January 4, 2017
Executive Director, Global Energy Management (GEM) Program
University of Colorado Denver Business School
Time for my first blog entry of 2017 – Originally I was going to write some predictions for 2017 but that approach is fraught with peril. Being wrong is guaranteed – the only “victory” lies in not being wrong by too much. I can do that all day, every day, without writing about it, so I am going to take a pass. Instead, I am going to write about four of the energy headlines that I saw just today and why I think they indicate trends that bear watching in 2017 and beyond. Each one includes a link that you can follow to learn more.
The EIA does a daily brief on energy that is well worth following. Today the headline was: Crude oil prices increased in 2016, still below 2015 averages. Here’s a key quote: “Crude oil prices ended the year above $50 per barrel. Although the annual average West Texas Intermediate (WTI) crude oil price in 2016 was $43/b—down $5/b from 2015—the WTI price ended 2016 at $53/b, $16/b higher than at the end of 2015.”
That doesn’t seem like much but do the math. The average price in 2016 was 10% below the 2015 average, but the ending 2016 price was more than 40% higher than the ending 2015 price. There is no certainty, of course, but these numbers show a distinct bottom in 2016 and what seems to be a relatively strong upward trend. We need an upsurge in global demand to give this real legs, but it’s still an encouraging start and I am optimistic about 2017 – oil prices this low are not really good for anybody in the long term and I think they are on the way back.
Full article here.
Waste-to-Energy CHP Plant in Copenhagen
I get a daily feed from Pennwell Power. Today they highlighted a new Combined Heat & Power (CHP) plant in Copenhagen that is ready to open later this year. You may have seen already that I posted it on the GEM LinkedIn site earlier this morning. The plant will be extremely efficient, using 400,000 metric tons of waste to supply electricity to 50,000 households and heat to 120,000. It will also recycle metal waste and – to top it all off – provide an architectural focal point for the city with an artificial ski slope on the roof. The plant is being built by the Danish unit of Babcock & Wilcox.
I love this trend and I hope it’s as important as I think it is. Not only is this plant providing a lot of energy from waste (thus putting zero demand on new primary energy sources), it’s doing it in a way that integrates with the local community and benefits a diverse group of stakeholders. I haven’t seen electricity cost or ROI numbers yet, so I don’t want to go completely overboard, but to me this is an example of the way we should all be thinking.
CO2-Capturing Power Plant in Tamil Nadu
I saw this story on the BBC this morning and followed it up later. In a nutshell, this is a coal-fired power plant at a town called Tuticorin in the Indian state of Tamil Nadu, that has – for the first time – implemented not Carbon Capture and Storage (CCS), but Carbon Capture and Utilization (CCU) technology on a commercially viable basis. The plant captures CO2 from its boilers and uses it to make baking soda, which has many industrial uses.
This is important for three reasons: (1) it shows at least one unsubsidized method of not just sequestering, but actually using CO2 in a way that could enable eventually coal to continue as a viable, cheap, and sustainable energy source in the developing world; (2) this breakthrough took place in India, proving that “developing” countries can provide energy innovation as well as demand, and (3) for some weeks we have been working to build relationships for GEM with Tamil Nadu – there is more going on there than just this plant – and this gives us more of a basis for doing that.
Tesla’s Gigafactory and Powerpack
Another daily feed I see comes from Renewable Energy World. Today they reported on the first installation of a grid-connected Tesla Powerpack in Europe. Coincidentally, CNBC reported on the start-up of battery production at the new Tesla Gigafactory in Nevada.
Now, I admit to a little skepticism when it comes to Tesla and its CEO, Elon Musk. Clearly, there is substance here, but it’s hard for me sometimes to distinguish the substance from the hype. Still, the opening of the Gigafactory is a big accomplishment; it should help to reduce the cost of lithium-ion batteries and pull production dependency back from China, at least a little bit.
