eenergy informer - energy economics · while evs, pvs and storage are not suitable or...

June 2015 EEnergy Informer

19

In this issue

From Scarcity To Abundance Of Power ............................................................................................................................... Forget Peak Oil, Focus On Peak Demand ............................................................................................................................ What Utility Future, Which Business Model? ..................................................................................................................... Tesla: Future Is On The Wall................................................................................................................................................ DOE: Future Is Resilient Energy Infrastructure .................................................................................................................... MIT: Future Is Solar ............................................................................................................................................................. NREL: Future Is Not Just Any Solar But Shared Solar ........................................................................................................... Borenstein: Future Not Necessarily Distributed? ................................................................................................................ When All Else Fails Gold Plate The Network ....................................................................................................................... California Tinkering With Residential Rates ........................................................................................................................ Learning To Live With Over-generation .............................................................................................................................. Zero Net Energy Homes: Here Today, Affordable Tomorrow ............................................................................................. Book review - Electricity vs. Fire: The Fight For Our Future ........................................................................................... Distributed Generation and its Implications for the Utility Industry ..............................................................................

1

3

5 8

10 12

15 16

18 21 24 25 26 30

From Scarcity To Abundance Of Power The only certainty is change, now at a faster pace

t is hard to believe how quickly things can change, even in the lethargic energy and power sector

where nothing seems to change, or when it does, change takes place at a glacial speed. In fact, the

expression glacial speed, is no longer what it used to mean since some glaciers are apparently

disappearing at a rather fast pace.

The most talked about change, of course, is the global oil glut coupled with prices far below their recent

highs. US Energy Information Administration recently reported that there is virtually no place to store

the excess oil inventories in the US. This has led to proposals to lift the embargo against exporting

domestic US oil – a moot point since there is relatively little demand for the stuff elsewhere – including in

China, where oil

consumption may be

peaking a lot sooner

than many had predicted

as described in article on

page 3.

OPEC’s latest

projections do not see

oil prices returning to

$100 per barrel any time

soon. If true, many oil

majors who have

invested billions in

expensive upstream

exploration and

development projects

probably wished they

hadn’t. There is

I

EEnergy Informer The International Energy Newsletter

June 2015

EEnergy Informer June 2015 Vol. 25, No. 6 ISSN: 1084-0419 http://www.eenergyinformer.com

Subscription options/prices on last page Copyright © 2015. The content of this newsletter is protected under US copyright laws. No part of this publication may be copied, reproduced or disseminated in any form without prior permission of the publisher.

How long before oil prices rebound?

Source: U.S. Energy Information Administration, Annual Energy Outlook 2015 (interactive table viewer)

http://www.eenergyinformer.com/

http://www.eia.gov/forecasts/AEO/

http://www.eia.gov/beta/aeo/#/?id=14-AEO2015&region=0-0&cases=ref2015%7Ehighprice%7Elowprice%7Ehighresource&start=2012&end=2040&f=A&linechart=%7E14-AEO2015.8.highprice-d021915a%7E14-AEO2015.8.highresource-d021915b%7E14-AEO2015.8.lowprice-d021915a%7E14-AEO2015.8.ref2015-d021915a&map=&

2 June 2015 EEnergy Informer

speculation that some of the investments may become stranded should oil prices remain low for long

(graph bottom of page). Historically, however, everyone knows that oil prices tend to be volatile,

surprising all as they bounce around. The question is when will they bounce back and how much?

The Energy Information

Administration (EIA),

generally cautious, explores the

effects of domestic US crude oil

production under various

assumptions about world oil

prices and domestic resource

availability in its latest Annual

Energy Outlook 2015 (graph

on front page). It expects US

crude oil production to rise

through 2020 as oil prices

recover from their steep decline,

reducing net petroleum imports.

Not long ago, there were

proposals to build half a dozen

or more liquefied natural gas

(LNG) import terminals in the

US due to projections of an impending serious shortfall of natural gas. US is now flooded with excess

natural gas, which has kept prices low compared to international standards. Department of Energy

(DOE) has awarded permits to build at least 5 liquefied natural gas (LNG) terminals (map above) – not

to import but to export natural gas.

The pace of change in the electric power sector has been short of incredible, including significant

increases in renewable generation in numerous countries prompted by rapidly falling prices just as

electricity demand growth seems to have come to a virtual stand-still in many places, resulting in

depressed wholesale prices and challenges of integrating growing amounts of intermittent renewable

generation while maintaining grid’s reliability.

In the meantime, technological advancements in distributed generation, notably rooftop solar PVs,

micro-grids, home energy management and energy storage systems – large- as well as small-scale –

are threatening the viability of

traditional utility business model –

which remains largely if not

exclusively dependent on growing

volumetric consumption.

In April 2015, Tesla’s flamboyant

CEO Elon Musk announced the

introduction of Power Wall, a

stand-alone battery storage system

that combined with an over-sized

rooftop solar PV installation and an

electric vehicle (EV) could turn

many a customers into virtually self-

sufficient powerhouses. While EVs,

PVs and storage are not suitable or

cost-effective for everyone, the mere

LNG terminals to export gas, not import U.S. LNG export terminals approved for construction

Source: Natural Gas Weekly Update, EIA.gov/natural gas/weekly

Stranded investments?

Source: Big oil faces disruptive change of climate, Liam Denning, The Wall Street Journal 7 May 2015


suggestion that growing numbers of consumers could turn into prosumers with little need to buy very

many kWhrs from the existing grid is not welcomed news for most utility executives as further described

in article on page 8.

These developments also put regulators in a difficult bind as they must decide how best to balance the

needs of the PV/EV haves and have nots. Not everyone is convinced that the future of electric power

sector is distributed – as explained in article on page xx – while some customers or groups of customers

could easily get by with far less reliance on the centralized grid.

Against this background, there is continued pressure to move away from carbon-rich fossil fuels – with

some experts suggesting that humanity must ultimately abandon fire altogether, as in this month’s book

review on page 26.

Activists pushing large pension funds to divest of fossil fuel holdings – whatever that means – are getting

some traction as a handful of universities and a few funds have decided to abandon certain carbon-heavy

investments. In early May 2015, for example, Norges Bank Investment Management, Norway’s

sovereign wealth fund, the world’s largest, under pressure from the Norwegian Parliament, reported that it

had divested its investments in companies “that only produce coal.”

Many environmentalists are hopeful that this year’s Conference of Parties (COP) in December in Paris

may provide a degree of clarity on longer-term restrictions on global greenhouse gas emissions.

Several articles in this issue explore the implication of these developments – not that anyone knows for

certain what they may be.

Forget Peak Oil, Focus On Peak Demand More experts agree that era of ever growing oil demand may be numbered

or a while, pundits have been suggesting that the historical focus on peak oil, initially popularized

by geologist King Hubbert in the 1950s, like so many other accepted wisdom of bygone days, is

outdated if not plain silly. As former Saudi Oil Minister Sheik Zaki Yamani is famously credited

as saying, the Stone Age did not end because man ran out of stones. By the same token, the era of

oil’s supremacy may wane in the coming decades as other energy sources, notably renewables combined

with more efficient use of energy, ultimately reduce the demand for oil.

This, of course, is not a scenario

favored by Saudis or other

OPEC members, nor by oil

majors whose livelihood

depends on ever growing

demand for petroleum products,

or Alberta’s tar sand

developers or those engaged in

biofuels, especially if they

compete with food production at

a time of growing water

scarcity, not to mention land

and other resources.

