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Fortnightly Magazine - February 2007

Assessing the Turmoil in New Zealand’s Electric Industry

 BOOK REVIEW: Alternating Currents or Counter-Revolution: Contemporary Electricity Reform in New Zealand, by Lewis T. Evans and Richard B. Meade (Victoria University Press).

Arthur O’Donnell

The news coming from across the Pacific Ocean over the past year seemed familiar, if at times puzzling. New Zealand’s energy minister, caught in a political faux-pas, hastily resigns—only to be reinstated a few weeks later. Concerns about inadequate power supplies and below-average hydroelectric storage are downplayed by government regulators. Then, a harsh winter wind storm triggers a transmission failure that blacks out the major city of Auckland. What to make of all this turmoil in New Zealand’s energy industry?

Duke's Risky Spin

Lackluster interest in Duke post spin-off bodes ill for the “pure play” electric utility.

Richard Stavros, Executive Editor

It was the most anticipated energy deal in the New Year, but not for the usual reasons. The spin-off of Duke Energy’s natural-gas business into a stand-alone company, Spectra Energy Inc., peaked interest because the transaction was to have marked the vindication of the so-called “pure play” electric strategy. The deal also has captured attention because the spin-off represented a divestiture strategy that until now hasn’t been universally embraced, with gas assets still seen by some utilities as part of core operations.

People

(February 2007) The Electric Power Research Institute appointed Bryan Hannegan vice president for environment research and development. PNGC Power named John Prescott senior vice president of power supply. Nora Mead Brownell joined the Comverge Inc. board of directors. The Midwest Independent Transmission System Operator Inc. announced the election of two new members to its board of directors: Michael J. Curran and Eugene W. Zeltmann. And others...

Climate Panic Button

Ecology scientist Ken Caldeira sheds light on some radical ideas for fighting global warming.

Michael T. Burr

Among climate scientists, Ken Caldeira is a self-described troublemaker. For instance, Caldeira annoyed tree-huggers and corporations alike by demonstrating that planting trees in most locations around the world actually exacerbates global warming. Fortnightly caught up with Caldeira recently to discuss his perspectives on geoengineering and its possible role in strategies to address climate change.

Unintended Consequences

Does anyone care about rising redispatch costs?

Richard Lauckhart and Gary L. Hunt

Regional transmission organizations (RTOs) or independent system operators (ISOs) dominate the major power grids of North America, with the notable exceptions of the Southeast and Pacific Northwest. The purpose of this article is not to criticize system reliability but to highlight the more pervasive challenge today and for the future: Controlling the cost impact of decisions by grid operators on energy market participants.

Greenhouse Gases: Reviewing the European Trade

Lessons from the EU Emissions Trading Scheme emerge after two years.

John Woodley

Despite assertions to the contrary, the European Union Emissions Trading Scheme is working. Industry has changed both short-term behavior and longer-term plans to reduce compliance costs—the driving down of greenhouse-gas emissions being the intended and achieved result. In this article, we review examples of the ETS affecting both planned and actual behavior. The other side of the coin is how regulatory and political uncertainty undermines this.

Future Imperfect II: Managing Strategic Risk In the Age of Uncertainty

Part two of our series shows how utility companies can manage, but never eliminate, strategic risk.

Dr. David L. Bodde

The consequences of a flawed strategic choice unfold slowly, but they carry great weight. Consider IBM, which in 1980 chose to outsource to Intel the 16-bit processor needed for its entry into the personal computer market. The Intel chip, however, could not use the operating system that IBM had designed for its older 8-bit processors. And so the company had to outsource the operating system as well as the chip—to a startup company called Microsoft.

The Rush to Reliability

FERC races to impose NERC’s new rules, raising howls of protest in the process.

Bruce W. Radford

After pleading with Congress for so many years, and then at last winning the requisite legislative authority to impose mandatory and enforceable standards for electric reliability, to replace its legacy system of voluntary compliance, NERC finds itself at a curious juncture. It wants to slow the transition.

Smart Grid, Smart Utility

The intelligent-grid vision is becoming clearer as utilities take incremental steps toward a brighter future.

Michael T. Burr

Building the intelligent grid will require less technical innovation than it does strategic innovation—a characteristic not typically ascribed to U.S. regulated utilities. But the utility culture is changing—by necessity, if not by choice.

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