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Ontario looks to balance energy needs

 Electricity demand in Ontario peaked last week at an all-time high of over 27,005 megawatts, prompting calls for greater energy conservation. Increased energy efficiency standards and incentives for renewable energy are some of the longer term measures being considered to establish more of a balance between the province’s energy demand and consumption.

Demand approached or exceeded 26,000 MW on three days last week, each ranking as one of the top ten recorded days for power consumption, says the Independent Electricity System Operator (IESO), which manages the electricity system and wholesale market.

The province’s electricity supply system was boosted by favorable conditions for hydroelectricity and the return to service of the 515-MW Pickering nuclear unit 1. But even the increased supply is unable to meet demand, and Ontario will continue to import electricity – around 2,000 MW on peak consumption days, says the IESO.

 IESO is urging consumers to reduce air conditioner usage, which accounts for up to 40 percent of energy demand on a hot day. Residential customers use around one-third of power in the province, while commercial, retail and industrial consumers use most of the remaining two thirds.

It is estimated that a one-degree increase in indoor temperatures would reduce air conditioner usage enough to cut imports, but individual consumers and businesses are unlikely to make significant changes to their daily routines, say experts.

The increased use of energy efficient-technologies, spurred by regulations and financial incentives, could have a much more significant long-term effect on energy demand. The Ontario Power Authority (OPA) will spend $400 million over the next three years on energy conservation education and rebate campaigns.

These can help raise awareness, but are not nearly as effective as putting a monetary value on replacing old, power-sucking appliances, or forcing new products to be more efficient. Even simple measures such as replacing incandescent lights with fluorescent bulbs – something the OPA campaign will encourage – could yield huge savings.

"Dollar for dollar, if you can save a kilowatt (of power) it’s cheaper than building a kilowatt, so every megawatt we save in total saves us money," noted Energy Minister Dwight Duncan recently.

Changes recently made to the Ontario Building Code for instance, will make new houses built after 2007 more energy efficient, possibly by as much as 21 percent, than houses built today. Requiring advanced technologies will also spur demand for such products and encourage innovation of energy-saving solutions.

Increased efficiency standards for appliances, industrial equipment and businesses could also help further reduce electricity use in Canada’s most populous province.

A variety of conservation and efficiency likely will be employed in Ontario’s long-term energy plan. The provincial government has directed the OPA to implement programs to reduce energy consumption by 6,300 megawatts by 2025. Conservation, a major component of the plan, is twice the amount initially proposed by the OPA.

Increasing supply – the other side of the energy equation – is also being sought through the refurbishment of nuclear reactors and doubling the use of renewables such as wind and solar. By 2025, the government hopes to make Ontario North America’s leading renewable energy producer, with 15,700 MW of capacity installed.

Providing electricity for the industrial center of Canada will continue to pose environmental and economic challenges, and further forward-thinking policies are required to spur private and public sector investment in advanced energy technologies. Regulation and funding must continue to be directed toward what has become one of the most significant issues facing the province.

Price Summary–Oil. Gas, Natural Gas

Official Energy Statistics from the U.S. Government

Price Summary
  Year Percent Change
2003 2004 2005 2006 03-04 04-05 05-06
WTI Crudea ($/barrel)
Gasolineb ($/gal) 
Dieselc ($/gal)
Heating Oild ($/gal)
Natural Gasd ($/mcf)
a West Texas Intermediate.
b Average regular pump price.
c On-highway retail.
d Residential average.

Renewable Wind get Colorado Boost from Xcel Energy

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Xcel (XEL) would become biggest Wind Power provider in U.S.

Xcel Energy announced today that it intends to acquire 775 megawatts of new wind power capacity for its Colorado system by 2007. The additional capacity would make Xcel Energy the nation’s largest utility user of wind power.

The announcement today is part of filings made with the Colorado Public Utilities Commission (CPUC) on the company’s Least-Cost (Resource) Plan (LCP), a process designed to address the state’s growing energy demand. Xcel Energy also announced today that it intends to acquire approximately 1,300 megawatts of natural gas-fired generation from new and existing facilities between 2007 and 2012.

