Energy & Utilities
A Little History

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By BuildMWell
February 11, 2004

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In the spring of 1967 I graduated from college. I was happy to have my first technical job as an IBM Facilities Engineer. As a practicing Mechanical Engineer and upon the encouragement of my fellow IBM cohorts, I was invited to a meeting of ASHRE (American Society of Heating and Refrigeration Engineers) as a potential member. The speaker that evening was Bill Lee, President of Duke Power. His subject was, "The future of Electrical Energy Production in America."

His talk was very enlightening. I have to tell you, I was soaking up every word. He explained that the key to the future was energy cost. Nuclear fuel was $.25 on the dollar compared to coal, which was almost half the cost of Oil and/or Natural Gas. Meanwhile, a Nuclear Plant cost about five times as much to build as a coal fired plant and three times as much as the cheaper Oil or Natural Gas plant. But, Nuclear was, in the final evaluation, the sure winner. Now, I was entranced...Bill Lee was talking my language. I knew precisely what he was getting at.

While I had majored in Mechanical Engineering, I had a minor in Economics. Actually, my expertise was in "Engineering Economy" which deals with the time value of money and making sound decisions based on the "Cost Effective" solution to problems. That expertise was what got me hired at IBM in the first place. Anyway, while many of the engineers in that room seemed bored by the talk, I was sucking up every word! I knew that Bill Lee had done his homework and he was right on target.

The fuel cost, when factored into the full-blown economic present worth evaluation, made Nuclear Power less than one-third the cost of any other alternative. Coal was a poor second choice and Oil and Gas came in a very, very distant third and fourth. The cost of electricity generated by Nuclear, per KWH, was impressively low. Without the Nuclear plants, Duke would have to charge almost three times as much per KWH for the electricity they sold. There was not one person in that room full of Mechanical Engineers who questioned his conclusion which was: "The future absolutely rests with Nuclear Power...there is no viable alternative."

Bill Lee explained that oil would never be a good choice for mass production of electrical energy because the price was dictated by the "best use" which was to power railroads, automobiles and trucks. He called these "Motive Consumption." Of course, some oil was also used for home heating but that was fast being replaced with Natural Gas since oil was too expensive based upon it's "Best use." Remember, this was seven years prior to the oil embargo of the mid-1970's.

Well, I have spent a large piece of my career in Power Plants and I have watched what has happened. In all honesty, I have never found one reason that Bill Lee was not right in 1967. Everything he taught me in my first introduction to power generation economics was true then and there is no reason that it should not be true today...except for the meddling in this picture by our Government to satisfy special interests.

Nuclear and Coal power generation have both been destroyed by over control/specification or by environmental regulations. I watched as hundreds of coal fired plants were converted to Natural Gas or Oil to solve pollution problems cheaply. For, converting from coal to natural gas is not expensive in the short-term...but the boiler capacity is halved. So, a 500 megawatt unit becomes a 250 megawatt unit, but it has no emissions to clean up. Or, at least, the emissions are greatly reduced.

Many utilities took the easy way out. They knew the truth...the consumer would pay later. The utility's job was to solve their immediate problem cheaply...but not necessarily cost effectively. The cost effective solution would have been to shy away from Natural Gas and to clean up their emissions. I knew that...I did the cost effective analysis myself. In truth, it was a no-brainer. If you really evaluated the fuel cost over time, there was but one real solution.

Plus, since the conversion halved the output of the unit, an electrical energy shortage was going to be that much quicker to evolve. As this was all happening, I left IBM and was involved directly with utilities on modifying their boilers or in installing pollution control equipment. That is where I was once again introduced to Bill Lee of Duke Power.

He showed me why these conversions were a waste of money and why Duke would have nothing to do with Natural Gas. In just a matter of minutes, he could explain why the only correct approach was to build more Nuclear plants and to clean up the Coal fired units. It was as simple as fuel cost...power generation is always about fuel cost and nothing else. Of course, I knew he was right...but what fouled up my brain was that so many other utilities were doing the wrong thing! While I tried to help them with the right choices, they were not listening. They wanted to install gas burners and I surely could do that too. My job was not to argue with job was to modify their boilers as they instructed me. Their foolishness wasn't my problem.

Now, my knowledge of cost effective evaluations led me into many lively discussions with high level utility managers. I found that the whole discussion always came down to one simple point of view. Many believed that Natural Gas would remain low in price. Thus, as long as Gas was under $1.50 to $2.00 per MCF, the decision to convert to NG was fairly straight forward. Plus, they argued that they could always convert back to Coal, pick up 100% more capacity per unit and do the clean-up of the stacks once the regulations were cleared up by Washington. They knew that if Natural Gas soared in price, they would have to get rate increases. But, that was simple enough because they had tied their rates to fuel cost. Obviously, if their fuel cost went up they just needed to pass that along to the consumer. They were not in business to lose money. I was shocked by their "short-term" outlook. However, I did understand it. The question would be answered in the future...and no one knows the future. Well, except great engineers. Bill Lee knew the future.

