Twelve events that took place in 2012 and that will shape the grid for the years to come
2012 was a historic year for energy and the smart grid and we can prove it!
1) Hurricane Sandy. Impossible to remember Hurricane Sandy without thinking about the 113 people who lose their life, the billions of dollars of destruction and the 8.5 million people who remained without power, some of them for several weeks. Sandy was not a historical event just because of the magnitude of its destruction but, more importantly because for the first time in this country, this catastrophe was directly related to global warming by prominent political leaders, notably Michael Bloomberg.
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2) The emergence of the US as the soon to be World’s top fossil energy producer. The US is on its way to produce more fossil energy than Saudi Arabia or Russia. Who would have thought, even last year, that this would be possible one day? According to NRG Expert, the USA will pass Saudi Arabia as the top world producer in 2020 and 2020 is not so far away from now. NRG Expert is even more optimistic when predicting the US will be energy sufficient in 2035. It is not difficult to assess the geopolitical impact of this change and how about its economic impact. Today, 25% of the USA’s trade deficit comes from the oil and gas import. Tomorrow, not only the USA will not have to pay most of this bill but the country may even cash on its own energy export. Furthermore, cheap energy may mean improved competitiveness and reindustrialization of the US. Will this be enough to make up for the loss of one third of manufacturing jobs that happened in the past 12 years?
3) The great Solar Massacre. A lot of demand and even more supply is a recipe for catastrophe. In 2012, most solar manufacturers collapsed one after the other because of over production, poor manufacturing or in the case of a Solyndra, wrong technology choices. Good news is that demand remains strong and manufacturing could rebound after thorough cleaning of the mess. The price per watt of Solar energy is sinking and now the challenge is in better mastery of mass manufacturing. What the solar industry needs the most though is robust financing. In this area, the least we can say is that VC is not up to the challenge.
4) FERC’s Order 1000, an attempt to clarify the roles, responsibility and payback of transmission investors. This is good news for whole industry that may unleash badly needed infrastructure investment. This may or may not be related but some significant investment initiatives have been launchedrecently. Like any initiative that tries to find a compromise between conflicting interests, Order 1000 is criticized. Its success, like any law or regulation, will depend on how it is accepted by the stakeholders and about how it is implemented.
5) President Obama’s reelection. Both candidates programs were quite different and there is no doubt that Barack Obama’s reelection has an impact on the direction the country’s energy policy will take. What to expect then? The lessons from the past should have been learned. No more financing of the like of the likes of Solyndra? Maybe. The current debate about the fiscal cliff gives us an idea of what a bipartisan energy policy should like. It should focus on issues where both sides are in agreement including energy efficiency a topic that was almost nonexistent during the campaign. Both sides will also have to reach a compromise on shale gas and oil drilling. What will happen with nuclear energy will probably remain blurry for the next few years and the debate on renewable energy the country deserves will very likely be postpone. Bottom line is, there is little long term change to expect from this 4-year term but the USA making substantial progress on energy efficiency would be a great achievement.
The success of the bipartisan Shaheen Portman bill a few days ago is a greatexample of what to expect in this area. Let’s cross fingers for more to come.
6) Municipal aggregation in Chicago. The recent choice made by Chicago for Integrys may be the sign that some fundamental change is taking place with the shift of bargainingpower in favor of customers. Rahm Emanuel is showing us that now any customer can have the same purchasing power as the government or the military; One more threat on the utilities’ business model.
7) More Utility mergers and bigger ones. A new equilibrium in any part of a value chain has an impact of the other parts. 2012 was a year of mergers and acquisitions in the utility business. We do not have any data that tells is M&A was exceptionally high or not but there no doubt that the whole electricity value chain in entering a time of in depth restructuring. This is maybe what we can assume from the merger between Exelon and Constellation Energy
and the one between Nstsar and Northeast Utilities.
8) The slow and irrepressible decline of coal. Coal is declining and there no coming backbut this is a very slow decline.
Coal is far from dead and the EIA predicts it will remain the main source of energy in the USA for the next 30 years.
9) The first answers to cyber threats. For the first time in 2012, Cybersecurity became main stream with the DOE, the NARUC and the NIST’s strong involvement in defining frameworks and guides. It is sufficiently unusual to be noticed but this time, these institutions did not wait for a major issue to come out before taking action.
and the utilities seem to be ready to follow up very soon.
10) Deep trouble at Desertec. What will happen with this €400B initiativethat lost its main sponsor a few weeks ago with Siemens’ withdrawal from the solar market? Maybe a “Taigatech” as the organization is trying to develop a partnership with Russia on wind energy (interestingly enough, Siemens is giving up solar energy but remains very committed to wind energy!). Does Europe need Desertaigatech to reach its renewable goals by 2050? Maybe not if we look at what Denmark has been able to achieve, at the very ambitious goals the UK has set to itself on offshore wind and at the incredible political will Germany is putting on solar energy. Desertec was more important as a symbol of north-south political cooperation.
11) Energy goals become part of business strategy. Energy is now “embedded” in the strategy of mostbusinesses. This is the result of a Deloitte published in May. 90% of the companies interviewed have set energy goals for their organization. This is 10% more than the previous year.
12) Eaton acquires Cooper, the Big four becomes the big five. It is always nice for the customers to have more choices. Here again, we may be at the beginning of a trend. The more global the market, the bigger the players. (OK, OK, there is nothing original here).