Author Archives: Jamie Fine

Nest’s Promising Results for Reducing Peak Electricity Demand

Back in January when Google announced it would spend $3.2 billion to purchase Nest, EDF knew this was a company to watch. The results of three new reports, released today, confirm that controllable thermostats like the Nest Learning Thermostat are both customer-friendly and useful for energy system planners. Moreover, the reports signal that smart devices, such as those Nest manufactures, have potential for generating marked savings for utility customers.

The reports analyze 2012-2013 energy use data gathered from four major utilities across the U.S. that offer Nest energy services programs: Austin Energy, Reliant Energy, Green Mountain Energy, and Southern California Edison.

The first report evaluates the results of Rush Hour Rewards, a demand response service that changes the temperature of the homes of Nest users during energy “rush hours”, or times when demand on the grid is highest. The second examines Seasonal Savings, a program that runs for three weeks and slowly modifies the temperature according to the customer’s behavior (which this smart thermostat is able to ‘learn’ via its built-in motion sensor and understanding of its owner’s temperature preferences). Both operate during times of heavy usage, namely winter and summer. The third report analyzes home energy data of Nest customers more broadly, comparing energy use before and after the installation of a Nest Thermostat. Read More »

Posted in Clean Energy, Energy Efficiency, Smart Grid| Comments closed

California on Course to Give Power to the People

Jamie Fine PhotoIn a report issued by the Energy Division at the California Public Utilities Commission (CPUC), experts demonstrated their commitment to the transition toward greener electricity rates in the Golden State. This is good news for two reasons: It will give customers more control of their utility bills and it keeps the state on course to cut pollution.

Today, most Californians are frozen by energy bills that are hard to understand and even more difficult to keep under control.  Fortunately, recommendations from the CPUC released Monday will put the power in the hands of customers by transitioning to rates that vary with the time of energy use.

These “time-variant rates” (TVR) can cut pollution by giving customers tools to directly influence how much money is spent on the least-efficient, most-expensive, and most-polluting power plants.   Critically, it’s also a way to avoid ever-growing, system-wide peak demand that leads to the building of additional power plants, known as “peaker plants” as they are specifically designed to serve customers at times of peak demand.

Because peak power plants run so few hours a day and are so inefficient, EDF estimates that if half of consumers participate in time-variant rates, California would save nearly $500 million annually.

The savings – from avoiding costly enhancements to grid infrastructure – will mean lower bills for customers and cleaner air for all.  The CPUC report affirms EDF’s analysis that total system costs will be reduced with wide-spread participation in time-variant rates, estimating that peak demand – and the associated costs of peaker plants – would be reduced by 12%.

As required by law, the rate reform proposal sets expectations that adequate protections be put in place for vulnerable customers.  The law also requires that people will always be able to choose their rate structure, but most will find that participating in time-variant rates will lower their bills with little or no effort to change their daily patterns.

The next step is for the CPUC and utilities to implement these recommendations and to put customers on the path to more cost- and environmentally-friendly rates.  With robust plans for education, outreach and enabling technologies (like programmable thermostats) to help customers reap the benefits of greener electricity prices,  time-variant rates can become another shining example of California’s commitment to innovation, the environment, and its people.

Posted in Clean Energy, Energy, Smart Grid| Comments closed

How's Your Electric Bill Treating You? Time To Give It Some Thought

When was the last time you really gave a lot of thought to your electric bill?

If your answer is “not very often”, then you’re not alone. In fact, the typical household thinks about their electric bill only six minutes a year.

The California Public Utilities Commission (CPUC) now has the opportunity give people another way to control household energy bills by creating a system where changing the time you use electricity can save money. This won’t mean you’ll need to invest more time thinking about energy use, but you’d be well-served to think about the timing of it.

