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
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
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.
A look at how commercial and institutional building energy use can be reduced by providing price signals.
Deconstructing the Rosenfeld Curve.
By Lucas Davis on Energy Insitute at Haas
Are California’s energy efficiency standards a useful rubric for other states?
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.
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.
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…)
Last week, 16 Democratic legislators sent a letter to ARB Chair Mary Nichols asking for a delay in adding transportation fuels to the AB 32 cap and trade program starting January 1, 2015. The legislators raise concerns about how a 15 cent per gallon increase could impact the state’s poor.
I was asked by EDF to sign on to a letter in response. That letter focuses on how much of the anticipated innovation arising from AB 32 is dependent on implementing this phase of cap and trade. However, I think the proposed letter misses an important point by the legislators.
Our state legislators are rightfully concerned about the impacts on those among us who have the least. Nevertheless, that problem is easily addressed 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.
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