Energy Round Table May 2011

North Carolina’s burgeoning energy industry invests billions in generating a cleaner, smarter and more sustainable future.

The energy industry is one of the bright spots in the Tar Heel economy, with a cluster of businesses growing in Charlotte and throughout the state. Business leaders from a utility, an electrical cooperative, their suppliers and academia gathered recently to discuss industry issues including strategic priorities, opportunities such as smart-grid development and the sector’s impact on economic development. Participating were Vincent Davis, director of Duke Energy Corp.’s Smart Energy Now initiative and its Envision Charlotte program; Steven Patterson, director of the Energy Production and Infrastructure Center, under construction at UNC Charlotte; Jimmy Morgan, vice president of installation and modification services at Westinghouse Electric Co. in Charlotte; Gary Rackliffe, vice president for North American smart-grid initiatives at ABB Inc. in Cary; Tim Holder, vice president for sales and economic development at EnergyUnited Electric Membership Corp. in Statesville; and John Espey, chief operating officer of Nexgrid in Charlotte. The round table, sponsored by EnergyUnited and ABB, was hosted by UNC Charlotte. The following transcript was edited for brevity and clarity.

What are the major issues facing your companies and the energy industry today?

Davis: We need to have more efficient generation. We need to make sure we are spending our money and capital appropriately as it relates to energy plants in the state of North Carolina. In 2010, Duke Energy invested more than $2 billion in construction of new plants and solar farms. One of the big things for us today is pursuing renewables and trying to determine that fifth fuel that we’re calling energy efficiency. The program I run, Envision Charlotte, is key to educating customers on how to use less of our product. When we talk about energy efficiency, we’re really talking about using less when you can and more when you should.

Morgan: On the nuclear side, we’re a continually learning industry. We’ll learn from what happened in Japan. We have four new technology units under construction, which are totally different from what’s in Japan. There’s no operator action required if there were to be an event. With the Duke Energy/Progress Energy merger, both companies had applications for two new units, two in Florida and two right here across the border in Cherokee, S.C. We’ll see how they move forward with the new combined entity. Now 52% of South Carolina’s generation is nuclear. About 37% of North Carolina’s is nuclear. We’re going to continue to support the industry, adjust from some of the changes that come out of Japan and continue to keep that carbonless footprint in the mix.

Rackliffe: We’re responding to some of the dynamics driving the smart-grid industry. Both Duke Energy and Progress Energy received $200 million in grants from the Department of Energy through the American Recovery and Reinvestment Act, with matching funds. That represents an $800 million investment, primarily in North Carolina. We’ve used smart grid and the investments surrounding that as a major growth driver, but it really meshes with our increased focus on power and automation. And then we take that all the way down to the end user at the home. We’re looking at how to use energy more efficiently through the application of different automation technologies.

The other area that we’re focused on is the aging power grid. Look at transformers, for example. The average age is nearly 40 years. We’re now at the point where all of those assets are going to need to be changed out. And then the third area is distributed energy resources, the interconnection of renewables to the grid. How do you take variable generation sources such as solar and wind and integrate those economically and efficiently to the grid? How do you incorporate electric vehicles into the grid?

How does energy efficiency fit into the picture?

Holder: The more efficient things are, the better off we are as a utility. The standard graph of what our day looks like is a peak that starts out and goes up and then, at the end of the day, it’s at the bottom. We want, ultimately, a flat line, because a flat line of energy consumption is easy to predict and schedule. The hardest piece of the renewables puzzle right now, when you get outside of a methane plant or a traditional plant, is scheduling that energy. In conjunction with Duke, we’ve invested millions of dollars into solar infrastructure, and it’s only on when the sun’s out. There’s a huge industry emerging in solar storage. Other storage components will begin to see opportunities to take that energy created at peak times and move it into another box, which ultimately will help us to flatten that line at the end of the day.

Espey: A lot of geopolitical factors are driving a heightened interest, even within the residential side. Consumers are demanding to know what’s going on with their power bill. What can they do to save money? What can they do to reduce their carbon footprint? Our business is around smart grid and applying technologies that, frankly, have been around for the last 10 to 15 years and are used in pretty much every other industry. That’s really, we believe, the way to tie everything together and address the needs of the commercial and industrial concerns, address the needs of the residential customers and also allow the utilities to be more proactive in managing assets on their grid.

How are you trying to reduce energy consumption?

Davis: Envision Charlotte is really focused on commercial office space in the uptown corridor. We believe we can impact people’s thoughts and decisions around energy. It’s the first program of its kind in the country. We’re creating this community of approximately 70 buildings and about 75,000-80,000 people who work, play and live uptown. We’re getting quasi-real-time data in front of them and just educating them on what they can do. The really neat component is the interactive display that will be in the lobby of each building. Think of it as a huge iPad that you can walk up to, touch and find out what’s happening in the community at any given moment in near-real-time energy consumption. For us, the real turn would happen when people change their behavior and how they view energy.

Rackliffe: I think the big challenge the industry has is how to educate the residential consumer on the need to try to lower the peak demand and raise the minimum low. We face as an industry a real challenge when the average consumer’s electric bill is less than their cellphone and cable bill. We need to leverage what we’ve done in the commercial and industrial center with automation. I think we need to get to the same place with home automation, where technology automatically responds to a price signal, or there are direct load-control programs where the utility or an aggregator can automatically control end use. I don’t disagree with anything you said, but I think there’s more than just having a smart meter. And that’s assuming a customer is going to every hour want to look at what their consumption is.

