Residential Solar isn’t the Enemy of Electric Utilities

Utilities shouldn't fight distributed solar, they should own it

Electric utilities are in big trouble. Investment analysts and industry executives are both using terms like "utility death spiral" and "failing utility business model" to describe how energy generated by residential solar units is threatening the future existence of grid-based electrical service.

Utilities are fighting back. They're trying to eliminate government incentives that currently make installing residential solar units more affordable. It's a very dumb and short-sighted response.
When a combination of technology and consumer preferences made cell phones another way to get in touch, major landline-owning telephone companies didn't fight the trend. They got into the cell phone business. Today, when solar cell technology is developing so rapidly, its costs dropping so dramatically, and consumer affection for solar so obvious, electric utilities should go the same route. Not fight a solar future. Take steps to get a big piece of that future.



Properly viewed, residential solar isn't a dangerous competitor of electric utilities. It's a natural adjunct to their present electricity supply operations. Getting involved here guarantees that no matter the mix of electrical generation in years to come, centrally produced or residential sourced (i.e. distributed), utilities will profit.

Changing the utility business model from totally grid-based to a grid and distributed solar-based model is the obvious solution to the industry's present market challenges. Indeed, it's really the only long-term solution.
How might an electric utility get into the residential solar business? There's no one answer to this question. No template at present to follow. But actually manufacturing and installing solar units would certainly not be required. Rather, deals of one sort or another would likely be cut with companies already in the field.
The advantages an electric utility would enjoy in any such arrangement are considerable. It already has direct and long-standing contacts with all potential solar customers via the electric service it currently provides. It can fund its residential solar involvement at very advantageous terms because it is able to borrow at near zero interest rates. It can take a long-term view on realizing profits, unlike many companies that must perform better every quarter.

Environmentalists should also cheer a move by utilities into the residential solar market. Utilities have the financial and marketing clout to hasten greatly acceptance and implementation of solar. And there's the political factor as well. It's far better to have a very powerful ally with well-established political contacts backing distributed solar power for the sake of its own profits, than a very powerful enemy fighting solar at every turn.

While utilities and environmentalists would both benefit from the former's move into residential solar, there would be one big loser here. The fossil fuel industry. The more solar that generates electricity in homes, the less utilities will have to spend burning fossil fuels to feed their grids.
Residential solar isn't the enemy of electric utilities. Acting in short-sighed ways that only benefit fossil fuel suppliers is the real threat to future utility profits.

Source: Renew Economy

German Renewable Energy Act Reform is not a “Feed-in Tariff 2.0”

The German government has presented a first draft to reform the Renewable Energy Act, cornerstone of Germany's energy transition. Anna Leidreiter explains the shortcomings.

Protests last winter against the looming EEG reform – main criticism: Energy democrary is to be pushed back in favor of big industry. (Photo by Jakob Huber/Campact, CC BY-NC 2.0)

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On April 8th, the German cabinet approved the Renewable Energy Act Reform. The reform, referred to by some as the Feed-in Tariff 2.0 (FiT 2.0), was necessary: In the past few years, Feed-in Tariffs successfully boosted renewable energy deployment in the country. This sparked public and policy discussions around the grid development, market integration and financial instruments that would finally enable Germany to reach its policy target of 80% renewable electricity by 2050.
Unfortunately, the bill passed fails to address any of these questions. Instead, it strengthens the corporations and energy utilities that have failed to integrate renewables into their business model in the past decade. The following analysis shows why the reform cannot be considered FiT 2.0.

