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  • 28 Jun 2017 10:50 AM | Anonymous

    (IRESN Comments to the California Public Utilities Commission Hearing on  Community Choice Aggregation Issues, February 1, 2017)


    The on-going rapid expansion of Community Choice Energy (Community Choice) in California is a breakthrough opportunity for successful deployment of economic, efficient and environmentally responsible local energy resources into competitive energy markets.


    California counties and cities are in the vanguard of a global “Smart Cities” movement, which revolves around data and local infrastructure, from transportation to micro-grids.  It encompasses all of the new services and web- and data-enabled automation necessary to make modern California cities more resilient in the face of climate change.


    The on-going evolution of “smart cities and counties” will require active engagement by Community Choice agencies.  Fully developed California smart cities and counties that partner with these agencies will have the tools necessary to drive down their carbon footprints much faster and more completely than other California cities.


    Smart cities (and counties) will need smart local energy grids.  How will local energy grid owners and local jurisdictions engage with one another to achieve necessary inter-operability and local technical and economic integration? 


    Such engagement must become the norm.  Why is it now so limited and exceptional?

    On the state-regulated utility side there has been a motivation deficit.  State-regulated utilities must engage with cities and counties according to rules and processes that ensure equitable treatment.  An offer, service or program has to be available to all, even though it may not fit all.  In fact state-wide energy programs cannot fit all, because each city's or county’s energy profile and related policy priorities differs substantially even from those of near neighbors”.[i]


    On the local side there is a capacity deficit with respect to locally integrated resource planning, program delivery, etc.  Cities and counties served by state-regulated energy utilities often lack basic energy management skills,  because in the past they did not need them.   Even though their economic regulation, rate-setting and utility operations capabilities have been honed by experience delivering water supply, waste collection, waste treatment and other public services, their “energy literacy” is still limited. 

    Community Choice agencies can fill gaps on both sides of the missing conversation and facilitate and support future collaboration. 


    Community Choice solves the local motivation problem by enabling  local jurisdictions to meet and manage local energy demand according to unique local needs and in ways that strengthen local economies.  Community Choice agencies manage energy service using familiar and mature local political and administrative processes.  They ensure local accountability through appointments of local elected officials to their governing boards and local citizens to their advisory boards.  This affords flexibility and insight to exploit local opportunities and solve local problems.


    Community Choice agencies have the skills and public trust to facilitate engagement between local jurisdictions and local energy resource developers and businesses.  The language of energy technology and regulation, like the language of local public service management, takes time to learn.  Community Choice agencies will learn to speak both languages…..  fluently. 


    A state can help by removing roadblocks to local speed and scale. Community Choice agencies can drive down local carbon footprints and scale up local renewable energy production much faster than state directed energy services and investments.  Local climate resiliency benefits include more integrative and flexible management of on-site energy supply, vehicle fueling, energy storage, building energy efficiency and real time energy usage management.   


    In addition to removing roadblocks, California should make sure management of public purpose surcharge collections is shifted to Community Choice agencies as fast as local capacity to manage them develops.  Some public purpose funds should be set aside initially to help local jurisdictions implement and measure local carbon footprint reductions achievable through local renewable energy deployment and accelerated substitution of electricity for vehicle fuels and building/water heating.[ii]  


    The state should also match the funds cities must spend to take full advantage of the local energy management capacity Community Choice agencies can provide.

    In summary, Community Choice agencies should be viewed by the California Public Utilities Commission and state-regulated utilities, not as competitors and interlopers, but as partners and facilitators of the engagement possible but still currently lacking between energy service providers and local jurisdictions.


    [i] G. Braun, Integrated Energy Analysis for Davis, California, http://www.energy.ca.gov/2016publications/CEC-500-2016-015/CEC-500-2016-015-AP-D.pdf

    [ii] The above referenced analysis provides a template for the necessary integrated energy analysis metrics and scenario work.

  • 28 Jul 2016 12:52 PM | Anonymous

    (Stan Hazelroth contributed the following article in early 2016, based on personal research.  For the full article, including figures, click here)


    Subsidies from government to new technologies or industries date back hundreds of years in the U. S.[1] The purpose of subsidies is generally to give exciting new technologies a boost in helping fund the cost of starting up until its’ cost of production is competitive with older, less desirable methods. Subsidies keep prices for consumers below market levels or for producers above market levels, or reduce costs for consumers and producers.[2]  Subsidies have also been introduced to increase production of a product whose national need has increased due to war or other national calamity.[3]


    Like all subsidies, those for energy are a redistribution of wealth from one group to another. In the case of the coal subsidy described in the article in footnote 3, supra, Congress increased income tax rates to pay for the Korean War and reclassified tax on income from coal to a royalty, thus reducing the tax paid on its sale.[4] Taxpayers thus paid increased income tax reducing their wealth and the decreased the tax on coal that increased wealth in the coal industry. The intended benefit was to increase coal production to fill the need to fuel the war.


    A negative consequence of many subsidies is that they frequently outlast the purpose for which they were created. Using coal again as an example, while the Korean War ended in 1953, the treatment of income from coal was still enjoying its status as a royalty well into the 21st Century. The result is that wealth continues to be redistributed

    from all taxpayers and redistributed to the shareholders and employees of a mature, self-sufficient industry. Even worse, some in the oil and gas industry not only benefit from these unnecessary subsidies, but actually spend money and resources in an effort to defeat subsidies intended to give a temporary boost to new more efficient types of energy. [5]

     

    Coal is not the only beneficiary of subsidies still in existence long past their justification.. Petroleum and natural gas continue to receive large re-distributions of wealth from the taxpayer long after they have become hugely profitable and in no way in need of continued taxpayer support. In Susan Kraemer’s article, “Despite Fears, New Renewables Are Not Bankrupting California” she says “[r]enewables..haven’t had the decades of persistent government support to back them the way that traditional energy had. Throughout the 1980’s, and ‘90’s, the Department of Energy led R&D into fracking…and federal legislation has long allowed pass-through investment in fossil energy through favorable tax treatment via Master Limited Partnerships”[6].

     

    Billions of tax dollars continue to be redistributed to profitable, mature industries. On top of this, the myth continues that subsidies  for renewables are extremely expensive and out of line with past subsidies for earlier forms of energy during their respective start-up years. They certainly are not.  The following chart shows the comparison in relative dollars of the subsidies given to several major energy sources during the first 15 years of their respective subsidies.[7]

     

    “Some argue that the consumer can purchase warmth or work or mobility at less cost by means of coal or oil or nuclear energy than by means of sunshine or wind or biomass. The argument concludes that this fact, in and of itself, relegates renewable energy resources to a small place in the national energy budget. The argument would be valid if energy prices were set in perfectly competitive markets. They are not. The costs of energy production have been underwritten unevenly among energy resources by the Federal Government.”

    — August 1981 report of the DOE

    Battelle Pacific Northwest National Laboratory

     

    So are renewable energy subsidies an unprecedented budget buster? The answer is clearly no. Even when wind, solar and other renewables were at the prototype stage and subsidies were needed to develop them, the argument that the relatively small subsidies were more expensive than those for earlier antiquated forms of energy was never valid.  The cost comparison premise is demonstrably false: renewables now offer better prices than fuel based generation resources especially if subsidies for both are extinguished completely. The taxpayer could be relieved of the billions of dollars they pay each year to subsidize all energy while still enjoying the cheaper, cleaner renewables. It’s time to unburden taxpayers from the redistribution of their income to all mature forms of energy until such time as even better sources not yet imagined emerge.


    [1] “A Closer Look at Fossil and Renewable Energy Subsidies”, by Susan Kraemer, Renewable Energy.World, June 10, 2015, http://www.renewableenergyworld.com/article2015/06/content/rew/en/authors/g-k/susankraemer.html

    [2] “The Future of Energy Use” by Phil O'Keefe, Geoff O'Brien and Nicola Pearsall, Published by Routledge (2nd Ed., 2010) at 268.

    [3] “What Would Jefferson Do? The Historical Role of Federal Subsidies in Shaping America’s Energy Future”, by Nancy Pfund and Bill Healey, DBL Investors, September, 2011

    [4] Supra.

    [5] “Elon Musk Fights Back Against the Koch Brothers’ Lobbying”, by David Z. Morris, Fortune Magazine, February 22, 2016.

    [6] “Despite Fears, New Renewables Are Not Bankrupting California, by Susan Kraemer, Renewable Energy World, May 22, 2013

    [7] See 3, supra.

  • 17 Nov 2015 11:49 AM | Anonymous

    (The following article is based on a presentation by Gerry Braun at the California CCA Forum in Los Angeles California on May 19, 2015)


    Summary 

    Decentralized energy technologies will transform the electricity sector over the next couple decades.  Community choice aggregators (CCAs) can be leading agents of the transformation to the extent they push for, and secure, the freedom to transform themselves.  The extent to which they evolve to take a more and more integrative role may determine whether local clean energy resources are developed or held back. 

    States lacks the capacity to account for decisive and locally specific factors affecting on-site and community based energy supply.  Meanwhile increasing numbers of local jurisdictions are aiming for sustainability and resiliency in their goals and plans.  In order to follow through they must have policies and programs in place that are responsive to on-the-ground energy trends and opportunities in their communities.

    Most communities, and even existing CCAs, do not yet budget for long term energy related planning and analysis, in part because they do not typically have staff capacity that includes qualified energy managers.  It is important that state public interest funds be used to begin to bridge this gap.  Rapidly maturing CCAs could take the lead in their service areas.  If they do, their sponsorship of integrated local energy analysis will enable smart local decision-making and collaboration among member communities. 


