It is not too soon to plan your market strategy for the next stage of the energy business cycle.
While the Administration pursues its virtual war against coal by piling on one onerous regulation after another, throwing good money after bad picking energy industrial policy winners only to end up with losers, and Congress dithers about what the energy policy of the Unites States should be, the market is quietly advancing strategies and technologies to transform the energy future. That market strategy can be summed up as follows:
- Declare Victory on RPS Goals. Renewable portfolio standards across the states diversify the energy portfolio by adding wind and solar energy to the mix sufficient to satisfy the state RPS goals but not enough to undermine reliability. Seeing more renewable energy in action is a good learning experience for all and provides lessons on integration, transmission access and the comparative advantages of alternative fuels and technology.
- EPA Regulatory ‘Drive by Shooting’ will wound Coal, Hurting Market Share but not Kill. This is a deliberate strategy choice. Let EPA proposed regulations drag down coal market share. The market watches coal take a beating knowing coal allies will fight back. Chastened coal will rub green noses in it by exporting coal to China rather than using it in America. Meanwhile enough existing coal plants will be forced into retirement to create a market opening for natural gas to assure reliability. Coals plants that survive will face rising costs and continued risk as they try to comply with new emissions rules.
- Praise Smart Grid but Prepare for Hybrid Distributed Energy Future. This is cheer leading knowing that all those smart meters deployed are going to look pretty dumb when politicians and regulators chicken out when it comes time to build more high voltage electric transmission to bring renewable energy to market and impose dynamic pricing to give end users incentives to change their energy use behaviors. This strategy recognizing that our weak economy is going to be slow in recovering so there is time to let this smart meter craze play itself out with a shift toward distribution automation and performance optimization and the need for load following resources closer to load centers to live into the distributed energy future.
- High Efficiency is the Killer App. The killer app of the energy future will not be smart grid or renewable energy but high efficiency gas turbines. Cleaner than coal, efficiencies better than 60% compared to 15-20% for renewable energy, load following, cheap to build, easy to site, no technology risk and fueled by domestic unconventional natural gas production growth, high efficiency combined cycle gas is poised to be BOTH the fuel of choice for power generation AND the winner in the race to dominate the clean energy future. Power plant builders led by the giants GE, Siemens, Alstom, and Mitsubishi have been bringing this next generation of power plants to market. Often called the H-class they are designed to operate in every global power market.
There is this gnawing feeling that economic recovery will begin in earnest with the change of Administrations in the belief that fundamentals will guide the new president more than “I won” politics dispensing the spoils of victory or industrial policy choices for the next Soylndra. Whether true of not, the strategies listed above are strategic, flexible, built upon fundamentals and easy to implement.
But what do we do until January 2013? Keep working the strategy and positioning the market leading plays to take off when the signs of recovery appear on the horizon. Bring on all that renewable energy because natural gas is our insurance policy of efficiency and reliability. Expect hybrid solutions that tightly integrate renewable energy and natural gas. Celebrate microgrid solutions and combined heat and power that optimize a micro portfolio and integrate scores, then hundred, then thousands of them into the modular high efficiency distributed energy future.This is our economic Lent, a time of preparation and anticipation, a time of reflection and hope for a better future. But Easter is coming and we are cooking dinner with natural gas.
What’s your strategy?