Conversations With Exelon

Eli sat in on an interesting conversation last week at the Brookings Institution involving Chris Crane the Exelon CEO.  Exelon is a large electricity generator and supplier in the US with over $30 billion in revenue and a large fleet of nuclear plants as well as natural gas and oil but not much coal.  Crane's first words were

The impacts of climate change are irrefutable

Bunnies can view the video if they have an hour or so.  IEHO it is worth it.

Eli visited the Brookings Bunny and live tweeted the discussion into the ether where it vanished.but  the talk is worth listening to because it goes considerably beyond the usual.

Eli is visiting for a talk given by the CEO of Exelon. Starts by saying that impacts of climate change are irrefutable.

— eli rabett (@EthonRaptor) October 22, 2018

What the utilities have is a century long record of outages and service calls many of which they can increasingly trace back to climate change (as well as various critters with sharp teeth chewing on wires and such).  It would be worth asking if they would share these, or already have, much in the spirit of the US Navy, with urging from Al Gore, making public the records of undersea observations of the Arctic ice pack.

Crane, of course, favors market driven choices with elimination of all subsidies but emphasizes the Golden triangle of safety, reliability and cost.  The first two are key going into the future because saving costs today leaves business, and generators subject to enormous procrastination penalties if generation and distribution are not hardened to deal with a 1.5 C world, let alone a 2 C one.  It's the nature of Golden triangles that you mostly get to pick two of three or at best trade off current costs against future disasters.  

He sees efficiency as the least expensive renewable energy cost, but as interestingly, does not foresee future nuclear plant builds because of the cost and time. Natural gas is too cheap to afford building new ones.  Between the lines you can sense that he is not a real believer in modular nuclear.  He would be pleasantly surprised, but mostly is not betting Exelon's bottom $30 billion on it either.  As Eli has been pointing out this means that the ONLY way of building lots of conventional nuclear plants is for governments to do it (Russia and China) or finance it (France) to absorb the up front capital costs and long build times.  The government could lease the plants back to operators for annual payments to finance continuing new construction.  One of the few new technologies Crane is optimistic about is  using high pressure hydrogen to cover the times when renewables are not producing.  Eli would point out that for some applications heat from burning the hydrogen could be used directly and yes Crane knows about embrittlement.  He is a very sharp cookie.

Perhaps the most interesting take away is how Exelon views carbon capture, not as a way of reducing carbon in the atmosphere, but as an enabling technology for expanded natural gas generation.  Eli sees the sense of this because natural gas after scrubbing is a clean fuel with essentially a single component, methane, whose combustion produces a stream of almost 100% carbon dioxide and water vapor.  The two components are relatively easy to physically separate which makes carbon capture easier, and the CO2 could at least in principle be re-injected into the natural gas wells.  

As far as the political side of the coin Crane sees customer and state demand for zero emissions and federal resistance.  He sees no point in trying to make believe that coal or oil is coming back to appease folk in WV, TX and various luckwarmer and denier think tanks.  The current US government may be bypassed, if for no other reason that utilities are state regulated.  While the prospects for a national carbon tax (much better than regulating emissions in his opinion) are grim, state or regional ones could happen.  

As an operator of utilities he sees that the climate is changing and this has already become a huge cost.  Exelon in the immediate future will close its older and expensive to operate nuclear generating plants, but closing all of them is dumb.  Germany has shown that the major effect of that is to increase the burning of dirt, aka lignite.  Clearly, according to Crane, the US has lost its base for building new nuclear plants which absent a new capital allocation mechanism will not improve, leaving the capacity for new nuclear builds worldwide mostly for China, Russia and Japan who have the technology.  

Which brought the conversation to what will be needed to go carbon free, or at least carbon less.  Networks and resistance to network expansion are keys.  New England is hanging by a thread in winter because loss of a single natural gas pipeline would put them in deficit but there is considerable resistance to new ones.  Expanding the electrical distribution network faces the same issues.  Grid reliability requires network expansion both for fuel and electrons.  If nuclear is not benefited for emissions reduction as renewable energy is then fossil fuel use will increase. 

Utilities in the US have to allocate capital in a 30 year time frame.  Rebuilding the network for two way flows  (e.g. for rooftop solar) will be expensive and, if it is to be done start soon.  Simpler technologies like smart meters can make a contribution and have a surprising to Eli benefit of immediately notifying operators of outages and speeding up response before troubles spread and the carrots in the fridge go bad.

As such things go worth a listen to understand climate change issues from the point of view of the utilities.

Note:  Edited to spell Exelon the way the SEC prefers it.