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No. 8 July 2013 siemens.com/energy Living Energy The Magazine for International Energy Leadership Combined Cycle Flex-Plant A Fast Start in California Essay: South Korea Paradigm Shift in Energy Policy
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No. 8 July 2013 siemens.com/energy Living Energy The Magazine for International Energy Leadership Combined Cycle Flex-Plant A Fast Start in California Essay: South Korea Paradigm Shift in Energy Policy Jeremy Rifkin: The Third Industrial Revolution and Power Market Design Editorial Dear Reader, The world of energy is full of possibilities. Let s connect them. siemens.com/energy Towards a sustainable energy system join us on the Road to Daegu and at the World Energy Congress Energy transitions throughout the world can succeed only when the respective economies can also afford the restructuring of their systems. Along with sufficient resources and capital as well as a society with a high level of education, a reliable energy supply is one of the fundamental success factors for a country s prosperity. The entire world is watching Germany: If our energy transition succeeds, then the restructuring of our energy system will serve as a model for many countries. Yet the question is whether Germany can afford the transition. Right now, the price of electricity is rising uncontrolled for both industry and other consumers. This trend is threatening the country s strong position in international competition. It is therefore urgently necessary to set the right course for the future of the country s power market. Our proposal for a new power market design and discussions with experts on this topic are the focus of this issue. While the restructuring of Germany s market is primarily aiming at a high CO 2 abatement target, the top priority in the USA is cheap electricity. As a result, power plant operators are forced to achieve maximum flexibility with their facilities in order to operate economically. The new Lodi Energy Center in California has been on the grid for about six months now a power plant with an especially fast start-up time, a low level of emissions and an efficiency of over 57 percent that can deliver electricity quickly and efficiently. Our country essay focuses this time on South Korea. This year, the country notable for its strong industry and high pace of innovation is hosting the world s biggest energy event, the World Energy Congress. On the road to Daegu we are exploring the potential for improvements in the regional energy systems. You can look forward to the results at and a summary in the next issue of Living Energy. With best regards, Making full use of the countless opportunities in the global energy system means achieving sustainability. Siemens is constantly striving to optimize the energy system and unlock efficiency potentials. With the growing complexity of the power system, we respond day by day with ideas to optimize the use of resources. The power matrix is full of possibilities. Join us when we think, talk, act energy on the Road to Daegu and at the WEC Visit us on siemens.com/wec Photo: David Sailer Michael Suess, Member of the Managing Board of Siemens AG and CEO of the Energy Sector Answers for energy. Living Energy No. 8 July Contributors Justin Gerdes Swati Prasad In her 19-year career as a business journalist, Swati Prasad has met many corporate bosses. But Adani Power s CEO Vneet S. Jaain was the first CEO she met who had designed his own office (see p. 38). Jaain would answer all s within minutes and call back soon, if he missed a call. When a company s performance belies the industry trend, you know the agent of change is right at the top, says Prasad. Vesa Sammalisto I used to be more or less indifferent towards India, but that has changed. I m really not sure what happened, but the whole Indian culture and imagery started fascinating me slowly. Indian music, Bollywood, dance, warm colors, cuisine, and the whole imagery of India really inspire me today. Working on this story, my aim was to capture the vibes of the warm and rich culture of India. Vesa Sammalisto is a Finnish illustrator. After managing his own studio in Berlin, he is currently based in Helsinki. Vesa was honored with the ADC Young Guns award in See p. 38 Living Energy correspondent Justin Gerdes had the chance to meet Jeremy Rifkin for a one-on-one interview at his office in Maryland: I was introduced to Rifkin s work as a 19-year-old college student, when he delivered a lecture on my campus. Nearly 20 years later, my reporting on energy and Rifkin s recent focus on the Third Industrial Revolution brought us together for this interview (see p. 8) about the global transformation of the power sector. Martin Suter For five long days after Hurricane Sandy devastated large parts of New York last October, journalist Martin Suter and his wife sat in the dark: Their apartment is located in the large part of Lower Manhattan that was left without electricity in the aftermath of the storm. For our correspondent, who