Q2 2013 – Project Leasing: Take Advantage of Low Interest Rates and Low Monthly Payments
Project Leasing: Take Advantage of Low Interest Rates and Low Monthly Payments
In today’s economic environment, many private and public organizations are faced with tight operating and capital budgets. These restrictive budgets are hindering organizations from investing in necessary purchases to ultimately reduce operating expenses.
A common way to reduce operational costs is to address and adjust how efficiently facilities are consuming power. For example, up to 80% of a commercial building’s electricity charges can come from lighting alone. Replacing or retrofitting old, obsolete lighting with a more efficient system will save money but is a significant upfront purchase. Because of this, leasing can be an attractive and financially viable option.
Project leasing can allow you to increase your buying power by purchasing at today’s prices and low interest rates while stretching out tightly budgeted money over several fiscal years.
General Characteristics of a Lease
A lease is collateral-based finance product, utilizing the advantages of fixed term, fixed rate and fixed periodic payments. It eliminates a significant equity investment by the customer and fixes the cash flows to simplify the budgeting process.
The lessor looks to use the leased equipment as the primary source of revenues and cash flows from which to repay lease obligation.
Financing can include “soft costs” such as installation, maintenance, freight, etc. as a part of the lease investment.
Why Consider Leasing?
1. 100% financing. Since leasing generally provides 100% financing, companies are attracted by the minimum upfront expenses and down payments required by other financing alternatives. Tangential out-of pocket expenses like shipping, freight, installation and engineering can be included in the financing.
2. Leasing is a fixed expense. With the uncertainty of interest rates and inflation, it is advantageous to lock-in long term expenses with today’s dollars. In addition, you have the opportunity to pay for the equipment from the savings realized (i.e. energy efficiency, utility rebates, and federal tax deductions).
3. Preserves existing lines of credit. Growing businesses generally have substantial credit needs to finance their development. By diversifying lending relationships, your business maximizes its access to credit and you never “put all of your eggs in one basket.”
4. Tax advantages. Leasing provides substantial tax advantages, in some cases providing a 100% write-off of the monthly lease payment. This is especially attractive to businesses subject to Alternative Minimum Tax.
5. Eliminates Cost of Waiting. With energy efficiency equipment time is literally money. With leasing, you can prevent the delays in equipment acquisition if you budget 6-12 months in advance and have not allowed for this particular purchase. With energy efficiency projects, one year of lost energy savings is usually greater than the entire cost of financing!
What Projects Can Be Leased?
Many energy efficiency measures can financed through a leased and multiple projects can be combined into a single lease. Examples include:
- Lighting – Lighting technologies are constantly improving. Today’s systems are not only energy efficient, they produce better illumination and have lower maintenance costs than older systems.
- Power Factor – Many industrial and manufacturing plants face a power factor penalty from their electric utility on every bill. Installing a capacitor bank to correct power factor can save thousands each month.
- Solar – Harvesting energy from the sun is another way to save on electricity costs by increasing energy efficiency and decreasing dependence on the utility grids.
- HVAC – Upgrades to HVAC systems improve energy costs with newer, more proficient technology. Aside from saving energy, you could reduce noise and lower maintenance costs.
Leases can be structured on varying term lengths to accomplish a company’s goals, whether that is quicker ownership or higher positive cash flow. Below is an example of a lighting & power factor project:
Energy project leasing may not be a fit for all companies, but for many, it can provide an alternative finance mechanism. Let RPM help you explore the opportunity to capture energy cost savings today, without little to any upfront cash outlay through leasing.
CREZ: Competitive Renewable Energy Zone
In 2008, the Public Utility Commission (PUC) approved a transmission plan proposed by ERCOT to create more than 2,300 miles of transmission lines linking west Texas wind power generation with the densely populated areas in central and east Texas. The plan identified areas in west Texas where wind generation had the greatest potential and determined the transmission infrastructure needed to move the power to market. The CREZ project was initiated by the state legislature in 2005 to create a competitive market for wind power in Texas.
Thirteen transmission companies have contracted with the PUC to move the power east, which was the largest financial barrier for west Texas wind generators. The total project was estimated at $4.93 billion, which was expected to be paid back by residential electricity consumers over the next decade. However, cost overruns have increased the total project cost by about 40% to $6.8 billion – or $800 per residential consumer. The project is expected to be completed by December 2013.
New Home Product: Nest Thermostat
Forget programmable thermostats — this ‘smart’ thermostat learns your behaviors and sets itself by mimicking your heating and air conditioning habits. Most programmable thermostats are complicated and time consuming to use, leaving no real benefit over a standard one.
People often leave their homes for work, vacation, a day out, etc. without adjusting the temperature. Nest learns your patterns and programs itself after a few times of use and can also be controlled from your smart phone.
Only 11% of programmable thermostats today are built to conserve energy. The Nest products ability to adapt to lifestyles allows an average user up to 20% savings on heating and cooling bills.
Installing Nest can be as simple as installing a new light fixture. Three out of four users installed the thermostat themselves in thirty minutes or less.
To see whether or not your home system is compatible with Nest please call 855-4MY-NEST. For more information, reviews and photos, visit www.nest.com.
Gross Domestic Product (GDP) rose at a 2.5% annual pace in the first three months of 2013. This was driven primarily by a rise in consumer spending. Consumer spending rose at the fastest pace since the end of 2010. On the other hand, cuts in government spending dragged on the economy in the first quarter.
Though the GDP rose 2.1% from Q4 2012 economists were expecting a stronger rate of 2.8% growth.
Economic growth isn’t as likely to be as strong in the second quarter due to the public sector cutbacks and lack of job growth in March.Read More
Q1 2013 – Customers Earn Revenue through Load Curtailment Programs
Q1 2013 – Customers Earn Revenue Through Load Curtailment Programs
As grid reliability is becoming more of an issue across the United States, many utilities have begun to offer load curtailment options. One program offered in Texas is gaining notoriety from industrial and manufacturing companies for the extra revenue it can bring. Texas has experienced growth like no other state in the nation with more than 421,000 new citizens added to the population in 2012. All growth requires infrastructure support, including building new generation plants to meet energy demands. Power plant construction is a long process and the Public Utility of Texas (PUCT) along with Electric Reliability Council of Texas (ERCOT) is offering commercial and industrial users an opportunity to earn money for load reduction as a substitute for new generation construction. In short, ERCOT and utilities will pay power users to be available to curtail electrical load, as long as a reduction is performed when called upon. The two main programs are LAR (Load Acting as a Resource) and ERS (Emergency Response Service), formally known as EILS. The LAR program is instantaneous load interruption and is targeted for large industrials with flexibility in load reduction. The ERS program offers advanced warning and is great program for demand response beginners.
In the past, commercial and industrial power users were reluctant to participate in the program due to high hurdles the state put in place to participate. Some of these obstacles included a maximum 10-minute warnings and shedding at least 1,000 kilowatts (kW) of load. Also, many demand response providers required installation of load curtailment equipment and software.