That, nevertheless, is the theme

of an article in the 6 May 2015

F

What peak oil?

Source: The Economist based on data from BP


issue of the Wall Street Journal by Amy Jaffe, the Ex. Dir. of Energy & Sustainability at Univ. of

California at Davis. Questioning the accepted conventional wisdom, Jaffe says,

“But I believe this forecast (i.e., continued global demand growth as illustrated on graph below)

misses on both fronts—underestimating the extent of the decline in demand for oil in the

developed world and overestimating the extent of the rise in the developing countries.”

Jaffe’s reasons are not dissimilar to a number of other experts who

have examined the future of global demand for oil, or more

broadly, energy against a background of fundamental changes on

the demand side of the equation, namely the fact that global thirst

for oil will gradually diminish as cars become more efficient,

replaced by electric vehicles, and ultimately by mass transportation

options in congested urban cities where owning a car is increasingly

becoming a nuisance rather than a convenience.

Comparing the cost of an occasional ride using Uber against

expensive parking, congested streets, insurance, gas, maintenance

and license fees in any major city in the US would favor the former.

As time goes on, more people are likely to rely on mass transit –

which will ultimately be the only viable option to get around the

mega cities of the future.

Jaffe observes (highlighting and italics added),

“Signs of change are already apparent. Most everyone

agrees, for instance, that a combination of policy

inducements, energy taxes and technological

breakthroughs has resulted in a peak in oil demand in the largest industrialized economies.

Europe’s oil use last year hit its lowest level since the mid-1990s. The US Energy Information

Administration declared 2007 as the peak year for oil use in the US (graph below), with demand

expected to fall by between

1.8 million and 2.7 million

barrels a day by 2035 based

on improvements in

automotive efficiency and

demographic trends.”

“Moreover, signs are

emerging of slowing oil

demand even in China,

which has been the biggest

source of growth in

consumption over the past

decade. Diesel demand in

China fell in each of the past

two years, raising doubts

about how much longer

China’s economy will require a growing supply of oil. China Petroleum & Chemical Corp.,

one of China’s largest fuel marketers, recently said on a call with analysts that China’s diesel

demand could peak by 2017 and gasoline by 2025 as the country transitions to less-energy-

intensive activities and sees through an aggressive national energy policy that promotes

renewable energy and advanced automotive technology at home and for export.”

Conventional view: In need of re-assessment

Source: Never mind peak oil – Here comes peak demand, Amy Jaffe, The Wall Street Journal 6 May 2015

Peak oil demand: 2007 in US, to be followed in more countries around the world



Looking at the global oil demand, Jaffe

says (highlighting added),

“The world’s economy is experiencing

transformational changes that, I believe,

will dramatically alter patterns of energy

use over the next 20 years. Exponential

gains in industrial productivity,

software-assisted logistics, rapid

urbanization, increased political turmoil

in key regions of the developing world, and large bets on

renewable energy are among the many factors that will

combine to slow the previous breakneck growth for oil.”

“The result, in my opinion, is as startling as it is world-

changing: Global oil demand will peak within the next two

decades.”

“None of this is set in stone, of course. A lot could change in the

coming years—economically, politically, technologically—that

could alter the oil-demand equation. But as Paris climate talks

approach, governments around the world will be working to

highlight their energy-efficiency policies and sharing information

on how to lower oil intensity for the global economy. Whatever

collective gains they make could seal the deal for peak demand.”

WSJ article

What Utility Future, Which Business Model? The questions everyone wants to know the answers to

he preceding article described some of the reasons why demand for oil may not grow as fast as it

used to, if at all, as is already evident in the US and much of Europe. As counter-intuitive as this

may appear, it gets even worse for future electricity demand growth. Not only do many of the

same fundamental drivers – such as more efficient appliances, lighting, motors, etc. – erode

industry sales, but a sub-class of consumers can in fact generate some or all of their electricity needs

through distributed self-generation, say from rooftop PVs.

And as the cost of distributed generation falls over time, more or less a given, and as storage

technologies become affordable, more consumers may be enticed to become prosumers. Since regulation

in many parts of the world currently provides generous subsidies such as net energy metering (NEM)

schemes, distributed self-generation is not only cost-effective; it is a bargain few consumers can resist.

T

Driving a little more, consuming a lot less


More productive, less fuel thirsty


http://www.wsj.com/articles/why-the-worlds-appetite-for-oil-will-peak-soon-1430881507


The combination of consuming less while producing more is likely to result in lower sales volume and

falling revenues for the incumbent utilities. There is no parallel in case of oil, natural gas or coal since

virtually no customer can self-generate.

Many within and outside the industry, of course, are sympathetic to the plight of the incumbents –

generators as well as those in

transmission and distribution –

who, by and large, historically

recovered their costs through

volumetric tariffs. Fewer kWhrs

means lower sales and falling

profits.

The parallels to oil industry, of

course, break down quickly since

certain segments of power sector

are considered natural

monopolies and are universally

regulated even in so-called de-

regulated or competitive markets.

In the oil business, on the other hand, companies like Exxon, Chevron or BP do not charge monthly

service fees to recover the substantial costs associated with their extensive distribution and retailing

networks. Nor can United Airlines or Lufthansa charge a fixed fee for maintaining their extensive global

network.

Naturally, a great deal of effort is going into predicting how these developments may define the future of

Forces of transformation according to PwC

Source: The road ahead: Gaining momentum from energy transformation, PwC global power & utilities

Future less predictable

Source: The road ahead, PwC global power & utilities


the power sector, impact incumbent players while creating opportunities for new entrants.

Among these is a recently released

report by PwC global power &

utilities titled the road ahead:

Gaining momentum from energy

transformation, which describes the

main drivers of industry

transformation and how they may

interact with one another over time.

According to the PwC,

“Global megatrends – such as

technological breakthroughs, rapid

urbanization and resource shifts – are

creating new opportunities and

challenges in customer behavior, new

forms of competition, different

generation models, and regulatory changes that could quickly eclipse current company and

country strategies."

Clearly, the power sector is entering unchartered territory where the outcome is not entirely predictable.

In fact PwC claims that the future is virtually unpredictable depending on what assumptions are made and

which country or part of the world one is dealing with. What applies in Germany or Denmark may not

be the same as in Texas, California or New York, for example.

Since the important variables are

likely to play differently in

different regimes and be

influenced differently by the

prevailing regulatory and policy

framework, the outcome is likely

to differ widely. Moreover,

depending on how incumbents

and new entrants play their cards

and position themselves the

winners and losers will differ.

The PwC report observes:

First, existing

generation assets

could be left

stranded as local energy systems and self-generation by customers "eat away at" the

traditional centralized grid and large-scale generation model;

Second, the expected transformation could shrink the role of some utility companies to

providers of back-up power;

Third, developing countries may "leapfrog" conventional centralized system models in favor

of local energy systems; and

Fourth, existing grid and network systems may be unable to rapidly evolve to meet the needs

of decentralized assets – delaying the adoption of advanced technologies.

New market paradigm will depend on sum of its components & more


Pick a business model that fits, and run with it



According to the PwC:

"It's not a question of

whether new market

models will take shape, as

this is already happening,

but which new business

models will be pursued in

the sector and what

countries and regulators

will do to increase access

to reliable electricity

supply and what existing

power utilities will do to

keep up with the change

and alter their course."

