Tag Archives: Energy Institute at Haas

Reaction to Is “Community Choice” Electric Supply a Solution or a Problem?

Severin Borenstein at the Energy Institute @ Haas wrote a good summary of the issues around community choice aggregation.

Source: Is “Community Choice” Electric Supply a Solution or a Problem?

I am on the City of Davis’ Community Choice Energy Advisory Committee and have been looking at these issues closely for a year. I had my own reactions to this post:

First, in California the existing and proposed CCEs (there are probably a dozen in process at the moment to add to the 3 existing ones) universally offer a higher “green” % product than the incumbent IOU, most often a 50% RPS product. And although MCE and SCP started out relying on RECs of various types to start out, they all are phasing out most of those by 2017. I think most will offer a 100% product as well.

The reason that these CCE’s are able to offer lower rates than the IOUs at a lower RPS is that the IOUs prematurely contracted long for renewables in anticipation of the 2020 goal. In fact, the penalty for failing to meet the RPS in any given year is so low, that the prudent strategy by an IOU would have been to risk being short in each year and contract for the year ahead instead of locking in too many 20+ year PPAs. At least one reason why this happened is that the IOUs require confidentiality by any reviewers and no connections to any competing procurement decisions. As a result the outside reviewers couldn’t be up to speed on the rapidly falling PPA prices. The CPUC has made a huge mistake on this point (and the CEC has rightfully harassed the CPUC over this policy.)

CCE’s also offer the ability to craft a broader range of rate offerings to customers–even flat 20 year rates that can compete with solar roofs on the main issue that customers really care about: price guarantees. In addition, CCE’s are more likely to be to nimbly adjust a rapidly changing utility landscape. CCE’s are much less likely to care about falling loads because their earnings aren’t dependent on continued service.

It’s also to recognize the difference between local government general services (e.g., safety and public protection, social services, regulation, etc.) and enterprise services (e.g., utilities of all sorts). In general, the latter are as efficient as IOUs (except LADWP which illustrates the INefficiency created by overlarge organizations). So one can’t make a broad generalization about local government problems and how they might apply in this situation. The fact is that almost all of the existing and new CCEs are or will be JPAs, which are often even leaner. (Lancaster is the exception.)

Finally, Severin made this statement:

“Whatever regulatory mandates, managerial mistakes, or incompetence occurred in the past, customers switching to a CCA should not be allowed to shift their share of costs from past decisions onto other ratepayers.”

I have to disagree to a certain exent with this statement. Am I forced to pay for the past incompetencies of GM or GE or any other corporation? Yes, utilities have a higher assurance of return on their investments, but no where is it written that it is “ironclad.” Those utilities had an assurance first as the sole legal provider and then as the provider of last resort, but that’s eroding. In California, the CTC was a political deal to get the IOUs out of the way. The fact is in California that the CPUC abrogated its responsibility to oversee these decisions on behalf of ratepayers with the encouragement of the IOUs. If the IOUs want to retain their customers, then they should be forced to compete with the CCEs (and DA LSEs.) It’s time to reopen this matter.

And to add a bit more:

The logic of this statement is that ANY customer who leaves the system, including moving to another area, state or nation, should have to continue to pay these stranded costs. Why should we draw the line arbitrarily at whether they happen to still get distribution services even though the generation services have been completely severed? Particularly if someone moves from say, San Francisco to Palo Alto, that customer still relies on PG&E’s transmission system and its hydro system for ancillary services. Why not charge that Palo Alto customer a non-by-passable charge? And why shouldn’t it be reciprocal? Relying on “political practicality” is not an answer. Either ALL customers are tethered forever, or no customers are required to meet this obligation.

 

A brief reply to “Real” Electricity Still Comes from the Grid

Source: “Real” Electricity Still Comes from the Grid

Catherine Wolfram at UC Berkeley posted about their paper looking at costs of distributed energy systems in Kenya and concluding that these were too expensive for households compared to connecting to the grid. However, the paper came under immediate criticism.

Here’s my thoughts based on her representation of the paper’s findings, some of which are mirrored by other commentators:

First, the paper talks about costs on one side, but doesn’t put them in perspective to the alternatives. The post lists the cost of the individual systems, but not the expected connection costs to the grid.

Further the paper takes a static look at current costs and doesn’t account for the differential trends in the sets of costs for an home-based system versus connecting to the grid. The latter costs can be expected to be steady or even rising, while it’s well known that both solar and storage costs have fallen rapidly.

Different scales of “grid” also are important. For example, solar projects show scale economies up to about 3 MW but then modular construction flattens the per kW cost. A village microgrid separate from a national central grid may be quite cost competitive.

Finally, the paper appears to lump large hydro in with other utility-scale renewables. The environmental (and economic development) record for large-scale hydro projects in the developing world is dubious at best. There is evidence of significant methane emissions from tropical reservoirs. Habitat is destroyed and poorly designed projects don’t deliver expected benefits. Hydro is by far the largest energy supplier on these grids, and they may be little better than coal from an overall environmental perspective.