The program turned a corner on June 26, 2012 when ERCOT announced a new, voluntary, 30-minute pilot program (http://www.ercot.com/news/press_releases/show/26236) in which $6 million has been allocated for funding. This has led to a higher level of participation and opened the door for more power users to take advantage of the financial benefits of the program. See below details and financial analysis of a potential participant.
ERCOT – Emergency Response Service (ERS) 30
This program requires a bid process where load is accepted up to the point whereby system load goals are reached. The maximum amount of time an event can last is eight hours and payments are made to power users who curtail at least 85% of their load bid. If at least 85% of the load bid is not curtailed, the power user can face suspensions from the program. The minimum commitment is 100 kW.
The program consists of four daily shaped participation blocks during each four month contract periods: October through January, February through May and June through September. See the below daily time periods:
- Business Hrs. 1 or BH1 (8am-1pm)
- Business Hrs. 2 or BH2 (1-4pm)
- Business Hrs. 3 or BH3 (4-8pm)
- Non Business Hrs. or NBH (all other hrs. and weekend and holidays)
Texas summers have the highest risk for potential rolling blackouts and as a result, many utilities are offering their own program along with the ERCOT ERS 30 program.
Oncor – Customer Load Management (CLM) Program
One of the main benefits of this program is that all load is accepted into the program. There is no bidding process. See some highlights and financial analysis below:
Oncor Program highlights are as follows:
· June – Sept Only
· M-F excluding holidays from 1-7pm
· One Hour notification
· Events cannot be called after 5pm
· Up to 25 hours of unscheduled events – unscheduled events duration 1-4 hours ($39.82 per kW)
· One required 3 hour scheduled test ($0.18 per kw)*
· No events were called in 2012
Example Calculation: Summer Block (June, July, August & September)
There have been nineteen LAR calls since the start of the program in 2002. As for ERS, there have only been two calls since the start of the program in 2008 and both events were in 2011. There were no curtailment events in 2012. As referenced in the ERCOT 2012 CDR report below, the potential for shortages in system will be increasing, and therefore, a potential for higher payments in the future.
ERCOT May 2012 CDR Report (Capacity, Demand and Reserves Report)
In conclusion, companies are affected by rolling blackouts. An organization which chooses to participate in a load curtailment programs is choosing to be part of the solution. If your company chooses a proactive approach, a financial payment can be your reward.
Simply contact RPM and an Energy Manager will walk you through a free financial load participation evaluation.
Main Line – 469-759-1450 | Email: firstname.lastname@example.org
The Top 10 states for new installed wind capacity in 2012
1. Texas (1,826 MW)
2. California (1,656 MW)
3. Kansas (1,440 MW)
4. Oklahoma (1,127 MW)
5. Illinois (823 MW)
6. Iowa (814 MW)
7. Oregon (640 MW)
8. Michigan (611 MW)
9. Pennsylvania (550 MW)
10. Colorado (496 MW)
In Obama’s second inaugural address, the President put a direct focus on regulating emissions to combat global warming. Thus, the EPA will take on a new focus as Chief Lisa Jackson is stepping aside. Below shows the major EPA regulations over the next three years with the most impactful legislation being MATS (Mercury and Air Toxic Standards) that will take effect in 2015. The law requires current coal plants to put in pollution control equipment to reduce harmful emissions. This equipment is very expensive and thus most coal plants will be retired.
To make up for this void of generation, all other types of power plants will have to be built including solar photovoltaics. Most corporations have passed on solar due to long returns and haven’t looked at it again. Corporations should change this habit and have an annual review due to the momentum of more aggressive incentives from Federal, State, Municipal and local utilities. See the below analysis of Texas commercial building incentives for 2013 in Oncor territory:
Lastly, Congress is looking at alternative financial methods to promote renewables. The two financial structures being proposed are allowing solar companies to for a REIT or M.L.P. for renewable energy projects. This would allow companies to reach more investors as the income is passed back to investors as they don’t pay corporate taxes and are often publicly traded. In conclusion, every corporation should have an annual review of Solar as an option for their facilities as the incentives keep gaining momentum.
Use the following link to a PDF example of a full proposal with roof layout: Proposal Example
Smart Meter Texas
Did you know that if you have a Smart Meter at your home or apartment, you can monitor your daily usage? Visit Smart Meter Texas at www.smartmetertexas.com to register your Smart Meter. All you need is the ESI ID and meter number off of your electric bill.
GDP Economic Update
According to advance estimates, the real GDP decreased 0.1% in the fourth quarter of 2012 after increasing 3.1% in the third quarter. The drop reflected a fall in government spending- mainly a decrease in defense spending- a decline in exports and inventory investments.
The full 2012 year GDP increased 2.2% after increasing 1.8% in 2012. The pickup for the annual GDP growth was due to a slowdown in imports and consumer goods, the housing market rebound, an overall upturn in inventory investment and a smaller decrease in state and local government spending.
Courtesy of the Bureau of Economic Analysis: www.bea.govRead More
Q4 2012 – LEDs: A Low Energy Lighting Solution
LEDs: A Low Energy Lighting Solution
LEDs are often associated with the red lights illuminating your alarm clock numbers, the brightly colored light panels in a night club or the bulb in the tiny flashlight key chains for sale at a convenient store. Fluorescent and incandescent bulbs remain the more practical lighting application; having lit up office spaces, hallways and our homes for decades. As time goes on, though, LEDs are evolving and finding their way as a lighting solution for residential, commercial and industrial users.
A Brief Background on the Light Bulb
Thomas Edison invented the first practical light bulb and electric lighting system in 1879. In more than 130 years, the light bulb has remained extremely similar to the original design. Modern incandescent/fluorescent bulbs are widely used due to low costs, wide availability and standard functionality.
General Electric developed the first light-emitting diode (LED) in the 60’s; a small light source that is illuminated by electrons moving through a semiconductor material. Original LEDs glowed red and several more colors came along over the next decades. Eventually LED manufacturers discovered how to create the bright-white color everyone is accustomed to in their standard bulbs.
Many are familiar with LED lighting but it is a technology that has not yet been widely accepted. This is mainly due to the high upfront costs.
Like any newer-age product, LEDs are ever changing. Their quality, durability and versatility are increasing and prices continually decreasing. The light is produced very efficiently and can last up to ten times as long as fluorescents and incandescents.
In an interview with Greg Barry, president of light engine solution company LEDlinX, he stated that more than 60% of all fixtures sold or replaced in the next five years will be LED.
“Technology is changing monthly,” he said, “with better chips, drivers, heat management and optics.”
Energy Consumption and Lifetime
The lifespan of an LED is much longer than a conventional bulb’s because there is no filament that will burn out. Technically, an LED will illuminate forever but the intensity decreases over time – they are considered officially dead when they produce no more than 70% of their original lumen output (brightness). Additionally, due to an LEDs design, they are not damaged in circumstances that a standard bulb would be. It is a solid fixture and stands exceptionally well to shipping and transportation.
