Google Aims to Become Electricity Marketer

google-energyOn Thursday, Google leapt forward into the energy industry in an effort to find reliable supplies of renewable energy for its power-hungry data centers. Google applied for approval from the Federal Energy Regulatory Commission (FERC) to become an electricity marketer, which would give Google the authority to buy and sell bulk power at market prices, just like utilities do.

Google applied through its Google Energy LLC subsidiary, which the company founded last month, recognizing the need to manage the risk of its considerable energy expenses and to have greater access to renewable energy sources to meet its environmental sustainability goals. If FERC approves its application, Google would join 1,500 companies in the United States that are defined as energy marketers. Most of those entities, however, are utilities or electricity generation facilities. Although it is unusual for a technology firm to opt for this energy procurement method, it is a sensible tactic for the company. According to Niki Fenwick, a Google spokeswoman, “We want to have the ability to procure renewable energy to offset power usage of our operations.” Google maintains that having more direct access to renewable energy sources will further its goal to become carbon neutral.

In 2007, Google announced that it intended to make its data centers and buildings carbon neutral, installing a 1.6 mW solar panel system on its headquarters building. As part of its RE<C program, which aims to find renewable energy sources that are cheaper than coal production, Google has invested $45 million in renewable energy start-up firms specializing in solar, wind and geothermal electricity generation.

Interestingly, Google does not publish its total energy consumption levels, nor how many data centers it operates and where they are located. The company asserts that such information could be used by its competitors to discover its energy procurement and management strategies. However, Rich Miller of Data Center Knowledge has been following the data center industry and has tracked Google’s facility locations. So far, he has identified about 24 Google data centers. Large data centers can use upwards of 30 to 50 megawatts of capacity each. Therefore, Google’s energy needs are probably comparable to the output of two power plants, hence the company’s determination to improve access to cleaner energy at more stable prices.

Stay tuned to find out if FERC will approve Google’s proposal to become an energy marketer. If such an important corporation can successfully purchase renewable energy to meet all of its energy needs and also jump-start the market for carbon-offsets, the renewable industry could quickly take off.

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New York’s New Energy Conservation Incentive

niagara-fallsIn 2007, the New York State Public Service Commission decided to further its push to promote energy conservation by adopting a revenue decoupling scheme for utility billing. This program aims to incentivize customers to use less energy, while maintaining a consistent revenue stream for utilities by eliminating the correlation between revenues and sales volumes.

The Public Service Commission approves the amount of revenue each utility can collect over a certain block of time, based on the utility’s predicted sales volumes. At the end of the period, each utility compares its revenue forecast to its actual sales and calculates the true-up adjustment. If sales exceed the forecasted revenue, the utility will issue customers a credit under the decoupling mechanism. If sales do not meet expectations, the utility will add a surcharge to the customer’s bill in order to recoup the revenue shortfall.  Utilities such as Consolidated Edison of New York, Central Hudson Gas & Electric, and Orange & Rockland all added a revenue decoupling line item to their invoices within the last several months.  The decoupling mechanism only affects the delivery costs of electricity and natural gas; the commodity portions will be unchanged under this initiative.

Although some groups accuse the scheme of being too generous to utilities, the program is crucial to conserving energy. Under the prior billing structure, the utility boosted its revenue stream as it sold more energy. Furthermore, the utility’s revenue would decrease as energy efficiency increased and the aggregate usage of customers dropped. With revenue decoupling in place, the utility will no longer be penalized by a decline in net usage due to efficiency improvements. This method encourages the utility to invest in energy conserving measures, presumably reducing the demand of customers. The decoupling legislation is part of New York’s plan to reduce electricity usage 15 percent by 2015.

New York is one of twenty states that uses decoupling for either electricity or gas. Some critics of decoupling claim that consumers will pay more for less energy. So far though, the adjustments have typically ranged between plus or minus 1 percent on a utility bill. According to Brandi Colander, an attorney for the NRDC, “rates may be going up slightly, but bills are going down”.

California has implemented a successful revenue decoupling program in the last several decades. The state began natural gas decoupling in 1978 and electricity decoupling in 1982. Since 1970, California has reduced its residential energy use per capita 19 percent, while that figure has risen 9 percent for the United States.

revenue_decoupling4

California's energy use per capita has remained flat for 30 years

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World’s Carbon Emissions Continue Rise…Despite Recession

smoke-stackPollution typically declines during a recession. Not this time.

Despite a global economic slump, worldwide carbon dioxide pollution jumped 2% last year, most of the increase coming from China, according to a study published online Tuesday.

“The growth in emissions since 2000 is almost entirely driven by the growth in China,” said study lead author Corinne Le Quere of the University of East Anglia. “It’s China and India and all the developing countries together.”

Carbon dioxide emissions, the chief man-made greenhouse gas, come from the burning of coal, oil, natural gas, and also from the production of cement, which is a significant pollution factor in China. Worldwide emissions rose 671 million more tons from 2007 to 2008. Nearly three-quarters of that increase came from China.

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New Natural Gas Supplies Delay Energy Crunch

nat-gas-reserves-chart3Global supplies of natural gas may be much larger than once thought. Breakthrough technology in gas exploration and production has advanced much more rapidly than predicted, which will unlock vast fields of previously irretrievable fuel. A new process known as hydraulic fracturing, or “fracking”, which involves injecting liquids, sands, and chemicals underground to flush out gas pockets trapped in shale and sandstone rock formations has propelled a great leap forward in the industry. Combining this method along with horizontal drilling and 3-D seismic imaging to determine the location of potential underground gas wells prior to drilling has rapidly increased the efficiency of natural gas production. In the past decade, these techniques have doubled the success rate of discovering wildcat wells, or wells that are separate from any known gas fields.

