While many distributors, reps and manufacturers are still getting their arms around the new sales opportunities now available with energy-efficient electrical products, just over the next hill is a world of alternative energy sources that will change how we power the world. Part 1 of a multi-part series.
Even if you aren't all that interested in the green scene, you can't escape it anymore. When you shell out $60 to fill up your SUV, you start wondering if you should buy a hybrid. You hear on the evening news how yet another oil minister from the Middle East wants to cut down on the flow of oil to the industrialized world, and get angry thinking about why the United States is still so dependent on foreign oil.
You wonder about the Bush Administration's cozy relationships with energy companies, and if the government could or should be doing more to develop renewable sources of energy. A friend says he made a bundle on a high-flying green stock, and you think maybe it's time to diversify some of your investments into energy-conscious companies.
When you go to your office, you can't escape it, either. Turn the pages of any electrical magazine these days and you see articles about LEED building standards, bans on incandescent bulbs, utility rebates and LED lighting systems.
Electrical Wholesaling has for years informed its readers about sales opportunities with energy-efficient electrical products. Even more information on the green market is now available. During the past year, the magazine's editors added a monthly department to the magazine on the green market. They also worked with the editors of Electrical Construction and Maintenance magazine to launch GreenBiz, a free e-mail newsletter that goes out to more than 60,000 electrical distributors, independent manufacturers' reps, electrical manufacturers, electrical contractors, facility maintenance personnel, specifying engineers and other end users.
As if you didn't have enough on your plate in trying to figure out how or if your company fits into the green market, this series of articles will give you a sense of future opportunities over the next hill with alternative energy sources, or “renewables.” This month's article offers a general overview of alternative fuels used in power generation. EW's May issue will cover wind energy; and in June the editors will cover solar energy. The July issue will cover geothermal energy, biomass, fuel cells and wave/tidal energy.
Let's start off by looking at how these renewable energy sources create power. At www.eei.org, the Edison Electric Institute (EEI) Washington, D.C., offers some brief but clear explanations. The following definitions draw in part from that material.
Wind is generated from the heating and rotation of the earth and is largely determined by weather patterns, the surface of the earth and bodies of water. The flow of air masses is harvested by wind turbines that capture the kinetic energy in surface wind and transform it into mechanical or electrical energy.
The sun's rays are harnessed by photovoltaic (PV) cells that convert sunlight directly into electricity and by solar panels used to heat up water for hot water systems. When sunlight strikes a PV cell, electrons are dislodged, creating an electrical current.
Fuel such as wood, crops, manure, and even garbage is burned in a boiler to produce high-pressure steam. This steam is introduced into a steam turbine, where it flows over a series of aerodynamic turbine blades, causing the turbine to rotate. The turbine is connected to an electric generator, so as the steam flow causes the turbine to rotate, the electric generator turns and electricity is produced.
Very hot steam (more than 300° F) or hot water (100° F - 300° F) helps drive generators that create electricity. Most of the geothermal resources in the United States are in the western states.
Hydrogen-powered fuel cells convert chemical energy in hydrogen to electricity. According to the U.S. Department of Energy's Hydrogen Program, pure water and potentially useful heat are the only byproducts. Researchers are working to improve the life and reduce the cost of manufacturing fuel cells in mass quantities so that they compete with traditional forms of power generation.
Wave and tidal energy
Some pilot projects now harvest the power of the waves and tides. According to Wikipedia, tide mills in Europe have been used to grind grain for 1,000 years. In these simple installations, the tide comes into a man-made tidal reservoir through a one-way gate. The gate closes automatically when the tide begins to fall. When the tide is low enough, the stored water is released to turn a water wheel. With wave power, huge floating water turbines convert waves into electrical power, and this power is carried via undersea transmission cables to on-shore distribution networks.
THE COST EQUATION
The opportunities that alternative power sources may offer companies in the electrical wholesaling industry ultimately depend on whether or not renewables can produce power at a cost that's the same or less than electrical power now being produced by coal-fired power plants, hydroelectric dams, nuclear power plants and other conventional power sources.
Green is great, but greed will have to reign supreme if it's going to transform the world's energy market. It's all about the bucks, and if companies can produce green power or sell green products at a profit, they will. If not, they will stick with more familiar and more profitable sales opportunities. Right now, renewables account for approximately 3 percent of the electricity produced in the United States, as you can see in the chart, “National Fuels Mix,” on page 30. Not all of the green technologies are cost-competitive.
