US utilities urged not to bet the trillion-dollar farm on natural gas

Natural gas prices are predicted to remain low over the next two decades, albeit not as low as today's price just under $2MMBtu, while the only way is up for electricity retail prices. 

You'd think that gas-fired power plants would be a no-brainer for investors looking to put long-term dollars to work in the power generation sector - even if the US introduces a price on carbon by the 12th of never, natural gas is far cleaner and less of a risk than coal.

But betting on natural gas as a non-volatile commodity is a high-risk strategy, according to a new report published this week by Ceres, which did a lot of work last year to lobby for even more stringent CAFE standards for vehicle fuel economy.

Practicing risk-aware electricity generation: what every state regulator needs to know sets out the challenges facing the energy industry in the US. Unlike other sectors, it is regulated to balance the needs of investors who want returns, utilities who want to make money for their shareholders and consumers who need to be protected from price shocks in electricity prices.

 These interests compete with each other in a context where the US has huge imbalances in the power sector: the country already has a legacy of overcapacity in gas-fired power generation in some regions thanks to a build-out campaign in the last decade (see figure above); coal-fired power plants in the rustbelt east are already likely to be phased out in favour of more gas generation thanks to EPA regulations; nuclear power plants around the country are approaching the end of their licence periods; and renewables are becoming disproportionately expensive compared with cheap natural gas-generated electricity.

"These challenges call for new utility business models and new regulatory paradigms. Both regulators and utilities need to evolve beyond historical practice," says the report. "About 70 percent of US electric generating capacity is at least 30 years old," says the report. "Much of this older capacity is coal-based generation subject to significant pressure from the Clean Air Act (CAA) because of its emissions of traditional pollutants such as nitrous oxides, sulfur dioxides, mercury and particulates."

Investment in transmission has also failed to keep pace with demand and technology, with some U.S. transmission facilities approaching 100 years old, it says.

Utility investment in transmission facilities slowed significantly from 1975 to 1998. In recent years, especially after the creation of deregulated generation markets in about half of the U.S., it has become clear that the transmission deficit will have to be filled.

One of the questions posed by Ceres in this report is: does the US want to bet the farm on yet more gas-fired generation? Clearly the answer is no.

Ron Binz, report co-author, president of Public Policy Consulting and former Chairman of the Colorado Public Utilities Commission, said: "Utilities, regulators and customers are entering what's going to be the most uncertain, complex and risky period in the history of the electric power industry.

"We have relatively flat load growth and that's predicted to continue for quite a while that makes capital to the utility system a lot more important to rates there's going to be a lot of upward pressure on rates and all of the intended effects that that creates in the economy and the politics around regulation."

The report estimates that the net asset value of the plant in service for all U.S. electric utilities in 2010 was about $1.1 trillion, broken down as $765 billion for IOUs, about $200 billion for municipal (publicly-owned) utilities (or “munis”), and $112 billion for rural electric cooperatives (or “co-ops”).

It cites the Brattle Group report in 2009 which predicted that total industry-wide capital expenditures from 2010 to 2030 would amount to between $1.5 trillion and $2.0 trillion.

"If the U.S. utility industry adds $100 billion each year between 2010 and 2030, the net value of utility plant in service will grow from today’s $1.1 trillion to more than $2.0 trillion— a doubling of net invested capital," the report says.

But utilities will struggle to raise large volumes of capital required as their balance sheets droop because of flat demand and the erosion of their creditworthiness since the 1970s and 1980s - there are now no triple A rated utilities in the USA.

"The financial metrics of the utilities going into this build cycle are much weaker than they were when the last build cycle occurred," said Binz. "We had some triple A rated utilities and a lot of double A and single A utilities back in the 70s and 80s the average rating was in the range of a this time around it's around the B triple B range, two or three clicks lower than it was before. That puts the utilities much closer to the boundary of non-investment grade ratings."

Denise Furey, report co-author, and principal of Regent Square Advisors, said that a diversified fuel mix is a credit positive for a utility.