has covered New York for 20 years and is always on the forefront of writing about new electronic devices, reliable energy is a key issue. He came back most impressed from his visit to the gas-insulated switchgear at a New Jersey substation that delivers record-setting capacity in a tight space (see p. 26). That GIS building will shrug off any hurricane, says Suter (pictured here on location with the managers at the GIS station in New Jersey). Ed Targett Ed Targett, a London-based journalist with a great deal of international experience, found Philip Lowe (see p. 46) a very knowledgeable operator who chooses his words carefully, but despite that, down-toearth and full of wry humor. But it was Lowe s modest choice of personal transport that particularly impressed our correspondent. An energy chief powering his way to a meeting by bicycle could look like a contrived PR stunt. But, as Targett notes, Lowe s dexterity as he disappeared amid the Brussels traffic could only be born of much experience. Tyrone Turner When I found out that I was to photograph and film Jeremy Rifkin, I was really excited. I have done a lot of photographic work exploring the field of energy and conservation, and Rifkin s insights in this field are fascinating. Though we had a lot of material to produce, he was very relaxed, very amenable to different portrait and action scenarios that we came up with. Based in Arlington, VA, photographer Tyrone Turner s work centers on environmental and social issues, especially in his native Louisiana and in Brazil. See p. 8 Photos: Claudius Schulze, Marcel Langenegger, Arush Mayank, Scott Gable, Tyrone Turner, Vesa Sammalisto, Ed Targett Marcel Langenegger and Roman Elsener LA-based director Marcel Langenegger s 2008 feature debut was the film noir Deception starring Hugh Jackman, Ewan McGregor and Naomi Watts. He teamed up with New York writer and producer Roman Elsener to visit and portray the Lodi Energy Center (LEC) and its brand-new Flex-Plant 30, a combined cycled power plant (see p. 64). Langenegger and Elsener have known each other for a long time. We developed a quick camaraderie with the team at the LEC, says Langenegger. The workforce was very welcoming. You could feel immediately that they are proud to be working at this trendsetting plant, says Elsener and adds: We couldn t have done this without the help, time, and enthusiasm that LEC combustion specialist John Quitter brought to the project. Thanks, John! Our picture shows Marcel Langenegger, John Quitter, and Roman Elsener (left to right) after a long night shift at Lodi. 4 Living Energy No. 8 July 2013 Living Energy No. 8 July Content Cover Story 8 Energizing the Third Industrial Revolution Author and EU advisor Jeremy Rifkin discusses changes in the global power market and the energy Internet. 14 Market Design for Transition The energy transition in Germany requires a market model that ensures cost-efficiency, rewards innovation, and is socially fair. 22 Regulating Electricity Markets MIT economist Paul Joskow argues that regulators must balance the costs of market imperfections against the costs of regulatory imperfections. 46 EU Director General for Energy Philip Lowe 64 Lodi: Combined Cycle Flex-Plant TM 30 Power Transmission 26 The Silent Power of GIS A New Jersey substation with GIS systems delivers high capacity within a highly confined area and with minimal impact on the wetlands environment of New York. Wind Power 54 Blades with a Twist Siemens blades are tailored to market needs. The latest revolution is an aeroelastic rotor blade that absorbs wind gusts for more efficiency and longer lifetime. Oil & Gas 34 Pioneers under the Sea Siemens Oil & Gas Division CEO Adil Toubia on equipping oil and gas companies with pioneering technology to power subsea factories. Energy Service 60 Green Megawatts The replacement of steam turbines at the Drax plant in the UK with minimal outage time shows how closely two companies can work together. 62 Flexible AC Transmission 38 Systems Adani Power CEO Vneet S. Jaain 26 Condensed capacity: New Jersey GIS substation Cover: Getty Images/Ulf Andersen, Photos/Illustration: Claudius Schulze, Marcel Langenegger, Arush Mayank, Scott Gable, Mariela Bontempi HVDC 38 On the Power Highway With an integrated business model and its 2,500-megawatt Mundra-Mohindergarh HVDC line, Adani Power is India s largest private thermal power player. Energy Policy 46 Cleaning up Europe s Energy Market A day in the life of Philip Lowe, the European Commission s Director General for Energy, who faces the challenge of integrating 27 national energy systems into a single market. Column 52 Weinhold s Power Lines Michael Weinhold on the business potential of electrifying heating and cooling in buildings. Reportage Hours at Lodi In Lodi, California, the fast-starting combined cycle Flex-Plant 30 leads the way to a reliable, resourcefriendly, and affordable energy delivery. Essay 76 A Paradigm Shift in Energy Politics South Korea s Director General for Energy Industry Policy, Seung Il Cheong, on the energy supply of one of the motors of Asia s economy. 