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Distributed Generation

ACEEE: No Utility Death Spiral, But…

ACEEE: No Utility Death Spiral, But…

written by Elisa Wood

The much-hyped utility death spiral may be just that – much hyped. Still, the patient better make some changes to keep up good health.

That’s the message in “The Future of the Utility Industry and the Role of Energy Efficiency,” a new report by the American Council for an Energy-Efficient Economy.

The death spiral refers to a phenomenon that occurs when utilities lose sales because of declining demand. This is now occurring as energy efficiency and distributed generation gain traction on the grid.  As the theory goes, utilities will need to raise rates to make up for lost revenue and cover the cost of new infrastructure. This will cause more customers to buy less energy, eventually sending the utility into an economic tailspin.

But the numbers don’t support this dire forecast, says the report by Steven Nadel and Garrett Herndon. Even in a worst-case scenario calculated by ACEEE – a 10 percent drop in energy use from 2013-2040 – the industry would not experience a death spiral.

Still, this would represent a “very significant” decline for an industry that has historically relied on load growth to fuel profits, the report said.

“Our key finding is that a utility industry with substantially increasing sales is unlikely, but a death spiral is also unlikely,” said the report.

To keep utilities healthy and service strong,  the industry and regulators need to rethink the best ways to earn a return on investments. What might these be?

After examining more than 60 reports and interviewing about a dozen industry experts, ACEEE offers as vision of how to prepare utilities for what is likely to be a bumpy transition to a new mode of operation.

“Our report recommends that utilities offer optional energy-related services to their customers, including energy efficiency and technical help and financing for larger customers installing and operating high-efficiency combined heat and power systems,” Nadel said in a recent blog about the report. “Such efforts can contribute to utility profits, reduce customer bills (since consumption is lower) and also provide services that customers value, positioning the utilities to offer additional services.”

The report also identifies what not to do. If you’re in a hole, don’t dig deeper, Nadel said.

“If sales are level or declining, then utilities and regulators need to be careful of investing too much in new generation, transmission and distribution,” he wrote.

The report offers some optimism for an industry that has been mired in worry about the future. Even as demand for their product falls, utilities can still earn a profit, customers can still enjoy reliable service at reasonable cost, and the environment can benefit – if utilities and regulators get the rules right now, says the ACEEE report.

This article is published under a cross licensing agreement with EnergyEfficiencyMarkets.com



June 17, 2014 0 comment
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California PUC Kicks off Big Debate on the Future of Net Metering

California PUC Kicks off Big Debate on the Future of Net Metering

written by The Vote Solar Initiative

The future of rooftop solar in California was front and center this week at the California PUC’s first workshop on the design of the expanded net metering program. Following a strong recent decision keeping the rules stable for existing net metering customers for at least 20 years, the CPUC must next decide what the net metering rules will be for customers who install onsite renewable generation after the sunsetting of today’s net metering program, ie. after about July 2017. More than 60 people packed the hearing room for the workshop, including clean energy advocates, utility representatives, groups representing schools and other large customers that have gone solar, and ratepayer advocates.

First on the agenda, Commission staff asked for input on the ‘guiding principles’ to be used when designing the expanded net metering program (see below for our proposed guiding principles). Next, CPUC Energy Division staff discussed plans to develop a public spreadsheet tool by the end of this year that will help quantify the costs and benefits of various successor program structures. Since the Commission is also set to approve changes to residential rate design by spring 2015, assessing the costs and benefits of various program designs will be no small task, because the ratepayer impacts of net metering flow directly from the structure of underlying rates.

The reality is, no one – including the big utilities that argue so strenuously against the current net metering rules – has provided any real evidence that our current net metering program is anything other than a fair way to value rooftop solar and enable ordinary Californians to control their own energy future and help tackle our climate challenge. California is a solar leader due in large part to net metering’s success as a simple, predictable way to compensate solar customers for the valuable local power they feed back onto the grid — and we are all reaping the benefits of that success via cleaner air, local job growth and climate progress. No other method for compensating rooftop solar customers has achieved anywhere near that kind of real-world success in the U.S.

We think it’s smart that CPUC has kicked off public discussion on the future of net metering early, well in advance of its decision deadline of December 2015. But we also think the Commission must have strong evidence that something is broken before it makes big changes to a  program that has made solar a classic California success story.  Stay tuned as this critically important policy discussion continues to unfold. In the meantime, we leave you with . . .

Vote Solar’s Guiding Principles for an Expanded Net Metering Program in California:
1)      Protect customers’ fundamental right to use as much or as little energy behind the meter as they choose, including reductions in their demand from the grid using renewable self-generation and other clean distributed resources. Only customer generation exported to the grid is relevant for the successor tariff.