    What is community choice?

    Enabled by California legislation, community choice aggregation, aka community choice energy, empowers local jurisdictions to decide how the electricity used in homes and businesses is produced and at what cost to energy users.  Once a community choice service is formed, the incumbent utility continues to deliver the electricity procured by the CCA and also continues to perform billing, distribution system maintenance, and other grid management and operations functions.  


    California now has three operating CCAs whose success in meeting locally set goals has led a large number of population centers, counties, cities and across the state to proceed with exploration and formation activity.  Drawing on the experience of CCAs already operating successfully in California, CCA formation can result in an effectively governed and competent authority to handle energy matters and reduce costs and greenhouse gas emissions.


    The state and its cities and counties share an interest in the evolution and maturation of community choice programs and the development of locally accountable competence and capacity to guide and them.


    Why does community choice matter at the state level?

    States have an obvious interest in any measure that makes their economies more robust and resilient.  Local clean energy deployment, aka distributed energy resources, does so in multiple ways.  What principles apply to state policy regarding local clean energy? 


    One important principle is subsidiarity, an organizing principle that says matters ought to be handled by the smallest, lowest or least centralized competent authority.  This principle is especially applicable to 21st century electricity.  States have an interest in keeping their regional electric utilities focused on what they are designed to do.  They also have an interest in creating local authorities that are  competent to adjust for economically important differences from one jurisdiction to another.  There is surprising, increasing and consequential diversity in energy usage patterns among even superficially similar communities.  This creates an economic incentive to diversify the energy supply and service strategies available to local communities.

     

    Why does CCA matter to Cities and Counties?

    Each California community has unique goals/priorities, energy usage and distributed energy "prosumer" trends, plus local siting and resource opportunities. All face the same need to optimize local energy supply and infrastructure to minimize economic and environmental costs of service. 

     

    Cities and counties have  an interest in effective and competent governance of energy services using the best available local information.  Their work needs to be aligned with local goals in order to minimize both cost and greenhouse gas (GHG) emissions. 

    Originally a state-sponsored market intervention in California, community choice aggregation is increasingly driven by the aspirations of local communities.  What do they want?  Davis, California’s recently approved CCA vision is an example of local aspirations for CCA service.  It distinguishes between near and long term aspirations as follows:


    Start-up Phase Vision.  The near term vision for Davis Community Choice Energy is to provide Davis residents and businesses greater choice as to the sources and prices of the electricity they use, by:

    • Offering basic electricity service with higher renewable electricity content at a lower rate than current utility service;
    • Offering other low carbon or local options at modest price premiums;
    • Establishing an energy planning framework for developing local energy efficiency programs and local resources in the near future; and
    • Accomplishing the above while accumulating reserve funds for future Davis energy programs and to manage energy costs and risks.

    Long Term Vision.  The future vision for Davis Community Choice Energy is to continuously improve the electricity choices for Davis residents and businesses, while expanding local energy-related economic opportunities, by:  

    • Evaluating and adopting the best planning and operational management practices in the electricity service industry;
    • Substantially increasing the renewable electricity content of basic electricity service over time;
    • Developing and managing customized programs for energy efficiency and on-site electricity production and storage; 
    • Accelerating deployment of local energy resources to increase local investment, employment, innovation and resilience;
    • Working together with other Davis and Yolo County efforts, and in alignment with city goals, to achieve climate action goals and shape a sustainable energy future; and
    • Saving Davis ratepayers money on their energy bills.

    One local energy service plan no longer fits all 

     

    Usage diversity mentioned above means that energy profiles of comparable communities differ in technically and economically important metrics.  For example , local solar and electric vehicle adoption rates in California are literally and figuratively all over the map.  For example, the City of Davis’s  solar adoption rate is five times the California average.  Our electric vehicle adoption will lag on-site solar by a few years but comparable adoption rates are likely.  Our current (thirteen hundred in 2014) on-site installations can expand to supply 20% of our electricity in 10 to 20 years even if the city does nothing.  Imagine the result if a CCA paid for on-site solar electricity according to its value and removed impediments to cost-effective system sizing and net positive energy production.

                   

    Electricity revenues depend on usage; per capita usage differences among comparable northern California cities can range to as much as a factor of four and ratios of average to peak usage can vary by as much as  50%.  These differences significantly affect both CCA revenues and costs. 

     

    Local planning and integration can and must account for major factors that simply didn’t exist in the 20th century.  These include increasing levels of participation and decision-making by energy users.  CCAs are offering tariff options featuring high percentages of renewable and local generation. Non-utility companies are offering them an increasing array of cost saving products and services that can be adopted without an energy utility’s help or encouragement.  Communities need a community-wide model to enable sensible and timely energy decisions by all of their residents and local businesses. 

     

    CCA meets the need for a model that is feasible, efficient and adaptive.  The right and left bubbles in the schematic below represent the components of electricity and fuel infrastructure and capital that electric utilities have planned and integrated for more than a century.  The top and bottom bubbles represent fundamental changes.  Top:  Prosumers using  the electricity they produce and selling the excess  at opportune times will be aided by automated  transactions that save everyone money.  Bottom:  Fuel switching in the transportation sector will have major impacts  on local planning and integration as electric, natural gas and fuel cell vehicles take market share from gasoline and diesel fueled vehicles.

     

    Local integrative analysis and planning

     

    Accounting for local differences means conducting thorough local integrated energy analysis, jurisdiction by jurisdiction, and regularly updating analysis results and the plans they inform.

     

    Updating requires monitoring of local trends, using and improving integrated planning models, looking at alternative local power deployment scenarios, understanding the  methods and economics of balancing supply and demand, and comparing alternative service scenarios in terms of their environmental and economic benefits.

     

    Fully developed, local integrated energy analysis will be needed to forecast:  1) potentially profound effects of substitution of low carbon energy sources for high carbon sources, and 2) the effects of energy user choices enabled by transformative information and communications technology.

     

    Substitution of local power sources for centralized sources will occur at increasing but highly localized rates.  Electricity usage patterns will change as climate conscious communities substitute electricity for natural gas and petroleum.  Vehicles will be put to work providing not just mobility but also emergency power, demand response and  energy storage.   Automated pricing transactions will begin to shift usage profiles and create  local economic and investment opportunities.

     

    It is both feasible and illuminating to create a spreadsheet model to project substitution effects that are transformative over a couple decades.  A spreadsheet model like the one the Integrated Resources Network developed for Davis just needs to be fed locally specific information and trends. Results often run counter to even the best educated guesses and intuition.  So, sound, credible integrated local energy resource planning is no longer possible without such models.

     

    Energy infrastructure planning requires accurate, reliable information.  For example, anticipating this need, Davis, California recently completed a study targeting elements of an integrated community level net zero strategy, i.e.:

    • Integrated use of city and county GIS systems for energy infrastructure planning
    • Retrofit packages that can be marketed and offered in a targeted way according to the age and demographics of specific neighborhoods
    • Identification of community solar and wind sites resulting in the least integrated cost of development and use.

     

    New and better data analytics for local energy initiatives are also becoming available.  For example, an effort by BIRA Energy to estimate on-site PV potential  in Davis, California concluded that covering all available roof area with solar PV would generate a few times the amount of  electricity currently consumed in Davis.[1]

     

    Integrated local energy analysis will be essential to smart local decision-making during the transformation.  Non-CCA jurisdictions can develop capacity for local planning and technical integration.  In most cases such capacity does not yet exist.  One strength of the CCA business model is that it provides the revenues to pay not only for electricity generation services but also for development of other planning and operational competence and capacity. 

     

    Capacity for local planning and integration will require time and iterative practice.  The local planning and integration responsibilities not undertaken by the CCA service provider will need to be undertaken by other locally empowered authorities. 

     

    From wholesale procurement to locally integrated energy service

     

    CCAs are driving toward more affordable and environmentally conscious wholesale electricity supply here and now.  This is fundamentally important.  Long term visions are only realizable by organizations that survive and thrive.  Plus, there is no shortage of immediate challenges, including a playing field vulnerable to incessant efforts to tip it to favor of  the static business models of regional monopolies. 

     

    Currently, CCA manifests as an alternative wholesale power procurement mechanism that can be more responsive to local priorities.  At its current stage of development CCA accommodates but does not yet emphasize deployment of distributed energy resources, even though highly modular clean energy supply and storage technologies, when deployed locally, create opportunities for collateral cost savings and local macro-economic benefits.

     

    The big CCA win is going to come over the long term as CCAs anticipate the direction new energy technologies are driving the energy market and learn to manage them on behalf of local communities.  To quote Wayne Gretzky, a former professional hockey star, “I don’t skate to the puck, I skate to where the puck is going to be.”  Applied to CCAs this means evolving to manage and integrate the forces that are transforming the energy sector. The hockey metaphor is particularly apt.  Because of the large scale of electricity projects and systems, electricity was a slow moving game throughout the 20th century.  The pace of the 21st century game is already much faster…and accelerating. 

     

    Anticipatory self-transformation

     

    Transformational change in the energy sector involve proceed along multiple parallel tracks.  The shift from centralized to modular electricity generation is well underway, enabling critically important shift from high to low carbon sources.  Decentralization will enable a shift from an emphasis on day to day scheduling to greater emphasis on real time transactions.  Power flow at the local grid level is shifting from one way to multi-directional, enabling conversion of consumers to prosumers able to not only purchase electricity but to also be credited for electricity they produce and ultimately to automatically adjust the timing of consumption and production in response to real time price offers. 