Consider the current cost of producing power from photovoltaic cells. Despite all of the advances in solar power in recent years, it costs 18 cents to 23 cents per kilowatt-hour to produce, compared to 5 cents to 10 cents per kilowatt-hour (a kilowatt-hour (kWh) is 1,000 watts of electricity being expended for one hour) for traditional power sources such as coal-fired power plants, nuclear power plants and hydroelectric dams, according to the Department of Energy. Despite a ton of potential, solar/photovoltaic sources are actually one of the smallest contributors to the renewable pie, as you can see on page 30. According to the Energy Information Administration, in 2007 U.S.-based solar/photovoltaic facilities generated 606,000 megawatt-hours (a megawatt-hour (MWh) is 1,000 kWh, and a gigawatt-hour (GWh) is 1,000 MWh), an increase of about 19 percent. Most of this increase is due to the construction of centralized PV plants in the southwestern states.
It's a different story with wind power. Net generation of wind power increased roughly 21 percent in 2007 to 32,143,000 MWh. According to FPL Energy, Juno Beach, Fla., a division of FPL Group and one of the leading producers of renewable energy in the United States, wind-generated electricity has become more economical to produce in the past 10 years, dropping from as much as 30 cents per kilowatt-hour to between 4.5 cents to 7.5 cents. This makes it more competitive with other energy sources. FPL says the cost to develop and build a wind energy facility is approximately $1.3 million to $1.7 million per megawatt, compared to $800,000 per megawatt for gas-fired energy generation.
These numbers are good to keep in mind when you hear proposals for renewable energy sources to account for 20 percent of all power generated in the United States in the next 10 or 20 years. It's an ambitious but doable goal, with the right amount of government incentives to get businesses and consumers to invest in the technology. California has ordered the utilities serving the state — Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric — to produce 20 percent of all their power from renewable sources by the end of 2010. Depending on how you work the numbers, at least two of those utilities are already at 15 percent.
This type of massive restructuring of a nation's power grid is already happening in Europe and Japan, where in some countries wind power already provides 20 percent or more of all power. What will it take for it to happen in the United States, too? Massive federal subsidies, similar to what the federal government has given to other power sources like nuclear and hydroelectric power. The German and Japanese governments now offer subsidies of this scope. It's interesting that these countries are far more committed to solar power than the United States despite the fact that neither has a particularly sunny climate. Both receive about as much sunshine as northwest Washington state.
The United States, and particularly the Southwest, actually has a much better climate for photovoltaics than these countries. Germany produces an estimated 50 percent of all photovoltaic power. Other global leaders in photovoltaics include Spain and the United States. Spain and Germany have more centralized PV plants than the United States, but a massive facility recently opened at Nellis Air Force Base in Nevada.
Germany is also the leader globally in wind power, with 22,247 MW of installed capacity, followed by the United States with 16,818 MW and Spain with 15,145 MW, according to the European Wind Energy Association (EWEA), Brussels, Belgium.
REALITIES OF RENEWABLES
Electrical distributors may never sell a photovoltaic panel or a wind turbine, but they shouldn't be surprised if one of their electrical contractors calls in looking for cable, strain-relief connectors, enclosures, fuses, circuit breakers, disconnect switches, fasteners, strut or some of the many other electrical products needed in conventional installations of photovoltaic systems. See the sidebar on page 28 called “Do You Sell Any of These Products?”
In the solar field, another piece of good news for traditional electrical distributors is that electrical contractors are already key players, because the National Electrical Code Article 690 governs the installation of photovoltaic systems, and many jurisdictions require licensed electricians to install these systems.
Judging from the standing-room only crowd at an Electric West 2008 seminar on new business opportunities in the photovoltaics market, electrical contractors are really interested in the PV business. The seminar, “Contractor Opportunities In The Solar Market Today And Tomorrow,” was given by Bernie Kotlier, director, Green Building Solutions, for the Los Angeles chapter of the International Brotherhood of Electrical Workers (IBEW)/National Electrical Contractors Association (NECA) this February in Las Vegas.
Solar-related sales may be the proverbial drop in the bucket today, but this is a quickly developing market and there's no reason electrical distributors shouldn't get at least a piece of it. They certainly can either sell the equipment directly to the contractors doing PV installations, or even function as a master distributor selling a package of this electrical equipment to solar distributors in their market. Offering the solar folks a local source of electrical products may save them the hassle and expense of stocking the equipment themselves.
This series of articles will also help you figure out if any of these renewable energy sources could be a source of power for your business or home. For instance, putting photovoltaic panels on your warehouse may one day in the very near future be a sound business investment, particularly if your state or utility offers a tax credit or other financial incentive to do so. Right now, New Jersey and California have big-time incentives for commercial photovoltaic installations. For instance, New Jersey's Clean Energy Rebate Program provides businesses, homeowners, nonprofits, schools and institutions with incentives for the use of photovoltaics, landfill gas, wind, biomass and fuel cells using renewable fuels. The program's budget is $273 million. Across the country, the California Solar Initiative is part of Governor Arnold Schwarzenegger's Million Solar Roofs program, which aims to create 3,000 MW of new solar power by 2017.