Bill Lee died a number of years back. Apparently, the sound logic of striving for lower fuel costs died with him. Nuclear plants have not been constructed in many years. Since 1999, even Duke Power has been building Natural Gas fired power plants. I know Bill is rolling over in his grave. In fact, all over America, over $100 Billion has been spent in building Natural Gas fired power plants based on the "assumption" that Natural Gas would be cheap and available in sufficient quantities.

So, there went our cheap power! Generation of major quantities of electric power using Natural Gas is just plain wasteful...of money! But, who pays? Not the utility. No, the consumer pays and then pays some more. And, every price hike will cause even more electricity rate hikes. Somehow, we have lost our way. Today, we have linked natural gas to electricity and to oil. That should never have happened because the price of natural gas is too volatile...a utility cannot rely on having enough supply at a competitive price. But, they do.

Today, we have tagged our electricity to the price of oil and gas while twenty years ago, it was tagged to coal and nuclear fuel. Tying electricity to oil/gas was a huge gamble and a very stupid, short sighted one! We must ask the question, "WHY?"

We got what we asked for. We wanted cleaner air with no increase in power cost and at the same time we didn't want nuclear or coal plants in our State? Meanwhile, excessive over-regulation drove the price of building a Nuclear plant to uncompetitive price levels. Coal was destroyed by a failure to set solid emission levels so that pollution control equipment could be designed to solve the problem. Instead, the Congress allowed nebulous standards that demanded "The best available treatment," of stack gasses. Then they kept adding new pollutants to the problem.

First it was just particulates...a simple electrostatic precipitator could solve that problem. But then they added sulfur compounds. Thus, any utility that had already bought a precipitator had wasted their they needed a scrubber. But, the government would not state the allowable emission levels...they were always changing.

Next they added nitrogen compounds. Suddenly, we were trying to eliminate ROX, SOX and NOX...and that was doable if enough money was spent. However, scrubbers that were designed to remove SOX and ROX were not necessarily able to meet the NOX levels. Today, they have added Carbon Dioxide as a pollutant. That's correct, the very compound that we always designed boilers to maximize is now considered a greenhouse gas. The very compound that we exhale with each of life's breaths is supposed to be killing our Planet. This is insane...but the public hasn't got a clue. They merely believe what they hear on their television. "It is someone else's problem," they think.

But, in truth, it is their problem and only they can solve it. No one else cares! The Congress couldn't care less. It isn't their problem...all they can do is write more laws and regulate even further. They are still patting themselves on the back for killing Nuclear and Coal.

It surely isn't the utility's problem. They don't care. They make power using the fuels that they are told to use. They will show us that everything pointed toward using Natural Gas and they merely did the right thing. Today they pass the fuel cost along to the consumer. That is easy enough to justify!

So, please tell me whose job it is to protect you from all of this foolishness? Who cares about fixing the real problems? Who even understands the real problems? Bill Lee is dead.

Until enough of us understand and take the time to let Washington know we understand, things are bound to just get worse. The foxes are in charge of the hen house. We are the hens and we are being manipulated. We need to demand that nuclear power plants or pulverized coal fired plants be built immediately. But, we have been brainwashed into thinking that is the wrong thing to do.

All we need to do is to announce that we are building new nuclear plants. Then, watch the prices drop...of electric power and oil and natural gas and gasoline. Because we will be back on the nuclear standard...not the oil standard. But, until the public becomes aware of the real economics, this whole discussion is going nowhere. And, when it finally moves in the right will take at least five years for new coal fired plants or nuclear to come on line. That $100 Billion that was spent in the wrong direction could already have new low fuel cost plants on-line. But, instead, we aren't even close to getting started in the correct direction! America remains clueless.

Have you just taken your electric power for granted like everyone else? Have you assumed that someone was looking out for your best interest? Please tell me who that someone might be? Who cares about your energy problems other than you? I cannot name a soul who is helping you! I can name thousands who are screwing you.

Today, they have us right where they want us. But, who is "they". Do you see the problem? There are so many middlemen that no one is in charge. The consumer is several steps away from the problem. So, the real problem is, what are you going to do about it? What can any of us do about the real problem? All sorts of special interests have inserted themselves between you and the solution. They love all this...this is their damned JOB!

There is only one answer. Write to your Senators and Congressman. Tell them that you know that they have let us down. I promise you, it is their fault. Their predecessors (and some of the ones still in office today) screwed this whole thing up years ago...and the only true fix is to undo the bad laws and regulations. It is completely in the hands of the politicians...but they work for us. We pay their salaries. Shouldn't we be getting value for our congressional dollar?

Of course, those special interest groups also give lots of money to the same politicians...but they have just one vote each. WE have just one vote each too...but we outnumber them by a hundred thousand fold. We must get our act together. Divided we fall. That is what the special interests are betting on. Plus, they are lots closer to the politicians that any of us. And, that is the real problem that we all must understand.

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