Last week, the CPUC held a public workshop inviting stakeholders — PG&E, SCE and, SDG&E, along with consumer, industry, and environmental groups — to present and discuss their proposals for revising the system of charges for residential electricity use. I had the pleasure of presenting EDF’s proposal for a time-of-use (TOU) pricing system: For customers looking for another option for saving money on their monthly bill, EDF sees TOU as the best pricing policy for both people and the environment; customers uncomfortable with this option would be able to “opt out” and choose another pricing structure.

Currently, the standard “tiered” rate charges customers higher prices for higher electricity usage. The approach is intended to send the message: “The more you use, the more you pay.”

Yet, current rates hide the true cost of electricity service at certain times of the day – and most customers don’t know where their usage falls until they actually see the bill at the end of the month. Ultimately, this lack of information prevents customers from making informed decisions about their energy use, limits their options for keeping bills within budget, and makes the overall energy system in California dirtier and more expensive.

As detailed in our proposal, EDF has found that updating the current pricing policy to be based on the timing of actual energy use will empower consumers to save money, dramatically lower overall system costs, facilitate more efficient usage of electricity generation assets, lower peak energy demand, provide more accurate and effective energy conservation incentives, and more equitably share energy system costs amongst customers. Here is a short list of what TOU can do for you, and California:

  • Dramatically Lower System Costs.  Using the utilities’ own data on the costs of serving electricity to customers, EDF estimates that if half of residential customers adopt the optional TOU rates available already , we’d reduce the cost of service by around $500 million each year.  If translated directly into savings for residential electricity customers, electricity rates could be reduced significantly: a roughly 15% rate decrease would be enjoyed by all customers. How can this be so?  Simply put, it is most expensive to provide customers with electricity at times when demand for electricity is highest.  If customers paid for energy based on actual costs of electricity service, they would see higher prices at peak times and thus be motivated to shift energy use to cheaper times of the day.  This shifting is better for overall system costs, and better for your wallet.
  • Avoid Adverse Environmental Impacts. TOU will: (1) reduce the need for “peaker” power plants that tend to be fossil-fueled, expensive to operate and among the most polluting resources on the system, (2) reduce the environmental impacts and costs of siting, operating and building power plants and transmission lines, and (3) help to integrate increasing quantities clean, renewable resources.
  • Attract Clean Energy Investments for Residential Consumers. TOU will spur innovation in the electricity marketplace, promoting the development of new services and technologies that enable utilities and customers to better manage electricity production and use through distributed, resilient, clean, and low-cost energy services and products. While the average customer may not think much about how and when they use electricity, service and technology companies live and breathe it. TOU rates provide new value propositions that clean energy innovators will deliver to our doors.
  • Reward you for your choices. A recent survey of nearly 5,000 customers by Pacific Gas and Electric and Southern California Edison found that 75 percent have tried shifting their energy use already – even though they receive no financial rewards to do so.

EDF’s proposal is a win-win for people and the environment, and takes us along the path to a cleaner, cheaper, and more resilient energy system. I urge the CPUC to conclude the same with a decision this Fall that will set the direction of California electricity pricing and prompt utilities to provide the robust consumer education and enablement with set-it-forget-it technologies.

While the concept may be complex, TOU will be better for you, for the environment, and the clean energy marketplace.

Posted in Clean Energy, Smart Grid| Comments closed

Cream Cheese and Time-Of-Use Electricity Pricing

“The cream cheese just fell off the roof of the car,” my 7-year old daughter said as I turned into my driveway after a trip to the grocery store.  Right now you might be asking yourself, “What does this have to do with time-of-use pricing?” Allow me to explain.

We live in Alameda, CA, where plastic bags are prohibited and stores must charge for a paper bag. Alas, I had forgotten to bring a reusable one.  To teach my children a lesson and avoid the public scorn (not so much the $0.05 per bag), I carried our groceries and asked the kids to lend their hands. And yes, I put the cream cheese on the roof of the car to free a hand to unlock it.

Once home, I realized that, in addition to almost losing my cream cheese, I’d been making potentially risky tradeoffs.  After all, exiting the supermarket with full hands prevented me from holding my children’s hands while crossing a busy – and dangerous – parking lot.

