The Energy Show

Electricity is a commodity - indistinguishable regardless of the source (all kwh are the same), available from different suppliers and easily transferrable. But like many commodities, the costs of electricity vary depending on the location to which it is delivered.

The cost range for electricity in northern California is fascinating. Utilities pay as low as $0.04/kwh for electricity they generate in centralized solar plants. Many companies are installing rooftop solar systems for the equivalent of $0.06/kwh (less for commercial installations). And the average charge to consumers is $0.20/kwh.

Why such a big range between wholesale generation costs and retail selling price? First, there are a lot of costs involved from generation to retail sales. And second, some electricity business models are much more expensive than others.

Conventional utilities provide three electricity services: generation, transmission and distribution. Here is how utilities break down their rate components to get to a retail rate of $0.20/kwh:

- $0.10/kwh for electricity generation (usually at a central power plant)

- $0.02/kwh for transmission at high voltages over long distances (those tall electric towers)

- $0.08/kwh for local distribution (that local network of substations, transformers and utility poles)

But why are these costs so high when generation costs are $0.04/kwh, and rooftop costs are $0.06/kwh? Mainly because monopoly utilities are not under any competitive pressures. A simple comparison between Investor Owned Utilities (IOU) and Municipally Owned Utilities (MOU) illustrates this point. My local IOU charges an average of $0.218/kwh to homeowners; just 5 miles away the local MOU charges an average of $0.115/kwh. IOUs have much higher cost structures; spend hundreds of millions of dollars lobbying regulatory agencies, legislators and the public about why they need high rates; and get a guaranteed profit of 10%.

I can’t think of a single reason why we cannot transition to a more consumer friendly and less expensive way to generate electricity. Please Listen Up to the Energy Show on Renewable Energy World for more about the artificially high price of electricity, and the future of cost-effective and reliable power generation.

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Rooftop solar is the cheapest way to generate electricity for your home or business. That’s good for you -- but not for your local utility. They lose revenue (selling fewer kwh) and profits (fewer assets on which they generate their guaranteed 10% profit). As a result of this competitive threat, utilities have implemented an organized, national campaign to slow down, and in some cases prevent, more rooftop solar installations.

In almost all other cases of new technology displacing old technology, customers were free to choose the products and services that would benefit them the most. But in this case utilities are a monopoly. In effect, their anti-competitive behavior is sanctioned, and partially constrained only by state public utilities commissions. Utilities and their front groups (such as the Edison Electric Institute) have organized on a national basis, and are spending hundreds of millions of dollars to convince the public, legislators and regulators that rooftop solar is not in the best interests of the pubic and ratepayers.

Their first argument, that rooftop solar is too expensive, has been proven to be false. Just about any homeowner with a sunny roof can generate their own power for less than the utility charges. Their second argument, that the grid can’t handle all the power flowing backwards from rooftops, has never been close to a problem anywhere in the developed world. Moreover, this potential limitation can easily be addressed with new feeder equipment installed at local substations (on which utilities will get their 10% guaranteed profit). Their third argument, that solar shifts costs from ratepayers, has been disproved time and again (most recently in the Brookings Institute Net Metering Meta Study).

Bottom line…it’s all about the bottom line. Should customers get the benefit of cheaper electricity with rooftop solar, or should utilities be allowed to maintain their highly profitable monopoly while charging customers ever more for electricity? A quick comparison between Investor Owned Utilities (IOU) and Municipally Owned Utilities (MOU) shows just how expensive the IOU model is for ratepayers. For more about the specific efforts of utilities to limit customer choice, constrain rooftop solar, and profit at your expense, Listen Up to the Energy Show on Renewable Energy World.

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Just because you have a worry free warranty on your rooftop solar system doesn’t mean things can’t go wrong. Murphy’s Law -- “anything that can go wrong will go wrong” -- still applies. On this week’s Energy Show we will discuss the few real world things that can happen that may affect the performance of your rooftop solar system.

The good news is that as long as your solar panels, inverters and rooftop mounting systems are installed properly there is almost nothing to worry about. Almost all solar panels sold in the U.S. have 25 year warranties, inverters have 12-25 year warranties, and most installers guarantee their workmanship. So besides keeping your panels clean and checking to see that the inverter is operating properly (hint: look for the green LED), you can look forward to 25+ years of clean energy generation.