In addition, the company intends to acquire up to 30 megawatts of energy efficiency supplied by bidders, known as Demand-Side Management (DSM). Xcel Energy has committed $196 million in company-sponsored initiatives for the remainder of the DSM program, which would be an additional 290 megawatts.

“Xcel Energy has taken the leadership position among all electric utilities in support of renewable energy — both in Colorado and throughout the country,” said Pat Vincent, Xcel Energy’s president and chief executive officer for Colorado. “We are working to ensure that wind power is an integral part of our nation’s future energy supply.” Xcel Energy — which currently has 282 megawatts of wind in-service or under-construction in Colorado — would increase its overall wind capacity in the state by 275 percent. Xcel Energy estimates that it also would meet the non-solar mandates of the voter-approved Renewable Energy Standard through 2014, essentially meeting the standard seven years earlier than required.

Companywide, Xcel Energy — which operates in 10 states — expects to have more than 1,100 megawatts of owned or purchased wind capacity on its system by early 2006, increasing to more than 2,300 megawatts of wind capacity by the end of 2007. This includes more than 1,000 megawatts each in Colorado and Minnesota.

Xcel Energy cautioned that while it is aggressively seeking to add more wind power in Colorado, the ultimate success of permitting, constructing and placing new wind farms into commercial operation remains in the hands of independent wind developers.

“While current economic conditions in the wind power industry are challenging, we will closely work with our future wind development partners in Colorado to see that their projects are successful,” Vincent said. “The completion of these projects is important to our customers and to Xcel Energy.”

Xcel Energy’s estimates of its current and future wind power capacity standing — in relationship to other utilities — is based on a compilation of current and proposed wind projects announced by utilities through various national wind power trade associations, and is subject to change based on future announcements.

Also today, Xcel Energy filed with the CPUC a request to shorten its planned resource acquisition period under the current LCP to nine from 10 years. In an application filed today, the company noted that conditions have changed since the original plan was filed in April 2004, requiring it to reconsider its long-range acquisition strategy.

“There are several recent economic, legislative and regulatory uncertainties that we need to better understand before we commit to another major resource that would come on line many years from now,” said David Eves, Xcel Energy vice president for resource planning and acquisition.

Specifically, Eves noted that the federal Energy Policy Act of 2005 places significant emphasis on improving the nation’s transmission grid, which could open up new generation resources previously thought unavailable to the company’s Colorado operations. Likewise, the Colorado commission will hold future resource planning and DSM hearings that could significantly alter the rules for acquisition of future generation.

The resource planning process occurs every four years in Colorado, and is designed to determine the company’s future energy needs and identify the resources that would be acquired to meet those needs. In the past decade, Xcel Energy has seen a 10 percent growth in per-household electricity use, a 20 percent increase in total customers and a 60 percent increase in peak demand for power.

Coupled with the addition of the 750-megawatt, coal-fired third generating unit at the Comanche Generating Station in Pueblo, Colo., the wind, natural gas and energy efficiency resources to be acquired through the announcement today combine to give Xcel Energy a very balanced and diversified supply portfolio, Eves said.

The acquisition of future wind power in Colorado is not a part of Xcel Energy’s premium customer “green pricing” program, known as Windsource. Xcel Energy also notes that one megawatt of generation can meet the electricity needs of approximately 1,000 homes in Colorado.

Xcel Energy (NYSE:XEL) is a major U.S. electricity and natural gas company, with operations in 10 Western and Midwestern states. Xcel Energy provides a comprehensive portfolio of energy-related products and services to 3.3 million electricity customers and 1.8 million natural gas customers through its regulated operating companies. In terms of customers, it is the fourth-largest combination natural gas and electricity company in the nation. Company headquarters are located in Minneapolis. More information is available at

If peaking is imminent

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Avoiding economic turmoil will require more than a decade of “intense, expensive effort,” according to a February study by Science Applications International for the Energy Department. The U.S. would need to build alternative fuel plants and greatly increase vehicle fuel efficiency.

“If peaking is imminent, failure to initiate timely mitigation could be extremely damaging,” the report warned.