Don’t get me wrong; I’m not lamenting the ban on plastic shopping bags.  I think it makes perfect sense, but it takes time to start making the adjustment and the risk tradeoffs aren’t always obvious.

This scenario– making adjustments that may seem inconvenient and a bit scary, but are well worth the effort– plays out in other areas of life as well.  Particularly in rethinking how Americans use and pay for electricity.

Most of us don’t think about how the time of day affects the cost of serving us power.  In California, we aim to change that by moving to Time-of-Use (TOU) pricing – which will make electricity more expensive during times of peak, or high, energy demand and cheaper off-peak.  In fact, just yesterday, the Sacramento Municipal Utility District (SMUD) recommended moving all residential customers to time-of-use rates by 2018 in an effort to give customers more control over energy costs.

EDF believes that TOU pricing will be best for people and the environment, just as banning plastic shopping bags effectively reduces their environmental impact.  This approach can encourage conservation and reduce peak energy use while providing customers with more choices that can ultimately lower their monthly bills.

Switching to TOU electricity pricing may feel to some like being thrust into a busy parking lot with an armload of groceries and two children to monitor.  When should I use my dishwasher?  Do I need to reset my air conditioner?  Well, yes and no.  You can choose to do nothing, or you can exercise a choice you don’t have with our current pricing structure: shifting energy use to times of lower electricity prices.  It’s quite doable.

A recent survey of nearly 5,000 customers by PG&E and So Cal Edison found that 75 percent have tried shifting their energy use already – even though they don’t get paid to do it.  Two-thirds of respondents said they’d be willing to risk higher bills for the chance to save energy for environmental purposes.  This willingness, combined with wise policies – such as the “Try-Before-You-Buy” bill protection that prohibits bill shocks for up to one year after a customer changes rate plans – bodes well for the union of can-do attitudes and technology innovations like digital electricity meters and automated “set-it-and-forget-it” learning thermostats.

The rewards will be significant: TOU pricing will reduce the amount of peak electricity needed from dirty fossil fuel “peaker” power plants, thereby avoiding costs from blackouts and new energy infrastructure investments.  It can also help to incorporate more renewable, clean energy resources onto the grid – like wind and solar – with significant benefits for energy independence and reduced air pollution that will put us on a pathway toward stabilizing our climate.

Most consumers will see lower energy bills from TOU electricity pricing without doing anything.  Others will need to make adjustments, particularly homes that use a lot of energy during peak energy times of the day.  With a little planning, knowledge and helpful technology, it can be as easy as keeping extra shopping bags in your car.

Just as banning plastic bags is helping to reduce environmental degradation, so too can TOU electricity pricing.  We just need to get comfortable with the idea.  That way we can have our cream cheese and clean environment, too.

Posted in Clean Energy, Energy, General, Smart Grid| 1 Response, comments now closed

Nest Labs: Proof Life Exists in the Smart Grid Ecosystem

There are many conceptions of the smart grid; what it is and what it should do for us – the “ratepayers” – who will finance the necessary upgrades to California’s electrical system.  I find the concept of a “smart grid ecosystem” — with smart customers, smart utilities and smart markets — to be a helpful guidepost as we seek to evaluate what should be accomplished by the utilities trusted to deploy our smart grid.

Ecosystems achieve resiliency through diversity.  We want a variety of clean energy resources on the supply side – hydropower, wind, solar photovoltaic, solar thermal – spread across a variety of locations (but never too far from customers).  Similarly, on the demand – or customer – side, Californians, buildings, appliances and electric vehicles create an intricate, synergetic web that can be made more efficient and flexible with customer education and empowerment, customer-focused energy pricing policies, and demand response (which allows customers to voluntarily reduce peak electricity use and receive a payment for doing so in response to a signal from their electric utilities).

