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How has Exxon Mobil performed since its acquisition of natural gas giant XTO Energy?

How has Exxon Mobil performed since its acquisition of natural gas giant XTO Energy?

In December of 2009, Exxon Mobil (XMO) announced that it had reached a deal with XTO energy to purchase the natural gas company in an all-stock deal. Initially, the stock price of XOM fell 4.3%, signaling a disapproval of the deal by the market. The deal was finalized in mid 2010. The acquisitions took place before the term fracking was became a controversial issue and natural gas prices were roughly twice as high as of 5/31/2013. How has the purchased performed for Exxon Mobil?

Looking at the stock prices since the purchase, XMO has lagged behind the S&P500, returning about 34% to the S&P500 49%. XMO has also lagged behind competitor Chevron, which returned 60% during the same period. In addition, Chevron provided a dividend yield around 3.1% % versus XOM 2.4%.

The fall in natural gas prices has hurt XOM. The CEO recently reported the timing was off for the acquisition and the payback for the purchase will be longer than initially expected. Other reports indicate that XOM paid too much for XTO Energy. Chevron, for the most part, has diversified natural gas outside the United States and has not been hurt by the fall in domestic natural gas prices. Either way, the cheaper domestic natural gas that consumers and business have been enjoying for that last few years has weighed on XOM.

Wealth Transfers for Energy

The United States transfers hundreds of billions of dollars every year to foreign countries for energy. Although the total imports has fallen about 10% from its peak in 2006  to about 3.3 billion barrel of crude oil today, the U.S. will still spend about $300B in 2013 on crude oil imports. The $300B leaving the U.S. represents about 2% of GDP the United States for foreign energy.

For the past few decades, investments to extract energy have mostly been made oversea. However, a movement to domestic energy production has begun to revitalize parts of the United States. Huge investments are being made in order to reach and extract energy sources.

In states like North Dakota, cities and companies are hiring at an extraordinary rate. The northernmost plains state boasts the lowest unemployment rate in the US. In fact, McDonald’s, known for its low wage positions, pays more than two times their typical wages in location in North Dakota, pushing hourly rates past $15/hour. These types of wages are made by domestic energy production.

Further, foreign energy dependence threatens more than our economic security, but also our national security. The risk is so prevalent that the Navy identifies energy dependence as a threat to national security. A reliable energy source is becoming as important as a reliable food source for a nation seeking independence and catastrophe preparation. Developing domestic energy sources will alleviate energy uncertainty in case on conflict.

The long term effects of domestic energy production are yet to be seen, but safely and effectively developing domestic energy sources should benefit both our economy and national security.

Natural Gas Power Output

CNG STatioJohnny Williams, The Daily and Sunday Review

CNG Station, Johnny Williams, The Daily and Sunday Review

 Natural Gas Power

How does the natural gas power output, specifically methane, compare to that of gasoline? The answer depends on a lot of factors but for the same engine using different fuel systems, a natural gas engine will produce about 17% less power. The lower power is not an indicator of an inferior fuel, but a matter of chemistry.

The optimum Air/Fuel Ratio for gasoline is 14.7 parts air to 1 part gasoline. At this point, the gasoline combusts at the highest efficiency, leaving no fuel unburned and no excess air in the combustion chamber.

The optimum Air/Fuel Ratio for methane is 17.2 parts air to 1 part methane. The 17% difference in the optimal Air/Fuel Ratio means that the same engine will produce about 17% less power with each revolution.

The power difference can be overcome by using a different displacement or compression optimized for natural gas in order to achieve the same level of output.  The differences in optimum Air/Fuel Ratio is important to understand when evaluating natural gas performance.

Renewegy is currently evaluating natural gas options for both compressed natural gas and liquid propane for on-highway application.

Natural Gas as an Alternative Fuel

The natural gas industry in the United States has been growing by leaps and bounds over the past six years due to new technology in extraction and billions of dollars in investment by energy companies. Natural gas has been used in heating homes for more than 75 years and natural gas is now being considered as energy for transportation. A few different popular fuels are known as “natural gas” and it is important to know the difference between the fuels.

The most widely used fuel for heating homes is methane, known by many as “natural gas.”