A brief recap of history
In 2000, Germany was one of the first countries to implement a Feed-in Tariff law (Renewable Energy Source Act) – thus becoming a role model for the world. Since then, about 100 countries, states and regions have copied the best policy that created an industrial revolution for renewable energies (RE). In Germany, Feed-in Tariffs have resulted in a more than 25% share of renewable electricity, technological innovation, thousands of tonnes of CO₂ savings, 370,000 jobs as well as high revenues for communities and regions. About 20 million Germans today live in so-called 100% RE regions (in total about 140 country-wide) that aim to supply 100% of their electricity and often also heat demand with renewables. These regions create local value by saving high costs for energy imports, creating local jobs and generating tax income. The FiT law leveraged private investment: About 888 energy cooperatives as well as private investors, farmers, banks and enterprises own about 95% of total installed RE capacity. The "big four" power providers own the other 5%.

Reform brings end to success story

Given the long success of renewables in Germany, it is not surprising that the world now expects the German government to design the policy framework for an infrastructure of permanent, safe and sustainable energy. Unfortunately, with this reform the German government ends its success story by putting the energy system back into the hands of those who have a deep interest in remaining with conventional, dirty fossil energy sources. The new policy creates deficits for communities and regions and protects industry interests. In fact, the reform is a collection of compromises that shields fossil autocracy and large energy utilities at the expense of energy consumers, citizen cooperatives and the renewable energy sector with its 370,000 employees. It threatens climate protection and planetary habitability – all for short-term profits.

While international experts last week again called for a fast phase out from fossil resources, the German government with its reform is slowing the rapid expansion of renewable power, as it forces investors to take higher risks when investing in a future-just energy system. The new bill protects industry from bearing the brunt of future cost rises by forcing households and middle-class enterprises to pay more. This reform clearly has the handwriting of the industry and proves again how corporations govern our lives.

A quick summary of the key reform elements:

Cap for wind and sun energyThe bill caps the amount of renewable electricity that qualifies for the FIT depending on the technology: on-shore wind 2.5 GW per year, photovoltaic 2.5 GW per year, biomass about 1 GW per year and offshore wind 6.5 GW to 2020. This is an attempt by the government to centralise and control the Energiewende – a transition that was successful precisely because of its decentralised and community-driven approach.


Exemptions for energy intensive industryThe reform continues to shield major industrial users of power from a renewable energy surcharge, which adds currently 6.3 euro cents per kilowatt-hour to the electricity bill of consumers. Exemptions for energy intensive industry are the main driver of the increasing electricity prices in Germany. Changing this was the key intention of the reform process and one of the main election promises of both governmental parties CDU and SPD. However, despite the fact that the European Commission would stop the exemptions due to European competition regulation, the German Energy Minister has helped ensure that 1,600 industry users are likely to continue to be exempt, saving them some 5.1 billion euros per year.


Taxing self-consumption of solar PVThe reform applies a Feed-in Tariff (FiT) surcharge to direct consumption. So far, owners of solar photovoltaic (PV) systems who use the electricity they themselves generate did not pay the FiT surcharge, which resulted in new business models for energy cooperatives and regional energy providers. This will now change for all operators of systems larger than 10 kW (existing installations are excluded). The industry has again successfully bargained an exception as the reform notes that energy intensive industries that generate their own electricity will pay only 15% of the surcharge, even if they are powered by gas or coal plants. Experts and associations have already announced that they will take legal action against this. Applying the FiT surcharge to direct consumption will destroy decentralised and cooperative-based business models.
Direct marketing
While the old Renewable Energy Act provided investment security by ensuring a fixed Feed-in Tariff for 20 years, the government now implements mandatory direct marketing. The reform foresees the mandatory direct marketing first for renewable energy plants with a capacity over 500 kW (from August 2014 onwards). From 2016 onward, this will also apply to installations over 250 kW and from 2017 installations over 100kW. Hence, owners are forced into a marketing system with immense bureaucracy and increased risk for them. It excludes energy cooperatives and private investors from the market – which have hitherto been the backbone of the energy transition.