The Powerpack story is in some ways more interesting to me. This is about energy storage at a solar PV farm. Although the scale is relatively small (500 kW), it demonstrates a reduction in intermittency for solar (and wind), which can improve their viability in the future. This also reminds us that Tesla’s batteries (even in cars) and be used to plug into and power buildings when not driving the car – I know of one small-scale apartment developer here in Denver who is doing just that, though I think he’s using a Nissan Leaf.
Together, these four headlines leave me encouraged for the future and optimistic about what 2017 may hold for energy. Every one of them indicates market trends that not only provide opportunities for our industry but benefit the public as well. I didn’t like 2016 much for many reasons, and I am more than happy to leave it in the rear-view mirror without looking back. So far 2017 looks a lot better – let’s hope that continues, and work together to make it happen.
Happy New Year.
Executive Director, Global Energy Management (GEM) Program
University of Colorado Denver Business School
Well, the election is finally over and, like any morning after, now we have to pick up the pieces and figure out what to do next.
I’d like to take this time outline what I think the future of the energy industry looks like for the next few years in the administration of President-Elect Trump, and the effect this might have on GEM students and alumni. It’s too early and the facts too scarce for detailed analysis, so this represents my best interpretation of what I have seen so far.
Before I get to Mr. Trump I want to write just a little bit about my view of the fundamentals – those things that probably don’t change much no matter who occupies 1600 Pennsylvania Avenue. Right now I am looking at four major drivers of energy that I think are more or less incontrovertible:
- Overall demand for energy will continue to grow worldwide. Even as efficiency improvements level off demand in North America, Western Europe, and the more advanced countries of Asia and Oceania, overall economic growth and alleviation of energy poverty in Africa and other parts of Asia mean that we’ll still need a lot more energy around the world in 2030 than we need in 2016. There may be occasional dips as world economic activity and growth fluctuates, but the overall trend will be upward for the next generation.
- We still have a surplus of oil and natural gas, resulting in downward pressure on prices. I’m not looking for a price crash – in fact, I still expect a modest rise through 2017 and 2018. The key word here, though, is modest – there’s just too much available and potential supply for more than that. A side effect of the gas price is continued pressure on coal. As much as some would like to have us believe that coal is being regulated out of existence, industry pros know that this is not true; coal is certainly fading, but this is much more due to cheap natural gas than to regulation, and nothing is likely to change that.
- Renewables will continue to grow market share as their technology and economics improve, and as people around the world demand them more. However, no matter how much wishful thinking there is, renewables’ growth will still be limited by technology, cost, and existing infrastructure for the next several years. The world will add a lot of renewables and the use of fossil fuels as a proportion of the global energy mix will decline, but the overall growth of energy demand means that we’re still likely to use more barrels of oil and cubic feet of gas in 2030 than we do now.
- There will be continued international and domestic pressure on energy due to climate concerns. I do not believe that this will have a major impact on either the amount of energy that we must produce or on the mix of primary energy sources that we use to produce it. I do believe, though, that there will be a need for continuous improvement across the industry: for fossil fuels we will have to get a lot better at managing carbon whether in the form of methane or CO2; for nuclear, we must find a way to alleviate public fear; for renewables we will have to improve supply chains, technology, and cost; and for every form and use of energy, we must continue to improve efficiency.
All of this represents an opportunity for energy leaders and specialists across the board and my long-term view of the future of our industry – and the opportunities within it – is a rosy one. We probably still have a few months of pain ahead of us, but I think the worst is past, and as an industry, we will emerge – maybe looking a little different – but still strong and getting stronger. Energy is too important to the world for any other outcome.
So that’s the fundamental context, but how will they be affected under President Trump? Mr. Trump has been a little scarce on details, but if we read what he has said we can make some educated guesses. It appears to me that the philosophical root of his policy is to make energy decisions based on pure market economics and price with some national security influence, but absent consideration of economic externalities like environmental or social impact (he denies the role of carbon in climate change). At this point, it looks like the Trump administration will have three major areas of policy emphasis with regard to energy: (1) US energy independence; (2) use of domestic fossil fuels and nuclear; and (3) rollback of federal regulations.