3 Editorial 4 Contributors 82 Directory, Imprint 83 In Short 88 Spotlight 89 Trade Shows and Conferences 6 Living Energy No. 8 July 2013 Living Energy No. 8 July Power Market Design Jeremy Rifkin: Energizing the Third Industrial Revolution After a century of centralized, one-way power supply, energy markets today are buffeted by volatile prices and competition from renewables. Living Energy met best-selling author and EU advisor Jeremy Rifkin for an exclusive interview at his office in Maryland about changes in the global power market and the energy internet. Text: Justin Gerdes Photos: Tyrone Turner Living Energy No. 8 July Power Market Design Author, social theorist, political advisor: Jeremy Rifkin heads the Foundation on Economic Trends. L iving Energy: The USA is coming out of an economic collapse; Europe is still mired in recovery. While fossil fuels will likely remain part of our energy supply for the foreseeable future, experts are already looking at cheaper alternatives that may take their place in the long run. How does the economic crisis shape the global transformation of the energy market? Jeremy Rifkin: They are completely interrelated. We ve had two events in the last five years that signal the end of the industrial age based on fossil fuels: In July 2008, crude oil hit a peak of US$147 a barrel on world markets. Prices across the global supply chain went through the roof because everything in this civilization is made of and/or moved by fossil fuels. In that month, the entire economic engine of the industrial revolution shut down. That was the economic earthquake; the collapse of the financial markets 60 days later was the aftershock. Most of our world leaders as well as businesspeople and economists are still dealing with the aftershock; we haven t gotten to the earthquake yet. We are in four-, five-, and six-year cycles of growth, slowdown, growth, and slowdown because the fossil fuel energy age is ending over the next 25 years. This leads us to the second event of the last five years the Copenhagen climate change talks of December The leaders of 192 countries went to Copenhagen to address the carbon bill for the industrial age. We spewed massive CO 2 into the atmosphere during the 19 th and 20 th centuries, with the First and Second Industrial Revolutions. We re not grasping the enormity of this moment. It s not just an economic crisis; the economic crisis has now given rise to a species crisis. This is a pivotal century where we have to make some very quick and determined decisions to move us away from carbon-based fuels and into a renewable energy future. And we have to do it in a way that will get us there in time. LE: Can you describe some of the decisions that will be required? JR: We need an economic game plan that is deliverable, and it has to move as quickly in emerging nations as in industrialized countries. We have to be off carbon in 30 years off. When we look at history, the great economic revolutions occur when new energy regimes emerge. New energy regimes make possible more complex civilizations. But the complexity then requires new communication revolutions that are agile enough to manage the new energy regimes. What s happening now in Europe is that the distributed, collaborative, laterally scaled communication revolution of the internet is beginning to merge with a new energy regime: distributed energies, which have to be organized collaboratively and scaled to peer-to-peer lateral power. It s a perfect match of communication and energy. LE: Your recent book, The Third Industrial Revolution, describes five pillars that will be the foundation for the new energy economy. What are those five pillars? JR: Pillar one: The EU has made a formal commitment to achieve a 20 percent share of renewables in its energy use by That s not a suggestion; that s a mandate. Pillar two: How do we collect energies that are distributed the sun, the wind, geothermal heat, waves, and tides? If distributed energies are everywhere, why don t we collect them everywhere? We collect them wherever there are buildings. In the EU, we have 191 million buildings, homes, offices, factories. The goal is to convert every single building in the EU to your own personal green micro power plant. New buildings will be legislated as zero-emission and positive-power structures. Pillar two is what jump-starts the European economy. Rifkin s views have been embraced by the United Nations Industrial Development Organization (UNIDO) and the European Commission, among others. Pillar three: This is a challenging pillar storage. At the EU level, we are committed to all storage; we have no preferences for flywheels, batteries, compactors, air compression, or water pumping. But in our planning, we have focused the center of the storage network on hydrogen, because it s the basic element of the universe. It carries other energies, and it s modular. The EU has committed 8 billion to a public-private deployment of hydrogen storage technology. Pillar four: This is where the