Renewable Score Card: Germany vs. California

Which has done better, or worse, in their respective energy turnaround.

This is a sample article from the July 2014 issue of EEnergy Informer.

California and Germany may seem rather dissimilar in many respects. But when it comes to their ardent support of renewables, they are nearly identical. The motivations may be different, but the goals are similar. In the case of the former, the main driver is the state’s climate bill, passed in 2006, which requires state-level greenhouse gas (GHG) emissions to be reduced to 1990 levels by 2020 — don’t ask why, or how, or at what cost. This is driving a great many sub-goals and targets, including the state’s ambitious renewable portfolio standard (RPS), which requires 1/3rd of electricity generation to come from new renewables by 2020 — ditto on the why, and how and how much.

Economic powerhouses turning their electricity sector around

In the case of Germany, the energiwende (pronounced energhi-wende) or turnaround, is centered on a rash political decision made in haste in the immediate aftermath of the Fukushima nuclear disaster in Japan to shut down 8 perfectly safe operating reactors immediately and phase out the remaining 9 by 2022. Again, don’t ask why or anything else because you are not going to get any good, or even lame answers.

The hasty nuclear exist plus the country’s desire to reduce its carbon emissions by moving towards a growing portfolio of renewable resources explains the developments — and the associated problems and costs — in Germany.

At an event organized on 5 June 2014, California Public Utilities Commission (CPUC), which is among the main drivers of the changes taking place in the Golden State, invited 2 speakers representing 2 of the largest utilities in each country/state to exchange notes. The parallels and the challenges were strikingly similar.

Germany’s green revolution

Graham Weale, RWE’s chief economist, Germany’s second biggest utility after E.ON, described the dramatic rise of renewables since 2000, especially from solar PVs since 2010 (graph above), and their impact on depressing wholesale prices while contributing to the rise in retail tariffs.

As reported in the June 2014 issue of this newsletter, German government has belatedly acknowledged, at least tacitly, that perhaps its energy turnaround has been too abrupt and possibly too expensive, certainly for residential and small commercial consumers who are bearing the brunt of the retail tariff increases. German politicians are particularly sensitive to the plight of the so-called export-sensitive industries, which are virtually shielded from all price increases associated with the rapid rise of renewables and their generous subsidies.

A proposal expected to become law in August 2014 is intended to put caps on how much additional renewables will be subsidized, while adjusting the subsidy levels downward, reflecting their falling costs

Germany to put caps on future growth of renewables

California’s experience with renewables was summarized by Fong Wan, Sr. VP of California’s largest investor-owned utility, Pacific Gas & Electric Company (PG&E) who, like RWE, must abide by edicts and targets coming from politicians and regulators. PG&E, among the greenest of major power generators in the US, is on target to further reduce its carbon footprint, already among the lowest of any major US utility (graph below right).

Not unlike Germany, with its 35 GW of installed solar PV capacity, PG&E is facing a rather steep rise from virtually nil in 2000 to over 1 GW, a trend that is expected to continue. Customer mounted solar PVs, incidentally, are not counted towards the 33% RPS target for 2020 since they are on the customer-side of the meter. They are treated as negative load by California Independent System Operator (CAISO), who can only guess their existence by watching the fluctuations in net load as the sun rises.

PG&E lowering its carbon footprint still further

California renewable generation is expected to grow just as in Germany. Wan believes, as do many others, that California will in fact exceed the 33% target — partly because nobody — the utilities, the governor, or the regulators — can bear the negative publicity for failing to reach it.

Counting existing large hydro and old renewables that existed before the RPS standard was set, California’s generation mix can easily exceed 50% by 2020, making it among the highest among major global economies.

While German consumers are beginning to notice the rising retail tariffs, California’s high volume consumers have been exposed to some lofty tiered rates, but not because of the rise of renewables.

More renewable

Since retail residential tariffs are tiered, consumers who get into top tiers pay steep prices. As illustrated in the graph below, PG&E’s top tier approached $0.5/kWhr in 2010, which resulted in consumer revolt in the hot central valley.

The top tier was subsequently eliminated, yet the 4th tier is now around 36 cents/kWhr, not exactly cheap. As described in the May 2014 issue of this newsletter, PG&E has proposed to move towards 3 and eventually 2 tiers over time — in an attempt to reduce the wide and widening disparity among the top and lowest tiers.

The top tiers have been rising because the bottom two were frozen after the 2000-01 electricity crisis. This resulted in all costs to be passed on to the top 4 tiers.

Steep tariffs in top tiers for PG&E customers, cents/kWhr

While both Germany and California could have done a better job of managing the transition to high renewable energy mix, on balance, it appears that the latter has done a better job — which is to say approaching its 33% new renewable target by 2020 while keeping retail rates reasonable.

California’s average retail electricity tariffs are around 17 cents/kWh, higher than the US average but a bargain compared to many high price European countries who have experienced steep retail tariff increases since 2008.

