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Electricity, meet Rock

For several years, the U.S. Geological Survey (USGS) has been investigating the potential effects of intense geomagnetic storms on electric utility infrastructure.  In 2016 they concluded,

“A severe geomagnetic storm could disrupt the nation’s power grid for months, potentially leading to widespread blackouts.  Resulting damage and disruption from such an event could cost more than $1 trillion, with a full recovery time taking months to years.” (1)

Bloomberg recently noted that in an upcoming report, the USGS more specifically identifies a stretch of the Interstate 95 corridor as particularly at risk of power outages related to geomagnetic storms.

This corridor is largely underlain by Paleozoic (very old) crystalline rock that acts as an insulator, reflecting back incoming energy from the sun, thus giving that energy a second chance to damage utility infrastructure.  Damaged electrical infrastructure, particularly utility transformers, can take many months to replace.

“Through a stroke of bad luck, the worst of these rocks basically traces the path of I-95 from Richmond, Virginia, to Portland, Maine, passing through Washington, New York and Boston along the way.” (2)

Putting aside for the moment the notion that rocks can be inherently good or bad, concerning how this connection between electricity and rocks may impact the electric grid, solutions are not simple.  Some may look to off-grid self-generation and battery storage for protection.  But, if a geomagnetic storm is strong enough to impact the grid, it also may impact the electric infrastructure at individual customers’ sites.

Faraday cages are a potential solution.  Faraday cages also may provide protection against EMPs (electromagnetic pulses).  More on this in the weeks ahead.

References:

Evelyn Teel, Ralph Russell and Jeff Dowdell contributed to this article.

The Avalon Advantage – Visit our website at www.AvalonEnergy.US, email us at info@avalonenergy.us, or call us at 888-484-8096.

Please feel free to share this article.  If you do, please email or post the web link.  Unauthorized copying, retransmission, or republication is prohibited.

Copyright 2018 by Avalon Energy® Services LLC

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NCAC – 22nd Annual Washington Energy Policy Conference

ONE WEEK FROM TODAY

Secure your spot here: https://www.ncac-usaee.org/event-2845352

Energy Technologies and Innovations: A Disturbance in the [Market] Force

Thursday, April 12, 2018, 8:30 AM to 6:00 PM

The George Washington University

Keynote speakers:

Mark P. Mills, Senior Fellow, Manhattan Institute

Gil Quiniones, President and CEO, New York Power Authority

In addition to these keynote speakers, the following panels will be held:

PANEL 1: The Grid Awakens: Electricity Generation and Demand
Phil Jones, Executive Director, Alliance for Transportation Electrification
Bryce Smith, Founder and CEO, LevelTen Energy
John Zahurancik, COO, Fluence
Barney Rush, Board Member ISO New England, Rush Energy Consulting (moderator)

PANEL 2: Hydrocarbons Strike Back: Innovations to Maintain the Status Quo

John Eichberger, Executive Director, Fuels Institute
Sid Green, President, Enhanced Production Inc.
Mike Trammel, Vice President for Government, Environmental, and Regulatory Affairs, Excelerate
Rita Beale, CEO and President, Energy Unlimited (moderator)

PANEL 3: Innovation: A New Hope in Energy

Bill Farris, Associate Laboratory Director for Innovation, Partnering, and Outreach, National Renewable Energy Laboratory
Elisabeth Olson, Economist, Office of Energy Policy & Innovation, FERC
Christopher Peoples, Managing Partner, Peoples Partners and Associates
Devin Hartman, Electricity Policy Manager, R Street Institute (moderator)

PANEL 4: Return of Energy Policy

Adele Morris, Policy Director for Climate and Energy Economics, Brookings
Jason Stanek, Senior Counsel, House Energy & Commerce Committee, Subcommittee on Energy
Pat Wood, Chairman, Dynegy
Kevin Book, Managing Partner, ClearView Energy Partners (moderator)

Note: Chatham House Rules apply.

Full Agenda and to register –> http://www.ncac-usaee.org/events.php#event151

RSVP: Required

Conference Information:

Organizer: Michael Ratner, NCAC-USAEE Vice President (mratner@crs.loc.gov) / 202-707-9529
Venue: The George Washington University, The Marvin Center, 3rd floor, Continental Ballroom, 800 21st Street, NW, Washington, DC 20052

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Natural Gas and Electricity Are Parting Ways – Part 1

In recent articles, we have explored the dramatic decline in natural gas prices over the past seven years.  See These Are Days To Remember and 10,000 Maniacs Were Right.

In the US Mid-Atlantic, natural gas and electricity prices have, over time, tended to move together.  While there has by no means been a perfect correlation between the two, the relationship has been strong.

Over the past 15 years, the coefficient of determination (R2) has averaged about 67% (see yellow line).  In other words, over this time period, 2/3 of the change in electricity prices can be explained by changes in natural gas prices.  More recently, however, the strength of this relationship has weakened and continues to weaken further (see red line).  Electricity prices have declined but not as precipitously as those of natural gas.

Why has this relationship weakened?  Two significant drivers relate to (i) dispatch order and (ii) capacity prices.

Dispatch Order

In scheduling energy to serve electricity users, the grid operator, PJM, utilizes a least-cost dispatch model.  PJM develops an expectation of projected system load on an hourly basis and then seeks bids from generators to supply energy to serve this load.  After bids have been submitted, for each hour, PJM accepts the lowest cost offers first and then works their way through higher price offers until sufficient supply has been cleared to match the projected load.  (There are a number of system constraints and complications that must be incorporated into the process, but this pretty much captures it.)  For each hour, the price at which the last megawatt-hour (MWh) clears sets the price for all the supply offers that clear in that hour.

For many years, the last generating units cleared were generally natural gas-fired units.  As a result, it has been these natural gas units that have set the price for electricity, leading to the strong link between natural gas prices and electricity prices.  A common understanding was that “as natural gas prices go, so go electricity prices.”

But now, low natural gas prices are leading to lower and lower supply bids by natural gas-fired generators, causing them to more frequently fall down the dispatch order and clear before coal-fired units.  Because of this, coal fired units are now more often becoming the marginal, or price-setting, units.  And, as a result, falling natural gas prices have not driven down electricity prices to the extent they once would have.

In addition to procuring energy, electricity wholesale suppliers must also own or procure capacity.  In our next article, we will look at how capacity costs influence electricity prices.

Evelyn Teel contributed to this article.

The Avalon Advantage – Visit our website at www.AvalonEnergy.US, call us at 888-484-8096, or email us at jmcdonnell@avalonenergy.us.  Please feel free to share this article.  If you do, please email or post the web link.  Unauthorized copying, retransmission, or republication is prohibited.  Copyright 2015 by Avalon Energy® Services LLC