Published on September 17th, 2013 | by Susanna Schick0
InventivEnergy CEO John Keller On The Future of The Grid (CT Exclusive)
September 17th, 2013 by Susanna Schick
CleanTechnica was recently granted an exclusive interview with InventivEnergy CEO & Founder, John R. Keller, on what the company is up to. InventivEnergy is a full service energy consulting firm specializing in power project development and construction project management, O&M and asset management, markets, valuation and risk management, as well as asset turnarounds. John describes InventivEnergy as a “one stop shop” for independent power producers in the renewables and clean energy space.
CT: What does InventivEnergy do?
JK: We’re a group of consultants and advisors that have carved out a niche service in identifying power assets for sale or under development. While there are some brokers who provide similar services we distinguish ourselves by our ability to offer solutions with creative enhancements and we know how to capitalize on them with hands-on optimization. Thanks to our extensive intellectual capital in power generation, we can quickly screen assets based on our clients’ criteria – even distressed assets, and identify assets under development, or operational that are most likely to hit target returns. We can also support completion of the project through C.O.D. (Commercial Operations Date) and provide asset management services to assure a project meets its targets. Lately we’ve seen some distress in the sector and have been adding considerable value for our clients through identifying and implementing strategies to enhance profitability of troubled assets.
CT: So you could fix up San Onofre and make it work?
JK: Well, nuclear has its issues, that’s for sure. I think Fukushima would not have happened in the US because our operators are trained and given the authority to make decisions without having to go through a chain of command. The Japanese are very command-oriented, and, as I understand it, the Fukushima operators elected to run the chain of command to get approval to vent the reactor containment. This delay may have exacerbated the situation and led to the containment structure breach. The operators in the U.S. would have had the authority to make decisions to prevent situations where design criteria and technical specifications could be exceeded without needing company executive approval.
Because he’s one of the smartest guys in the room, and I’m a native Californian, I couldn’t resist asking about his Enron experience…
CT: So what’s it like being one of the smartest guys in the room?
JK: (laughs) At Enron I was doing what was considered the boring, stodgy work on power plants and pipelines. When the dust settled, the brick-mortar, iron-in-the-ground assets were the only ones actually making real money. We were building and expanding actual pipe, not just pipedreams.
CT: California’s a big energy market, as you know. What is InventivEnergy doing to ensure some of the profit from selling energy to Californians stays in California?
JK: For years the opportunities in the California energy market have attracted all kinds of outside investors and developers because it’s such a huge market, especially for renewables. There are so many power plants in CA that are owned by consortiums from all over, not just out of state. I’m afraid keeping profits in California, from the sale of power in California, is beyond the capabilities of InventivEnergy.
CT: Natural gas is where California gets most of its energy, yet solar projects seem to be the most popular. Where do you see the Natural Gas market heading? How viable is fracking for the long term?
JK: Right now there’s a glut of natural gas on the market. It’s popular because it has half the emissions of coal or oil, and is cheaper to produce. I think fracking is here to stay. Although it has its issues, it’s just much cheaper on the commodity market compared to coal or oil, in part because it requires lower investments in emissions controls.
(as reported here in 2010, Coal is Dead…)
Natural gas became cheaper than coal a year ago and surpassed coal as the major source of electricity generation in the US. Because coal has so many expensive emission requirements, and the market price of natural gas is less, it’s cheaper to generate power from natural gas in the US. It’s likely that the Northeast will be self-sufficient on natural gas in the next ten years, except for peak periods. There are a couple of LNG (liquefied natural gas) terminals expected to be built, which will increase demand. The price is expected to rise slowly, and as a power generation fuel, it will become more expensive. However, while natural gas prices are so low, it makes renewables a harder sell. As natural gas prices rise, and power prices follow, public favor for renewables should also increase. The time is not long-off where renewable energy will be fully competitive with thermal power. When that day comes, we will see the greatest expansion of renewable energy projects.
The power business is very boom/bust- when prices are low, we focus on what’s cheap. One of the few crystal balls we have is the NYMEX futures index. That’s the main commodity exchange for natural gas. We look at 10-year futures, but we can never be sure if they will hold true. Fracking could fall out of favor through contamination of aquifers in PA, which would cause prices to skyrocket. The same is true for power; power-pricing curves go out about 5 years, and they are primarily driven by natural gas.
CT: What exciting trends do you see in improving transmission and storage of renewables like wind and solar?
Well, you know, the windiest places are often the least populated. Existing transmission lines are Alternating Current, which incur considerable losses from the source to the customer. The new trend is to install high voltage Direct Current lines, which have very little losses over long distances, then convert the power to AC closer to the customer. But transmission lines are very expensive to build, so that’s a prohibiting factor. There’s going to be a movement toward combined heat & power/ wind/solar/etc. to provide for distributed generation with a focus on renewables. I see battery technology getting better, maybe combining with fuel cells, micro turbines, solar, wind and more. I see the whole grid changing, to smaller networks, distributed generation, communities serving their own power needs, using a variety of methods, and transitioning ultimately to utilizing the grid as backup.
CT: Is that too much of a threat to business as usual for utilities?
JK: Not really, because there will always be a need for a grid. Not everyone will be able to supply their own power. Utilities should look at this transition as support to their grid, displacing the need to continually invest in generating assets. This trend will also move power generation supply much closer to the point of use. The difficulty will be to figure out how to manage the grid at optimum efficiency as its sources of energy shift. For example, if everyone in New York City had rooftop solar, and had everything running on a bright clear day, and a big cloud came by, there could be a significant system disruption due to an intermittent loss of generation and subsequent increase once the cloud passes. So there needs to be another source of base-load power as well and a backup, in order to support rapidly changing grid conditions. I think it’s good for utilities that more people are installing rooftop solar and other clean and renewable technologies close to demand. It helps their customers, and it helps them because they have a reduced need to build more power plants, which is a massive capital investment.
CT: So tell us more about your background.
JK: I’ve been in the energy business for my entire career. Out of graduate school I joined a young engineer/executive program at Con Edison, and I’ve worked in power generation and gas pipelines ever since. I’ve always been on the infrastructure side of things, enhancing and optimizing power assets and assuring returns for private equity. I have an in-depth knowledge of hydro, wind, biomass, solar and gas fired power technologies, along with coal and nuclear. I’m all about power and I love this business! When I left Con Ed in 1995 I joined United American Energy and managed multiple power assets including hydro, coal and natural gas. When I joined Enron in 1999, I was Director of Enron’s power assets in Central America and the Caribbean and then transitioned to VP of their gas pipelines in the US. We operated 25,000 miles of pipelines in 2001 moving 10 billion cubic feet of natural gas per day. I was asked to stay on as COO of Enron Wind in 2001 until they went out of business in 2004. From there I started consulting, working for EDF Renewables completing development and construction of wind farms and managing assets for them, along with a number of other companies. I’ve led the completion, operation and asset management of fleets of power generation assets both in Latin America and the U.S. I’ve been consulting all this time except for a two-year stint as COO of North American Energy Alliance (now Essential Power), before starting InventivEnergy in 2010.