Water: The Big Issue for Fracking

On February 13, the Cleveland office of the law firm McDonald Hopkins hosted a panel to discuss the pivotal water issues facing producers of oil/gas from shale via fracking.  In addition to three MH attorneys, the panel also included Jeff Dick (Director of the Natural Gas and Water Resource Institute at Youngstown State University), Samuel Johnson (Director of Water Asset Development for CONSOL Energy (NYSE: CNX)), John Lucey (EVP of Business Development and Engineering for Heckmann Corporation (NYSE: HEK)) and Sudarshan Sathe (President of Water and Wastewater Equipment Co.)

I took away three main observations from the panel discussion.

First, it’s important to keep in mind the distinction between produced water and flowback water.  Flowback water includes all of the fluids used in the fracking process to initially stimulate oil/gas production.  Produced water is defined as the flows associated with ongoing oil/gas production long after the fracking is complete,  as has long been the case with all conventional oil/gas wells that never required fracking, since all oil/gas production usually contains a sizable fraction of water.  The water treatment issues for flowback waters and produced waters are thus different.  In particular, flowback waters are contaminated by the proprietary ingredients that fracking operators want to protect for competitive advantage, whereas produced waters contain loadings of the minerals that leach out from the particular oil/gas bearing shale strata being tapped.

Second, as significant as the challenges are for treating the water resulting from fracking operations, sourcing the quantity of water from fracking operations may be even more challenging.  Simply, fracking operations require enormous quantities of water.  While the voluminous Great Lakes would seem a natural supply basin, the Great Lakes Basin Compact signed a few years ago by the jurisdictions within the Great Lakes Basin precludes transporting Great Lakes water outside the basin — and while the Marcellus and Utica shale plays are not far at all from Lake Erie as the crow flies, it nevertheless so happens that they generally lay outside that basin.  Thus, fracking operators in the Marcellus and the Utica have to get their water from somewhere else.

Lastly, for a company that is historically rooted in the coal industry, CONSOL comes across as highly progressive.  Among other eyebrow-arching comments, Mr. Johnson argued that environmental regulations associated with fracking operations needed to be tighter than they currently were simply to drive further technological advancement — existing practices just weren’t good enough.  I leaned over to a colleague and said that either (1) Mr. Johnson is out of step with his management, (2) CONSOL was outstanding at “greenwashing” with convincing public relations messaging, or (3) the company is genuinely trying to differentiate itself from many of its peers.

The panel was timely:  just a week prior, in an appallingly flagrant disregard of environmental law, a renegade operator in Youngstown called Hard Rock Excavating was caught by regulators dumping untold tens of thousands of gallons of untreated wastewater into the Mahoning River (which drains into the Ohio River).  The principal of the operation, a Mr. Ben Lupo, is subject to up to three years in prison and up to $250,000 in fines if convicted of violating the Clean Water Act.

(Oh, by the way, even though he was only just recently caught red-handed, this event doesn’t appear to have been the first for Mr. Lupo, who seems to have a long history of illegal water dumping, according to this article by the Vindicator.  Not to mention, Mr. Lupo also owns and operates another company, D&L Energy, which was responsible for the injection wells thought to have triggered the seismic activity in Youngstown in late 2011.  It’s almost as if Mr. Lupo is waging a one-man public relations demolition derby for the industry.)

My guess is that everyone on the panel, and presumably in the audience, would be in favor of strict punishment for Mr. Lupo, assuming that his guilt is confirmed.  Not only are the environmentalists up in arms, the panelists and others who seek to pursue fracking in the Marcellus and Utica shale know that they can’t afford many bad black-eyes like the one(s) wrought by Mr. Lupo’s apparent disregard for good practices.

Water’s just too important for the fracking business not to handle wisely.

The Powerful Capabilities of AEP’s Dolan Labs

Thanks to the efforts of Chris Mather, co-head of the Tech Belt Energy Innovation Center, I was able to gain a tour of the Dolan Laboratories, located just outside Columbus, owned and operated by American Electric Power (NYSE:  AEP).

This facility is now highly unusual for the electric utility industry.  Back in the day, a few other utilities had their own laboratories to test the basic equipment upon which the power grid is based.  Alas, most of those laboratories have since been shut down or spun-out to private operators.  Indeed, now even the Electric Power Research Institute – the industry’s collective non-profit R&D organization – sometimes uses Dolan for their work.

The labs at Dolan include chemical and water testing facilities and civil engineering (especially related to concrete) capabilities that are mostly relevant for powerplants.  However, our tour was mainly focused on the Dolan Technology Center:  the set of facilities and equipment employed for testing assets downstream of generation, particularly transmission and distribution.

