Energy Exchange

Solar, Wind Prompting Electricity Grid Innovation In California

By Jamie Fine / Published: March 4, 2013

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. Read More »

Also posted in California, Grid Modernization / Tagged CPUC, Wall Street Journal | Comments are closed

Clean Energy Market Poised For Rapid Growth In California

By Brad Copithorne / Published: March 1, 2013

Environmentalists and other policy makers have long touted the economic benefits of investing in energy efficiency and renewable projects. For California, that vision is on course to being realized.

Yesterday, EDF, Citi and Wilson Sonsini held Innovations in Energy Efficiency Finance II, a sequel to the successful conference we hosted in 2011. That year, we discussed several interesting ideas about how we might finance projects. Yesterday we heard from sector leaders on how those ideas are being implemented in California and beyond.

Citi and EDF conceived of this event as an opportunity to bring the energy efficiency and renewable industries together to discuss these opportunities and to build momentum for increased transaction flow. Judging by the makeup of the audience, I think we succeeded. I attend quite a few conferences to discuss energy efficiency and most of them are dominated by fellow public policy types. Yesterday, however, was a different story. Of the 185 attendees, over 2/3 were representing private sector companies in the clean energy or financing business.

As former Governor of Colorado, Bill Ritter noted, “California continues to take bold steps toward clean energy and provide the private sector with clear opportunities to invest in energy efficiency and renewables, critical components of our nation’s economic growth. A key part of achieving our clean energy potential, and creating jobs in America, is ensuring access to quality financing for homes and businesses that want to participate in the new energy economy.”

Also posted in California, Energy Efficiency, On-bill repayment / Tagged Finance | Read 2 Responses

President’s Vision Encompasses A Next-Generation Energy System

By Elizabeth B. Stein / Published: February 14, 2013

Tuesday’s State of the Union (SOTU) speech included much that was music to environmentalists’ ears. The headline, of course, is the commitment to take serious action to address the most significant challenge our generation faces – climate change. And, with it, the extreme weather and public health burdens that are already making life harder for vulnerable regions and people nationwide, and that stand to become so much worse as the root cause remains unaddressed.

But some of the most exciting aspects of the SOTU message are the nuts and bolts that underlie the top-line goal. Specifically, the President’s speech recognizes that Americans have an opportunity to achieve many of the carbon reductions we need through actions that create new business opportunities, increase national security and drive economic growth. In fact, we already are. As the President noted, the past four years have seen the beginnings of a revolution in American energy production and use – technological innovations have put us on track to energy independence and renewable resources constitute a growing share of electric generation capacity.

The President’s vision, as outlined in the SOTU, encompasses a next-generation energy system – one where the system that was revolutionary in Thomas Edison’s time is finally supplanted by a system that meets the needs of our time. Technological change can bring full-scale transformation, and government can play a role by accelerating technological development. A future where cars and trucks no longer depend on oil can finally be imagined – and government efforts can help bring that future into the present more quickly.

Carbon-free wind and solar energy represent a growing share of our resource mix, and they can grow to serve a larger and larger share of load. And energy waste in buildings can be cut substantially – but doing so requires innovations in energy retrofits, building operations and finance, which government can also help to foster.

Finally, President Obama referred to fostering a ‘self-healing power grid,’ which is extremely important. Modernizing our outdated, aging electric grid and how it is operated (as well as customer-side technology and practices) will help minimize problems that arise from extreme weather events and other disruptions, while also allowing for greater shares of electric demand to be served by resources whose output depends (literally) on something as fickle as the weather.

Also posted in Energy Efficiency, Grid Modernization, On-bill repayment, Washington, DC / Tagged SOTU, State of the Union | Comments are closed

El Paso Electric Inks Solar Deal That Is Cheaper Than Coal

By / Published: February 7, 2013

On the heels of our blog post last week, showing how competitive wind and solar power have become in recent years, is news of possibly the cheapest solar deal yet in the U.S. (that we know of publicly, at least). Even more interesting is the fact that the deal was made between Texas-based El Paso Electric and First Solar, an Arizona-based solar manufacturer. While it’s a little sad that a Texas-based company has to go to New Mexico to build solar, it’s at least heartening that they could partner with a U.S. company to get the project done. First Solar has been one of the leading solar manufacturers for several years, and last year their suite of projects made them the #2 solar panel supplier in the world (up from #4.)

Marty Howell, the City of El Paso’s Director of Economic Development and Sustainability, said that “El Paso Electric’s recent solar contract with First Solar is another example of our great partnership with El Paso Electric and how El Pasoans are working together to make our community more sustainable.”

This new 50 megawatt (MW) project in New Mexico comes in at 5.79¢/kilowatt hour (kWh), which is almost half the cost of a new “advanced” coal power plant (12-14¢/kWh), according to the Energy Information Administration. It is helpful to note that the deal did benefit from subsidies, as detailed in an article by Renewable Energy World, including the Investment Tax Credit (ITC) – which provides renewable energy projects with a tax credit equal to roughly 30 percent of a project’s costs. If we were to remove that credit and the benefit of local incentives, the project would come in right around the cost of a new advanced coal plant, even if the coal plant lacks carbon capture and storage technology.

