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Category Archives: ‘Restructuring: N.America’
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Electric utilities! They are to me what sideboobs are to Huffington Post — I just can’t stop writing about them.
A couple of days ago I posted a brief introduction to utilities and the way they currently work. The take-home lesson is that current regulations give utilities every incentive to build more infrastructure and sell more power, but very little incentive to cut costs or innovate.
The situation is no longer working for us. We need rapid, large-scale innovation in low-carbon electricity systems, and we need it now. It’s time to fundamentally rethink the utility business model.
I hope you’ll indulge me just one more scene-setting post before I finally get to the long-awaited post on solutions. Today we’re going to take a look at the way electricity has typically gotten from generator to customer, the electricity “value chain,” so we can better understand which parts need to change. This is a complicated topic, to say the least, but I’ll do my best to break it down in the simplest terms I can, with the proviso that I’m glossing over lots and lots of important details.
The electricity value chain
OK. Think of the electricity value chain as having three basic links:
- Generation: These are the power plants that generate (most of) the electricity.
- Transmission and distribution (T&D): These are the poles and lines that carry electricity to customers, both high-voltage long-distance transmission lines and lower-voltage local distribution lines, along with all the substations and transformers that help the power along its way.
- The distribution edge: This one takes a little explaining. The point where the grid meets the customer is the power meter, which tracks the customer’s electricity consumption for billing purposes. Most of the time that meter is on a house or building, though sometimes, in the case of “microgrids,” there is one meter for a whole collection of buildings. Everything that goes on in the building(s), before net consumption is tallied up by the meter (think rooftop solar panels, smart appliances, electric cars, energy storage, energy management software, etc.), happens “behind the meter.” Everything at and behind the meter is known as the “distribution edge.”
In the beginning, most utilities, especially investor-owned utilities, were “vertically integrated,” meaning they owned and operated the entire value chain, from the power plant to the meter. At the time, electricity was viewed purely as a commodity; the utility’s sole job was to get as much of it as possible to customers as cheaply as possible. What customers did with it on their side of the meter was of little concern, as long as they kept using more of it.
In the electricity-as-commodity model, it’s all about economies of scale. The bigger you make the power plants, the cheaper the power. That’s why utilities were monopolies: so they could maximize the benefits of scale.
The physical expression of the commodity model is the “hub and spoke” electricity grid, with large centralized power plants sending power out long distances to surrounding customers. It helps to think of it as a hydrological system. Electricity springs from power plants and flows down great rivers of transmission cables into the smaller canals and streams of a distribution system. In this system, power flows only one way, from hubs outward. It’s like gravity pulling water downhill.
Since there is no way to store the power, there must always be enough flowing into the streams to sate customer thirst. When demand surges in certain areas at certain times, grid operators fire up more power plants to supply the extra need. The plants that are always running are “baseload,” usually coal, nuclear, or hydro. The ones that get fired up for the busy daytime hours, the “mid-merit” plants, are typically natural gas combined-cycle plants. And then when demand “peaks” for a few hours, usually in the afternoon and again when people come home in the evening, they fire up the more expensive oil or gas “peaker plants.” There must always be enough power plants online — enough “generation capacity” — to supply well in excess of any expected peak, establishing “reserve margins” of 15 to 20 percent. That’s how reliability is assured: The canals and streams are kept full at all times.
Previous utility reforms
In 1978, seeking to open up the generation side of things to smaller and cleaner power plants, Congress passed the Public Utility Regulatory Policies Act, or PURPA. (There’s some talk that it could be used to drive a new wave of distributed renewables, but the details are complicated and not essential to the story I’m telling.)
More significantly, in the 1990s, there was a wave of regulatory restructuring that “unbundled” generation from transmission and distribution. These changes created competitive wholesale and retail power markets on the generation side, but left transmission and distribution — getting power to customers and billing them for it — to regulated utilities.
(This is often referred to as “deregulation,” but I think that’s a misleading term; the whole industry remains regulated from top to bottom.)
