One of my favorite Hemingway books is “The Sun Also Rises.” It’s about Spain, bull fighting and a group of lost generation friends in Paris in the 1920s. But this show is an energy podcast, not a book report. So with apologies to Ernest Hemingway — here in California — the sun also rises. But it rises at night with battery storage.
Governor Brown recently signed into law a bill called SB 700, which establishes an additional $800 million dollars of incentives for behind the meter battery storage. These incentives, part of the Self Generation Incentive Program (SGIP), are designed for both commercial and residential systems. SGIP is the biggest battery storage incentive program in the U.S. For the past year and a half, our battery storage customers have been using SGIP funding to reduce the costs of their combined solar and storage systems.
These incentive programs don’t appear automatically. The California Solar and Storage Association (CALSSA) worked for three years to finally get this storage incentive passed. Bernadette Del Chiaro, Executive Director of CALSA, explains the key reason for these storage incentives: “What we’re trying to do is create a mainstream market for energy storage — just like we’ve done for solar photovoltaic systems.”
Why did it take so long? There was intense opposition from electric utility business interests who do not want customers storing their own energy, just as they do not want their customers generating their own solar power. Utilities benefit financially when they install their own “grid-sized” batteries on their side of the meter, just as they benefit from large utility scale solar farms. From an overall perspective we still need utilities, not necessarily for electricity generation, but primarily for long distance transmission and local distribution of electricity.
Utilities have provided a terrific service to the world for over 100 years. Now, with inexpensive solar and batteries, utility customers can install their own generation and storage systems. To learn more about why the Sun also Rises At Night with Batteries, Listen to this week’s Energy Show.
We have all seen those big power plants outside cities that provide power — historically from coal, oil and nuclear and now more recently, natural gas. These utility power plants have served us well for over a century. But technology is passing them by. These old central generation power plants are obsolete. They are more expensive than power generated by wind, solar and energy storage. Even some of the newest gas peaker plants under construction are destined to be obsolete within a decade. New power generating technologies – solar, wind, battery storage, distributed energy resources, virtual power plants, etc. — are steadily improving in terms of cost, duration and reliability.
Unfortunately, commercial and residential electricity customers are saddled with the costs of existing power plants, even ones that have been installed recently. Utilities pass their costs of power generation, transmission and distribution directly to ratepayers. Moreover, utilities are guaranteed a 10% profit based on their net assets. Although they do indeed care about reliability and safety, utilities actually make more money when they own a lot of assets (higher profits) and charge high prices for power (higher revenues).
These new clean, inexpensive power generation and storage technologies are turning the utility industry upside down. Commercial and residential customers can essentially purchase their own power plants for less money than utility-provided power. Listen up to this week’s Energy Show as we review the deteriorating economics of utility-based power plants, as well as the implications these new technologies are having on consumers throughout the United States.
The electric utility industry is undergoing rapid change. There used to be two types of utilities: investor owned utilities (IOUs, such as Pacific Gas and Electric and ConEd) and municipally owned utilities (MOUs, such as LADWP and Silicon Valley Power). Now there is a third hybrid type, called a Community Choice Aggregation (CCA) utility.
IOUs work for their stockholders — striving to maximize their profits by charging the most they can for electricity, maximizing their net assets and minimizing their expenses (often maintenance). MOUs work for their local cities — and try to provide affordable and reliable power in their territory. Not surprisingly, electric rates at IOUs are almost always higher than rates at nearby MOUs. Because IOUs profit by installing their own solar and storage systems and maximizing their own sales of electricity, they do not look favorably on homeowners and businesses installing their own systems. My biggest competitors for almost 20 years have been local IOUs.
CCAs offer the potential for lower electric rates for customers in their territory, without changing completely to a municipally-owned business structure. CCAs buy power from large solar and wind farms, as well as hydroelectric facilities. They then distribute this power over the existing utility lines. The existing utility bills customers and maintains the power lines, while the CCA essentially just charges customers for the energy they use. CCAs offer customers cheaper electricity, and they offer better economics to solar customers.
Silicon Valley Clean Energy (SVCE) is the new CCA serving most of the Silicon Valley area. My guest this week is John Supp, Manager of Accounts Services at SVCE. Please listen up to this week’s Energy Show as we talk about the operations, economics and effects that CCAs will have on both customers and the utility industry in general.
Electric utilities got their start in the U.S. in the 1880s. Thomas Edison began transmitting DC power as he literally illuminated the world. Then George Westinghouse (with help from Nikolai Tesla) deployed a better way of delivering electricity with AC power. Both Edison and Westinghouse went on to build tremendously successful companies, aptly named General Electric and Westinghouse Electric respectively. Although dominant in the 20th century, both companies have struggled in the 21st century.
Without a doubt utilities strive to deliver reliable and affordable power all over the world. But new technologies — particularly wind, solar and battery storage — are making the conventional utility business model obsolete. Customers are able to purchase and maintain their own power plants for less money than it costs a utility to centrally generate power and transmit it to every building. There is no doubt in my mind that over the next 20 years we will transition to a network of microgrids supported by some type of intelligent power distribution system.
What we knew and (some of us) loved about conventional utilities is changing. And utilities are fighting back — hard — to maintain their power supply monopoly. So here are Ten Electric Utility Company Myths — some of which were based on fact, and some were simply PR spin.