The implications of this discovery are significant. The proportion of fuel that the United States needs to import will decrease as a larger domestic energy supply becomes available. Natural gas currently accounts for one quarter of U.S energy consumption, and 22 percent of electricity production. A report released on June 19th by the Potential Gas Committee found that estimated U.S. natural gas reserves have grown from 1,532 trillion cubic feet in 2006 to 2,074 trillion cubic feet in 2008, an increase of 35 percent. Shale gas now comprises 616 trillion cubic feet of reserves, almost one-third of the nation’s total. This promising outlook for the natural gas market, coupled with the development of solar, wind, and biofuel technology, will advance America’s goal for energy independence. According to Ambrose Evans-Pritchard, International Business Editor for Telegraph publication, “As for the U.S., we may soon be looking at an era when gas, wind and solar power, combined with a smarter grid and a switch to electric cars returns the country to near energy self-sufficiency.” Most importantly, the United States will no longer be transferring billions of dollars in wealth overseas by importing two-thirds of its oil, much of it from politically unstable countries.

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New York City Increases Sales Tax Rate on Gas and Electricity

nyc-battery-park2On July 13, 2009 the New York State Senate passed A.B. 8615, A.B 8866, and A.B. 8867, which modify the New York City sales tax code. Effective August 1, 2009, the New York City sales tax rate increased from 4.0% to 4.5%. The combined state and local sales tax rate effective in New York City has increased from 8.375% to 8.875%. This rate includes the 4.0% state tax rate, the 0.375% Metropolitan Commuter Transportation District tax, and the 4.5% city sales tax. Furthermore, all revenues related to transportation and delivery charges of electricity and gas commodities are subject to the 4.5% city tax rate, even if purchased from an Energy Services Company (ESCO). The new tax rate applies if the meter is read on or after August 1, 2009, and more than half the days covered by the bill occur after August 1, 2009.

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Cold Winter for East Coast Predicted

old-man-winterThe USA’s East Coast could shiver under a blanket of unusual cold this winter, according to forecasters. The impact of this forecast is already being seen in the pricing of Natural Gas and Electricity futures as they’ve doubled from the August lows.

“It could be one of the coldest (U.S. winters) in this decade, depending on what happens in the West,” says Matt Rogers, a forecaster with the Commodity Weather Group, a consultancy with clients in the energy and agriculture industries. “We feel like we need to watch this particular winter closely.”

Temperatures could be 5% to 10% below normal, Rogers says. However, he and others also predicted a milder-than-usual winter across other northern states.

Forecasters are basing their predictions on El Niño, a periodic warming of the tropical Pacific Ocean that can bring warm air to the north. Forecasters say El Niño will be weaker than normal this year.

INTERACTIVE GRAPHIC: How El Nino affects U.S. weather

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Senate Introduces New Cap-n-Trade Bill

Senators Boxer and Kerry introduced a Climate bill in the Senate that would require a 20% reduction in emmisions by 2020 from 2005 levels (the US House passed a version earlier this year). Reactions are mixed. Stay tuned for a busy Senate session this fall. Meanwhile the EPA moved forward with its own plan for GHG regulation which would not require congressional approval.

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Block & Index - What Should I Do?

block-index1We have a lot of conversations with our clients and prospective clients about the electricity and natural gas markets. Most of those conversations revolve around taking either a “fixed price, variable (indexed) price or a combination of the two (block and index) 3rd party supply contract”.  The other part of the conversation usually revolves around “how long of a term” and “when should we do this”.  What NuEnergen does best in our energy sourcing group is  to have the necessary conversations with Sr. Management around risk management and budget.  We find that most of the time by doing a deep dive with the right group of people around these two issues, coupled with our in depth analysis of where the market is heading, we’re able to best recommend the strategy that is right for you.  Our process involves many moving parts, but the most important part of that process typically lies with our clients, their short and long term financial goals and their risk tolerance. So the next time someone gives a recommendation on purchasing energy in a deregulated market, ask the question - why?

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Ontario Bets Billions on Wind Power

2Ontario’s power grid is getting a $2.3 billion makeover as part of an ambitious, three-year effort to create 20,000 jobs and bring more green electricity to homes and businesses across the province.

In all, 20 projects are slated to go ahead. Some will boost capacity of existing transmission corridors, while others involve construction of “enabler lines” that branch out from corridors and tap into areas with rich wind and hydro electric potential.

Even with difficult economic times, this will be a record year for wind energy development in Canada. By the end of 2009, wind turbines installed in Canada will have the capacity to generate 3,169 megawatts of power, though about a third of that figure more realistically reflects average output over the year.

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NuEnergens John Carmichael - Tailhooker of the Year

jc-tailhookThis September 10th, John Carmichael (Director of Client Services) was named Honorary Tailhooker of the Year at the 2009 Tailhook Annual Reunion and Symposium in Reno, Nevada. John has been writing a blog for the Tailhookers for the past couple of years. We’re proud of John and his achievements with the U.S. Navy. You can read more here about his being honored by the Navy.

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