Big, bold new ideas for utilities?

Recent coverage of 'big ideas' in this space

Phil Carson | Apr 23, 2012

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I wrote about the Rocky Mountain Institute's involvement with utilities and major initiatives around energy efficiency in commercial building space last week. If you missed it, refer back to "The Biggest  Ideas, Outside the Power Industry?"

The RMI worked with Duke Energy on scenario planning to determine its portfolio mix in a carbon-constrained context set by CEO Jim Rogers. The group worked with the owners of the Empire State Building to cut energy use in that globally iconic building by 35 percent. That's big stuff by anyone's standards—almost.

One back channel response from a man who claimed to "deal in facts" and eschew "ad hominem attacks" called the RMI "radical environmentalists." I show mercy by not naming names. I asked what he thought of Duke's CEO Jim Rogers. No response.

It made me realize that many good ideas and new ways of thinking for utilities may never take root when minds are closed shut. I have heard a self-described power industry expert say that the simplest solution to future power needs is to build a lot more coal-fired power plants.

Well, the future is an opt-in environment; if you don't want to go there, you're free to opt-out. The rest of us will be shaping the future through the use of open minds. So here's a brief recap on ideas presented in the past two weeks. You can almost hear some minds springing open and other snapping shut. So be it! The rest of us can have a look at the big ideas.

Smart meters and advanced metering infrastructure have been sold by some utilities, in part, as improving outage management by pinpointing problems and diagnosing them. But in "Managing Expectations on Outages?" Accenture executives pointed out that systems integration issues remain a hurdle for many utilities in this area. Will the fundamental value propositions used to sell the "smart grid" remain elusive long enough to derail public support? That's a big idea, if not the kind we'd like to deal with.

In "New Metrics for Customer Service?" Jamie Wimberly, CEO of DEFG and EcoAlign, which work on customer issues, proposed new metrics for customer satisfaction, which could translate positive customer experiences into revenue rather than the traditional notion that customer service is a cost center only. I should think utilities would be jumping all over the possibilities there.

In "Bulk Energy Storage: A Modest Proposal," the Coalition to Advance Renewable Energy Through Bulk Storage or CAREBS, suggested a multi-point plan for advancing the market for energy storage without onerous mandates for utility procurement. These are ideas well worth exploring, as we've seen in our coverage of California's deliberations on energy storage policy that the industry's "holy grail" remains elusive. I should think a paper like this one would generate some serious discussions in the industry. Storing electricity in an economical and financially beneficial way? Dang, that's one of the biggest ideas around.

Can utilities survive as rooftop, neighborhood and community distributed generation and microgrids flourish? We explored that big idea with John Farrell, who directs the Energy Self-Reliant States and Communities program for the Institute for Local Self-Reliance in "Utilities Facing a Distributed Generation Future?" The grassroots efforts towards energy self-sufficiency, for economic reasons, and utilities and the survival of centralized power—if that ain't a big idea worth considering, I don't know what is.

Finally, along the same lines, in "Power Utilities' Morphing Future" and "Utilities Race  to Reach the Customer" I raised questions around how wisely and swiftly utilities can reassess and redirect their business models while those third-party advancements penetrate their (former?) customers' minds and pocketbooks. Big ideas? I'd think so, but I've been wrong before.

The bottom line is that nearly every utility is pursuing objectives such as energy efficiency, demand response, customer engagement and renewables integration that some 40 years ago might have been mischaracterized as "radical environmentalism." Today, not so much—these are mainstream ideas and the only debate is how best to implement them.

So if you're a stickler for "facts," welcome to reality. These changes aren't being forced on utilities by third parties; they're being embraced by the leadership of the power industry.

But, like I said, it's an opt-in future. Join us if you like. Or become a living fossil. Your choice.