US Energy Independence
The President-Elect has expressed this concept in a couple of different ways. On the one hand, he has stated an intention to make the US completely energy-independent. He has also given a little more nuanced view that we should be independent of the need to import energy from OPEC or any nations hostile to US interests. My view is that the former is both impossible and undesirable, but the latter is fairly easy to achieve – in many ways we’re there already, and I don’t see a lot of change here from the status quo. A possible exception would be if a drive toward energy independence leads to actual restrictions on oil imports; I can’t predict the probability of this one way or the other, but the effect would be a substantial increase in both oil price and domestic production with a much smaller effect on natural gas.
Primary Energy Sources
It’s abundantly clear that Mr. Trump is no fan of wind or solar. He has many statements on record opposing both, mainly for economic and aesthetic reasons (he says they have long payback periods and they’re ugly). He also applies the payback argument to green buildings. He is a strong believer in shale, nuclear, and coal, and has vowed to expand oil and gas production along with a resurgent coal industry. He would open up more federal lands and offshore areas for oil and gas production.
We actually have a few specifics here. The President-Elect has said that he will “cancel” the Paris Accords (it’s unclear exactly what that means or whether he can actually do it), and eliminate the Climate Action Plan, the Clean Power Plan, and the Waters of the US rule. In general, he plans to eliminate all “unnecessary” regulations. I would not expect a carbon price under the Trump administration.
If we simply take the President-Elect’s statements at face value, it’s pretty clear that oil, gas, and coal will provide the major areas of opportunity over the next four years. Absent either subsidies or regulatory drivers, renewables and energy efficiency are likely to suffer, though I doubt that they’ll go away entirely. The power & public utilities sector probably proceeds more or less as usual, except with a reduced pace toward adoption of renewables.
However, both market and non-market forces still apply, which is where the fundamentals that I discussed earlier come into play. Mr. Trump has not addressed how regulatory reform will expand oil and gas production at $50 per barrel, or how expanded production will not continue to erode prices. He also ignores the fact that cheap natural gas, not federal regulation, is by far the most potent “killer” of coal. It’s very hard to see how to support both more natural gas and more coal production at the same time, and I think coal will continue to suffer unless he finds a way to subsidize exports; even that might prove ineffective if there is a general decline in trade or restrictions on oil imports.
As far as oil and gas prices are concerned, I see forces in both directions: downward pressure will come from increased supply as more production is encouraged, and potentially from reduced global demand if protectionist policies negatively impact global growth (one of the “dips” I mentioned in the fundamentals). Upward pressure will come from geopolitical uncertainty regarding the Middle East and China, from deterioration in the value of the dollar that we are already starting to see this morning and which may well continue as a matter of trade policy, and possibly from a restriction on imports. On the whole, I would look for more downward than upward pressure, at least in the short term, but in the longer term, I would expect a return to fundamentals, except in the (hopefully) unlikely event of import/export restrictions or a major trade war.
On the non-market side, there will continue to be pressure that favors renewables; the international community, environmentalists and ordinary citizens will not stop demanding either climate action or renewable energy. Jurisdictions and companies that have developed strong economic interests in wind and solar will press Congress for continuation of policies that benefit them, and their respective Senators and Representatives will work to protect their constituencies.
So in the end, I think we’ll still see headwinds for renewables, energy efficiency, and green building, and tailwinds for oil, gas, coal, and nuclear; however, I think these will be moderated by the market and we’ll get more “business-as-usual” than we might expect at first glance. To whatever extent Mr. Trump gets his way, the cheapest possible energy will be the norm.