Restructuring was proceeding at a brisk clip until California happened in 2000-2001. Remember that? Enron? Maximum fubar? More or less overnight, “deregulation” and “consumers get f*cked” became synonymous in the public mind and restructuring of the utility industry froze in place.
I stole these handy maps from American Electric Power:
The top map shows all the states that were investigating or implementing restructuring in 2001. On the bottom you see the situation in 2010 — only Texas and the Northeast have stuck with restructuring. (Arizona is apparently looking into it.)
So we’re left with a mix of public and investor-owned utilities, some vertically integrated and some with only T&D, and just for fun, some have undergone decoupling (which we’ll talk about in a later post) and some haven’t. All these categories overlap. Oh, and some holding companies own both independent power producers and regulated utilities. It becomes very difficult to make generalizations or simplifying assumptions about utilities — and it also becomes super-boring.
I think I speak for all Americans when I say that contemplating the post-partial-quasi-halfway-restructured U.S. electricity industry gives me an intense, nagging pain just above my left eye socket. This is what happens when you bang into the force field of tedium.
What has changed in electricityShare This Post
Microgrids could be a threat or an opportunity for utilities.
Chris Nelder: May 23, 2013
Defenders of the electric grid status quo have long argued that always-on baseload power generators like coal and nuclear plants are essential, and that variable renewables like wind and solar will remain bit players in power generation.
They argue this for several reasons: The grid isn’t designed to accommodate them. They’re too expensive. Or they aren’t reliable enough, so they require 100% backup from conventional power plants at all times. An essay by former utility CEO Charles Bayless in the September 2010 issue of the Edison Electric Institute’s Electric Perspectives magazine details the utility view of these issues nicely.
But one by one, those arguments are being knocked down.Share This Post
Sarah Battaglia | May 23, 2013
The United States has taken the lead yet again, but this time, we may not be so proud. We have surpassed every nation, including China, in the category of energy waste. Yes, our country wastes the most energy in the world. The U.S. has an energy efficiency of 42 percent, which means 58 percent of all the energy we produce is wasted! How can this happen?!
To read the entire article go to: http://www.energybiz.com/article/13/05/us-waste-more-energy-any-country&utm_medium=eNL&utm_campaign=EB_DAILY&utm_term=Original-MemberShare This Post
By Eugene Robinson, E-mail the writer
President Obama should spend his remaining years in office making the United States part of the solution to climate change, not part of the problem. If Congress sticks to its policy of obstruction and willful ignorance, Obama should use his executive powers to the fullest extent. We are out of time.
With each breath, every person alive today experiences something unique in human history: an atmosphere containing more than 400 parts per million of carbon dioxide. This makes us special, I suppose, but not in a good way.
The truth is that 400 is just one of those round-number milestones that can be useful for grabbing people’s attention. What’s really important is that atmospheric carbon dioxide has increased by a stunning 43 percent since the beginning of the Industrial Revolution.
The only plausible cause of this rapid rise, from the scientific viewpoint, is the burning of fossil fuels to fill the energy needs of industrialized society. The only logical impact, according to those same scientists, is climate change. The only remaining question — depending on what humankind does right now — is whether the change ends up being manageable or catastrophic.
Only someone who was ignorant of basic science — or deliberately being obtuse — could write a sentence like this one: “Contrary to the claims of those who want to strictly regulate carbon dioxide emissions and increase the cost of energy for all Americans, there is a great amount of uncertainty associated with climate science.”Share This Post
Who Speaks for Illinois on Fracking? Dr. Sandra Steingraber or Sierra Club, Compromising Environmental Groups?
Posted: 05/22/2013 6:56 pm
Author of 'State Out of the Union: Arizona and the Final Showdown Over the American Dream'
Before environmental lobbyists and legislators push a hydraulic fracking bill through the Illinois legislature, they need to sit down with farmers in Clinton County and learn how well regulations defended their water, farms and cankered lives from the contamination of coal slurry in the Pearl Aquifer.