Quota system instead of Feed-in TariffsThe government foresees a change of the renewable energy policy approach from the successful FiT to a tender or quota system by 2017. Doing so scraps the determining success element – the purchase obligation – which provided guaranteed grid access for renewable energies and thus enabled the uptake of renewables in Germany. Studies and experience from several countries prove that a FiT system results in cheaper electricity than the quota model. Further, due to volatile market and trading prices for certificates, plant operators are affected by a lasting trend of little planning security. This has a major impact on the variety of actors involved in the energy market because energy cooperatives, farmers and individuals do not have the resources to take part in elaborate bureaucratic tendering.


Feed-in Tariff (FiT) surchargeWith the FiT surcharge, consumers pay the difference between the fixed price for renewable energy fed into the grid and the sale of the renewable energy at the energy stock market. As the price of renewable electricity on the stock market decreased, the amount of the FiT surcharge therefore increased. This leads to the paradox of electricity consumers paying more for their electricity through the surcharge added to their bill despite decreasing prices on the stock market. This mechanism was created by former governments and is not addressed in the new Renewable Energy Act reform. The reform, therefore, will be unable to achieve its ultimate goal of cost reduction.


Conclusion
This analysis shows why the Renewable Energy Act Reform is not and does not deserve the term "Feed-in Tariff 2.0 (FiT 2.0)": It does not build on the successes of the best policy of the past but rather ends it. This policy development demonstrates again the shift from public to corporate government which cannot and must not be accepted. The transition to 100% renewable energy is a political decision and an ethical imperative which our government must take up. In times of climate change, energy policy is not about seeking competition between clean and dirty energy sources but about providing a path towards 100% RE. Our government has the moral duty to protect and empower its people – not its corporations. The energy market as designed by the German government is a market that disproportionately robs the 99% and rewards the 1%. It is neither a free market nor a liberal market. It is a 1% market that serves the short-term profit interests of a few.



Source: EnergyTransition.de

New York orders Utilities to focus on Local Generation & Storage

California issued a storage mandate and settled its net metering debate last year. Texas is in the process of overhauling its ancillary services market. Minnesota has set a value-of-solar tariff. But all of that is small potatoes compared to the market transformation for electric distribution utilities that New York just announced.

New York's Governor Andrew Cuomo has asked his public state commission and chairman of energy and finance, Richard Kauffman, to fundamentally shift utility regulation to meet the needs of a more distributed, consumer-focused energy system.

"The existing ratemaking structure falls far short of the pace of technology development that defines many parts of our economy," Audrey Zibelman, chair of the New York Public Service Commission, said in a statement. "By fundamentally restructuring the way utilities and energy companies sell electricity, New York can maximize the utilization of resources, and reduce the need for new infrastructure through expanded demand management, energy efficiency, renewable energy, distributed generation, and energy storage programs."

While most states are grappling with net metering, standby and demand charges, New York's PSC has laid down the gauntlet in a proposal, Reforming the Energy Vision. The report calls for an overhaul of the regulation of the state's distribution utilities to achieve five policy objectives:

• Increasing customer knowledge and providing tools that support effective management of their total energy bill
• Market animation and leverage of ratepayer contributions
• System-wide efficiency
• Fuel and resource diversity
• System reliability and resiliency

The PSC acknowledges that the current ratemaking procedure simply doesn't work and that the distribution system is not equipped for the changes coming to the energy market. New York is already a deregulated market in which distribution is separated from generation and there is retail choice for electricity. Although that's a step beyond many states, it is hardly enough for what's coming in the market.

"One key outcome of the transformation is to address the Commission's stated objective to make energy efficiency and other distributed resources a primary tool in the planning and operation of an interconnected modernized power grid," the report states.
The PSC is the first to admit that the system is broken. The bulk power system is oversized to meet the demand of the few hours of peak demand every year; the transmission and distribution system has annual losses of nearly 9 percent; the commodity markets are inefficient; and there isn't adequate storage for electricity.