If I were early in my energy career I would lean toward the commercial side of oil and gas, midstream, downstream gas (distribution, retail, and end use), and public utilities. Many people have left the oil and gas industry, whether by choice or not, and I am hearing a lot of indications of a talent shortage in 2018, even with a small increase in price. I would lean – but not run – away from domestic renewables, efficiency or green building consulting, and environmental roles. I don’t think these will go away, and if renewables were my passion I would not give up, but I do think that growth will be slower and domestic opportunities tougher; however, if I had my eye on international I would expect continued robust green opportunity. I would also keep in mind that to a significant degree much of President-Elect Trump’s policies and goals buck the long-term fundamentals and so are probably not viable forever; even if I spent 100% of my time in traditional energy areas for the next few years, I would respect the fundamentals, continue to build my pan-energy chops, and preserve my options to work anywhere in the energy industry in the future – pretty much what you’re doing at GEM already..
I am currently an Advisor for ExxonMobil’s new Business Development team in Europe. As part of my day-to-day activities I tend to parachute into projects as a subject matter expert, workhorse and focal point bringing together diverse experts to construct new business development opportunities for senior level consideration. Often we will be looking at the pursuit and capture of oil and gas resources through license tenders, negotiations and farm-ins and constructing preliminary plans to assess technical and commercial risks and uncertainties. It is an exciting role, which has let me travel to Austria, Romania, USA and Azerbaijan to engage with counterparties and stakeholders. My favorite part of the role is the opportunity it gives me to interact across what is a huge organization and learn from each and every individual. I often spend my days talking to geologists about the subsurface risks in a particular country then moving on to discuss country fiscal stability with tax lawyers and public affairs experts, then engaging development engineers to discuss optimal pipeline landing points and costs before finally sitting down at my desk and piecing it all together into a proposal.
I’m a bit of a global nomad having grown up across the world, happily following (being dragged) around by my parents to countries such as Egypt, Pakistan, Nepal, Australia and The Netherlands. After graduating high school from Cairo American College in Egypt I decided to pursue a bachelors and masters in Chemical Engineering from the University of Manchester in England. Towards the end of my time in Manchester I was accepted for an intern position within ExxonMobil’s Gas & Power Marketing group in London and happily accepted a graduate position there after finishing my Masters. I have spent 8 years working with ExxonMobil in London with a brief two-year hiatus during which I was seconded to Shell in Aberdeen, Scotland. My career has taken me down many diverse and challenging paths managing natural gas transportation portfolios in The Netherlands, working shifts controlling the flows of gas in Norway, advising joint venture board members on acquisitions and negotiations, leading a shift team producing gas in the UK’s Southern North Sea and most recently chasing new business opportunities around the world.
I graduated from university, the first time, almost a decade ago and the GEM program has really shown me just how much can be accomplished in education in eight years. The technology and advanced teaching tools in the GEM program are sublime and make being a student half the world away in a different time zone a breeze. Future students really shouldn’t be daunted by the distance. I was when I first started and what I discovered were lecturers who understood the challenges and worked around them and students who embraced time difference. Nobody ever acted as a barrier to accomplishing this degree. The degree is also flexible. I started with Cohort 11 and took a six-month break to pursue some personal goals before re-joining with Cohort 12. However, I can’t completely sugarcoat my experience. The GEM program requires a lot of time and effort, especially when managing a full time job with travel. Ironically being in this degree made me more productive at work because I had to plan my time better, and jump on the opportunity to get work done as soon as possible to avoid building a mountain of work too big to climb.
I chose the GEM program for several reasons. In one all-encompassing sentence I can say it was because it provided the opportunity to learn material relevant to the energy industry in an environment filled with individuals who are equally or more knowledgeable and experienced as me in energy related fields. I looked at MBA programs; but I was sold on how specific the GEM program was. Several “Energy MBA” programs offered their standard MBA with two to three energy electives, but not GEM. I was drawn to the idea that I could talk about human resource management, or financing, or operations management all in the context of the energy industry with fellow energy industry professionals.