According to Energy Star, incandescent bulbs release 90% of their energy as heat. This is why you have to turn a light off and let it cool down before removing the bulb. Efficiency remains the number one advantage of an LED over standard bulbs. Not to mention they are cool to the touch.
Barry explained that one year ago return on investment for LED fixtures were in the 8 to 10 year range. Today the industry is seeing payback in the 5 to 6 year range and in five years consumers will see payback in the two year range.
“As acceptance matures, costs will come down significantly,” said Barry.
The above chart, courtesy of LEDLinX, shows the approximate lighting sales in North America. In 2012, LEDs made up $0.5 billion of the sales and in 2016 it is estimated that this number will increase to about $5.4 billion. In 2020, LED sales are estimated to be around 65% of the total lighting sales in North America.
For more information on LED lighting options for your facility, please contact us today. For more information on LedLinX please visit www.ledlinx.com.
The PUCT Raises the Offer Cap for 2013 and Beyond
The Public Utilities Commission of Texas (PUCT) voted again to increase the system-wide offer caps for 2013 and beyond. The current cap, at $4,500, will increase to $5,000 on June 1, 2013; $7,000 on June 1, 2014 and $9,000 on June 1, 2015.
Discussions on raising the cap began when the Electric Reliability Council of Texas (ERCOT) announced decreasing reserve margins. A reserve margin is the amount of available power above the capacity needed to meet normal peak demand levels. ERCOT’s target reserve margin, used to ensure stable grid operation, is set at 13.75% and actual reserve margins are likely to fall below the target by 2014.
The anticipated goal for the cap rate increase is to spur construction of new generation facilities. More generation would lead to an increased reserve margin, resulting in fewer struggles to meet demand during extreme weather situations coupled with Texas’s continuous population growth.
United States’ First Tidal Power Generation Project
Ocean Renewable Power Company’s underwater turbine located off the coast of eastern Maine is the first of its kind in the United States. On Thursday, September 13, the ocean tide turbine delivered it’s first electricity to the US power grid. An underwater turbine generates electricity by using the ocean’s tide to spin blades which are connected to electrical generators.
The amount of electricity produced in this project is small – powering roughly 30 homes – but the potential is great. Two more turbines are planned to come online in 2013 bringing production up to 4 megawatts (MW), which is enough electricity to power 1,000 homes per day.
Ocean Renewable Power invested $15-million in this project.
An underwater turbine. Courtesy of Ocean Renewable Power.
In 2014, Ocean Renewable Power Company and Fundy Tidal Incorporated plan to install units off the coast of Nova Scotia, where the Bay of Fundy offers even greater tidal power potential.
Increasing West Texas Nodal Charges
Nodal, an electricity congestion charge that began in December 2010, is frequently passed through from a retailer to the end user. Previously, this cost was distributed evenly for all end users across the four major regions of the state: Houston, North, South and West. Now localized, Nodal costs are directly tied to the congestion occurring in your specific location.
The grid has been strained in west Texas mainly due to increased oil and gas production in the region. The recent results are Nodal charges as high as $0.03 per kWh for many west Texas customers. To relieve the congestion, ERCOT’s board approved a $57 million project to improve transmission capacity across west Texas.
RPM advises it’s West Texas customers to lock in basis on their next contracts. Please contact us today.
The United States’ real GDP rose at a rate of 2% from the second to the third quarter of 2012 according to advanced estimates. This estimated increase reflects positive contributions from personal consumption expenditures, federal government spending and residential fixed investment. Imports (a subtraction in the calculation of GDP) decreased.
Economists predicted a 1.7% growth for the third quarter. Although .3% higher than expected, the growth is not enough to lead to strong hiring and is still a sign of the sluggish economy. On major theory suggests that the economy needs to grow around 3% a year to bring unemployment down by one percentage point.
Chart courtesy of CNNMoney.com.
Q3 2012 – Electric Market Design vs. Price Reliability
Electric Market Design: Price vs. Reliability
Most states participating in power deregulation started in the late 90’s to early 2000’s. The intention of deregulation was to expand the market for competition and strive to reduce costs for consumers. Retail and generation entered into a competitive market, while the delivery function remains regulated by the utility.
While a consumer’s main focus is pricing, regional transmission organizations (RTO) or grid operators focus on the reliability of power. A significant part of the reliability equation is making sure there is adequate generation to satisfy the electric demand.
Grid operators are in charge of selecting a wholesale market design to incentivize new generation. Two main designs are used in the US; energy-only or capacity. As an example, ERCOT, an energy-only market, will be compared to PJM’s capacity market.
Map: There are 10 regional transmission organizations (RTO) or grid controllers in North America. Courtesy of www.isorto.org
ERCOT – Energy-Only Market
The Electric Reliability Council of Texas (ERCOT) launched its competitive retail electric market in 2002, allowing residents and business owners to choose their own power providers. Over time, several adjustments have been made but one thing remains un-changed – ERCOT has always been an energy-only market where selling electricity drives operations and investments. ERCOT is the only region in the United States with the energy-only design (Alberta and Australia are two regions who also follow this strategy).
PJM – Capacity Market
PJM is an RTO that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia. As a capacity market, PJM provides reliability by offering power plant investors a stable revenue stream in which they can finance electricity generation investments: the main purpose of capacity markets is to incentivize these investments. PJM mandates adequate reserve margins (10% minimum level) through their capacity market. A reserve margin refers to the amount of available power above the capacity needed to meet normal peak demand levels.
Day-ahead or real-time pricing is used in ERCOT and while PJM uses real-time or day-ahead pricing as well, the capacity portion of the price is determined three years in advance. This piece tends to reflect the delta in price between the two markets.
The chart on the left (courtesy of Frank Travaglione with First Energy) shows the capacity portion of PJM’s prices. The price from one year to another fluctuates greatly in the different territories. Some prices increase while others decrease.
Generators submit capacity bids which determine prices 3 years in advance. Because this capacity portion offers more stability for power plant investors, retail prices tend to be more stable than in an energy-only market.
The fluctuating market may not always reflect a low price in either design but when prices drop to the lows in which we see today, ERCOT immediately benefits while the capacity portion of PJM’s prices lags.
Demand Response Role
Demand Response programs also play a role in both market models. Demand Response is a voluntary program in which customers cut back on power when shortage is a threat. Clients get paid for their load reduction because it is helping the grid operators maintain reliability. Because the PJM market has advanced auctions that demand response companies participate in, customers have accepted demand response as a revenue opportunity. ERCOT customers have lower participation in these types of programs because the real time market payout hasn’t presented enough economic incentive.
In theory, a capacity market offers more generational stability, but it is not always guaranteed that there will be sufficient power in either market design. Extreme weather events, power plant maintenance, government regulations (i.e. EPA rulings) and other unforeseen events can still cause power outages.