To rectify these and other issues in the market, the PSC is calling for utilities to become Distributed System Platform Providers. The DSPPs will upgrade the distribution network and then "create markets, tariffs and operational systems to enable behind-the-meter resource providers to monetize products and services." They will essentially become the purchaser and aggregator for distributed resources.
"It's time for the regulatory system to catch up with advances in clean energy, and New York is one of the first states to act. New York's re-evaluation of the utility business model will spur a future in which solar and wind power and energy efficiency can deliver grid resilience and reduce pollution," Cheryl Roberto, associate VP of clean energy for Environmental Defense Fund, said in a statement. "This is a move of national significance and should reverberate across the country."

Other key stakeholders in New York agree. A working group that came out of a recent Advanced Energy Economy forum, which includes Consolidated Edison, PSEG Long Island and New York Power Authority, concluded that a more competitive business model is needed, one in which benefits are redefined to capture consumer value, system resiliency and efficiency.
The first task for the DSPPs will be to eliminate peak, which the PSC has identified the best example of the value of modernizing the grid and its markets. Rather than set a storage mandate as California has, DSPPs will identify economic applications of storage and likely move toward time-based rates.

Ratemaking for the Future

As distribution utilities shift toward functioning as managers of distributed energy resources, they will need new ways to make money. The second part of the reformation will be an overhaul of the traditional rate of return using an annual rate case cycle, with a new focus on long-term (up to eight years) performance-based rates emphasizing results for customers and system efficiency.
The new rates could affect not just distribution system efficiency, but efficiencies within the utility. "The most effective outcome paradigm may be one that creates a network of incentives with an enterprise-wide effect," the PSC report states. "That is, any given employee or mission within the enterprise should be linked in some way to an outcome that, if achieved, will result in improved earnings."
New rates will likely be based much more on time, flexibility and controllability. Instead of flat rates, there will need to be "a greater unbundling" of products and services. The PSC is aware that the new results-based approach cannot come at the expense of the obligation to deliver reliable and affordable power, a challenge that is acknowledged in the report and will have to be addressed in the months ahead.

One model that New York state is looking at is the United Kingdom, where the regulatory body changed its ratemaking policies to encourage innovation and manage more decentralized energy assets.
The PSC hopes to move quickly, but even lightning speed for a state regulatory body could still prove to be relatively slow. The PSC expects to have "policy determination on issues relating to regulatory design and ratemaking in the first quarter of 2015," with the first status report coming this summer.
The gap between policy determination and implementation is unclear. The PSC states that "a reasonable and realistic sequence will be essential," and, among other factors, will depend on standardization of communications equipment to control distributed energy resources. Zibelman's role at the helm of the PSC could make a difference, as her experience in the private sector could help her accomplish real reform.

If the major electric utilities, such as NYPA, Con Ed and PSEG Long Island (formerly LIPA), are really on board, it could be one of the fastest-moving regulatory proceedings any state commission has ever seen for an overhaul of this magnitude. But even if stakeholders align, it will be a challenge to move the process forward as fast as innovation is happening at the grid edge. The stakes are huge, however, and the outcome could have impacts well beyond the Empire State borders.

"New York is now at the forefront of states looking to find answers to a rapidly evolving energy industry," Rory Christian, director of New York Clean Energy at EDF, said in a statement. "To be clear, this proceeding is not a destination, but a significant step toward a future where people have the option to play a greater role in how they use energy."

Source: ReNew Economy & GreenTech Media

Listen Up: Let's Talk Solar Grid Storage

To many of us old timers, the battery storage industry looks a lot like the solar industry did ten years ago. Energy storage on the grid depends on future battery cost reductions, requires sophisticated management electronics, tricky packaging, favorable government policies, coordination with utility rates and appropriate financing. Not surprisingly, we're seeing successful solar entrepreneurs from the last decade applying their finely-honed skills and tactics to build new energy storage businesses.