The GEM program has been fundamental in helping me revive my career when I didn’t even know it was needed. I originally joined the GEM program with the view to educate myself on the American and renewable energy businesses and expand my breadth of experience. However, as time progressed I discovered that the GEM program was able to help me fill in many of the commercial gaps in my education that appeared when I jumped from being an engineer to a commercial expert. It provided me with the confidence to discuss topics at work, that I only had vague notions about previously, and I used GEM to help me provide that extra boost on work projects. For example, when we started facing fiscal system issues on one of the projects I was working on, I was able to write a university paper on a similar topic, which not only helped me develop conversational language but resulted with me representing ExxonMobil in a country’s parliament when talking to the ministry of finance. Since then I credit the GEM experience with helping me seamlessly integrate into my new business development role and enabling me to be selected as one of two European representatives on ExxonMobil’s Global economic experts network.
The GEM Program is proud to announce that Sarah Derdowski, Director of Operations, has received the Emerging Leader Award.
“It couldn’t have gone to a more well deserved individual,” said Sarah Landry, Chief Operating Officer of the Colorado Oil and Gas Association.
The Emerging Leader Summit Award recognizes the outstanding achievement of an emerging energy leader. These recipients have made significant contributions to the industry and demonstrated the potential for leadership, dedication, and innovation.
“It is humbling to be recognized by the energy industry. Thank you to the COGA committee that selected me for this award,” said Derdowski, who received the award at the Rocky Mountain Energy Summit Conference. “I also wanted to express my sincere gratitude to my team at CU Denver and the Global Energy Management Program.”
Our September GEM’s Gem is Carrie Dixon, and she says the GEM Program has already helped her in reaching career goals.
“I recently received a promotion at Xcel Energy,” said the Cohort XIII student. “I am now the Market Operations Manager, leading Xcel’s interests in the Southwest Power Pool.”
Dixon is currently pursuing a Master’s Degree in Global Energy Management at the University of Colorado Denver with an anticipated graduation date of June 2016. She is a recipient of the Global Energy Management Leaders Scholarship.
“Being a GEM student is great,” she said. “The unique hybrid-online design of the program has given me the opportunity to interact and network with other energy professionals from all over the world. The GEM classes have helped me to strengthen my skills and prepare me to be a leader in the industry.”
As Manager of Market Operations at Xcel Energy, Dixon oversees Xcel Energy Service’s participation in the energy market operated by Southwest Power Pool, Inc. She also serves as Xcel’s representative on various industry committees and provides technical support in various state and federal regulatory forums.
“Prior to enrolling in GEM, I evaluated several other programs such as an MBA and MS in Economics, and neither felt like a fit,” she said. “After reviewing the curriculum and meeting several faculty members and alumni of the program, I determined that the GEM program was the right fit for me. The unique focus will give me an edge as an emerging leader in the industry.”
In 2005, Ms. Dixon joined Xcel Energy as an Associate Trading Analyst. There, she developed short-term energy optimization analyses for use in scheduling of constrained resources and power plant commitment decisions. Furthermore, she provided analytical support for forward fuel requirements and the daily gas nomination process.
In 2007, Dixon joined BP’s Integrated Supply and Trading division in Chicago, IL as a Trade Control Analyst. In 2010, Dixon was promoted to the position of Market Risk Advisor for the Global Residual and Distillate Trading benches. In 2011, Dixon returned to the Trading Analytics group at Xcel Energy in Denver. She was the lead Front Office Project Member for the Southwest Power Pool Integrated Marketplace launch.
Dixon received her BS in Mathematics and Computer Information Science, with a minor in Psychology, at the University of Oregon.
Congratulations to GEM alumni Heath Lovell and Lincoln Anderson who have been accepted into the Denver Petroleum Club’s Mentor/Mentee program.
“I’m seeking to find a role model through this program; someone who is inspiring and a great example to professionally mirror,” said Anderson, a Lease Analyst at SM Energy Company. “I don’t have much of an opportunity at work to get to know management in this capacity, so engaging with someone who has had a successful career would be a great benefit.”
The Mentor/Mentee (M&M) program brings together established oil & gas industry leaders with young industry professionals to provide insight, guidance, and advice regarding their professional career development.
