Berkshire Hathaway Power Generation Alert #6

Interconnecting things with people, intelligence, niche experts and wise crowds for power industry decisions

We are providing you with decision systems to provide the 4 knowledge needs, Alerts, Answers, Analysis, and Advancement. This week you are receiving the Alerts on coal-fired boilers and gas turbine decisions. They include many entries in the Linkedin discussion groups. There are no new entries in the NO_x scrubbing but we have been talking to companies who are investigating the capture of NO_x in scrubbers with various scrubber designs. One of the thoughts is that the spray towers can be retrofitted with trays to substantially improve mass transfer. This would not be a costly upgrade for Hunter and Huntington.

With the BHE and Supplier Connect program we are already interconnecting nearly one hundred people and that could soon grow to many hundreds. We would hope that the success demonstrated at BHE will lead to similar programs at each major utility around the world. In BHE Alert #2 we proposed that BHE consider working with McIlvaine to offer O&M programs to other utilities. We now discover that PacifiCorp started down this path with ABB 20 years ago. So we again pose the question but with three companies. Could ABB, BHE, and McIlvaine offer the programs? Here are details on the 1997 initiative:

In 1997 PacifiCorp and ABB Inc. formed EnergyPact, a first-of-its-kind, jointly owned, limited liability corporation to help investor- and publicly owned utilities and energy companies increase their competitiveness and prosper in a deregulated electric industry.

EnergyPact will offer an unprecedented menu of comprehensive energy products and services including upgrades to generating plant equipment, plant management services, fuel procurement services, risk management, energy trading and the considerable capital resources of both ABB and PacifiCorp.

"At ABB, we're looking for non-traditional ways to meet the changing needs of our core customers," said Fritz Gautschi, executive vice president of ABBs U.S. power generation businesses. "In teaming with PacifiCorp, we found a company with similar views about where the industry is going and complimentary skills that would bring value to the deregulated electricity marketplace."

"If the electricity business is viewed as a stream of activities from fuel resource development to delivery at the customers' light switch", said Fred Buckman, PacifiCorp president and chief executive officer, "PacifiCorp and ABB, through EnergyPact have all the products and core business skills to bring value to utility and energy companies facing competitive challenges."

With increasing competition, many utilities and power producers are exploring new ways to meet the changing needs of their customers. EnergyPact brings together the strengths of two industry-recognized leaders to provide a wide variety of choices to enable energy companies to develop new competitive strategies.

EnergyPact will work closely with each of its clients to provide a customized solution that matches each company's operating goals. Additionally, EnergyPact will provide the tools that minimize risk associated with operating in a new a deregulated environment.

"EnergyPact provides energy companies a choice in what aspects of their business they want to focus on as competition accelerates," said Dennis Steinberg, PacifiCorp senior vice president for global sales, marketing and energy trading. "This allows energy companies to do what they do best while EnergyPact helps them manage the intricacies of power generation and wholesale energy trading."

"ABB and PacifiCorp each bring considerable financial resources and greater buying power to customers in helping them solve problems with their generating resources," said Tim Curran, vice president for ABB's power generation ventures business.

We searched the literature but found no mention of EnergyPact recently. So we assume that it was an initiative that was not long lasting. But now with the avalanche of available information and the software to interconnect things, it is time to rethink this option.

GE, Emerson, Siemens and many other companies are creating software to connect things. There is a big potential in power generation. This potential was reflected in a number of papers and displays at the recent PowerGen Asia exhibition.

“We believe the success of our power generation customers will be more and more supported by the intelligent use of data generated by ever increasing connectivity of devices. The integration of those data with people expertise and knowledge will create additional services in a cycle delivering unprecedented knowledge of the behavior and potential of their assets,” said Marco Sanguineti, Head of Technology for ABB’s Power Generation business unit. “

Companies such as ABB are integrating the data from many thousands of sensors which are monitoring thousands of pumps, valves, mixers, fans, compressors, burners, conveyors, filters, etc. In a large utility with multiple plants there are hundreds of individuals with specialized knowledge which may be valuable in a specific lowest TCO determination. As a result there are likely to be many thousands of people who can contribute to the decision making process.

Jeff Immelt of GE observed that the power industry needs to adopt the “hurry up” attitude of silicon valley in developing new technology. McIlvaine believes that this “hurry up” mode can best be achieved by decision systems such as created for BHE. The newest addition has been to supplement periodic webinars with very focused Linkedin discussion groups. These groups facilitate “wise crowd” decisions by addressing all the criteria needed for a wise crowd to function properly.

Criteria	Description	Linkedin Role
Diversity of opinion	Each person should have private information.	Small Linkedin discussion groups lend themselves to extracting the niche expertise and unique ideas.
Independence	People's opinions aren't determined by the opinions of those around them.	The small Linkedin discussion groups are not subject to the peer pressure of the large webinars. McIlvaine editors then integrate the conclusions reached in the discussion groups.
Decentralization	People are able to specialize and draw on local knowledge.	The small Linkedin discussion group is the ideal way to extract the local knowledge and benefit from niche expert participation.
Aggregation	Some mechanism exists for turning private judgments into a collective decision.	The Linkedin discussion groups are a bridge between analyses and webinars which result in the collective decisions.

The Linkedin discussion groups are an important part of the entire interconnection system between:

· The final interconnection between all the many individuals in each of the above

You can recommend subjects for the discussion groups. We envision hundreds of very focused discussion groups. To join one of the existing discussion groups just click on the Linkedin group and ask to join.

For answers to your general or technical questions contact Bob McIlvaine rmcilvaine@mcilvainecompany.com 847-784-0012 ext. 112.