There are other ways to contemplate diversity in the energy context:  Unlike some other states, most Californians can’t choose their power providers, though they can choose among rate “plans” (which are payment schemes, not plans to help manage energy use and costs).  EDF recognizes that a smart energy marketplace will thrive with a greater variety of competitors, products and services, and would like to see “3rd party energy service providers” able to participate (that catch-all term includes organizations that deliver energy services and products to customers at a variety of levels throughout the smart grid ecosystem).

Yesterday’s announcement by Nest Labs (Nest) is more proof that the smart grid ecosystem is alive and well.   With utility partnerships in California and Texas, among other places, Nest uses their intelligent, WiFi-connected thermostat to help customers smartly and painlessly trim energy use by learning, and mimicking, their temperature preferences automatically.  For example, the Nest’s Seasonal Savings services will alert your thermostat when new rates apply with a change of season and the device will begin slight adjustments to presets to adapt to predictable weather trends.

Source: Nest Labs

Even more exciting is Nest’s Rush Hour Rewards service that provides centralized, automated small reductions to heating or air conditioning at times of peak demand, when energy use is highest.  The offering in particular is designed to enable customers to be good environmental stewards by enrolling in peak energy trimming programs, such as Southern California Edison’s Peak Time Rebate rate.  Another benefit of participation is lower energy bills.

While customers retain the ultimate authority to override thermostat settings, the basic premise is to accept a payment to adjust settings by a couple of degrees when the electric grid is most stressed.  The trouble is involving people in energy conservation actions is less reliable and slower than communicating directly to appliances with computers.  Enter the Nest, strategically located at the interface between utility and customer, with specific dominion over the biggest energy hog in your home – the heating and cooling system.

The reality is that the electric grid as we know it is changing, driven by California’s quest to secure an environmentally safe and affordable energy system. Increasing the amount of clean, renewable energy on the grid will mean that more generation is variable (meaning electricity output from solar and wind depends on sunshine or windiness, respectively).  Up to this point, California has met this challenge by backing up clean resources with dirty fossil fuels.

Smart grid ecosystems can provide hot beds for innovation, like Nest’s learning thermostat, but they must start by getting energy pricing right.  Nest’s business model will thrive when residential customers see time-variant prices (where the price customers pay reflects the cost of electricity produced at a given time of day) that align with the actual costs of delivering power.  We’ve already seen it work in large, statistically-valid studies.

This is how Nest’s learning thermostat will make a difference to your electricity bill and the environment:

  1. Customers would upgrade their old programmable thermostat,
  2. Customers would sign up for a time-variant electricity rate (perhaps at the same they are online for the utility rebate on the new learning thermostat),
  3. On peak demand days when electricity use is highest and the utility will pay consumers handsomely to trim their energy use for a few hours, Nest Labs will signal customers’ thermostats via WIFI.  It’ll feel to customers like an air conditioner turned up a few degrees when it’s over 100 degrees outside (aka, hard to notice any difference).

For California overall it will add up to avoiding more harmful  pollution from fossil fuel power plants in the coming years and, eventually, could be tuned to work harmoniously with variable clean energy resources like wind and solar.  Nest thermostats are among a growing number of products capable of precooling buildings in advance of peak electricity demand, a strategy that will become commonplace once time-variant pricing pervades.

California has already spent billions of customer dollars installing a robust digital metering infrastructure – and it’s time to put these meters to work by enabling customers to participate in demand response and other demand-side programs, such as building weatherization.  Coupled with technologies that now allow for fast, reliable, automated ‘set-it-and-forget-it’ adjustments to electricity use – like Nest’s learning thermostat and other exciting energy innovations – we can seamlessly integrate variable clean energy resources, such as wind and solar.  In California’s energy ecosystem, customers can now choose to actively, or passively, be part of the clean energy revolution without leaving the comfort of their own nests.

Posted in Clean Energy, Smart Grid| Comments closed

Solar, Wind Prompting Electricity Grid Innovation In California

This commentary was originally posted on EDF's Energy Exchange blog.

