Ron Lischeid raises many good questions regarding the news that Xcel will be converting several metro power plants from coal to natural gas-- which, as we've heard, will mean cleaner air for the metro area. BTW, congrats to all those working for the Xcel plant conversions!
I want to address some of Ron's concerns about natural gas markets and his household electric bill; and I will focus on some Mpls aspects of the issue, after a few general industry comments. Sorry for the length. Natural gas is a clean burning fuel and coal is a dirty burning fuel. The US has vast amounts of dirty coal and it is relatively cheap-- which is why so many power plants burn the stuff and create greenhouse gasses in the process. Natural gas is less plentiful in the US, and the deeper and more remote the well, the more expensive the gas, which must be piped from the wellhead to the burnertip-- but it burns very clean relative to coal. Over the years, natural gas has been referred to as a 'bridge' fuel source-- a clean, high-quality energy source that should be sparingly used to get us from our current state of fossil fuel dependence to a future, more sustainable energy future. The transition has begun. Natural gas competes with oil at the burner tip in the industrial markets, and the larger plants switch from one fuel to the other based on price and air quality concerns. Prices can be very volatile for both oil and natural gas, and they swing daily based on supply and demand, inventory levels... international events, weather on the gulf coast and weather across the country. The conversion of these power plants to gas will add price volatility to Xcel's supply portfolio, although these plants represent only a small fraction of their (Xcels), overall production capacity in MN. However, as more power plants begin operating on natural gas across the country, we will undoubtedly experience increased supply and demand imbalances in the natural gas markets as we move forward-- and this will be reflected in prices. As domestic natural gas prices escalate in the future, more costly (but vast) supplies will come from Canada (after investment in wells and pipelines), and I'm sure there will be proposals for liquefied natural gas supplied from points around the world. (Conservation measures and efficiency improvements will again become popular) Xcel has a natural gas supply portfolio(s) to meet their customer needs-- both gas and electric customers. They have long-term, short-term and spot contracts that incorporate various pricing scenarios, and they utilize forward contracts and hedging strategies to mitigate the effects of price volatility. Many large industrial plants across the country and here in MN, purchase natural gas directly from producers; they pay the interstate/intrastate pipelines and local distribution companies (if used), to transport it to the burner tip. The natural gas markets are largely deregulated. The electric industry is in the early stages of deregulation, with generation, transmission and local distribution being the major industry segments. In general, large industrial customers can buy electric power from remote generators and have the power delivered by transmission/distribution companies. Federal regulators are pushing deregulation at the national level via interstate transmission rulings and states are investigating/ experimenting with deregulation as it pertains to the generators and distributors they regulate. Local distribution companies, regulated by the states, generally must provide service to all firm customers in their service territories, according to established tariffs. Federal law has evolved to the extent that smaller producers of electricity can connect with the transmission grids and sell/supply power to customers on the grid-- hence industrial cogenerators, wind turbines and wind farms now produce electricity and sell it to customers (or distribution utilities) after negotiating transmission/distribution contracts, etc. The larger players are in the deregulation game and the smaller players generally are not, at this point in time. As deregulation continues to evolve, smaller customers-- buyers and sellers, will be able to negotiate power agreements and move the power over the grid-- selling the power; and paying for the power and the transmission/distribution as separate line items on their bills. Large central station electric power production and high-voltage transmission has historically been the norm. With deregulation, it will be easier to build smaller-scale power generation plants and sell the power to customers nearby or in remote locations. Either the power producers or the customers will negotiate transmission capacity rights to guarantee delivery. These smaller, widely distributed production plants should result in a more reliable supply of power since large-scale outages would be minimized. These deregulated, decentralized energy production technologies and distribution scenarios will offer consumers new options as we move ahead. Increased competition and more diverse supply options should result in lower prices. It may also result in a cleaner environment, but that depends on many additional factors. The city of Minneapolis could investigate purchasing gas or electricity directly from competing producers to meet municipal needs; or it could purchase on behalf of all residential customers (maybe other customer classes as well) located within the city. Suddenly, Xcel and Reliant would have competition in reaching the burner tip or the wall outlet (they will be offering the energy commodity-- gas or electricity, as well as the local delivery/distribution service.) Could the city do better than Xcel or Reliant in procuring gas or electricity? I think it's doubtful, but you never know until you take a look. (Remember the city trash contracts?) The local distribution costs should be a wash, with only energy commodity prices (the gas and electricity) and interstate/intrastste transmission costs varying. Maybe the city would decide it wants green power produced from biomass or the wind-- the city, or it's agent, would issue the RFP/RFQ seeking bids, and see what is out there! Not enough green power available? If there is enough demand, some entrepreneur(s) may decide to invest in green generation capacity and negotiate the necessary contracts to finance a deal! Several large private or public buildings in Mpls. may decide to cooperate and install a cogeneration and/or a distributed generation system to provide heat and power, or generate power beyond their needs and sell the excess to others at an attractive rate (i.e. the new library and Henn. Co. General Hospital). Talk about new business opportunities! By the year 2025 we could see wind farms in western MN, and eastern SD, western WI and IO, and along the North Shore, providing electricity to Minneapolis and other metro locations. Or, Xcel could package the deal, purchasing the same green power on behalf of Minneapolis customers... a scenario similar to today. How will the electric industry evolve nationally and here in Minnesota? How can we in Minneapolis influence the evolution of the electric industry that supplies us with power? How can we influence our own energy future? All good questions to ask of those running for state legislative office and governor! What kind of electric power future do we want in Minneapolis and how can our elected leaders help us? What is their energy vision for our future? What are the candidates representing Minneapolis offering in terms of state energy policy futures-- especially electricity? What happens when Monticello and Prairie Island nuclear plants need replacement and relicensing? What happens when temporary waste storage is full? (I know, it's going to Yucca Mountain... but they've been saying that for 20 years.) Does the city need an energy policy? We'll never find out if we don't ask. Ask the candidates about energy policy this weekend! Michael Hohmann Linden Hills www.mahohmannbizplans.com _______________________________________ Minneapolis Issues Forum - A Civil City Civic Discussion - Mn E-Democracy Post messages to: [EMAIL PROTECTED] Subscribe, Unsubscribe, Digest option, and more: http://e-democracy.org/mpls
