Why Smart Meters are not a silver bullet

A dose of real world analysis in the midst of the smart meter euphoria... this article talks about how utilities need to do more than just install smart meters for them to be an effective tool in reducing our energy usage...

Smart Meters: Not So Sharp For Consumers (from forbes.com)

MPs demand inquiry into great energy 'swindle'

Article: Great Energy Swindle | The Independent

Unfortunately the 'big six' supply companies may have some defence in their argument. It is quite likely that most of them do hedge forward their demand estimates as much as three years in advance; if they didn't their risk would really be too high and this would severely knock their share price. Ok, they will not have hedged their full volume in the first part of 2008, when prices were soaring, however, a large portion of their demand would have been covered at higher prices than we are seeing now.

This leads to many questions with two of the more interesting ones being:
- who did benefit from the higher prices locked in by the big six supply companies?
- When will we see some drop in prices on the back of recent lower wholesale markets?

The answer to the first question may depend on who the supply companies acquired their hedge from, which is probably a mix of their own internal trading company or the commodity trading banks, who by the way are all having massive years! A point to realise is that the integrated utilities do not really care about the electricity price but more about the generation margin (i.e. the difference between power and the fuel price - the so called 'spark spread' or 'dark spread'), which will not have seen such big gains because fuel prices were also high. This being said, we might expect the nuclear generators to be the big winners for once as their fuel price is less impacted by emission prices or other highly volatile energy markets.

The second question is harder and really depends on the hedging strategy in each company but certainly the retail prices ought to start looking lower from now. However, we should not expect the benefit to be a big hit though as the impact will be spread over the price we pay during the next three years or so.

Of course, if prices in the wholesale market start firming again then this benefit will be diluted; with commodity price induced inflation not far around the corner, because the supply/demand situation hasn't improved much of late, do not hold your breath!

BP’s new Chairman

Rumblings from up high in BP …

BP’s New Chairman to Lead Shakeup | Reuters

Wireless Power (nearly) a Reality

I am sure many readers of this blog have the daily annoyance of needing to carry around multiple charging adapters and plugs (Laptop, iPod, Mobile, GPS). The lack of standards across devices (no one charger to rule them all) and having to carry around long, self knotting wires make this an exercise in minor frustration.

Because of this I have been following the research and development effort on wireless device charging for some time now. There seems to be a few players out there with slightly differing technologies, but recently PowerMat has announced it is about to release a product which uses magnetic induction to distribute power. Key features include charging multiple devices simultaneously and the same or faster recharge speeds (not sure how that works?).

What's the catch? Well currently it seems to be aimed at small devices (phones but not laptops) and product support is, as is to be expected, limited. Currently there seems to be two options – product specific back panel receivers (which are slightly bulky) or a receiver with USB and other adapters. If popular, I hope product manufacturers will adopt.

I wonder if this is a ‘green’ solution or is always drawing power from the mains and distributing into the Ether.

Check it out.

Blame the speculators.. or is it currency movements. Why not just listen to the market?

If it is not the options traders causing higher oil prices then maybe OPEC are correct that the speculators are to blame, at least according to Abdullah al-Badri (the secretary-general of OPEC).

Speaking at the same conference, Tony Hayward (chief executive of BP) also said that the recent rise in oil prices was related to currency movements; are the currency traders to blame then?

So why is anyone to blame? My understanding is that prices go up because there are more buyers than sellers (economics 101). I just wonder why it isn't simply that the market thinks current prices are too low; somebody is clearly willing to take delivery of oil at these levels and so called speculators only buy because they believe prices are going up; oh and they also sell when they think prices are going down.

The only thing that we can be sure of is that nobody knows...isn't that why markets exist and why there is risk!

The Impact of Options on the Oil Price

An interesting article in the FT today about potential upward pressure on the Oil price if it surpasses $80 as sellers of Calls need to cover their position with futures.

Options-driven rally likely if oil prices move above $80 | FT, 20 Oct

Energy Regulation Goes International?


There’s a new group in town … ICER is a group of 12 regional energy regulatory associations that are trying to talk about regulation on a bigger stage. Looks pretty EU-centred on first blush but may represent a reasonable first step.

International Energy Regulator Launched | Energy Risk, 19 Oct 2009

I will say, however, that based on the “google scale of relevancy” – a term I just came up with –this organisation needs to work on getting more press (or at least hire some SEO folks to get their website higher in the search results).