Then they would fight to the end, like five southern Illinois county boards, for a moratorium on fracking--instead of a regulatory compromise that undercuts their efforts.
In the process, potentially impacted residents in southern Illinois have repeatedly raised an important question: Who should we trust to speak on behalf of protecting our water, land and lives: The moratorium stance of Dr. Sandra Steingraber or the compromising role of the Sierra Club and other environmental groups?
To read the entire article go to: http://www.huffingtonpost.com/jeff-biggers/who-speaks-for-illinois-o_b_3322287.html?utm_hp_ref=greenShare This Post
Posted: 05/23/2013 6:47 pm
Former executive director and chairman, Sierra Club
Last week the Department of Energy gave approval to the Freeport LNG export terminal. Combined with an earlier approval at Sabine Pass, the U.S. has now committed the first 2.4 billion cubic feet of natural gas it produces each day over the next 20 years to foreign consumers -- because under these LNG contracts exporters will be able to offer higher prices than any domestic user, regardless of the price of gas that results. These two terminals alone will divert enough energy to replace a half million barrels a day of oil.
You may find these facts surprising, even implausible. I don't blame you. You have been massively misled.
The current media conversation about whether oil and gas exports are in America's interests makes the lead up to the Iraq War look like public policy on truth serum. All informed participants know -- and almost all conceal -- that the primary purpose of building export infrastructure like the Keystone Pipeline or LNG terminals is to raise energy prices in North America. What is mystifying is why almost all of America's political class is willing to support a set of policy decisions whose outcomes will be to impoverish most Americans and weaken the nation.
To read the entire article go to: http://www.huffingtonpost.com/carl-pope/the-big-lie-on-natural-ga_b_3327146.html?utm_hp_ref=greenShare This Post
Posted: 05/22/2013 4:03 pm
If you've noticed the rhetoric about the Keystone pipeline heating up lately, it's because the folks at the American Petroleum Institute are getting nervous.
The 500-member oil and gas industry group is behind the current "What Does it Take to Make America Run?" TV campaign seen during important broadcast news programs -- including on PBS. And that's just one of a long line of TV and print ads; the group also spent $7.3 million on lobbying last year, according to the Center for Responsive Politics.
But fighting a four-year PR battle against the reality of climate change isn't easy, so API brought in the big guns by hiring National Rifle Association lobbyist Christopher Rager
on May 2. Since the NRA was able to kill something as ambiguous as background
checks while the smell of gunpowder still lingered after the Connecticut mass shooting, API has apparently embraced their tactics.
The bigger picture in what prompted this move is that Jack Gerard, president and CEO of API, was a Mitt Romney backer -- hoping for a White House or Cabinet post -- and used the multimillion-dollar "Vote 4 Energy" campaign to support Romney. Within weeks of the 2012 election defeat, the miffed API regrouped with a new TV campaign targeting Senate Democrats up for re-election in 2014.
To read the entire article go to: http://www.huffingtonpost.com/da-barber/can-nra-tactics-sell-keys_b_3307329.html?utm_hp_ref=greenShare This Post
By Ucilia Wang | GigaOM.com, Published: May 21
This article originally appeared on GigaOM Pro, our premium research subscription service.
The Pacific Northwest National Laboratory has completed a study that comes up with two ways to use compressed air technology to store wind energy in underground chambers, the national lab said Monday. The two ways both use data and computer modelling to figure out the best sites that could successfully bank wind energy to be used at a later time.
Compressed air, as its name suggests, makes use of an electrically powered air compressor that sends pressurized air into a storage facility, which can be man-made or an underground reservoir. The pressurized air is let out later to run a turbine and generator to produce electricity. As much as 80 percent of the electricity used to compress air can be recovered when the pressurized air is used to generate energy, the lab said. Power losses are common when converting one form of energy to another.
