A balanced electricity future: Operator and customer empowerment are key
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16 Mar 2012
Re Robert Marritz’s post on the speculative nature of future projections – whether for renewable power, energy efficiency, or the smart grid – it’s of course true that they all depend on assumptions about population growth, economic considerations, and electricity demand.
Our energy future also depends on what actions we take today and in the near term and I am wary of multi-decade projections. First, projections beyond a year or two lose accuracy and relevance at an accelerating rate. Second, they tend to be only half the story, depending on the analyst’s desired outcome. For example projected savings from efficient appliances are based on the expectation that consumers will act a certain way, which often does not happen.
People also make projections regarding expected grid investment. For transmission owners and renewable energy developers, the more transmission built the better, since the former earns a return on plant in service and the latter depends on transmission access to sell their product. The underlying need here is for balance and perspective. The important thing is not to view any solution in a vacuum. One could say that grid reliability is vitally important and therefore justify a robust expansion of transmission capacity. However, this must be tempered by the cost to consumers and the larger economy.
In this respect I think the merits of the so-called smart grid are greatly misunderstood. Investment in enhanced grid operational control and consumer empowerment seem to be held apart as an optional adder to the energy policy menu – an afterthought or luxury. I would argue that a digitized grid – both customer- and grid-facing – is essential to fulfillment of our energy policy needs, whether they be driven by environmental, economic or reliability concerns.
Peak demand drives the capacity needs of the grid, both in terms of generation, towers, and wires. But it would be wasteful to envision a trillion dollars of grid investment without first providing the means for consumers to see the variable price of the commodity – seasonally, daily, or hourly – and to respond accordingly. It is astonishing also that load factor, which tells us how efficiently generation capacity is utilized, is rarely mentioned in the broad energy policy discussion. Here you can see that the load factor in New England has steadily declined over the past thirty years, meaning that consumers are paying for an increasing amount of generating capacity that sits idle waiting for demand to peak.
If we want to make it possible to connect remote, intermittent resources we will need far better operational control of the grid itself. Finally, whether the environment or concern about reliance on foreign oil is your focus, you will want a smarter grid that can accommodate electric vehicles.
The bottom line is that there is no single solution. Our future will include growth in renewables and other resources, greater energy efficiency, and a digitally advanced grid that will assure reliability – in other words, all of the above. The proper balance among options should be informed by attention to both physics and economics. The fundamental challenge is to get the electrons to the customer at a price that’s economically competitive.
— David O’Brien (Mr. O’Brien is Director of Regulatory Strategy & Compliance for the BRIDGE Energy Group. He may be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. . He formerly served as Commissioner on the Vermont Department of Public Service.)
Assumptions, projections – and apathy
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12 Mar 2012
“Evidence of Things Unseen” is a fine 2003 novel by Marianne Wiggins. The things “unseen” are the x-rays and atomic radiation that figure in the story, which stretches from the end of World War I to the atomic bombs dropped on Japan essentially ending World War II.
Our world is rife with things unseen, beginning with electricity itself. But the policies that shape our electricity future are projections of that future – assumptions about growth rates, discount rates, fuel costs, penetration of technologies, demographics, and more. The future is a minefield of assumptions, which everyone is free to challenge. And they do.
Last week, Guido Bartels, chairman of the Global Smart Grid Federation and manager of IBM’s Global Energy and Utilities Industry, told us that electricity prices in western countries will climb 400 percent by 2050 if adequate investment in smart grid isn’t made now.
My snap reaction was that Bartels’ number seemed outsized, but I changed my mind allowing for both the cost of outages and declining reliability as our infrastructure continues to age, as well as the inability to integrate renewables efficiently without a smart grid. Introducing a smart grid, Bartels told an Israeli audience, will make it possible to reduce this cost increase to just 50 percent.
Last week, the American Council for an Energy-Efficient Economy informed us that existing appliance standards, taken from the inception of each national standard through 2035, will net consumers and businesses more than $1.1 trillion in savings cumulatively. New and updated standards will add another $165 billion – and perhaps much more; who can say? – to those savings.
Also last week the Energy Information Agency’s “Annual Energy Outlook 2012” saidrenewable energy production will more than double by 2035 even without federal tax credits. That projection seems conservative.
Why do we make these mind-numbing projections? For two reasons: (1) We need goals to aim for and (2) we need reasons to aim for them.
It’s a plain, indisputable fact that there is widespread public indifference, even ignorance, about how these three areas – appliance efficiency standards, renewable resources, and the smart grid – can make our society and the world more efficient and prosperous, environmentally as well as financially.
There’s a mountain to climb in these and other areas. We make progress slowly, but we domake progress. Perhaps it is “evidence of things unseen” – projections of a future we can hardly imagine – that pulls us reluctantly along on our upward climb.
— Robert Marritz
Getting the right recipe for retail competition
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06 Mar 2012
We’re about to publish a superb article by Professor Stephen Littlechild on how regulators in jurisdictions where there is retail competition may go astray by being overly prescriptive.
Professor Littlechild’s article – “Ofgem’s Procrustian Bed” – takes issue with the regulator of electricity and natural gas in Great Britain on its new one-size-fits-all rule, which seems aimed at stimulating more customer shopping for service and switching to new suppliers. But Ofgem’s approach, Littlechild argues persuasively, will likely restrain ingenuity and differentiation among suppliers, as it would limit standard offers that suppliers may make, and also set the monthly fixed charge each supplier may charge.
