Tag Archives: energy

How much should utilities pay for distributed solar power?

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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”

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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.

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

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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.

ElectricitySalesThru2030

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.

National Climate Assessment: trouble ahead

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duluth flood - mpr

A draft of the US National Climate Assessment was released about a week ago, and the outlook for changes headed to the Midwest and country as a whole is not good.  Minnpost has a good look at the Midwest section (emphasis mine):

Climate change will tend to amplify existing risks from climate to people, ecosystems, and infrastructure in the Midwest. Direct effects of increased heat stress, flooding,

drought, and late spring freezes on natural and managed ecosystems may be altered by changes in pests and disease prevalence, increased competition from non-native or opportunistic native species, ecosystem disturbances, land-use change, landscape fragmentation, atmospheric pollutants, and  economic shocks such as crop failures or reduced yields due to extreme weather events.

These added stresses, when taken collectively, are 

projected to alter the ecosystem and socioeconomic patterns and processes in ways that most people in the region would consider detrimental.

Much of the region’s fisheries, recreation, tourism, and commerce depend on the Great Lakes and expansive northern forests, which already face pollution and invasive species pressure – pressures exacerbated by climate change. Most of the region’s population lives in urban environments, with aging infrastructure, that are particularly vulnerable to climate-related flooding and life-threatening heat waves.

CC Midwest temp rise

Over at MPR, Paul Huttner also has a good overview, highlighting the coming “climate shock” of project 5-degree warming headed to Minnesota.

 

Bottom line?

This magnitude of warming will likely cause some dramatic… and potentiallyalarming changes in our Minnesota Landscape.

Our forests will shift north. Pine forests may dissapear, and transition to hardwood forests in significant sections of northern Minnesota.

Prairies will also overtake areas that are now forested…possibly even the parts of Twin Cities metro.

Increases in the frequncy of extreme rainfall events will create more events like the multiple “500 to 1,000 year” flood events seen in Duluth and southern Minnesota in the past 9 years.

The changes we’re already observing in Minnesota will continue…and the pace of change is likely to quicken in the next 30 years. Our children will live in a very different Minnesota than our parents did.

How are we doing to address this challenge?  Haven’t US greenhouse gas emissions gone down recently?  Yes, but unfortunately not enough, and we can’t just worry about US emissions.  From the report’s mitigation section (emphasis mine):

Even absent a comprehensive national greenhouse gas policy, both voluntary activities and a variety of policies and means at federal, state, and local levels are currently in place that lower emissions. While these efforts represent significant steps towards reducing greenhouse gases, and often result in additional co-benefits, they are not close to sufficient to reduce total U.S. emissions to a level consistent with the B1 scenario analyzed in this assessment. 

And remember, hitting that B1 scenario is critical if we want to avoid the most dangerous impacts and potentially runaway climate change.  For more on what the world might look like if we stay on the emissions path we’re on, take a look at the World Bank’s most recent report on 4-degree warming.

Thinking about backup power

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The New York Times reports that post-Sandy “a chimpanzee could sell generators by the truckload.” From their story on the disaster-preparedness economy:

Ms. Giangeruso, who notes that last year, after the “Snowtober storm” on Halloween, her house was powerless for six days. “If we are talking in the neighborhood of $6,000, it is worth every dollar. If I could get it right now, I’d write a check,” she says. “The wives in this area don’t want jewelry for Christmas. They want generators.”

I was curious why this article didn’t mention renewables as a backup at all. Unlike generators, they can be used in non-emergency times to offset some of your utility costs. They also don’t require you to have a large tank (or pipe) of fossil fuel on-site at all times in case of power outage.

On Amazon, you can know purchase a 255 watt solar panel for $334. A 75 ah heavy duty battery will cost you $200. If I’m doing my math correctly, two of these batteries could run an efficient refrigerator for almost two days. You’d never have to worry about your mobile phone (a modern lifeline) running dry.

Given my household’s usage, just four solar panels would offset 30% of our annual electricity usage. A very rough ballpark estimate puts the installed cost, with batteries, at $4,000. Using current electricity prices, that system would have a 23 year payback without rebates, and 8 years with Xcel and federal rebates. Peace of mind during extended outages (however rare) should also add some value.

Depending on your willingness to accept risk, $4,000 or so for such a system might make sense. Does it make sense for a utility? Many mobile data/phone providers are starting to back up their towers with batteries specifically in response to emergency outages. New Jersey also apparently has 200,000 solar panels installed on utility poles throughout the state. Certainly large installations like this could have a climate benefit, but do they make a dent when it comes to emergency power? It seems liked they would have to be paired with distributed battery storage and some way to curtail per-unit usage in an affected area (no plasma screens during emergencies).