At this time, ERCOT is experiencing a shrinking generation fleet coupled with increased demand. The Public Utilities Commission of Texas (PUCT) is being forced to analyze options to address the lack of generation and exposure to rolling blackouts. Experts have proposed several recommendations to make ERCOT more reliable and efficient. One short term solution is to make participation in demand response programs more attractive to consumers, just as PJM has.
Another option is to implement the capacity portion of the market in ERCOT. It is unknown at the time what the best option is and experts suggest further analyzing the market before applying any drastic changes. The debate will continue on whether the reliability of a capacity market is better than the immediate price advantages of an energy-only market.
Production Tax Credits
The American Wind Energy Association (AWEA) wants congress to extend at least the wind portion of the production tax credits (PTC). The PTC is scheduled to expire on December 31, 2012.
The PTC provides an income tax credit of 2.2 cents per kilowatt-hour for electricity production from renewable energy sources, such as wind or geothermal energy. The PTC is an effective tool used to keep electricity rates low and encourage renewable energy projects. Extending the credit will also create jobs and investments in proven clean energy technology.
The Senate upheld the EPA’s Mercury Air Toxics Standard (MATS) rule after a vote on June 20. According the the EPA, Mercury and Air Toxic Standard will prevent 130,000 childhood asthma attacks; more than 6,000 cases of acute bronchitis among children; as many as 11,000 avoidable premature deaths; and 4,700 heart attacks, annually. Read more about the MATS here. The Cross-State Air Pollution Rule (CSAPR) is currently being held up in the US District Courts.
Photo courtesy of EcoWatch.
America’s economy grew at a 1.5% annual rate in the second quarter of this year – down from the 2% growth the previous quarter and slightly above the expected 1.4% gain. The increase reflected positive contributions from personal consumption expenditures and exports, which were offset by a negative contribution from government spending. Imports, which are a subtraction in GDP, increased. Economists see no decline in unemployment in the near future because of weak consumer spending. Expected growth for 2012 is 2.2% followed by 2% in 2013. Annual economic growth of 2.5-3 percent is needed to create enough jobs just to keep up with the expanding workforce and 4 percent or more is necessary to significantly reduce the unemployment rate.
Oil and Gas Update
The EIA estimates the second half of 2012 crude oil prices to be $88 per barrel and the price of West Texas Intermediate (WTI) crude oil will average about $89 per barrel in 2013. EIA expects regular gasoline to average $3.49 for 2012 and around $3.28 per gallon in 2013. The average price for regular gasoline in 2011 was $3.53 per gallon.
Natural gas inventories reached seasonal record highs due to a warm withdrawal season and increased production of natural gas in the shale plays across the US. At the end of the second quarter, natural gas inventories were at 3.1 trillion cubic feet, about 23% above the same time last year. Prices remain at historically low levels; the June 2012 price averaged 46% less than the June 2011 price. The Henry Hub natural gas spot price is forecast to average $2.58 per MMBtu in 2012 and $3.22 per MMBtu in 2013. Projected consumption of natural gas in the electric power sector grows by 21 percent in 2012, primarily driven by the increased relative cost advantages of natural gas over coal for power generations.
Coal exports are to total 112 million tons in 2012, 4.6 percent higher than 2011, but the EIA expects that coal exports will fall by 14% in 2013.
The latest rig count for the second quarter totaled at 1,966 – 1,425 of which were oil rigs and 541 of which were natural gas rigs. Compared to last year’s numbers, oil rigs have significantly increased while gas rigs have shown a steady decline. The production continues to shift from natural gas to oil due to extremely low natural gas prices.
GDP Economic Growth Rate Chart Courtesy of CNN Money.
Q2 2012 – Energy Efficiency Projects: Don’t Leave Money on the Table
Energy Efficiency Projects: Don’t Leave Money on The Table
Replacing your HVAC units? Upgrading lighting? Before you do, learn about the rebate offers in your area.
Manufacturing facilities, warehouses and commercial buildings require large amounts of energy to operate. As a way to push businesses to offset energy costs and promote efficiency measures, many utilities provide incentives and rebates to customers willing to update equipment.
Whether a project entails new construction or simply a replacement of outdated equipment, there are funds available for companies to receive.
Often times, utilities require a pre-inspection or audit before approving a project, and then a post-inspection to verify an adequate reduction in kilowatt hours has been reached. If your facility can afford to wait a few months before replacing or installing a unit, participating in an offer program could benefit your budget.
For example, Oncor, the North Texas utility, offers rebates for anything from lighting retrofits to motor replacement.
Table 1A shows the dollars per kW and kWh a facility will receive for reducing overall electricity consumption.
A recent purchase of a variable frequency drive by an industrial plant netted a rebate of 25% of the units total cost. The rebate dollars will vary on the application as more netted efficiency will net more rebate dollars.
If your company has any plans to update lighting, build a new facility with energy efficient equipment, replace an HVAC unit, upgrade motors, etc., you may be eligible for the incentives or rebates from your utility and state energy programs. Any customers in the Oncor footprint may contact Rapid Power Management for additional information and those outside of the Oncor territory may contact an RPM sales representative to help facilitate research in your area.
To find Tax Credits, Rebates and Savings in your state please visit http://energy.gov/savings.
Can’t Participate in Demand Response?
Many retailers are developing their own program (stemming off of the Demand Response program) to pay customers for curtailing electricity usage. Rather than an independent system operator (ISO) calling upon customers to decrease energy use during a system emergency, retail electric providers are calling upon customers to use less power when electricity prices are highest.
How it Works:
The customer is alerted when conservation is needed along with a price per megawatt hour (mWh) for curtailment. If, during that period of time, the customer is able to curtail consumption an appropriate confirmation will need to be sent to the retailer. After the event, the retailer will compare actual metered usage to the load hedged at the time of signing. From there, a payment is calculated and distributed appropriately.
Since most customers are locked into fixed-price contracts, they are safe from any price spikes in the wholesale power markets while the retail electric providers are not. Retailers assume the risk for instances such as: extreme temperatures, power plant outages, wind storms, etc., and any customer willing to conserve will be rewarded for lending the retailer a hand.
Chinese Solar Panel Tariffs
The failure of Solyndra, the California based solar equipment manufacturer, was, in part, due to the abundance of low-cost Chinese panels. According to the LA Times, the US Commerce Department is imposing a tariff of 2.9% to 4.73% on solar panels imported from China after determining the manufacturers there received illegal government subsidies. At this time, a panel manufactured in the United States costs about 20% more than a pre-tariff Chinese panel.
This tariff is significantly smaller than what was originally hoped for but, regardless, is an effort aimed at supporting US jobs and America’s renewable energy future. When it is determined whether or not China has been sending the panels to the US at below-cost prices, additional tariffs could be imposed as early as next month.
China currently controls approximately half of the US market for solar panels and Chinese solar panel imports totaled $3.1 billion dollars in 2011.
Job growth and home construction started out strong in the beginning of the quarter and then slumped. This, coupled with the decline in government spending, subtracted from any economic growth.