     

    Further structural changes will favor differentiation over commoditization.  The trend to community choice will expand the dimensions of energy user choice.  As decentralization enables a greater variety of retail transactions, Wall Street’s dominant role in financing bulk supply projects will recede in importance as opportunities for local investors and prosumers expand.  The 20th century innovation cycle relying on multi-stage, multi-decade R&D and centralized hardware scale-up will give way to an emphasis on IT driven annual incremental improvement, featuring information and communications technology vs. basic hardware design substitution. Change on these various tracks is accelerating and unstoppable.

     

    Accelerating, because decentralized supply projects have short lead times and  schedules.  Solar PV trends provide a measure of a transformational pace that inverts established paradigms.  For example, in 2014 sixty-five percent of the California solar PV market  consisted of utility scale projects, while by 2018 sixty percent of the market is instead expected to consist of projects serving homes.

     

    Unstoppable, because there is has also been a paradigm shift from economies of plant scale to economies of manufacturing scale.  The fastest growing clean electricity technologies (solar and wind) are modular, mass produced, quick to deploy and entail no fuel risk and little performance risk.  So, risks are more manageable even as their competitiveness continues to improve.  Their variability requires upgrades, but not fundamental changes, in the flexibility available to grid operators. 

     

    Why?  Because the same design principles that guided the creation of existing centralized infrastructure also apply to local electric system integration.  Electricity usage is variable.  Increasingly, as solar and wind capacity expands, so is supply.  Current centralized electric systems are designed to handle changes in combined usage/supply variability.   The moving parts of a local grid or micro-grid mimic those in the centralized case.  The local grid model evaluated for Davis, California shows them to be smaller and local, e.g. on-site solar and community solar and wind, local electricity circuits and storage, and flexible generation to accommodate usage and supply variations that storage can’t handle economically.  The schematic suggests the opportunity to shrink the supply side dynamics of the centralized model down to the level of a local electricity generation resource mix. 

     

    With energy sector change accelerating and unstoppable, the long term vision and goal of the CCA movement should be anticipatory self-transformation as well.

     

    The fully evolved CCA

     

    Fully evolved, community choice can be an efficient, adaptive model for local management of energy sector change and decentralization.  Planning and integration will need to happen at both the centralized and local levels. There will be a compelling need for integration between these levels and between CCAs and grid owners and operators.

     

    Like other competitive organizations, CCAs will need to develop portfolios of specialized competencies, especially in early development phases that necessarily focus on wholesale generation services sourcing and scheduling.  Local energy futures are a moving target.  So, a key evolving competency will be the ability to adapt the basic CCA model to be integrative across more functions and to accommodate diverse local parameters, capacities, trends, supply opportunities and energy user needs.   

     

    Local CCA competencies will need to evolve, because regional and local electric grids will be evolving from current designs that only enable radial power flow from big power plants  through big wires to local grids and meters.  The big pieces won’t need to change much.  This is fortunate, because the pace of centralized supply portfolio change is currently way too slow to accommodate timely and sufficient GHG emissions reductions.  

     

    The smaller pieces, including local grids, will change more fundamentally and rapidly.  They will need to accommodate 21st century electricity flows from local meters and micro-grids to other local meters and micro-grids as well as 20th century flows from outside the community to local meters.  Local grids will need to be managed in a way such that electricity can be exchanged between consumers and even between communities.  CCAs will need to evolve toward roles not only focused on supply but on the integration of supply, demand and local grid operations.

     

    The fully evolved CCA will need to be competent to evaluate specific highly localized needs and opportunities and adapt the evolving CCA model to participate in delivering “integrated decentralized” energy service.   CCAs can be powerful agents of acceleration as they evolve.  The best fully evolved role will depend on the local parameters and priorities.  A fully evolved CCA will enable maximum local sustainability and resiliency.

     

    Recapitulation

     

    Decentralized energy technologies will transform the electricity sector over the next two decades.  Local energy sector change management can capture significant local economic benefits.  Clean technologies will save  more money for ratepayers if local deployment is properly planned and facilitated.  Local economies will benefit  as wealth is recirculated locally.

     

    Building up local integrated energy analysis and planning capacity is essential, not just to local communities but to states as well.  An increasing share of state managed energy innovation funding should be allocated to this public purpose in order to develop integrative capacity at a pace consistent with on-going local electricity supply and storage deployment.

     

    CCAs can be leading agents shaping future energy ecosystems, electricity sector transformation and decentralized energy innovation.  They can also help accelerate a trend to zero carbon footprint communities, to the extent they push for, and secure the freedom to transform themselves in partnership with the communities they serve.


    [1] Source:  Davis Future Renewable Energy and Efficiency Draft Report, August, 2015

  • 01 Oct 2015 4:59 PM | Anonymous

    (The following article by Gerry Braun was published on September 1, 2015 in Renewable Energy World.  It included content from the executive summary of an IRESN report entitled Integrated Energy Analysis for Davis, California.  Click here for the Renewable Energy World article and here for a pdf of the full report.)

     

    Toward a Template for Local Integrated Energy Analysis


                    Thanks to cost-effective rooftop solar electricity, new neighborhoods in California are generating their own electricity from the start.  Likewise, local grids serving settled communities are being strengthened by deployment of local sources, smarter end use, and electricity storage.  Regulators are considering new grid architectures that allow each local grid to be operated according to its unique blend of local and imported supply and evolving usage patterns.


                    In California, renewable energy deployment is gaining traction in support of locally established climate action goals.  Where such goals apply, electricity must, sooner than later, be substituted for natural gas use in buildings and for petroleum products in transportation, and new transportation fuels like hydrogen must be produced from local renewable sources.  Accounting for and tracking these changes will require timely and accurate integrated local energy analysis.   


                     In 2008, the California Energy Commission launched an R&D program to share the cost of related local planning and innovation with California communities.  To date 21 projects have been completed at a shared cost of more than $40 million, and the program’s next phase is in preparation.  The City of Davis, California recently completed one of the 21 projects.  The DavisFREE project proved the need for integrated local energy analysis and funded the development of analysis models that can be adapted to the needs of other communities.


                    Some highlights follow that illustrate the data and assumptions cities and counties will need to use in evaluating their opportunities for climate action, choosing their energy service options and engaging collaboratively with local energy service providers.


                    In general, Davis’ electricity service options include:  1) regulated for-profit utility service (current),  2) establishing a municipal utility, or 3) joining/creating a community choice energy agency.  Can Davis achieve its environmental and economic goals within the current framework of state regulated energy services?  Do alternative frameworks enable faster progress and more effective use of local resources?


                    Energy usage, local energy supply and the supply/usage balance were modeled for the three above-mentioned electricity service options.  Scenario-specific models were developed to account for building and transportation energy usage and local solar, wind and clean vehicle deployment over the 20 year period from 2015 to 2035.


                    Scenarios allowing high rates of local renewable deployment resulted in monthly and daily usage and supply variability that must be managed locally.  So, in these scenarios it was also important to determine amounts and timing of electricity imports and/or exports.

            

                    In the past decade, Davis’s energy use has continued to inch upward in spite of intentionally slow population growth and statewide programs to encourage energy efficiency.  Its building energy use accounts for 72% of direct energy costs and carbon emissions.  Light vehicle energy use, accounts for 28%.  Transportation accounts for 50% of its carbon footprint when indirect heavy vehicle use is included.  Clean energy vehicle energy use is taking off and is expected to increase rapidly, adding significantly to local electricity usage.


                    California’s long term energy strategy emphasizes efficiency and renewable energy.  These elements are necessary but not sufficient to achieve faster local than statewide carbon footprint reductions.  A third essential emphasis is substitution of low carbon for high carbon end use energy commodities. 


                    For example, a major portion of Davis’s building energy is used to generate heat using natural gas.  Substitution would mean heating buildings with heat pumps powered by renewable electricity and heating  water with solar energy.  In the transportation sector, substitution would mean powering vehicles with renewable electricity, hydrogen or bio-methane, thus taking large bites out of Davis’s greenhouse gas emissions.


                    Historically, almost all of Davis’s electricity has been “imported”, i.e. not produced locally.  (Energy in, dollars out.)  Now, however, Davis is blessed with cost-effective opportunities to generate solar electricity locally.  Also, there are good to excellent quality wind resources within 10 to 50 miles of Davis’ city limits.

     

                    Solar water heating and bio-fuels are potential complements to solar and wind electricity, as is vehicle to grid electricity storage.  As fuel cell electric vehicles (FCEVs) gain a foothold, solar electricity, along with natural gas, will be used to produce hydrogen for the FCEVS.  In the longer term, additional hydrogen can be produced and used to displace natural gas for heating purposes and/or to fuel zero carbon residential and commercial CHP systems.  


                    On-site solar electricity installations, preferably sized to at least match and preferably exceed on-site use, offer a simple and environmentally ideal pathway for increased dependence on local renewable resources.  At current per capita deployment rates five times the California average, on-site solar electricity would supply 20% of Davis’s electricity even without city engagement in energy planning and programs.


                     The potential for on-site solar PV to supply a large amount, or even the majority of the city’s energy needs is real.  At present this potential is forestalled by interconnection rules that severely impede on-site and local deployment.  Faster adoption of on-site solar would create a need to deploy cost-effective energy storage technologies.  Fortunately, the rate of battery powered electric vehicle adoption in Davis is mirroring the historical high rates of early stage on-site solar deployment.