2)      Keep compensation structures simple, stable and predictable over the long-term so that solar customers, developers and investors can reasonably predict their return on investment.

3)      Encourage customer adoption of storage and other customer-side innovations that improve grid functionality and balance supply with demand.

4)      Minimize customers’ exposure to stranded assets. Utilities must plan for investments in the grid properly taking into account likely future growth in renewable behind-the-meter generation, storage, energy efficiency and other distributed resources. If a utility does not appropriately account for the benefits associated with distributed generation and other distributed resources, and the result is partially or fully stranded assets, then shareholders should bear the cost, not ratepayers.

5)       Ensure that customer-sited renewable distributed generation continues to grow sustainably, as required by AB 327. Statutory language states that the market for distributed generation must be uncapped after July 1, 2017, and implies that the installation rate should be similar to or faster than what we see today. In order to achieve the state’s sustainability goal of 80% reductions in greenhouse gas emissions from 1990 levels by 2050, studies show substantial increases in customer-sited and other renewable generation are likely to be needed in excess of current goals, in addition to electrification of the majority of the transportation sector.

6)      Ensure that the total benefits and costs of the tariff to all customers are approximately equal, as required by AB 327. Put another way, customer generators must receive fair compensation for the benefits of their exports. Updated analysis is needed to determine if benefits and costs will be approximately equal, assuming revised rates and including societal as well as grid benefits, under the current NEM tariff. If the updated study finds costs and benefits are approximately equal, no major policy change is warranted at this time.

7)       Encourage growth in customer-sited renewable distributed generation among disadvantaged residential customers, as required by AB 327.



April 25, 2014 0 comment
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Time to Celebrate! Ten Times More Solar for New York

Time to Celebrate! Ten Times More Solar for New York

written by The Vote Solar Initiative

New York State regulators just approved a plan to extend Governor Cuomo’s successful NY-Sun Initiative solar program through 2023. This historic clean energy commitment will result in ten times more affordable solar up and down the state. In other words: it’s time to solar-brate!

Today’s decision is the result of more than five years of blood, sweat and tears from our team, our members, and our strong coalition of environmental, consumer and business groups. Together we have sent tens of thousands of emails urging policymakers to establish a big, bold solar program for New York. We’ve channeled New York’s support for solar through Solar Job Days from Buffalo to Long Island, a Times Square photo contest, and one meme-worthy ‘solar spill’ billboard. Even Actor Mark Ruffalo took a break from playing a big, green superhero to speak up for the state’s big and green solar opportunity.

We are tremendously grateful to all of the New York solar supporters whose voices and actions got us to this win – and especially to Governor Cuomo who turned that support into action with his NY-Sun leadership.

Increased investment in local solar energy is already helping to build a clean, safe and more resilient energy supply throughout New York. Since Governor Cuomo launched the NY-Sun Initiative in 2012, solar energy development has surged bringing with it quality jobs, cleaner air, and valuable distributed generation for a stronger grid. NY-Sun has resulted in almost 300 megawatts (MW) of solar capacity, more than was installed in the entire decade prior to the program. According to The Solar Foundation, the growing solar industry now employs 5,000 New Yorkers, ranking the state 5th in the nation for solar job creation.

And those economic benefits don’t stop with the solar industry itself. Solar is giving New York families, schools and businesses control over rising electricity costs like never before. Take the case of GAL Manufacturing, which builds elevator parts at their Bronx factory. Thanks to NY-Sun, they now use solar to help power their operations. If you go to a game at nearby Yankee stadium, keep an eye out for their impressive 988 panel solar array. The 100-year old business has been part of the New York City community for generations. In a Journal-News op-ed Vice President Paul Seifried said, ”We’re proud to continue that tradition by being good stewards of the community and reducing pollution — but we went solar because it made good business sense.” Solar is reducing the company’s electricity bills to the tune of $50,000 each year, savings that allow them to stay, grow and create manufacturing jobs right in New York.

Originally launched as a two-year pilot program, NY-Sun has quickly delivered on its promise of driving solar industry growth and making solar more affordable. Extending the successful program through 2023 means that many more New York energy consumers like GAL will be able to go solar.

The expected 3,000 megawatts of new solar capacity will be enough to power nearly 500,000 New York homes and cut greenhouse gas emissions by 2.3 million tons annually. Private investment in solar at this scale reduces the need for utilities to build expensive, polluting power plants and transmission infrastructure, which can help keep rates low for all New Yorkers. The plan’s long-term horizon provides invaluable policy certainty so that industry and consumers can invest with confidence in the state’s solar market over the coming years. By keeping energy dollars invested in New York communities, we calculate that the program will spur $8.3 billion dollars in local economic activity and support 10,000 local solar jobs. And its smart design puts the local industry on a growth path to provide New Yorkers with affordable, competitive solar free of direct state incentives. In other words, today is a big day for New York solar!