"A sizeable negative event will have an impact on the utilities credit ratings and the market appetite for its bonds which will result in turn in an increase in the cost of capital.

"The problem with natural gas and anything that is commodity based like this is that the price of it is a short-term price and we can't hedge very far out.

"A portfolio with diversified fuel mix reduces risk the sector is looking to build new generation assets currently the price of natural gas makes gas-fired generation look optimal. However, gas power plants have long lives and conversely the price of natural gas used constantly relying on current natural gas prices as predicted in long-term trends is pure folly. A mix of asset types including renewables is really optimal.

But beyond the regulators attempts to rein in rates for consumers, the social contract in the energy industry extends much further. Some 65% of utility equities and fixed income securities are owned by institutional investors such as insurance companies, mutual funds and pension plans while most retail investors own utility stock and bonds indirectly through mutual funds and 401k plans.

More than any other industrial sector, if utilities do well, everyone is a winner from the investment fund managers to the pensioners who have the potential to win twice on regulated rates and a comfortable retirement.

The utility industry is not yet being dismantled one residential rooftop solar panel at a time, but managers, utilities and regulators know that business models cannot stay the same over the next 20 years.

Regulators will play an essential role in playing referee in the long game to come in the energy sector.

Sue Tierney, managing principal at the Analysis Group and former Massachusetts Public Utilities Commissioner, said:

"What signals do regulators and policy makers send to private decision makers about what matters? Regulators often inject other measures of what matters in utility investment decisions.

"As we look across the US there are parts of the country that are in competitive markets where investors in new power generation technology are merging or competitive players and they are not making decisions based on guidance from regulators about what they may or may not invest in. In those markets we're highly likely to see gas generation dominate.

But west of the Rocky Mountains the regulated energy markets could look very different, she said: "Those are the parts of the country that are being addressed in this report where regulators can put a different non-market orientation onto the decisions at utilities managers where to invest."

"There is likely to be a different role for diversification, hedging for fuel risk … so those decisions are being made by shareholders and managers of merchant companies."

Obama's SOTU clean energy wishlist derailed by Congress gridlock

A week is a long time in politics… 52 weeks between state of the union addresses is a lifetime. But progress in creating legislation that will actually help the US economy recover has been proceeding at such an agonisingly glacial pace thanks to the so-called "gridlock" in Congress that last year's appeals by the President to support investment in clean energy have not advanced since last year. 

Many Republican members of Congress are increasingly making it clear that they are not interested in running the country, just running their 44th President out of office – if his policies succeed, then Barack Obama has more chance of winning a second term in office and they will stop at nothing to stop anything that makes the current incumbent look like he might be a competent president.

Pugnacious comments punctuated Obama's usual emollience, which made his plea for Congress to look to the US military on tips on cooperation.

Chinese imports of cheap PV were clearly in the crosshairs when Obama announced the creation of a Trade Enforcement Unit to investigate "unfair trading practices in countries like China," thereby turning up the heat in the trade war started by SolarWorld's legal challenge last year.

"And I will not stand by when our competitors don’t play by the rules. We’ve brought trade cases against China at nearly twice the rate as the last administration –- and it’s made a difference… It’s not fair when foreign manufacturers have a leg up on ours only because they’re heavily subsidized."

Solyndra was not specifically named. But when Obama acknowledged that public investment in technologies had associated risk - some that paid off, such as shale gas and some that failed - everyone knew he was referring to the Californian thin-film solar company that collapsed last year taking around 535m federal dollars with it.

"Some technologies don’t pan out; some companies fail. But I will not walk away from the promise of clean energy."

He called for an end to fossil fuel subsidies - a vague hope that has not moved on since his last SOTU address. "Pass clean energy tax credits," he urged, before the first and only mention of climate change, over which his tongue slipped to say "flight" rather than fight climate change. The clean energy standard which would create a federal-wide renewable portfolio target for utilities, also got an honourable mention for the second year in a row even as bills in Congress have not inched further forward in the past 12 months.

