Energy round table: Powerful position
It’s a busy time in North Carolina’s energy industry. New sources, including renewables and natural gas, are adding generation options. Companies are applying technology to modernize the grid and increase efficiency, and they’re partnering with educational institutions to train a modern workforce. Business North Carolina magazine recently assembled a panel of energy experts to discuss how the industry is changing and the challenges it’s facing.
The discussion was moderated by David Doctor, president and CEO of Charlotte-based trade group E4 Carolinas. Support was provided by North Carolina Petroleum Council and ABB, whose Smart Grid Center of Excellence in Raleigh hosted. The transcript was edited for brevity and clarity.
What makes North Carolina attractive to the energy industry?
O’HARA: It’s many things. The state had the foresight a decade ago to create policy that encouraged renewables. That, along with federal policy and the falling cost of solar-energy equipment, has driven the industry. North Carolina was No. 2 in the nation for deployed solar in 2016, according to [Washington, D.C.-based] Solar Energy Industries Association.
FULLER: North Carolina provides companies with an educated workforce through partnerships with universities and community colleges statewide. We see a skill set that’s based in computer science. Underlying it is the state’s entrenched manufacturing culture.
SELF: We’re fortunate to be on the N.C. State campus. It provides us with great employees. Look back to Research Triangle Park’s start, when [Armonk, N.Y.-based] IBM Corp. and the other companies brought diverse people, views, ideas and technologies. That mix has helped the state, which still offers a level of diversity that other places lack.
HEISHMAN: It’s a research-rich state. EPRI works with power plants worldwide. The U.S. began using nuclear power in the late 1960s, ahead of most other countries. That solid base remains a benefit today. The early plants gave the Carolinas a head start.
BOWMAN: North Carolina is a policy leader. Its 2002 Clean Smokestacks Act, for example, was prior to any EPA mandate. Now, we’re talking about innovation again with House Bill 589, which would create a smarter, more sustainable approach to increasing renewables. It’s a great state to work and live. Many people are moving to North Carolina, whose population was 10.1 million on July 1, 2016, up from 9.5 million in 2010, according to [Washington, D.C.-based] U.S. Census Bureau.
What is energy’s role in economic development?
BOWMAN: Energy prices are a big concern for businesses, especially manufacturers. We are working with economic developers more than ever, assembling energy packages that they can present to prospective companies or expansions. They detail rates and available electrical and natural-gas infrastructure.
MCGOWAN: The Atlantic Coast Pipeline will transport natural gas from West Virginia to customers in Virginia and North Carolina. Its first construction approval is expected this fall. It should be online sometime in 2019. It will be a tremendous economic resource for eastern North Carolina, opening the door to manufacturers, such as those that use heat to cook, dry, melt or glaze their products, who previously overlooked the region because of lacking supply.
What are the industry’s environmental challenges?
MCGOWAN: There are economic and environmental incentives to limit greenhouse gas emissions. We’re interested in ensuring that we limit those as much as possible. Market-based solutions are better than regulatory mandates, which restrict economic development to achieve reductions. The oil-and-gas sector has invested billions of dollars in technology to cut emissions over the last 10 years. The amount almost exceeds investments by the federal government and all other entries combined over the same period. The industry recognizes it’s an important topic that presents challenges. It’s working through those, addressing them in economically and environmentally sustainable ways. In addition to the economic-development aspects of an increased natural-gas supply, it also brings environmental benefits. As Duke Energy has retired coal-fired power plants and brought natural-gas plants online, we have seen cleaner air in North Carolina and along the East Coast.
HEISHMAN: We need traditional power plants to meet base load, the minimum electric demand on a grid over a period of time. Renewables, such as solar and wind, only can generate during certain environmental conditions. Nuclear plants can provide base load without emissions. But many are approaching 60 years old. Their builders didn’t expect them to be in service much longer than that. So EPRI recently started examining how they can be safely used for up to 80 years. It can be done; some fossil-fuel plants ran past 80 years. It boils down to ensuring the concrete, metals and cables remain safe. We also are examining fourth-generation nuclear reactors, which are very passive. In the event of a meltdown, like what happened at Fukushima in 2011, when reactor cooling was lost after a tsunami hit Japan, these plants will safely shut down automatically.
