Articles on Breaking Energy

Dr. Sioshansi is a regular contributor to the Breaking Energy website. Here are some recent articles of his that have been posted there:

For a full list of articles by Dr. Sioshansi on Breaking Energy click here.

Posted in Coal, Nuclear, Renewables, Storage | Comments Off

Will EVs Save The Day?

Some are hopeful electrification of transport will improve the industry’s fortunes

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

The power sector in developed parts of the world is confronting falling customer demand due to energy efficiency gains plus the rising penetration of distributed generation, notably from rooftop solar PVs. The net impact is that customers use less while generating more — becoming prosumers in the process.

The evidence in a number of mature economies suggests that demand growth in the power sector may be a thing of the past as demand growth rates continue to shrink over time, approaching zero or even falling in a few places, as happened in Australia (graph below).

Demand falling down under

Such developments makes folks at the Edison Electric Institute (EEI), the lobbying arm of the US investor-owned electric utilities nervous, as it should. The same applies to EEI’s counterparts in Europe, Australia and elsewhere.

The last time demand growth seemed to be approaching saturation levels, air conditioning came to the industry’s rescue. Its wide-spread universal adoption over time gave the industry a big boost, necessitating massive investments in infrastructure not only to generate the energy but also meet the new peak demand created by central air conditioners everywhere.

The added air conditioning load, occasionally called the load from hell due to its extreme peakiness, were tolerated because they were accompanied by lots of kWhrs, vastly adding to the industry’s revenue base. But now in many countries, that load has approached or is approaching saturation levels. With the rising threat of self-generation, what is the industry’s next big savior?

In a recently published report EEI is urging its members to promote electric vehicles (EVs) in particular, and more broadly electrified transportation to stimulate demand for electricity — reversing trends that threaten the long-term viability of the industry.

Without such a strategy, it warns, utilities will continue to face slow growth and stagnant revenues. EEI calls electric transportation a win-win-win-win: It offers the potential to boost demand, offer incumbent players new ways to interact with customers, reduce greenhouse gas emissions while reducing operating costs of utility’s own vehicle fleets through electrification. According to the EEI report:

“The bottom line is that the electric utility industry needs the electrification of the transportation sector to remain viable and sustainable in the long term.”

What demand growth?

The report’s release comes against the background of two ominous and hard to ignore trends:

  • First, continued drop in demand growth, a reality in most advanced economies (graph above); and
  • Second, rapid penetration of solar PVs in a number of key markets further eroding utility demand growth (graph below).

Solar PVs eating into utility demand growth & revenues

According to the EEI report,

“Stagnant growth, rising costs, and a need for even greater infrastructure investment represent major challenges to the utility industry,” adding, ”Today’s electric utilities need a new source of load growth — one that fits within the political, economic and social environment.”

While EVs do not resolve the longer-term revenue erosion problem associated with solar PVs, it lessens the pain. According to OPower, customers with EVs, on average, use nearly 60% more electricity than the average customer, while those who own both a solar PV system and an EV consume roughly the same amount of electricity supplied from the grid as an average customer (graph below).

If you fancy solar panels on the roof, would you consider an EV in the garage?

This means that encouraging solar PV customers to buy an EV will largely offset their excess solar generation — which utilities must currently buy back through net energy metering (NEM) laws, usually at prevailing retail tariffs.

It is a clever idea, especially if consumers were encouraged to buy an EV without installing solar panels. But even when they do invest in solar PVs, customers with EVs remain relatively large net users of electricity, greatly reducing the revenue erosion associated with prosumers.

EVs offer other advantages including their ability to serve as massive batteries when solar generation is at its peak, usually during sunny mid-day hours when many networks experience over-generation. This means that EVs can solve the over-generation problem while charging EV batteries with essentially free and carbon-free electricity for use at later hours, an elegant solution to so many problems. It is hard to argue against EVs even if it sounds self-serving for utility growth mongers.

Posted in Electric Vehicles | Comments Off

Article on Nuclear Costs at EU Energy Policy

Dr. Sioshansi has a new article on the cost of nuclear generation at the EU Energy Policy website. It is titled, “Nuclear Construction: Never On Time, Or Budget”. To read it, click here.

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Article on Solar at Renew Economy

Dr. Sioshansi has a new article on the Renew Economy website. It is titled “With solar and storage, do energy markets need regulation?”. To read it, click here.

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September 2014 EEnergy Informer

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

  • California Examines Role Of Distribution In Evolving Market
  • Solar On The Rise
  • Why Nuclear Cost Overruns Are The Norm
  • Nuclear’s Global Fortune In Decline
  • Stalled In 2013, US Wind Poised To Resume Growth
  • Will EVs Save The Day For Power Business
  • Are Renewables Even More Expensive Than Thought?
  • Morgan Stanley Bullish On Storage
  • Germany Sets New Renewable Record
  • Fuel Poverty Or Dirty Coal: Are Those The Only Options?
  • Would Consumers Pay For Higher Reliability?
  • Spain’s Renewable Subsidies: The Beginning Of The End?

You can request a sample issue of EEnergy Informer here.

Posted in EEnergy Informer, TOC | Comments Off

Article on the “War on Coal”

Dr. Sioshansi has a new article up on the Renew Economy website. It is titled, “War on coal – already lost”. To read it, click here.

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New Book on Distributed Generation

Distributed Generation and its Implications for the Utility Industry Dr. Sioshansi’s latest book, Distributed Generation and its Implications for the Utility Industry, is now available from Elsevier. For more details, including a complete contents list and a special price, click here.

Posted in Books, Distributed Generation, Grid | Comments Off

August 2014 EEnergy Informer

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

  • Ignoring Climate Change Is Risky Business
  • War On Coal – Already Lost
  • Regulators Ask Simple Questions, Get Complicated Answers
  • Germany To Introduce Capacity Payment Scheme
  • Nuclear Construction: Never On Time, Or Budget
  • Renewables Breaking New Records
  • Australia’s Falling Demand Makes Solar Uptake More Noticeable
  • Distributed Generation Calls For New Business Model
  • Emerging Energy Cloud

You can request a sample issue of EEnergy Informer here.

Posted in EEnergy Informer, TOC | Comments Off

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

Posted in California, Europe, Renewables | Comments Off

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).

Posted in Retail | Comments Off