How much should utilities pay for distributed solar power?

Close-up of completed project - Gibbs Dairy goes solar

In the energy and climate circles, there is a lot being written lately about the threat to the traditional utility model from distributed, renewable energy sources.  David Roberts has been running a series describing the problem and looking for solutions.  Chris Nelder also has a good read on the topic.

One of the key issues is the idea that utilities want to avoid “stranded assets”, or infrastructure they still have to pay to maintain with a shrinking pool of customers.  As some customers get more power from solar, sales of electricity shrink, leaving utilities with the same distribution infrastructure to maintain using less revenue.  Some utilities, the latest being a municipal utility in San Antonio profiled by David Roberts, argue they shouldn’t pay customers the “market” rate for electricity their customers generate with rooftop solar, but instead should pay them a wholesale rate, or the same as they pay for other electricity on the grid.

The thinking here is that paying the wholesale price will put renewable energy on an even playing field, and help keep the old utility model more financially whole, since wholesale prices are typically much lower than market prices.  For example, the 5-year average wholesale price for electricity in the grid area that serves Minnesota was $53.62 per MWh for the period ending in 2010, according to FERC.  This is for the “peak” time of day, meaning the afternoon, which is also the time solar is most productive.  That’s equal to roughly 5 cents per kWh, which is the unit at which typical household sales are measured.  Last month I paid about 11 cents per kWh to Xcel before taxes, fees and other charges like WindSource.

At 5 cents/kWh, rooftop solar would take a very long time to pay off.  Many fewer people would likely choose to install it.  However, those in the renewable energy world will tell you that 5 cents/kWh doesn’t pay the owner of a system for some of the benefits solar energy has over wholesale electricity.  We should actually be looking at a “value of solar” that includes not just the wholesale energy price, but reimbursement for other values.  There is movement right now in Minnesota to legislate that a true “value of solar” be computed for future projects.  So what other value does solar energy have that utilities might value?

For one, it can be more efficient.  Whenever you transmit electricity or long distances, you lose some due to resistance (heat).  EIA estimates these loses at 7% nationally and 7.4% in Minnesota.  That means utilities are generating more kWhs than are needed to make up for the losses, and thus the customer is paying more for each kWh.  If you’re generating power very close to where you use it, you minimize these losses and the extra generation.  Distributed solar energy should actually be valued 7% above wholesale prices by a utility if you think it will reduce these line losses.  If you include that 7% bump, 5 cents becomes almost 6 cents per kWh.

The other value is the reduced environmental cost of solar generation.  There is plenty of discussion about what the optimal cost of carbon should be, and it all depends on what you adopt as your discount rate.  Here is a must-read on discount rates, also by David Roberts.  If you think that climate change will have a net drag on the economy in the future, your discount rate is likely low, and the optimal cost of carbon gets up into the $50 to $100/ton range.  Carbon levels per unit of electricity produced vary quite a bit across the county, but in Minnesota and parts of the upper Midwest, they averaged 0.738 metric tons per MWh in 2009 (the latest year for which EPA has data).  At that rate, a high carbon tax might add between 3.5 and 4.5 cents per kwh.

If you add all this up, (an economically optimal price on carbon, savings from transmission losses, and a wholesale price consistent with the 5-year peak average), you get a value of solar energy between 9.5 and 13 cents per kWh.  That’s at or above the market rate I’m paying in Minnesota right now.  Check out my extremely messy spreadsheet if you want to see the math.

Keep in mind there are other values of solar energy I haven’t considered in my calculus.  The Minnesota House legislation includes the savings from delaying capital investments in distribution infrastructure, savings from not having to build more generation, fuel price hedge value savings (not having to bet on fuel costs), and the value of local employment generated by manufacture and installation of solar energy.

“Disruptive challenges”

The investor-owned utilities themselves think that things are about to change dramatically, drawing comparisons to industry disruptions like those faced by regulated airlines, the phone company monopolies and RIM.  Mostly these disruptions will be driven by distributed renewable energy, but also by energy efficiency and market changes.