How is the industry updating its infrastructure?
BOWMAN: Duke Energy will invest $13 billion to modernize North Carolina’s electrical grid over the next 10 years. It was designed to move power from plant to customer, but with more renewable generation, such as residential solar, power needs to flow both ways. ABB and others have developed smart-grid technologies. They include smart meters, which report use in real time. There also are smart transformers and relays, which help us restore power faster with- out rolling service trucks. We need to update our information-technology infrastructure, too. We’re expecting to hire about 7,000 workers to help with the modernization. Many will be linemen and engineers. They won’t be contract jobs. We’ll need them to maintain the new grid. It will be a boon to the state’s economy.
SELF: A big part is communication technology, making system information easily accessible and more useful, especially when it comes to planning and proactive maintenance. We discuss even the smallest assets such as the distribution transformer outside your home. While the infrastructure around it costs much more, it needs to be monitored. If we don’t know what’s going on with these assets, we’re going to destroy many more costly things. It will require upfront money, but we’ll be more efficient, reliable and productive in the long run.
HEISHMAN: Many nuclear plants built in the late 1960s and early 1970s still use analog instruments, and parts and replacements for them are impossible to find. So they eventually will migrate to digital instruments. We’ve worked with regulators, studying how a digital upgrade affects a nuclear plant, where safety is paramount. It costs more to generate electricity from nuclear power plants than other types. About a year ago, chief nuclear officers from U.S. generators created a plan to provide nuclear power that’s safe, reliable and “too cheap to meter.” While the last hasn’t been realized, U.S. plants are focused on reducing operation-and-maintenance costs by 30% over the next three years. That won’t be simple, but we’re not the only ones who see the need of accomplishing it. I was recently in China, where the government directive is cut those costs 10% by next year.
MCGOWAN: Many natural-gas assets, including some liquid lines along the East Coast, were built more than 50 years ago. They have had status and control systems upgrades, but they’ll continue to be a challenge for the sector. The industry also hardened its computer systems against cyberattacks, which could have profound environmental and economic consequences.
How are workforce needs being addressed?
MCGOWAN: The industry’s employment numbers have recovered substantially since its 2014 downturn. We do have challenges with millennials, communicating the benefits of our products and the opportunities that the industry provides its employees. One of our biggest challenges is finding those folks in the middle, who may have community college training or a STEM background, and deploying them in the right positions.
HEISHMAN: Many of us in the industry have gray hair and are nearing retirement. The next generation will need to be as or more effective than we’ve been. EPRI is looking at ways to train them, including “Generation Swipe,” people born after 2000. They swipe technology, such as smartphones, to access information. They’re not using the library like I did. EPRI focuses on getting workers to the needed education level and making them effective. We’re looking at things such as smart-grid technology, figuring out if a job needs 50 traditional linemen or 20 supported by data analytics.
BOWMAN: Our Brunswick Nuclear Plant near Southport has a training simulator that uses swipe technology. We have a long history of partnering with North Carolina’s university and community-college systems for workforce development. We’re partnering with the latter for linemen training, which takes about three years. We’re even working with students in the last two years of high school, helping them with the math and science they’ll need later. Hiring linemen is a big challenge. We’re competing against other utilities and telecommunication companies, which are paying high wages to linemen to string fiber optic cable along our utility poles. We’ve partnered with N.C. State, which has a well-recognized nuclear engineering program. We also are trying to tap into the folks who are moving here.
SELF: We have 60 manufacturing plants in North America, and we want more. We hire a diverse group of people. The jobs that require higher education are hard to fill because so many are open. That means we’re understaffed here. Energy isn’t the sexiest or highest-paying industry, so we have to sell ourselves in many places. Sometimes as economies fall in other places, we relocate workers to the U.S. We are hiring people continuously. We work with community colleges such as [Raleigh-based] Wake Technical Community College. We host or sponsor programs with them because any level of skill that we can improve through the educational system really helps us.
O’HARA: We are hiring. We have about 350 full-time employees and up to 1,700 people working in the field at any time. They are electrical, civil and mechanical engineers. And there are lawyers, accountants and development folks, too. There’s a lot of interest around the country about reshoring manufacturing. We may call building a solar farm construction, but it’s really manufacturing with the assembly line moving around the product. It’s not construction when you drive efficiencies by getting your supply chain and process efficiency right. It can be difficult to see that when it’s happening outside and not in a factory.
