Tag Archives: electricity

The utility revolution hits the mainstream

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This New Yorker article, “Power to the People,” is one of the first mainstream press articles discussing how the energy utility landscape is being transformed. (This was sent to me by one of my non-energy clients.) It prompted one thought: the “death spiral” only occurs if we hold on to the traditional model of utility investment and regulation. Allowing utility shareholders to participate in the transformation through their unregulated holding companies can mitigate much of the potential for a death spiral.

Decoupling of economic and electricity demand growth

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After posting a dire report about the lack of cost-effectiveness for energy efficiency, I came across this more encouraging graphic. It shows that as national economies become wealthier, the electricity consumption growth rate declines. So we won’t be on a never ending treadmill.

Electricity-GDP

Davis to look at Community Choice Energy

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After calling a halt to the deeper exploration of an electric publicly-owned utility, the city has turned to an easier mountain to climb in community choice energy aggregation (now remonikered to CCE). The original POU study briefly looked at the CCE option and moved past (and in my opinion used too generic of an approach to assess the POU path with some incorrect assumptions and didn’t consider the rapidly changing electricity market). Several direct access providers have approached the city and interested parties about helping implement a CCE. The citizen’s committee will look at whether a CCE opens up new value for the city and its citizens, and whether to go it alone or to join another CCE. Marin Clear Energy and Sonoma Clean Power both have participation rates over 90%. I will be sitting on that committee as an appointee via the Coalition for Local Power. (I also sit on the Utilities Rates Advisory Committee which has an appointee.)

Perhaps one of the most attractive features is that Davis can gain control of the energy efficiency funds available from the public good charge by preparing a plan specific to the city. Fortunately, the framework for that plan is already underway with a prompt from the Georgetown University Energy Prize.

PG&E to release 65,000 emails since 2010

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PG&E in the wake of more revelations about ex parte contacts with CPUC commissioners and staff is releasing 65,000 emails over the period from 2010.  This should make for some interesting reading by interested parties. Is there anyone out their who might like to cooperatively compile a readable database?

Smart, clean and local energy technologies for Davis

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Second in a series published in the Davis Enterprise on how the City of Davis can address its energy future:

Smart, clean and local energy technologies for Davis

Questions yet to be answered from the CAISO Symposium

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While attending the CAISO Stakeholder Symposium last week I had rush of questions, not all interconnected, about how we manage the transition to the new energy future. I saw two very different views about how the grid might be managed–how will this be resolved? How do we consider path dependence in choosing supporting and “bridge” resources? How do we provide differential reliability to customers? How do we allow utilities to invest beyond the meter?

Jesse Knight, former CPUC Commissioner and now chairman at SDG&E and SCG, described energy utilities as the “last monopoly” in the face of a rapidly changing economic landscape. (Water utilities may have something to say about that.) SDG&E is ahead of the other utilities in recognizing the rise of the decentralized peer-to-peer economy.  On the other hand, Clark Gellings from EPRI described a world in which the transmission operator would have to see “millions” of nodes, both loads and small generators, to operate a robust network. This view is consistent with the continued central management implied by the utility distribution planners at the CPUC’s distribution planning OIR workshop. At the end of the symposium, 3 of the 4 panelist said that the electricity system would be unrecognizable to Thomas Edison. I wonder if Alexander Graham Bell would recognize our telecommunications system?

One question posed to the first “townhall” panel asked what role natural gas would have in the transition to more renewables. I am not aware of any studies conducted on whether and how choices about generation technology today commits us to decisions in the future. Path dependence is an oft overlooked aspect of planning. We can’t make decisions independent of how we chose in the past. That’s why it’s so difficult to move away from fossil fuel dependence now–we committed to it decades ago. We shouldn’t ignore path dependence going forward. Building gas plants now may commit us to using gas for decades until the financial investments are recovered. We may be able to buy our way out through stranded asset payments, but we learned once before that wasn’t a particularly attractive approach. Using forethought and incorporating flexibility requires careful planning.

And along those lines in our breakout session, another question was posed about how to resolve the looming threat of “overgeneration” from renewables, particularly solar.  Much of the problem might be resolved by charging EVs during the day, but it’s unlikely that a sizable number of plug-in hybrids and BEVs will be on the road before the mid-2020s. So the question becomes should we invest in gas-fired generation or battery or pumped storage, both of which have 20-30 year economic lives, or try to find other shorter lived transitions including curtailment contracts or demand response technologies until EVs arrive on the scene? It might even be cost effective to provide subsidies to accelerate adoption of EVs so as to avoid long-lived investments that may become prematurely obsolete.

Pricing for differential reliability among customers also came up. Often ignored in the reliability debate at the CAISO is that the vast majority of outages are at the distribution level. We appear to be overinvested in transmission and generation reliability at the expense of maintaining the integrity of the local grid. We could have system reliability prices that reflect costs of providing flexible service to follow on-site renewable generation. However the utilities already recover most of the capital costs of providing those services through rate of return regulation. The market prices are suppressed (as they are in the real time market where the IOUs dump excess power) so we can’t expect to see good price signals, yet.

Several people talked about partnerships with the utilities in investing in equipment beyond the meter. But the question is will a utility be willing to facilitate such investments if they degrade the value of its current investment in the grid? Fiduciary responsibility under traditional return on capital regulation says only if the cost of the new technology is higher so as to generate higher returns than the current grid investment. That doesn’t sound like a popular recipe for a new energy future.  Instead, we need to come up with creative means of utility shareholders participating in the new marketplace without forcing them down the old regulatory path.

Margaret Jolly from ConEd noted that the stakeholders were holding conversations on the new future but “the customer was not in the room.” Community, political and business leaders who know how electricity is used were not highly evident, and certainly didn’t make any significant statements. I’ve written before about offering more rate options to customers. I wanted to hear more from Ellen Struck about the Pecan Street study, but her comments focused on the industry situation, not customers’ behaviors and choices.

Using an event to measure energy savings program effectiveness (again)

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Koichiro Ito again has used a discrete event to develop a “control” for an economic experiment. In this case, he has studied PG&E’s 20/20 rebate program in 2004. The “event” he uses is the eligibility date for the program–he uses new customers who connected to service just before and after that date. He finds that the program had almost no effect on coastal customers but that it was effective in reducing energy use for low-income inland consumers. 

Previously, he had looked whether tiered-block rates were better at inducing conservation across the entire pool of customers. The final version of his paper was published February in the American Economic Review. Discerning the true effects of tiered-rates has been very difficult due to the endogeneity problem–consumers essentially set their own marginal price by choosing their consumption level. Many studies have been conducted in both water and electricity trying to tease out this effect, but the results have always been questionable for this reason. 

Ito was able to use two key facts in his latter study: 1) the 2001 California electricity crisis caused rates to rise rapidly and 2) the SCE and SDG&E service areas are closely interlocked across similar communities in southern Orange County. He was able to run an after-the-fact experiment with two treatment groups that had similar socio-economics and were exposed to the same media market. It’s as if two groups of customers were presented with two different sets of rates from the same utility–a truly unique situation that probably can’t be duplicated. He found that the tiered rates induced no more change in energy use than simple average rates.

These well-done studies can cause policymakers to ask whether complicated proposals that seem to mitigate various concerns are truly effective. In these two cases, the answers are largely “no”.