Any number of market models could emerge including:

Markets in which governments own and operate certain aspects of the business while

mandating the adoption of renewable generation;

Ultra-distributed generation markets where generators invest in distributed generation;

Localized energy markets where local communities demand greater control over their energy

supply; or

Regional super grids with large-scale renewable generation, storage and transmission

capacity.

As PwC sees it, one of these models will not necessarily win out over the others or different models may

emerge in different countries depending on the circumstances. It speculates that incumbent players may

not be as nimble or focused as some new entrants – a polite way to say they may be disadvantaged

relative to the new players. On the other hand, the incumbents currently enjoy a number of advantages –

e.g., existing assets, customer relationships – which may prove valuable in fostering new partnerships.

PwC Report

Tesla: Future Is On The Wall Will affordable storage be a game changer?

n 1 May 2015 at the company’s design studio in Hawthorne, California, Elon Musk, the

mercurial CEO of Tesla Motors Inc. unveiled a battery pack that can store electricity for homes

and small businesses, boasting, “Our goal here is to fundamentally change the way the world

uses energy,” adding, “We’re talking at the terawatt scale. The goal is complete transformation

of the entire energy infrastructure of the world.”

Nobody can accuse Mr. Musk for being modest. The company he founded in 2003 now has a market

capitalization of $31 billion. Needless to say, the news went viral.

Tesla’s home battery, named Powerwall, is a rechargeable lithium-ion battery that mounts on the wall

and comes in 7 to 10 kWh versions with deliveries starting in late summer at prices starting from $3,000.

O

Business focus depends on the model


http://www.apo-mail.org/150422.pdf


What makes Powerwall battery exciting is that it

allow customers to shift load by charging during

times when electricity prices are low and

discharging when prices are high.

In its home state of California, there is now serious

talk about super-off peak and super-peak time of

use (TOU) tariffs – with significant differentials

between them (article on page 21). An affordable

storage device, not to mention an electric vehicle

with a large battery, will become real handy to take

advantage of such price differentials.

More important, it can store power generated from

rooftop solar panels during sunny days and release

it at night while providing backup during outages. If

all goes according to plan, a homeowner with

sufficient amount of solar panels can become

virtually self-sufficient, storing excess generation

for use when the sun goes down.

The average American home consumes about 30 kWh of energy a day, according to the Energy

Information Administration. Musk said the Powerwall batteries will come in different colors and sizes

to fit the needs of different customers and designed to look like “a beautiful sculpture on the wall.”

Tesla, whose batteries are already supplying large customers like Wal-Mart Stores Inc., Cargill Inc.,

and a number of others, has formed partnerships with companies including Green Mountain Power to

sell its home batteries. Tesla said it is teaming with Southern California Edison (SCE), the second

largest investor-owned utility in California, to install batteries for utilities, while Amazon.com Inc. and

Target Corp. will begin testing its batteries for business use. Tesla’s utility-scale battery will consist of

100 kWh blocks that can be grouped to a scale of 500 kWh to more than 10 MWh.

Elon Musk, who is a major investor of SolarCity and is related to its CEO, will offer its batteries to

SolarCity customers – it is a strategic

partnership that makes a lot of sense. The

battery “replaces noisy, dirty fossil-fuel

generators with zero-emission storage

technology,” according to SolarCity,

which began taking orders for the Tesla

batteries immediately after the

announcement and expects to begin

installing them in October 2015.

Tesla’s $5 billion mega-factory under

construction near Reno, Nevada is

expected to deliver lots of batteries at costs

reportedly 30% less than the current ones

used in Tesla’s own cars.

There are, of course, lots of ifs and buts

that need to be sorted out, yet some interpreted Tesla’s announcement tantamount to a death spell for

traditional utility business model.

It is called Powerwall, not the guy, the battery

Source: The Wall Street Journal 2 May 2015

Source: The Wall Street Journal 2 May 2015


For some time, pundits have been predicting that PVs + EVs – that is distributed generation plus storage –

will be the disruptive change that will shake up the traditional utility business model, whose livelihood

has been on generating and delivering large amounts of kWhs to customers. If customers can generate

most of what they need as envisioned by Teslas and SolarCities, what role do “traditional” utilities play?

As this editor sees it, technological advancements such as Tesla’s fabulous electric cars, its Powerwall

and SolarCity’s no upfront investment PV leasing

business are indeed game changers, disrupting the

utility business model at its core.

But as Borenstein observes (article on page 16), the

distributed generation and storage model is not suitable

or cost-effective for everyone – just as Tesla’s beautiful

but pricy cars are not for everyone. Tusk and his cousin

at SolarCity are clever and will undoubtedly inflict

serious pain on the incumbent utilities by taking away

some of their best customers – just as Tesla’s $75,000

Model S is inflicting pain on traditional automakers.

But would apartment dwellers residing in dense high-

rises in mega cities with minimal electricity usage, no

roofs and no cars be as interested in Powerwall or a

Tesla or solar panels?

This goes to the core of the current debate on the future of utility industry – the topic of so much

speculation and confusion at the moment – hence multiple related articles in the current issue of EEnergy

Informer.

DOE: Future Is Resilient Energy Infrastructure First quadrennial energy review is big on infrastructure

veryone, it seems, is talking

about rapid change and the

need to keep up. In the first

installment of the quadrennial

energy review (QER) released in

April 2015, the US Department of

Energy (DOE) is focused on the

infrastructure for energy

transmission, storage and

distribution (TS&D), broadly defined

as infrastructure that links energy

supplies, carriers, or by-products to

intermediate and end users.

At a press event on 21 April 2015 at

PECO in Philadelphia, Vice President

Joe Biden, Secretary of Energy

Ernest Moniz and Policy Director of

White House office of Science &

Technology John Holdren

E

Solar PVs come in all sizes with growth in all

Source: Alex Klein, special section on CERA week in The Wall Street Journal, 21 April 2015

Energy infrastructure covers quite a bit

Source: Quadrennial Energy Review, US DOE, April 2015


characterized the report as the Obama

Administration’s blueprint to

modernize the US energy

infrastructure, create a clean energy

economy built to last, combat climate

change, and increase reliance on

domestic energy resources, including

the renewable variety.

While the QER covers all forms or

energy, quite a bit of space is devoted

to the electricity sector – undergoing

fundamental transformation along its

long value change.

The report starts by stating the

obvious. Yet it is striking how rapid

the pace of change has been. The first

3 paragraphs in the Executive

Summary for Policymakers pretty much capture the flavor of the QER:

“The U.S. energy landscape is changing. The United States has become the world’s leading producer of oil and natural gas combined. The country is less dependent on foreign oil, as a percentage of national oil consumption, than it has been since 1971. Current cars can go farther on a gallon of gas than ever before. Between 2005 and 2014, U.S. consumption of motor

gasoline fell 2.6% despite population growth of 7.6% and gross domestic product growth of 13.0%. Additionally, as a result of changes in economic structure and conditions and policies to promote energy efficiency, U.S. electricity consumption was flat over that 10-year period and total energy use declined by 1.9%.”