"We can also spur energy innovation with new incentives. The differences in this chamber may be too deep right now to pass a comprehensive plan to fight climate change. But there’s no reason why Congress shouldn’t at least set a clean energy standard that creates a market for innovation. So far, you haven’t acted.  Well, tonight, I will.  I’m directing my administration to allow the development of clean energy on enough public land to power 3 million homes.  And I’m proud to announce that the Department of Defense, working with us, the world’s largest consumer of energy, will make one of the largest commitments to clean energy in history -– with the Navy purchasing enough capacity to power a quarter of a million homes a year." 

In many ways, that Obama's energy and climate goals have found a more welcome home in the US military comes as no surprise. As with the fuel economy standards introduced last year, executive orders are a useful addition to the political arsenal of the commander in chief. It's a curious trick of America's style of democracy that bypasses Congress… that is where Obama appears to be most effective. The same could be said of his administration's foreign policy - killing Osama Bin Laden tops a long list of successes in the state department thanks to Hilary Clinton, along with withdrawal from Iraq and toppling murderous dictators such as Colonel Gadaffy.

But the Republicans pretend not to be interested in foreign policy to avoid drawing attention to Obama's successes, citing the domestic problems as far more pressing.

But given the freedom to execute his executive role, Obama is clearly more effective without the burden of a Congress that has bound itself to industrial interests such as the Koch brothers et al at the expense of the wider American public. 

Tea Party Republicans mask prejudice and discrimination and obstruct reasonable discourse on everything from energy policy to abortion by citing the constitution, or rather their own appropriated interpretation, with the same religious fervour as Islamic fundamentalists cling to the Koran, or their own warped interpretation, as justification for waging war on the west.

Climate change is just one issue where Republican sceptics make themselves sound ridiculous because their arguments and comments have to stray so far from the facts and the scientific consensus that the rest of the world accepts.

That Republican presidential candidates are now equating "socialism" with "European" makes them sound silly. But these daft comments become more serious when this newly coined synonym passes almost without comment or inquiry by the public or press in the US…  David Cameron, Angela Merkel, Nicolas Sarkozy are all right of centre party leaders who have vowed to cut public spending and allowing sovereign monarchs to remain as heads of state in countries like Spain and the Scandinavian nations, is hardly a "socialist" strategy for organising society.  

During a conversation recently with a VC specialist at a large accounting firm the discussion turned around to Obama's threat to tax "wealth creators" and "wasting money on entitlements". Ah yes, the benefits culture has become a problem in the UK too, I said. To which the reply was: That's right, in Europe, you have socialism there. 


This lazy association through redundant ideologies obstructs discourse. After all, China a country run by a "communist" party has little or no "welfare" state as we would call it in the west, where healthcare payments are based on the extended family's ability to pay. So much for socialism taking care of the poor… if by socialism = European, they mean social equity, then that's a definition I'll live with. But that is a pejorative concept for too many Republicans.

In the Iron Lady biopic of Margaret Thatcher there is a wonderful scene in which Meryl Streep quotes: "Beware of your thoughts, they become your words. Beware of your words, they become your actions. Beware of your actions, they become your habits. Beware of your habits, they become your character. Beware of your character, it becomes your destiny."

Words and their real meaning should matter to everyone, especially politicians, regardless of bias.

The global warming debate is where this lack of interrogation of factual accuracy stands out in the US - it is depicted as if there is still enough weight of evidence to give credence to the doubters. That is just not true and it doesn't matter who says so or how many times, the US is a country where consensus on climate change can be reported as a "revelation" 10 years later than every other nation because it suits politicians and their fossil fuel influencers to obscure and dissemble.

