The Only Thing we Learn from History

globe_booksI was a terrible student of history in high school.  It was my worst subject.  I barely graduated because back then you had to pass a four year comprehensive Regents exam in history.  I had high 90s in math and science but a low 70 in history.  It was so bad, and I was so afraid of not passing, that I took the class my senior year twice each day from the same teacher … twice!  I passed by one point.  Whew!

The only thing I remember from all that was the title of this blog.  Of course I remember more, but that quote was often repeated to me in my senior year as a reminder that we simply do not learn very much from history, and as a consequence, we are doomed to repeat it.  Albert Einstein’s definition of insanity is doing the same thing over and over again and expecting a different result.

The energy industry is stuck in a rut for the past few years.  We seem to simply regurgitate what we have all said and heard before, and we assume we have the complete truth when we do.  We don’t think critically.  We don’t look at the trends.  We assume we are on the right track and that all we need to do is stay in that rut and perhaps move a bit faster.

At the same time, I am witnessing the average American shutting down on energy agendas.  They are tired of trying and achieving so little.  They want to “escape” from today’s worries and woes and they simply don’t want to work very hard at anything any longer.  Don’t get me wrong, there are and always be that vibrant 1-2% that we always seem to attract and engage, but once you try to move off that to mainstream, you get lost in the whirlwind that distracts them.

What should we be learning and what should we be doing differently as a result?  I think you have to go back to the basics. We now make things way too complex.  People are tired and want easier things to do.  We assume people are rational decision makers.  They are not, they are emotional.  We assume people want to improve their lives.  Most are happy and just want to be left alone.


Sure, everyone would like more money, more respect, a nicer house, etc.  These are silly things so when you ask people silly questions about them you get silly responses that make you think you understand them.  One of my friends said it best.  People want something to do, someone to love, and something to look forward to.  Think about it.

People are happiest when they are productive.  People want to do things that make a difference.  We all know the story of the three brick layers who are asked what they were doing.  The first said laying bricks, the second that he was building a brick wall, and the third described his work as building a great cathedral.  Sure, the last person had the big vision, but they could all feel OK about themselves that they were doing something important.  It mattered.  Someone had to do it.  It needed to be done.  Idle hands are the Devil’s playground.  Be sure people have plenty to do that is meaningful and productive.

Meetings on the other hand I observe do precisely the opposite.  Ban any meeting that is not truly important.  No meeting should last a minute longer than it has to. In fact, I would suggest you establish a meeting policeperson in your company.  No meeting can be scheduled and no attendee can attend unless and until the agenda for that meeting, the time allocated, and the decisions or action items that are to come from it are identified, tied to a company agenda, and approved.  But Joel, if we have to go through all this, we wouldn’t have any meetings!  Then you shouldn’t!  And, be vigilant about latecomers (if you are not there early, you are late) and those who use digital devices during the meeting.  We banned them.  No phones, no iPads … nothing but a note pad.  And, if the person is not taking notes on either the papers being handed out or their own notebook, they are reprimanded.

It is time to get serious and time to get busy.  People need to believe they are earning their pay by contributing and participating.  If not, let them go and do the rest of your employees a favor by that.

Caring for others is also important.  You could flip the perspective around and describe that as being needed, or at least feeling they were needed.  Self-worth is important.  Having raised four daughters I know that all too well.  If you want to be sure your children stay away from the worst elements in society, be sure they have a healthy self-esteem.  Seems like we have some work to do here in our modern utility workplaces.  Lots of folks feeling unloved.

We used to call it mentoring.  I think we need that again.  Pair people up and have them invest in each other’s professional and personal development.  The scariest thing I ever hear in life is the phrase “I don’t care.”  People should care deeply about their own lives and the ones it touches.  If they truly don’t care, let them go and find a place they want to work where they do care.