                    Many electricity users lack suitable space for on-site generation.  To enable their access to solar electricity, community controlled “brownfield” sites are available for larger (but still local) projects as a complement to on-site net positive power. However, in California  such “community” solar and wind projects are still impeded by surcharges, regulations and market rules that also preclude designation of locally generated electricity for local use.


                    California legislation enabling “community choice energy (CCE) ”, i.e. local responsibility for sourcing grid electricity, provides a pathway for California cities and counties to avoid some current impediments and accelerate adoption of on-site solar and community solar and wind.  Cities served by publicly owned utilities (POUs) have even greater flexibility to accelerate adoption, while cities served by investor owned utilities (IOUs) have much less.

     

                    How much difference could locally accountable electricity sourcing or service make for Davis?  Figure 1 shows an ideal build-out of local clean energy resources that could be implemented by Davis over the next twenty years according to the modeling assumptions for the POU scenario.

     

    Figure 1.  Ideal Build-out of Clean Energy Resources for Davis

             

    Click here for Figure 1.


    Figure 2 shows combined decarbonization effects in the three scenarios of:  1) local renewable electricity build-out, 2) substitution of electricity for fossil fuels in heating and transportation sectors, and 3) locally effective energy efficiency and conservation programs. 


    Figure 2.  Decarbonization Effects of Local Action in Three Scenarios


        

                   The above-mentioned report also provides results of quantitative modeling of locally implemented strategies to balance local supply and usage variability in scenarios that achieve both carbon neutrality and local self-reliance. 

                 

                    Analysis of production to balance monthly demand in the 20th year of the Davis case indicates that in summer months, some renewable electricity would be available for export or sale, while in winter months equivalent amounts of flexible local natural gas fueled electricity production would be needed to round out monthly supply.


                    Analysis of hourly variations in daily usage indicated that seasonally varying  amounts of distributed electricity storage would be required to match daily renewable production according to demand over 24 hours of usage.


                    Would  the likely amount storage embedded in locally based electric and plug-in vehicles suffice as a load shifting tool?  (For example, charging could be encouraged during hours when variable renewable supply exceeds building usage.)  Our analysis showed that it would not, per se.  So, plug-in vehicles can have a prominent role in supply/demand balancing, but other load management strategies will be needed as well.  


                    Would projected cumulative vehicular storage capacity suffice to store excess generation during some hours and return it to the local grid when needed each day?  Our analysis showed that it would in most but not all months.  So, some additional stationary storage might be required.


                    By implementing a locally integrated energy supply plan and taking full economic advantage of local renewable resource opportunities, Davis and many other cities blessed with abundant high quality local renewable sources can achieve a near zero carbon local carbon footprint by 2035 while reducing electricity supply costs.  Integrated local energy analysis is key to the economic and environmental benefits of planning and developing local renewable supply.   

              

                    Locally accountable energy service may prove essential to effective integrated energy planning and deployment.  A dozen or so northern California cities are already served by municipal utilities.  A couple dozen more are already taking responsibility for electricity sourcing under California’s community choice aggregation law.


                    As a result, these communities will have relatively convenient and unfettered access to data necessary for definitive integrated local energy analysis.  Others simply evaluating their options will not and may need to rely on preliminary scoping methods as described above and in more detail in the report entitled Integrated Energy Analysis for Davis, California.                 

  • 01 Oct 2015 4:09 PM | Anonymous

    (The following article introduces and summarizes conclusions and recommendations contained in a June, 2015 Electricity Journal article, co-authored by Gerry Braun and Stan Hazelroth and entitled Energy Infrastructure Finance: Local Dollars for Local Energy.  This synopsis omits text, tables and charts of the full article that provide an overview of electricity infrastructure investment, power sector finance, on-going power sector transformation and emerging trends in local power production and finance.  Click here for a pdf of the full article.)


    Introduction

     

    In California[1] and the US, mature, centralized energy grid infrastructure exists.  So, does centralized, carbon intensive electricity supply infrastructure.  Transitioning to clean, climate friendly and smarter electricity systems means bringing innovative, capital intensive, and increasingly decentralized power sector infrastructure on stream.  National, state and local policy should recognize and address the implications for finance, particularly the need for investments that capture and optimize local economic benefits.

     

    In this regard, we see an urgent need for policy research that informs movement toward a new balance of planning and investment between centralized (Washington, state capitols and Wall Street) and local.  Lacking local empowerment, we see decentralization occurring anyway as a natural evolution, with trial and error adding cost and extending time frames.

     

    Conclusions 


    Pent up local energy supply investment will drive lagging local energy infrastructure investment.  The finance innovations under-girding local supply investment have already been transformative. Navigating the transition to increasingly decentralized energy supplies and infrastructure presents multiple obstacles to both mature and experienced public power entities and their investor-owned counterparts. Newly created entities will enjoy the relative freedom to adapt.  Obviously it is in the broader shared public interest to maximize effectiveness of both emerging and established market participants.    


    Increasing public ownership of energy infrastructure may be a necessary condition for adequate investment and innovation.  Transformative changes in energy supply and delivery technology and markets may compel changes in energy infrastructure finance.  The balance may have to shift toward public ownership of distribution infrastructure if innovation and investment continue to lag.


    The pace of investment in local energy delivery infrastructure must increase.  It currently lags the pace of cost saving distributed generation investment in some communities and regions, where it is already a bottleneck. 


    Promising to fill the gap, a decentralized energy (DE) revolution is underway.  DE saves money by relying on new technologies characterized by predictable economic performance, rapid maturation, and decoupling from the price of carbon. We anticipate an energy services finance paradigm shift driven by the economics of transformative technologies, in particular the opportunities for cost savings through less restricted local power flows and use of clean and efficient on site generation.  The DE revolution will create new revenue streams and drive a shift in the balance and sources of public and private capital for electricity infrastructure.  We believe a mix of public and private sector investment in energy infrastructure can continue to offer opportunities for economic optimization, but we also believe the best source of private sector investment in local supply infrastructure will be local energy consumers, and local businesses. 


    DE adoption can be impeded in the US; long term, it cannot be stopped.  Comparably sized competitive industries (IT, auto, and solar) are already financing/selling decentralized electricity products, using finance innovations to break through utility industry resistance. 


    Engaging in energy planning and investment responsive to local needs and opportunities can empower local communities.  With electricity generators increasingly localized and with distribution systems needing to accommodate bi-directional energy flows, the economic model that regards them as undifferentiated elements of a larger energy supply pool do not remain valid for pricing or capital allocation purposes. 


    Change is a given; whether it is orderly or chaotic is a choice.  In the past electricity distribution costs and investments were roughly indexed to numbers of meters.  In the future “virtual” NEM electricity exchange arrangements will stimulate distributed generation infrastructure investment. 


    New local energy agencies are the leading edge of a new energy infrastructure paradigm.  In the future, capital needed to maximize productivity of energy assets will be best allocated by local investors rather than Wall Street.  


    There are mutual benefits of regional standardization and local flexibility.  Newly created public entities must focus on the new functions and opportunities that motivated their creation, while established entities consider how best to incorporate and manage innovation


    Policy Research Recommendations

    Energy policy research tends to address small incremental shifts in business as usual at the national and regional levels and almost completely neglects the policy integration needed between regional utilities and regulatory bodies and local jurisdictions.  This unbalanced emphasis results in need for the following:

    • Policy support to stabilize/reduce finance costs for decentralized electricity supply;
    • Better understanding of the extent to which local energy resources and dollars can be put to work to the economic benefit of local communities;
    • More imaginative consideration of the strategic role of incumbent local public power utilities in financing decentralized energy supply and delivery infrastructure;
    • Determination of the need and role for new locally accountable agencies capable of mediating between regional and local grids to manage local two way flows;
    • Policies that encourage local investment in micro-grids and virtual power plants;
    • Policies that enable re-financing of centralized merchant renewable electricity generators by host communities after tax incentives have been captured by local investors;
    • Determination of how to remove barriers between rural communities that are able to develop local renewable electricity supply resources and urban communities needing the resulting electricity;
    • Consideration of whether existing and proposed Federal renewable electricity incentives result in a capital efficient balance between centralized and decentralized assets;
    • Determination of best practices for local level policy development in support of local renewable energy resource development and more pervasive local energy infrastructure planning and integration with other municipal services;
    • Review of local energy supply and infrastructure costs attributable to taxes, finance and related trade-offs leading to an efficient mix of ownership by:  1) large corporate monopolies that pay taxes, 2) people, local businesses and banks that pay taxes, 3) local agencies that are not taxed but can use their revenues to secure financing for creation/maintenance of local infrastructure, and 4) national, state and local green banks.

    These are not academic questions.  They have implications for infrastructure modernization.  They also have implications for the speed and scale of our response and adaptation to climate change.  Under-investment by investor owned utilities in power sector infrastructure modernization, particularly at the city and county level, may be budget driven rather than revenue driven.  Can it be mitigated by increasing levels of lower cost public investment in distributed generation and local electricity distribution assets?

     

    [1] Our primary reference is California where renewable resources, electricity sector policies, and other change drivers favor decentralized energy especially when compared to most other states.