Professor Naomi Oreskes deftly argues in the LA Times that climate change is an issue where "open mindedness" does not apply. It's just one of many issues: it is no longer scientifically acceptable to stay "open minded" on the adverse affects of smoking; nor is it socially acceptable to stay "open minded" about prejudice or discrimination on grounds of colour, gender, religion or sexual orientation. There are some things in life which are so politically or socially unpalatable in a free and fair society that "open mindedness" is inappropriate…

Unlike last year, there was no specific mention of high-speed rail. Last January, Obama boldly said:

"Within 25 years, our goal is to give 80% of Americans access to high-speed rail, which could allow you go places in half the time it takes to travel by car."

In the 12 months since then, not a single piece of HSR track has been laid and its deep controversies have seeded doubt about its viability even among staunch supporters such as Joe Simitian, a Democratic state Senator for Palo Alto, a region not known for its aversion to technology. 

This year, Obama played safe by pledging to reduce redtape on infrastructure projects: 

"Building this new energy future should be just one part of a broader agenda to repair America’s infrastructure."

Clean energy advocates responded positively to Obama's speech last night. But the headwinds of cheap and abundant natural gas, the possible expiration of the Production Tax Credit low and the spectre of China's oversupply of cheap PV - the Solyndra ghost will haunt the solar industry and government support for clean energy for years to come.

Eileen Claussen, president at the Center for Climate and Energy Solutions, which had to remodel itself from the Pew Center on Global Climate Change after Pew Charitable Trusts cuts its purse strings at the end of last year.

"Even if comprehensive legislation remains off the table for now, we can make important progress tackling these challenges piece by piece. C2ES is working with policymakers and stakeholders on ways to expand enhanced oil recovery using captured carbon dioxide – an approach that can boost domestic oil production while reducing greenhouse gas emissions. Similarly, we’re working with automakers, environmentalists and others on a plan for integrating plug-in electric vehicles into the U.S. electrical grid. We look forward to sharing the results of these and other C2ES initiatives aimed at practical solutions to our twin climate and energy challenges."

C2ES is now mostly funded by business, including Entergy, HP, Shell, the Alcoa Foundation, Bank of America, GE, The Energy Foundation, Duke Energy, Rockefeller Brothers Fund. The presence of energy companies among its top donors may explain the interest in advanced fossil fuel technologies such as enhanced oil recovery which aims to maximise the extraction of the resource and does nothing to minimise the effect of burning what comes out of the ground.

At one point the president pointed out Bryan Ritterby, who he tried to present as an ordinary Joe who was laid off …

"Bryan Ritterby was laid off from his job making furniture, he said he worried that at 55, no one would give him a second chance.  But he found work at Energetx, a wind turbine manufacturer in Michigan.  Before the recession, the factory only made luxury yachts.  Today, it’s hiring workers like Bryan…"

But Bitterby is no ordinary born-again American clean energy industry worker. He is representative of many who work in the US wind industry - largely developed with expertise from Europe where policy has created an export market for renewables.

Although Energetx is an American company that has changed course from making yachts in Michigan, if it's not built by GE, wind turbines in the US will be built in factories established by European-based companies: Gamesa, Siemens and Vestas just to name a few. These companies were attracted to the US manufacturing industry partly by the 48C advanced manufacturing tax credit, which as I've reported before, was not taken by GE. However, last night Obama made clear that any future tax credits would favour indigenous companies. Where that leaves the Europeans who have been so involved in developing the US wind industry and creating a manufacturing base remains to be seen.

Aside from being a wishlist of things that will never happen, like the clean energy standard, commentators last night also saw Obama's third SOTU as a stump speech for the presidency. I wonder whether he will make it to a 4th… otherwise Mitt Romney may be required to dig into his own deep pockets for ideas on how to help the economy recover. Perhaps he could pay down some of the US debt from his own savings account?

Hawaii's feed in tariffs won't turn islands into renewables paradise

When hurricane Iniki hit Kauai in 1992, legend has it that power was restored on the Hawaiian island only when the US military eventually hitched a socket onto the grid from a nuclear submarine docked at Lihue.