Finally, the light at the end of the tunnel is hopefully not an oncoming train.  I remember visiting one client and he had this sign on his door:  In an attempt to be more efficient, the light at the end of the tunnel has been turned off.  Sad.   But, he was expressing his lack of anything to hope for.  This is possibly the biggest hurdle the energy industry has at the moment.  They are not looking forward to anything.  In fact, they look into the future and see nothing good.

As I have read the works of others who faced desperate times and hopelessness, I have been inspired by their simple faith statements like “all things work together for the good” and “every cloud has a silver lining” and others.  Some may criticize them as Pollyanna.  I think our minds are more capable of being creative and productive when we are not hunkered down in fear, but rather are searching for success.

The old story of the boy in the barn comes to mind.  Others see a pile of manure.  The boy digs feverishly into the pile saying “there has to be a pony in their somewhere!”   There probably is.

It is funny how often we refer to the “good ole days” as if they were really all that good.  They were simpler.  They were certainly less hectic.  But, what do we miss so much?  Could it be that we did things that mattered, were loved by people who were not distracted, and had so much to look forward to?

Boo! Did I scare you?

We Americans all seem to love a good scare, especially if it is tied to an underlying conspiracy theory.  Aliens visited our ancestors and will return again.  Asteroids will destroy civilization as we know it.  It happened in the past and it is certain to happen again.  Global Warming (sorry they now call it Climate Change because they can’t see any warming to speak of), Global Cooling, Ozone Depletion, Y2K and the list goes on.  Boo!  If you check the dictionary, this form of boo always needs the exclamation mark.

How about this possibility?  Utilities are out to get us!  They are secretly conspiring to convince us that natural gas is now cheap and the supply will last forever … just long enough for us to let them all build natural gas power plants and then gig us with high prices when natural gas returns to its proper Btu parity value!  Boo!

Boo can also be very scary when it is used as a verb to show contempt such as when performing artists are booed off the stage.  This is my fear right now for the electric utility industry.  I fear the day, perhaps very soon, that the seeming partnership utilities have with renewables will turn rather negative.  Politics makes for strange bedfellows, and it has been interesting to me to see the previously antagonistic National Resource Defense Council (NRDC) become an advocate for electric utility ratemaking to preserve the renewables game going forward.

I saw the same thing happen after the energy embargoes of the 1970s.  PURPA was designed to foster cogeneration and utilities were being forced to buy the output in New York State at $0.06 per kWh despite the market value on the grid at the time being $0.03-$0.04.  I watched the utilities that were deregulated just ask for stranded cost recovery and promise to keep rates the same for ten years only to be clobbered by the rate true-ups after that.  The pattern always seems to be the same.  Fear gives way to political positioning rather than being the standard bearer for truth and taking the heat.

Frankly, I am alarmed at the current state of utility affairs in the United States.  It reminds me all too much of the movie The Wizard of Oz.  The electric utility industry is all hunkered down in fear.  They, under the guise of political correctness, are afraid to stand up to their enemies and frankly afraid to enlist the help of their allies as well.

This is truly sad.  The closest analogy I can come up with is how elephants are trained in the zoo.  They begin their lives chained to a stake in the ground and learn quickly that they can’t pull free.  As they get older, they simply assume they still can’t pull the stake out of the ground.  Even as full grown animals, they stay tethered to that stake in the ground until their trainers free them.

Oh please … pull on the stake … it will come out of the ground so easily!  And, no, there is no Boogey Man that will bite you!  Please?!?  Face your fears!!

I loved the movie The Wizard of Oz.  All the characters were scared of something, and they seemed to have legitimate reasons to be scared.  Scarecrow, Tin Man and Lion all had seemingly valid reasons to go to see the Wizard to get what they needed.  Scarecrow needed a brain.  Tin Man needed a heart.  And Lion needed courage.  Give me a break.  You have the diploma, clock and medals.  What you lack is the confidence to pull yourself out of the rut you are in!

Our son played the Wizard in a local drama production and as a result I listened carefully to the lines.  They are actually rather profound and portray the utility affairs rather well.   Because our son was so captivated with drama, I decided for us all to see the Broadway Play Wicked in New York City as part of a trip there a few summers ago.  As you know, it is somewhat of a twist on the Wicked Witch of the West.  It is kind of a back story on The Wizard of Oz.  It was a wonderful event, and will never forget it.

