Energy Industry: Here is Your Mission for 2014

on January 03, 2014 at 10:00 AM

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It’s that time of year when people look back at their behavior of the past year and wonder what they can change in the coming months. They set goals and try to put in place new practices as part of their New Year’s Resolutions.

The energy industry has had a busy, transformative decade. Technology innovation and the widening use of new techniques and approaches has engendered real changes and real advances. Political support for wind and solar generation has been controversial and often messily implemented, but in a short time span efficiency has climbed rapidly, prices have fallen even faster and deployment has spread faster than forecasted. The oil and gas business continues to reap the fruits of investment in new drilling technology and techniques, testament to its commitment to innovation underneath its often-chalky corporate exterior.

Some of the early expectations for electric vehicles and smart home energy use have been met more slowly, but even there progress continues to be made and the weight of consumer desire for better, sharply designed devices is pressing on the industry. Technology firms with substantial entrepreneurial nous and well-staffed research teams are working on knitting together early disjointed efforts at smart homes and electrification of transport, and with expanded usage feedback their products and processes improve markedly each year.

One area of the sector, however, has yet to feel the impact of this technology revolution. In 2014, the energy business needs to turn its attention to transportation, transmission and storage.

Moving and storing is the heart of any commodities business, but it presents unique challenges that have historically led to sanctioned oligarchic business models or state control. Changes to the transportation and storage components of energy markets can be abnormally disruptive, especially because financing for these expensive and cumbersome infrastructure investments often requires long periods of guaranteed income to be efficiently built.

State and federal regulators have wrestled with the problems of an aging transportation, transmission and storage (TTS) system in the US for more than a decade. The Federal Energy Regulatory Commission has issued controversial rulings and rules on various fundamental aspects of TTS, and waiting for those rulings and for guidance on resulting disputes has pushed back needed investment by utilities.

But for all the truth that new regulatory approaches are necessarily in such a tightly monitored market, as in other parts of the energy sector technology changes are wreaking their own disruption and in 2014 the time has come for all the industry stakeholders to focus on emerging threats and opportunities in energy TTS:

Transportation: Linkages between natural gas pipeline usage patterns and electricity production and pricing have grown both closer and more complex as the cheap price of shale gas has expanded the use of natural gas in power production. Better monitoring and improved analytical understanding of those linkages is needed to help with planning and more-efficient use of existing, often strained, infrastructure.

Transmission: Christmas blackouts in the Northeastern US and Canada are fresh reminders of how delicate our transmission system. Since Superstorm Sandy regulators have focused more closely on ways to improve and update models for investment in expanded and more-efficient transmission, but the growing role of distributed and renewable generation makes efforts to tinker with the current system short-lived at best. A rethink of ways to pay for necessary transmission upgrades is needed across the sector, using the best new technology available to help with prioritization, security and access equality.

Storage: Storing electricity has been one of the great challenges and promises for the power sector since its inception. The ability to store power at low cost and easily access it for distribution would in a moment eliminate many of the thorny problems that plague transportation and transmission transformation efforts today. Real advances are being made in storage, but current business and regulatory models fail to support further evolution. Storage is the game changer for the power sector (the Department of Energy thinks so too), and the technology that needs the most dedicated attention and external support to make meaningful gains over the coming decade.

The energy sector has proved it can be innovative, creative and transformative, often with the help of informed regulators and politicians. Putting aside backward-looking arguments over who had more subsidies when is key to moving forward with truly important change, and focusing on the integrated transportation, transmission and storage sector for 2014 is the best first step.

Peter Gardett is Founding Editor of Breaking Energy. This post also appeared on his website