In a February Wall Street Journal article (“California Girds for Electricity Woes”), reporter Rebecca Smith gives an alarmist and misleading account of California energy regulators’ efforts to secure a cleaner, less expensive, more reliable electricity grid. Right now, California has plenty of power: 44 percent more generating capacity than it typically uses, including a considerable fossil fuel energy portfolio. Renewables – large scale, rooftop solar, wind, and, increasingly, energy storage – make up almost 15 percent of the grid, a percentage that will more than double in the next decade. These clean, innovative energy technologies are working to improve the system by reducing the need for fossil fuels.

The reality is that the grid is changing, driven by California’s quest to secure an environmentally safe and affordable electricity system. Increasing the amount of renewable energy on the grid will mean that more generation is variable; electricity output from solar and wind depends on sunshine or windiness, respectively. Up to this point, California has met this challenge by backing up clean resources with fossil fuels. But California’s ratepayers can’t afford to keep doing this, so instead of “girding for woe,” the CAISO and the CPUC met to proactively address our changing future – to move California towards cleaner, less expensive electric grid planning.

This new approach can increase California’s ability to rely on clean energy generation by building greater flexibility into the system – while giving more options to consumers. Not only can customer-based (“demand-side”) clean energy technologies reduce reliance on polluting power plants, they are quite likely to be more reliable and are potentially more cost-effective. Demand response, or the ability of customers to choose to save money by responding to a price or electronic signal from the grid operator in times of excess system demand, will be key to integrating large amounts of intermittent solar and wind without back-up fossil or storage. In fact, during afternoon peak demand, where supply is extremely limited in its ability to serve load, the addition of virtual generation resulting from the participation of DR into the market will actually lower energy prices.

California has already installed a robust digital metering infrastructure – and it’s time to put these meters to work by enabling customers to participate in demand response and other demand-side programs. Coupled with technologies that now allow for fast, reliable, automated ‘set-it-and-forget-it’ adjustments to electricity use, we can seamlessly integrate variable electricity resources, such as wind and solar, without disrupting energy users. Customers can choose to become an energy resource instead of fossil fuel plants.

Other “smart” resources could also help to integrate renewable resources, including weather forecasting, scheduling energy at shorter time intervals, and sharing the variability in the output of these generators across large geographical regions to smooth out local variation. While these tested technologies would be newer to the California grid, the truth is that conventional fossil fuel facilities are subject to far greater extreme ranges of temperatures than wind and solar. They fail much more frequently, and have to be taken off line for regular maintenance. But the grid was developed to manage these large forced outage rates, and the costs of handling these uncertainties at great cost to ratepayers the grid. Clean resources, coupled with greater flexibility, can create a far more reliable and less expensive system.

California’s regulators should amplify efforts to put in place the right set of solutions to integrate renewable resources – clean energy resources like demand response and other customer-based resources. The story isn’t about having too much solar and wind. It’s about how traditional fossil fuel power plants aren’t viable if we are to protect the environment and ensure a flexible, reliable and sustainable clean energy economy. This meeting of California regulators was one step forward towards integrating clean, resilient, homegrown resources by empowering consumers and sparking the investment and innovation needed to power California’s future.

Posted in Clean Energy, Climate, Smart Grid| Comments closed

San Diego's New "Smart Energy Community"

San Diego Gas & Electric Co. (SDG&E) and Sudberry Properties have announced plans to incorporate breakthrough smart grid technology in the construction of Civita, the new master-planned development in Mission Valley, California. With a focus on sustainability and energy-efficiency, the “smart energy community“ will be home to vehicle charging stations, solar and fuel cell electricity, battery storage and energy management tools for residents.

"The Civita project is consistent with what we are trying to achieve here in San Diego," said Mayor Jerry Sanders.  "By integrating solar power, clean transportation and energy efficiency into the very foundations of our homes and businesses, we can help preserve the environment while strengthening our community overall."