Listen To Podcast

The synergies between solar and battery storage are obvious, but problems still exist in getting the economics to pencil out for customers. As in the solar industry, clever system designs and financing strategies can go a long way to improve customer economics and generate real sales. Although we'd like to see a solar array on every residential roof and two battery stacks in every garage, what is more likely to happen is that commercial customers will be the early adopters of combined solar and energy storage systems.


Tom Leyden, CEO of Solar Grid Storage, is building a business at the nexus of solar and battery storage. They have developed an elegantly packaged combination of battery storage, inverters and rooftop solar. Just as importantly, they offer flexible financing packages that effectively combine storage and solar as a service — with the economic benefits accruing both from grid support services as well as customer peak shaving and backup power. Please join me on this week's Energy Show on Renewable Energy World as Tom Leyden explains the current opportunities and customer demand for combined solar and grid storage systems.


Find more episodes of The Energy Show here.




About The Energy Show

As energy costs consume more and more of our hard-earned dollars, we as consumers really start to pay attention. But we don't have to resign ourselves to $5/gallon gas prices, $200/month electric bills and $500 heating bills. There are literally hundreds of products, tricks and techniques that we can use to dramatically reduce these costs — very affordably.

The Energy Show on Renewable Energy World is a weekly 20-minute podcast that provides tips and advice to reduce your home and business energy consumption. Every week we'll cover topics that will help cut your energy bill, explain new products and technologies in plain English, and cut through the hype so that you can make smart and cost-effective energy choices.

About Your Host

Barry Cinnamon is a long-time advocate of renewable energy and is a widely recognized solar power expert. In 2001 he founded Akeena Solar — which grew to become the largest national residential solar installer by the middle of the last decade with over 10,000 rooftop customers coast to coast. He partnered with Westinghouse to create Westinghouse Solar in 2010, and sold the company in 2012.

His pioneering work on reducing costs of rooftop solar power systems include Andalay, the first solar panel with integrated racking, grounding and wiring; the first UL listed AC solar panel; and the first fully “plug and play” AC solar panel. His current efforts are focused on reducing the soft costs for solar power systems, which cause system prices in the U.S. to be double those of Germany.

Although Barry may be known for his outspoken work in the solar industry, he has hands-on experience with a wide range of energy saving technologies. He's been doing residential energy audits since the punch card days, developed one of the first ground-source heat pumps in the early ‘80s, and always abides by the Laws of Thermodynamics.


Source: Renewable Energy World

Tesla battery business plan gives energy utilities strife

Elon Musk, the maverick CEO of Tesla Motors Inc., is not to be taken lightly. First, he came up with an elegant electric vehicle that performs as good as it looks, while offering an extended range, something other all-electric vehicles could only talk about. Now, he says, time has arrived to go mainstream, with a version that offers extended range but with a price tag that may appeal to the ordinary folks, not just the rich, who have been his clients up to now.

The biggest obstacle is that there are not enough batteries for Tesla to ramp up production. The second is that today's batteries, when you can find them, are pricey for the amount of energy they store. Now that Tesla feels confident that if it can build more, consumers will buy them, it has decided to get into battery manufacturing business, and not in a haphazard way, but by building what is referred to as a $5 billion mega-factory.



Following the announcement, Mr. Musk, who is worth billions as stocks of his company continue to defy all laws of logic and gravity (graph on page 15), said, "Shifting to greater use of solar and wind power will challenge utility companies." In case his message did not register, he added, the shift will bring, "some amount of strife for the existing utilities, especially for those invested more heavily in fossil fuels."

Speaking before a receptive, if nervous, audience at the California Public Utilities Commission (CPUC), the state's regulator, Musk said Tesla is "working to create stationary battery packs that last long, are super safe and are compact."

His cousin, SolarCity's CEO Lyndon Rive, went even further by predicting that "There is no doubt storage will become cost effective and deliver electricity with storage at night." As if that was not enough to shock and awe, Rive added that utilities in California and elsewhere, who are resisting change, are merely delaying the inevitable.

