POWER July 2013 - 59

ELECTRIC POWER 2013: FLExIbILITy and adaPTabILITy
4. Load loss continues. Industrial load growth has declined for three quarters in a row in
AEP's service territory. Source: AEP
Primary metal manufacturing
Mining (except oil and gas)
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
Mar-06
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Mar-13
Rooftop PV is only one component of
the real enemy of the utility business model
going forward, which is weak electricity
demand. McCullough showed graphs of
dropping industrial load in AEP's considerable
service territories (Figure 4). On the
bright side, he also acknowledged that shale
gas processing and delivery needs electricity
to run pumps, compressors, and other
machinery. He said load is probably not going
to grow substantially because of demand
side technologies and behaviors. " Energy
efficiency is real. "
How real was underscored by other panelists.
A 1% rise in gross domestic product used
to lead to a 1.6% rise in electricity demand,
he said. Today, the associated demand figure
is 0.3%. Light bulb replacements and appliance
efficiency standards, to name two factors,
have reduced cooperative utility load.
Nipper also stressed the importance of
" utility-customer partnerships " in implementing
energy efficiency improvements.
Lots of projections show demand going
down, echoed Moeller, so customer relationships
with utilities will be very different. In
this context, Polsky was more conciliatory:
Customers still need the utility as a backup.
Binz gave the example of a state-of-theart
refrigerator that uses less electricity than a
75-watt light bulb! " Ten years ago, the same
refrigerator would have consumed four to five
times that wattage. " But efficient appliances
are only part of the story. Binz observed that
no panelist had yet used the phrase " smart
grid, " adding that the smart grid is a digital
mesh that will provide services in the backJuly
2013 | POWER
ground. He noted that in the UK, the standard
" rate of return " is no longer the benchmark
for setting electricity rates. " PUCs need to
incorporate more concepts of risk. " This loss
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Chemical manufacturing
Paper manufacturing
Petroleum and coal products manufacturing
of load is " irreversible, " he concluded.
" Lowest cost is not necessarily the solution, "
Polsky said. An option selected may not
be the least cost today but will be over time.
One audience member said, " Diversity
comes from long-term resource planning. "
Then he asked, " Do we need to re-introduce
long-term strategic planning, central planning,
for public infrastructure? " In different
ways, the panelists answered yes, even if
they undoubtedly had different ideas of the
percentage of each resource that would constitute
" diversity. "
In closing, think about this. Global petrochemical
and manufacturing companies are
making decisions whether to invest in multibillion-dollar
facilities to take advantage of
domestic shale gas. The investment horizon
is similar to that of a power plant. They
will have to contract for raw materials for
the front end and compete on price for their
products. They will have to meet as many, if
not more, environmental and product quality
and safety regulations. There will not be
a regulated rate of return on that investment.
Nor will there be a PTC, ITC, RPS, carveabt.
power feb 13:Layout 1 5/31/13 3:56 PM Page 1
out, or other subsidy. ■
-Jason Makansi (jmakansi@ pearlstreetinc.com)
is president of Pearl Street Inc., a
technology deployment services firm.
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POWER July 2013

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