Last week, I had the pleasure of presenting at the Pacific Energy Innovation Association’s (PEIA) monthly energy breakfast, “Power Market Dynamics and Grid Optimization”. I was asked to give a presentation on Smart Grid and I expanded the topic to include Smart Grid in the context of the larger energy market. The B.C. government passed Bill 17 – 2010 Clean Energy Act on June 3, 2010. That Act foresees significant integration of green and renewable resources within B.C. as it promotes conservation, demand-side management and various innovations around energy utilization. It also anticipates spending $930 million dollars in smart meter technology and infrastructure upgrades by the end of 2020.
I presented a view that the movement towards Smart Grid and the development of the Clean Energy Act took place during a market dynamic that was quite different from the market dynamic that exists today. When this market concept and the development of the Act were initiated, the market was going through a period of extreme volatility and high prices. It was a time where the peak oil mentality was pervasive, the US and Canada weren’t so sure about their future energy mix and where green concerns around GHG were paramount. The market was defined by considerable concern around energy availability and energy security. Today there is the expectation that the US, with the help of Canada, will be energy self-sufficient by the year 2020. With abundant gas and oil, the shale plays, the keystone pipeline build out, together with very low prices and the ability to easily transport energy, the fear factor is greatly reduced. The market has inverted the supply demand relationship.
While the drivers for deregulation and Smart Grid may have spawned from energy security concerns and local economics, today there is much deeper concern around the all-consuming global economic situation and the potential for recovery from that. Today, the concern is more around economic recovery, market enforcement and market compliance, whereas it used to be market security and management of global warming. I think the market is witnessing a retraction from the global warming mentality which influenced the development of a significant amount of greener or alternative resources. With the availability of low-priced gas today, we are going to return to a market where the primary generation fuel is natural gas. If we look at the generation mix and the new additions from a new development perspective, gas is already overtaking other forms of generation. Nuclear and greener renewables are flat or slightly in decline.
So, while my talk went much further than that, I think my primary message is that a lot of policy, including Smart Grid, was developed in a market paradigm that no longer exists. It is likely that the new energy paradigm will reshape the market thinking in Smart Grid, and other policies that were introduced at the same time.
Thank you to the organizers at PEIA for inviting me. I sincerely hope my contrarian remarks did not leave the audience too disturbed! You can find a copy of my slides on the PEIA website – www.peia.biz.
You can find more information on upcoming ZE events at http://www.ze.com/news/event-schedule.htm