  • 21 Dec 2014 4:11 PM | Anonymous

    Set a goal, commit, make a plan, do the work, have fun.  Common sense that reminds me of Integrated Resources Network (IRESN) colleague, Ronnie Holland’s, approach to life.  Everyone, of course, does their work.  Not everyone is purposeful about the other four steps.  In his essay, “Headwork”, Edward Hoagland reflects on the notion of “work”.  He says that “work…can become second nature, and you can’t stop, don’t want to stop, don’t need to know who benefits – continuing with it for its own sake but with the destination of reaching other ears and minds.”

     

    That might just sum up IRESN’s 2014.  We set goals, committed, made a plan, and 2014 was about doing the work.  We had some fun.  Not much time left for IRESN communications.  Making more time for communications will be a 2015 goal.

     

    A Small City Reviews its Energy Service Choices…

    One 2014 goal was to wrap up and communicate the work of the Davis Energy Service Options Technical Advisory Group (TAG).  We launched the TAG as part of the City of Davis’s initiative to consider how best to provide energy service to Davis residents and businesses.  As cities are prone to do when they need to make a complicated decision, Davis hired consultants.  The TAG’s charter was to advise and review the consultants’ work. 

     

    Bottom line:  The consultants concluded that creating a municipal electric utility would better support the city’s goals than forming a community choice energy agency or staying on the sidelines watching the incumbent utility do its work.  The TAG advised the need to do some serious business planning around the matter of costs as a first step toward implementing the consultants recommendations.


    Benchmarking Electricity “Rates”:  Apples, Oranges, and….  

    The ensuing discussions among city leaders led us to dig deeper.  The results, as yet unpublished, included some important insights. 

     

    For starters, it’s advisable to do some serious benchmarking.  Comparing the consultant’s budget assumptions with the Sacramento municipal electric utility’s latest detailed annual budget points to a favorable scenario.  Specifically, a Davis municipal electric utility’s cost-based, post-start-up electricity prices could, subject to business planning results, be at rough parity with the regional  for-profit utility’s prices. 


    That said, rate comparisons are tricky.  Comparing tariffs for both publicly owned and for-profit northern California electric utilities revealed a surprising range of structural and quantitative variations.  Some tiered rates.  Some not.  Some top tiers very pricey.  Some not.  Some seasonally differing rates.  Some the same the year round.  Some costly public purpose programs.  Others bare bones.  Also, average annual non-residential unit (kWh) costs can be either significantly higher or significantly lower than average residential unit costs.[1] 


    Cost drivers are diverse and vary widely.  Some high per capita and/or per meter usage.  Some much lower.  Some fairly efficient asset utilization (reflecting the relationship of peak to average demand).  Some not so much.  Some usage dominated by residential customers.  Some more balanced among residential, non-residential. 


    If there is a bottom line, it’s probably that looking at historical or even current economic statistics does not suffice.  Some serious modeling needs to be done.  (More on that later.) Plus, the power industry is in transition between 20th and 21st century business models… which brings us to the next bit of work. 


    Local Dollars for Local Energy. 

    In 2013, Stan Hazelroth and I addressed the question of how energy infrastructure is financed and the difference it might make if it were financed more with local dollars…vs. dollars that have to run the Wall Street gauntlet on their way from and to Main Street.

     

    We collaborated, generated a report, received thoughtful comments from IRESN colleague, and presented our results at the 2014 Energy Policy Research Conference in San Francisco.   Our conclusions and recommendations identified gaps in policy level understanding of a globalization counter-trend, i.e. on-going energy localization.  So, our next step may be to talk with policy research sponsors about our recommendations.

    Beyond that, Stan has a web page on the IRESN site devoted to energy finance.  Please be sure to check it out. 


    21st Century Energy:  Capital Intensive Decentralized Supply.

    We feel we more than scratched an important surface.  Energy sector finance is changing; adaptive innovation addressing local conditions and priorities is possible.  It is needed because historical power sector finance models were designed to solve a problem that no longer exists, i.e. to enable electricity service providers to secure capital for expansion of generation systems during decades of rapidly growing demand.  Nowadays, expansion of the most capital intensive generation, i.e. renewable power, is typically not financed by utilities.  Rather in some cases, notably Germany, it is financed mostly by people and smaller businesses. 

     

    The cost of money for capital-intensive decentralized electricity generation, storage, and local delivery, exchange and sale already matters a great deal.  Especially in areas where solar PV accounts for a significant and growing share of local electricity supply.  Historical global statistics cited by fossil fuel advocates seeking to portray solar PV as a still relatively small contributor to global energy supply can be especially misleading in a local context.  For example, by the end of 2015, locally produced solar electricity in IRESN’s home town, Davis, California, is projected to cover more than 10% of local electricity consumption.


    For reasons explained in our paper, publicly owned utility weighted average costs of capital are typically about 5% below the costs of capital paid by for-profit utilities, which in turn are about 5% below the returns on investment targeted by for-profit corporations when evaluating recommended capital projects, e.g. manufacturing plants.  Some state infrastructure finance programs, including a new “green bank” in New York and “resiliency bank” New Jersey, are starting to offer loan guarantees and direct low interest loans for targeted infrastructure. 


    An existing for-profit utility’s capital requirements can be financed on its balance sheet, but financing local solar generation that way would be unaffordable.  Nevertheless, local solar generation will be a long term infrastructure asset for local communities.  A transition from current, highly leveraged, financing of local solar investments to a framework enabled by local energy service providers will be needed.  It merits near term innovative attention, pilots and policy support. 


    Energy Localization Topics. 

    In 2014, thanks to David Sweet and the World Alliance for Decentralized Energy (WADE), IRESN’s work benefited from opportunities to attend and contribute to events organized, co-sponsored or endorsed by WADE. 

     

    Power Market Transformation…conference on in San Francisco, April 2014.  Recent rapid solar PV industry growth has apparently taken US utilities and their regulators by surprise.  Combined with low, no, and, in some cases, negative growth in electricity demand and enabled by a revolution in information technology, the emergence of  new and successful rooftop solar business models is challenging the traditional commodity-based electric utility revenue model.    Conference sessions aired both sides of a debate on the consequences and equity issues of net metering.  Especially noteworthy in this context were presentations on solar tariff models in Minnesota and Austin, Texas that account for the economic value of solar.

     

    “Death spiral” scenarios (shrinking revenues-driving cost increases-driving reduced consumption-driving shrinking revenues) are not new.  They attracted a modicum of interest in the early days of electric market restructuring.  Now they have US for-profit electric utilities manning the barricades, seeking regulatory and legislative “relief” and, following the lead of the Edison Electric Institute, advocating for evolutionary vs. revolutionary change, or in other words, a preference for business as usual.


    Be that as it may, what has actually changed, evolutionary or not, is the relative size and political heft of two industries, electric utilities and national solar energy retailers.  The conference featured several panels on which each industry and/or their regulators and customers were represented.  The sub-text was an interesting difference of opinion regarding “ownership” of customers.  Monopolies, almost by definition, own customers.  The question is whether and how electricity service monopolies should now share or compete for customers now that customers can cost-effectively generate their own electricity and now that the policy rationale for private sector energy monopolies has pretty much evaporated. 


    Opportunities for Distributed Energy in the San Diego Region…community energy systems roundtable in May.  SANDAG (San Diego Association of Governments) and CADER (Communities Advancing Distributed Energy Resources) convened a roundtable to discuss trends, perspectives and opportunities for distributed energy resource (DER) projects in the San Diego region.  IRESN organized a session on the need and funding for distributed energy resources projects.  Originally organized around distributed generation information and advocacy, CADER adopted a mission to facilitate dialog and collaboration between utilities and the communities they serve. 


    The roundtable’s premise was that both utilities and communities have an economic stake in orderly and cost-effective use of local energy resources.  The roundtable demonstrated CADER’s ability to organize informative sessions and thoughtful conversations among utility technology experts and community leaders.  It also demonstrated potential for serious engagement between communities and the energy utilities.  But it was also apparent that neither local communities or regional energy utilities are yet prepared and committed to more consequential dialog and engagement.  This means that CADER’s new mission will be at risk until there is policy and funding support for the necessary work.     


    Two Definitions of Energy Resiliency…WADE’s annual meeting and distributed generation conference in New York in October.  Stan and I attended.  While WADE’s historical core constituency has been organized around natural gas and combined heat and power (CHP), the 2014 agenda included at least some reference to distributed solar generation.  My task was to speak to the impact of California policies and markets on the progress of decentralized energy.  I took the opportunity to advocate for integrative models enabling more rapid deployment of both local renewables and CHP. 


    The conference agenda focused on recent  policy initiatives in New York and other east coast states in the wake of Super Storm Sandy.  “Resiliency” was an over-arching theme.  Resiliency is also emerging as an integrative theme in California. It evokes a notably different meaning in New York than in California. 


    The measure of east coast resiliency, for now, is the ability to absorb a devastating blow like Sandy without losing energy and other basic services across a broad area.  An emerging debate centers on whether existing distributed generation should come into play during a major weather event in support of the big grid, or rather in support of insulating local energy users from a regional grid’s temporary collapse, or somehow both. 

    The measure of energy related resiliency in California can be broader, i.e. the extent to which local economies depend less on imported energy and more on locally produced energy that empowers a more robust local economy as well as a more robust overall electricity grid.


    Entry Market for Smaller Grids….November conference in San Diego on commercial and military “micro-grids”  One welcome highlight was Byron Washom’s progress report on UC San Diego’s small (not so micro) grid.  UCSD’s 20 year old micro-grid continues to serve as a working laboratory for the integration of emerging technologies that reduce costs of operation and carbon footprint at the same time. 


