ERMUSR MISC MEMO 08-12-2008Ji
Elk River -~
Municipal Utilities
13069 Orono Parkway • P.O. Box 430
Elk River, MN 55330-0430
August 7, 2008
To: Elk River Municipal Utilities Commission
Jerry Takle
Jerry Gumphrey
John Dietz
From: Bryan Adams
Subject: Miscellaneous Issues
Phone: 763.441.2020
Fax: 763.441.8099
Enclosed is the packet for the Tuesday, August 12, 2008 commission meeting at 4:00 p.m.
Electric usages are up 6.6% above last year due to the data centers while water usages are down
8.6 % from last year. Enclosed is the following information for your review:
APPA publication titled Electric Utility Basics. The first three chapters deal with more
of the technical aspects of our industry which you may or may not be interested in. The
last three chapters deal with finance and restructuring issues which you should review.
2. July 25, 2008 issue of The Kiplinger Letter addressing climate change and energy.
3. Article on Plug-in Hybrid Electric Vehicles from "Climate Wire".
' r etter
e ~ ~n e
Obama and McCain both support a new law:
A cap and trade scheme...limiting emissions
of greenhouse gases and providing tradable credits
for companies that cut even deeper. The two men differ,
though, on the degree of emissions reductions needed
and on whether industries hard-pressed by competition
from overseas should get a pass or at least extra help.
A Democratic Congress makes an OK certain by 2010.
Odds are regs will kick in within six ~.
Costs will start climbing, before then, as firms
make investment decisions based on what's coming.
Hit first and hardest: Coal producers and users. Coal burning power plants
will be retired early, and utilities will shift wherever possible to natural gas, nuclear
and renewable fuels. Even development of technology to capture and sequester C02
won't save power plant coal consumption from a 60%-90% drop over two decades.
Electric bills will climb for everyone...most steeply for factories in the East
and Midwest, served mainly by coal burning plants. More modest jumps in the West,
with its host of natural gas and hydroelectric plants, and for those served by riuclear.
Also socked especially hard: Metals manufacturers. Global competition
leaves them little room to pass on higher prices, and their energy needs are great.
Plants that recycle scrap...using less energy and producing fewer emissions
than primary producers and integrated steel mills...will have an increased edge.
Integrated oil companies will be pressed to boost production efficiencies.
A wallop too for aviation...even if U.S. climate legislation lets it slide...
because the European Union will include aircraft in its emissions trading scheme.
Any U.S. carriers that land at or take off from EU airports will be roped in.
For chemical makers caps well both bad and good news: Increased costs
to cut or offset emissions of a wide variety of greenhouse gases created in production.
But also opportunities to gain from other industries' drive for energy efficiency...
more demand for photovoltaic cells, more plastics in autos and aircraft and so on.
For financial services...a silver lining: A brisk new line of business
in trading emissions credits will likely offset any loss from the drag on the economy.
The country will lose 5000 gas stations this year, more than twice as many
® as last year and the worst dropout rate since the 2001 recession.
As motorists cut back, competition from big chains is driving out independents.
Discounts for cash are making a comeback. Wafer-thin profit margins
are devoured by fees to credit card firms. Most motorists now buy fuel with plastic.
Getting a big_push from industry: Synthetic gasoline and diesel...liquid fuels
that are made from biomass but, unlike ethanol and biodiesel, are chemically identical
to petroleum-based products. That gives the biomass synfuels a big advantage:
They can be shipped, stored and pumped using the same facilities and equipment
as the real McCoys. Early leaders include Choren Industries, which is partnering
with Royal Dutch Shell on a pilot plant in Germany and is mulling another
in the U.S. And Amyris Biotechnologies, which has a pilot facility in the works
in Brazil and plans one for the Southeast U.S. Also in the race: Gevo Inc. and LS9.
Demand for biomass will soar in coming years...fueled by development
of cellulosic ethanol and utilities that burn biomass directly, as well as by synfuels.
For many businesses, crop and forestry waste, sawdust, orange peels, whey...
waste of all sorts, in fact...will evolve from liabilities that must be disposed of
to valuable commodities. Municipalities may even turn trash into income streams.
To facilitate market development, the Biomass Commodity Exchanee
is gearing up. With help from the Agriculture Dept., the BCEX will debut next year
At first, it will look more like Craigslist than the Chicago Board of Trade, though,
with members using a Web site to list what they have to sell or want to buy.
Adams, Bryan
rom: Tanksley, Sarah [sanksley@APPAnet.org]
Sent: Wednesday, July 30, 2008 10:50 AM
To: Adams, Bryan
Subject: Article on Plug-in Hybrid Electric Vehicles Published in ClimateWire
July 30, 2008
TO: PHEV Interest Group
FROM: Sarah Tanksley/ stanksleyna,appanet.org/ 202-467-2934
SUBJECT: Article on Plug-in Hybrid Electric Vehicles Published in ClimateWire
Below is an article recently published in ClimateWire which APPA staff thought would be of interest to
members of the PHEV Interest Group. The article discusses a deal with major auto manufacturers on creating a
plug-in vehicle which would connect to the power grid without creating a strain on supply. The article is below
for your convenience. If you have any questions or would like more information please feel free to contact me.
"Reprinted from ClimateWire with permission from Environment 8~ Energy Publishing, LLC. www.eenews.net.
202/628-6500"
`AUTOS: GM, Ford, power companies work out logistics of plug-in
cars (07/24/2000
Colin Sullivan, ClimateWire reporter
SAN JOSE, Calif. -- Executives from U.S. auto manufacturers and major electric utilities convened here
yesterday to announce and discuss a landmark deal meant to address how plug-in vehicles would connect to the
power grid without overtaxing energy supplies.
