Insight and counsel on energy and electricity.
During the President’s State of the Union Address, I was glad to hear him utter the words “Clean Energy Standard.” I continue to believe that this is the smartest policy mechanism for drastically minimizing environmental impact and having a hope in hell of achieving the domestic energy security every president has talked about since I was in high school (and readers, that’s a long time ago)…You didn’t ask but the worst policy Rx in my humble opinion was cap and trade. Imposing the same volatility and speculation onto our energy infrastructure that collapsed the global financial system? No thanks…Whether done by Democrats, Republicans, Tea Party, or Occupy Wall Street, the reindustrialization of America, which was a lot of what the President spoke about, has got to be good for our industry (go industrial load!) and I am all for it…The vociferous outcry about the production tax credit (PTC) not being extended has me thinking…really? If you average the mini-boom in wind activity this has prompted for 2012 and the dearth of activity for 2013, you still probably have two pretty good years business-wise. And does the wind industry really need the PTC? All that competition for turbine sales coming in from China, all the domestic manufacturing that’s been put in place, do wind company executives really make decisions like that thinking the tax credit goes to infinity? And let’s face it, how many permanent jobs does a wind farm add to the economy? Give them generous credits for building manufacturing facilities, maybe even credits and incentives for offshore wind, but surely the landlubber PTC has served its purpose. And no PTC is going to help a wind developer compete against $2.50 gas. Some credit is due Southern Company for pushing forward to build the new nuclear units at Plant Vogtle in Georgia. Right now, that this country even retains the option of building nuclear has much to do with Southern’s persistence. Not many companies in our industry can still plan within a fifty-year framework, much less a ninety day one. And thank whomever you like to thank that the Fukushima disaster in Japan appears to have caused minimal real impact on the U.S. nuclear industry. As I told my kids a few weeks after Fukushima started melting down, more people died today in Chinese coal mines, more people died last year from natural gas pipeline explosions in the U.S., than did at Fukushima. Have you noticed how popular automation and electrical and electronic product suppliers have become in the world of acquisitions? Last year, GE bought Converteam, early this year, Dresser Rand acquired Synchrony Inc, and most recently ABB purchased Thomas & Betts (or was reportedly doing so in the major papers), after less than two years ago buying Baldor Motors. I describe this as knowledge about the equipment is becoming more valuable than the equipment. More value is added through automation and intelligence these days, brains trump brawn. Everything changes in five years: In 2007, natural gas had climbed beyond $14/million Btu. Today, well, you can’t give it away, judging by how much of it is flared – that means utterly wasted, methane converted to CO2 and sent to the skies, by the way – at sites pumping oil. Coal plants divested by New York utilities during the heyday of deregulation and competition (and costing ratepayers through stranded asset charges) and acquired by AES Corp just declared bankruptcy. I remember when these and other coal plants in New York were some of the most profitable in the owner’s portfolio at that time, five years ago. Until next time…Jason Makansi, Pearl Street Inc (www.pearlstreetinc.com, jmakansi@pearlstreetinc.com).
