President's Message 4th Quarter 2017

By Robert Thornton posted 10-23-2017 10:56

  

Ben Franklin’s axiom that “an ounce of prevention is worth a pound of cure” still rings true today. As I write this column, communities across coastal Texas and Florida are just beginning to recover from record winds and flooding inflicted by hurricanes Harvey and Irma. Puerto Rico is facing unprecedented devastation after Hurricane Maria, while other Caribbean islands were ravaged by Irma and Maria. Television coverage has depicted vast flooded acreage, impassable streets and highways, flattened homes and miles of downed power lines strewn about the debris. The bleak reality of these immense, deadly storms is counterbalanced by heartwarming stories of heroism, human kindness and perseverance. 

It will be months before we have a full accounting of the losses, but it’s clear that recovery will take many months, if not years. Weather events of this scale seem to defy comprehension yet can provide critical lessons for planning and emergency preparedness. As cities and communities recognize this step change in severity and frequency of record-breaking storms, we are reminded of the inherent value of investing in critical energy infrastructure. In and around Houston and Galveston, IDEA member systems followed Franklin’s advice, demonstrating how prudent design, robust assets and thoughtful preparation could keep systems operational during Harvey, standing up to the worst weather Mother Nature throws our way. (See page 30 to learn more about the storms’ impact on IDEA members.)
 

Continuous operation of mission-critical facilities does not happen by accident. In 2001, Tropical Storm Allison brought devastating flooding to Houston, inundating the hospitals in the Texas Medical Center (TMC), causing nearly $2 billion in losses, including invaluable research. Subsequently, the leadership at TMC invested nearly $50 million in flood mitigation including floodgate networks, above-ground electrical vaults, generators and water pump systems.
 

Similarly, the board and leadership of Thermal Energy Corp. (TECO), which provides district energy services to more than 19 million sq ft in 18 institutions at TMC, recognized the need to harden utilities by investing in a 48 MW combined heat and power facility. Reliable cooling and heating are necessary not only for climate comfort but for maintaining precise humidity and temperature conditions for health care operations and critical research. TECO’s CHP can provide 100 percent of the plant’s power, allowing it to function off the grid as needed. TECO’s advance planning and infrastructure have allowed it to provide chilled water and steam for air conditioning, refrigeration, heating, sterilization, laundry and hot water. The company also has an extensive emergency preparedness plan that it activated before the storm, which includes taking care of its “ride-out team” by providing food, beds and supplies to completely meet their needs for seven days. 

In downtown Houston, Enwave operates a large district cooling system that provides chilled water to about two dozen customer buildings in the central business district. The plant was designed to withstand Category 5 winds, and some equipment was installed at 45 ft above sea level, higher than the adjacent Bray’s Bayou normal level of 27 ft. The plant is supplied with electricity via dual feeds from nearby utility substations. Additionally, Enwave management and operations staff bring time-tested utility operations experience from related district energy systems across the country but most notably from nearby New Orleans. Operations staff are highly trained and dedicated, often facing damage and disruption at their own homes when duty calls. In advance of Harvey, Enwave activated its comprehensive storm management plan and was more than prepared to maintain district energy service throughout the storm. 

It is becoming increasingly important for cities and communities, and especially coastal communities, to have storm management and emergency response strategies for mission-critical facilities like hospitals, first responders, housing complexes and nursing homes. Business continuity is an important factor when deciding where to locate functions like data centers and research and production facilities. If you are a process industry, even a brief shutdown due to power loss can cause substantial economic loss. For example, a dairy can be forced to dump a whole day’s volume of milk in process, worth millions of dollars, if pasteurization is interrupted. While community microgrids often integrate solar or wind capacity, when you consider the longer duration and weather conditions of a major hurricane, it becomes apparent that some form of gaseous fuel must be included in the generation mix. Just look at the performance of district energy/ CHP systems like Princeton University or New York University during Superstorm Sandy and the inherent value of district energy/CHP comes to the fore. 

