Energy Issues on Carbon Management, Alternative Energy, Smart Grid Technology and more with Don McConnell

Chat Transcript January 26, 2010

Editors note: Typographical errors have been corrected and unanswered questions have been omitted.

Announcement: Welcome to the web chat

Question: How have energy markets changed in the last year? Don McConnell Answered: The last year has seen quite a bit of churn in energy markets. For the first time since 1955, there was a decline in the demand for electric power. Fuel demand decreased, price of oil dropped from $140 a barrel to $35 and has recovered to $70 per barrel. With the freezing of credit markets, almost all capital projects in energy came to a halt.

Question: How have those market changes affected Battelles business? Don McConnell Answered: In FY 09, markets were essentially frozen, from early in the year until the announcement of ARRA funds. At that point, all of our innovation alliance partners came forward looking to build program in response to ARRA. By the end of the summer, Battelle Energy was written into some $3.6 billion worth of industry proposals. By November, we had been informed that our teams were awarded more than $1.1 billion in contract wins. This represents some $250 million in the next three years for Battelle Energy.

Question: What is smart grid and what is Battelle's role? Don McConnell Answered: Smart grid is loosely used as the term for an electric power system where real time, two-way flow of information allows for much more accurate management of power generation and power utilization. It includes a wide variety of functionality, including allowing customers to manage demand in response to real time

prices for power, the ability to recover from power outages remotely and the ability to reduce carbon emissions by managing for greater efficiency. Battelle's role is to be a principle player in the introduction of real time management of energy use within the home, the introduction of smart appliance controls and the ability to integrate distributed resources such as renewables, generation, community energy storage and the ability to detect outages without customers phoning the utility. We are engaged in both the AEP gridSMART implementation here in Columbus at 110,000 homes and the Pacific Northwest smart grid implementation at 60,000 homes in five states.

Question: Returning for a moment to the ARRA contracts that have been awarded. Could you describe the various contracts wins and the teams they affect? Don McConnell Answered: In smart grid space, the major teams we are on are AEP Ohio and the Pacific Northwest utility consortium. In carbon management space, we are again teamed with AEP at the Mountaineer plant in New Haven, W.Va., and with Babcock and Wilcox on carbon capture technology. Internally, this involves staff from the energy systems product line, electronics systems, the environmental group and process engineering. It also involves staff from Pacific Northwest National Lab.

Question: My understanding is that Smart Grid is being trialed in certain local markets. Will Battelle receive metrics from these trials? Is there any data you can share? Don McConnell Answered: With the two smart grid demonstrations that Battelle's engaged in, we have the opportunity to develop the most complete and consistent data set on customer response to smart grid that has yet been created. Our expectations are that we can examine the impact of varying rate structures and various technologies on customer acceptance of smart grid. As to current data, the best set of information that's been developed came out of the grid wise Pacific Northwest demonstration on the Olympic Peninsula, where there was a 16 percent reduction in peak energy demand and a nine percent reduction in average demand, realized consistently.

Question: Why are some people against Smart Grid? What are the detractors saying? Don McConnell Answered: The questions on smart grid pivot around two principle issues: privacy as to how a particular resident uses power and external control of energy use. The approach to resolving both those concerns is to maintain security of individual usage and to go to a system where the homeowner determines what responses they will permit in their residence. In simplest terms, you can choose maximum savings or maximum comfort--but once you do that, your intelligent thermostat or your home

energy manager acts as your surrogate to manage energy for you. You can override those settings any time you choose.

Question: With a growing demand for carbon-free electricity, how do you see Battelle taking advantage of this growth? (Ex. Power Plants, Transportation, Nuclear Safeguards, Nonproliferation, etc.) Don McConnell Answered: There are a number of plays in which we are engaged in next generation technologies for reducing the carbon signature for electric power. First and foremost, we are in the forefront of the efforts to capture and geologically sequester carbon dioxide. This technology will be critical to enabling the transition to a low-carbon energy system while minimizing economic disruption. With regard to clean energy, we also are in the lead in systems for utilizing bio-mass for both power and liquid fuels. We have also begun the process of demonstrating the integration of plug-in hybrids into the electric grid and will demonstrate that here in Ohio. While the national labs are directly involved in next-generation nuclear power and nonproliferation, Battelle Energy has been involved in the effort to close the nuclear fuel cycle and dramatically reduce the amount of stored nuclear materials from used fuels.

Question: should I presume that smart grid and GridSmart are the same? Don McConnell Answered: gridSMART is a registered trademark of AEP and represents their implementation of smart grid technologies. Smart grid itself is a much broader term used to describe intelligent power management systems.

Question: With demand currently being down, and the price of electricity held low by the current supply of cheap natural gas. Do you foresee a strong economic incentive for consumers to reduce load; specifically, if carbon legislation is delayed? Don McConnell Answered: There is no doubt that reduced economic activity slows aspects of energy efficiency and new energy systems because it reduces both the economic and physical pressures on energy systems. Here in Ohio, Senate Bill 211 mandates energy efficiency improvements to be demonstrated and will penalize utilities for failure to do so. In a regulated market, this will drive behaviors much as limitations on carbon or new generation capacity would. While the current outlook for carbon legislation is far less aggressive than it was just six months ago, there is an interest by utilities and industry for creating a framework that in the long-run will enable both renewable energy and energy efficient systems to be more broadly applied by insuring that there is a route of return to reward energy innovators.