Electric power transmission and distribution lines look pretty benign, given the lack of moving parts.  However, the forces in (and around, and caused by) these cables are, well, shocking.

At Dolan, AEP has the ability to discharge 1.2 megavolts, which creates something not far removed from a lightning bolt.  In addition to electrical energy, the labs have physical equipment inside containment rooms that can impart extreme mechanical forces to push supporting items like conductors and mounts to their breaking points.  The resulting explosions unleash shrapnel much like a hand grenade.

Trust me:  do not try this at home.  I won’t get into any specifics, but the stories associated with working on grid infrastructure – usually when something is not right, often in difficult environmental conditions (night, rain, snow, wind, cold, heat) – are sobering.

A key function of Dolan is to quality check the supplies that AEP receives from its vendors before deploying to its grid, where failures harm service reliability, pose safety risks and are expensive to repair.

To illustrate, our host Bob Burns (Manager of the Dolan Technology Center) showed us how Dolan has been working to improve underground distribution cables.  Twenty years ago, due to the novelty of the technology, AEP rejected upon receipt about 5% of its underground cable purchases owing to unknown defects.   Dolan was able to identify the root causes of cable failure and work with manufacturers to dramatically reduce those failures by changing designs and production processes – with economic, reliability and safety benefits that redound not only to AEP but to the power industry at large.

In addition to its grid focus, the Dolan Technology Center also includes a number of end-use application testing facilities.  For instance, the main facility includes a dummy household kitchen containing a number of appliances (stoves, refrigerators, dishwashers, water heaters) and control systems, a spectrum of electric vehicle recharging stations, and various installations of advanced lighting and metering technologies.

Although we spent most of the tour indoors, outside were some other uncommon capabilities.  Down the road a half-mile was a former site of a small peaker powerplant, at which Dolan staff experiments with novel technologies relevant for microgrids, including grid-scale energy storage and small-scale distributed generation.  It was here that Dolan has been helping Echogen with their innovative waste heat recovery technology, and it is here that the Dolan is testing community energy storage approaches for AEP’s GridSmartOhio pilot program to be rolled out in suburban Columbus.

It should be noted that AEP contracts out Dolan’s equipment and staff to perform services on behalf of third-parties, and that they have ample spare capacity.  Facilities like this are not found in very many places.  It’s an asset that the cleantech community should capitalize upon more fully.  If you need some specialized technical help related to the power industry – especially in on high-voltage issues – and you’re not able to find a place to get work done, I’m sure the good folks at AEP’s Dolan Laboratories would be happy to take your call to see if they can fit the bill.

Student Cleantech Entrepreneurship in the Buckeye State

On January 29, I spent a day inside a ballroom on The Ohio State University campus in Columbus serving as a judge for the Ohio Clean Energy Challenge, presented by the University Clean Energy Alliance of Ohio and NorTech.  This contest pitted student teams from universities and colleges across Ohio pitching their clean energy business plans, in the hopes of winning $10,000 and advancing to the next step in the National Clean Energy Business Plan Competition conducted by the DOE.

Twelve teams vied for the prize.  Perhaps not surprisingly, reflecting the strong agricultural heritage of the Buckeye state, several of the contestants had a strong biomass or agricultural bent to them.  Somewhat surprisingly, given the thin-film solar capabilities so strongly embedded in the Toledo area, no photovoltaics concepts were promoted.

The winner of the event was Amplified Wind Solutions (AWS), a start-up venture commercializing a technology born in the laboratories of Prof. Majid Rashidi at Cleveland State University (CSU).  As the name connotes, Prof. Rashidi’s technology is an innovative concept for wind energy generation:  using cylindrical towers as a means of channeling higher velocity and higher density wind flows to turbines mounted on the sides of the towers in the zones where the wind has been “amplified” by the tower.  The claim is that such amplification can yield 4-6 times as much energy capture from the wind as a comparable “unamplified” wind turbine.

A “Gen 1” version of Prof. Rashidi’s technology is visible on the CSU campus off of Chester Street, and a “Gen 2” version of the technology is even more visibly deployed atop the right field corner of the home park for the Cleveland Indians, Progressive Field.  AWS has a Gen 3 design up its sleeve that it aims to develop, offering greater simplicity and robustness at a lower manufactured cost.

A key reason underlying the victory of AWS was the strength of the presentation made by its CEO, Niki Zmij.  As is evidenced from this video, Ms. Zmij, an MBA student at CSU, was passionate, clear and confident in her pitch.  Certain other teams were touting very interesting technologies that could be winners in meaningful markets – although their chances for commercial success were far less well-articulated.