Do the Math

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The article I linked to earlier by Mims sent me to Do the Math, which I find very intruiging.  It’s written by Tom Murphy, an associate professor of physics at UC San Diego.  He writes about growth, energy and economics, but from a physical science point of view, which is fascinating.  Some most-read posts include Galactic-Scale Energy, Can Economic Growth Last and Sustainability Means Bunkty to Me.

If you only read one post, read Exponential Economist Meets Finite Physicist.

Act One: Bread and Butter

Physicist: Hi, I’m Tom. I’m a physicist.

Economist: Hi Tom, I’m [ahem..cough]. I’m an economist.

Physicist: Hey, that’s great. I’ve been thinking a bit about growth and want to run an idea by you. I claim that economic growth cannot continue indefinitely.

Economist: [chokes on bread crumb] Did I hear you right? Did you say that growth cannot continue forever?

Physicist: That’s right. I think physical limits assert themselves.

Economist: Well sure, nothing truly lasts forever. The sun, for instance, will not burn forever. On the billions-of-years timescale, things come to an end.

Physicist: Granted, but I’m talking about a more immediate timescale, here on Earth. Earth’s physical resources—particularly energy—are limited and may prohibit continued growth within centuries, or possibly much shorter depending on the choices we make. There are thermodynamic issues as well.

They go all the way through dessert.

He’s also obsessed/extremely dedicated to reducing his personal energy use footprint, and writes about his exploits pinching therms in graphic detail.

The only downside to Tom’s blog is that he doesn’t include full text articles in his RSS feed.  But you should subscribe anyway.

The end of nature

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Christopher Mims delivers a sobering review of man’s near-total dominance over nature, and what might be next.

If you think of the Earth as a space ship with an energy budget that equals the input of the sun, which is exactly what it is, then you can imagine that there is a total quantity of biological productivity of which our planet is capable. Estimates say that humans are already appropriating between one quarter and one half of this productivity. The total amount of land given to crops is tied with forests as the single largest terrestrial ecosystem. Our food production requires almost a quarter of the total land area of the planet.

We have basically killed most of the wildlife that was available to us only a single generation ago. Chief scientist of the Nature Conservancy Peter Kareiva has declared that while 13 percent of Earth’s landmass is now protected as some sort of park — an area larger than all of South America — we have completely failed to stop the eradication of the plant and animal inhabitants of these “wild” places. Much of this is due to the fact that wild things are apparently quite tasty. And if you think this is limited to the land, the evidence is that our oceans are in even worse shape, with global fishing stocks set to collapse by mid-century. Meanwhile, as we all know, climate change is only accelerating what scientists now call the “sixth extinction.” Or in other words, the sixth time in the 4 billion year history of life on earth that the entire planet was so challenged that a vast majority of life came perilously close to being snuffed out.

This is not a narrative that should surprise anyone. Like all species, we were destined to expand up to the carrying capacity of our environment. We just happen to be the best ever at altering that environment to support ever more of us, consuming at an ever more rapid rate. What’s nature, now? To a significant extent, it’s us. It’s our machines — the hybrids of flesh and technology that we have all become.

I don’t mean to be cavalier about the damage we’re doing to our planetary life support systems. But any attempt to talk about the 21st century without acknowledging that every living thing on the planet will be altered by humans is intellectually bankrupt. There is no “nature” left — only the portion of nature that we allow to live because we imagine it serves some purpose — as a thing to eat, a place to reprocess our waste, or an idea that fulfills our dwindling desire to maintain “the natural” for aesthetic or ideological reasons.

It is truly the age of the Anthropocene.

Road train tested on public roads

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Your first robot car might not be the totally-robot google kind, but a lesser robot that only takes over when you’re on the freeway.  Volvo has taken their long-running road train test to public streets in Spain.

Volvo used three vehicles – a XC60, a V60 and a S60 – that drove autonomously following a truck for 200 kilometers (124 miles) at 85 kilometers an hour (53 miles per hour) on the roads outside Barceolona. The follows vehicles used “cameras, radar and laser sensors” and wireless communication to copy what the lead vehicle is doing “using Ricardo autonomous control – accelerating, braking and turning in exactly the same way as the leader.” The vehicles were about six meters (20 feet) apart.