late 90's I worked for GE, and this company, like many other multi-national companies, had pulled out of Colombia as the country’s political and social environment worsened. For example, in the business I worked in, GE Energy Services, we pulled out all expats and sold off all local operations and maintenance contracts.

The departure of the international business community tore important economic vitality from an already troubled nation.

But in 2005, after four years of the Uribe government, and as things seemed more positive for the nation, due to Uribe’s hard line approach, I took on the challenge of preparing a case to convince GE that the time was right to reenter the country. Security had improved enough to make this a viable idea and there was potential for GE Energy to re-establish a presence and grow their business there.

I pulled together a detailed country update and found proven opportunities in both the power generation and oil & gas businesses. As a result of this effort, GE Energy’s president at the time, John Krenicki, authorized the hiring of a country manager and a return to doing business in Colombia. This important decision paved the way for GE to re-establish itself as an energy player in Latin America and take advantage of Colombia’s economic rebirth.

Timing was everything and both GE and Colombia benefited.

Please refer to the following Wall Street Journal book review by Alvaro Vargas Llosa, titled, “The Man Who Saved Colombia” for a more detailed account of Mr. Uribe’s achievements.

From Impasse to Opportunity, U.S. - S. Korea Nuclear Cooperation

This October, I thoroughly enjoyed participating in a panel discussion at Georgia Tech between the Center for International Strategy, Technology and Policy (CISTP) and the Korean Advanced Institute of Science and Technology (KAIST) concerning the prospects for strengthening nuclear energy cooperation between the U.S. and South Korea. 

As part of an effort to advance respective national deliberations on the renewal of this important partnership, CISTP and KAIST convened a panel of esteemed scholars and policy experts to explore key technological, economic, political and strategic dimensions to the issue.  

Topics ranged from projected market trends to technical, economic and nonproliferation aspects of nuclear fuel cycle development. Those present provided a unique and important international perspective on nuclear technology in both the power and arms arenas.  

Of particular note were the discussions about the recent South Korea-UAE nuclear plant sale and the affect that will have on upcoming negotiations for the renewal of the U.S. - South Korea nuclear cooperation agreement, a prerequisite under Section 123 of the Atomic Energy Act for nuclear trade.

My take-aways from the meeting included: 

-- If there is a lack of vision on the part of the US for how to meet the needs of S Korea’s nuclear agreement, this will put in question the U.S. technical leadership role for nuclear technology.

-- There is a substantial geo-political impact to what is happening now in Asia as far as nuclear development is concerned. The impact of the recent South Korea - UAE sale is not just commercial. If South Korea acquires fuel reprocessing capability as part of the 123 agreement, this will affect Northeast Asia nuclear strategy and the proliferation of nuclear technology internationally.

To read more about this conference and see a list of panelists at the event, please click here.