Those teams that didn’t win shouldn’t necessarily be discouraged.  It should be noted that AWS missed the cut in the prior year’s challenge, and has subsequently been polishing its story for a year.  With additional time and effort to refine their stories, success may come to the runners-up in future years.  Stay tuned.

Meanwhile, AWS goes to Chicago on April 4 to compete in the Midwest regional section, being convened by the Clean Energy Trust, aiming to win a $100,000 prize en route to the national finals in June 2013.

All told, I was extremely impressed and encouraged by the commitment to cleantech entrepreneurship being demonstrated by so many of today’s students and tomorrow’s future leaders in Ohio.  I sat humbled in the awareness that I, at a similar age 30 years ago, could not possibly have stood in front of a sizable audience baring my soul by promoting an uncertain business proposition – nor even to have such a risky aspiration as pursuing a professional path that didn’t involve someone paying me a safe salary.

It’s a far different world today, indeed.  And a good thing, too.

EPRI’s View on Emerging Technologies

Writing in the January issue of POWER magazine, Arshad Mansoor (Senior Vice President of Research and Development at the Electric Power Research Institute) authored an article entitled “Emerging Technologies Enable ‘No Regrets’ Energy Strategy” to provide a soup-to-nuts vision of the future technology landscape for the electric power industry.

I don’t know that it’s possible that any player in the challenging U.S. electricity sector can pursue a path that is truly “no-regrets”, and it’s not easy to cover the gamut of technology possibilities of such a complex industry in one relatively brief article.  However, Mansoor’s essay does at least provide some visibility on the broad technology trends of the future, and lays out a taxonomy to consider the panoply of technologies that electric utilities will be facing in the years to come.

Mansoor begins by singling out the three key drivers facing the industry that imply “unprecedented change in the industry over the next 10 to 20 years — more change than in the previous 100 years”:

  1. The availability of natural gas and its increasing role in power generation.
  2. The expanding role of renewable generation.
  3. Technology challenges to reducing carbon dioxide, mercury and other emissions.

As an implication of these three forces at work, Mansoor outlines three categories of technologies that collectively represent a “no-regrets” approach:

  1. Flexible resources and operations.  This spans a variety of technologies to enable both the power grid and power generating sources to better accommodate the inherent variability of demand and an increasingly variable supply base in an uncertain world.  The range of technologies include energy storage, demand response, advanced transmission (e.g., HVDC, FACTS), improved software (for planning, forecasting and operational management), and fossil/nuclear powerplant operational flexibility.
  2. Long-term operations.  This seems to be centered on a variety of robotic technologies to improve the ability for utilities to remotely and efficiently monitor asset conditions and anticipate failures before they happen.
  3. An interconnected and flexible delivery system.  This covers a swath of technologies for power distribution and utilization under the umbrellas of “smart energy”, “grid resilience”, and “consumer-focused technologies”.  Smart energy covers standardization of communications protocols among the various devices on the grid, while capitalizing on the trend towards “big data”.  Grid resilience acknowledges the increasing concerns about security from man-made and natural disasters, with technologies ranging from unmanned aerial vehicles for damage assessment to using plug-in electric vehicles as a power source in the event of emergencies.  Consumer technologies acknowledges the trend towards ubiquity of the always-connected customer (not to mention utility employee), envisioning apps on smartphones and tablets to modulate or activate just about anything on the grid — from specific equipment at a powerplant or a substation to a particular light fixture at a house.

Alas, I think there are some gaps in this overview.  As a primary example, after acknowledging the prospect of tightening environmental regulations, Mansoor barely mentions air or water pollution control technology opportunities that electric utilities may need to consider — and it’s not clear where in his three categories such technologies would even fit.

So, I view Mansoor’s article as a good first starting point in developing a holistic perspective on the future of the electricity sector and how new technologies will reshape it.

It will be interesting to see if the industry evolves as much and as quickly as Mansoor asserts.  As one electric utility executive said to me and some colleagues many years ago, “no major innovation has been widely adopted in this industry unless and until it was essentially required by regulators.”  His point was that utilities are mainly judged by reliability and cost — and new technologies usually (at first) represent risk and entail higher cost than the status quo.  So, why exactly would utilities adopt something new?

I would like to hear EPRI’s take on why it believes that the electricity industry will change more in the next few decades than over the past century, especially given the dire political and economic situation facing the U.S. and the associated regulatory stalemates that are likely.  Perhaps Mansoor or his colleagues can write a follow-up article to address this very important question.