“The composition of the Nation’s energy supply has also started to shift:

Whatever else, less carbon for US


Big storms, big interruptions, billion dollar headaches


More, not less, grid investments by US utilities



petroleum consumption is flat and coal consumption is declining, while the use of natural gas and renewables is growing. In 2014, renewable energy sources accounted for half of new installed electric-generation capacity, and natural gas units made up most of the remainder. Electricity generation from wind grew 3.3-fold between 2008 and 2014, and electricity generation from solar energy grew more than 20-fold.” “The focus of U.S. energy policy discussions has shifted from worries about rising oil imports and high gasoline prices to debates about how much and what kinds of US energy should be exported, concerns about the safety of transporting large quantities of domestic crude oil by rail, and the overriding question of what changes in patterns of US energy supply and demand will be needed—and how they can be achieved—for the US to do its part in meeting the global climate change challenge.”

The QER is about the big

stuff that matters at a high

level of abstraction – yet it

dives into what needs to be

done to achieve them from a

policy, regulatory and

investment perspective. What

is not entirely clear, however,

is how would DOE, with its

weak mandate spread thin

among many areas, be able to

deliver or encourage others to

deliver on these lofty goals.

The report, however, picks

the correct issues that need to

be dealt with, even if it does not have a strong mandate to implement change or influence investments. If

this were China, with its central planning bureaucracy, it would be a different story.

QER’s main recommendations, all requiring legislative endorsement, are grouped under 5 categories as

illustrated in visual above right. It sounds sensible. What is there not to like?

Energy Review

MIT: Future Is Solar The sheer scale of solar resource suggests it may ultimately prevail

entral to the debate about the fundamental drivers of change is where the required energy to

power the globe will be coming from, from what source and in what form. The answer depends

on who you ask. The fossil fuel industry – oil, gas, coal – would want you to believe that when it

is all said and done, they will be the ones who will fill the car tank and keep the lights on –

climate be damned. The nuclear people would want you to switch all electricity generation and much of

the transportation sector to atom. The renewable proponents say the answer is ultimately renewable, and

the sooner the better.

A May 2015 report by Massachusetts Institute of Technology (MIT), titled The Future of Solar

Energy, might as well been called the “future of energy is solar.” And it is not hard to see why.

C

What is there not to like?


http://energy.gov/sites/prod/files/2015/04/f22/QER%20Summary%20final_1.pdf


For a start, there is so much of it everywhere. The report points out that the “solar resource is massive by

any standard.” Covering 0.4% of US land with today’s technology will provide sufficient electricity to

meet US demand. Not impressed? Consider the fact that this is roughly half of the land area currently

devoted to produce corn for production of ethanol, which contributes barely 7% of the energy content of

US gasoline. That much to give you a sense of solar’s potential scale.

Everybody, of course, knows the drawbacks of solar, namely the fact that it is diffused and it is only

available when and where the sun is shining, which is not all the time or everywhere. Additionally, one

needs to deal with integration, intermittency, costs and a host of other issues.

The opening sentence in the report’s Executive Summary says,

Getting better all the time Best research cell efficiencies

Source: The future of solar energy: An interdisciplinary MIT Study, May 2015

US growth potential Cumulative Grid-Connected PV Capacity by State Annual U.S. PV Installations by Market Segment



“Solar electricity generation is one of very few low-carbon energy technologies with the potential

to grow to very large scale.”

The study is focused on 3 main issues:

Reducing the cost of installed solar capacity;

Ensuring the availability of technologies that can support expansion to very large

scale at low cost; and

Easing the integration of solar generation into existing electric systems.

MIT’s dense 356-page report

achieves this and much more. It is

comprehensive and technical – as

one would expect from MIT. It

covers the in and out, the why and

when, and the what ifs of solar

energy.

Its summary for “policymakers”

reads:

“The main goal of US solar policy

should be to build the foundation for

a massive scale-up of solar

generation over the next few

decades.”

It does not say how massive the scale-up should be or over what time period, other than the vague

reference to “next-few decades.”

It notes that small-scale solar, such as those on residential and commercial rooftops, is nowhere as

economical as utility-scale. Yet each offers advantages. It also points out that the balance of system costs

– that is everything other than the PV panels – constitute an important part in the overall cost and should

receive more attention than they have received in the past (graphs below).

Among its many findings, the report notes that the third-party ownership model, popularized by the

likes of SolarCity, has been a game-changer for the residential solar market and points out that it is

currently allowed in about half of the country – stating “residential solar would expand more rapidly if

Falling costs Average U.S. Prices for Residential and Utility-Scale PV Systems


Balance of system costs Stair Step Build-Up of Estimated Costs for a Utility-Scale PV System Stair Step Build-Up of Estimated Costs for a Residential PV System



third-party ownership were allowed in more states.”

Without taking sides, MIT report states that utilities have been challenged by the rapid uptake of rooftop

solar with a few – most notably Arizona’s Salt River Project – introducing additional fixed charges on

solar customers. The study acknowledges that net energy metering (NEM) schemes “result in a subsidy

to residential and other distributed solar generators that is paid by other customers on the network.”

Yet it adds that not everyone agrees that net metering programs are a net burden to the network or to non-

solar customers. It refers to a 2014 study for Nevada Public Utilities Commission by Energy and

Environmental Economics (E3), a San Francisco based consultancy, that concluded that a carefully

designed NEM program can support self-generation without creating a burden on non-participants.

It is not the sort of reading that is well-suited for the beach, but timely and comprehensive while avoiding

the hyperbole.

MIT Study

NREL: The Future Is Not Just Any Solar But Shared Solar Not everyone has a roof big enough to catch enough sun

olar potential, as everyone knows, is huge and its costs are rapidly falling. That explains the recent

growth in both utility- and small-scale solar installations world-wide. Among the limitations of

distributed solar is the fact that not everyone has a roof, or a roof that is big enough, or directed at

the right angle to receive adequate sunshine. Many city dwellers, for example, live in high-rise

apartments with very little roof for multiple residents.

This restriction alone means

that densely populated cities

such as Hong Kong, Tokyo,

Seoul, London or New York

simply don’t have sufficient

rooftops for the number of

residents, limiting how much

distributed solar generation

can be installed.

Even in the US, which enjoys

large open space relatively to

the size of its population, an

estimated 49% of households

and 48% of businesses are

currently unable to host a PV

system of adequate size to

meet their full electrical needs,

according to the National

Renewable Energy

Laboratory (NREL).

The obvious solution? Shared

solar, where multiple parties

share the benefits of on- or off-site PV arrays. A recent NREL report concludes that shared solar has the

S Share the sun even when there is no roof Four different community solar business models

Source: Shared Solar: Current Landscape, Market Potential, and the Impact of Federal Securities Regulation, NREL, Apr 2015

https://mitei.mit.edu/system/files/MIT%20Future%20of%20Solar%20Energy%20Study_compressed.pdf


potential to dramatically expand solar energy access for residents and businesses across the US – and

everywhere else – while offering opportunities for utilities to play a greater role in the transition to a low-

carbon economy.

For shared solar to reach its

ultimate potential, however, one

needs new business models,

regulatory reform and

clarification – plus the obvious

technological advances and

lower costs, according to

NREL’s April 2015 report,

Shared Solar: Current

Landscape, Market Potential,

and the Impact of Federal

Securities Regulation.

According to the report’s

executive summary,

“Fundamentally, these (shared solar) models remove the need for a spatial one-to-one mapping

between distributed solar arrays and the energy consumers who receive their electricity or

monetary benefits.”