    Parallels between the early global small grid market and early solar PV markets came to mind.  For most of its first three decades the solar PV industry expanded rapidly.  Profitability depended on applications that saved money in cases where the alternative was (often prohibitively) costly.  For example, small bits of power far from the nearest electricity grid.[2]


    According to market analyst Peter Asmus, the global small grid, aka micro-grid, market is already measured in billions of dollars and is strongest in areas where it is especially costly to provide electricity service according to the centralized grid model.  Not surprisingly, the regional market Asmus projects to be most active in the near term is Africa.  Island states and nations are also opportune and likely transitional market as the overall small grid market matures. 


    Military base small grids, apparently the leading edge of the US market, are essentially at one end of the global market spectrum.  At this end, resiliency does in fact mean the ability to isolate from the regional grid and maintain operational continuity across a whole military base, not just building by building, critical load by critical load, relying on back-up generators.


    Integrated Energy Analysis for a Small City (Davis, California). 

    The last months of 2014 have been to devoted primarily to research and advocacy around the topic of Davis, California’s energy future.  In a recent op-ed, Richard McCann and I summarized energy service options available to Davis, pointing to the benefits of locally accountable energy service delivering clean, low carbon electricity to Davis residents and businesses.  In another recent op-ed, Lorenzo Kristov and I review trends in the costs and performance of clean energy technologies that are now poised to offer an energy future that can be small-scale and local. Meanwhile, Davis’s Coalition for Local Power is turning its attention to Community Choice Energy. 


    Davis may lead.  Davis may follow.  Davis may watch from the sidelines.  That will be a political decision. IRESN’s work in the last months of 2014 in support of a decision will have other uses.  Specifically, we created an integrated model of Davis’s energy usage, supply and imports and used it to evaluate and compare the main scenarios for local renewable energy deployment.    Results will be summarized via a free  webinar scheduled for mid-January.   


    Work to date confirms one of the Integrated Resources Network’s main premises, i.e. that local energy infrastructure will, within the next couple decades, need to be much better integrated, economically, technically and especially locally.  Push-back against this technically and economically driven need is already a factor in local decision-making.  Unfortunately, no model can predict how the politics will play out.  The best that can be hoped is for a technically and economically well informed local decision-making process, specifically one that can be broadly replicated. 

    Please e-mail me at gbraun@iresn.org if you have questions or comments on any of the work summarized above. 

     

    Gerry Braun

    Integrated Resources Network

    www.iresn.org



    [1] For example, In Davis, California non-residential customers currently pay three times the average residential rate during summer peak periods.   

    [2] Peter Varadi, co-founder of Solarex, for many years the leading company in the emergent solar PV industry, published a book in 2014, Sun Above the Horizon, that tells the little known solar industry creation story extremely well. 

  • 31 Mar 2014 10:58 AM | Anonymous
    Net Positive Electricity: Insights from Home, Church and City Projects
    Contributed by Gerry Braun

    Net zero building retrofits were identified in a Cal-IRES report as a key element of a renewable energy roadmap for Davis, California. In the past year I’ve had opportunities to smoke the devil out of the details of this vision. I purchased a PV system for our home, negotiated a solar electricity power purchase agreement for our church, and worked with a few like-minded colleagues to advocate for applying net zero as a standard for a new residential development in the city. In parallel, in the 2013 legislative session our state senator, Lois Wolk, successfully carried legislation that carved out 20MW for the city in a bill that mandates 600MW of "solar gardens" state-wide.

    It’s important to start this article with a bit of philosophy. For the lessons from my projects to be worth sharing, the projects needed to save money. Projects that don’t save money simply don’t provide broadly replicable experience. My premise, validated by the projects, is that it is easily possible, at least where I live, to make investments that have a good economic return and also add up to a strategy for carbon neutrality. “Add up to” is an important term, as I’ll explain. There are no convenient silver bullets. Decisions need to be technically and economically informed, and most importantly, integrated. Fortunately, this is not as difficult as it sounds. Common sense is a reliable ally.

    Driving an existing home’s carbon footprint toward zero
    As if to validate the importance of integrated thinking about a solar array for our home, I learned that our utility, PG&E, will not connect arrays that produce more annual electricity than historical usage. This is defensible in the context of concerns about "solarizing" inefficiency, to borrow a thought from my friend, Jan McFarland. But it works against grass roots climate action. Let me explain.

    In our household, the batteries of our two hybrid cars were approaching the end of an impressive ten year lifespan. Our plan was to purchase an electric vehicle to replace one of the hybrids. We would use the EV around town and on regular trips where recharging would be convenient. If we went ahead and purchased an EV, the utility’s array sizing limit could be adjusted upward to account for estimated increased usage. So, we were able to "over-size" our array by about 20% to account for our new EV’s expected annual electricity use. As the photo suggests, the array covers only a portion of our south facing roof. You’ll notice there is a lot more roof area available that could be used to produce net positive electricity.

    What we are aiming for is net zero carbon, not just net zero electricity. It turns out that switching to solar electricity was just a good start. The electricity component of our household carbon footprint was only 40% of the total, with the other 60% attributable to the natural gas we use for water and space heating and cooking. Solar water heating is cost effective in many cases; it requires much less roof space per unity of energy delivered than solar PV, and there is a fair chance of finding a qualified local installer. (Makes me sort of wish we used more hot water, but as empty nesters we don't, so the economics are less attractive for us than for families with teenagers taking frequent, long showers.)

    Space heating and cooking are more problematic. We like cooking with gas. Northern Europeans rely on hydronic space heating, making combined solar space and water heating a good retrofit option, but most US space heating is "forced air", meaning air is heated directly and then distributed around the home to heat its rooms. If bio-gas or hydrogen were distributed to homes, it would enable us to back out natural gas with more climate friendly fuels. This option is not on the horizon in our area.

    The immediate option is to back out the gas we use for space heating using electricity, and to generate the electricity on our roof. It turns out we have enough south facing roof area for this. But the first step is to switch to electric heating before expanding our solar electricity system to cover the additional usage. We may or may not need additional panels.

    This approach turns out to be a good idea for other reasons as well. Our heating, ventilation and air conditioning system was about 14 years old, has lost some efficiency over the years, and was a candidate for replacement. So, we just replaced it with a heat pump unit. The photo shows the outdoor heat exchanger. This should go a long way toward driving our everyday total carbon footprint closer to zero. Newer HVAC equipment is more efficient, plus duct leakage can eat away as much as 20-30% of heating and cooling energy inputs.

    Our experience argues for more flexibility to at least temporarily generate more electricity than historical usage would require. Otherwise, climate conscious homeowners face the need for two sequential solar installation projects, resulting in significant duplicative “soft” costs in cases where electricity usage needs to increase in order to achieve greater “decarbonization”.

    Driving a commercial building’s carbon footprint toward zero
    It turns out that our church faces the same sizing flexibility issues “in spades”. First, as an artifact of utility tariff design, the economically optimum solar array size does not result in net zero electricity. Our church is on a time of use tariff. This means that, with net metered solar arrays, we will get credit for electricity our solar arrays produce at prices we would have paid for the equivalent amounts of grid electricity. Our usage is weighted to daytime, so it is well matched to solar production profiles. As a result, we can reduce our grid electricity bill to near zero by sizing our solar capacity to generate only about 80% of our annual consumption.

    Over-sizing our church’s solar arrays would result in being credited for "over-production" at PG&E's marginal generation cost, i.e. about 20% of the average price we pay them for what they sell us. Not a good deal. Sounds complicated, and it is, but it is how things work out with electricity tariffs that were designed before solar electricity became a cost saving option.
    Our church’s new solar electricity array will reduce our church’s carbon footprint by about 25%, with most of the remainder attributable to our natural gas usage. So, it becomes clear, as with our home, that our church will have to take further steps to shrink its carbon footprint. We will need to consider retrofitting our multiple HVAC systems (different sizes, different designs, different ages). We’ll need a five year plan for the transition.

    The good news is that our church, like our home, has plenty of roof space for additional solar. Its new solar array will be on a carport in the church parking lot, leaving most of our south-and west-facing roof space for additional solar arrays. The carport is a perfect site for an electric vehicle charging station or two. It is worth noting that the choice to build a carport for the solar array was actually economically and otherwise preferable to roof mounting. This adds to the weight of comparable experience from the UC Davis West Village net zero solar community.

    Democratizing solar electricity

    The question of our city's solar electricity portfolio is becoming more important as we work to determine how much of our electricity can come from solar and how much solar electricity must come from community "solar gardens" rather than systems behind electricity customer meters. In settled communities like Davis that have healthy “urban forests”, most existing residential buildings are not suitable for rooftop solar because of shading and limited roof space having the right orientation, etc. The good news is that commercial buildings require parking lots for their customers. Our church project demonstrates that mounting solar PV on shade structures is now cost-competitive with roof mounting. It is economically preferable in many cases even without considering the bonus of shaded parking, including energy saved by avoiding the need to cool hot vehicle interiors.

    We are fortunate, thanks to the work of Mitch Sears, Mark Braly, and Richard Flood, to be in the early stages of the DavisFREE project, which will, thanks to cost sharing with the California Energy Commission, generate a detailed renewable energy build-out roadmap for our city. As we seriously plan the best strategies to achieve our city’s carbon neutrality goals, rules of thumb, untested intuition and expert advice all need to be validated by independent analysis.
    Energy users are on a learning curve, and so it appears are our utilities and policy makers. It is becoming important for electric utilities to know their own costs, specifically which of their customers are getting a good deal at the expense of the others. There is quite a bit of misinformation in circulation on this point. I was surprised in a recent meeting to hear a state legislative aide assert matter-of-factly that the state's rooftop solar electricity customers are being subsidized at the expense of non-solar customers.

