September 2012
“Perfect Storm” of energy prices still looms
In March of 2008, my manager’s article in the SWRE newsletter outlined the integral components of a “perfect energy storm” on the horizon. In this month’s issue as we celebrate our 75th year anniversary, I would like to look back at that article and see where we stand in 2012 compared with the items discussed in March of 2008. I do not believe that the coming “perfect storm” has abated and is no longer a threat, but some of the key components have been affected in the last four years. The first part of the storm that we discussed in March of 2008 was the increasing demand for power. The recession or slow down (whichever you prefer) that hit in October of 2008 did stifle the growth rate of the economy and thus slow down the rate of growth for electrical ca- pacity. However, as many areas of the country plunged into difficult times, the oil and gas producing areas held steady and then began phenomenal growth in the last two years. So once again the need for electrical capac- ity began to increase. The intense drought and heat of the last two years reflected all-time record demands for electricity being set in the Southwest! Once again the need for increased capacity, though stalled in different parts of the country, is now once again a component of a future storm.
Another component of the “storm” was the negative environmental considerations for new and existing coal plants. This portion of the storm has increased. There is virtually no funding to build a coal plant in the U.S. Existing coal plants are targeted to meet new “clean coal” standards or shut down. In many cases, older coal generating facilities will shut down because the retrofits to meet EPA standards will not be cost effective. With- out debating the right or wrong of these standards, the capacity lost when these plants cease to generate must be replaced.
As we look at the options in 2012, natural gas genera- tion looks very attractive. Natural gas prices are much cheaper than March of 2008 due to fracturing and shale production. It appears that coal plants that are retired will logically be replaced with natural gas generation. Yet the practice of “fracturing or fraking” which has opened ac- cess to great reserves of natural gas in the U.S. is also becoming a target for potential environmental restric- tions. Natural gas generation is a good option today, but what happens if natural gas prices once again rise dramatically and much of the coal generation has been retired?
Wind power capacity has increased dramatically, especially in our part of the country. You can travel any
by Mike R. Hagy
direction from our service territory and you will encounter hundreds of wind turbines. Wind is actually helping to stall a portion of that “perfect storm”, but wind is still not a “firm” source of power. If the wind doesn’t blow, you have no power, and the demand for power may be the great- est when that wind power is unavailable. Solar and hydro power fall somewhat into the same category, although hydro power can be stored as long as the lake levels al- low release.
Nuclear power before the tsunami in Japan was actu- ally becoming a viable source as an acceptable means to generate electricity. As the world watched a potential plant melt down, nuclear options faded once again as a viable choice.
The political portion of the storm is also still present. There are some who believe that all fossil fuel genera- tion is fine and there are those who believe that power should only come from renewable sources. I truly believe that coal generation must be cleaned up to some extent and I believe that renewable energy is a logical option for additional capacity, but the key is to weigh all the options before extreme solutions are imposed. We must balance growth, environmental standards, and logical solutions to meet the future needs of our area, nation and world. The “perfect storm” has not disappeared! It is still wobbling like a hurricane offshore, intensifying and then dissipating, but continuing to be a threat in the future! The “perfect storm” is still out there and will come ashore. The question is whether we will be ready or be able to weather the storm. Your local, state, and natural rural electric leaders are monitoring the situation every day and representing the needs of rural electric members across the nation. We desire the most affordable price for our members, while preserving the environment around us. We want to be good stewards of our resources, but we want the op- portunity for success to be a reality. I believe that we can have both! As neighbors, rural folks have always worked together for the good of the community. It would be nice if that would catch on in D.C.
At SWRE we will work with our state and national organizations and leaders to meet all of these challenges as they occur. We will continue to keep that “perfect storm” on the radar, and serve the needs of our members through our vision of safety, service, and satisfaction – one member at a time!
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140 |
Page 141 |
Page 142 |
Page 143 |
Page 144 |
Page 145 |
Page 146