People who shop by themselves for energy are taking a risk with their own, and sometimes their organization’s money. 

They remind me of people who go wilderness trekking by themselves, or ride bicycle without a helmet, or jaywalk.  Things might turn out OK, but if anything goes wrong, look out!

The Albany Times Union’s Cathy Woodruff, the paper’s consumer advocate, put together an excellent article in Sunday’s paper (September 25, 2011).  Here it is:  http://www.timesunion.com/default/article/Too-many-choices-lead-to-too-much-confusion-2187518.php

Without mentioning our 22 Chamber of Commerce programs, or association programs, Woodruff did an excellent job illustrating the difficulty that people have trying to figure out energy proposals.  That’s why smart business owners, municipal officials and others have used our Energy Alliance programs to cut through the confusion and save money. 

The size of our group programs makes it feasible to mobilize the competition from the suppliers and the expertise from our consultants to assure consumers they are getting a good deal.  Group buying works!

One can only wonder what New York electric consumers will think when they learn that their interests are being represented by a power plant construction company from Long Island, two Ivy League professors, a New Jersey university researcher, a professor and consumer advocate from Virginia, and a utility industry executive, among others. 

Where are the consumers on the New York Independent System Operator’s hand-picked 15-member Consumer Advisory Council, announced April 7?  On cursory examination, this Council looks like it is there to insulate the ISO from consumers, not to provide a meaningful, qualified voice for consumers in the ISO’s offices.

They are hard to find.  OK, the New York State commissioner of Agriculture and Markets may represent farmers and food processors.  The President of the Capital District YMCA represents an organization with electric cost concerns.  The Executive Director of the NYS Conference of Mayors represents cities and villages that consume energy.  And the president of the Manufacturers Association of Central New York is included as well.

But the big problems for consumers with the electric system are in the Capital Region and New York Metro.  Is there anyone representing those areas on the Council?  Not really. 

I find the general flavor of the council, judging from the professional affiliations, to be unrepresentative of energy consumer concerns and largely out of touch with New York ISO issues.  But judge for yourself.  http://www.nyiso.com/public/webdocs/newsroom/press_releases/2011/NYISO_Consumer_Advisory_Council_Membership-_04.07.11_-_FINAL.pdf

 As far as we can see, the council is sure to insulate the NYISO from any meaningful consumer input, such as the problems caused by congestion charges, the inadequacy of the NYISO’s cost-benefit model for evaluating solutions to the economic problems, and whether their auction model treats consumers fairly or just sets up windfall profits for generators. 

Protecting the NYISO.  Electrical insulation.

This week, while the nuclear plant crisis in Japan is still unfolding, the media are asking every available elected politician, “do you still support nuclear power?”  The fact that they have all said “yes” (more or less) does not give us much useful information, and in fact illustrates how the media is prone to asking the wrong question.  The Fukushima crisis is not only a near nuclear meltdown, but a financial crisis for the owners, and a political test for countries trying to stabilize their energy sectors.   

It will be years before we know everything that has happened at the Fukushima reactors, to the people and land exposed to the radiation and to the financial condition of the utility owner.  Investigations can’t hope to begin until the crisis is over and the plants cool down.  Then the scientists must examine the evidence.  And the problem with most things nuclear is that many of the dangers are largely invisible and can only be measured and perceived through scientific instruments.  Putting the instruments in place, or repairing and replacing the sensing equipment that has been damaged in the crisis, will take many months if not years. 

Because we won’t know what happened for a long time, we can’t learn the technical lessons for a longer time.  Therefore, the media should be asking, “what should we do with our existing nuclear plants, and how much should we be using this technology in the future?”  That asks for a more complex answer, hopefully preceded by thinking.

What’s my expertise in this area, you ask?  Fair question.  In 1980, while on the staff of the New York State Assembly Speaker Stanley Fink, I worked on developing a package of legislation in response to the Three Mile Island incident.  Others on the staff worked on regulations, economics, energy strategy, etc., while I handled emergency planning, working with FEMA, the NRC, state and local agencies.  The result of my work was Chapter 708 of the Laws of 1981, which requires local governments near nuclear plants in New York to develop and test their emergency plans. 

More than 10 years before that, in 1968, as a reporter for the Schenectady Gazette, I researched and wrote a series of stories on nuclear power, keying off of Niagara Mohawk’s proposal to build a plant in Easton, Washington County.  That proposal was thwarted by the issue of cooling water—not enough river water to adequately cool the plant without adversely affecting aquatic life with warmer effluent. 

So, why is the media question the wrong one?  Because the answer is irrelevant.  No matter what position state or federal elected officials take today on nuclear power, the existing plants are not going anywhere very soon.  Local efforts to close sites like Indian Point near New York City and Vermont Yankee near Brattleboro will inevitably face the question of “what’s the replacement?” or “how much will electric prices rise if the plant closes?”  The answers are not easy or pleasant to contemplate.