From a report by the Edison Institute, an association of shareholder-owned utilities:

There are important lessons to be learned from the history of the telephone industry. First, at the onset of the restructuring of the Bell System, there was no vision that the changes to come would be so radical in terms of the services to be provided and the technologies to be deployed. Second, the telephone players acted boldly to consolidate to gain scale and then take action to utilize their market position to expand into new services on a national scale. Finally, and most important, if telephone providers had not pursued new technologies and the transformation of their business model, they would not have been able to survive as viable businesses today. So, while the sector has underperformed the overall market since 2000, and as shown in Exhibit 5, even a leading industry participant like Verizon Communications has not been able to perform in-line with the overall market despite its growth, market share and solid profitability outlook due to the competitive uncertainties inherent in the business. However, those telecom providers that have embraced new technologies and addressed the competitive threats they faced have managed to survive and to protect investors from a “Kodak moment.”

Both David Roberts and Chris Nelder have better and more extensive write-ups of this study.

2012 Nice Ride Flows

2012 Nice Ride FlowsPresented here without scale or legend, are the Nice Ride flows from 2012.  As with the mapping I did for 2011, individual road segments are thickened to represent the volume of Nice Ride traffic that traveled over them during the year. Bike trails and lanes were favored by the routing software, but since it looked for direct routes, some paths may be under or over represented compared with real-life Nice Rider travel (Cedar Lake Trail versus Hennepin Avenue, for example).

St. Paul is much more vibrant in 2012, with the Lake Street bridge seeing a high volume of Nice Riders crossing to our twin city.  Top traffic segments included the Hennepin-Lyndale Bottleneck south of Loring Park, south of the Stone Arch Bridge, West River Parkway, and the Hiawatha trail east of the Metrodome.

Once again, kudos to Nice Ride for releasing all this awesome data.

“significant risks of derailment at both ends”

Twin Cities Business via Minnpost, has an excruciatingly detailed look at the history of the TC&W railroad and the problems facing potential relocation of said railroad for the SW LRT project.

The goal is that TC&W head west as it does now out of downtown Minneapolis on BNSF rails, but rather than turning southwest into Kenilworth, it would continue past Highway 100 to join the MN&S, heading south through St. Louis Park to rejoin its current route near Louisiana Avenue and Highway 7.

Problem is, the MN&S, which in 1993 looked to TC&W like a long-term solution for a modest amount of additional spending, is now perceived as unworkable by the railroad. The cost of remaking it to fit TC&W’s operations has ballooned from an optimistic $1 million to $70 million or more, and the railroad and others say it presents engineering challenges that may not be solvable within the budgets of the SWLRT project.

In December, the railroad filed its most emphatic objections yet to the SWLRT reroute. Wegner says the MN&S reroute is “a design we intuitively know is bad.” It has “significant risks of derailment” at both endpoints.

In a nutshell, the MN&S, and the proposed connections to it, are engineered for the small CP freight trains that currently use it, not the 100-car trains TC&W runs. The railroad is wary of the undulating MN&S grades, curvature, and proximity to St. Louis Park High School for their potential to insert costly inefficiencies into its operations.

“We have no issue with Southwest Light Rail,” insists Wegner. “But we need to get to St. Paul with the same cost structure as today.”

St. Louis Park officials, concerned about the impacts of the reroute, concur with TC&W. “A lot of the reroute is unfeasible,” says Mayor Jeff Jacobs. He maintains that as currently drawn, the reroute will require expensive noise and vibration mitigation, and the likely removal of 30 to 40 homes. But he says a realistic plan that also functions for 100-car freights will require more expense than the $70 million or so estimated for it, plus removal of additional buildings. “I wouldn’t be surprised to see [the reroute] get to $100 million or above.”

The cost of the freight rail reroute was never included in the evaluation of alternative alignments for the SW LRT project.

All the ways we subsidize growth

Over at, I reflect on a recent event I attended, ““Kicking the Habit: Unsustainable Economic Growth” that featured contributor Chuck Marohn delivering his Strong Towns message.  I focus on one issue that is featured prominently in the Strong Towns narrative: intergovernmental transfer payments which subsidize growth and potentially hide the true cost of development.