Oil and Gas Update
The EIA estimates 2012 crude oil prices to be $112 per barrel, $10 per barrel higher than last year’s average price. The price of West Texas Intermediate (WTI) crude oil will average about $106 per barrel in 2012, also according to EIA estimates.
This year’s driving season, April through September, regular gas prices are forecast to average around $3.95 per gallon. EIA expects regular gasoline to average $3.81 for the entire 2012 year and around $3.73 per gallon in 2013. The average price for regular gasoline in 2011 was $3.53 per gallon.
Due to the warmer winter, natural gas inventories reached seasonal record highs. The Henry Hub natural gas spot price is forecast to be $1.49 lower than last year’s average — The 2012 average is about $2.51 per million British thermal units (MMBtu).
The latest rig count for the first quarter totaled at 1,968 – 1,316 of which were oil rigs and 652 of which were natural gas rigs. Compared to last year’s numbers, oil rigs have significantly increased while gas rigs have shown a steady decline. The historical numbers are showing a shift in production from natural gas to oil due to extremely low natural gas prices. Moreover, the natural gas rig count hit a 10 year low during the quarter as producers try to prop up the market price. Click to enlarge the graph to the right.
Q1 2012 – Wind Energy
It’s Blowing In The Wind
The United States is home to massive electricity demand and one of the best wind resources in the world. If harvested, US wind has the potential to produce 37 trillion kilowatt-hours of electricity annually – nearly ten times our existing power needs1.
Texas is currently the national leader in wind installations as well as a manufacturing hub for the wind energy industry. About 10,135 Megawatts of power are produced via wind in Texas which accounted for 6.4% of the state’s overall power in 2010.Texasis also home to the top five of ten largest wind farms. The runner up, Iowa, powers 15% of their electricity customers by means of wind power.
Wind Powers Economic Development
Developing, constructing and operating a wind turbine or farm require cooperating efforts of many individuals. Jobs created range from operations and maintenance to construction, manufacturing and many support sectors.
Wind is an ample and free resource which can stimulate the local economy by harvesting and selling power to regional users. Coal, natural gas or oil power plants often use fuel from different countries or regions to generate electricity. Reducing reliance on foreign sources of fuel will in turn strengthen national energy security.
Small Wind Systems
Small wind turbines provide clean power to individual homes, farms and small businesses. These turbines are scaled down from the utility turbines and can be suitable for use on properties as small as one acre. Prices to install a wind turbine vary depending on several factors. The federal government and individual states have rebate and tax programs to encourage land owners to invest in wind.
More than 98% of wind projects are located on private land leased from the landowner. Typically, a landowner signs a contract granting the developer the right to use his/her land and the wind above it for wind development, receiving compensation from the developer in the form of lease payments2.
For example, Blackwell Independent School District in West Texas brokered a deal with a wind farm company in 2005. Their on campus wind turbine produces nearly 40% of the school’s electricity. By 2019, the revenue Blackwell ISD will have made from the deal is estimated to be $35 million. Read more about wind farm money and Texas schools at: http://www.texastribune.org/library/multimedia/wind-farm-money-spending-schools/
Industrial Applications – Wind Farms
Wind Farms – both on and offshore – are gaining popularity across the world. Wind farms are used to distribute electricity through the grid to several entities rather than an individual home or business. MidAmerican, Green Mountain and Constellation NewEnergy are among several retailers in North America dedicated to purchasing a great amount of their renewable energy from wind farms. By doing so, they allow customers the option to purchase a percentage of renewable power.
Wind farms are usually built in areas with large regional power markets that facilitate smooth and cost-effective integration of wind into the overall electric system3. Wind turbines are also commonly found in rural areas as to not disturb the landscape and help mitigate noise.
Due to aesthetics and noise issues, off-shore wind farms are becoming more common. Europe is home to nearly 50 off-shore wind installations. While the United States does not currently have an off-shore wind farm, there are several projects in the developmental phase (i.e. Cape Wind).
Twenty Percent by 2030
Wind energy is abundant and clean unlike the fossil fuels used in many power plants today. Wind turbines do not release pollutants into the air; they do not require water for cooling; and they do not produce any harmful waste. These are a few of the many reasons why wind power is rapidly growing in the United States and why the Department of Energy is estimating that 20% of the nation’s electricity portfolio can be made up of wind power by 2030.
If your company is interested in a renewable energy source such as wind power, please contact JD Dodson at 469.855.5161 or at JD@rapidpower.net.
1 NREL, Wind Resource Potential, 2010
2 American Wind Energy Association – Economic Growth for Rural America
3 American Wind Energy Association – Offshore Wind and Wildlife in the US
Private businesses increased their inventories $56 billion–after a $2 billion decrease in the third quarter—and consumers increased spending at the end of 2011. This has facilitated the nation’s gross domestic product (GDP) to grow at a 2.8% rate in the fourth quarter.
An increase of 3.2% was expected, making economists weary of a still-weak economy. The bulk of growth came from businesses building up their stock of goods. If consumers do not buy those goods, it can ultimately be a struggle on GDP increases.
GDP grew a total of 1.7% overall in 2011, only about half of the 3% growth seen in 2010. The Federal Reserve has lowered its outlook for the economy in 2012 and will keep federal fund rates near zero until late 2014 as the economy is still too weak to handle higher interest rates.
Oil and Gas Update
Average household heating oil expenditures are expected to increase by four percent this winter heating season (October 1 – March 31) compared to last winter. On the other hand, natural gas and propane expenditures are projected to decline by seven and one percent. Electricity expenditures are two percent lower than last winter’s levels.
EIA is expecting the price of West Texas Intermediate (WTI) crude oil to average about $100 per barrel in 2012. This is about $5 per barrel higher than the average price last year. The EIA expects WTI to continue rising in 2013, reaching $106 per barrel by the fourth quarter. This forecast assumes U.S. GDP grows by 1.8% in 2012 and 2.5% in 2013.
Natural gas inventories continue to set record highs. Working inventory in December 2011 ended at an estimated 3.5 trillion cubic feet (Tcf), 12% above the same time last year. The forecast for 2012 Henry Hub natural gas spot prices is $3.53/MMBtu – a decline of around fifty cents from the 2011 average spot price.
Save the date for the CREST EXPO, March 30th from 10 AM to 5 PM at the Dallas Convention Center. Visit Rapid Power Management at Booth 502.Read More
Q4 2011 – Solar Power
Solar Power: Time To Shine?
Renewable energy sources such as Solar power have become an increasingly popular energy resource over the years thanks to decreasing prices and increased awareness via reduced production costs, green energy advocates, government incentives and panel manufacturers’ marketing efforts.
Although solar power is still approximately three times more expensive than electricity produced by natural gas, prices have fallen by two thirds since 2008. To further solar power’s affordability, federal and state governments are offering tax breaks and subsidies.
The federal government offers a tax credit of 30 percent for the gross cost of solar panel installation for residents and businesses. On top of the tax credit, each state offers its own incentives for all forms of renewable energy, including solar.