Energy Impact slows Global Economy

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Continued from the the Cherry Creek News

“The relationship between U.S. crude oil stocks and oil prices has become unhinged during the past year, probably due to new demand/supply factors heavily influenced by China,” says Gail D. Fosler, Executive Vice President and Chief Economist of The Conference Board. Her analysis appears in StraightTalk, a newsletter designed exclusively for members of The Conference Board’s global business network.

These imbalances have generated major crises in the past, both in the U.S. and abroad, although there are important offsets-particularly by deep discounting in other prices-today. Despite recent dips in energy prices and holiday promotions, consumers across the U.S. will be hard hit in the short term.

Says Fosler: “The recent energy shock is reminiscent of the 1970s. Rising gasoline prices have taken the energy share of consumer spending from about 4% in 2001 to 6.5% this September-the highest level in more than 20 years.”

While oil prices hit new highs during the recent hurricane crises, the recent surge was not sustainable and oil prices have already declined again. But current oil prices are still well above the level consistent with their long-term fundamentals. In the coming months, oil prices should continue to fall toward levels more consistent with long-term economic fundamentals.

The effect of lower oil prices on natural gas and gasoline prices is based in part on their relationship to crude prices, since natural gas prices tend to lag crude oil prices. When crude prices rise sharply, natural gas prices spike briefly and then begin to decline.

“Still, even if oil prices fall to $40 a barrel, natural gas prices are likely to remain at about $7 per MMBTU, which is still above the prevailing price of the last 10 years,” says Fosler.

A Trend Toward Higher Energy Prices

The same trend is pushing gasoline prices. Refiners’ margins have been increasing steadily as crude oil prices rise. The shortage of refining capacity is due, at least partly, to low crude oil prices over the past 15 years, which have depressed refiners’ margins. Today, margins are up, as are crude oil prices. As with natural gas, however, even a sharp drop in oil prices would produce gasoline prices that are in the range of $2 a gallon, which is above the prevailing level of recent years.

Meanwhile, non-food, non-energy prices in the Consumer Price Index have continued to slow since 2001.

A Drop in Personal Consumption

Estimates from The Conference Board show that a permanent increase of 50 cents per gallon in the price of retail gasoline will reduce the level of real personal consumption by 1% to 1.5% within a year.

Consumers have benefited from low interest rates and home equity refinancing, trends that have supported spending power in the face of relatively modest wage growth. Now, rising interest rates and the magnitude of the hurricane-related gasoline shock appear to be taking their toll. Auto sales are likely to be down 30% year over year and 4.5% from the third quarter.

“Probably the most critical impact of higher energy prices is their ability to weaken consumer spending relative to investment and impose margin pressure on energy-intensive industries globally,” says Fosler. “Investment is driving most of the economic growth around the world and in the U.S. History suggests that, despite the huge amounts of cash available to fund investment, investment rates cannot be sustained if they get too far ahead of consumer spending.”

Source: StraightTalk, Volume 16, #10, November/December 2005 The Conference Board

What is Peak Oil Investing?

Peak Oil investing is a set of strategies to make rational economic decisions in the face of the radical financial, social and political transformations which are the inevitable consequences of significantly higher oil prices.

Peak Oil is the peaking of worldwide oil production, which may have already occurred, or will occur in the next five, ten, or fifteen years. Many experts argue that the peak of oil production will only be recognized in hind sight.
Regardless of when peak oil occurs, the aftermath will be higher energy prices and wild fluctuations, at least in relative terms, at the pump. Those consequences will ripple throughout every sector of the economy, resulting in challenges and opportunities of a magnitude unparalleled in human history.
Peak Oil investing seeks to find ways to guide capital allocations through the dislocations of this coming crisis in liquid energy sources and the first forced change in the dominant energy regime in human history. Opportunity will present itself in the form of new technologies to recover previously uneconomic oil and gas resources, in alternative energy forms and technology, from substitution effects as high energy prices force consumers and businesses to make new choices in everything from development patterns to retail to luxury goods.
To understand the importance of peak oil, read this recently declassified CIA analysis of the Soviet Union’s peaking oil production– an event which brought down the world’s other superpower. 
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