Nevertheless, I have seen four general types of problems that are not covered by equipment or installer warranties: damage from rooftop pests (squirrels, rats), damage to the glass of the panels (painting, improper cleaning, tree branches), solar panel defects from non-standard or bankrupt solar companies, and overly optimistic savings estimates. For more about the maintenance and operation of your home solar system, Listen Up to this week’s Energy Show on Renewable Energy World.

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We’re in the midst of a bizarre presidential election. And a global energy transition driven by both economics and climate change. So where do Donald Trump and Hillary Clinton stand with their plans for our energy future?

Fortunately, the platforms of both parties were published this July, and are very specific about their respective goals for the U.S.’s energy future. Not surprisingly, the republican platform wants to kill the Clean Power Plan (which calls for the reduction in greenhouse gas emissions by 32% by 2025), use more coal (which the platform arbitrarily characterizes as “clean”), ease nuclear permitting, prevent taxes on carbon, state that the environment is too important to leave to radical environmentalists, and solve environmental problems with human ingenuity and the development of new technology. On the other hand, the democrat platform wants to get 50% of our electricity from clean energy sources in a decade, install half a billion solar panels in four years, generate enough renewable energy to power every home in the country, eliminate tax breaks for fossil fuel companies, and oppose efforts by utilities to limit consumer choices for clean energy deployment.

Hillary Clinton is completely aligned with the democrat’s energy platform; it is apparent that she and her team had influence in writing the platform itself. However, Donald Trump’s energy position is at times very different than that of the republican party; he goes with his gut. As a result, it would not surprise me at all that, if he were to be elected, Trump would turn into a big supporter of solar power.

Pretty much the only thing the Republican and Democrat platforms agree on is that we need new energy technologies -- but we should not play favorites with particular technologies. Except, of course, with their preferred technologies. Nevertheless, regardless of what the politicians say, the economics of energy generation and distribution will ultimately have the biggest impact on the outcome. For more about presidential energy politics and the specific positions of Hillary Clinton and Donald Trump, Listen Up to this week’s Energy Show on Renewable Energy World.

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For over fifteen years I’ve been talking to homeowners who want solar shingles. This is a concept called Building Integrated Photovoltaics, or BIPV. The idea is for the outside of your building -- the part that is exposed to the sun -- to do double duty: roof shingles or coverings that generate electricity, windows that let some light in but also absorb light and generate electricity, or some kind of wall covering that generates electricity. The hope is that money will be saved by combining two product categories (for example, shingles and solar panels), while at the same time improving the aesthetics of the home.

BIPV is a great concept, but very challenging in reality. I’ve seen dozens of BIPV product announcements, done a number of BIPV installations myself, and then observed almost all of these products disappear from the market. In retrospect, there are three reasons that these BIPV products almost always fail to get market traction:

They are more expensive than ordinary solar installations, even considering the avoidance of ordinary building materials,

They are never as reliable as ordinary solar, and

They have a difficult time meeting new safety requirements (arc-fault, rapid shutdown, fire clearances).

Nevertheless, intrepid companies continue to innovate BIPV products. I remain hopeful that someone, someday will find a way to solve these problems. For more about the promises and challenges of Building Integrated Photovoltaics, Listen Up to this week’s Energy Show on Renewable Energy World.

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I don’t normally do book reviews, but I came across a recent book called “Fueling Freedom - Exposing the Mad War on Energy,” by Stephen Moore and Kathleen Hartnett White. From the book’s jacket: “...climate policies are pushing a grand-scale shift to unreliable, impractical, incredibly expensive, and far less efficient energy sources.” Hmm, really?

What makes this book even more timely is that both Mr. Moore and Ms. White have just been named to Donald Trump’s economic advisor team. Media Matters recently commented that

Moore and Kudlow have long histories of playing fast and loose with the facts while making outlandish and incorrect claims about the economy. After reading this book, I couldn’t agree more with this characterization.

Understanding the premise, data and conclusions of “Fueling Freedom” -- and similar seemingly authoritative but deceptive books -- are important for people working hard to transition to future energy sources. So Listen Up to the Energy Show on Renewable Energy World to hear my perspective and rebuttal of these specious arguments for past polluting power plants.