Espey: We were doing a pilot program in Wilson, where we installed 500 smart meters and some load-control switches, as well as thermostats for a home-area-network display application. One of the project managers cut his bill in half over six months. This is a guy who really understands the way the power works in the home. And even for him, just having the visibility gave him the ability to know when they were using power ineffectively. I think the key point is nobody wants to use more power. They just don’t have the tools to really understand what’s driving their usage.

"We’re responding to some of the dynamics driving the smart-grid industry."


I guess what you’re saying is it requires investment to educate the end users. Are there a variety of ways to do that?

Davis: The key point for us is, how do you convert it from the energy vernacular to something relevant to the everyday user. What we’re seeing is we can automate as much as we want, which is important. We’re going to continue to do that. But you can control the lighting. You can’t control whether that employee in that building turns on the task light and leaves it on when they walk away.

What other technologies are in the works?

Morgan: In the 1990s and 2000s, we invested millions in creating the latest generation of nuclear reactor, the AP1000. China is building them as we speak. That technology leap is huge from an industry that was created in the ’60s and ’70s. The new design has 80% less valves and moving parts. We use some of ABB’s products on the innovation side. It’s all touch-screen. The control room is totally different. It’s a quantum leap in technology.

It is a totally different world than it was back in the ’60s and ’70s. How does that affect engineering education?

Patterson: Whereas there was a lot of theoretical research for a long time, people are more and more seeing that some of these new ideas are actually going to get out there in the field. The students are seeing that there’s an expanding job market, and educating and doing the research in these areas is a steadily growing business. In fact, I would say interest in the education is probably growing as fast or faster than the business itself. We have not built nuclear plants for a very long time, but we’ve also not built most of the major turbine installations. It’s all aging infrastructure, including the expertise that’s maintaining it. So I’m looking for another generation of hardware, and I’m looking for another generation of engineers to be able to design and service that hardware.

What kinds of challenges does that create for educators?

Patterson: The major challenge I’m facing is getting good students. The other challenge for the universities is that this is a capital-intensive business. Good education requires access to high-capital-value activities, and it requires access to those experienced engineers who are ready to pass on their skills. I am really blessed in the region to have a lot of industry that is showing leadership in this area. I have students now who are working with Westinghouse engineers looking at fabrication techniques associated with the AP1000 reactor. As I tell my students, there’s not very many schools that offer you the opportunity to have on your résumé that you worked on the most modern commercial reactor before you even graduated.

Holder: From our perspective, you talk about a lineman today versus a lineman 20 years ago, an engineer today versus an engineer 20 years ago, and those guys being able to understand the way the system works today. And now we’re at a point where these folks are going into retirement. How do you fill that backlog?

What challenges are the rest of you facing in finding quality engineers and other employees?

Rackliffe: Being an engineer in the energy market or in the power-engineering industry requires an understanding of how the grid works, how you design generation, transformers and other components, and then how it works as a system. We’re working with communication companies for our automation and our asset management. The truly successful engineers of the future will be those individuals who can easily work in those three areas.

Morgan: In the past five years, we’ve hired 5,000 engineers at Westinghouse. You’ve got a young workforce now that’s been hired, you’ve got the guys ready to retire, and there’s very few in the middle. So we’ve got to quickly get these people ramped-up to speed, and then you’ve got to bridge technology, which is a challenge. You’ve got to get the young engineers that are willing to learn the old technology, like relay logic, because you’ve got to keep it alive while you bring the new technology on board.

Why do you think Charlotte and North Carolina are emerging as an energy hub? What does that mean from an economic-development standpoint?

Holder: Workforce and quality of life. And the price of energy is very good for a business that’s traditionally been energy-intensive. So the cost, to me, is still a predominant driver in North Carolina, and it helps us to attract business and be competitive. Look at ABB’s new facility that manufactures high-voltage cable at Huntersville. These folks can move a new facility here and maybe cut their costs by 10-15%. In today’s market, 10% out of your cost of doing business is a huge number. As for economic development, we’ve seen more activity from companies in the last three months than we’ve seen in two years. You do see a lot of smaller startup renewable businesses and the solar industry as a whole. I can’t count on 10 fingers how many startups I know of in the last four years.

Davis: I think this is absolutely the right time for us. Companies are continuing to make investments in this region. I stated earlier that Duke in 2010 invested more than $2 billion. That actually translated to approximately 2,500 jobs and work with such suppliers at Sharp, General Electric and hundreds of other small energy suppliers that a lot of people don’t even mention. So I think there’s a movement, a lot of traction happening.

Holder: Recently, economic developers did a survey of site-selection consultants asking about chief drivers in their relocation efforts and what are some of the questions these folks are asking. One of the biggest questions is, what kind of sustainability or green initiatives are in this location? So utilities like Duke and EnergyUnited have put programs in place that will allow these companies to have a green initiative or sustainability program, which will translate into something that’s really key to those businesses today.

Rackliffe: The reason we selected this area is transportation and proximity to suppliers and the engineering talent we can recruit from the area. There’s a clean-tech cluster initiative that’s emerging in the Research Triangle, but it really applies to the whole state. It’s a combination of industry, the government and the universities.

Morgan: The Southeastern corridor is a great location. Manufacturing is coming this way. It’s where all the power generation is going to be needed. Then you have access to students. We’re working hard with UNC Charlotte on the EPIC center. But you’ve got North Carolina State, you’ve got UNC Charlotte, you’ve got Clemson in South Carolina.

Patterson: Companies can compete in areas and collaborate in others. The collaboration is genuine. It’s enthusiastic. You’ve got a city, you’ve got a county, you have a state. Amazingly enough, those politicians can sometimes work together in a very collaborative way. And I think that’s one of the real keys.

This article originally appeared in the May 2011 issue of Business North Carolina magazine.