internet communication revolution converges with the new distributed renewable energies. It s the nervous system for this new economic paradigm. If you don t need electricity at any given time in your building, you can program software to sell that electricity across a distributed smart grid: an energy internet that extends from Ireland all the way to the borders of Russia, just as we now create and store digital information and share it online. Pillar five: The last pillar is shifting transport and logistics to electric vehicles. The five major global auto companies will roll out fuel cell cars, trucks, and buses running on hydrogen in 2015 and We will build Prophet of Transformation the infrastructure for electric cars to plug into green electricity everywhere, including every parking space. While your car is parked, if the price of electricity goes up on that grid, your software can direct your car to sell some of your electricity back to the grid. u Everybody agrees that energy markets are an essential element of modern societies. But that is where agreement ends; when it comes to the design and shaping of these markets, opinions vary considerably. Jeremy Rifkin, economist and political advisor to several heads of state, is the author of The Third Industrial Revolution. In his book, he predicts that the transformation of power sectors worldwide will bring the opportunity to achieve a transition, by the middle of the century, from the centralized fossil-based energy systems of the 20 th century to innovative peer-to-peer energy supply ultimately based on renewable sources. This revolution, he argues, will not only help avert a climate catastrophe, but also offers new business opportunities for ailing developed economies over the coming decades. 10 Living Energy No. 8 July 2013 Living Energy No. 8 July Power Market Design Power Market Design Jeremy Rifkin Born on January 26, 1945 in Denver, Colorado Background Founder and President of the Foundation on Economic Trends Education: BS in Economics, Wharton School at the University of Pennsylvania (1967); MA in International Affairs, Fletcher School of Law and Diplomacy at Tufts University (1968). Author of numerous books on many issues including US and global economics, the environment, biotechnology, and energy. Living Energy at The economic crisis has now given rise to a species crisis. Has advised the EU for the past decade. Consultant to the governments of Germany, France, Portugal, and Slovenia during their European Council Presidencies on economy, climate change, and energy security. The Third Industrial Revolution framework was formally endorsed by the European Parliament in Rifkin s global economic development team is the largest of its kind in the world, advising cities, regions, and national governments on the d evelopment of master plans to implement postcarbon infrastructures. His best-selling book The Third Industrial Revolution, which has popularized the idea of lateral power, had sold 100,000 copies in China alone as of The app version of Living Energy features a film of our interview with Jeremy Rifkin. These five pillars alone are components. It s only when we connect them and phase them in that we create a general-purpose technology platform. We do not need to repeat the mistake made here in the USA. President Barack Obama wanted a green economy; he still does, and his heart is in it. But we spent billions and billions of US dollars in stimulus money and still don t have a green economy. Why? Because the money was spent on siloed stand-alone piloted projects. When a community, let s say a region in Germany, starts to build this fivepillar infrastructure, it immediately has to look for other nodes. If it has a surplus of green electricity due to strong sunshine or high winds, it wants to sell it to some other zone in other parts of Europe. This energy internet favors large continental regions that can share surpluses against lulls because of different times of the day, seasonal differences, climatic differences. The energy internet runs across land masses, like Wi-Fi, until it reaches the ocean s edge. The next stage of globalization is continentalization. We need networked political unions that can create the codes, regulations, standards, and interoperability. LE: What do big, centralized power producers in the USA and Europe think about that? Even though the transitioning won t happen overnight, they face major challenges rapid deployment of distributed generation and falling profits because of plunging wholesale prices. JR: The energy companies have not been overly happy with this, but some of them are moving in our direction. They realize they have to be in two portfolios. We aren t leaving centralized energy tomorrow morning; we have a whole infrastructure out there. We have to manage that existing centralized model of fossil fuels and nuclear power by reducing CO 2 and increasing efficiency. At the same time, the energy companies would be well served by also being inve
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