The whole notion of energy resiliency seemed to galvanize in the wake of Superstorm Sandy. Of course, deadly, destructive weather is not a new phenomenon, but the insurance industry has been tracking a marked increase in the number of named storms generating losses greater than $1 billion. When you couple that trend with growing interest in urban sustainability and consider the pace of change in the energy industry, you soon come to realize the importance of deploying more district energy/CHP/ microgrids in our cities, communities and campuses to fortify energy infrastructure. 

Four years ago, there were no city resiliency officers (CROs); today, there are over 80 around the world, largely fostered by support from the Rockefeller Institute of Government. In most cases, the CRO is chartered with uncovering vulnerabilities, assessing risks and infrastructure needs, educating and mobilizing community stakeholders and, now, cultivating the financial resources for implementation. The hardest part is identifying viable projects and partnerships to activate public and private funding sources to construct or harden vital infrastructure that will enable a community to adapt and recover quickly from a serious natural disaster. It will be important for IDEA members to support urban CROs in planning, developing and integrating district energy/CHP/microgrids into critical energy infrastructure. 

Activating public-private partnerships is key to more deployment. City capital budgets and bonding capacity will need to focus on core infrastructure while district energy/CHP/microgrids have the advantage of discrete revenue streams, enabling financeable special-purpose entities. The utility regulatory landscape is problematic and confusing, even though we are witnessing a clear shift from large central station generation to more adaptive, lower-cost community energy production, typically driven by clean renewables. From my perspective, the federal government needs to adapt to reflect this market shift from central to distributed energy resources. For example, construction stoppages at multiple nuclear plants in the southeastern U.S. once again seem to spell the end for nuclear power. But despite massive construction budget overruns and continuous delays, the nuclear industry and large utilities have benefited from a regulatory framework that exposes regional consumers to capital recovery on their electricity bills without ever receiving a single kilowatt from those unfinished nuclear plants. I understand the principle behind risk mitigation for large capital investments, but surely the exposure should rest more with shareholders and less with the ratepayers. 

The U.S. Department of Energy has already committed to back $8.3 billion in loans for one of the projects – the last new nuclear plant under construction in the U.S. – after developers stopped work on a separate project in South Carolina. The Trump administration has proposed killing the federal loan guarantee program, which ensures that loans to the project will be repaid. Congress may follow suit, so we should watch to see if additional federal financing is rushed through to beat the cutoff. If it occurs, this nuclear bailout will dwarf by a factor of 10 the much-ballyhooed $535 million loan guarantee to the failed Solyndra solar business; but I suspect the majority will ignore that matter. Historically, the DOE loan guarantee program has been aimed at projects with values exceeding $1 billion, and due to underwriting provisions and front-loaded process costs, offered little support to district energy-scale development. Given the current political climate, I have little confidence that a priority shift in our direction is imminent, but if market forces are forward indicators, public-sector awareness must certainly follow. IDEA is working to elevate awareness of district energy/CHP in federal infrastructure plans, but progress has been slow.
 

At the same time, there is also growing interest among city leaders in committing to "100 percent renewable energy." This is a laudable objective, but in most cities, heating and cooling of buildings represents at least 50 percent of primary energy use. Achieving full renewable penetration will require greater deployment of efficient district heating and cooling systems, delivered at scale. Technologies employing surplus heat recovery, urban waste wood, biomass, heat pumps and energy sharing will need to be fully exploited. Fortunately, integrating power generation with heating and cooling through district energy/CHP is a proven, cost-effective approach to a more robust and resilient urban energy infrastructure. 

Achieving all these objectives – resiliency, efficiency, sustainability and economic competitiveness – can happen with thoughtful planning. Massive weather events have repeatedly demonstrated the resiliency and operational benefits of district energy/CHP. As the costs of renewal and replacement come into focus, along with accounting for losses avoided from effective business continuity, we can share the hard lessons of Hurricanes Harvey, Irma and Maria to help other cities, campuses and communities make the investment in that “ounce of prevention” that will provide a more resilient energy future. 


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