“Options such as off-site shared solar and arrays on

multi-unit buildings can enable rapid, widespread

market growth by increasing access to renewables

on readily available sites, potentially lowering costs

via economies of scale, pooling customer demand,

and fostering business model and technical

innovations.”

“Shared solar could represent 32-49% of the

distributed PV market in 2020, growing cumulative

PV deployment in 2015-2020 by 5.5-11.0 GW and

representing $8.2-$16.3 billion of cumulative

investment.”

The most significant aspect of shared solar schemes may be

that it offer the incumbent utility to play a role – possibly a central role – by recruiting and aggregating

customers, managing installation, maintaining and sharing the resulting savings based on a viable

business model that makes everyone happy. NREL Report

Borenstein: Future Is Not Necessarily Distributed Incentives for distributed solar should reflect true costs, and benefits

n a blog posted on 4 May 2015, Severin Borenstein, a Professor at University of California

Berkeley’s Haas School, asks, “Is the future of electricity generation really distributed?” From

the way the question is posed, one can surmise that the answer is not necessarily. And Borenstein I

More sun to go around Estimated PV market potential of onsite and shared solar distributed PV capacity

Source: Shared Solar: Current Landscape, Market Potential, and the Impact of Federal Securities Regulation, NREL, Apr 2015

Not everyone has a roof U.S. households by units in structure, stories in structure, and renter/owner occupation

Source: Shared Solar, NREL, Apr 2015

http://www.nrel.gov/docs/fy15osti/63892.pdf


makes a number of insightful observations to support his conclusion. The blog is certainly worth a read.

Excerpts follow.

To start off, Borenstein declares that he is not fond of distributed generation:

“I’m sorry, but count me among the people who get no special thrill from making our own shoes,

roasting our own coffee, or generating our own electricity. I don’t think my house should be

energy independent any more than it should be food independent or clothing

independent. Advanced economies around the world have gotten to be advanced economies by

taking advantage of economies of scale, not by encouraging every household to be self-

sufficient.”

“That’s not to

say that

distributed

generation (DG)

couldn’t be the

best way for

some people at

some locations

to adopt

renewables, but

simply that DG

should not be the

goal in itself.”

“Compared to

grid-scale

renewables, DG solar has many advantages. Generating and consuming power onsite means no

line losses, which typically dissipate 7-9% of grid-generated electricity before the power gets to

your house.”

“But DG also has some serious drawbacks. The first and foremost is that design, installation and

maintenance of solar PV small rooftop by small rooftop costs a lot more per kilowatt-hour

generated than grid-scale solar,

probably about twice as much these

days.”

“How do these pros and cons sort

out? Right now, I believe that

residential solar loses to grid

scale. But I’m not convinced that

will always be true. And I don’t

think that means households should

be impeded from adopting DG solar

today, just that we shouldn’t be

giving it special incentives. We

need to recognize that DG’s role in

the electricity future is uncertain

and locking in on this (or any other)

technology is unwise.”

Panels on the roof: Feels good, gives you something to brag about, but does it make good economic sense?

https://energyathaas.files.wordpress.com/2015/05/solarinstallcapacity.png


“Well, then, how should we decide whether to go with DG renewables or grid-scale

technologies? We shouldn’t decide. Instead we should design incentives that reflect the real

benefits and costs of each type of system and then let them battle it out. This has two big

advantages. First, it reduces the political fighting that comes with policymakers choosing one

technology over another … . Second, it pushes all alternative technologies to keep innovating and

lowering their costs.”

“ … we should craft incentives that accurately reflect the net benefits each alternative technology

offers. I’m not sure exactly how those incentives should be structured. But I can tell you that they

don’t involve paying households retail rates for power injected into the system as net metering

policies currently do.”

“They (should) include

much greater use of

time-varying pricing and,

probably, location-

varying pricing to reflect

the real value of power

on the grid.”

“If DG solar with

incentives that reflect its

true benefits wins, that

will be great, because we

will know we’ve got the

least-cost approach to

reducing the externalities

of electricity generation. If it sputters, that will be fine too, because it will indicate that there are

other less-expensive ways to achieve our environmental goals. Either way, it’s time for incentives

that are truly calibrated to costs and benefits, not to achieving penetration of one low-carbon

technology over another.”

Borenstein’s Blog

When All Else Fails, Gold Plate The Network A time-tested way for regulated utilities to make money survives

n 1962 two economists, Harvey Averch and Leland Johnson, wrote an article in the American

Economic Review titled Behavior of firm under regulatory constraint. It is a classic, frequently

cited by researchers and academics to this day. Among a number of important observations, the

authors stated that firms under rate of return (ROR) regulation tend to err to over-invest in capital –

all else being equal – apologies for the rough characterization of original text. Simple explanation? A

regulated firm operating under ROR, where the return on investments are set by the regulator, would be

better off the more it has invested in assets. The more it has in its so called rate base, the more it is

allowed to earn.

The practice is called gold plating – and it is a time-tested way for regulated utilities to make money,

especially if the regulator is not vigilant, is incompetent, understaffed, not sufficiently motived, or a

I

Utility scale solar: Far more economical

The 550 MW Topaz Solar Farm in San Luis Obispo County, California

https://energyathaas.wordpress.com/2015/05/04/is-the-future-of-electricity-generation-really-distributed/


combination of the above. Another problem is the fact the regulator, even when watchful and competent,

does not know as much about the condition of assets, their performance, efficiency or what needs to be

replaced or upgraded and when.

Unfortunately for utility’s customers, one or more of these conditions frequently applies, which explains

why regulated utilities have a tendency to gold plate and over-invest if they can get away with it – as they

often do.

An article in the 21 April 2015 issue of the Wall Street Journal titled Utilities’ Profit Recipe: Spend

More, suggests that the practice is alive and well. And it says utility customers are paying for it – who

else? The practice, by the way, is not unique to American utility companies as Australians, for example,

would agree.

According to the Energy

Information Administration (EIA),

the average price of a kilowatt-hour of

electricity in US rose 3.1% in 2014 to

12.5 cents a kilowatt-hour, far above

the rate of inflation. Since 2004, US

residential electricity prices have

jumped 39%. The explanation?

“Over that same period, annual capital

expenditures by investor-owned

utility companies more than

doubled—jumping to $103 billion in

2014 from $41 billion in 2004,

according to the Edison Electric

Institute (EEI), a trade association.

The group expects total capital

spending from 2003 through 2016 to

top $1 trillion.”

“This is the biggest splurge in capital

spending we’ve seen in at least 30 years—it’s the reason rates have been going up,” said Bob

Burns, an independent consultant and former energy researcher at Ohio State University.

According to EEI, the biggest chunk of that spending—38% in 2013—went into new power lines and

other delivery systems, roughly equal to the amount that went into generation – some of it for new gas-

fired plants to replace coal-fired ones that don’t meet new environmental rules.

The latest EEI report, Transmission Projects: At a Glance provides a summary of more than 170 major

transmission projects completed in 2014 or planned over the next decade. It says US investor-owned

electric utilities spent $16.9 billion in 2013 to build transmission infrastructure. Roughly 40% of the

planned investments are for large, interstate transmission projects while 46% are for projects that support

the integration of renewable resources, it says.