With plans to build nearly 5,000 homes and around a million square feet of office properties, apartment living, public parks, and a civic center over a once 230 acre gravel quarry, Civita could become one of the first communities in the nation to be “fully upgraded with smart grid technology and stand at the forefront of the broader transformation of the electric grid the community.” Civita aims to surpass current California energy efficiency standards by at least 15 percent by using energy star appliances, highly efficient residential lighting and onsite power sources, and by allowing some buildings and areas within community to operate independently of the grid.

Posted in Clean Energy, Smart Grid| Tagged , | Comments closed

Spinning Facts to Suit Industry Interests: New California Manufacturers & Technology Association report is full of holes

By Jamie Fine, PhD and Ruiwen Lee

Jamie Fine is EDF’s Senior Energy economist, and a graduate of UC Berkeley’s Energy Resources Group; Ruiwen Lee is an economics fellow and graduate of Princeton University’s Woodrow Wilson School of Public and International Affairs.

California’s energy and climate change policies have saved the state over one hundred billion dollars and dramatically reduced levels of environmental pollution since the early 1970’s. Yet these policies have been in the crosshairs of industry for decades, despite their demonstrated success. It’s not surprising that the latest study sponsored by the state’s main manufacturing lobbying group, the California Manufacturers and Technology Association (“CMTA”), ignores the achievements of these landmark policies while attempting to downplay the benefits of new laws that protect human health and the environment.

EDF’s team of economists looked behind the curtain of CMTA’s most recent tirade against clean air laws and found cherry-picked assumptions, secret modeling calculations, and confusion over basic economic principles. Accordingly, while CMTA’s new report maintains that it modeled the impacts of California energy and climate policies on the state’s economy, the results more closely resemble CMTA members’ manufactured products than actual economic analysis.

Cherry-picked data – CMTA’s report is based on the impact of seven different policies currently underway in California:  The 1) Low Carbon Fuel Standard (“LCFS”), 2) Pavley II car standards, 3) SB 375, 4) the Renewable Portfolio Standard (“RPS”), 5) Combined Heat and Power (“CHP”) standards, 6) new efficiency measures, and 7) the Global Warming Solutions Act of 2006 (“AB32”).

Though these policies have been carefully designed and the economic impacts studied, modeled, re-studied, re-modeled, and peer reviewed, the report’s analysis assumes significantly lower benefits and higher costs than nearly every other peer-reviewed analysis that currently exists.  With these new assumptions, each described in a mere sentence or two, the goal seems to have been to engineer a flimsy model that puts AB32 into a bad light.

Even more subtle assumptions are not immediately obvious at first glance. For example, in the electricity model, the report uses a simplistic “average change in electricity demand”, based on the ten-year historical decline in electricity use per unit of state output, to project future electricity demand.  However, this model does not consider the reduction in electricity demand from the energy efficiency measures that have only recently been implemented, or yet to be imagined by innovators – meaning the modeling output undercounts savings from day one.

In addition, this model is posing extremely pessimistic assumptions about new transportation fuels and the California LCFS.  These same assumptions are at the heart of a recent oil industry report, and fail to take into account policy-inspired innovation that will lead to newer transportation fuels in adequate supply.  As previously discussed here,  here and here, these pessimistic assumptions aren’t grounded in the reality of market incentives for innovation, making the CMTA report eerily similar to other oil industry “sky-is-falling” reports – this one just has a different cover.

Finally, like other faulty anti-AB 32 analyses that have been debunked, this newest CMTA piece fails to take into account the full range of benefits that can be achieved by implementation of California’s regulations.  For example, the analysis only calculates the costs to carbon-intensive commodities, ignoring the positive demand impacts on clean products and services.

Secret modeling calculations – The output presented in this new paper is based on an internally designed model that claims to weave together “24 interacting models that measure the combined impacts of AB 32.”  However, nothing more is presented than a few spreadsheets of model output and some graphs.  This amounts to a clear admission that the model simulated the operations of an entire economy and then offered the output as fact, without any discussion of range or uncertainty.  Simply put, CMTA’s new report says, “trust me” even though the findings are vastly different from prior, peer-reviewed scholars.