Reblog: If you like your time-invariant electricity price, you can keep it

Severin Borenstein at the Energy Institute at Haas makes the case for giving customers the choice of TOU or fixed price rates. I’ve commented several times on the Energy Institute blog about this approach, and blogged myself about the need for this option.

Source: If you like your time-invariant electricity price, you can keep it

Reblog: Leaking Coal to Asia

Maximillian Auffhammer at UC’s Energy Institute @ Haas focuses on the issue of exporting coal from the Port of Oakland, but he turns to the issue I highlighted recently–the path to accomplishing environmental objectives should travel through compensating those who are worse off from such policies.

Source: Leaking Coal to Asia

Energy Institute @ Haas takes on DOE weatherization study

Are the Benefits to the Weatherization Assistance Program’s Energy Efficiency Investments Four Times the Costs?

The authors of a study questioning the net benefits of the Weatherization Assistance Program critique the use of non-energy benefits to swing the program assessment to a net positive results. (The authors have responded to some critiques here.) Given the recent revelation that asthma is more likely to be caused by early childhood care decisions, that particular benefit may be quite vulnerable. The biased representation of other benefits undermines the DOE study as well.

I’ve posted some of my own comments on the Energy Institute blog.

Retrospective on restructuring and what it means for our future

Jim Bushnell of UCD and the Energy Institute at Haas has posted about a paper he is coauthoring with Severin Borenstein looking back 20 years at restructuring. It has some interesting insights, but I take issue with a couple points about the original motivation for restructuring, and whether we will be left with legitimate stranded costs with the current transformation.

My comment on the post:

The rationale behind restructuring (as reflected by my agricultural and industrial clients at that time) of “never again”–the utilities had demonstrated an inability to contain costs in constructing Diablo Canyon, SONGS and Helms, and FERC had gutted the ability for third parties to build turnkey plants in the BRPU decision. The utilities were very slow to adopt the low-cost combined cycle technology, so the only solution looked to be to walk away. Restructuring did establish the merchant industry which has been the leaders in developing renewable technologies and even rooftop solar. Again, we could have expected the utilities to drag their feet, so we have gotten institutional innovation that otherwise would not have happened. (Institutional innovation, not technological, is what got us reduced SOx emissions under the Clean Air Act Amendments of 1990.)

Going forward, leaving the utility system only “strands” network infrastructure if we take the static view that the network will continue in its current state. Shareholders are still recovering their investment, and if they’ve been paying attention since 2007, they should know that overall demand has been falling. They will only be stuck with infrastructure costs if either they have had little foresight or if a sudden technological change accelerates customer exit. In the latter situation, this will only occur if distributed resource costs fall dramatically in which case the exit will probably be socially beneficial. Why should consumers be locked into a large scale network to protect shareholders?

Restructuring was marked by a sudden, dramatic change–opening the market on a single day, divesting generation assets within a few months. The current transformation is more gradual because it is house by house, business by business. Utilities can change their investment plans, and depreciation recovery allows them to recoup their past costs. We may be foregoing the benefits of a paid-up network, but we have almost never regretted such technological change in the past. (Maybe the sale of the “red cars” rail system in LA as the most salient exception.) Do we regret that we’ve left behind land lines for our cell phones? Given the benefits of carrying around microcomputers for daily activities, I think not.

Repost: Californians Can Handle the Truth About Gas Prices

Sev Borenstein writes about the two sides of the argument on whether transportation fuels should be rolled into the cap-and-trade program in January 2015.

I have an observation that that has only been alluded to indirectly in the debate. The main point of the legislators’ letter calling for a delay in implementation is that low income groups may be particularly hit. The counter argument that we need the inclusion of transportation fuels under the cap to incent innovation seems to pit the plight of the poor against the investment risk of wealthy entrepreneurs. We haven’t really done a good job of addressing affordability of the transformative policies that can change GHG emissions. The proposal to use carbon tax revenues to rebate to low income taxpayers has been floated at the national level, but of course that died with the rest of the national cap and trade proposal. A similar proposal was made to mitigate electricity price impacts.

Our state legislators are rightfully concerned about the impacts on those among us who have the least. Nevertheless, that problem is easily addresses with the tools and resources that are already available to the state. Those families and households who now qualify for the CARE and FERA electric and natural gas utilities rate discounts can be made eligible for an annual rebate equal to the average annual gasoline consumption multiplied by the amount of the GHG allowance cost embedded in the gasoline price. This rebate could be funded out of the state’s allowance revenue fund. For example, if the price is increased by 15 cents per gallon and the average automobile uses 650 gallons per year, an eligible household could receive $97.50 for each car.

About 30% of households are currently eligible for CARE or FERA. On a statewide basis, the program would cost about $650 million, which is comparable to the cost for CARE for a single utility like PG&E or Southern California Edison. Those legislators who are most concerned can coauthor legislation to put this program in place.

(BTW, I think the DOE fuel use calculator is outdated–on my many trips to LA I haven’t seen these types of fuel economy changes. My average MPG is pretty much the same no matter how much traffic there is on I-5.  But that’s just a fun fact aside…)