Power in under ground caves
To read the entire article go to: http://www.washingtonpost.com/business/technology/using-data-and-computer-models-to-store-wind-energy-underground/2013/05/21/799c98d4-c1cc-11e2-9aa6-fc21ae807a8a_story.htmlShare This Post
by Chris Clarke
on May 21, 2013 2:08 PM
A report on the industry thinktank website The Energy Collective suggests that Pacific Gas & Electric might be the first U.S. power company to fall to competition with increasingly cheap rooftop solar.
Explainer: PACE Loans, Feed In Tariffs and Net Metering
Explained: Understanding Distributed Generation
What is...? The Grid
In his report, analyst Douglas Short points out that a confluence of factors contribute to what he sees as a bleak outlook for PG&E's future, including the utility's retail price structure for power, state laws, and good old California sunshine. Other analysts have called this looming threat to utilities the "death spiral": as rooftop solar gets cheaper and more people install it, utilities raise rates on non-solar customers, who then have greater incentive to install rooftop solar.
Understandably enough, PG&E disputes Short's bleak prognosis for the company -- but not his overall assessment of the issues.
Short puts it succinctly:
PG&E's marginal prices cannot compete with solar. Large residential customers pay 31¢-35¢/kWh [kilowatt-hour], the same prices that cause the solar revolutions in Hawaii and Australia. Even worse, according to PG&E, "By 2022, PG&E's top residential rate could reach 54 cents." Residential customers represent about 40 percent of PG&E's retail electric revenue.Share This Post
By Dale Kasler
Published: Wednesday, May. 22, 2013 - 12:00 am | Page 6B
California's heavy industries spent $280 million on greenhouse gas permits in the state's latest carbon auction – a sign to environmentalists that the controversial program is hitting its stride.
The California Air Resources Board, reporting on the results of its third carbon auction, said credits that allow polluters to emit greenhouse gases this year sold for $14 a ton. That's the highest price for any of the auctions.
Allowances for use in 2016 sold for the minimum $10.71 a ton. The auction was held last Thursday.
The auctions are an essential piece of the California cap- and-trade market, which is designed to reduce carbon emissions.
To read the entire article go to: http://www.sacbee.com/2013/05/22/5438313/carbon-auction-price-rises.htmlShare This Post
Tuesday, May 21, 2013
In California, the cost of carbon is starting to rise.
Last week, California held the third auction of greenhouse gas “allowances” under the state”s new cap-and-trade system, in which companies buy and sell permits to emit carbon dioxide.
A gently rising price is exactly what cap-and-trade supporters want. It gives businesses – such as operators of power plants, factories and oil refineries – a reason to cut their greenhouse gas emissions. At the same time, a slow increase won’t trigger sudden spikes in the cost of energy or consumer goods.
“We have solid reasons to be optimistic about California’s carbon market, and the continued growth of the clean energy economy,” wrote Emily Reyna with Environmental Defense Fund on the group’s web site. “The skeptics aren’t staying silent, but their case is losing steam.”
To read the entire article go to: http://blog.sfgate.com/energy/Share This Post
May 21, 2013
Gov. Jerry Brown's proposal to shift $500 million in cap-and-trade fees levied on business for greenhouse emissions into the state budget ran into bipartisan opposition Tuesday.
The two Democrats and one Republican on a Senate budget subcommittee denounced Brown's plan, which was included in a revision of his state budget last week.
The $500 million loan to the general fund is designed to partially offset the Brown administration's forecast that revenues will dip below earlier projections in the 2013-14 fiscal year by $1.8 billion, but members of the committee said it made little sense since the same budget proposes to repay some of the state's "wall of debt," which is mostly money owed to schools.
To read the entire article go to: http://blogs.sacbee.com/capitolalertlatest/2013/05/500-million-cap-and-trade-loan-to-state-hits-wall-of-opposition.htmlShare This Post
By Holly Smithson and Susan Frank
Special to The Bee
Published: Wednesday, May. 22, 2013 - 12:00 am | Page 13A
We had such high hopes in April.
