An Ignoble Experiment

2. Research challenges theory that emission guidelines will hurt grid reliability

Three diverse organizations have come together to reach a consensus on a proposal to address power plant emission reduction requirements under Section 111(d) of the Clean Air Act, which is under review by the White House Office of Management and Budget. The set of energy efficiency principles agreed upon by the National Association of Regulatory Utility Commissioners (NARUC), the National Association of State Energy Officers, and the National Association of Clean Air Agencies are being presented to the U.S. Environmental Protection Agency (EPA) as one of many potential compliance mechanisms to reduce carbon emissions from existing power plants.

Colette D. Honorabe. Credit: NARUC

The groups realizes that there are many options states can incorporate in compliance plans under the proposed guidelines, but these principles present a flexible framework for the EPA to rely on in considering energy efficiency as one of the options. The document is -- by design -- general, and encourages EPA to recognize the diverse programs states have already undertaken to reduce emissions and promote cleaner, more efficient use of electricity.

"States are leaders in developing and implementing energy efficiency programs," said NARUC President Colette D. Honorable. "This early action has equipped our nation with the tools necessary to further reduce emissions and promote more efficient electricity usage. While NARUC remains neutral on the existing and forthcoming EPA rulemakings, we encourage the agency to recognize each State's diverse generation fuel mix and provide flexibility so electricity consumers are not overburdened."

According to the principles presented, EPA should provide guidance to states no later than June 2015. The guidance will set forth a non-exhaustive list of approvable approaches/provisions that may be included in state compliance plans, as well as recommend energy management and verification protocols and approaches, providing technical assistance for energy management and verification of state, utility and non-utility provided energy efficiency projects and programs.

The principles also recommend that EPA offer guidance on options to avoid double counting -- which occurs if an entity funds an efficiency project within a utility's service territory and transfers the credit to another regulated party or another state -- of emissions reductions from public investment, utility programs, and non-utility delivered efficiency efforts.

Finally, because energy efficiency programs and policies can vary significantly from state to state, EPA should consider multiple approaches to achieving quantifiable and reliable reductions while avoiding imposing onerous and potentially expensive requirements on the states.

The CO2 emission standard is expected to be released in early June 2014.

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By Barbara Vergetis Lundin

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3. Poaching industry talent not a great idea

New requirements soon to be proposed by the U.S. Environmental Protection Agency (EPA) for the reduction of greenhouse gas (GHG) emissions from existing fossil fuel plants will not result in electric system reliability problems, according to research conducted by Analysis Group. The research finds that the new rules will provide states with significantly more opportunities for flexibility, innovation, and creativity in accomplishing the targeted reductions.

Analysis Group researcher and senior advisor Susan Tierney found that concern over electric system reliability impacts overlook three factors: the mission orientation of power companies and grid operators to ensure that the system can meet customer demands, the expected long lead time offered for implementation in the new guidelines, and the inherent flexibility of the EPA's "cooperative federalism" model in Section 111(d) of the Clean Air Act.

Reflecting on this well-established federal/state "cooperative federalism" framework, Tierney argues that, "In essence, EPA identifies the destination (e.g., ambient air quality; or in the case of the upcoming regulation, the new GHG emissions standards for existing fossil power plants), and states determine what route they want to take to get there (i.e., in various components of their State Implementation Plans or SIP)."

As the new guidelines are developed and implemented, this offers significant latitude to states to submit tailored SIPs by the June 30, 2016 deadline.

"The bottom line: there is no reasonable basis to anticipate that EPA's guidance, the states' SIPs, and the electric industry's compliance with them will create reliability problems for the power system," Tierney said, "as long as the EPA and states plan appropriately and take timely actions to assure electric system reliability in their plans. Section 111(d) affords states considerable latitude to mitigate and otherwise resolve reliability concerns."

There are many different possibilities states can consider in developing SIPs that meet cost-effective emissions reductions while also ensuring electric system reliability, including options focused both inside the fence (on generating units) and outside the fence (considering shifting output to other power plants, changes in power demand, policies supporting output at generating units with zero carbon emissions, and transmission solutions).