The WSJ article correctly observes that some of the increased spending can be explained by

environmental regulations and the need to modernize and harden the grid – as described in QER article on

page 10. It, however, adds:

“But utilities have another incentive for heavy spending: It actually boosts their bottom lines—the

result of a regulatory system that turns corporate accounting on its head” – as predicted by

http://www.eei.org/issuesandpolicy/transmission/Pages/transmissionprojectsat.aspx


Averch-Johnson, not mentioned in the WSJ article.

“In most industries, companies generate revenue, deduct their costs, and are left with profits,

which can be expressed as a percentage of revenues—the profit margin. Regulated utilities work

differently. State regulators usually set an acceptable profit margin for utilities, and then set

electric rates at levels that generate enough revenue to cover their expenses and allow them to

make a profit.”

“At the moment, it is common for utilities’ allowable profit to be capped at 10% or so of the

shareholders’ equity that they have tied up in transmission lines, power plants and other assets. So

the more they spend, the more profits they earn” – again just as Averch-Johnson predicted.

“Critics say this can prompt utilities to spend on projects that may not be necessary, like electric-

car charging stations, or to choose high-cost alternatives over lower-cost ones.”

“ ‘Until we change things so utilities don’t get rewarded based on how much they spend, it’s hard

to break that mentality,’ says Jerry R. Bloom, an energy lawyer at Winston & Strawn in Los

Angeles who often represents independent power companies.”

“… Ken Rose, an energy consultant in Chicago, says that regulators don’t always do enough to

make sure projects are

the best deal for the

customers footing the

bills. He says companies

have a propensity to

choose expensive

solutions to problems—

building a new power

plant instead of

promoting energy

efficiency, for

example—because it

puts big chunks of

capital to work that lift

profits.”

The issue noted by Ken

Rose is critical as regulator is often put in the untenable position of second guessing the true motivations

of the regulated utility. For example, consider upgrading and modernization of the distribution network.

What if a regulator denies a request by a utility to invest millions to replace aging poles, wires and

transformers and subsequently a major storm knocks down service to millions of customers. The utility

would blame the regulator, with some justification.

If, on the other hand, the investment is allowed to take place, customer rates will rise, and the regulator

can be blamed for allowing gold plating of the network. The WSJ article points out that:

“Families in New York are paying 40% more for electricity than they were a decade ago.

Meanwhile, the cost of the main fuel used to generate electricity in the state—natural gas—has

plunged 39%.”

“Why haven’t consumers felt the benefit of falling natural-gas prices, especially since fuel

accounts for at least a quarter of a typical electric bill?”

Moving towards cleaner fuel mix, slowly but surely

Source: U.S. Energy Information Administration, Annual Energy Outlook 2015

http://www.eia.gov/forecasts/AEO/


“One big reason: utilities’ heavy capital spending. New York power companies poured $17

billion into new equipment—from power plants to pollution-control devices—in the past decade,

a spending surge that customers have paid for.”

As currently planned, New York utilities’ spending plans could push electricity prices up an additional

63% in the next decade – which is among the reasons the regulator, New York Public Service

Commission, is re-examining the future of power sector and its own regulatory apparatus under its much

publicized Reforming the Energy Vision (REV), featured in May 2015 issue of this newsletter.

New York, of course is not alone as consumer advocates in places as far away as Australia complain

about gold plating – the practice is universal – especially if the regulator is not vigilant.

WSJ Article

California Tinkering With Residential Rates Barely moving forward

Chines proverb says a journey of 5,000 miles begins with a single step – highly appropriate for

a proposed decision issued on 21 Apr 2015 by the California Public Utilities Commission

(CPUC) following months of hearings, testimony and reams of filings and re-filings by the

state’s 3 large investor owned utilities and hordes of experts and interveners.

And what has been accomplished or proposed? Relatively little, the metaphoric first step in a journey of

5,000 miles.

To be sure, a lot is at stake, namely who will pay how much to keep the 3 IOUs solvent amidst rapid

changes taking place within the power sector and beyond – notably California’s ambitious efforts to

reduce its

greenhouse gas

emissions, increase

the amount of

renewable

generation, continue

aggressive energy

efficiency policies

against a background

of flat or declining

sales as consumers

increasingly invest in

energy efficiency and distributed generation.

As described in the May 2015 issue of this newsletter, Golden state’s residential tariffs, which were

substantially re-designed at the height of the 2000-01 California electricity crisis have become seriously

misaligned with the passage of time. The original 5-tiers, later reduced to 4 (table above) under-collect at

the bottom tier while painful and punitive at the top.

As the cost of distributed generation, particularly rooftop solar PVs, continues to fall, more customers

find it cost-effective to install solar panels while taking advantage of generous net energy metering

(NEM) law, enacted in 1995 when the technology was rather pricy and there was no SolarCity offering

no-money-down contracts with virtually guaranteed savings from day 1.

A

Current California tariffs have a significant differential between top & bottom tiers

Source: Proposed Decision on residential rates reform for PG&E, SCE and SDG&E and transition to TOU rates, CPUC, 21 Apr 2015

http://www.wsj.com/articles/utilities-profit-recipe-spend-more-1429567463


Another problem, growing by the day, is the imbalance between load and generation – it is called over-

generation or overgen for short. As renewables continue to grow, the grid operator, California

Independent System Operator (CAISO) is facing increasing number of incidents when there is more

supply than load, say during early spring season –further described in article on page 24.

Experts are nearly unanimous in calling for time of use (TOU) rates, which in principle encourage higher

consumption when rates are low and the reverse when the opposite is true.

Moreover, billions of dollars invested in converting virtually all electric meters in the states to smart

variety are seriously under-utilized – a rather embarrassing stranded asset for both the IUOs and the

regulators – since virtually all residential customers, save a token few, remain on fixed tariffs. The

situation can be characterized as smart meters, dumb

prices.

A bill passed in 2014 gives the CPUC considerable

flexibility to redesign the residential rates, including a

clause that allows the introduction of fixed fees.

Currently, Pacific Gas & Electric Company (PG&E)

is allowed a minimum fee of $4.5 month, roughly $5

for San Diego Gas & Electric Company (SDG&E)

and none for Southern California Edison Company

(SCE).

As any consultant worth his/her high billing rate would agree, a significant portion of the cost of serving a

typical residential customer is fixed – i.e., it does not vary with how many kWhs are consumed.

According to SCE, the proportion is 38%.

There are a number of reasonable and an even larger number of unreasonable arguments about what

portion of cost of service to a typical residential customer is fixed – partly depending on the methodology

applied and how far up-stream of the meter one is allowed to go (see box below). But hardly anyone

would say that it is zero or trivial.

How much of the cost of serving a residential customer is fixed? The never ending debate about fixed costs is summarized in the CPUC’s latest proposed decision, without the fine print or the detailed supporting documentation, which may be found in utility filings.

The short answer is it depends. Fist, on the methodology used; and perhaps more important on which components of total costs of service are included – i.e., does one stop at the nearest pole and transformer that serves a customer or go further to include the fixed component of the cost of transmission and generation, including such costs as fuel inventory or storage (table).

Most experts would agree that costs of metering, billing, collection, customer account maintenance, service inquiries and a significant portion of the cost of maintaining and operating the distribution network are fixed, in the sense that a customer living in a vacation home should pay even if he/she does not reside in the premise for months at a time. Studies by Electric Power Research Institute (EPRI) and a white paper by Borlick & Wood previously reported in

Shifting peak demand California utilities say peak period summer demand starts later and ends into the evening – a major departure from the historic noon-to-6 pm definition

IOU Summer on-peak demand period

SCE 2-8 pm

SDG&E 2-9 pm

PG&E 4-9 pm

Source: CPUC Energy Division, 8 Apr 2015

Fixed costs depends on who you ask, and methodology used

Utility Fixed costs per customer/mo.