California recently collected nearly half a billion dollars under its new emissions trading system, which "caps" industrial greenhouse gas emissions and requires firms to obtain pollution permits for every ton of carbon they emit. The state's unenviable next task was to choose among all the worthy options to meet the law's requirement to invest those proceeds in projects that further the goals of AB 32, the state's landmark clean energy law.
On the table were a host of impressive near- and long-term projects to advance clean and efficient energy; more bikeable, walkable communities; mass transit; the weatherization of low-income homes; and the all-important job-training programs to enable low-income Californians to take part in our growing clean energy economy.
Then came last Tuesday's announcement that these investments will likely have to wait. The governor's May revised budget disclosed plans to divert $500 million in cap-and-trade auction proceeds to the general fund. This transfer would be a one-time loan to be paid back with interest.
The Brown administration's rationale is that it wouldn't be "fiscally prudent" to start investing these funds when income from future auctions can't be predicted.
The underlying premise may be true, but the stakes are too high for such a drastic maneuver.
To read the entire article go to: http://www.sacbee.com/2013/05/22/5438341/brown-should-not-retreat-from.htmlShare This Post
Activists hope the pension giants will reinvest in sustainable energy
This article was published on 05.23.13.
Does your pension cause climate change? Demonstrators at last week’s Regents of the University of California meeting in Sacramento think so.
A movement is afoot to divest city pension funds and university endowments from fossil-fuel companies.
Organizers of the campaign, including local students and climate-change activists with 350.org, hope to tarnish the brands of oil, gas and coal companies. Ultimately, their goal is to move hundreds of billions of dollars from economic activities that cause climate change toward renewable, low-carbon investments.
California and Sacramento will be major battlegrounds.
Divestment activists are targeting California’s state pension systems, the California Public Employees’ Retirement System, or CalPERS, and the California State Teachers’ Retirement System, CalSTRS. Both have enormous holdings of fossil-fuel company stocks and bonds.
The University of California, which administers its own giant endowment and multiple pension funds, is also being pressed to ditch oil, gas and coal securities.
Last Thursday, students converged on the Regents governing board meeting at the Sacramento Convention Center.
“We’re hoping to convince the Regents to divest the UC system from the 200 largest publicly traded fossil-fuel companies,” said Ophir Bruck, a third-year UC Berkeley student who helped organize the action. “We’re not going to bankrupt these companies. It’s largely about hitting their reputation. …
“We want folks to associate their brand with the destruction of the Earth’s climate system.”
Sacramento-headquartered CalPERS manages the retirement investments for most of the Golden State’s city, county and state employees and has approximately $265 billion in assets under management. CalSTRS, also headquartered in Sacramento, has $164 billion invested.
Another group taking up the cause, California Teachers for Fossil Fuel Divestment, plans to press the CalPERS and CalSTRS boards to dump carbon-energy company securities.
“This will not be easy,” said Gary Waayers, a biology teacher from San Diego who founded California Teachers for Fossil Fuel Divestment. “Fossil fuels are a major part of the net worth of the planet, so divestment means divesting from a significant sector of the economy.”
CalPERS, the nation’s largest pension system, owns shares in at least 292 different companies involved in oil, gas and coal exploration, production, refining and transport. About 10 percent of the market value of CalPERS’ stock portfolio is fossil-fuel investments. The pension’s largest fossil-fuel stock picks are U.S. corporations Exxon Mobil Corp., Chevron Corp. and Schlumberger.
CalPERS also owns about $1.4 billion in oil, gas and coal company bonds. Through the bond market, CalPERS has financed the activities of companies like Nexen Inc., one of the largest exploiters of Canada’s massive oil sands.
CalPERS also owns tens of millions in company bonds financing TransCanada, which has battled environmentalists, landowners and scientists for a decade over its proposed Keystone XL pipeline, which would transport oil-sands extracts to Texas for global export.