Time will tell whether this deal is an exception or the new rule, but growing signs of price parity for solar power, and the continued growth of competitive wind energy, consistently point to a critical shift in our energy infrastructure. With continued declines expected in both wind and solar prices, this First Solar project seems more likely to become the norm than not. The only question is whether utilities and regulators are ready for such rapid growth in wind and solar power.

In New Mexico, they certainly seem to be ready. However, in many other states, including El Paso Electric’s home state of Texas, that’s still an open question.

Posted in Renewable Energy / Comments are closed

Hawaii Making Waves In Financing Clean Energy

By / Published: February 5, 2013

Public Utility Commission orders on-bill program to finance clean energy

Last Friday evening, February 1, the Hawaii Public Utilities Commission (PUC) issued a landmark decision and order to create an on-bill program, very much in line with EDF’s recommendations for on-bill repayment (OBR), that will provide access to low-cost financing for solar and energy efficiency projects for homeowners and small businesses. This decision comes 18 months after the State passed legislation directing the PUC to investigate an on-bill program and authorized the Commission to implement the program (by decision and order or by rules) if the on-bill program was found to be viable.

The PUC decision determined that a statewide on-bill program is viable, and specified program design criteria that the Commission deems necessary to achieve viability. EDF has been working to shape the proposal with key stakeholders including environmental groups, lenders and the Hawaii State Energy Office.

The specified criteria include the following components that EDF believes are critical for achieving both success and scale:

bill neutrality (project savings exceed financing payment obligations)
tariff-based obligation
tariff is tied to the utility meter and therefore transferable
standard collection procedures, including disconnection for non-payment of OBR obligation
pro-rata allocation of partial payments

Since the terminology can be confusing, it is worth noting that this is not a typical ratepayer-funded on-bill finance program, despite having the same designation. The Hawaii program leverages private capital, and the PUC supports participation by multiple sources of capital rather than a single financing entity. EDF believes both of these elements are critical to scaling the program and meeting the needs of a diverse set of property owners.

Also posted in Energy Efficiency, On-bill repayment / Tagged Hawaii PUC, OBR, On Bill Finance, On Bill Repayment | Read 3 Responses

New ERCOT Report Shows That Texas Wind And Solar Are Highly Competitive With Natural Gas

By / Published: January 28, 2013

An interesting fact seemed to go unnoticed in all the press around the Electric Reliability Council of Texas’s (ERCOT) Long Term System Assessment, a biennial report submitted to the Texas Legislature on “the need for increased transmission and generation capacity throughout the state of Texas.” ERCOT found that if you use updated wind and solar power characteristics like cost and actual output to reflect real world conditions, rather than the previously used 2006 assumed characteristics, wind and solar are more competitive than natural gas over the next 20 years. This might seem a bit strange since we’ve been told for years by renewable energy skeptics that wind and solar power can’t compete with low natural gas prices. Let me back up a second and explain what’s going on here, and what it means for both the energy crunch and Texas’ ongoing drought.

Every two years since 2005, ERCOT has used a series of complex energy system models to model and estimate future conditions on the Texas electric grid. This serves a critical function for legislators, utilities and regulators and others who need to prepare for changes as our electric use continues to expand and evolve. As with any model of this kind, the assumptions are critical: everything from the price of natural gas, to the cost to build power plants and transmission lines. Facing an acute energy crunch and given that solar and wind costs have come down a great deal since the first study in 2006, ERCOT dug a little deeper into their historical assumptions and developed a version of the model that used current, real-world cost and performance data for wind and solar power.

What they found was astounding: without these real-world data points, ERCOT found that 20,000 MW of natural gas will be built over the next 20 years, along with a little bit of demand response and nothing else. Once they updated their assumptions to reflect a real-world scenario (which they call “BAU with Updated Wind Shapes”) ERCOT found that about 17,000 MWs of wind units, along with 10,000 MW of solar power, will be built in future years.

In addition to demonstrating the economic viability of renewable energy, these results show two drastically different futures: one in which we rely overwhelmingly on natural gas for our electricity, and one in which we have a diverse portfolio of comparable amounts of renewable energy (which does not use water) and natural gas. All of this is crucial to keep in mind as the Legislature, the Public Utility Commission and ERCOT evaluate proposals to address resource adequacy concerns and the impacts of a continuing drought on our state’s energy supply.

Finally, one ERCOT statement in particular stands out from this analysis, in direct contradiction to renewable energy opponents who say that renewable energy is too expensive: “the added renewable generation in this sensitivity results in lower market prices in many hours [of the year].” This means that when real-world assumptions are used for our various sources of power, wind and solar are highly competitive with natural gas. In turn, that competition from renewables results in lower power prices and lower water use for Texas.

As state leaders look for ways to encourage new capacity in the midst of a drought, it’s important to realize that renewable energy is now competitive over the long term with conventional resources. The fact that renewable energy resources can reduce our water dependency while hedging against higher long-term prices means that however state leaders decide to address the energy crunch, renewables need to be part of the plan.

Also posted in Demand Response, Natural Gas, Texas / Read 5 Responses