The Department of Energy (DOE) rolled out the SunShot Initiative in 2007 to decrease solar energy system costs by 75% before 2020. When this goal is reached, systems will even be affordable without any rebates or tax cuts. The main goal has been to drive innovative technology.
Under the initiative, the DOE began backing the company 1366 Technologies this October with a $150-million loan. 1366 believes their new manufacturing process will significantly cut costs, making prices competitive with that of coal.
New thin-film photovoltaic cell technologies are also bringing down the costs and large companies like GE are beginning to manufacture the panels. In October GE announced plans to build the largest thin-film panel factory in the United States.
These initiatives are not only bringing down costs, they are creating jobs and with their implementation, protecting the environment.
Solar’s portion of the power business remains small but has great potential to flourish. According to the U.S. Energy Information Administration (EIA), solar power is capable of providing many times the total current energy demand.
U.S. Department of Energy (DOE) SunShot Initiative; http://www1.eere.energy.gov/solar/sunshot/
Information on state, local, utility and federal incentives and policies that promote renewable energy and energy efficiency: http://www.dsireusa.org/
HAVE SOLAR COSTS COME DOWN ENOUGH FOR YOUR FACILITY?
See the example of a Ft. Worth, Texas territory cost comparison*:
THE SAME SYSTEM COST 1.6 TIMES MORE IN 2006 THAN IT WOULD NOW
*These are simply estimates calculated by RPM based on real numbers from NREL and a solar panel installer. While every state in the US is given the same federal tax credit, each state adds its own incentives. For example, New Jersey offers a yearly payback through their surplus agreements for the first 15 years of your systems life which could slash costs up to 60%.
SOLAR POWER FACTS
- Low-temperature solar collectors also absorb the sun’s heat energy, but instead of making electricity, use the heat directly for hot water or space heating in homes, offices, and other buildings.
- Covering 4% of the world’s desert area with photovoltaics could supply the equivalent of all of the world’s electricity.
- The Gobi Desert alone could supply almost all of the world’s total electricity demand.
- Passing of Bill 632 restricts any Home Owner’s Association from banning solar panels on home rooftops.
- Photovoltaic cells are used to transform energy from the sun directly into electrical power. The amount of electricity generated by a cell depends on a few things including device size, weather and length of exposure to light.
- Since the sun is an intermittent energy source, another electricity source would need to provide power during the evening or during a storm when light is not present or potent. Highest electricity demand is during the day time so the ‘back-up’ energy source would be used sparingly.
- Using solar energy produces no air or water pollution and no greenhouse gases
The nation’s economy gained much-needed strength in the third quarter, as the pace of growth nearly doubled compared to the previous three months.
According to an advanced estimate released on October 27, U.S. gross domestic product grew 2.5% – almost double the second quarter. A poor 0.4% growth in the first three months of the year was followed by a slightly more promising 1.3% increase in the second quarter.
Stronger consumer spending significantly contributed to the growth, helping to make up for cuts in government spending.
An increase of at least 3% is needed to create enough jobs to lower the unemployment rate but economists aren’t expecting to see that rise even through 2012.
OIL AND GAS UPDATE
EIA projects average household heating expenditures for natural gas, propane, and heating oil will increase by 3 percent, 7 percent, and 8 percent, respectively, this winter (October 1 to March 31) compared with last winter, while electricity heating expenditures fall by less than 1 percent. Average expenditures for households that heat with oil are forecasted to be higher than in any previous winter.
This forecast reflects higher prices for natural gas, propane, and heating oil, and slightly milder weather than last winter in much of the nation contributing to lower consumption in many areas.
EIA expects the U.S. average refiner acquisition cost of crude oil to average $99 per barrel in 2011 and $98 per barrel in 2012, compared with $100 per barrel and $103 per barrel, respectively, in the previous Outlook.
Natural gas working inventories ended September 2011 at 3.4 trillion cubic feet (Tcf), about 2.6 percent, or 91 billion cubic feet (Bcf), below the 2010 end-of-September level. EIA expects that working natural gas inventories will approach last year’s high levels by the end of the injection season, typically October-November each year. The projected Henry Hub natural gas spot price averages $4.15 per million British thermal units (MMBtu) in 2011, $0.24 per MMBtu lower than the 2010 average. EIA expects the rate of growth in domestic natural gas production to slow in 2012, with the Henry Hub spot price averaging $4.32 per MMBtu.
Q3 2011 – EPA’s Clean Air Act Amendment
EPA’S CLEAN AIR ACT AMENDMENT COULD CAUSE ENERGY PRICES TO RISE AS EARLY AS 2012
On Thursday, July 7, the Environmental Protection Agency finalized a decision which may have an immense impact on the power generation industry. This “Cross-State Air Pollution Rule,” an amendment to the Clean Air Act, gives the EPA authority to monitor green-house gas emissions from our nation’s power plants. The Clean Air Act gave the EPA full responsibility more than 40 years ago to act if ever a new threat to health or the environment is discovered.
A previous amendment to the Clean Air Act, made in 1990, changed the generation industry significantly. It forced new coal plants to install strict emission control equipment, making approximately 88% of new plants built since 1990 natural gas-fired.
The debate on whether the EPA should hold power to curtail green-house gas emissions has been contested for nearly a decade. This debate ultimately led to the Supreme Court ruling June 20, reinforcing the EPA’s responsibility on this issue. For further information regarding the ruling, please visit the following link:
Coal Plant Impact
Coal plants produce roughly 4-trillion kilowatt hours annually and represent some of the cheapest electricity for the US. Nearly half of our nation’s electricity is produced via coal, making the amendment a significant factor in any future power generation. Reducing pollution emissions means older plants will be forced to either shut down or retrofit with expensive scrubbing systems to comply with regulations. Given the depressed price of natural gas, it can be expected that most utility companies will opt to build natural gas-fueled power plants in the future.
Utility companies such as American Electric Power Co. and CPS Energy have already announced plans to close older coal-powered plants in favor of clean energy. This means a larger impact on Midwest power markets (i.e. PJM and MISO) which rely heavily on those older coal plants. Some reasoning for tightening up the Clean Air Act and a list of potential savings can be found at: HTTP://WWW.EPA.GOV/AIR/SECT812/PROSPECTIVE2.HTML Health Savings benefits are estimated to be $4 trillion by 2012 vs. the low estimate cost of implementation ($65 billion).
Large Map of Cross-State Air Pollution Rule (CSPAR) States
The EPA’s new restrictions affect 27 states east of the Rocky Mountains (including Texas) and begin six months from now. Following the January 1 restrictions, a new set will be imposed May 1, forcing companies to comply – and quickly. The restrictions also establish new emissions trading programs for both SO2 and NOX. HTTP://WWW.EPA.GOV/AIRTRANSPORT/
The stakes are high and far-reaching for electric utilities, independent power producers, energy traders, natural gas and coal producers, large energy users and investors in stocks and bonds of the affected companies. As your energy advisor, we strive to keep you educated as these new rules are expected to alter future gas and electricity contracts. Prepared for these effects, retailers have already implemented added costs to deals currently being priced.