But, one of the songs from Wicked has really stuck with me.  It is the song Wonderful.  Here are some of the lyrics that I think apply here:

Where I come from, we believe all sorts of things that aren’t true. We call it history.
A man’s called a traitor or liberator. A rich man’s a thief or philanthropist. Is one a crusader
or ruthless invader? It’s all in which label is able to persist.  There are precious few at ease
with moral ambiguities, so we act as though they don’t exist.”

I am terribly concerned that the labels that will persist for the electric utilities emerging from these past few decades will be that it was lethargic, heartless, and cowardly.  How’s that?  Did I get your attention with that?

Lethargic because it refused to state the obvious: you can’t assume renewables and energy efficiency will avoid the need for new generation.  Heartless because, at the end of the day, it is a cost recovery business and will be held whole so it didn’t really care as much about the financial damage done to others, especially the less financially able.  There will be financial pain to the industry, but it is not like a free market company and certainly not akin to what fragile financial postures look like in the masses.  It will survive and evolve … kicking and screaming along the way … but it will make it.

Cowardly may seem harsh until you look at what the word means:  lacking the courage to do or endure dangerous or unpleasant things.  Hmmm.  Political correctness is therefore another word for cowardice.  I rest my case.

I am deadly serious.  I am disappointed by the cowardice of the industry right now.  I am alarmed by the heartless disengagement as the utility’s customers are lured into energy systems that will fail to provide the benefits promised and will be abandoned just the same as the boondoggles during the second oil embargo.  I do wonder why the industry has become so lackluster.  It has some of the smartest people on the planet in it.  Maybe it is partly because those who know what is really going on are surrounded by so many new employees who don’t.  Couple that with the popular management style of consensus decision making and you blunt the impact of this wisdom.

Let me remind you all that consensus caused the State of Virginia to legislate that the constant Pi be rounded to 3.0 instead of the irrational number it is.  “There is always a well-known solution to every human problem – neat, plausible, and wrong,” wrote H.L. Mencken in 1917.

Maybe the problem can be summarized by the scene in Star Wars where Luke yodafirst encounters Yoda.  His plane is sunk in the swamp.  I am no Yoda but my prayer for all of you is to watch this brief scene and break that silly chain you think is holding you back.

Do.  Or do not!  There is no try.  And, if you want to know why you are still chained to the ground, watch the next scene right up to the very end:

Boo … (the verb).

Will someone please explain this to me…

I truly wonder why IQs seem to have dropped among the really smart people when things like those shown in the press release below can happen.

I am a fan of fuel cells for what they can do, but I am always struck by the lack ofhydrogen-fueling-station-199x300_000 discipline in considering where the source of hydrogen is going to come from and what the full stoichiometric balance will look like.

The raw fuel supply for these hydrogen fueling stations is natural gas.  Let’s call that essentially methane, or CH4.  If you split off the hydrogen, where did the carbon go?  Did it fall to the ground as a lump of pure carbon?  No, it normally forms Carbon Dioxide so where did that go?  How come no one ever talks about that?

Then, let’s get back to the reason we all talk about hydrogen in the first place.  We want to use it in fuel cells.  Well, if we have hydrogen fuel, we can run our existing cars on that and produce only water vapor out the tail pipe with only a small carburation change once we figure out how to add the tanks of it to our cars.

Can you see the farce here?  Why aren’t the smart people on the planet calling this the farce that it is??