The disaster report from the National Oceanic and Atmospheric Administration noted:

Electric power and telephone service were lost throughout the island and only 20 percent of power had been restored four weeks after the storm.

The most destructive hurricane to strike Hawaii in the 20^th century, which caused six deaths, damaged or destroyed 14,350 homes on Kauai and cost $3bn, was a hard lesson in the vulnerability of small islands.

Kauai is abundant with life. Jagged fluted cliffs of the Napali coast and the jagged peaks atop the crumbling green mountains, sharpened by rapid erosion, act as rain catchers which cascade into the lush valleys where taro, breadfruit, papaya, mango, coconut, avocado grow easily in the wet and fertile soil on the volcanic island.

Most of these stable crops were imported by the Polynesians, Hawaii’s first visitors. Plants on the inventory of the canoes that voyaged east across the Pacific 2,000 years ago turned the island into a tropical paradise with abundant food.

A recent visit to the Limahuli Gardens, on the north coast of Kauai, demonstrated the sophistication of the horticultural husbandry of the Hawaiians, including agricultural terraces built out of lava rock and planted with kalo (taro).

The experts at Limahuli believe that the Hawaiians achieved this abundance through ahupua`a, a system of resource management that allowed them to live sustainably… at least until Captain Cook dropped anchor in 1778.

But in 2011, this so-called Garden Island, and the other seven islands of Hawaii cannot sustain themselves without huge imports of food and energy from the mainland – and further afield.

Despite Hawaii’s prime solar, wind, marine and geothermal capacity, these are largely untapped renewable resources. The US’s 50^th state is 90% dependent on oil (largely foreign imports) to generate electricity, a dirty and economically and environmentally inefficient way to keep the lights on. Initiatives such as the Hawaii Energy Policy Forum are trying to find a route out of this oil dependency.

But for now, 92% of Kauai’s electricity comes from the burning of imported fossil fuels, according to the Kauai Island Utility Cooperative which supplies electricity to most of the island. In recognition that costs of electricity generation on the Pacific island could be shielded from oil price volatility caused by events in the Middle East thousands of miles away, KIUC has set a target to produce 50% of its electricity from renewable sources by 2023.

But even this figure seems lacking in ambition when the total generating capacity of Kauai's utility company is only 125MW. But the utility still has to find ways to make money, and is probably protecting its interests by encouraging utility-scale projects such as a 12MW solar project developed by PowerWorks.

Other schemes, such as the Kauai Economic Opportunity programme, offer installation of solar water heating system (NB, not PV!) to low income households as part of the American Recovery and Investment Act 2008. The scheme is laudable, but those on low incomes generally tend to be lower consumers of energy and programmes like this do nothing to target those in Hawaii’s grand coastal homes valued up to $18m.

 Long before the Middle East crisis in Libya, Lloyds of London and Chatham House released a report last year predicting that the price of oil might double by 2013.

Islanders have genuine concerns that if energy prices rise too high, the cost of living will skyrocket and the only full-time inhabitants on Hawaii will be the rich, the retired or those paid to service the wealthy residents or tourist industry, its main source of income.

A good comparison of Hawaii's electricity costs (high compared with other US states) can be found on this blog, but they appear to range between 20c-38c per kWh. Aloha Analytics has also posted this fascinating interview with farmer Richard Ha, who is leading a consortium called Ku’oko’a (Freedom) which hopes buy Hawaii Electric Company (HECO) and invest in geothermal energy. The consortium aims to buy HECO with $2.3bn and includes heavyhitters such as Jim Woolsey, former CIA director.

Ted Peck, US state energy adviser reportedly left his job to join Ku’oko’a. Before he left Peck, predicted a $1.2 billion in clean-energy investments in the state in 2011. This four-fold increase since 2009 was because of government policy, he claimed.

In 2008, the former Governor Linda Lingle signed and MOU with the Department of Energy for the Hawaii Clean Energy Initiative (HCEI) to decrease energy demand and accelerate use of renewables. HCEI aims to have 70% or more of Hawaii’s energy needs met by efficiency measures (30%) and locally generated renewable sources (40%), including solar, marine, geothermal and wind.

