The Next Step Needs To Be Action

on July 19, 2011 at 6:00 AM

Over the past eighteen months, the global energy industry has experienced two near disasters that have been matched neither in scale nor frequency during recent history. That’s the bad news. The good news is we have a tremendous opportunity to learn something from these events if we play our cards right, and this knowledge will serve as the catalyst our nation needs to develop the policies and regulation necessary to encourage the adoption of intelligent energy strategies to carry us into a secure energy future.

We all know the story. In April 2010 the US was struck with the tragedy caused by the Deepwater Horizon incident. And in March 2011, the world watched in horror as the Fukushima nuclear plant in Japan threatened a meltdown.

We’ve seen tremendous media coverage and finger-pointing related to these two incidents, which has since died down. I haven’t seen, however, much actual exploration of what these two events mean for the future of our energy mix.

The impact is two-fold. The oil rig explosion brought our dependence on oil, and the inherent dangers of that, into laser focus. The unfortunate events at Fukushima called the safety and efficacy of nuclear–clean, safe, and reliable–into question. Japan has now scrapped its plan to increase nuclear power to 50% of its energy supply by 2030 – instead promoting more energy from renewable sources. And as the after effects of Fukushima continue, the rest of the world considers following suit.

At the same time, it’s no secret that the population is expanding at an exponential pace – predicted to reach 10 billion by the year 2100. As more countries industrialize and adopt the energy-intensive lifestyles of the developed world, and the developed world adopts innovation in cleaner transportation such as electric vehicles, the demand on the global energy supply will become increasingly strained.

With obvious questions on the future of oil and nuclear, and demand for power on a severe upswing, it begs the age old question: how can we meet our energy infrastructure needs today and tomorrow? And can we do it without causing energy costs to spiral out of control, and without relying on building out new generation that will likely be dirty? And do we even have the natural resources to support new generation?

There are a lot of questions, and anyone who has been involved in this area knows the answer is certainly not simple. In my opinion the core of the answer lies within changing the way we use energy – and despite what you may have heard, it’s not all about energy efficiency. It will be a mix of efficiency, clean technology and renewables that form the lynchpin of the energy mix in the coming years.

Energy efficiency is one strategy everyone supports. Our next step needs to be action.

We can be much smarter about the way we use and conserve energy, which will enable us to effectively generate energy for tomorrow by saving it today. Energy efficiency is the world’s cleanest, quickest and cheapest energy resource. The technologies and services are proven and commercially available today.

Demand response is also one of these strategies, and it’s something that everyone in the power sector should be implementing. Demand response takes what was once a one-way street, the power grid, and makes electric power a bidirectional, two-way street, putting consumers of energy in greater control of their electricity demand and costs.

Just like you might think differently about how and where you drive when you see that $4/gallon sign, demand response offers the equivalent for electricity – putting a price tag on electricity before use, and then going a step further by offering the opportunity to work with the utility to shed load during high peak times and be rewarded financially for it.

In terms of a larger benefit to the power system, this technology will become increasingly important as we continue to develop renewables. Solar and wind sources do not constantly produce energy, and they do not necessarily produce it during high demand periods when it is needed the most. The next wave of demand response technologies combats this problem – connecting grid operators and consumers of energy to work together in responding to swings in supply and demand.

By providing methods to ramp energy use up and down according to peak price periods – as well as ways to actually sell back energy into the grid – demand response is emerging as a critical component of a smart energy strategy for businesses and consumers alike.

The Federal Energy Regulatory Commission (FERC) recently issued a landmark ruling that will encourage the adoption of this energy strategy. FERC 145 declared that “negawatts” (a unit of energy that does not need to be produced) from buildings and facilities can demand equal market prices as megawatts of actual, generated electricity.

Think about how transformative this can be for an industry that has largely been operating in the same way since its inception. Now, in FERC’s eyes, every commercial building or facility can function as a power generator, except it will be paid for units of demand response as opposed to units of power. It really is a fantastic way to work, and it’s something that is possible today.

Of course, beyond this ruling there are a myriad of other things that need to happen to make this energy strategy commercially viable. The next hurdle will be figuring out how quickly utilities will be able to enable demand response on a large scale, and the education, policy and incentives that will drive it. After that comes ensuring that building managers and consumers alike are aware and understand what can be made possible from an energy management perspective with the advent of what the industry has termed a ‘smart’ grid. And the list goes on.

While we’re certainly not at a place where we can sit back and relax, we are in fact making progress. I find that as a country, we are an unbelievable force when it comes to rising up in response to disasters. Where we need to improve is rising up to prevent them. The FERC ruling is just one example of moving in the right direction. My hope is that the potential energy catastrophes that have occurred recently will only serve as a catalyst for our industry to develop strategies that address the energy dilemma, and that energy innovations will continue to be supported by regulatory bodies and policy makers.

Chris Curtis is Executive Vice-President, Power, North America & Buildings Businesses at Schneider Electric.

Schneider Electric
is a global energy management firm in electric vehicles charging solutions, data metering and power systems management solutions.