FULLER: We’re a simulator, engineering and training company. We help customers understand what we call “the proficiency gap.” It involves finding ways to bring folks up to job proficiency faster. We’re working with a utility that wants its engineers proficient in 18 months, but it’s currently taking five years. We’re working on that now, using technology to make that happen. Many utilities have training simulators in their nuclear and fossil-
fuel power plants. There are great opportunities to leverage that. The grid and generation are modernizing, but more importantly, so are the controls used by the operators. It’s exciting.
How is policy driving the industry?
BOWMAN: What’s happening at the EPA doesn’t change Duke Energy’s fleet modernization, which will provide cleaner energy for its customers. We’ve retired more than half of our coal-powered plants in North Carolina. We’ll continue to reduce carbon emissions regardless of what’s happening in Washington, D.C. We have to comply with regulations, so they will always drive decision-making to some extent. We’re addressing coal-ash basins statewide.
O’HARA: The fundamental drivers of growth in our industry are the improving and attractive economics of renewable energy and the desire to move toward cleaner energy sources. Policy won’t stop that, but it can dictate the pace. Federal policy must ensure grid and market access for renewables. There’s a big bogey on the horizon for the solar industry in particular. [Norcross, Ga.-based] Suniva Inc. has filed a petition with the International Trade Commission asking for significant tariffs on imported solar panels. It would at least double the price of imported solar panels. We grow where we’re competitive. Artificially raising costs makes us uncompetitive, and the rate payers lose in the end. Economics, not federal policy, should determine our growth.
MCGOWAN: When we make long-term investment decisions, we want some certainty that the framework under which they’re made will persist. That’s our biggest challenge and perhaps opportunity under the current federal administration, not necessarily about less or more regulations, but that they are smart, efficient and certain.
SELF: We watch industry’s reaction to policy, and we attack that to try to get business. There’s no doubt that federal policy drives industries to do things. It opens opportunities. We want that business.
Will renewables ever meet all our energy needs?
SELF: The technology is available, but it’s not currently cost-effective. There have been big advancements in solid state transformers and circuit breakers and fuel cells, but their life cycles, cost and sizes are bad. But that could change soon because technology is moving faster than ever. It seems like every week we introduce an inverter, which switch direct current, which is what solar panels, for example, generate, to user-friendly alternating current. We’ve never invested as much in research and development as we are now.
O’HARA: Renewables, existing hydro, natural gas and nuclear will dominate the grid for at least the next 20 years. How much of each is the question. There will be more renewables. When battery storage becomes more cost-effective — and that’s coming soon —the variability of renewables will be mitigated. We’ve had plenty of successes, but we’re still a long ways from the grid suffering problems from too much renewables. So we’ll need incremental solutions along the way. Recently a bid was put forth for a solar-plus-storage project in Arizona that would produce 4.5 cents per kilowatt hour electricity. That’s competitive with natural gas.
BOWMAN: In North Carolina, Duke Energy has to do least-cost resource planning. We provide electric service to our customers 24 hours a day, every day, and it must be reliable and cost effective. We also see a diverse generating portfolio, including nuclear and natural gas, going forward with renewables playing a larger role. We are doing many innovative projects. On top of Mount Sterling near Asheville, for example, solar panels and a battery power a ranger station. It was more cost-effective than maintaining a 4-mile distribution line. We’ll continue to consider those types of solutions where they are most logical.
How is the state a leader in the industry?
MCGOWAN: The oil-and-gas sector has seen progress in alternative-fuel vehicles, specifically those that use compressed natural gas. [Canada-based] Cummins Westport Inc. is building engines for them in Rocky Mount, and [High Point-based] Thomas Built Buses Inc. offers the technology in its vehicles.
BOWMAN: The trend is toward more generators, though central station generation will continue. Duke Energy’s work to integrate the amount of solar that has been brought online is precedent-setting. Those lessons are exportable to other states. Many states, especially in the Southeast, have a regulatory structure similar to North Carolina’s. They will deal with the issues that we’re dealing with today in one or two years. It’s incredibly important that we get it right.