DOE GRANTS AUTHORIZATION OF EXPORTATION OF US NATURAL GAS
On May 20, the Department of Energy granted Cheniere Energy (Ticker Symbol: LNG) approval to export natural gas from the Sabine Pass as liquefied natural gas (LNG). Liquefied natural gas is natural gas which has been temporarily liquefied to ease the transportation and storage of the commodity.
This authorization allows Cheniere Energy to distribute 803-billion-cubic-feet per year — up to 20% of the current US storage — to major LNG importers across the world.
By exporting the supply into the global market, demand and costs will increase. Exportation begins in 2015 and RPM is prepared to continually monitor the situation and keep our clients updated on the potentially rising rates.
Oil & Gas
The release of nearly 60 million barrels from International Energy Agency members’ strategic reserves aided in the drop of World crude oil prices following a June announcement. Reflecting this drop in price, regular-grade gasoline fell from a peak average of $3.91 per gallon in May to an average of $3.68 a gallon in June
The Energy Information Administration is still expecting oil markets to tighten through 2012 due to increasing demand and stunted growth of supply from non-OPEC (Organization of the Petroleum Exporting Countries) countries. EIA anticipates West Texas Intermediate crude spot prices, which averaged $79 per barrel in 2010, to average $98 per barrel in 2011 and $103 per barrel in 2012. The projected US cost of crude oil will rise from $102 a barrel in 2011 to $108 a barrel in 2012.
OPEC met June 8 to discuss projection targets for the international oil market but reached no formal decision. The organization will hold their 160th meeting December 14 in Vienna.
Natural gas working inventories ended this June at 2.5 trillion cubic feet (Tcf), approximately 8% lower than the end of June 2010. EIA believes working gas inventories will build strongly during the summer months resulting in record-level highs the second half of 2011.
In 2012, the natural gas market expects to begin tightening due to the Henry Hub spot price increasing to an average of $4.54 per MMBtu.
The natural gas futures 12-month strop had a low of $4.22 in early March and a high of $5.06 in the beginning of June. Currently, the August contract is priced at $4.315 per MMBtu.
After adjustments to what was presumed as a 1.8% annual rate increase, the first quarter GDP for 2011 has been revised to .4% – significantly lower than the government initially thought. The Commerce Department reports a second quarter GDP increase at an annual rate of 1.3%.
A decrease in imports and an increase in both business investment and federal government spending contributed to the second quarter’s growth.
The price of goods and services purchased by US residents slowed in the second quarter. Energy prices also slowed while food prices grew at about a 3.2% rate. Excluding food and energy, prices rose .2 % from the first quarter.Read More
Q2 2011 – Nodal: Are You Paying More for Your Electricity?
Nodal – Are You Paying More for Your Electricity?
Texas’ new wholesale power pricing model, known as Nodal, is four months into its tenure. Energy users who have not paid close attention to their invoices are probably not aware of how the change has affected them. Retailers have invoked a clause in their contract called, “Change of Law.” This provision allows them to alter their pricing if government regulations are changed that effect their cost structure. This clause hasn’t been used since the Texas market was deregulated in January 2002. That all changed with Nodal, which started in December of 2011. Consumers need to analyze their invoices, as there may have been several charges added.
Here is an example bill that shows what the new costs are being labeled:
As shown in the invoice above, there are two main charges that are being passed thru to the client. One is called basis and the other is RUC (reliability unit commitment.) RUC is noted in the bill as Nodal Ancillary Credit or Charge. Of the two, the basis charge has had a greater financial impact. This new cost represents a customer’s contribution to congestion costs or the costs they contribute to managing the distribution of power across the grid. This cost used to be spread within each of the four large regions of the state, now it is being localized, so a client’s costs are directly tied to their site’s contribution to congestion. After four months, below is the average cost difference to what used to be the costs associated to the zone:
Average Basis Costs from Dec 1, 2010 to March 23, 2011
|$ 0.00009||$ 0.00071||$ .00554||$ 0.00077|
The only zone that has had a significant costs impact was the south zone, but note that the above costs represent an average. Every customer needs to understand how they have been directly affected. The first bill above represented an extreme rise in costs as the impact was two cents a kWH or a 10% increase on the bill. The bill below represents the exact opposite as the account had over a 10% credit. The first site was in a highly congested area in the South zone and the below location was in a remote area in West Texas.
The second piece of the Nodal cost structure is a term called RUC. RUC stands for Reliability Unit Commitment and it represents several pieces of our ancillary costs. Ancillary costs are costs associated with having generation available to help in balancing of the grid on an ongoing basis.
RUC ensures there is enough supply in the right locations to meet the forecasted load. The four RUC components are RUC Capacity Short Charge, RUC Make-Whole Uplift Charge, RUC Decommitment Charge and the RUC Clawback Charge. The first two charges are the most important components of RUC as they have the largest financial impact on the end user. If there is not enough forecasted generation to meet the scheduled load, ERCOT will directly assign the cost to the suppliers that created this shortage. This component is the RUC Capacity Short Charge. There is a cap in place limiting the amount each short supplier will have to pay. If the cost of the shortage has not been covered by the time the cap has been met, the remaining amount will be allocated evenly across all suppliers on a load ratio share basis. This is called the RUC Make-Whole Uplift Charge. The graph below shows a 100 MW shortage in the forecasted generation by the suppliers. The cost of this shortage is then charged back to the suppliers as described above. If the supplier passes through RUC on their contracts, the end use customer will incur the cost.
RPM advises our customers to track these new charges so you understand the impact to you. With summer coming soon, no one knows what these costs will look like during our peak demand months. If you have any questions, don’t hesitate to call your Rapid Power Management energy manager for an explanation.
Texas Legislative Update
The Texas legislature meets every other year from the beginning of January through the end of May. This year the tone regarding energy legislature is dramatically different than in 2009 and 2007. During those legislative sessions, energy deregulation was heavily criticized because energy prices were significantly higher than they are now. Thus, legislatures were trying to appease their constituents who were suffering from higher costs. Private consumers felt cheated as prices were supposed to drop under deregulation. Please note that this was the general idea as deregulation promotes new technologies, thus more efficiency, and it also promotes competition. In truth, pricing will fluctuate based on natural gas prices as natural gas is the fuel that determines pricing within the wholesale market. The current legislative environment is much less turbulent but there are a couple of bills that are worth mentioning.
The bill below relates to Home Owner Associations’ (HOA’s) power of regulating solar installations. In states such as Florida, solar panels are ubiquitous as the benefit of using the sun to lower the energy bill is obvious. In Texas, HOAs has been a huge barrier in getting installations approved. If this bill passes it will be a big boost to the Texas solar market.
SB238 Relating to the regulation of solar energy devices by a property owner’s association.