A dizzying and ever-changing array of factors affect the growth of alternative energy sources, the cost of the power they produce, and the sales opportunities they may or may not offer electrical distributors, reps and manufacturers. These factors include the following:
Technological advances in solar, wind and other power sources. A mix of private capital and federal grants is fueling a surge in R&D.
Government subsidies, utility rebates and other financial stimuli. Top of the news in this area is the push by solar energy supporters to extend the 30-percent federal tax credit for at least 10 years, and to eliminate the $2,000 cap on residential tax credits for the installation of solar systems.
Opportunities distinct to certain geographic regions. The southwestern United States has a perfect climate for centralized PV power plants operated by electric utilities or independent power producers, and the construction of new wind farms in Texas, California and the Upper Midwest are adding sizable quantities of green power to the U.S. electrical grid.
The transformation of the utility industry to meet skyrocketing electrical demand, and to deal with the increasing frequency of blackouts, brownouts and other power disruptions. Utilities would rather entice residential, commercial, industrial and institutional users to cut down on their energy usage with rebates and other financial incentives than to build or upgrade generating facilities or their transmission networks to accommodate new power demands.
The different market opportunities offered by distinct segments of the wind and solar markets. Large-scale wind farms and/or solar facilities operated by utilities or other independent power producers are on an entirely different scale than the photovoltaic panels, solar-heated hot water systems or wind turbines being installed by homeowners, businesses, schools and other private or public end-user entities.
An already functioning distribution network servicing existing product demand for some of these alternative energy sources. Distributors can't expect to compete head-to-head with well-entrenched solar or wind specialists in selling the core alternative energy products such as solar panels or wind turbines, but as mentioned earlier, distributors may be able to supply some electrical products to solar and wind distributors in master distribution relationships.
Ingrained business habits within the electrical market. The electrical industry may not often offer the double-digit annual sales increases of faster-growing markets. But because it has provided distributors with a pretty dependable stream of business without having to experiment too often with new products or markets, only the most adventurous companies venture far outside their traditional borders.
These factors are to some degree all inter-related, and a change to one can drastically affect another. For instance, if long-term federal subsidies were put in place to increase the installation of photovoltaic systems, manufacturers of this equipment would ramp up R&D efforts and develop more alternative energy sources that could cost effectively compete with traditional power sources. Future articles in this series will explore the distinct challenges and opportunities offered by each alternative source of power.
Next month: The solar market
DO YOU sell ANY OF THESE PRODUCTS?
Wind energy and solar/photovoltaic systems require lots of conventional electrical products to get tied into the electrical grid. If you haven't yet sold any of these products, you may in the near future.
Wind turbine installations
- Pad-mounted transformers
- Medium-voltage power-factor correction products
- Medium-voltage cable
- Cable lugs
- Cold-shrink rubber termination kits
- Motors and hydraulics
- Motor controls
- Low-voltage circuit protection equipment
- Tower lighting equipment such as LED strobe beacons
- Bi-directional meters for net metering
- Strain-relief fittings
- Wire and cable
- Mounting brackets and fasteners
- Bi-directional meters for net metering
- Junction boxes
- Power blocks
- Ground-fault circuit protection devices
- Terminal strips
- Grounding electrodes
- AC invertors
- Backup generators
- DC-rated and listed fuses and circuit breakers
- Charge controllers
- Load centers
- Disconnect switches
- Bi-directional meters for net metering
FUN FACTS ABOUT ALTERNATIVE POWER
Which country has an estimated one-third of all installed wind power?
A: Germany. According to a recent article in Engineering-News Record, the country has 20 new deep-water wind farms approved for construction in the North Sea. These facilities will have a total of 1,200 turbines of up to 5 MW each. With rotors approximately 393 feet in diameter, each turbine will be built on a 300-foot tall tower in water approximately 130 feet deep.
Geothermal energy has heated the capital of which island nation since 1930?
A: Reykjavik, Iceland. Along with heating homes and businesses, geothermal energy heats the city's outdoor pools right through the Icelandic winter.
Which European nation plans to install the world's largest commercial “wave farm”?
A: Scotland. The awesome power of the waves traveling thousands of miles across the Atlantic before battering Scotland's Orkney Islands could produce as much as 1,300 MW (enough electricity to power a city the size of Seattle) by 2020. According to a recent article in Fortune magazine, the wave farm that ScottishPower plans to install will use a 460-foot-long machine manufactured by Pelamis to convert the ebb-and-flow of waves into electric power. The Edinburgh-based Pelamis is funded in part by GE.