Britain was one of the first nations in the world to introduce retail competition in electricity service, and has been the longest at it as Professor Littlechild well knows. A globally-recognized expert on competition in previously monopolistic industries, he was the first Director General of Britain’s Electricity Supply and also headed its Office of Electricity Regulation (the electric predecessor to Ofgem, which deals with natural gas as well as electricity). In short, he was there at the start and has never quit the field.
His article addresses each of the claims that were raised as justifying Ofgem’s proposed narrowing of supplier offerings, and he persuasively dispatches each as being inapposite and misguided.
“Ofgem’s Procrustian Bed,” in addition to being a delightful read, deals with many arguments that have been raised in restructured states in the US as well. It’s essential reading for regulators in restructured states, as well as for their utilities, competitive suppliers, and customers.
In the US, restructured jurisdictions include Pennsylvania; New Jersey; Maryland; Delaware; the District of Columbia;, New York; all of New England, except for Vermont; Ohio; Illinois; and Texas. Other states, such as Michigan, Montana, and Oregon, have allowed competition but only to a limited degree.
If you are a subscriber to ElectricityPolicy.com and ElectricityPolicy Today, you already have access to Professor Littlechild’s article.
— Robert Marritz, Editor & Publisher
Games People Play
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09 Mar 2012
Game No. 1: The circular firing squad. Arrange all the players in a circle. The game master recites a litany of our energy woes and asks the assembled politcos and technocrats, “Who has a solution to our energy policy?” The first one to raise his or her hand gets pelted by Glow in the Dark Blaster guns from all the other players.
The blogosphere these days is filled with whining about energy policy. Why we don’t have one? The Speaker of the House, Mr. Boehner, says it’s “about damn time” we did. If the White House were to announce one, the president’s adversaries would rejoice, for they would have something more solid to shoot at than a few failed loan guarantees to solar and battery companies – loans that were, in fact, well within losses Congress allowed for when it approved the loan guarantee program.
Editorials and screeds in the blogosphere are singing a familiar tune: “President’s failed energy policies responsible for soaring gas prices.” Soon I expect to read that the president will conspire with Iran’s mullahs’ desire to close the Strait of Hormuz to oil shipments because he wants to boost EV sales.
Game No. 2: Half Full or Half Empty? There are two teams – the Glass Is Half Empty, and the Glass Is Half Full. Each team argues why electric vehicles (EVs and plug-in hybrid EVs) should – or should not – succeed. The winning team prevails by exhausting the other.
The “Half Empty” team argues that EVs are an idea that’s appeared before its time. Gas is cheap – less than half the price in Europe’s – so it will take five years or more to recoup the extra cash you spent to buy this technology. And what about those dangerous batteries?
The “Half Full” team argues that EVs and PHEVs help clean our air, aid our balance of payments, use our electric system more efficiently, and are fun to drive. EVs are great for most city driving, and PHEVs deal with range anxiety. Both allow you to feel virtuous and make your neighbors jealous.
ElectricityPolicy.com and EP Today invite you to submit your own suggestions for energy policy parlor games.
— Robert Marritz
We all want an energy policy: Ours!
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02 Mar 2012
In this increasingly fetid political season, with gas prices rising at the pump, shrill cries abound for a national energy policy. It’s “damn time” for one, Speaker John Boehner, recently declared in a show of emotion.
One can already see fingers unholstered, ready to point. At the White House. At the oil companies. At Iran.
And Congress? Congress is so dispirited and divided that one of the few Republican moderates remaining, Senator Olympia Snowe of Maine, just announced her departure. Left to its own devices, it’s doubtful that Congress alone could fashion an energy policy that a majority of both houses could support – much less one the president could endorse.
As anyone who is not in a coma knows, it’s impossible to craft an energy policy when at least one house of Congress favors conventional fossil-fuel production and more of it (even as US domestic production has never been so high) and turns up its nose at so-called “clean energy.”
The White House favors an all-of-the-above policy, which its congressional opponents disbelieve. But the policy, though Solomonian to a fault – and promptly had Energy Secretary Chu turning up at the Southern Company’s Vogtle plant, congratulating that recent recipient of the first license for a nuclear plant in 34 years, and hoping that it may be the first of others to come – dismays many greens. Indeed, as one blogger believes,
“The future of American electricity policy is not about tradeoffs, but rather a chance to trade-in an obsolete, centralized paradigm for a local, clean energy future. Utilities would have us believe that new high-voltage transmission lines are necessary to get more wind and solar power. But the truth is that the American electricity industry refuses to embrace the fundamentally different nature of renewable energy: its ubiquity means that Americans can produce energy near where they use it, in an economically competitive manner, and at a community scale.”
Ubiquity, indeed. Perhaps the writer confuses a pleasant fantasy with a more complex reality. Perhaps his is a fantasy that’s the diametric opposite of Speaker Boehner’s.
By all means, let us have a national energy policy! Last year, if possible. But with Congress seeming quite as addled as much of the electorate, one’s chances of predicting the 2013 Kentucky Derby winner seem more likely.
— Robert Marritz
