Friday, March 29, 2013

Solar a Mortal Threat to Utilities

It appears that the public is waking up to the obvious threat that solar is to the status quo energy providers.  We live in an age of accelerating change and disruption.  I wrote last year about how solar will continue to expand rapidly into the general market regardless of what the utilities do to discourage it.  What today's Wall Street Journal piece means to me is that the national dialog will start to become even more rancorous with respect to clean energy issues.
David & Goliath -- Distributed Generation vs Traditional Utilities
Unfortunately, there is some truth to the fact that solar is currently only feasible for the wealthy and that federal tax credits could be seen as a transfer payment from average tax payers who can't afford solar to wealthy ones who can. The consequence of this dialog will be the elimination of federal and state incentives for distributed generation systems. Solar already has unsubsidized grid parity in many markets so growth their will continue to drive down the global costs for installing solar.  Companies like Solar City & Sun Run will have to re-model their current business plans, and I doubt they will weather the storm very well since their profitability is so tied to the current incentives.  New installation company concepts will emerge though and I think more traditional contractors will finally get into the game.
Utilities may go further and try to ban the connection of solar systems to the grid. Standalone solar with back up systems will be ready for the market by the time this happens though. Essentially this will be the last arrow in the utility's quiver to stop the rising tide of distributed solar. At that point, we'll probably cross the tipping point where they don't have enough rate payers to maintain affordable rates. Then things get really ugly.

While I am advocate for progress and technological innovation, crippled utilities will be a major issue for an already crippled political system to address. Add this difficult situation to the already huge list of complex issues that we don't seem to be able to effectively address (national debt, climate change, social security insolvency, resource depletion, population growth). The brinksmanship games we are playing will take on an entirely new dimension when we start to have daily brown outs and extended power outages.

Friday, March 1, 2013

The Dirty Side of Deregulated Energy

I've written about deregulated energy markets in a previous post.  While every deregulated state is not the same in how they run their energy programs, most often clean energy development needlessly suffers when clean energy tariffs are integrated with generation fees.
Distribution is not the same as generation--this matters to clean energy
To drill into this a little bit, we pay separate charges on our bills based on our consumption for generated energy and for the distribution of that energy to our location (there is also a flat metering charge).  Taxes and green energy tariffs are assessed on top of these fees based on the amount of energy consumed.  In a deregulated market, consumers have a choice of purchasing the generation portion of their bill from companies other than their local utility.  The local utility provides the distribution services (power line maintenance, service for power outages, billing, etc) regardless of where the power is purchased from.  This is good for consumers in that they can get the best price for their electricity and even get added value from companies like Power2Switch.

When clean energy tariffs originally went into effect, legislators associated them to generation which was logical since the clean energy fund was intended to mitigate environmental issues with coal, oil, gas, and nuclear generation plants.  As a consumer used more electricity, they would pay more into the fund to encourage better energy (seems fair to me).  Clean energy funds came about in the context of Renewable Portfolio Standards (RPS) which are self-imposed mandates requiring clean energy to make up a portion of total electrical generation.  With an RPS and clean energy fund, the idea is that more local clean energy systems would pop up to meet the RPS over time.
The sun is setting unnecessarily on some clean energy incentives
The wrinkle in this good plan is that with deregulated electricity, consumers pay money to companies outside of the original clean energy tariff structure for their generation so these tariffs don't get collected.  The consequence is that the funds for local solar and wind projects dry up as is happening in Illinois right now.  The easy fix is to shift the clean energy tariffs to the distribution portion of the electricity bill since that money is paid to utilities within the RPS umbrella.  Rate payers don't pay anymore on their bills than they originally would have and local clean energy gets the boost it was intended to get.

Legislation, like making sausage, is typically an ugly process.  This is a unique example of a simple fix that will have significant positive benefits for us all.  I encourage my fellow Illini to support the bill to fix the Illinois RPS.