Moreover, according to a recent NREL/LBL study, high RPS targets appear to be achievable without putting undue pressure on retail tariffs

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Article on Retail Prices in Energy Spectrum

In the latest issue of Energy Spectrum magazine Dr. Sioshansi digs into the details behind varying retail electricity prices in different parts of the world. To read it, click here (PDF).

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Article about Disruptive Technologies on Renew Economy

Dr. Sioshansi has an article about Disruptive Technologies on the Renew Economy website. To read it click here.

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July 2014 EEnergy Informer

The July 2014 issue of EEnergy Informer is now available. Here is the contents list:

  • Obama’s Carbon Legacy?
  • EPA Unveils Climate Proposal
  • Did FERC Go Too Far On Order 745?
  • Backlash Against Renewables Not Justified On Facts
  • Ohio Puts RPS On Hold, More States To Follow Or Avoid?
  • Disruptive Technologies Are, Well, Disruptive
  • Renewable Score Card: Germany vs. California
  • Exxon: Oil Will Remain Indispensible
  • Taxes And Levies Behind Rising European Electricity Prices
  • Hawaii Regulators To HECO: NOT Business-As-Usual
  • BP: Oil’s Supremacy In Decline

You can request a sample issue of EEnergy Informer here.

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Happy 60th Solar PV

Solar PVs are poised to disrupt utility business model.

This is a sample article from the June 2014 issue of EEnergy Informer.

It is hard to believe, but the first demonstration of a working solar PV took place at the Bell Labs in New Jersey on 25 April 1954. For decades, the technology languished as an interesting curiosity because the initial costs were out of the reach of anyone but scientific laboratories, and later, NASA’s space program were costs posed no constraints.

When will you switch to solar?

As reported in the media on the 60th anniversary of Bell Lab’s first public demonstration, the world’s first practical solar panel would have cost roughly $286 per watt, which means the average rooftop installation, the type commonplace today, would have cost $1.5 million, give or take a little. And that would assume you could get enough panels to cover your roof, since the panels were custom designed and painstakingly hand-made in the Bell Laboratory.

Solar PVs, of course, have come a long way since then, especially during the last decade, with dramatic drop in price and equally dramatic improvements in their performance, longevity, and efficiency. In 2013, an estimated 36.5 GW of new solar PVs were installed, more than new wind capacity of 35.5 GW. That alone is an astonishing feat.

Global PV Module Demand

Solar accounted for 28.7% of new US generation capacity in 2013, and enjoys enormous popularity among consumers everywhere. According to a recent survey by Solar City, 60% of American homeowners say they’re interested in installing solar; 73% say they would welcome clean energy provided by an entity other than their utility.

There are many other developments that make the rapid growth of solar PVs noteworthy, including the claim that there are now more solar installers in Texas than ranchers and cowboys.

The most noteworthy aspect of solar PVs rise, however, is the fact that they are challenging the centralized utility business model, prompting utilities in a number of states to lobby to scale back net energy metering laws and/or raise the costs of installing solar panels as described in the lead two articles. That fact alone, is the most amazing achievement of solar PVs. Happy 60th.

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Distributed Generation Seminar Report from Energy Spectrum

On April 23, Cornwall Energy and Menlo Energy Economics hosted a seminar that examined the impacts that a rise in distributed generation could have on the traditional business models of the incumbent utilities. Dr. Sioshansi was one of the main speakers. Cornwall Energy’s Alison Forbes summarized some of the main contributions to the day for Energy Spectrum magazine. To read her report, click here (PDF).

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New Utilities Article at Renew Economy

Dr. Sioshansi has a new article up on the Australian website, Renew Economy. It is titled “Utility of the future: Future of utilities”. To read it, click here.

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June 2014 EEnergy Informer

The June 2014 issue of EEnergy Informer is now available. Here is the contents list:

  • Utility Of The Future: Future Of Utilities
  • New York Embarks On Bold New Industry Vision
  • LNG: To Export Or Not To Export?
  • European Electricity Prices: High But Not Rising
  • CAISO: In Need Of Flexible Generation
  • Happy 60th Solar PV
  • California Can Have Its Cake And Eat It Too
  • Germany Adjusts Its Renewable Subsidy Scheme
  • What’s Wrong With DR
  • German Renewables Set New Record
  • Who Pays Higher Prices and Why?

You can request a sample issue of EEnergy Informer here.

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Article About US Wind Generation in Energy Spectrum

Dr. Sioshansi has an article in the latest edition of Energy Spectrum magazine. It is titled It is titled “US wind’s growing footprint″. To read it, click here (PDF).

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California Solar Exceeds 4 GW

Doubling every year, accounting for half of US solar capacity.

This is a sample article from the May 2014 issue of EEnergy Informer.