In Minnesota, we build roads really well. If you look at the metro area, we’ve created a system where despite wide differences in job and housing density, commute times are virtually the same whether you live in Dahlgren Township or Loring Park in downtown Minneapolis. We also have a semi-famous regional government that makes connection to the same wastewater system easy, no matter where you are in a 7-county region that includes both farms and skyscrapers. All these things (and more) are made possible by shared resources, often collected from one area or community type, and sent to another with a different character. Somehow we’ve determined that this is a good thing (for ease of access, equity, environmental protection, political will, etc) As I listened to Chuck I thought, “you’d really have to remake how local governments interact if you wanted to promote (or even test) the idea that our “most productive places” should be differentiated from our least productive.

I won’t attempt to figure out how this can be done. But I think it’s valuable to think about all these “transfer payments”. There are more than most people ever think about. So, here goes:

Read the rest.

How much would a 10% solar standard reduce Minnesota’s greenhouse gas emissions?

Presenting Curt Tosh's farm-based solar project - Solar Works in Central Minnesota!

This week a bill was introduced to the Minnesota legislature to establish a 10 percent solar energy standard by 2030.  This would be on top of the existing requirements for utility renewable energy, bringing the total amount of energy coming from renewables in the state to at least 35 percent in 2030.

This bill is being promoted for it’s job creation aspects, but clearly a key benefit is the reduction in greenhouse gas emissions from the electricity generation sector (which currently produces 32% of the state’s greenhouse gas emissions).  So, by how much would a 10% solar standard reduce Minnesota’s emissions?  Would it allow us to meet our greenhouse gas reduction goals?

The first (and easier) part of trying to put some numbers to this is estimating how much electricity Minnesota will use in 2030.  EIA summaries tell us that Minnesota consumed a little under 68 million megawatt hours in 2010.  Power projections produced for the Annual Energy Outlook tell us that in MRO West (our electricity grid region), the annual growth in electricity consumption will be very modest through 2030, typically under 1% annually.  If you assume these growth rates apply to Minnesota, we may consume over 73 million MWh in 2030, or 8 percent growth over 20 years.


10 percent of that is 7.3 million MWhs in 2030.  Figuring out exactly how much greenhouse gas this would save is trickier.  In 2010, electricity generation accounted for 32% of the total 155.6 million metric tons of CO2 equivalent emissions.  Rough math using EIA consumption figures provides a greenhouse gas coefficient for Minnesota electricity of 0.73 metric tons of CO2e per MWh.  However, this figure will surely go down over the next 20 years as utilities work to meet the existing renewable energy mandates already on the books.  Xcel Energy, which has to meet a more aggressive renewable energy standard then the rest of the state, already has a coefficient closer to 0.5 mt/MWh, which will be declining (see slide 17) to something like 0.42 mt/MWh by 2025.

So, assume the state’s net greenhouse gas coefficient for electricity is somewhere around 0.5 mt/MWh in 2030 (assuming other utilities and imported electricity are both dirtier than Xcel).  If 10% of our electricity demand is met by solar energy, this would be a savings of 3.6 million metric tons of CO2e.  3.6 m metric tons is about 2.3% of our 2010 emissions total, or about 7% of emissions from the electricity sector in 2010.

Using an net coefficient average emissions factor for calculation may be too simplistic, but it’s the best I’ve got right now.  Those more in the know say that renewable energy like solar will most frequently replace natural gas production, rather than coal or nuclear, as gas is easier to cycle on and off.  I’m not sure whether this would increase or decrease the benefit of this level of installed solar (but I’m working on it).

Update: I was pointed to this journal article by Carbon Counter, which attempts to calculate “marginal emissions factors”, rather than average factors. It turns out, since the Midwest is coal-heavy, usually an “intervention” (adding solar, for example) would displace coal power first, rather than gas.  The marginal emissions factor they calculate for the Midwest is about 13% higher than the 0.73 mt/MWh I mention above.  The Midwest is somewhat unique in this regard, as most regions show gas as the most common “marginal fuel source”.  It also has the highest marginal emissions factor of all the regional electricity generators looked at in the study.  A 12% increase over 3.6 million mt is 4.03 million mt.

At something near 3 or 4 million metric tons of emissions saved, would a 10% solar standard help us meet our state emissions reduction goals?  Nowhere near on its own, but it would be a significant step in the right direction, especially when combined with strong action in other sectors like transportation and agriculture.  Think of it as part of the Minnesota version of the wedge game.