Methane is one of the most abundant organic compounds on Earth that can be found in natural gas fields, landfills, coal mines and even farms that produce livestock. Methane is gathered and transported by pipeline as a gas to its final location where it is burned for heat or to generate electricity. Methane has a wide distribution network to millions of buildings in the United States. Methane in its typical gaseous state does not work for transportation because a constant flow of methane at low pressure is needed to operate furnaces and turbines at their most efficient level.

Methane in a liquid or high-pressure gas state can make sense for transportation. The liquid form of methane is known as liquefied natural gas, or LNG, and the high-pressure form of methane is known as compressed natural gas, or CNG. Each has unique characteristics.

LNG is methane under pressure and stored in a refrigerated tank that keeps the methane at about -240 Degrees C. For comparison, the coldest temperature ever recorded on earth was -82.8 Degrees C. LNG can require a tremendous amount of energy to maintain its liquid state and is hindered by a very narrow distribution channel. However, methane in its liquid state has about the same amount of energy as ethanol, yet is cheaper to distribute than ethanol.

CNG is methane under extreme pressure stored in a tank that fits in a vehicle. CNG is stored at about 3600 PSI at the same temperature as its surroundings. The pressure will change with its use and surrounding temperature, so maintaining a constant pressure is key in using CNG.

Another type of natural gas that is widely used is propane, both in its liquid and gas form.

Propane in its liquid form, known as LP, as been used for years to power indoor lifting equipment like forklifts and other large machinery, like Zambonis and city buses. LP is injected into engines and ignited similar to gasoline. The intake for the fuel line is at the bottom of the storage container to ensure only liquid is delivered to the engine. There is already a wide distribution network to support propane delivery since businesses already use LP tanks for their equipment. However, propane is a by-product of petroleum refinery and supply cannot be easily adjusted based on demand. Once it is produced, propane is stored in large salt caverns where is it distributed by pipeline to other areas.

Liquid propane gas, LPG, is not used in transportation but as a fuel for cooking. LPG is the same propane hydrocarbon, but rather than igniting the injected propone, LPG pressure is regulated with a nozzle to maintain a steady flame. LPG is almost identical to LP, but rather than delivering the fuel as a liquid, it is delivered as a gas.

Renewegy is currently working on up-fitting on-highway engines to burn natural gas. The process involves recalibrating the engine settings, replacing the fuel injectors, changing the harnessing on the engine among other vehicle changes like replacing the tanks. Since natural gas energy prices are about half that of gasoline, companies are able to take advantage of lower fuel prices while using a cleaner-burning, American source of energy.

Agricultural Wind Turbines

Old Windmill Patrick Bolduan

Wind has always been an important part of agriculture. In fact, wind has powered agriculture for more than a thousand years to mill wheat and pump water. Wind in agriculture has produced many iconic tributes to agriculture throughout history. The multi-bladed wind mills sitting atop a lattice tower in rural America, the famous windmills of the Netherlands, and the coastal windmills of Greece all pay tribute to the wind powering agriculture. You can still see many flat-bladed wind mills in rural areas either pumping water to crops or pumping air to ponds and lake. So how is wind used to support agriculture today?

 

The biggest contribution wind is providing is giving farmers extra funds with land use leases. Most farms are large, relatively flat, and separated from residential neighborhoods. Farm land is often a very good option for installing utility scale wind farms.  Project developers typically pay $3000 to $5000 per turbine per year, offering another source of income to farmers.

 

Agricultural wind turbines can also generate electricity for use at the site. A distributed wind turbine (small wind turbine) that ranges from less than 20kW to 100kW can be scaled to meet the farm’s need for electricity. For example, farms in the Great Plains have high electrical needs to power the irrigation water pumps. The pumps use about 60kW when operating; electricity in rural farm land is often significantly more expensive than near cities.  Generating electricity on-site, offsetting electrical needs and reducing peak demand can make the most sense for people that live in high wind areas with more expensive electricity, especially when state incentives are available.

What’s New with Small Wind Turbines?

SCA HQ Turbines

SCA HQ Turbines

Small wind turbines continue to evolve as consolidation, innovation, and competition drive the market to newer, high tech turbine systems. Small wind turbines follow the innovations of the larger, utility scale turbines. The utility scale turbines led to current innovation like remote monitoring, active yaw and pitch controls, and composite blades. Now, many utility scale turbines feature direct drive, permanent-magnet generators. Small wind is likely to follow in the path of direct drive, permanent magnet generators because they offer many advantages over inductive generators with a gearbox.