We’re witnessing the transformation of electricity generation, storage and usage of electricity in buildings. The “home of the future” will have an appliance that combines an inverter, rooftop solar, battery storage and an EV charger - linked together with easy to use management software.

In August, Tesla implied they are developing such a product. But other companies have been working on similar complete systems -- as well as individual components -- for years. SolarEdge, Enphase and others for inverters; dozens of solar module manufacturers; multinationals such as GE, Siemens and Schneider for chargers and home electronics; and thousands of software entrepreneurs who hope to create an “app for that.”

These developments are being driven by new technology in solar, battery storage and power electronics. From a consumer’s “demand” perspective, it is becoming increasingly cost effective to generate and store one’s own electricity. And from a utility’s “supply” perspective, the realization is dawning that they cannot maintain their “we generate it so you must buy it” business model.

The challenge is to build a profitable business around this future building energy reality. Can one company dominate the commodity manufacturing of solar panels and batteries to create a complete “home energy appliance” product offering? Or will multiple companies collaborate as they provide pieces of this appliance, integrated by one or more suppliers of electronics and software? For more about the Next Big Energy Appliance, please Listen Up to the Energy Show on Renewable Energy World.

Traditional finance theory characterizes investments by their risk and their return. High risk investments, such as junk bonds, have to offer high interest rates to compensate for the fact that some of these investments will fail. Low risk investments, such as government bonds or bank accounts, offer low interest rates because there is almost no chance of these investments failing. There is a complete spectrum of investments in between. It is very unusual for low risk and high return investments to exist for long -- simply because when these unusually good investments become available, investors flock to these investments, pushing the rate of return down.

But rooftop solar is an outlier to this traditional financial theory -- especially from the perspective of an individual homeowner. Paybacks for rooftop solar are in the range of five to ten years -- the equivalent to a 10% to 20% rate of return. And risks are very low -- rooftop solar will keep working as long as the sun comes up (most systems are guaranteed for 12-25 years).

When my finance friends run the numbers for their own home, they are often amazed that more people don’t install rooftop solar. These friends are happy to take cash out of their investment accounts -- where they may have been earning 2% after tax -- and install a rooftop solar system where they will earn an equivalent 15% after tax return. For more about the financial risks and rewards of a rooftop solar system, please Listen Up to the Solar Energy Show.

Some nuclear power news: PG&E is shutting down the Diablo Canyon nuclear plant, the last plant in California. Their decision is not for safety or reliability reasons, it’s simply because other energy sources -- such as solar, wind and natural gas -- are cheaper. And other utilities around the country are coming to the same conclusion.

Utilities have three primary goals: generate profits for their stockholders, keep the lights on, and keep people safe. Although nuclear plants were at one time thought to be the cheapest and most reliable way to generate safe electricity, rapid cost declines in renewables (wind and solar) and natural gas have made these generation technologies much cheaper on a lifecycle basis.

The decision by PG&E was partially motivated by California’s goals of 50% renewable power by 2030. A compromise was reached among PG&E, California’s Public Utility Commission, environmental groups and unions representing nuclear workers to shut down Diablo Canyon earlier than scheduled -- while at the same time shifting more towards renewable power generation instead of natural gas. For more about the $3.8 billion early shutdown of the Diablo Canyon nuclear plant, Listen Up to the Energy Show on Renewable Energy World.

EVs will continue to gain popularity for the same reason as rooftop solar - the economics keep improving. Batteries (mass production) and charging costs (from solar) are getting less expensive, gasoline will inevitably increase in price again, and virtually every single automaker is rolling out new EV models. But it’s easy to overlook some of the other benefits of EVs: they are fun to drive, require almost no maintenance, and reduce your commute time with HOV lanes.

The fun part is evident the first time you get into an EV and floor the gas pedal. Acceleration is brisk, and in high performance EVs better than even the quickest sports car. But the extra battery weight of EVs does inhibit their performance around corners.

Range anxiety is the biggest disadvantage of EVs. Charging up a high capacity battery takes time, and public chargers are neither widely available nor inexpensive (public charges are usually 2-3 times more expensive than charging at home). Moreover, it is inconvenient to plug your car into a charger every time you pull into your garage. Nevertheless, every EV owner I have met will not go back to a gas vehicle for their daily commute. For more about the benefits, disadvantages and comparative operating costs of different EV models, Listen Up to the Energy Show on Renewable Energy World.