On compost

Biodegradable cutlery

Don’t you dare throw that in the trash.

At Ensia (formerly Momentum), Bill Chameides tackles compost, or our lack of it.

The thing that really caught my attention was a report on the results of a series of student dumpster dives around campus. After collecting and sorting all the garbage, they found that about three-quarters of Duke’s so-called non-recyclable trash destined for area landfills was compostable—things like food scraps, napkins, paper towels, etc. Based on calculations fromgovernment data [pdf], the national average is closer to 50 percent, but that’s still a lot of compost mostly headed for a landfill.

While I agree with the gist of his post – we should stop sending so much compostable material to the landfill, it makes good dirt – he reaches, what seems to me, a somewhat troubling conclusion (bold emphasis mine):

Right now we send a lot of compostable materials to landfills. If you’ll pardon the pun, that’s a waste. Instead of being treated like trash, compostable items can be converted into organic-rich soil for growing crops. And that could even help slow climate change. The anaerobic decay that occurs in landfills produces methane, a greenhouse gas that can escape into the atmosphere if a gas-capturing system is not installed. Composting, which is primarily an aerobic process, generates very little methane.

But the real challenge in making a compost economy is moving our compostable trash toward 100 percent. Let’s replace recyclable, petroleum-based plastics with nontoxic, cellulosic, compostable plastics. In addition to making compostable products, let’s make the packaging compostable too.

Now, in that first quote he says half our of current trash is compostable.  That seems to me to indicate that our trash is already fairly compostable, and we aren’t doing anything about it.  It seems our real challenge(s) is/are:

  1. Make sure compost collection is available (far from standard across the country, and certainly not in Minnesota).
  2. Education/coercion (get people to throw it in the right bin).  No small task.
  3. Make sure that ability to process compostable material is available.  This is not a minor issue.  Consider that in the Twin Cities metro, there is one location that processes organic compost.  Many items collected through composting collection regimes can’t simply be thrown on a compost pile, they need specific temperature, moisture and material mixtures to break down properly.  Processing needs to expand if we’re going to get that other 50% composted.

My other issue is with Bill’s conclusion: let’s turn all our disposable products into compostable products.  This is backwards.  If collection isn’t available OR people don’t separate their compostable material properly (and just about universally), the results (for the climate, at least) could be worse.

Consider work done by David Allaway at the State of Oregon’s Department of Environmental Quality.  They looked at the lifecycle impacts of different water delivery systems (water bottles), including PLA (compostable) and PET (oil-based, recyclable) water bottles.  As Bill notes, in a landfill, compostable materials produce methane, which when combined with the upstream impacts of making the water bottle, are worse than just using a regular, oil-based recyclable bottle.


Green bar – 62% of PLA bottles are diverted from the landfill and composted, the rest go to landfill, where they produce methane during decomposition.

The scenario above, represented by the green bar, shows that even if you’re successful at collecting and composting 62% of compostable bottles entering the waste stream, the emissions from the landfill of the remaining 38% offset any benefits.  This includes “upstream” emissions, like making each bottle.

And this assumes a collection regime is in place.  Every time I see a Twin Cities restaurant trying to up their green cred by offering “compostable” cups or flatware, I check their waste disposal area.  Nine times out of ten there is no “compost” container available.

So, is promoting a conversion of “throw away” products like flatware and packaging to compostable materials a good idea?  At best, maybe.  At worst, well, it could make things worse. I think much more analysis needs to be done, and certainly more collection infrastructure and a highly-effective education campaign about sorting need to be in place.  Of course, composting food waste that’s already in the waste stream is a no-brainer, but let’s take a closer look at compostable products.

Department of Accessibility

At, Andrew Owen has a fascinating look at the work he has done with David Levinson on measuring accessibility in the Minneapolis-St. Paul metro area.  I’ll let Andrew define accessibility:

Accessibility measures the ease of reaching valued destinations.

Think about the last trip you made. You were in place A, you wanted to be in place B, and you got there by paying some sort of cost. There are several components at work here.