Lovell and Anderson will join a group of 15 mentees who will begin working together in August 2015. The program will culminate at the Club’s 2016 Charity Bash held in May 2016.
“I’m looking forward to participating in planning and managing that [event],” Anderson said. “It’s reassuring to know we’re working to help the Denver community, and at the same time gaining experience with planning and executing a project.”
Lovell, a Senior Landman at Anadarko Petroleum Corp., joined the program because he is new to the Denver area.
“I wanted to broaden my network base and have the opportunity to be mentored by some of the leading energy professionals in the area,” he said. “I have set the bar very high for myself in this new chapter of my life and will take all of the knowledge and mentoring I can get. Companies, their assets and jobs come and go. Relationships, knowledge, education and experience stand the test of time and is what propels an individual in their career.”
“I always try to put myself in a position to learn as much as possible from those who have been in the industry a lot longer than I have. Anytime I get the opportunity to sit and hear one of my elders provide advice, I am always tuned in. The parties and balls sound fun too, but I am excited about the charity aspect of the experience as well,” Lovell added.
From monthly educational meetings to competitive games and volunteer projects, there is a lot to be accomplished in just nine short months.
GEM has also had 14 mentees in previous classes including: Greg Adam, Chase Boswell, Michael Burn, Jessica Cavens, Scott Hazelwood, Bruce Hopkins, Kyle Hoppes, AJ Jairamani, Ryan Johnson, Patsy Landaveri, Owen McMillen, Ryan Pocius, Blake O’Shaughnessey, and David Watts.
GEM Advisory Council Members who have donated their time as mentors in the industry include: John Mork, Bill Schneider, Peter Dea, and Dave Keyte.
For more information about the program, please contact Sally Hallingstad at (720) 663-9070.
Sarah Loughran, GEM’s Director of Programs and Stakeholder Relations who joined the program in 2009 before the start of the first cohort of students, will resign in early September.
“Working with you all has been such a privilege, and I have enjoyed my time with you all,” she said. “I’d love to keep in touch and hope to maybe work with you in some capacity again in the future.”
Loughran has helped to transform the program and curriculum. Among her many accomplishments are recruiting more than 15 new professors from around the globe and integrating new courses.
Loughran recruited GEM Marketing Professor Melissa Wood before the second cohort.
“While the merits and quality of the program drew me to join the faculty, it was Sarah’s enthusiasm and passion for this program that truly sealed the deal,” said Wood. “Sarah is a big reason why the GEM program has evolved and become a world-class educational opportunity for energy professionals. She brings with her an unparalleled ability to create a vision and translate it into a reality, never losing sight of what’s most important — the students and faculty.”
“Beyond her expertise and professionalism, I will miss her wit and kind heart. Although, it’s not ‘goodbye.’ She can’t shake me that easily because I consider her a true friend.”
Loughran has also led efforts to develop the GEM Competency Model to integrate the competency expectations of a new GEM graduate into corporate career development.
The Denver Business Journal recently selected her as a Top Women in Energy Leader. She was among 40 women who were selected as key influencers in metro Denver’s energy sector.
“I’m so sorry to see Sarah leave us even while I’m thrilled for her bright future,” said GEM Finance Professor Mike Orlando. “Sarah was the first person I met on the GEM staff. She was exceedingly courteous and capable in bringing me onboard and helping me to contribute to the GEM program over the years.”
Loughran’s husband was offered an outstanding new opportunity based in San Clemente, California this spring, and it was an offer that they couldn’t pass up.
“While I have been working in a remote capacity for GEM the last several months, I feel the time has come to tender my resignation,” Loughran said. “As a Colorado native, it was heartbreaking for me to leave the mountains. However, our new home has an ocean view and a yard full of citrus trees – so I’m starting to come around.”
Loughran’s last day at the GEM Program will be Sept. 4.
“She is always so accommodating and helpful – professional, but very sweet,” said GEM Professor and alumnus Ralph Cantafio. “I know we are all going to miss her, but I think we are all so happy for her and her family.”