Companions HB 450 Lucio III (Identical)
3-14-11 H Committee action pending House Business and Industry
SB 302 Wentworth (Identical)
3-2-11 S Committee action pending Senate Intergovernmental Relations
SB 477 Jackson, Mike (Identical)
3-2-11 Committee action pending Senate Intergovernmental Relations
Bill History: 04-04-11 H Referred to House Committee on House Business and Industry
The second bill (see below) has to do with the unfair charges that neighborhood ball fields face. They incur higher costs because they are charged based on their peak demand, or a demand ratchet. A demand ratchet is a peak usage moment, usually occurring during night games from the necessary lighting. The local delivery company charges customers based on the higher of either the previous month’s peak demand or 80% of the peak demand over the last 11 months. So even though the average usage for a typical ball field is low, these users can end up paying a lot. As schools are facing big government cuts, this bill is gaining a lot of traction.
HB 362 Relating to the regulation by a property owners’ association of the installation of solar energy devices and certain roofing materials on property.
Bill History: 04-20-11 S Referred to Senate Committee on Senate Intergovernmental Relations
For more information and to provide support for these bills, please visit the legislature’s web-site: http://www.capitol.state.tx.us/BillLookup/BillNumber.aspx
Hydraulic Fracturing Website Launched
As natural gas drilling has gained momentum and has moved close to populated areas, the process has come under increased investigation. In particular, the scrutiny is directed at the chemicals used in the process and how they might affect drinking water in the surrounding communities.
Hydraulic fracturing (“fracking”) involves blasting water, sand and chemicals into a shale bed to fracture the shale and allow gas to escape. The technique made development of the Barnett Shale possible. Over 99% of the fluid used is composed of freshwater and sand. The remaining amount (less than 1%) is made up of special-purpose additives found in common consumer products, such as household cleaners, disinfectants and cosmetics.
In response to public concerns, a new website has been launched for natural gas developers to publish a well-by-well accounting of the chemicals they use in the natural gas recovery process. A joint project of the Ground Water Protection Council and Interstate Oil and Gas Compact Commission, the website is called the FracFocus Chemical Disclosure Registry and is active and available to the public at http://fracfocus.org/. The website is also designed to provide a centralized location for public information and education about natural gas recovery through the fracking process. Some of the companies participating in the voluntary registry are: Anadarko, Chesapeake, Devon, Apache, Pioneer Natural Resources and Southwestern Energy.
Many regard chemical disclosure by the developers as a critical step in the nation’s ability to maximize the opportunity provided by our natural gas resources. Although there have been no documented cases of drinking water contamination related to fracking, recent media attention has increased the public perception of concern over the chemicals used in the process. The hope is that voluntary participation by industry leaders in the public education on the process and chemicals used, will dispel the perception of danger and secrecy.
RPM encourages our customers to visit the site and learn more about the process and become fully educated. Through education, we will all be able to have a rational discussion about how best to ensure safety measures are followed while maximizing the opportunity that our natural gas resources provide our nation.
For information regarding a potential break-thru in technology in handling the water pollutants used in fracking, please see the following link: http://blogs.forbes.com/jeffmcmahon/2011/05/02/fracking-pollution-may-be-solved-doe-says/?partner=alerts
‘TIS THE SEASON FOR SURGE PROTECTION!
You may not be able to prevent lightning from striking but you may be able to protect your business from lightning damage. According to Business Week, damage caused by surges in electrical systems equate to over $26 billion per year in lost time, equipment and equipment repair for US businesses. In this automated and computer driven world, protecting mission-critical electronic systems with surge suppression is a relatively inexpensive electrical system insurance policy.
While it is important to install surge protection at the service entrance to prevent damage from lightning, the truth is 80% of transients come from inside a facility due to equipment switching. Typical symptoms from these transients appear over time and include; cumulative damage, premature equipment failure, data losses and nuisance tripping of controls.
The truth of the matter is that to a business, the damage that an electrical surge is able to inflict could be crippling in a multitude of ways. In addition to the direct costs of equipment failure, businesses must also account for the indirect costs of lost productivity due to downtime of employees and the stoppage of phone, computer and network systems, as well as the potential for lost data. The good news is that the threat of incurring these catastrophic costs due to lightning damage is largely preventable.
Surge Protection Devices (SPD) equipment will protect your electrical, data and telecom equipment from the effects of lightning induced voltages, external switching transients and internally generated electrical transients. These effects range from panel board destruction damaged variable frequency drives, and data equipment failure.
The cost of surge protection can be small, compared to overall system cost and benefits in performance. Therefore, added quality and performance in surge protection may be chosen as a conservative engineering approach to compensate for unknown variables in the other parameters. This approach can provide excellent performance in the best interest of the user, while not significantly affecting overall system cost. Call Rapid Power Management at (469) 759-1450 to request a quote or visit www.rapidpower.net for more information.
The West Texas Intermediate crude oil spot prices in March 2011 averaged over $103 per barrel and reached up to $112 per barrel in early April. Crude oil prices are currently at their highest level since 2008. The U.S. Energy Information Administration expects oil markets to tighten over the next two years due to forecasted growth in world oil demand and slow growth of supply from non-OPEC countries.
The EIA expects the price of WTI crude oil to average about $106 per barrel in 2011 and an increased to $114 per barrel in 2012. OPEC is scheduled to meet on June 8th to discuss production targets. The EIA’s expectations for OPEC production have decreased compared to last quarter due to the situation in Libya.
At the end of March 2011, natural gas working inventories were at 1.6 trillion cubic feet (Tcf), which is slightly below levels at the same time last year. In 2011, inventories are projected to stay relatively high throughout the year.
The Henry Hub spot price averaged $4.10 per MMBtu in 2011, which is $0.29 per MMBtu lower than the average for 2010. The EIA expects the natural gas market to tighten in 2012 with the projected Henry Hub natural gas spot price average of $4.55 per MMBtu.
The natural gas futures 12-month strip had a low at $4.16 in late February and a high of $4.95 in late January. Currently, the May contract is priced at $4.87 per MMBtu.
The GDP increased at an annual rate of 1.8 percent in the first quarter 2011 (January through March) after a real GDP increase of 3.1 percent in the fourth quarter of 2010. The GDP was slightly below the expected 2 percent growth by economists.
The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, and nonresidential fixed investment that were partly offset by a negative contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased. The Bureau emphasized that the first-quarter advance estimate released April 29th is based on source data that are incomplete or subject to further revision by the source agency. The “second” estimate for the first quarter, based on more complete data, will be released on May 26, 2011.
The deceleration in real GDP in the first quarter primarily reflected a sharp upturn in imports and a deceleration in PCE. Also, the decrease in government spending declined by them most since 1983. The Fed trimmed its 2011 annual GDP forecast to 3.1 percent from 3.3 percent just before the release of the first quarter GDP. The Fed’s longer-term projection for inflation is a range of 1.7 percent to 2 percent. The rising oil and food costs may push up prices of other goods and services.