The "Thought Leaders" session at CPUC, which normally draws 50 attendees or so, filled the largest auditorium and 2 adjacent rooms as hordes of people, no doubt including many job seekers with resumes in hand, flocked to hear Musk, a high-tech celebrity worthy of Hollywood paparazzi.

Musk and Rive, of course, can say what they want and get away with it. Both their companies are on a rapid growth path, pushing new technologies, enjoying increased sales, and facing declining costs. The utility industry, by contrast, is facing tepid or no growth, for the most part relies on technologies that have been around for decades if not longer, and facing increasing costs, especially in upgrading the aging network, the grid. While the average age of Tesla and SolarCity's workforce is under 30, utilities are mostly dealing with an aging workforce ready for retirement. Utility stocks are stable at best, if the companies are well-managed while Tesla's stocks keep on rising. The contrast between the old and the new is inescapable.

As CEO of a major solar PV company, Rive was critical of utilities, who are "taking months to connect residential solar panels to their systems" accusing them of playing games, "because they profit from the current system."

"When you have a game- changing technology, those in the game don't want to change," Rive said. "They like the existing game, the sole source, cost-plus model."
Rive noted that it now takes 8 months for utilities in California to connect a SolarCity PV customer with an energy storage system to the grid.

As reported in the February 2014 issue of this newsletter, Hawaiian Electric Company (HECO) placed a temporary moratorium on new solar PV connections while trying to figure out how to deal with the surge of new installations.

Tesla's new battery factory, if all goes according to plan, could make it easier for customers to store their excess generation during sunny periods for later use, whether in their Tesla cars or in a storage device in the garage. Musk, who is SolarCity's chairman and the largest shareholder, has been offering Tesla batteries to selected rooftop solar customers in parts of California and New England. Once battery production soars and prices plunge, as expected, more PV customers can be fitted with storage.
Tesla's stock shot to $352.54 on 19 March 2014.



Source: Renew Economy

SolarCity Freezes Energy Storage Program as Utilities Resist Grid Connections

SAN FRANCISCO -- SolarCity Corp., the biggest developer of U.S. rooftop solar panels, halted efforts to install and connect systems that include batteries for power storage because California's utilities are reluctant to link them to the electric grid.

About 500 SolarCity customers in the region have agreed to use the systems, and the state's three biggest utilities have connected 12 of them since 2011, said Will Craven, a spokesman for San Mateo, California-based SolarCity.



SolarCity is testing the units with photovoltaic panels to generate power and batteries that retain that energy for use when the sun isn't shining. The combination makes customers less dependent on local utilities. It may be a threat to the business model that's underpinned the power industry for a century.
"We've stopped submitting applications because we've lost faith that these things are actually going to be carried out in any reasonable time," Craven said in a phone interview.
The utilities require a series of applications and fees that Craven said makes the process too onerous. SolarCity has installed a total of 65 of the systems in areas overseen by PG&E Corp., Edison International's Southern California Edison and Sempra Energy's San Diego Gas & Electric.
"The ones we have submitted haven't gone anywhere," he said.
Homeowners with rooftop panels buy less electricity from the grid, and those who use batteries to store power may need to purchase even less.


Utilities Reply
The utilities say they support the use of solar power and new technologies such as batteries that promote energy efficiency. They also note that storage is a relatively new capability and that it will take some time to properly assess how to add it to the grid at fair pricing.
David Eisenhauer, a PG&E spokesman, said it takes about eight to 10 weeks to handle applications and the utility has processed eight of the 20 it has received.
"Because battery installation is such a new technology," he said today in a phone interview. "We're still working to find more efficiencies in processing the applications."
San Diego Gas & Electric said there is "an ambiguity in the existing tariff language" regarding storage and it's working with regulators to determine the appropriate fees, Hanan Eisenman, a spokesman, said in an e-mail today.

Source: Renewable Energy World