Future projects will be placed on “deep hold” to allow time for the Nuclear Regulatory Commission, among others, to review safety standards once the information and lessons are known from Fukushima.  Therefore, it will be many years before a new nuclear site is approved in the U.S.  Adding units at existing nuclear sites may be more possible than at new sites, but not easy, as regulators and intervenors alike pour over every scrap of evidence of seismic activity and add more redundant and passive cooling systems, just for starters.  

One of the most immediate effects of the Japan crisis will be on the consumption and price of other fuels for electric generation, namely coal and natural gas. The Financial Times of London March 16 quoted Ricardo Leiman, CEO of Noble Group, one of the world’s largest traders of coal and emissions credits:  “We think it is going to impact positively on thermal coal and gas.  The world is going to be reluctant to expand nuclear in a big way.”

The same article reports that uranium prices have fallen 25% since Friday, and that there will be a “renewed dash for gas” in Europe as governments drop plans to expand nuclear projects.  “A U-turn such as the one that could very well ensue would push European gas prices further north,” said an analyst for Societe Generale, the French bank.

Of course, we can all agree that in the long run, we want renewable energy from solar, wind, tides, etc.  Easy to agree on something everybody wants.  But Fukushima has created an acute near term crisis—perhaps lasting a decade or more.  Between coal and natural gas, countries committed to dealing with climate change will opt for natural gas, using coal only if carbon credits are purchased as well (and the price of credits has skyrocketed in recent days).  Others concerned about the economics of production inputs will burn coal.  “Clean coal,” where carbon emissions are sequestered, is still off in the future and more expensive anyway. 

The Japan utility that owns the Fukushima complex of six reactors is not new to a nuclear-earthquake crises.  They were forced to shut seven other reactors after a quake in 2007, and in 2003 closed all its nukes after regulators found safety data to have been faked (Financial Times March 18).  The Prime Minister is yelling at the utility CEO, and the company has the weakest balance sheet in the global energy sector (FT).  A bankrupt utility is not likely to be investing billions to restore its nuclear plants.

In the U.S., let’s be realistic.  The appetite for nuclear power will diminish, notwithstanding the statements from elected officials.  The policy goals requiring nuclear energy to meet greenhouse emissions objectives over the next 30 to 70 years must be reconsidered.  In the continuing absence of “clean coal” technology, substituting coal for nuclear would seriously set back international climate goals.  Process-of-elimination, in addition to the objective merits, gets you to natural gas as the substitute generating fuel.  The challenge is that coal will always be priced below natural gas unless or until carbon taxes are imposed and factored in. 

Bottom line, the country, the world, must maintain a diversity of energy sources so that we are not held hostage by one fuel, assure economic competition to keep costs down, and continue to protect the environment and human health.

I am going to be watching natural gas markets with extra interest this morning when they open around 10:30 to see if the crisis in Japan has any effect on prices here.  My guess is we will see a significant up-tick in natural gas today and for a while.

Japan is the Number One importer of natural gas in the world (U.S. Energy Information Administration).  With four of their nuclear plants out of service, probably for good, they will be buying more natural gas in the international market to supply their electric power needs. 

Today, Japan generates about 30% of its electricity from natural gas, about 83 gigawatts of capacity.  That will certainly rise in the coming months to replace the downed nukes, and imports of Liquified Natural Gas (LNG) to fuel them rise as well.  That, in turn, should affect future prices for gas in the global market.

Where does Japan buy its LNG from?  Persian Gulf, Australia, Malaysia, Brunei are the top sources.  Although the U.S. still imports natural gas, imports declined from 2008 to 2009 by more than 10%, and are expected to continue to decline as domestic “unconventional” shale sources are developed. 

So watch the price of natural gas.  Higher natural gas prices will force electricity prices up in New York State, because natural gas-fired generation sets the pace in our electric markets.  From a home heating perspective, it won’t have much effect, as we are done with the winter heating season now (the next monthly contract is April, March prices are already in the bag). 

Long term, I would bet on those increased LNG supplies to Japan staying up.  Japan had planned on increasing nuclear’s share of electric capacity to 50% by 2050 from 24% today.  After the events of the past few days, that plan looks unrealistic.

I am on the road today, but wanted to just say that in today’s Saratogian reporter Lucian McCarty went to work on this and has published a very readable, coherent and accurate article about the congestion problem afflicting the region.  http://www.saratogian.com/articles/2011/03/08/news/doc4d75ace622626259976825.txt 

I will have more to say about this tomorrow.   See also last Saturday’s Daily Gazette’s Steve Williams column, covering the same meeting, also well done by Steve, and my presentation on this issue. 

Happy reading.