The direct drive feature eliminates the need for a gearbox, which saves material and maintenance costs, but also reduces much of the noise a wind turbine makes. Many times, the noise associated with a wind turbine is the gearbox reverberating through the tower, particularly for monopole towers. Also, with fewer moving parts, the wear and tear on turbine components will be reduced, saving on maintenance and warranty costs.

The permanent magnet generator is more efficient that the inductive generator. The permanent magnet generator doesn’t produce as much heat as an inductive generator while allowing a turbine system to produce more energy at lower wind speed.  In addition, variable speed turbines allow for better aerodynamics by adjusting rotational speed to match the most efficient rotational velocity of the blades for a given wind speed.

Cost and performance are good metrics to consider when choosing a wind turbine, but the manufacturer’s ability and responsiveness to service the turbine should be considered when purchasing a turbine, as well as a particular turbine model’s up-time.  Read more about selecting a wind turbine here.

 

 

Renewegy Commercial Wind Turbine: Hydraulic Tip-up

 

The concept behind Renewegy’s hydraulic tip-up is both simple and very complex. The simple idea was twofold:  to eliminate the need for a crane to keep the operators on the ground and be free from numerous regulations related to working at heights; and to remove and re-use the high-value hydraulic system on multiple turbines installation–reusing the hydraulic system saves the customers thousands of dollars in unneeded equipment.  The complex concepts comes in designing a system that is safe, effective system that has enough power to tip a 10000 lb tower and 1200 lb turbine head.

 

Renewegy uses a 7 HP hydraulic power unit and two 50-ton cylinders to move the massive, 100 foot tower.  Renewegy technicians first connect the two upper tower sections, then terminate the electrical connections and attach the turbine head and blades prior to tipping up the turbine (read the full installation process here). The cylinders are attached to the gussets near the tower base that are held in place with specially designed pins and bearings. Once everything is in place, the operator raises the tower. The operator uses a dead-man controller to ensure that the tower can’t accidentally rise on its own when set on the ground. The tower may sway a little bit during erection, but the two cylinders keep the tower on a straight path.

 

Technicians then bolt the tower to the base in a specific pattern and continue their installation process.

Wind Turbine Payback is Important, but What Else Matters?

Commercial Wind Turbine Located in Wausau, WI

Often the first question about wind turbines is “what is the payback?” The answer is usually the same: It depends on many factors. The payback period depends on the site – obstructions such as building and trees as well as the surrounding terrain; wind energy potential; the local cost of electricity; local incentives; and the performance of the specific wind turbine. Wind turbine payback is important, but what else is important in selecting a wind turbine? Safety, reliability, manufacturer’s support, and appearance are all factors to consider when choosing a commercial wind turbine.

 

Safety should be the number one determining factor in selecting a turbine installation; a turbine that proves not safe to operate will never pay itself back. Some standard safety features found on most turbines is a maximum cut-out speed, emergency braking, rotor over-speed protection, and electrical protections. Remote monitoring has been used in utility scale turbines and relatively new to the small wind turbine market. Remote monitoring offers the added safety of forcing a shutdown when a problem is determined. Safety in the turbine system encompasses not only the operation of the turbine system, but also installing and servicing the turbine system. The utility scale turbines are installed in pieces using a crane; some small wind turbines can be installed with a crane while more advanced small wind turbine systems use a tip-up tower design to keep installers and technicians on the ground.

 

Reliability is another determining factor in selecting a wind turbine. Similar to safety, if a system is always broken down, it will never pay itself back. Reliability is usually a function of design time and the quality of the components within a system. Trading component quality for cost savings will not help in the long run.

 

Manufacturer’s support goes a long ways when a failure does occur. Wind turbines can fall victims to lightning strikes since they are purposely placed to be the highest point in a surrounding area. Is the manufacturer responsive and pro-active in resolving issues? Does the manufacturer carry sufficient inventory to correct issues in days rather than months? Can you easily find who to call when there is a problem? These questions should be answered before a decision is made.

 

Appearance is another factor to consider when choosing a wind turbine system. Many wind turbine systems are designed to last 20 or more years. A customer will see the turbine system nearly every day during that period. A system that proves to be an eyesore is dreadful for not only the customer, but neighbors.