Although the MOU was not legally binding, the HCEI resulted in a state Renewable Portfolio Standard (RPS) which mandates utilities to sell 15% of electricity from renewable sources by 2015, and 20% by 2020.

Hawaii’s feed-in tariffs (FIT) will be at the core of incentives for investors. Last October, the Hawaii Public Utilities Commission approved feed-in tariffs for renewable energy generators up to 500kW in size. The predicted FIT capacity will be 60 MW on Oahu, 10MW on the Big Island and 10MW on Maui, Lanai, Molokai (combined) with rates ranging between 27.4c and 33.1c per kWh  that appear to favour smaller installations below 20kW. Customers on net metering schemes are also allowed to switch to a tariff.

There are small solar projects slated in Kauai, such as a 6MW solar PV facility next to KIUC's Port Allen Station power plant. 

Clean energy is no newcomer to Kauai. Small hydroelectric plants, commissioned by sugar plantation owners have been operating for 100 years or more, this this curious Heath Robinson-style hydroelectric plant (see below) we discovered a few doors up from our holiday rental which still powers the Kauai Coffee Company 33 miles away.

It was a jaw-dropping technical feat of its time, installing the transmission lines across the wet, crumbling mountain was a triumph of engineering way before the tyres of any motor car hit the dirt on the island.

Looking around Kauai, it would seem that distributed solar generation would be a perfect fit. As far as I can tell, FITs don’t even figure on Kauai – but I would be happy to be shown otherwise. Decentralised power sources could also potentially get the lights back on quickly - especially useful on an island prone to tsunamis as well as hurricanes.

Distributed generation is a tough sell to utilities and investors – and therefore lacks the political support it enjoys on the mainland in states such as California.  

Utilities in Hawaii have more reason to continue to monopolise energy generation to protect their revenues because their market is so small. Even Ku’oko’a would most likely limit a change to its business model by just switching to a different source of energy, rather than push distributed power, therefore keeping the power generation revenue for itself.

Dave Waller, VP of customer services at HECO, told Hawaiibusiness.com that he was confident that FITs would take off in Hawaii.

So now the incentives are in place, is it enough to tempt investors into putting their dollars into project finance? And are FITs the right policy tool to create a market in solar, wind, marine or geothermal energy on the islands?

Matt Cheney, chief executive officer of CleanPath Ventures, offered some insight into the particular nuances of Hawaii’s FIT this week at the REFF West conference.

“We’ve worked in every state – Hawaii for a while required that the state investment tax credit could be monetized by an entity other than the entity that was monetizing the federal investment tax credit and that kills it. For the most part the national banks don’t necessarily do work in Hawaii  - it’s valueless to them.”

In later comments after the panel discussion, he explained that although high energy costs make renewables attractive, loads are small because “Hawaii is dinky” in population size by comparison to states like California and “distribution lines are dead ends” unlike say the inter-connected grids on the west and east coasts of the US.

“They have chosen to build their energy infrastructure around oil. How awkward for a state that has an enormous amount of geothermal, wind, solar and small hydro. They never hoped to optimize around indigenous energy resources at the point of investment or inception of how it is that they’re going to develop their energy infrastructure and subsequently you have a state that has all of this legacy power plant infrastructure that is dependent on fossil imports that alone tells you why the Democratic senators of Hawaii voted in favour of developing the north coast of Alaska for oil.

“Every time they entertain the idea of investing in renewables they in turn have to choose to create this reserve capacity of stranded infrastructure. So every dollar they allow to be spent on renewable energy and every contract they write to accept that renewable energy, they’re choosing to idle part of something they have already invested in that they have to pay for. All of this amounts to having some of the most expensive electricity rates in the whole world. Certainly at a level that encourages renewable energy. If they had to do it all over again they probably would have done it differently."

Cheney hinted that utilities would be forced into radical restructuring before renewables could really take hold.