Phil Carson
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com
303-228-4757

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Comments

Not all markets are utilities

There are some electrical markets in which the generation is all competitive--the utilities do not own generation assets.  In the ERCOT market, we are facing a shortage of reserve margin because the federal PTC and cash grant programs skewed the market badly.  The result has been a lack of investment in newer, cleaner, and more efficient generation to replace older, dirtier, and less efficient facilities because subsidized wind in particular has upset the econonic forces in the market.  RESs and RPSs have the same effects of slanting the market.  Combine the planned EPA regulations on CO2 emissions and the difficultly of permitting nuclear and we will have a situation in which virtually all new generation is either natural gas or "renewable" which hardly diversifies the technology mix.  Throw in the RES/RPS and one is forced to renewable, only one had  better build some natural gas plants to provide backup or one will have to tolerate one of two things:  1) Keeping older, dirtier, less efficient plants operational as backup power to support the grid, or 2) Tolerating less reliable electricity supply.  I know, I know--storage; but, storage is expensive and exactly how much storage (and additional intermittent generation to charge it) is needed to compensate for times when a high pressure cell settles in an area and the wind does not blow for days or for times when the skies are overcast for days.

Promoting efficient buildings is good.  Combining efficient buildings and distributed combined heat and power can realize overall energy efficiencies in the 80 to 90% range.

 

Empire State Building

Does anyone have the results of the efficiency upgrades at the Empire State Building? All the articles I could find have the projected savings but there are no published results of the actual savings.

Doug

Big Ideas Are Fine

But as Mr. Scritsmer points out, rushing headlong into some of them has been expensive and in some cases, it is not producing the expected results.

I'd like to see a slightly different approach.  Identify promising technologies.  Provide R&D money focused on reducing cost and improving performance using a phased approach that links additional funding to past success.  Forget about mandates, because it's an expensive way to effect market transformation.  This approach requires government to "pick" winners and losers only to the extent private industry doesn't have the appetite for funding risky ideas.  We should be doing this now for storage, photvoltaics, certain kinds of wind turbine components, and solar-thermal technologies. 

Policymakers also need to make sure they get objective input from technical people who know what they're talking about.  California is now in a bit of a panic because efforts to assess the impact of variabile and uncertain wind production were not carried out as soon as the mandates were announced.  Now the California grid operator is concerned that it won't have enough of the right kinds of balancing reserves.  That problem should have been addressed years ago.

Subsidies and incentives are inefficient, both administatively and economically.  I would not favor tax abatements for those who sell energy efficient homes, but I would favor much stricter building codes and a requirement that homes carry an energy efficiency rating before they're put up for sale.

Jack Ellis, Tahoe City, CA

More big ideas

Good stuff, Jack.

I get and largely agree with your approach, but if you impose stricter building codes and demand energy efficiency ratings, a lot of folks are going to scream and cry -- and let them.

I disagree that mandates are always bad. Sometimes a nation of people have to establish standards; the market doesn't always work. (See bailout, Wall Street.)

But the ideas expressed here -- particularly yours on having technical expertise available for policy makers -- are very solid indeed.

Regards, Phil Carson

Mandates

Energy efficiency standards are effectively a mandate, so I'm not unalterably opposed to them, but they have to make sense.  Mandates in the form of renewable portfolio standards might make sense once the cost gap between renewable energy technologies and fossil-fired technologies closes.  In the case of both solar and wind, cost and technology improvements have led to lower costs and better reliability, but I think it's fair to ask whether there was another way to reach the same level of technological maturity and cost performance without throwing money at hardware that was economically obsolete within a short time.

Jack Ellis, Tahoe City, CA

How to deal with natural gas?

"These changes aren't being forced on utilities by third parties; they're being embraced by the leadership of the power industry."

I disagree. The move towards renewables wouldn't be happening without renewable mandates by many states and recent moves by the EPA. Ultimately the utilities don't care because their ratepayers will finance whatever changes are necessary and the regulated utilities will still make their guaranteed profit. Why fight when you can still win by embracing it? Last year Xcel in Colorado got the ratepayers to finance the closing of old coal plants that were getting harder to maintain and replacing them with shiny new efficient plants running cheap natural gas. Sounds like a good deal to me.