    As noted in a previous IRESN article, this particular bit of conventional wisdom doesn’t square with direct experience. In Davis the opposite appears to be true. Our utility's cost of wires connecting net metered customers is small in comparison to the value of solar electricity flowing into the grid from net metered customers rooftops during peak usage periods. As residential customers, we are credited by our utility for the electricity our solar array feeds into the local grid during peak periods at about $.013/kWh; meanwhile our church is charged $.045/kWh for its simultaneous use of electricity, including the electricity that spills into the grid from our rooftop.

    As we enter a period of energy infrastructure transformation and policy re-alignment, we need to consider the source of our “facts”. Some become “facts” through repetition and are not facts at all. We should be especially careful not to use them as a foundation for energy policy and market regulation. Do bad facts underlie bad policy? Would energy policy experts agree that the (fictitious?) cross-subsidization that so worries some electric utilities must be curtailed in due course? Rather, I hope that they will come to recognize that electricity service costs vary according to location and be wary of generalizations that are valid only in hypothetical situations, not in real life.

    A dose of reality regarding local climate neutrality goals
    Speaking of real life, our city has a nice piece of land that developers have been lusting after for quite a while. This year a proposal came forward to make it the site of a new neighborhood for about 500 residents.

    Our city has a long term carbon neutrality goal. Naturally, some of us saw the new development as an opportunity to apply and build on the net zero residential development lessons of UC Davis' West Village. The developer apparently did, too, and hired a local energy efficiency consultant to scope the energy packages for the new homes.

    It probably shouldn't have come as a surprise that, rather than designing to a net zero standard, the developer chose to make net zero an option at significant additional cost to the home buyer. The fact that, on a life cycle basis, net zero would be the best deal for all of the new homeowners, did not fit the developer's business model. Thanks to the conversation the Valley Climate Action Center (VCAC) initiated with the developer, at least some of the homes will have net metered solar PV arrays, albeit small ones in relation to average annual energy usage. In the context of the city's climate action plan, the outcome feels like an unfortunate missed opportunity.

    Buildings hang around more or less unchanged for many decades. New ones that aren’t the best they can be become a part of an overhang of excessive greenhouse gas emissions that is much more expensive to whittle down through retrofits than it would be to just avoid in the first place. The unshaded roofs in the new development could have generated clean electricity, not just for residents in the new neighborhood but perhaps even a net amount to distribute to other electricity users in the city.

    Net positive energy. We need to change our electricity systems so that net positive electricity production is encouraged, not prohibited.

    Reality is that negotiations between cities and land developers typically revolve around concessions having nothing to do with a development’s carbon footprint. Getting to carbon neutrality will be a heavy lift for a settled, low growth community where the overhang of existing buildings includes a high percentage of rentals. We obviously need a plan. Hopefully VCAC’s DavisFREE Project will inform it, and community solar gardens will provide the low carbon electricity needed by new net negative buildings as well as existing net negative buildings.

    This outcome is far from guaranteed. In our case the incumbent utility has proposed an alternative implementation of Senator Wolk’s bill that would rely on “green tariffs” rather than enable community solar gardens as Senator Wolk envisioned. The green tariff model would essentially decouple solar electricity production from the communities whose residents purchase it. It would essentially set aside a portion of the solar electricity purchased anywhere in very large region for resale by the incumbent utility at a premium to electricity users that lack other access to solar electricity. Fortunately, the Sierra Club and some of our local energy policy stalwarts (Gene Wilson, Matt Cheney, and Richard McCann) have intervened on behalf of the legislation’s intent.
    Their briefs and testimony on behalf of the Sierra Club make interesting reading, the disturbing implications of which are that some utilities will choose to defend the 20th century electric utility business model at all costs. This is somehow reminiscent of the US auto industry right before overseas competitors began selling us better cars at lower prices.

    The importance of standards
    In Davis we almost lucked out. Last year our Natural Resources Commission developed and sent to our City Council a proposed ordinance that would have flexibly mandated on-site renewable energy for new buildings and buildings undergoing major renovation. Had the ordinance been in place while the city was negotiating concessions with the land developer, negotiating positions would have been reversed, and the city would have been in a position to consider how best to apply its standard. Instead, the usual horse trading between local government and land developers used the usual bargaining chips.

    So, one thing we learned the hard way is the importance of standards. Not just for Davis, but for all communities facing the need to account for energy in an economic and environmental sustainability context. It seems doubtful that eventual state net zero standards will do more than codify the energy efficiency metrics of new net zero buildings. New building energy usage profiles depend as much on occupant numbers and behavior as design. Specifying the sizes of solar arrays for “net zero” will be a long and contentious process. It may be better to de-emphasize net zero standards and focus more on standards for net positive and net negative buildings, both new and retrofit. In the trade-offs and balancing between net positive and net negative lies much of the potential to accelerate progress toward overall carbon neutrality.

    This suggest an urgent need for a more comprehensive and pragmatic approach to net metering. Net zero is a standard that needs to be achieved on the average, not building by building. Some buildings can be net negative if others are sufficiently net positive. Our experience sizing a solar array for our home suggests that a lot of homes and commercial buildings can easily be highly net positive. This should not be news. Even in Germany where annual solar resources are less productive, “feed in tariffs” have been very effective in capturing net positive electricity. The only thing standing in the way in the US is the lack of tariffs for net positive buildings. Let’s get to work on this!

    A community's unshaded roofs and parking areas are not just an energy resource but a sustainability resource that in most cases is vastly underutilized. Even in Davis where local solar installations already account for 3% of our electricity usage, we are just getting started. But we probably won’t get far without standards.

    Our city is taking first steps toward owning its own electricity distribution infrastructure. This may be the key to making maximum economic use of our unshaded roofs parking areas and brownfield sites. The ability to feed net positive electricity into the local grid will accelerate the rate at which we can deploy cost effective solar and shrink our carbon footprint. By a lot. Every roof or unshaded area that is fully used will mean a comparable area of agricultural or undisturbed land that won't be needed for energy generation.

    20th century US electric utility models are a big stumbling block. In Davis our hopes for net positive electricity and virtual net metering standards may be dimmer than for other communities that are already being served by publicly owned utilities. There is growing interest in new utility business models. Publicly owned municipal utilities are in a position to take the lead in creating new business models. When they do, “integrated resources enabling sustainable communities” will be a reality, not just IRESN’s tag line.
    ©2014 The IRES Network
  • 16 Oct 2013 12:50 PM | Anonymous


    The short answer, in an electric system planning context anyway, is “yes, because of fundamental economic and technical complementarities.”  The appropriate follow up question might be:  “Does anybody do electric system planning anymore?”  The answer to that one is, “probably somewhere, but in California, not so much.”  For more insight on the question and answer, see the blog, “Strategic Planning is Dead?”

                     

    The classical planning view would be that in an electric generation mix, higher capital cost/ lower fuel cost generators and higher fuel cost/ lower capital cost generators complement one another, resulting in a least cost generation mix.  There are also other complementarities, e.g. overlapping science and technology needs (think enhanced geothermal and natural gas fracking).  Likewise, there is a potential at least for shared infrastructure (think injection of bio-methane and later hydrogen from renewable sources into gas pipelines and distribution systems).

     

    So much for simple answers.  Let’s dig in a bit.  As mentioned in an earlier discussion of net energy, a main premise for thinking about future electricity systems flies under the rather vague banner of “smart grid”.  A fully educated grid will introduce an aspect of mutual help between renewables and natural gas beyond optimizing the generation mix.  Intelligent infrastructure will mean distributed intelligence, supporting automated decision making and thereby enabling electricity micro-grids and a mix of net positive and net negative end use interconnections.

     

    And let’s also be realistic.  Current grid infrastructure is a huge, mostly sunk, cost.  Useful infrastructure endures.  Our natural gas and electricity grids are essentially permanent features of our energy landscape, where they exist.  The important and still somewhat open question is “what will feed in where and how will it be used?”

     

    It is fair, though perhaps controversial, to observe that natural gas and electricity market restructuring intended to apply market pressure downward on fuel costs.  Instead it seems to have applied downward pressure on infrastructure investment and even maintenance.  Society now faces a fairly large bill for deferred expenditures as it comes to terms with a future requiring more, not less grid resiliency in the face of a gathering storm of locally catastrophic weather events.

     

    One foundational and perhaps pervasive element of future grid resiliency will be local mini-grids and micro-grids able to not only operate independently of brittle or fragile regional grids, but also able to purchase, sell and exchange electricity.

    But won’t renewable electricity be too expensive relative to electricity from cheap and abundant natural gas?  At the well head maybe.  But otherwise it is time to close the window on outdated cost forecasts and look instead at market pricing.  Remember that we are talking about grids here, and global markets for fuel and renewable energy equipment.  These tend to level out the local differences, and it only needs to be mentioned that wind and solar electricity are already at price parity with wholesale and retail grid electricity respectively in this increasingly integrated context. 

     

    The big “aha!” is that renewable electricity costs have plummeted in recent years while the conventional energy industry’s radar was aimed elsewhere.  The result, e.g. best in class installed utility scale solar PV costs finally below the $2000/kW target level set decades ago, have definitely caught the attention of energy finance experts well below the radar screens of most everyone but energy finance experts.