First, lets look at your reason for wanted to be in place B. That’s the whole reason the trip took place! You didn’t just want to move around for a bit, and then come back to A. (People do that sometimes, but we don’t consider it travel — we call it things like recreationexercise, or NASCAR.) No, you had a reason for traveling to place B. That reason, from a transportation economics perspective, is the value that place B holds for you.

Now that we’ve established that place B has some value to you, it would be great if you could get there whenever you want, for free. But you can’t. Even if you frugally decide to walk from A to B instead of drive, fly, take the bus, or ride a horse, you cannot escape spending a precious resource: your time. The total amount of resources you spend in getting to B, whether they are time, money, oats (for your horse), or some combination, is thecost you pay to reach place B. To generalize just a little bit more, we can say that when the cost of getting to B is low, then B is easy to reach.

That, in a nutshell, is accessibility. It combines the value that we get from travel with the cost of making the trip. I love accessibility because it neatly encapsulates what I consider to be the fundamental purpose of transportation systems: providing ways for people to get to places they want to reach, at costs they are willing to pay.

Andrew then goes on to discuss the results of a project they completed for MN-DOT on measuring “cumulative opportunities accessibility”, or how many things can be reached within a given cost (time) threshold by car and transit.   You should read the whole post to see Andrew’s many interesting conclusions.

After reading it, a few things jumped out at me:

Owning a car gives you an overwhelming advantage in accessing jobs in this metro.  In a huge swath of the metro, making up all but the most outlying areas, you can access at least 100,000 jobs in 20 minutes by car.  A very large area, incorporating both core cities and most first-ring suburbs, can access over 500,000 jobs and up to 2.2 million.  By contrast, transit accessibility to jobs maxes out at 100k – 250k jobs, and this is if you live very near downtown Minneapolis.  If you live in parts of North and South Minneapolis and use transit, you have the same access to jobs in 20 minutes as someone with a car living in southern Dakota County (like in a corn field).  Or, based on the map shown below, from parts of Minneapolis, you can only reach 10-20% of the number of jobs reachable by car.

Ratio of jobs accessible by transit to jobs accessible by car

Is our transportation/land use system is failing those that can least afford a car?  I’d say that judgment wouldn’t be a stretch looking at these maps.  It will be interesting to see what MNDOT does with this information.

There will be a temptation to interpret this metric as only about transportation.  It’s actually about destination density AND transportation system performance.  I posted this idea in the comments and Andrew had a good response:

That’s a great point, and I didn’t talk much about the land use side of things in this post.

I feel like the popular conception often sees land use as more static than transportation; it is the background canvas upon which the dynamic lines of transportation are drawn. Discussion of expensive, exciting transportation systems tends to magnify this effect.

But in reality land use is far more dynamic! Transportation systems change in big fits and starts, but land use is constantly evolving in countless small ways. Even if we completely halted new investments in transportation, we could still make huge changes in accessibility through the policies we choose to guide land use development.

MNDOT mostly builds roads, so I assume they’ll use this report to think about where and how they should build more roads.  But if your goal is increasing accessibility, is it cheaper to lay blacktop or increase jobs/housing density?  What are the environmental implications of choosing each of those options?  Why do we have one half of the equation that’s totally socialized (road & transit building) and one that is totally privatized (with obvious regulation – land use controls/building construction)?

What if instead of a Department of Transportation we had a Department of Accessibility and it’s mission was to improve accessibility while meeting environmental standards, building resilient systems, and being economically viable?  I bet it would look at lot different than our current DOTs (hint: it would do a lot more with land use).

It’s a bird, it’s a plane, it’s dedicated ROW!

Over at, I have a post about everyone’s favorite fictional urban transit revolution, the urban gondola (or aerial tram).

The case history on US urban gondolas doesn’t look good cost-wise, but the travel time savings look great.  The Portland Aerial Tram, which could also be called an urban gondola (if you consider low-slung Portland urban), cost $57 million, or roughly $90 million per mile, if I calculated the hypotenuse correctly.  The Portland Aerial Tram travels at a top speed of 22 mph, which could make an Uptown Transit Station to Hennepin-8th Street trip in 6.5 minutes.  That’s about one-third the posted travel time for the #6 bus, and less than half the travel time of the limited-stop #12.  6 minutes is even less than half the travel time identified by Metro Transit for an upgraded arterial BRT on Hennepin.