 

Renewegy prides itself on its safe, reliable, and attractive VP-20 commercial wind turbine that has been proven safe and reliable with over 99% fleet up-time. We stand behind our product with an included 5-year warranty included with every turbine. For more information on the VP-20 20 kW wind turbine, click here.

Federal Incentives for Commercial Wind Turbines

Through 2010, there were a few major federal incentives for business considering energy-efficient upgrades and renewable energy property. There are fewer incentives today but some do still exist for specific property. Even though the Production Tax Credit is in danger of expiring and the 1603 Program has expired, tax credits for commercial wind turbines do still exist.

 

The Production Tax Credit (PTC) is a tax credit calculated on the number of kilowatt hours produced by renewable energy property. The PTC is scheduled to end Dec. 31, 2012 and would spell a major blow to manufacturers and customers of wind energy. Customers, who are mostly utilities that installed large wind, would no longer be able to receive tax credit that were available at the time of a wind system’s purchase, while manufacturers can no longer use the tax credits in their presentations to potential customers. Many websites such as the American Wind Energy Association are voicing their support for a PTC extension. View their update here

 

Commercial wind turbines have been dealt their own blow with an incentive expiring. The American Reinvestment and Recovery Act (ARRA) of 2009 allowed wind turbine customers to receive a payment from the Department of the Treasury about 30 days after installation. The program, officially named “1603 Program: Payments for Specified Energy Property in lieu of Tax Credit,” ended in Dec 2011 after a one year-extension late in 2010. The 1603 Program was credited with encouraging more than $30 Billion in investment in energy property.

 

The ARRA did provide mid-term support for commercial wind with a change in the tax code. The ARRA eliminated a $4,000 maximum credit for businesses that installed renewable energy property; there is no longer a maximum credit. The tax code for 2012 to 2016 allows businesses a 30% tax credit on the installed cost of a wind turbine system. The credit (or refund) is received when a business files their taxes for the previous year. When new forms are available through the IRS, Form 3468 will no longer have a maximum credit for small wind.

 

Renewegy makes a 20kW wind turbine that can be classified as a small wind turbine and a commercial wind turbine. For product information click here.

What Are Commercial Wind Turbines?

Wind Turbines installed in the State of Washington

Commercial wind turbines fit in a small segment of the wind market that lies between residential wind turbines and utility scale wind turbines. The segment has been active for decades but only recently has become an option for companies seeking to add renewable energy. There have been many innovations in the segment to add performance, reliability, and cost-effectiveness to this growing market.

 

Size/output comparison

 

Commercial wind turbines are usually defined as the capacity between 10kW and 100kW. This capacity is suited for manufacturing facilities, commercial buildings, large retail, government buildings, and farms. By adding multiple turbine systems to a site, an owner can scale the amount of electricity the turbines produce to match the needs of the facilities. At 10 kW, a system can produce about 10,000-15,000 kilowatt-hours in most conditions, while a 100kW system can produce well over 100,000 kilowatt-hours. The actual numbers will vary based on the site; for example, areas in the Great Plains and the coasts generally have more wind energy than most areas in the United States. The towers for commercial wind turbines typically range from 60 feet to 140 feet.

 

Residential wind turbines are usually defined as the area under 10kW. The wind turbine produces enough electricity to power a single residential home. The turbines are most often seen in rural areas as larger municipalities have zoning laws restricting heights on structures. Residential wind is the cheapest wind option but provides the least amount of electricity. One can expect about 1,000 -5,000 kilowatt-hours depending on the turbine size and the location. The tower height of residential wind is typically less than 60 feet.

 

Utility wind is the area above 100kW. Utility wind turbines have been pushing the capacity of their turbines from less than 1 GW a decade ago to about 7GW currently available. The utility wind turbines are often set on farms of 30 or more units in high wind areas to support the energy needs alternatively provided by fossil fuels. Utility wind towers are usually taller than 300 feet (and continue to get taller) and require the most set-back from property lines.  Utility wind can also encompass off shore wind turbines located in coastal waters.

 

Renewegy provides a 20kW commercial wind turbine that has been proven safe and reliable across the US. Click here to see the VP-20 Product Page.

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