On 8 March, a sunny Saturday, California Independent System Operator (CAISO) reported 4,093 MW of solar capacity on its network, a new record. While not impressive by German standards, it was more than double the record set in June 2013 and more than quadruple the 2012 figure. In case you are not impressed yet, CAISO estimated that 78% of the state’s 5,231 MW of installed solar capacity was producing energy. Moreover, with CAISO demand around 22.6 GW at the time, solar was roughly 18% of demand.

Half of US solar capacity is in sunny California

“This shows that California is making remarkable progress in not only getting new resources approved and connected to the grid, but making meaningful contributions in keeping the lights on as well,” Steve Berberich, president the CAISO, said. “The milestones illustrate that we are well into a new era when clean, renewable energy is shouldering its share of our electricity needs — and that is exciting.”

Mr. Berberich is spot on. The rapid rise of renewables, particularly solar and wind, make for an exciting life at CAISO with their hourly, daily and seasonal variations — which are mostly, but not entirely, predictable. CAISO now has 11.1 GW of wind and solar resources plus a number of other renewables — not counting hydro — totaling roughly 15 GW in its resource mix.

Moving forward, the renewable component is expected to grow, driven largely by the state’s mandatory 33% renewable portfolio standard (RPS) by 2020, and perhaps higher by 2030.

The duck’s belly is getting fatter, the neck more pronounced

“We have seen production drops of over 300 MW in less than 30 minutes,” according to Steve Greenlee, a CAISO spokeman. By 2020, CAISO may experience the need to ramp up and down by as much as 13 GW within 3 hours as illustrated in graph above, the so-called duck curve, due to its resemblance to a duck, where the belly is getting bigger and the neck rising steeper.

If this were not exciting enough, having 15 GW of renewables on a day when peak demand may be as low as 23 GW, such as on 8 March 2014, results in low or, in some cases, negative wholesale prices. Negative wholesale prices, now routinely occurring in Germany, Texas — less so in California — means that baseload thermal generators with little operational flexibility, are willing to pay the grid operator to take their output rather than ramp up and down, which is difficult and costly for them. It also means that renewable generators are willing to pay to the grid operator not to curtail them because they may have contractual agreements or, in some cases, get credits for pumping clean electrons into the network.

As long as the frequency of these episodes is not great and the duration is short, it may be tolerable. But the experience of thermal generators in Germany in the past few years due to depressed wholesale prices have led to massive retirements of plants and write off of assets.

Closing in on 5% cap in California

In case of California, CAISO is introducing an Energy Imbalance Market (EIM), in October 2014 in anticipation of a future where renewables will play an even more pronounced role in the daily operation of the network. EIM is a real-time market for last-minute balancing of supply and demand to non-ISO entities on a pay-per-use basis.

The new market is intended to expand the pool of participants who can offer to buy or sell from beyond their own balancing areas, according to CAISO. The participants need not be in California either. PacifiCorp, an Oregon-based utility, is among the first participants in the EIM. “If the sun blocks the Southern California solar facilities, utilities can tap into the EIM and buy energy from non-ISO generators,” Greenlee explained, “Or if PacifiCorp has an excess of energy, it can offer it in the EIM.”

California has been adding solar capacity at a fast clip doubling its rooftop solar installations from 1 GW in 2012 to 2 GW in 2013. To put this number in perspective, Bernadette Del Chiaro of the California Solar Energy Industries Association (CSEIA), points out that it took over 30 years to build the first 1,000 MW of rooftop solar PV in the state.

“When utility-scale solar projects are added in, California’s total solar power picture well-exceeds 4,000 MW today — nearly twice as much installed capacity as exists at California’s last remaining nuclear power plant, Diablo Canyon,” according to Del Chiaro.

Last year, Southern California Edison Co. (SCE) announced it was shutting down San Onofre Nuclear Generating Station (SONGS), its two remaining operating reactors near San Diego, leaving Pacific Gas & Electric Co.’s (PG&E) 2-unit Diablo Canyon as the last nuclear man standing in the state. A law on the books prohibits building any new nuclear reactors until/unless a solution is found to nuclear waste disposal — a sad American story — which in this case means no nuclear future for California once the existing two eventually retire.

377 MW Ivanpah solar plant, an image to behold

Rooftop solar PVs aside, the Ivanpah Concentrated Solar Power (CSP) plant (photo above), which stated operation in February 2014, added 377 MW of new solar capacity, with a few more utility-scale projects currently under construction, including the 4,400-acre McCoy Solar Energy Project.

With about 5,890 MW of installed wind capacity and more expected, CAISO’s EIM is a welcomed development.

The sun'll come out tomorrow

As noted by The Economist (8 Mar 2014), the US Department of Energy (DOE) wants solar to meet as much as 27% of America’s electricity from the current 1% (graph above). What we’ve seen thus far is the mere tip of the iceberg. With prices continuing to fall, DOE’s goal does not seem outlandish as suggested by the Box above.

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