Risk Management no longer does what it says on the tin

There has been a trend recently that suggests Risk Management no longer does what it says on the tin; so much so that nowadays it appears risk management and optimisation drive business decisions even less than accounting, as identified in my earlier comment (http://energyandcommoditiesnews.blogspot.com/2009/09/without-risk-taking-there-is-no-banking.html).

Over the last year in particular, Risk Managers have become more like Risk Controllers (to bash the trader) and Risk Reporters (more for regulatory reasons rather than business reasons). The days that good risk management was a tool to help the business make positive contributions rather than just limit innovation may now be part of history. Good risk analysis, information and advice can improve performance, help traders use their risk capital more efficiently and highlight scenarios that their position is exposed to; it is also reasonable to expect that new profit opportunities will be identified as a consequence.

Risk Managers, whether they are the trader as the first line of risk management, an independent group or both, need to spend more time looking forward at how risk can impact and change performance rather than looking back.

The timeliness of this information is also important and more often than not it is almost a day behind, by the time it has been usefully interpreted! Providing the data for analysis and reporting the results of standard metrics can often be outsourced and provided in a timely manner for interpretation. This requires a different skill set to the real expertise of understanding what risk can do and how to utilise it in order to benefit the business.

Let’s look forward to the days when highly skilled and experienced Risk Managers start thinking about managing risk again, rather than spending their time preparing cushions of reports at ridiculous levels of confidence, precision and complexity.

OpenLink closes Petrobas

Petrobas, the Brazilian energy giant, announced that they will use OpenLink’s Endur platform as well as the cMotion suite for their refined products business.


Petrobras Selects OpenLink's Endur for its Crude Oil and Refined Products Business

| Bobsguide

3 becomes 1: welcome to the US Power grid


Many of you have probably been reading about the benefits of a High-Temperature Superconductor (HTS) in the media recently. Apparently it was announced today by the American Superconductor Corporation (AMSC) that they have been chosen for the Tres Amigas Project which will connect all three major electricity grids in the US as well as provide pipe to bring in new non-dispatchable renewables onto the newly formed national grid.

Apparently scheduled for completion in 2014, it sounds like a pretty exciting prospect that should bring greater reliability and competition to the grid as well as provide a more effective environment for renewable sources to sell intermittent power into. Looking at AMSC’s chart, however, it appears this news was not a surprise as there was effectively no movement in the stock price today although maybe we’ll see a jump tomorrow as the announcement was late in the day.



Superconductor Electricity Pipelines to be Adopted for America's First Renewable Energy Market Hub | Yahoo Finance

American Superconductor to Provide Hardware for Tres Amigas Project | Green Energy Reporter

The Tres Amigas Project: America's Renewable Energy Hub? | Fast Company

An interesting investment or a foolish gamble

If you like to try your luck at the casinos in Vegas and also secretly hope to see a major green revolution take place in the near term you can take a position on both today. How? Buy ZENN stock (ZNNMF). ZENN, for those of you who don’t know, has been in the business of making zero-emissions vehicles but recently decided to change tact and now is focusing exclusively on an electric drive train that they plan on selling to Ford, Toyota and other major manufacturers. The ace up their sleeve? Their intimate relationship with EEStor a company that few know well but who is making some fairly audacious claims in the ultra-capacitor marketplace.

An “ultra-capacitor” is similar to battery technology in that it stores energy but rather than using a chemical process it stores electricity on it’s surface. A capacitor (even an ultra-capacitor) is typically characterised as possessing very high power-density (aka, power can be moved into and deployed out of very quickly) but very low energy-density (aka, stored energy on a per mass or per volume basis is very low). See the chart below to see this historic relationship with other technologies. It’s true that ultra capacitors are gaining greater energy density through nano-technologies but what EEStor is claiming would be a huge jump from anything else in the market. If believed, the EEStor technology would not only revolutionise motive transport but also the whole power industry (peak shaving, reduced spinning reserve, more economic and new power switching and quality devices, etc.)


EEStor’s ownership structure is not completely clear but it appears the two biggest holders are Kleiner Perkins (20%) and ZENN (12%). Even without the ownership stake it appears ZENN’s fate is highly correlated with EEStor’s. Admittedly I’d prefer to take the gamble directly with EEStor but as that option isn’t available to the public I think I’ll take a punt on ZENN. What do you think? Smart bet? Interesting gamble? Easy way to lose money?

Here’s a few links to help you decide:

[a few over-enthusiastic investors]  [news on ZENN’s April run-up on prices]

[more news on ZENN]  [more news on EEStor]