Energy Commission will fund new hydrogen fueling stations in California

May 2 – McClatchy-Tribune Regional News – Mark Glover The Sacramento Bee

The Sacramento-based California Energy Commission says it will invest $46.6 million to accelerate the development of publicly accessible hydrogen fueling stations

DG & Microgrids – Do you really care if customers are being duped? Aka, only floss the teeth you want to keep!

tooth-brushingI went to see my Dentist a few days ago.  It is a twice a year thing and, despite the discomfort, it is always a pleasure.  The hygienist has become a good friend.  She and our dentist have watched our son grow from a toddler to a young man.  We value the relationship even though you could say the services are a commodity.  There is a sense of caring that goes beyond the fact that we are paying for a service.  When anything has ever happened to my teeth I feel they both care deeply that I get things back to normal.  He never seems rushed (even though I know other patients are waiting to see him) and he never seems prone to “spend my money” unless it is the right thing to do.

As a consequence, we recommend his practice to anyone and everyone we come in contact with who is seeking to find a dentist.  He often thanks us for those recommendations and has recently told us to stop doing that … he has no more room to take them!

This is the essence of what people today are talking about to replace customer satisfaction as a metric for relational success.  It is called net promoter score and you can imagine that my dentist has a very high one.

I also learned something a while back from my Dentist.  The title phrase for this article was posted conspicuously on that light he shines into my mouth.  I had to look at it a lot.  We all know it is true, but how many of you floss at least once a day?   There was one time in my youth when I didn’t pay as much attention to flossing as I should … and the results were very bad.  I lost two teeth as a result.

Yes, flossing can make your gums bleed, and it can be a bit painful to floss the first time if you haven’t been flossing regularly.  But, it if you fail to floss those painful situations, they will get worse and when they do, it threatens your teeth.  My hygienist tells me it can also threaten your general health.

So, now let me get to my point.  How does your organization handle painful customer situations?  Does it welcome them and want to floss them?  Or, is your culture afraid of bad news?  Does it shoot the messenger?  Or, does it view customer glitches and complaints as opportunities to improve and possibly even transform your business?  I hope it is the latter, because it needs to be.

Oh, and by the way, you might want to measure your net promoter score.  It is probably negative!

My personal belief is that the secret to marketing and sales success is to focus on customer pain and fear.  That is where I can be of most help.  Do you hear the pain and anguish your customers are experiencing that go beyond your energy supply responsibilities?  Are they wincing under increased environmental pressures?  Are they coping with cost cutting pressures in their business?  Are they competing with other members of their own company for market share?  That’s right … is your local manufacturing plant competing with other plants in the family of production resource for business?

There is a cute story I think might help here.  A father drives up to a local bank about a decade ago because his young daughter wants to deposit some money in her savings account. She walks in, waits in line, and then presents her $0.65 to the teller for deposit.  The teller curtly tells her the bank does not accept deposits that small.  Tearfully, she goes back out to the car and repeats the story to her dad who then promptly walks in and asks for a certified check for his entire bank balance of several hundred thousand dollars so he can move it to another bank who will honor his daughter’s wishes.

My fear is that utilities are missing huge opportunities here under the guise of efficient operations and the natural cost cutting agendas that are so appropriate at this time.  Everyone is under pressure.

It is rather common for customers to come to their energy providers and look for some help when they are under cost cutting pressures.  After all, when the world price of aluminum is low and electricity is one of the largest cost components, it is only natural for them to seek relief.

But, many of you will respond with the obvious statement: “They already get our best price because they are a high load factor customer!”  Go ahead, keep that excuse going and watch them go out of business.  Or, you can redefine your relationship to them recognizing they are in a commodity business and that your price is critical to their survival.  The right answer is to write a derivative contract to them that, on average, indexes the price of power to the world price of aluminum.

I can see you wincing.  You don’t want to work that hard.  Or, worse yet, your answer to me is: “You don’t have a program for that.”   Oh please.  What other excuses do you want to throw at me?  The fact is that you are just not willing to take on the customer’s problem and solve it.  Plus, the rep who brought this situation to your attention was probably told that this customer was bluffing and to stop asking for more concessions.

How do you solve this problem?  You go to an energy trader who writes a derivatives agreement that pays you a constant price for your electricity and then gives the customer a variable price to reflect the market for aluminum.  It is called a “contract for differences” agreement and happens all the time in the natural gas business.  And, yes, the customer will pay an insurance premium over just facing the market variations without it.  After all, someone is giving them a hedge and they should rightfully have to pay for that.