Question: What were the major outcomes of the "Energy Futures" workshop that the Energy Technology Global Business recently facilitated among the other Global Businesses, potential business partners and the laboratories? Don McConnell Answered: The Energy Futures workshop was an effort jointly with the national labs and the Ohio universities to look forward to a time when we have successfully reduced our carbon emissions by 80 percent over 2005 levels. There were a series of working groups studying industries such as utilities, basic materials, manufacturing, transportation, chemicals and fuels, each of which reported back to the main group on the key innovations that had to occur in order to achieve the 80 percent reduction. The common themes that emerged across the groups' findings were much closer integration of product design and manufacture to minimize inefficiencies, the development of tailored materials to suit specific applications in near-net shape form, much better flow of information to manage both energy and manufacturing to increase efficiency and the evolution of carbon capture and disposition technologies to reduce emissions from both power generation and manufacturing.

Question: The Obama Administration has passed an executive order (13514) that requires the federal government and agencies to improve federal environmental, energy and economic performance. Some companies are concerned that the requirements imposed on the federal agencies themselves will also be expanded to the companies who contract with these federal agencies. Have we seen any increase in work with the federal government due to this executive order? Have we considered the potential energy and environmental opportunities (and perhaps challenges) that will occur if companies must comply as well? Don McConnell Answered: We have a seen a growing interest on behalf of federal agencies, especially DOE and DOD in implementing technologies and systems to reduce energy consumption. All of the national labs have been tasked with both reduction of energy use and increase in recycling and recovery of resources. This has taken many forms, but the most dramatic is at the National Renewable Energy Lab, where the entire lab is on a path to net zero emissions and net zero energy consumption by 2012. Within the military, the response so far has been site-by-site specific and only in the last year has momentum built toward service-wide approaches to minimizing energy consumption. Battelle Energy and National Security (NSGB) have been working at the Pentagon to both plan a path forward and to identify contributions Battelle could make to realizing Executive Order 13514.

Question: What involvement does Battelle currently have and future prospects in bioenergy?

Don McConnell Answered: I think that both directly through Battelle Energy and through the national labs that Battelle manages, we are on several fronts of bioenergy. Battelle Energy, working with Pacific Northwest National Lab and Idaho National Lab, has been working on systems necessary to allow a major oil company to substitute bioderived feedstock for crude oil with the goal of 20 percent reduction in crude requirements by 2020. Oak Ridge National Lab and NREL are engaged in efforts to advance the state-of-the-art in cellulosic feedstock conversion, breaking the dependence on seed oils and sugars for biofuels. All of these are elements of a broader strategy to look towards a future where 30 percent of our demand for liquid fuels is met by bioderived fuels.

Question: What are our current primary initiatives in the area of alternative energy? Secondly, what alternative energy niches are we targeting for future entry? Don McConnell Answered: At the moment, under the rubric of alternative energy, we are working on the introduction of fuel cells as high-efficiency power units for mobile applications with the first deployments into commercial markets occurring in 2012 with a unit which we developed jointly with Delphi Automotive. We continue to look towards portable power, using fuel cells, for the military as low-signature, high-efficiency power sources. As discussed earlier, we also are looking at the use of biomass for both electric power and fuels and chemicals production. Lastly, we have begun the investigation of both third-generation photovoltaics and concentrated solar systems to offset energy requirements in petrochemical refineries and reduce carbon signatures.

Question: Do you foresee any risk to Battelle's energy technology business given the potential for a "high profile" failure by other (less reputable) smart grid technology vendors; which could damage the public's opinion of all things "smart grid"? If so, how should we differentiate ourselves to avoid such potential fallout? Don McConnell Answered: In any emerging market, there will be a range of systems deployed. The first line of defense against high-profile failures is the measured and cautious implementation of smart grid technologies by the utilities. For example, in the AEP Ohio demonstration, all of the technologies will have been smoke tested at AEP's Dolan Lab prior to field deployment. In terms of protecting our reputation, we have developed a test-bed facility here in Columbus to permit stress testing of our systems prior to their deployment. In addition, we are working with both the GRIDWISE Alliance and the National Institute of Standards and Technology to develop standards for smart grid systems that will become national requirements for new systems. Perhaps the greatest risk we face is poorly designed customer programs that will trigger consumer reluctance to new systems. This last area is an area of focus going into the next round of demonstrations, where we believe we can take the leading position in defining approaches that benefit both the rate payer and the utility.

Question: What are the International Projects underway and Opportunities on the horizon for the Energy Business? Don McConnell Answered: The largest single effort underway is with Petronas in Malaysia to address both alternatives to petroleum and the expansion of alternative energy systems in petroleum production and refining. This effort will likely extend to the broader issue of reducing carbon signatures from petroleum production and refining over the next year. Beyond this, we are just now beginning to explore opportunities more broadly in Asia, for both smart grid and carbon management technologies, in countries such as Korea and China.

Question: Looking forward, what are some other energy innovations you see Battelle pursuing? Don McConnell Answered: The key innovations where we believe Battelle derives competitive advantage from its base of science and technology include intelligent energy management, reduced carbon systems for fossil fuel generation and energy conversion, fuel cell systems (particularly from mobile sources), subsurface disposition of CO2 and ultimately process technologies for the reprocessing of nuclear fuels. All of these represent areas where significant innovations derived from sound science and technology would be welcomed in the energy economy.

Question: What do you see happening with biofuels over the next few years? Don McConnell Answered: The next few years are going to be quite challenging for biofuels. The existing sugar-based ethanol plants will be challenged to remain profitable in the reduced demand markets for liquid fuels. Longer term, the evolution of cellulosicderived fuels, more broadly defined than ethanol, will likely emerge as near-net zero carbon emissions fuels. That likely won't occur until three to five years from now.

Announcement: Thanks everyone for your questions today. In Columbus, we will be hosting a series of brown bag luncheons to discuss each of the major areas of Battelle Energy's business. We hope that you'll participate and bring your questions as well as your lunch. We look forward to seeing you then. Watch for Daily Bulletin reminders for dates and times of these upcoming events. Have a great day.