The Future of the Energy Market
Tue, 04/21/2009 - 11:18am
Riding the Green Wave To Stay Competitive
Being "green" and environmentally friendly are more than buzz words these days. Now that alternative energy has caught the attention of Silicon Valley, investors are pumping cash into a wave of technologies some better known than others, but all indicate a shift from the norm. Despite the sluggish economy, alternative-energy start-ups received a record $2 billion in venture capital funding in the second quarter of 2008, a 58 percent increase from the previous year, according to Cleantech Group, a market research firm. Today, clean energy accounts for 20 percent of all venture capital funding and continues to attract interest.
In 2007, the United States' energy demands were met primarily by petroleum, coal and natural gas. Renewable energy sources accounted for only seven percent. Of the renewable energy sources, hydroelectric power generates the lion's share of electricity. At the end of March 2008, the US had an installed wind power capacity of 18,302 Megawatts, accounting for only about one percent of the total usage in the country. However, as small as that percentage may be, this clearly indicates a shift in the direction in which we are moving.
Installed wind power grew a staggering 45 percent in 2007, and that growth is poised to continue. In a recent report, the Department of Energy said if a series of challenges are met, the US should be able to derive a full 20 percent of its electric demand from wind power alone by 2030.
Research and investments are being poured into this technology, which is helping fuel its rapid growth. In a recent research paper in the International Journal of Global Energy Issues, engineers in Greece examined the total cost of various "green" technologies to see how they stacked up to fossil fuels once construction, maintenance and disposal were taken into account. They found that wind power, along with geothermal energy, were the greenest alternatives to fossil fuels so the boom in wind power is not only good for the U.S.' energy independence, but it is good for the planet as well, as it reduces our dependence on fossil fuels.
With the credit crisis, worldwide recession and reduction in energy prices dampening near-term demand for renewable energy and capital for those projects, there is still a surge in wind power demand and also a similar surge in demand for the equipment needed for capturing the wind. In April, turbine manufacturers confirmed that a wind turbine shortage existed, and is growing. In a conference call to analysts, General Electric reported that they currently had a $12 billion backlog of orders booked but not shipped; over double that of just one-year prior.
Not to be outdone by wind power, solar is making large leaps in terms of installed projects. In California, companies have almost completed construction on a pair of massive solar plants that together will generate over 800 megawatts of power more than 12 times the power than that of the next largest plant currently in operation. The plants, when completed, will cover over 12.5 square miles in sunny, central California. The scale of these plants is significant, as previous studies have shown that small solar installations are not actually an efficient alternative to other power sources. It was only once the scales became large enough that solar was a cleaner and greener alternative to fossil fuels. Additionally, the newer solar technology is concentrating solar power where large "farms" of solar mirrors collect and concentrate the sun's rays to create electricity.
While the latest available data shows that the United States has a long way to go before it will reach some of the lofty goals put forth for renewable energy, the surge in wind interest alone suggests that significant changes are underway. Currently, there are many states that have large amounts of wind energy production facilities in the construction pipeline. Once the planned projects are built, four states are set to be producing more wind power than the entirety of the country did in 2007. However, improved national electricity transmission will be required in order for industrial customers to realize the market benefit for these renewable energy projects. For example, if the wires to move the power from a Wyoming wind farm cannot be built, the power cannot get to the large, electricity-using markets.
Today, energy companies are becoming increasingly global in terms of their operations and comprehending energy issues, compliance and taking advantage of certain situations that may play into their favor. Delta Green, a service of Delta Energy, helps its customers in terms of regulatory monitoring with regard to specific guidelines coming from different countries. Developing a carbon strategy, understanding the approach for carbon regulations, assessing greenhouse gas emissions, generating or purchasing renewable energy and measuring the financial impact of carbon issues are all strategic to staying ahead of the evolving energy movement and employing the best business practices.
Last summer, we witnessed energy costs skyrocket to levels not seen in decades. And, while cost is a motivational factor for industrial customers when it comes to making decisions regarding an energy purchase, brand image is something that many mid-size to large energy consumers take into account. To that end, some energy companies will spend more this year on renewable energy because they not only think it's good for their brand, but they also know it is important to a large part of their client base.
In order to stay ahead of this changing energy market, it is paramount to keep abreast of the regulations that are coming down the pipeline. Last summer, we witnessed the Lieberman-Warner Leading Climate Change Bill, and, although it failed in the Senate, there are many key regional and state initiatives that will most likely be implemented that will cap greenhouse gas and carbon emissions from large corporations, and we have already witnessed this in Canada. A smart energy consumer is one that is well informed and is cognizant of proposed legislation that could affect any energy programs that are already in place.
Another topic to be addressed is demand response. Although this isn't exactly a "green" initiative, per se, it does help a company cut down on its energy spending by paying close attention to real time usage and current consumption. Demand response uses real-time meters to track energy usage. A demand response program gives businesses or a company the opportunity to earn money by making itself available to reduce electricity when called upon. This typically occurs during rolling blackouts, or on hot summer days when energy consumption is at higher levels than normal. This provides more current information than the standard method in place with most electric companies, which read total usage once a month. Added benefits of such a program include an additional source of revenue, improved emergency preparedness and data that can help you better manage your energy costs not to mention recognition as a conscientious industry leader.
Most world energy needs are currently met through the combustion of fossil fuels. With projected increases in global energy needs, more sustainable methods for energy production and storage will need to be developed, and production of greenhouse gases will need to be reduced. By leading rather than following the pack, you can make the best use of technology to continue to remain competitive in the ever-changing energy market. Certainly not just a fleeting trend, the "green movement" is definitely here to stay. The best advice is to ride the wave. Going green can help attract customers, cut down long-term costs, enhance your reputation and avoid supply concerns not to mention ensure regulatory compliance.
Dan Black has over 20 years of experience in the energy and environmental sectors and is currently Manager, Sustainable Energy, at Delta Energy, LLC. About Delta Energy, LLC Delta Energy is a team of experienced, knowledgeable and dedicated energy professionals - creating customized, innovative, cost-effective energy programs for a growing roster of national industrial, utility and commercial clients and energy producers. Delta Energy is a skilled, nimble, proactive energy partner to its clients, emphasizing personal relationships and exceptional service.