The oil sands, thick deposits of bitumen and dirt from which oil can be extracted, can be refined into 168 billion barrels of oil. By comparison, Saudi Arabia has 264 billion barrels of reserves buried beneath it.
The scientific consensus is that if such vast reservoirs of oil are tapped and burned, climate change will very likely destroy the conditions for life on Earth, causing spikes in temperatures, massive droughts, wildfires, rising sea levels and other catastrophic transformations of the biosphere.
During last week’s Regents meeting, the university’s leaders received a presentation from UC researchers about climate change. Under a business-as-usual scenario, in which carbon reductions are not made, California’s Sierra Nevada snowpack will entirely disappear by 2050. Without mountain snow, California’s cities and agriculture will dry up, according to UC’s scientists.
Sacramento would become an uninhabitable desert.
Sabrina Fang, a spokeswoman for the American Petroleum Institute, said divestment by university endowments is misguided.
“The development of oil and natural gas in America has done more to create jobs and generate revenue than any other industry,” she said.
Fang pointed to a December 2012 study, commissioned by API, that showed oil and gas company investments as producing big returns for universities.
She called the current oil and gas boom in the United States an “unstoppable revolution … helping economic recovery.”
Climate activists have countered with their own research. A recent report by the Aperio Group, an investment-management company, urges endowments and pensions to “do the investment math” when it comes to the question of whether dumping fossil-fuel stocks negatively impacts earnings.
Aperio’s analysts conclude that “the impact may be far less significant than presumed,” and that exclusion of oil, gas and coal stocks is likely to change overall investment returns by only half-of-one-hudredth of a percent.
Another report, circulated by activists and written by the HSBC bank, says sticking with carbon-energy stocks is risky.
HSBC’s analysts note that much of the value of oil-, gas- and coal-company stocks is based on the presumption that these firms will tap and burn their proven reserves. If, however, governments act to reduce CO2 emissions and invest in new technologies to reduce demand, then the value of these stocks could plummet, sticking investors with big losses.
Activists say, however, that dumping dirty-energy stocks should only be the start for cities.
“I hope that in the end reinvestment will become an even bigger movement than divestment,” said Jamie Henn, a spokesperson for 350.org. “There are these huge pools of money sitting in college endowments and state pension funds that could be invested in ways that both deliver a good return and help the environment and community in the process.”
California’s massive pools of pension and university endowment wealth also have global reach. CalPERS money is invested in Russian energy giants like Gazprom and Lukoil and Brazil’s state oil company Petrobras. UC pension funds are tied up with European and Chinese oil and gas companies.
Neither CalPERS nor CalSTRS have taken up the issue of a possible move to divest from carbon-intensive-energy holdings. Bruck said he’s hoping his coalition can press the UC Regents to take up the issue in the fall and perhaps vote sometime next year.
Already seven UC campus student governments and the faculty Senate of UC Santa Barbara have voted in favor of divesting UC’s $71 billion in pension and endowment investments from fossil-fuel companies.
The total endowment holdings for the nation’s 831 largest colleges and universities is estimated to be $406 billion as of last year. Exxon Mobil alone has a market capitalization of $401 billion.
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He wants to move efficiency “way, way up” on the Energy Department’s list of priorities.
Stephen Lacey: May 21, 2013
Only three hours after getting sworn in as energy secretary, Dr. Ernest Moniz went to the Washington convention center this afternoon to deliver his first speech in office.
Secretary Moniz spoke to a crowd at the Energy Efficiency Global Forum about his upcoming agenda as secretary.
"Efficiency is going to be a big focus going forward," he said. "I just don't see the solutions to our biggest energy and environmental challenges without a very big demand-side response. That's why it's important to move this way, way up in our priorities." The audience applauded.
Moniz's decision to speak at an energy efficiency conference "speaks volumes about how important efficiency is" to his plans at the Department of Energy, said Kateri Callahan, president of the Alliance to Save Energy.Share This Post