“My idea of smart policy an unlimited ability of people to decide for themselves where they want that generation to come from. Distribution and transmission, that’s a job for the utilities, to coordinate the grid and smart grid. When it comes to you deciding how you want to live your life and you’re paying a generation rate as part of your bill you should have a say in that. That’s where the change is coming.”

But even if that transition to cleaner energy comes soon enough to protect Hawaii from the next shock of volatile oil prices, howling hurricanes and Alaskan earthquakes, that change might not be the right one to ensure  power is restored as quickly after a natural disaster unless more distributed generation is encouraged.

Japan's nuclear crisis after quake prompts clean energy debate

Europe has been quick to review plans to build more nuclear power stations as Japan’s struggle to from its apocalyptic explosions from its Fukushima plants following Friday’s 8.9 magnitude earthquake.

Angela Merkel is expected to put on hold a decision to extend the life of the fleet of ageing nuclear plants in Germany, where 50,000 protesters held a demonstration outside a nuclear facility near Stuttgart.

Campaigners have urged developing countries such as India, China, Turkey and Indonesia – where nuclear programmes are gathering pace - to shelve proposals or raise safety standards.

UK energy and climate change secretary Chris Huhne attempted to reassure the British public about the safety of its ageing fleet of nuclear reactors on the coast of Britain at the weekend:

“We take this incident extremely seriously even though there is no reason to expect a similar scale of seismic activity in the UK. It is essential that we understand the full facts and their implications, both for existing nuclear reactors and any new programme, as safety is always our number one concern.”

But discussions on nuclear safety in the US are so far limited despite hopes expressed by Tom Clements of Friends of the Earth: "This is going to change the discussion in the US and elsewhere about basing energy supplies on nuclear power. Placing stations in earthquake zones is going to change the debate.”

Energy secretary Stephen Chu has yet to make a statement on the situation in Japan, but he is expected to do so during an appearance before the House Energy and Commerce Committee on Wednesday.

Nationally, nuclear generates 20% of electricity in the US. In California, 47% of electricity is produced by gas-fired power stations. But 16.5% of the state’s electricity is also produced at two nuclear power stations at Diablo Canyon and San Onofre, between Los Angeles and San Diego. They are positioned on the coast so they can use ocean water for cooling, but this also puts them in the firing line of a tsunami.

Pacific Gas and Electric Company (PG&E) declared “an unusual event” at its Diablo Canyon plant on Friday but how the reactors, which are only 1,800 ft from a recently discovered fault, would cope with a large natural disaster worries some residents nearby. And PG&E’s actions over the San Bruno gas pipeline explosion hardly inspires confidence in the company’s safety record and seismic protection measures.

Even as the apocalyptic disaster continues to unfold in Japan, some analysts are already viewing the debate over nuclear safety as an opportunity for renewable technologies (as opposed to clean energy after Barack Obama placed nuclear alongside clean energy from solar and wind).

Barclays Capital issued a statement this morning from New York which predicted:

“The recent earthquake in Japan could help stimulate more constructive cleantech policy discussions and improve the longer term policy outlook for the sector, in our opinion. Nuclear (along with natural gas) were considered to be prominent threats to clean generation technologies such as wind, solar. The bull case for nuclear policy could now become weaker and this could indirectly benefit solar/wind policy development, in our view.”

After the damage has been assessed, the horrific scenes in Japan call for a debate on whether nuclear and “clean coal” belong in the same energy mix as clean technologies such as wind and solar.

"Brown energy" hazards associated with earthquakes, also seen in Japan, however, should also be explored in areas such as San Francisco’s Bay Area which has six fault lines running through it. Chevron put its 245,271-barrel per day refinery in the north east bay in tsunami preparation mode on Friday without dropping production. Chevron executives will not have ignored the blaze at the Cosmo refinery in Ichihara. There are six further refineries in the bay area and dozens more along the Californian coast, often in urban locations, sited next to residential areas or malls.