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The rising cost of energy combined with sluggish, post-recession economic performance is forcing companies to choose between hiring workers and paying their energy bills. The future looks promising, however. The possible repeal of the Public Utilities Holding Company Act and pending electric transmission system overhauls by Congress all point toward continued open market reforms in the energy sector.
At the center of a more liberalized electric power industry will stand influential, federally-regulated Regional Transmission Organizations (RTOs). These reformulated, Independent System Operators will exercise devolved Federal authority to direct long-term planning for our nation’s transmission grids. Working in collaboration with local utility companies, State regulators, and regional stakeholders, these RTOs will form the nexus of a revitalized electric power industry. Around them will operate regulated transmission companies and an otherwise open wholesale power market, open to all comers. The real winners of open market reforms will be industrial, commercial, and institutional owners, who will represent the largest share of new electric generation capacity added to the system. Distributed energy will cease to be a behind-the-meter solution to regional demand response initiatives, and will cross-over to the supply-side as a least-cost approach for mitigating the problems of transmission system congestion.
The global imperative of the Kyoto Protocol takes effect February 16, and will guide energy policies for most of the industrialized nations within the Organization for Economic Co-operation and Development (OECD). Even the United States, who withdrew its status as a co-signatory, will be affected. International corporations will lead the fray. Voluntary, self-regulating corporate initiatives within the US economy will target sustainable energy policies to gain economic and political traction, and consistency with their overseas counterparts in Kyoto signatory countries. And, in parallel with Kyoto’s global cap-and-trade program, the Northeast Governors and eastern provinces of Canada are working towards integration of energy policies and climate change initiatives. One possible outcome may be a regional cap-and-trade market for greenhouse gas emissions.
As the US industrial sector struggles for productivity gains against job losses in a post-recession market, rising energy prices further deteriorate corporate profit margins and hamper access to capital financing. In order to trim operating costs, industries, commercial enterprises, and institutions will turn to more efficient and affordable, advanced low carbon energy technologies. State and Federal policy makers will converge on this demand for cost-effective energy strategies as they seek further opportunities to liberalize the energy market and stimulate economic growth.
The term “distributed energy” refers to a distributed network of facilities that generate electric power. These facilities typically range in size from a few hundred kilowatts to roughly fifty megawatts. Distributed energy based on low carbon energy technologies is usually modular in design and can include combustion turbines, reciprocating engines, and novel generation technologies such as fuel cells, fuel cell/combustion turbine hybrids, and Ramgen Turbines. Distributed energy systems that recycle waste heat while generating electricity can nearly double fuel cycle efficiencies over simple-cycle, fossil-fired electric power stations.
Low carbon energy technologies provide near-term, least-cost alternatives for consumers of electric power, and can be developed locally by consumers themselves. Highly efficient combustion systems such as combined heat and power, and co-generation, produce more energy per pound of carbon emitted than other, less efficient simple cycles that produce only electricity. These more efficient fuel cycles are a low carbon energy resource. Such resources are smaller, more geographically distributed, and closer than centralized power plants to actual load pockets – like urban cores and industrial parks – where there is a high demand for energy. This proximity to load centers enhances the efficiency of distributed energy as it incurs less transmission line losses than larger, centralized power plants, which must transmit electricity over greater distances.
One benefit of distributed energy is greater grid security; it reduces the vulnerability to blackouts at both system and owner levels. Because of the diversity of electric generators located in or close to where high demand loads reside, distributed energy can result in lower cost expansions of high voltage transmission corridors into these areas. Distributed energy reduces green house gas emissions, because of its more fuel-efficient combustion cycles. Thus, it can have intrinsic economic value to owners under environmental tax or emission cap-and-trade regimes. As natural gas prices increase, efficient low carbon energy technologies gain political and economic attractiveness to both facility owners and Government policymakers alike.
For owners, the energy cost savings realized by implementing distributed energy technologies offsets operating expenses, thus allowing companies and institutions to leverage project financing outside of their normal capital budget cycles. This "no regrets" strategy of self-generated energy means that while consumers lower their costs for energy and create jobs, they are also addressing the global climate change imperative. Such strategies ultimately lessen the impact on human health and world mortality rates caused by the combustion of fossil fuels.
In the coming year, the White House, along with Congress and State Public Utility Commissioners, will pay closer attention to low carbon energy resources to ensure that these distributed energy options are considered by RTOs in long-term transmission plans. Federal and State sustainable energy policies will promote the innovation and market diffusion of low carbon energy solutions to reduce consumer costs, and to improve energy security and system reliability. The impacts of these low carbon energy policies will spill over to renewable energy and expand the total market for alternative energy resources.
Low carbon energy technologies can be used effectively throughout the industrial, commercial, and institutional sectors of our economy to satisfy their needs for safe, reliable, and low cost energy. In the coming year, governments will progressively implement open market reforms to eliminate market barriers and to broaden State energy portfolios. As policymakers respond to the economic needs of consumers and industries, they will also, without regret, improve the environment and human condition, and in so doing, take a step towards global harmonization.
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