Nothing unifies a group of people more these days than the assertion that the price of gas is out of control. Stateside, we can hardly get through a single day without somebody whining about the price of gasoline. It seems like when the news gets slow in Lafayette, which it often does, the local TV news channels can always fill a few easy minutes by sending their roving reporter out to a couple gas stations around town to ask the tough question to gas station patrons, "What do you think about the current price of gas?" Responses typically range from words that Caterpillar specifically prohibits me from writing publicly to invocations of the "good old days" when the price of gas was cheap.
Indeed gas prices in the US seem high to me until I traveled to Germany a few weeks ago to discover that the going rate for gallon of gas there is pushing €1.33/liter (US$8/gallon). No thanks. I'll take the train.
The good news in the US is that the "good old days" are here again. Not with respect to petroleum fuels like gasoline. That stuff is not getting any cheaper any time soon. The good ole days are here again for natural gas. New technologies in extracting domestic natural gas coupled with a massive build out of natural gas distribution infrastructure means that gas as a fuel source has not been more abundant, more available, or cheaper in the past 10 years.
A lot of the industry and financial press has given this fact a lot of attention lately. So have Electric and Gas Utilities. Many big electric utilities are in the process of converting a lot of their coal fired steam turbine plants to natural gas fuel.
However, smaller electric utilities like municipals, inter-agencies, and cooperatives are seeing their delivered cost of electricity continue to rise and are not crossing the line into capital investment in distributed generation assets again. I believe part of the reason is related to long memories. Fifteen years ago when gas (and diesel) was inexpensive relative to electricity, there was a large move by both municipal and independent utilities towards distributed generation peaking plants using natural gas (and diesel) fuel. Unfortunately, gas prices flipped 10 years later and those plants became a lot more expensive to operate. Oops.
So what is different today? Is there a business case, reliability case, energy independence case, etc. for North American utilities such as cooperatives and municipal utilities to change when everything went wrong in the mid 2000s?
Well the answer is: It depends. There are a lot of factors for utilities to weigh before making a move. Caterpillar's resident electric power utility expert, Mike Devine, is scheduled to explore these issues during a live webcast on May 2nd at 3pm US eastern time (sign up here).
Hopefully, you can help get the conversation started here on our blog:
- Do you work for an electric or gas utility? Are you a large user of energy?
- How do you see gas and electric utility industry changing in the next 10 years?
- Where are fuel prices headed?
I'd like to hear from you, so please post below. Bear in mind that I'll be travelling back to Europe the week of the 23rd. Not only paying $7 for a gallon for gasoline but I'll be away from my computer much of the day so I'll try to respond as quickly as possible.
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