Including up-stream fixed costs

PG&E $11.49

SCE $13.30 $76

SDG&E $14.56 $40

Source: CPUC Proposed Decision, 21 Apr 2015, see pages 179-183 for details


this newsletter based on aggregated data on national level put the fixed cost component in the $70/80 range for a typical US residential customer. Bottom line? It is not a trivial amount – and covering it through volumetric tariffs is becoming increasingly untenable – especially for solar customers.

At 336 pages, the CPUC’s Proposed Decision is a long and at times arduous read. It covers history, legal

and regulatory precedence, technical and accounting details, who said when and where and why going

back to 1996 when California originally restructured its electricity market, to disastrous results in 2000-

01.

If you are patient enough to make it to page 278, you can read the Finding of Fact – as if it has been

hiding somewhere to be found – all 215 of them, followed by Conclusion of Law beginning on page 296

– it has 57 points. Only another Administrative Law Judge (ALJ) could possibly enjoy reading it.

The most disappointing – even if you have the time and patience to endure – is the let down that comes

with little in terms of clarity, vision or even a half-coherent set of recommendations or conclusions.

Concerning what constitutes

fixed vs. variable costs,

following a protracted

discussion the proposed

decision reads:

“While we are persuaded that

collecting customer-related

fixed costs separately from

capacity costs and energy is

reasonable, we agree with

TURN (a consumer advocacy

group) that the record is not

sufficient to reach definitive

findings on the exact

definition and amount of

fixed customer costs.”

Similarly, on the relative

merits of fixed monthly

charges vs. minimum monthly fees – the latter would apply only if consumers used very few kWhs or

none, but once you go over a minimum threshold, you revert to a regular volumetric tariff – the decision

reads:

“Based on this, we agree that a fixed charge representative of fixed customer-related costs should

be a part of residential rare design. However, … blah blah blah …we believe that it is necessary

to approve employing a minimum bill rather than a fixed charge in the immediate future.”

The bottom line? Since under the current law, fixed monthly charges for residential customers are capped

at $10, a debate about the actual amount of fixed costs is a moot point. Unless the Commissioners have a

last minute change of mind, a minimum monthly bill of $10 will go into effect for California’s

residential consumers starting in 2015.

PG&E’s tiered rates: Soon to change to 3 and possibly 2, if IOUs get their way

Source: CPUC Thought Leaders Session, 5 June 2014


Residential tiers, currently 4 (graph

on page 23), are also likely to be

reduced, initially to 3 and eventually

to 2 – as proposed by the 3 IOUs –

with the price differential

significantly reduced.

Other, more innovative rate options

such as the introduction of time-of-

use (TOU), and whether they should

be voluntary or mandatory, will have

to wait another day, more pilot

studies, hearings, and expert

witnesses.

CPUC Report

Learning To Live With Over-generation California’s renewable bounty leads to new challenges

uring the 2000-01 California electricity crisis, the biggest challenge facing the embattled grid

operator, California Independent System Operator (CAISO), was to meet the daily load on

the network with

scarce and

expensive generation, both

real and artificial. Today,

CAISO’s biggest, and

growing, headache is too

much supply, especially when

load is minimal. What a

remarkable turnaround it has

been.

In the last few years, the

abundance of solar

generation, mostly from

utility-scale plants augmented

by a growing distributed

portion, is creating increasing

episodes of over-generation

or overgen, especially during

the sunny spring season

before high temperatures lead to air conditioning demand. Not only does this lead to extremely low or

negative wholesale prices but occasionally leads to significant curtailment, already exceeding 1 GW of

solar and wind capacity.

Talking in public, Tom Doughty, CAISO’s director of regulatory strategy, said “In the past, who would

have even thought of the concept of overgen? But it’s a harbinger of what’s to come.”

As reported in the Feb 2015 issue of this newsletter, CAISO estimates that under a hypothetical 40%

renewable portfolio standard (RPS), there may be over 800 hours of curtailment by 2024. California’s

D

SDG&E’s proposed rates for its experimental TOU tariff Proposed Optional and Experimental TOU Rates with 2015 RDW TOU Periods

Source: CPUC Proposed Decision, 21 Apr 2015

It is called overgen RPS Curtailment in 2024 under a hypothetical 40% RPS Scenario, MW by month

Source: Notice of ex parte communication by CAISO, CPUC, 3 Dec 2014

http://docs.cpuc.ca.gov/PublishedDocs/Efile/G000/M151/K305/151305677.PDF


current RPS mandate calls for 33% RPS by 2020 – a fait accompli. California governor Jerry Brown,

however, has been talking about a 50% RPS by 2030. “We have clean energy sources producing a lot of

megawatts,” adds Doughty. “We need somewhere to put it.”

California, of course, is among a handful of states marching aggressively toward high RPS targets. But a

number of states have no RPS requirements and little renewables aside form hydro. For example, 7 states

currently have virtually no renewable generation aside from hydro with another 8 with less than 1% of

their total demand met from such resources.

Zero Net Energy Homes: Here Today, Affordable Tomorrow Once dismissed as California dreamin’ it is here and not exorbitantly pricy

s problems go, some consider California’s energy abundance a good problem to have (preceding

article). The state’s regulators and policymakers continue to push aggressive energy efficiency

measures. In 2008 the state set a goal for new residential buildings to reach zero net energy

(ZNE) target starting in 2020 with the same extended to new commercial buildings by 2030.

California regulators define ZNE as “a general term applied to a building with a net energy consumption

of zero over a typical year.” To cope with fluctuations in demand, zero energy buildings are typically

envisions as connected to the grid, exporting electricity to the grid when there is a surplus, and drawing

electricity when not enough electricity is being produced. The amount of energy provided by on-site

renewable energy sources is equal to the amount of energy used by the building.

When initially proposed, skeptics said the ZNE goal could not be met, certainly not by 2020, and not even

remotely at a cost anyone could afford. But indications are that reaching the target may not be as onerous

as some had initially thought. Like any energy efficient car or appliance, you pay a little more when you

buy it but it saves you a bundle over time in lower energy costs.

On Earth Day, 22 April 2015, Meritage Homes, a major US homebuilder based in Scottsdale, Arizona,

said it was developing Sierra Crest, a small ZNE community consisting of 20 homes in North Fontana

area. In collaboration with BIRAenergy, Itron, Southern California Edison (SCE), the Electric Power

Research Institute (EPRI) and California Public Utilities Commission (CPUC), Meritage Homes said

it would evaluate the energy use and grid integration of this new community and investigate economic

feasibility to support California’s “big bold goal.”

The homes in Sierra Crest will have high-efficiency solar photovoltaic (PV), HVAC systems, water

heating equipment, heat pumps and integrated fresh air ventilation. In addition, each will have spray

foam insulation, highly insulated windows, energy-efficient lighting, smart chargers and smart

appliances. Together, these features are expected to reduce a typical home’s energy use by as much as

60% compared to a house built to the latest California building code.