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By Barbara Vergetis Lundin

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4. Industrial CHP for efficiency, emission reduction

The lack of a skilled workforce in the face of upcoming retirements is not only felt in the United States, but is a threat to the oil and gas industry globally. In the United States alone, many large employers risk losing 50 to 80 percent of their retirement-eligible population in the next five years, according to Mercer's energy consulting practice.

Credit: Tech Collector/Wikimedia Commons

The oil and gas industry will add more than 530,000 positions in core professional and technical jobs over the next five years and 1.1 million over the next 10 years, according to Mercer, but more than half of the world's largest oil and gas producing countries will not have an adequate supply of talent to meet this demand.

A recent survey conducted by Mercer revealed that approximately two-thirds of oil and gas companies intend to fill the void by "buying" talent from outside their organizations, and nearly 50 percent plan to use "poaching" from competitors as their predominant source for new talent.

Not such a good idea.

"The widely-embraced strategy in the oil and gas industry of 'poaching from the competition' is simply not viable or sustainable," said Philip Tenenbaum, senior partner and global leader of Mercer's energy consulting practice. "A more strategic approach to both talent acquisition and workforce management that focuses on innovation and execution is required for those oil and gas industry members who hope to become leaders and separate themselves from the competition."

Looming retirements, while the primary concern topping the list for oil and gas industry employers, is rivaled by other critical talent issues. The survey revealed that 74 percent of organizations surveyed cited "technical skills gap" as a critical problem, but leadership, management and supervisor skills were also noted as being in short supply.

In 56 percent of the companies surveyed, there is a workforce-planning process that identifies gaps; however, only 27 percent say that process also provides solutions to close them.

The solutions Mercer recommends include a talent sourcing and development strategy to build an adequate supply of required talent, enhance the skills and capabilities of the company's existing workforce, engage staff, and foster commitment and loyalty, as well as address the need to manage cost and risk exposure.

"The tendency to simply 'benchmark' will not be enough," said Tenenbaum. "Oil and gas HR leaders need to lead the way in conducting a deep examination of their own workforces, understanding labor trends in key markets, forecasting talent and skill needs and most importantly building a customized plan of action that will address their very specific talent gaps and opportunities."

The good news for struggling oil and gas employers is that addressing these issues brings the potential for positive return on investment, as well as increased employee productivity, decreased attrition, increased production, and decreased operating expenses.

Oil and gas companies must find more innovative ways to fill the talent pool over the short and long term, if they expect to create a true competitive advantage in the industry.

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By Barbara Vergetis Lundin

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5. ISO NE efficient and competitive

In 2012, North America, Western Europe, and Eastern Europe accounted for 80 percent of installed combined heat and power (CHP) capacity worldwide in 2012, according to Navigant. The market continues to be driven by concerns about grid reliability, meeting demand for electricity, improving grid efficiency, and reducing greenhouse gas emissions. To this end, governments around the world are focusing on increasing subsidies and other incentives for the adoption of industrial CHP systems.

CHP is one of the most mature forms of distributed generation, examples of which can be seen in small- or large-scale resource extraction, such as: upstream oil and gas and mining, processing applications, such as refineries and food and beverage facilities -- and manufacturing facilities, such as: pulp and paper mills, steel mills, and packaging plants, according to Navigant Research. By deploying CHP, these industrial facilities enjoy efficiencies of up to 85 percent and the additional benefit of producing thermal energy that can be used as heat, converted to electricity, or converted to cooling when coupled with an adsorption chiller while taking advantage of low-cost fuels.

"Combined heat and power represents slightly less than 6 percent of global installed electricity generating capacity, but it is one of the most mature distributed generation segments," said Mackinnon Lawrence, research director with Navigant Research. "Although growth in the industrial CHP sector has stagnated in the United States and Russia, the two leading national markets, in recent years, this technology is expected to reach nearly $30 billion in annual market value by 2023."

The global capacity of industrial CHP will grow at a compound annual growth rate of 30 percent per year from 2014 to 2023, according to Navigant.

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By Barbara Vergetis Lundin

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