As Paul and anyone else in business will tell you, “certainty creates confidence and confidence creates the opportunity for growth.” We thank Governor Cuomo, NYSERDA and the PSC for giving New York solar that opportunity to shine.



April 24, 2014 3 comments
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Xcel Looks Out for Number One, Tries to Stifle Public Participation

written by Walter Wang

Sometimes your opponents make your case even better than you can.

Vote Solar has intervened in a regulatory proceeding in Colorado to make sure that owners of solar systems get fair credit for their generation. We were concerned that the utility, Public Service Company of Colorado, and Xcel company, would use the proceeding to try to

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February 20, 2014 0 comment
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Distributed Generation Means Trying Times for Investor-Owned Utilities

written by Walter Wang

Here’s a good article that discusses a few different vicious cycles in which the investor-owned utilities (IOUs) find themselves. As more people install solar (or whatever) on their properties, the infrastructure by which power is generated, transmitted, and distributed must be amortized over a smaller base,

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January 1, 2014 0 comment
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Reframing Our Utilities’ Mission Statement

written by Walter Wang

I have to admit that tension really is brewing between the power utilities and the solar industry – at least the part of it that promotes distributed (e.g., rooftop) generation (DG). Yet it’s hard for me to understand all this bad blood. The utilities are doing exactly what we asked them to do: generate and distribute

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September 4, 2013 0 comment
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Surviving Sub One-Percent Growth — The Choices Facing the Utilities

written by Walter Wang

The Great Recession ended in 2009. The economic recovery from the recession has been anemic at best. Some have even argued that there has been no recovery.

This is particularly true for electric utilities. Some 41 months later, electric sales have not bounced back to

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August 2, 2013 2 comments
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Growth in Renewable Energy to Change Utility Business Model?

written by Walter Wang

The solar PV growth curves illustrate the rapid expansion in the deployment of this form for distributed generation (DG). The only conclusion one can draw from looking at these graphs is that, after decades of customers’ putting their toes in the water, they’ve begun to take the plunge. Solar has arrived as a mainstream force, dramatically reshaping the way we

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May 28, 2013 1 comment
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Microgrids: Coming or No?

written by Walter Wang

You know that experience, when you buy a new car, and suddenly you see the model everywhere? Since Superstorm Sandy I’ve had the equivalent experience with the term ‘microgrid.’

Policymakers and thought leaders in the US Northeast started talking microgrid in earnest shortly

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May 6, 2013 4 comments
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Duke Energy Addresses Blueprints for Greater Distributed Generation

written by Walter Wang

Advanced meters are the most visible component of recent smart grid deployments, dominating much public and media attention. However, industry members recognize even greater opportunities and imperatives for modernizing distribution infrastructure and operations further up the line. Distribution automation (DA) is a hot topic in the utility industry, encompassing

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February 7, 2013 0 comment
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Using Renewables to Serve Local Capacity Requirements

written by Walter Wang

On January 24, the California Public Utitlies Commission will vote on an important precedent for using renewables to enhance grid reliability.

Grid reliability requires that there be a certain amount of local generation–known in wonkspeak as ‘local capacity requirements’, or LCR.

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January 21, 2013 0 comment
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Los Angeles Approves Launch of Feed-In Tariff

written by Walter Wang

We’re thrilled to see that the LA Department of Water and Power (LADWP) adopted a Feed-In Tariff (FIT) program last week.

We’d like to congratulate all the folks who, after three years of hard work testifying and developing the research and policy, made this victory possible (looking at you, LABC, Environment California, Sierra Club, Global Green, and many many more).

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January 14, 2013 0 comment
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Distributed Generation Holds Promise, Faces Challenges

written by Walter Wang

Those of us who maintain optimism for a future than includes sustainable practices in energy generation place a great deal of hope in “distributed generation” – the concept in which the model of buying electricity from huge utilities becomes increasingly irrelevant, and in which individual users generate more – or all — of their own. Such a schema has many obvious

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August 27, 2012 0 comment
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Too Good To Fail: What’s Wrong With the Electric Grid?

written by Walter Wang

The temperature is 100 degrees and we have no air conditioning, no running water, no telephone and no Internet. It’s been 60 hours since our household lost electricity because of the super derecho, a rare surprise storm that swept ten US states and the nation’s capital on June 29.

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July 6, 2012 3 comments
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