You put up a straw dog of someone supporting more coal. Not once did you mention natural gas. It's the cleanest, cheapest fuel these days, and we have plenty of it. While renewables have their niche, so far nobody has come up with a way to use them as our main baseload power. Nobody has a cheap way of dealing with storage. Nobody has demonstrated that depending on fickle solar and wind will give us the 99.99% reliability we have today. Natural gas solves all those problems. It's old, and it's boring, but we know that it works -- cheaper than anything else.

There's lots of talk about the smart grid, but so far these efforts have led to endless discussions of standards and security with little to show for it. Xcel's smart grid pilot in Boulder was a complete failure. No doubt it got bogged down in bureaucratic snafus and politics. But companies like Xcel are going to have to be the leaders in moving us towards a renewable future. This does not bode well. Neither did the government efforts in funding many renewable efforts such as Solyndra and A123. How are we supposed to trust our energy future to government planners when they still haven't picked a big winner?

I'm not against renewables. One day we are going to have to move away from fossil fuels and everybody knows there will be failures along the way. However, while I'm not a power engineer, my background is in engineering, and for something as critical as our power supply nobody should ever advocate jumping head first into such unproven solutions on such a large scale. Rather than make a huge leap into the unknown, why not take it in steps by replacing coal with natural gas? I didn't like the strongarm tactics Xcel used last year in moving from coal to natural gas, but it was a step in the right direction.

       Milton Scritsmier

       Boulder, CO

Straw "man"

Milton,

We appreciate your thoughtful contributions here. Good points.

First, the person suggesting an all-coal future was serious and not a straw man, designed to obscure broader points.

I advocate "the mix," which is coal, natural gas, nuclear, wind, solar, geothermal, etc. As localized needs are met locally, and utilities transition from coal to natural gas and RE, we'll be better off.

Some utility executives indeed are leading the way. Two years ago, many called for a price on carbon emissions as a way to lend more certainty to big investments.

The natural gas option will get more scrutiny. First, right now, hydro-fracking has contributed to both cheap natural gas prices and a whole lotta wastewater that has raised serious issues of disposal. Natural gas has a history of volatile pricing. Any basket you put all your eggs into is bound to get knocked over.

So, to be clear, a mix of sources at utility-scale and energy measures at the home and business level will continue our march towards greater efficiencies and distributed resources  that lessen the burden on each utility.

I have no problem with the public demanding renewable portfolio standards and utilities struggling to meet them. The monolithic structure of the electricity G + T + D is fracturing and that's a good thing.

Regards, Phil Carson

Some of the future is mundane

Phil -

Anyone who knows me, knows I love big ideas. But, the first steps in this future are millions of small ideas. Housing stock lasts an average of 75 years. Much of the housing stock is poorly insulated, and has very inefficient heating and cooling. While the government has offered programs, most require the taxpayer to take it off their taxes, something many people can't do.

We need to start with building codes, creating and "Energy Star" both for new and existing homes. If you want to sell a home is has to be rated. Set the bar high. Lightiing, heating, cooling, and other energy use should be in the mix.

If a home is rated as a "top pick" then remove any sales taxes or other government fees in the transaction to sell the home. If the home is a "bottom pick" then charge a refundable fee of $20,000 to sell the home. If the home is brought up to standard, the owner gets the money. This may sound drastic, but it means the housing stock gets better much faster than it would in history. Homes turn over on a average of every 15 years.

Follow a program of energy star for applicances that drops the bottom 10 percent of the appliances out of the market every 3 years. The government did this with air conditioners once, it needs to be a reoccuring practice.

Similar programs for leasing commercial buildings need to happen.

Reducing demand, without impacting quality of life should be a key part of the equation.

Then the big ideas have time to take hold and grow.

Great idea

Thanks for this notion of how to incentivize EE in the residential market. I hadn't thought of the 75-year life of "housing stock." All I notice is that 1,000 year-old cliff dwellings face south and are warm in winter, while houses built today take almost anything energy related into account.

Differentiate the market and add value in resale to those who invested in EE. Brilliant.

Do you think that Congress is up to the task? (I say that half in jest, half in sorrow.) That's one fixer-upper that needs attention, too.

Regards, Phil Carson