Confusion over basic economics – The principles that underpin cost analysis, though complex, are fundamental to the accuracy of the overall output of economic models.  In this report, CMTA has apparently gotten some of those basic principles backwards, meaning that the modeling results are likely to be fundamentally flawed.

For example, in the description of their direct cost estimation model for electricity, the report wrongly concludes that, “the cost of electricity is decreased by efficiency measures, which drives up demand.” In fact, it is the other way around – efficiency measures shift the demand curve down (given any electricity price, consumers use less electricity than before efficiency measures are implemented), so the cost of electricity is decreased, even as the quantity of electricity consumed is further reduced.

Model inconsistencies – In another area of the report, where it separately modeled electricity and natural gas price and demand impacts, it appears there is double counting and inconsistent assumptions due to confusion over the linkages between commodities markets. For example, even as the report predicts electricity generation from natural gas will decrease by 40% from 2012 to 2020 (Appendix D-6), overall natural gas demand will increase by 6% over the same period (Appendix E-1).  A simple question underpins the potential error of these inputs: when so much electricity is currently made using natural gas, how can the state reduce its use in the power sector by 40% while using so much more in the aggregate?

In yet another example, the report purportedly uses a simple summation of impacts (Appendix C-2) from modeling outputs to calculate policy “costs”.  However, since at least some of the commodity markets that have been analyzed are substitutes for one another, a simple summation method will almost certainly result in double counting. The report doesn’t make clear which commodity markets were modeled based on direct cost estimations, and which were separately modeled based on aggregated data – a wholly separate problem from the one described above.

The bottom line is, this report is deeply flawed in its analysis and its presumptions. If your summer reading list includes fiction, then by all means take the time to read it. But if you are looking for a well-documented and peer-reviewed examination of California’s anti-pollution laws, this report doesn’t make the grade.

For more information on modeling AB 32 policy and the overall benefits of AB 32 implementation, read here and here.

Posted in Clean Energy, Global Warming Solutions Act: AB 32| Comments closed

A Dynamic Approach To California Energy Use

Californians are poised for a more functional, data-driven model for setting the prices people pay for electricity. The new model will make the massive differences in costs of providing electricity during the course of a typical day more evident to us as energy users, thereby inspiring more efficient use of electricity resources.

The California Public Utilities Commission (CPUC) started a rulemaking to examine if the current rate structure for residential energy users is fair and equitable across customer classes and if it:

  • supports statewide-energy goals;
  • facilitating technologies that enable customers to better manage their usage and bills;
  • enables conservation and efficiency on the customer side of the meter; and
  • increases the reliance on non-fossil based generation to reduce overall greenhouse gas emissions.

We know already that the short answer is “no”, so CPUC is eyeing a transition to time variant (“dynamic”) rates. According to Pacific Gas & Electric (PG&E), with time variant, or what is often referred to as “time-of-use”, pricing – rates “will be higher during summer weekday afternoons when electric demand is higher, typically noon to 6 p.m., May through October. In return you’ll pay lower rates at all other times. This means that when you use energy is just as important as how much you use.”

EDF’s Energy team has been, and will continue to be, closely involved in the CPUC’s rulemaking, which will examine several facets of the current system. EDF has also been involved in the related smart grid proceedings, such as the deployment of smart grid infrastructure – which provides the ability to both measure energy use in real time and inform customers about the costs (and environmental impacts) of their choices to use electricity at different times of the day. This Advanced Metering Infrastructure (AMI) enables a smoother transition to dynamic rates for residential consumers.