Because the homes are highly efficient, they need a relatively small solar PV capacity to reach the ZNE

target. “In a conventional home, the size of PV … sufficient to make a home ZNE can be between 7-10

kW. Because of the included advanced energy efficiency, our ZNE homes can achieve (this target) with

3.5-4.5 kW,” according to CR Herro, Vice President of Environmental Affairs at Meritage Homes.

Currently the energy used in homes and buildings is the second largest contributor to California’s

greenhouse gas (GHG) emissions, which have to be reduced to their 1990 level by 2020, and much more

by 2050. The ZNE goal is among the schemes to reach that goal.

A


According to the

California Energy

Commission (CEC),

with the stringent

Building Standards and

ZNE requirements for

new residential homes

by 2020, the energy

consumption in

California is expected to

flatten compared to the

baseline forecast

through 2040 (graph on

left).

With energy savings

from energy efficiency

and on-site renewables,

ZNE residential homes

(red dotted line) alone

could avoid 18,000

GWh of electricity by

2040.

Book Review Electricity vs. Fire: The Fight For Our Future By Walt Patterson Kindle e-book from Amazon UK £3.00 http://www.amazon.co.uk/dp/B00W5HO1RY $4.40 from Amazon US http://www.amazon.com/dp/B00W5HO1RY or through Walt Patterson <www.waltpatterson.org

ver since its discovery, fire has played an important role in human life, keeping our ancestors

warm while keeping the predators at bay. Zoroastrians, among many others, considered fire

sacred, keeping it burning in fire temples – they were mistakenly called fire worshippers. Fire, in

other words, has been associated with warmth and light for centuries.

Beginning with the dawn of the industrial revolution and subsequent discovery of oil, humans mastered

the art of not just making ever more fires but managing and controlling it and putting it to good use, be it

running steam locomotives, battleships or more recently internal combustion engines, planes, trains and

everything else that essentially runs on fire. That is how Walt Patterson calls in his utterly engaging and

easy to read book Electricity vs. Fire: The Fight for Our Future.

Instead of calling it fossil fuels, thermal generation or such euphemisms, Patterson calls a spade a spade.

We burn vast quantities of fossil fuels of one kind or another – setting aside renewable resources – to

sustain our modern lifestyles. And we have been so successful that we have essentially forgotten the fact

that it is fire, explosions, and heat that is basically running our economies. At its basics, nuclear power is

E

Source: California Residential and Commercial Building Energy Use Characteristics, California Energy Commission

http://www.amazon.co.uk/dp/B00W5HO1RY

http://www.amazon.com/dp/B00W5HO1RY

http://www.waltpatterson.org/


a convoluted way to bring water to boil.

You can quickly get the gist of Patterson’s

arguments by scanning the way he has

organized his 103 page book, starting with an

amusing Prologue titled Fire Hazard, where he

highlights fire’s central role in our daily lives

while pointing out that it is dangerous and we

must leave it behind.

“Fire, however, has a long head start. It has

shaped human affairs for many millennia.

Human society still relies on fire for most of its

activities – even when it need not, and despite

the ever more urgent problems fire is creating.

We learned to control electricity only two

centuries ago. Fire still dominates. Indeed we

still generate most of our electricity using fire.

But that is changing. The roles of fire and

electricity in human activities are now evolving

faster than ever before.

“Can we leave Fire Age behind? Will

electricity supersede fire in time? The answer

may determine our future on earth.”

The rest of the book, as you might expect,

examines how humans have gotten hooked on

fire – Part 1: What we do and how do we do it

– what are some of the problems with our over-

dependence on fire – Part 2: The trouble with

fire – and how we can kick the habit – Part 3:

How we can do better.

Patterson is convinced that not only can we kick the fire habit, but indeed we must – the subtitle of his

book.

Very few people can write such a

book, with such clarity and easy flow

while delivering a powerful message

in 100 pages. There are no graphs, no

tables, no references, no footnotes and

no bibliography – the reader must

simply trust Patterson at his word.

While this may be disconcerting at

first—especially for those of us who

are used to it – it actually accentuates

the message by removing the clutter

that so often accompanies technical

books.

And, it must be noted that Patterson

delivers his message with aplomb that

Can we leave fire behind?

U.S. Installed Cost of Wind and Solar Power ($/kilowatt)

Source: Lawrence Berkeley National Laboratory


only an experienced energy economist can.

Looking at the future of man on earth, he refers to forces of good and evil, the fire feeders vs. the fire

fighters. The former are powerful enterprises and their supporters whose livelihood depends on our

continued use of fossil fuels. The latter are people such as Patterson who are convinced that man’s

survival is at stake,

and the sooner we stop

feeding the fire, the

better we, our children

and grandchildren and

future generations will

be.

Patterson, as you

might guess, is rather

fond of fire-free

electricity generated

from renewable

resources rather than

fire-fed variety from

coal, gas, natural gas

and uranium.

Divulging any more

will take away from

the pleasure of reading the book.

It is a compelling message and one whose time has arrived. It, however, is not one the fire feeders will

enjoy reading – or for that matter – want anyone else to read.

It is a battle between the evil and the good: Fire feeders vs. fire fighters Power generation capacity additions in GW

Source: Bloomberg New Energy


To our valued subscribers As long-term subscribers would attest, subscription rates for EEnergy Informer have not increased since publication began 25 years ago. The only change has been the introduction of site license, which allows access to multiple readers within the same organization. Starting July 2015, rates will rise with the following options to fit the needs and budgets of our diverse and valued subscribers: Subscription type Annual price

Regular subscription $450 Single reader, no distribution

Discounted subscription $300 Small business, single reader, no distribution

Limited site license $900 Distribution limited to 4 readers in same organization, single location

Unlimited site license $1,800 Distribution unlimited within same organization including multiple locations

Student subscription $150 Limited to students & qualified solo professionals (Please inquire if you qualify for this special discounted price)

Existing subscribers can extend current subscription at existing prices until end of June 2015. Moreover, any subscriber who assists in recruiting a new paying subscriber will automatically get a 6-month free extension.

Subscribing to EEnergy Informer

To extend existing or start new subscription to EEnergy Informer visit website www.eenergyinformer.com under toolbar SUBSCRIBE TO EENERGY INFORMER and select the appropriate price. You will be prompted to provide credit card details, which are securely handled through PayPal. You will get an instant electronic transaction receipt and we will get notification of payment. You do NOT need a PayPal account and need NOT be a current PayPal user. If you require a customized invoice &/or prefer to wire funds directly to our bank, please contact us at [email protected]. If you are paying with a check, it must be in US$, payable to EEnergy Informer and mailed to 1925 Nero CT, Walnut Creek, CA 94598, USA. Any questions or if you experience problems with the PayPal payment system, kindly notify us at [email protected] or the editor at [email protected].

EEnergy Informer

Copyright © 2015 June 2015, Vol. 25, No. 6 ISSN: 1084-0419 http://www.eenergyinformer.com

EEnergy Informer is an independent newsletter providing news, analysis, and commentary on the global electric power sector. For all inquiries contact Fereidoon P. Sioshansi, PhD Editor and Publisher 1925 Nero Court Walnut Creek, CA 94598, USA Tel: +1-925-256-1484 Mobile: +1-650-207-4902 e-mail: [email protected] Published monthly in electronic format. Annual subscription rates in USD: Regular $450 Discounted $300 Limited site license $900 Unlimited site license $1,800 Student/special rate $150


mailto:[email protected]





eenergy informer - energy economics · while evs, pvs and storage are not suitable or...

Documents