Monday, February 18, 2008

Why Do We Need More Power Generation Capacity?

Anyone who follows energy industry trade press is aware of the growing need for power generating capacity in North America. There’s no question that more capacity is needed. A nice summary of the issue is presented in 15 slides by Harold Garabedian of the Vermont Agency of Natural Resources and member of the International Air Quality Advisory Board.

There are many people who question just how MUCH additional capacity is necessary. Keep in mind that of all energy delivered to industrial facilities in the U.S., about 40 percent is not applied as intended to works in progress. In other words, a lot of energy is wasted. Avoiding much of that waste is not only economically feasible at the facility level, but in fact desirable from the general public’s perspective. If energy consumption is inflated through waste, then investment in new power generation facilities will be similarly inflated.

The trick, as always, will be to somehow reduce the waste. There are 200,000 industrial (manufacturing) facilities in the U.S., plus another 85 billion square feet of commercial building space, all of which is managed by teams of people who go to work each day to face urgent issues that have nothing to do with energy use.

Sure, corporate leaders are aware or rising energy costs, but each has a business to run. They don’t have time for energy problem-solving. Their reaction is to do what top managers are supposed to do: they delegate the issue to a subordinate. And the energy issue keeps getting delegated downward until it falls in the hands of someone who has time for it (or who has no opportunity to delegate it any further). The lower you delegate energy cost-control duties, the more localized and temporary the solution. In practice, the “owner” becomes a facilities person who lacks the authority to spend money, change procedures, or compel change on the part of the many colleagues whose day-to-day decisions impact the organizational use (and waste) of energy. While energy is usually a SMALL portion of expenses for most facilities, ALL facilities still use it. With energy waste being a "small" fact of life for so MANY facilities, it has been too inscrutable a problem for most organizations to take seriously. So start building those power plants. We’re going to need them, and we're all going to pay for them.

It’s a fair question to ask how much it costs to supply (or to avoid supplying) a marginal increment of kilowatt hours. It’s a completely different question to ask how much time it takes to accomplish the same. We can be confident that public policies and programs will make more energy resources, technologies, and information available to industry. But availability doesn’t always beget demand. Public policy can do very little to untangle the organizational disincentives and disconnects that prevent managers from investing the time it takes to pursue energy solutions.



At 7:05 AM, Blogger Unknown said...

I think there has been books on how much additional generation capacity is needed or not needed, and in my opinion, the best one is by Amory Lovins, in his series of books from Soft Energy Path in 70s to the new Small Is Profitable. Wasted energy is the greenest energy in the world, and is almost abundant for the decades to come.

One trick is, even in a ocuntry like US where infomration is believed to be transparent and readily available, the media groups, the public are not fully educated.

So it is not surprising in China the government is focusing on additional generation capacity, with a special favor of larger turbines, the larger the better, to put on line, and it is going to build 70 GW, most of them will be coal-fired in the coming several years, to meet the increasing demand. And that means some US$ 35 bn of investment and although we believe 10% of that will satisfy the need by reducing the current demand, especially in manafacturing plants. But unfortunately there is no sign that this kind of lowest cost approach will be put in place.

And by the way, I learnt your blogger through Strategic Planning for Energy & Environment, a free gift offered by Globalcon 2008 in Austin.

Samuel Zhou



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