     

    In Europe, the renewable percentage of annual capacity additions is at over 70% and rising.  The remainder is mostly natural gas.  In the US renewable capacity doubled in the period 2009-2012 while natural gas installed capacity was increasing by 50% in the 2007-2012 period.  Global wind capacity reached 282 GW in 2012 while global PV capacity additions leveled off temporarily at 20-25 GW per year since 2010 with double digit growth expected to resume in 2014.

     

    On the core question of whether renewable energy and natural gas can help one another, Europe’s answer is that renewable penetration is rapidly approaching levels that compel attention to the need for flexible generation.  The symbiosis between flexible natural gas generation and variable renewable generation is clarified in the recommended reading in the April-May 2013 IRESN Insights.  High penetration of variable renewable sources presents a major challenge to current electric systems.  The main problem is coping with sudden load ramps, for instant increasing wind generation and reduced demand at the beginning of a weekend and the opposite at the beginning of the week.

     

    The figure (see the original article in the June-July 2013 issue of IRESN Insights) shows a situation that occurred in Germany in 2009. Exploiting the low variable costs of wind power plants, for example, will not necessarily require more or less utility scale natural gas generation but a different mix.  In any event, the economic deployment of wind energy creates a relatively stable and predictable market for natural gas in the power sector, while flexible natural gas generation will enable higher levels of cost effective wind energy grid penetration.

     

    Likewise, the favorable economics of solar PV at the building and community scale will not necessarily require more or less overall natural gas generation.  Nevertheless, it may require a mix of natural gas generation more heavily weighted toward distributed natural gas generation.  Providing flexibility to accommodate variable renewable electricity feeding in and affecting loadings on distribution circuits can be accomplished in several ways.  Distributed natural gas generation currently tops the list, because it relies on mature, proven and well supported products.

    Deployment of solar PV in smaller increments can proceed very rapidly.  So, can deployment of flexible distributed natural gas generation, at least in areas where meeting air quality impacts is feasible.

     

    To the surprise and benefit of two as yet unacquainted industries, PV and natural gas distributed generation may widen market windows for one another. The economics of high penetration PV deployment may drive the creation of a relatively stable and predictable market for flexible, utility dispatched natural gas distributed generation (NGDG).  On the other side of the coin, NGDG may  be a primary enabler of economically desirable levels of cost effective distributed solar electricity production.  Deployment of comparable levels of utility dispatched electricity storage will likely be slower to take root.  Deployment is more likely to start on the demand side, i.e. in support of demand side management, building owner response to time of use tariffs, etc.

     

    The renewable/NG symbioses discussed above are relatively immediate and urgent in a global context.  Also in more local context.  For example, on the Hawaiian island of Oahu, rooftop PV deployment, within three years of getting underway, reached levels approaching minimum circuit demand across much of the utility service area.  Adding PV capacity beyond this level typically requires special consideration and/or rule changes.

     

    Other symbioses are also opportune but may be farther out on the horizon.  For example, thermal solar for heating has considerable traction in Europe and China but lacks appropriate policy attention in the US. Efficient integration of solar and natural gas thermal sources would reduce carbon footprints at the building and community level, but would require attention to design integration and plug and play product packaging opportunities.  Likewise, compressed air energy storage is a longer term and lower carbon flexible generation option for electricity grids with high levels of variable renewable penetration.

     

    The full presentation summarized above is posted on the IRESN website.  A full report that discusses the information presented in the slides may be developed, subject to sponsor support.  

  • 16 Oct 2013 11:55 AM | Anonymous
    When we use the term “renewable integration” to describe IRESN’s focus, what do we mean? Integration with what?  In what context?
      
    IRESN has been active in certain major dimensions of renewable integration.  They are:
    • Project integration
    • Infrastructure integration
    • Money integration
    • Societal integration

    Without some examples, these terms don’t help much either.  So, for example:

    Project integration

    Gene Wilson, a local Davis colleague, stresses the importance of “real projects”  He intervenes in projects that require public approval but which fall sort of using clean energy to best advantage.  Integration projects can be as simple as arranging for solar electricity systems to be installed and “net metered” by local electric utilities.  In even simple cases, technical, economic and political aspects need to be integrated or the project will fail. Plus, the projects get started as a result of a vision, personal or shared.  So, personal and organizational vision can be an essential integrating factor.

    A good example is the new land development project under consideration by the City of Davis.  It’s called The Cannery Project.  IRESN has been supporting the Valley Climate Action Center’s efforts to make sure net zero principles are applied in shaping the energy packages for the new homes and buildings in the proposed development.  The local newspaper has done a good job covering the technical, economic and political issues that need to be integrated for the project is to gain approval. 
     
    From a renewable integration perspective, the key question is whether the new project will add to or have a neutral effect on the city’s carbon footprint.  This depends on whether the project is viewed holistically vs. one building at a time.  Getting to the right answer requires both views… and a lot of others.  This is what we mean by project integration.
      
    For example, The Cannery Project specifically requires integration of renewable energy and energy efficiency at the building level, just as the UC Davis West Village project did.  Fortunately, Davis Energy Group, the original energy consultant for West Village, has been engaged by the developer and can apply net zero solar community design lessons to scoping energy packages for the Cannery Project buildings.

    But that’s the technical part.  An economic and policy issue is whether net zero should be a standard feature or an "up-sell" option.  This is where full span integration rubber hits the road.  Of course there is a political process that parallels the economic number crunching and the technical fact checking.  There are endless options, and developer profits are at stake.  The city’s climate goals are also at stake, but so are other concessions the city could ask the developer to make.  The vision and political aspirations of city council members also matter.  
    Technical and economic facts become blurred in political processes, and in newspaper reporting as well.  

    Such projects are laboratories for integration across the technical, economic and political dimensions of local renewable energy.  If there is one lesson from The Cannery Project so far, it is that the technical, economic and political dimensions can be more readily integrated if the vision dimension is not a blank sheet of paper.  Fortunately, Davis has a climate action plan. 

    Unfortunately, there were no pre-agreed standards for determining if a specific project is aligned with the plan. Lacking standards, an arbitrary and expedient determination is quite feasible.  But it might not support the plan.

    In Davis, standards are on the way in the form of a draft renewable energy ordinance spearheaded by Gene Wilson, who also chairs the city’s Natural Resources Commission.  IRESN supported Gene’s effort.  But the proposed standards will only apply after they are adopted by the city council.  They would have guided project scoping.  Extensive and inconclusive negotiations and related newspaper articles might not have been necessary. This may serve as a lesson for other communities having clean energy deployment or climate action goals.

    Links to further information about The Cannery Project and Davis' Renewable Energy Ordinance are provided in the Aug-Oct 2013 issue of IRESN Insights 

    Other integration dimensions


    We’ll discuss other integration dimensions in future Insights issues.  For now, a quick mention of specific examples will have to suffice.


    Infrastructure integration has many dimensions.  Power and natural gas infrastructure are very important to renewable deployment but they also depend on water, transportation, communications and other regional and local infrastructure.  It is at the edges of these infrastructure systems that renewable integration examples are easiest to explain and understand.  


    What, for example, are the infrastructure integration implications of solar electricity on home rooftops?  Many have come to mind in the process of matching a rooftop solar electricity system to our home’s present and future electricity usage.  A single solar home does not create many integration issues, but a community that maximizes its rooftop solar potential will face many more.


    Money integration is our shorthand for the shifts in capital flows that will be driven by decentralized energy deployment.  At the simplest level, financing of decentralized renewable energy supply is a matter of adapting project finance and equipment leasing protocols to solar electricity and other renewable energy applications.  The result is that partly integrated projects are possible because financing is still only partly integrated.  Fully economically integrated projects are not yet possible.  For example, a solar capacity upgrade project for a local church in Davis has recourse to well-conceived but incomplete financing offers that focus, understandably, on solar assets that have quantifiable residual value to their owners. 


    But what if efficiency investments that complement the solar investment are needed?  What if electricity is not the only energy bill and/or only a relatively small part of the energy user’s carbon footprint?  How can energy upgrades be financed in a way requires only a single project, technically and economically integrated and financed as a whole, not in pieces?  And what happens when real time use of a building’s physical energy assets determines how much the building owner pays and is paid for energy?  This is a glimpse of the future of money integration in a renewable energy context.


    Societal integration implies that a city or county’s energy concerns are not limited to the cost of imported fuel and electricity but rather extend to the preservation and improvement of local economic and ecological vitality.  The strongest advocates for local energy empowerment are also the strongest advocates for local “sustainability”, e.g. the Sonoma Climate Protection Campaign, and like-minded groups in other cities and counties. 


    Municipal and rural utilities are typically focused on quality and cost of service, as are investor owned utilities (IOUs).  However, a substantial portion of IOU revenues (i.e. more than 10% of baseline residential rates in northern California) is spent on “public purpose programs”.  Ideally, these expenditures would be managed to achieve local as well as broader societal purposes. Are they now?  Can they be in a more decentralized energy future? 


    Putting aside questions of equity and effectiveness, how can collateral societal purposes be met in a future, more decentralized energy economy.  A practical, non-academic question facing city councils and publicly owned utility governing boards.  What is the right level of funding to set aside for public purposes?  What if programs that accelerate deployment of clean energy are at cross purposes with a utility’s primary mission of cost containment and uninterrupted service.  How can programs having a long term economic or societal purpose receive adequate management attention and funding in an operating company environment?  Can their purposes be cost-efficiently served if no locally chartered energy agency exists to account for unique local problems and opportunities?

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