Maybe this one hits a bit closer to home:

A recent Utility Dive survey of what worries electric utilities identified distributed generation as the top marketing and customer service issue.  The industry knows that this is being driven by financial facilitation – customers are not buying the DG, they are being sold the benefits in some form or fashion and the “deal maker” is packaging up the system in that deal.  Yes, this is being fostered in part by incentives that may be questionable in the full light of day.  Yes, these agents are unregulated and the incumbent may be regulated.  But, no, this is not a healthy sign of flossing your teeth regularly.

Do you know what the customer is being told about their electricity savings?  If you do, do you believe that the customer is going to get the benefits promised?  I would suggest the answer is “no” given the recent actual performance of solar and wind systems as documented by others.  We are all aware that things do not work as well as we hope and that Murphy’s Law is at work all the time.

Can’t you see that by being a bystander and just letting customers get duped that you also suffer in the process?  What if they sign deals that threaten their wellbeing?

Finally, let me offer a true story about the carpet industry in upstate New York.  It was under constant attack by everyone for its waste water discharges.  The rules were getting tougher by the year.  A city in North Georgia decided it could attract these customers by building waste water treatment facilities that could accommodate carpet finishing plant effluent.  They offered to build them and simply charge the carpet companies a fair price to take away their sins so to speak.  It is now the carpet capital of the world.  All because it decided to solve the customer’s problem.

So, are you just going to wince and let your teeth rot out?  Or, are you going to floss your customer situations and watch what a healthy set of gums brings you?  Your choice.  Only floss the teeth you want to keep.

It’s like déjà vu all over again

What a fun French phrase!  You no doubt know this originated when Yogi Berra witnessed Mickey Mantle and Roger Maris repeatedly hit back to back home runs.  The psychologist Edward B. Titchener in his book 1928 A Textbook of Psychology, explained déjà vu is caused by a person having a brief glimpse of an object or situation, before the brain has completed “constructing” a full conscious perception of the experience. Such a “partial perception” then results in a false sense of familiarity.   Scientific approaches reject the explanation of déjà vu as “precognition” or “prophecy.”  I have to admit I am suffering from this right now, despite the science that says it is not prophetic.

I have been told that the energy industry is like a big rock.  If you stand still in one spot around this rock, ideas will work their way around that rock and appear timely and correct again … you just have to wait long enough.  That certainly seems to be the case with distributed generation.  I can remember lots of things that were in vogue 20  and 30 years ago and now watch with amusement that today’s new crop of utility managers feel they are new and novel.

How soon we forget.

The electric utility industry started out as distributed generation and electricity was frightfully expensive.  It was only affordable to the rich and famous.  Before that, industrial firms located along rivers and used hydropower to provide mechanical work.  Farmers used windmills to pump water and to process grain.  Once electricity was invented, DC motors were employed to take this mechanical work and produce energy that could be moved more effectively through wires to the points needed.  Edison’s first power plant was a Diesel, engine-driven DC generator.  That was the beginning of the central station power plant and the only use was for street lighting.

The economy of central station power plants and the inexpensive delivery of that energy over the public highways of electricity distribution systems made the local generation by even rich people uneconomic.  That is, until fuel prices cycled through their low points and made it economically interesting for almost anyone to get into the business.  That has happened numerous times in the past.

Low natural gas prices in the 1950s spawned a series of projects, mostly using reciprocating engines since gas turbines were not commercially available in this format quite yet.  They were almost all abandoned within about 10 years once natural gas prices moved back up on to the fundamentals of fuel price parity.  Customers grew tired of tending to these maintenance and operational distractions.