General Motors Corp. signed an agreement yesterday with Los Angeles-based Southern California Edison Co.
(SCE) and dozens of other utilities to work through the logistics for plug-in electrics (Greenwire, July 22). The
idea is to collaborate on how power companies would cope with the potential emergence of hybrid and pure
electric cars that are bound to drain the grid during peak demand periods.
Edward Kjaer, director of electric transportation at SCE, said utilities should view electric cars as the future of
the U.S. market as companies like GM bank their development plans on smaller and more efficient models like
the Chevrolet Volt and other plug-ins. Given that shifting marketplace, Kjaer thinks it's essential for utilities to
plan now for an industry already adjusting rapidly to renewable energy in acarbon-constrained environment.
"How are we going to connect these cars to a changing grid?" he said. "This is not going to be an easy task at all
because we're blazing totally new ground."
~!
A computer-generated image of the Chevy Volt, apuug-in hybrid that GM
hopes to get into showrooms by 2010. Photo courtesy of GM.
Kj aer told attendees at a plug-in conference that he expects
"the sweet spot" for this new market to emerge in the 2010-
12 time frame. He anticipates an increasing focus on the
pure battery-electric car (in addition to hybrids) as
consumers tire of high gas prices, assuming oil prices don't
bottom out in the years ahead.
"There's a whole bunch of vehicles in development," said
Kjaer, citing not only GM's plans but new design efforts at
Ford Motor Co. and Toyota Motor Corp., among others. "It
says there's a lot of heat and a lot of light in this space."
'An appliance on wheels'
To prepare for the convergence of electricity and cars, SCE
wants to start a $3 million residential pilot program under which consumers would experience the garage of the
future, which could be powered by solar panels or wind energy and equipped to charge electric vehicles.
"What we're trying to do is take all this theory out of the theory and put it into the practical," Kjaer said.
The primary obstacles in the real world are changing "the passive relationship with the customer" and
developing reliable storage systems, he added. Customers in California, for instance, would need better
information about when to charge their cars to avoid draining peak summer supplies when air conditioners go
full throttle.
Power customers are used to simply turning their lights on and getting a bill 30 days later. But Kjaer believes
the future consumer will "have to be much more informed" about real-time energy management to pursue
intelligent charging and more efficient control of resources.
SCE therefore envisions smart meters and identification numbers for vehicles that would allow drivers to refuel
(or repower) their vehicles at remote charging stations. The typical driver in this scenario would register his or
her car with the utility to manage and access the energy bank.
In other words, SCE views the future car as "an appliance on wheels" that could charge both at home and on the
road, with a bill still waiting at the end of the month.
'Millions' of plug-in vehicles?
Dan Sperling, a board member at the California Air Resources Board, said it's a mistake to assume all drivers
would charge their cars during off-peak times. If electricity is 1 or 2 cents a mile, or even 3 or 4 cents a mile,
Sperling said, consumers could use that power "whenever they get a chance."
"We talk about peak rates and smart grids and all this, but what we really don't know is how the consumer is
going to respond," he said. "It's hard to say."
~~ ._
The Tesla electric roadster, already being sold in California. Photo by
Debra Kahn.
new batteries, he said.
Even so, Sperling, who also directs the Institute of
Transportation Studies at University of California, Davis,
predicts a bright future for electric utilities, given all the
pressure on automakers to produce more-efficient cars. A
regulation like California's low-carbon fuel standard, for
one, could benefit power companies because the rule has
been designed as a performance-based approach meant to
prod carmakers toward biofuels and more fuel-efficiency.
In Sperling's view, acredit-trading environment under the
low-carbon fuel standard would (in theory) push carmakers
toward developing and selling more electric cars. This,
combined with the state's stalled greenhouse gas emissions
standards for cars and a mandate for more zero-emissions
models, could mean a boom for electrics, especially if the
federal government funds research and development into
"If we do all this, I think we'll see millions of plug-in vehicles on the road in the near future," Sperling said.
Sperling also supports establishing a price floor for gasoline at $4.00 a gallon, but he admitted the concept
might not fly politically.
Battery capacity and supply remain problematic
i~lancy Gioia, director of the hybrid vehicle program at Ford, said this is all well and good from a utility
standpoint as power companies position themselves to potentially replace gasoline distributors. But from the
auto manufacturing perspective, engineers are still coping with a fundamental concern: storage.
Gioia has overseen development of the Ford Escape Hybrid and other more efficient models -- including hybrid
versions of the Ford Fusion and the Mercury Milan -- and she believes in plug-in cars. Yet she also sees a
technical problem yet to be resolved in terms of battery development.
"The biggest challenge remains the battery," she said.
Electric-battery technology, she points out, is still unproven and has limited range. Add to this concerns over the
spiraling cost of steel, copper, aluminum and lithium carbonate, plus the likely dominance of battery
manufacturing by China and Japan, and you've got some steep market challenges for U.S. companies.
Echoing this concern was Jonathan Lauckner, vice president of global program management at GM. Lauckner
said U.S. corporations will have to decide whether they view battery manufacturing and R&D as priorities to
bring down the cost of components at home. Otherwise, Japan and China will rule this side of the market.
"All of the battery capacity is located in Asia," he said. "It's not cheap shipping batteries all the way from Asia.
There's a very sizable logistics cost."
,ord's Gioia also views the component market as a major issue and appeared to signal support for the
emergence of U.S. suppliers.
"Without domestic or regional supply around the world, it just becomes another issue of ... potential instability,"
she said.