EDF is very encouraged that the CPUC is considering time variant pricing because it will help consumers to be more thoughtful about their energy usage, particularly at times when demand is peaking and pushing electricity supply sources to their limits. This type of rate structure can encourage conservation and reduce peak demand while providing customers with more choices that can ultimately lower their monthly bills. For example, allowing consumers to see how much they can save on their electric bills by reducing their energy use during peak hours will encourage a shift of energy-intensive activities, such as washing and drying clothing and dishes, to off-peak (and less expensive) times of the day.

Because a dynamic pricing system will alleviate pressure on the electric grid during peak demand, it will also lead to a more stable, less expensive energy system that is increasingly resilient to extreme weather events. The economic motivation should also help to create an easy way for consumers to make decisions more efficiently, thereby lowering their electric bills and shrinking their environmental footprints.

Futhermore, dynamic pricing can help integrate renewables and electric vehicles into the electric grid by allowing utilities to respond to price signals more effectively. For example, time-of-use rates support electric vehicle charging at times when grid resources aren’t strained, such as late at night or early in the morning when most people are sleeping.

This new approach will facilitate conservation and energy efficiency, as well as an increase in the use of clean energy sources that avoid harmful greenhouse gas and urban air pollution. If adopted, the dynamic pricing model can be a common sense approach to saving energy and money, while promoting energy efficiency and a smarter, “greener,” electric grid country-wide.

Posted in Clean Energy, Smart Grid| Tagged , , | Comments closed

New study confirms cap-and-trade leads to low-cost pollution reductions

After hearing that his obituary was published in the New York Journal, Mark Twain was quoted as saying, “The reports of my death are greatly exaggerated.” 

A similar retort applies to media coverage of a recently released report that questioned the effectiveness of cap-and-trade policy, since the study actually found that federal programs to control sulfur oxides (SOx) and nitrogen oxides (NOx) achieved goals at lower than expected costs. 

In the study, Lawrence Berkeley National Lab (LBNL) researcher Margaret Taylor found that greenhouse gas cap-and-trade programs do not necessarily induce the private sector to develop patents for innovative technologies to address climate change.  

Unfortunately for the study, the finding has been woefully misinterpreted and seized upon by those looking to undermine California’s plan to use cap-and-trade to cut climate pollution. David Roberts of Grist called the report’s announcement “a classic example of a press release overhyping and oversimplifying.” 

Published in the Proceedings of the National Academy of Sciences, the paper reaffirms the well-documented idea that cap-and-trade programs help companies meet emissions targets more cheaply than anticipated. The consequence, observed Taylor, was low allowance prices and a consequent decline in related patents.   

The key point of the paper though—and the main reason that this is a positive—is that cap-and-trade regulations keep pollution abatement costs low by encouraging program participants to find and adopt an unexpected range of approaches for reducing emissions.

Here are two key takeaways from Taylor’s paper:

  1. Reducing emissions more cheaply than expected goes hand-in-hand with faster-than-expected deployment of clean technologies and strategies.
  2. The flipside of low costs and rapid deployment means fewer new inventions and patents (a point Taylor emphasizes).

Overall, the report should be read as good news for California. As Taylor found, these approaches may not result in an onslaught of new patents but they are likely to cut pollution quickly and efficiently. Companies that are capped under California’s program can use industrial energy efficiency, building weatherization and fuel switching efforts to cut emissions.

We appreciate the spirit of Taylor’s inquiry. Yet, the question being asked isn’t the right one.  Rather than asking if a policy spurs measurable innovation in the face of climate change where action is unquestionably needed, the right question is, “does cap-and-trade show greater promise to spur low-cost solutions better than the alternatives?” 

The answer is a definitive “yes” when the cap-and-trade policy creates expectations of a nontrivial, persistent price on pollution. A recent story in Reuters stated that global warming is close to becoming irreversible if we don’t act now. California and economies around the world are acting by putting a price on carbon. This is the most environmentally and economically sensible approach to cutting emissions, which is key to helping us avoid the worst consequences of climate change.

Posted in Cap and trade, Clean Energy, Climate, Global Warming Solutions Act: AB 32| Tagged , , | Comments closed