Tax credits and a fear over our dependence on foreign oil spurred a bunch of projects in the early 1980s.  It is funny to remember that natural gas was banned as a fuel for utility power plants back then.  Check it out.  It was called the Fuel Use Act.  It was passed in 1978 and then repealed in 1987 due to low fuel prices.  Cogeneration was encouraged with PURPA in 1978 as well and persists today, but almost no one takes a really close look at today’s operational performance to see if it passes the minimum thresholds set by that legislation.  Today’s natural gas prices are so low no one cares.  It strikes me as somewhat humorous that today’s electric utilities are so quick to try to adjust their standby and backup tariffs when the first defense to illegitimate projects is the thermal standards themselves as the law exists.  Customers have no rights to fair standby or backup tariffs unless and until they meet these standards.

If you are old enough, you may also remember when the speed limit was reduced to 55 mph at the same time in the late 1980s.  With all the talk about energy efficiency and café standards, why in the world was that allowed to expire?  Oh, right, I forgot how inconvenient it was to travel at that speed.

Just recently, the speed limit on our loop around Atlanta (Route 285) was raised from 55 mph to 65 mph.  I think the reason was that no one was driving 55 mph on it anyway, so they might as well raise it.  It does make you feel better when you can do 65 mph because otherwise you are only averaging 5 mph during rush hour.

My biggest fear of déjà vu is that fracking now has us believing we are in for a long future of low gas prices.  It seems like no one believes natural gas prices could rise in the future.  I have been shocked to see electric utilities run to natural gas and abandon coal.  Where is the sense of portfolio risk management?   I get the environmental impacts, but I am troubled by the prospect that the abandoned coal plants will not be operable in the future.  The employees being let go cannot be replaced in any reasonable period of time.  The skills will be gone.  Coal is a very difficult fuel to burn.

It is amazing to me that we have forgotten the history of natural gas being at price parity with oil over the long haul.  Sure, we seem to have way too much natural gas here in the US at the moment.  Why isn’t anyone worried about that?  Does anyone realize what would happen if natural gas returned to its historical fundamental of price parity with oil?

So, let me give you a dose of reality.  Let’s assume today’s price for oil at around $100 a barrel is a good planning value.  There are about 6 million Btus in a barrel of oil.  Let’s make the math easy and say that oil is around $16 per  million Btu or about $1.60 per therm.  A therm is defined as 100,000 Btus.  Natural gas right now is less than one third of that.  Yes, oil is three times as expensive as natural gas.  What my friends do you think will happen when the supply/demand balance swings back to parity?  What would happen if just one environmental accident threatened the fracking industry in the US and shut it down, even just for a year or two?

Yep, you have it right.  Americans would be almost bankrupt in their home heating bills. Electric utility electricity prices would double almost overnight. It would be just about as bad as the market crash in the 1930s on our economy.  People would be choosing between heating and eating.

How can we sit so calmly today with the specter of this on the horizon?  I have asked this question to many leaders in the industry and they say “Joel, everyone in the fracking industry knows the success of it depends upon the industry policing out any chance of an environmental risk.”

Well, frankly, I don’t find that comforting any more than thinking about the vulnerability we have to terrorists in other areas.  All it would take then is for one malcontent to do something terrible here.

Let me therefore raise my concern.  My wife calls me Dr. Doom because I can always see the dark side of how things can go wrong.  I call it Cassandra’s curse.  Let me not dwell on this but just ask that you internalize what I am saying and take it to heart.  Stop arguing the counterpoint.

What if I am right?  How would you feel at some time in the future having not done what you should start to do now, and facing the ruin to the American way of life as we know it now?  Don’t you think you should be working to balance out the supply side risks by explicitly admitting this is a risk to everyone in the market?  How can you sleep at night without cautioning your customers that this is a national risk?  I hear so many other less significant risks being discussed all the time like energy efficiency and demand response.  This single unmitigatable risk could cripple the United States, and at a time we can least afford another financial setback.  Where is your sense of conscience?

I am not arguing against distributed generation.  I am only using it to point out how we tend to go around the rock.  We are going to work our way around this rock.  But, this time, when you say “It’s like déjà vu all over again” it won’t be funny as in Yogi Berra’s day.  It won’t be funny at all.