1. Myth: Utility profits are decoupled from selling electricity
2. Myth: Solar shifts costs to disadvantage ratepayers
3. Myth: Utilities support energy efficiency, we offer rebates
4. Myth: Utilities like EVs. They get to sell a lot more electricity
5. Myth: Utilities like Solar and Battery Storage
6. Myth: Utilities are a public monopoly working for ratepayers
7. Myth: Solar reduces electricity costs
8. Myth: Safety is a utility’s #1 concern
9. Myth: public utilities are the only way to provide reliable and affordable electricity
10. Myth: Solar will disrupt the grid at high penetration levels
Listen up to this week’s Energy Show as we go into detail on each of these myths — and explain their implications on ratepayers and competing power industries.
There is no doubt in my mind that the “All Electric future” is inevitable. The only question is how fast…20 or 50 or 75 years? Electric generation and storage technology is getting cheaper, while at the same time the problems with fossils fuels keep getting worse. Many of our new construction customers at Cinnamon Energy Systems want to power their entire homes with electricity. They will not need natural gas for heating, hot water, laundry or cooking. And with EVs, they will not need gasoline for their cars. Naturally, a bigger solar array is required. And battery storage for when the grid goes down — also to maximize savings with time of use rates.
Mankind has been using fossil fuels since we started burning coal thousands of years ago. What does it mean when our homes, businesses, industries and transportation systems operate primarily from electricity instead of coal or oil or gas? In some states our political leaders are pushing for this 100% clean energy transition. The solar and wind industries will obviously benefit – as well as electric utilities which can transition to fueling our vehicles as well as powering our buildings. The coal industry — and eventually other fossil fuels — will steadily decline as their polluting product also becomes too expensive compared to wind and solar. Breakthroughs with clean coal or inexpensive nuclear are becoming less and less likely as renewable power prices continue to decline.
Enabling this transition is a steady stream of new devices and appliances that substitute electricity for fossil fuels. A few examples include heat pump hot water heaters, induction electric stoves and electric vehicles. Please Listen Up to this week’s Energy Show for more about this “All Electric future” — and what you can do now to best prepare your home and business.
For over a hundred years our civilization has been getting electricity from centralized generation. This utility business model relies on remote power plants fueled originally by coal, oil and gas — and now increasingly by wind and solar.
But the development of inexpensive rooftop solar power over the past 20 years is changing this central generation paradigm. It is now cheaper for homes and businesses to generate their own electricity on their rooftop, and only stay connected to the utility for night time power. These Distributed Generation (DG) solar power systems are connected on the customer’s side of the meter, or referred to as Behind the Meter (BTM) from a utility’s perspective.
Utilities generate their profits by selling power, as well as owning the power plants and utility power lines. When customers generate their own power, utilities lose revenues. Moreover, when customers pay for their own solar generating systems, utilities do not get to own additional generating assets – further reducing their profits. This loss of revenues and profits is disrupting the conventional Investor Owned Utility (IOU) business.
Utilities claim that there are costs being shifted from solar customer to non-solar customers. This cost shift argument is nonsense, since in reality the utilities are trying to regain their lost profits from solar customers by increasing rates for everyone else. Think about it: since utility customers are going elsewhere for the utility’s product (electricity), utilities are raising prices for everyone else. Nice work if you can get it.
The trend towards BTM solar (and now battery storage) is inexorable as these technologies continue to get cheaper. The aptly named Institute for Local Self Reliance (ILSR) focuses on these technology and sociological transitions. Our guest on this week’s Energy Show is John Farrell. John directs the energy program at ILSR and is best known for his research and papers on economics and benefits of local ownership of decentralized renewable energy. John is one of our best thinkers and communicators on this subject, so Listen Up to this week’s Energy Show for his commentary on the superior economics of Behind the Meter solar and storage.
We call our power system an electric “grid” because it is composed of a network of wires that move the power around from node to node – basically a combination of power sources (natural gas power plants, solar farms, nukes), wires (long distance transmission lines and local distribution utility poles) and controls. Microgrids are the same concept but on a much smaller scale.
One example of a microgrid is a complex of buildings on an island. The power plant on an island has historically been a diesel generator, which feeds power to buildings through a smaller network of relatively low voltage wires. More recently these island microgrids have an array of solar panels and batteries providing most of the power, with a backup diesel generator for extreme weather conditions.
New commercial and residential PV and battery storage systems function essentially the same way. These much smaller microgrids provide inexpensive solar power, maximize savings with batteries for when power is expensive, and function in backup power mode if the utility goes down.
The microgrid concept is becoming more popular due to the realization that multiple, linked smaller power grids are more reliable and less expensive than larger centralized grids. Note that microgrids do not carry the high management and investor overhead that utility grids require. These microgrids can also be deployed much more rapidly and take advantage of the latest technology. Listen up to this week’s Energy Show to learn more about microgrids, and the importance they are playing in the changing landscape of central and distributed energy.
Solar is clean and renewable and cheap. So more solar is better for everyone…except your local utility. Keep in mind that utilities generate their profits from selling electricity and building generation, transmission and distribution assets. When electricity customers install more solar, utilities make less money. Unfortunately, utilities have the political clout to enforce their monopoly on customers who would otherwise prefer less expensive rooftop solar. The biggest battles are emerging in relatively mature solar markets.
Over 15% of residential customers in some areas of Hawaii have rooftop solar. As a result, Hawaii is the first “test case” in the U.S. for high penetration solar. Faced with this loss of profits, the Hawaiian utilities clamped down on new solar installations by capping net metering, raising solar-specific rates, and in some cases simply prohibiting installations. Instead of upgrading the local grid to handle these two-way power flows efficiently, their knee-jerk reaction has been simply to limit solar. Their rationale for these limitations is questionable at best, especially at these still low penetration levels.
The impact on the Hawaiian solar market has been severe. Installations have dramatically slowed down and solar companies have gone out of business. The Solar Survivors (who have not been kicked off the island) are migrating to install battery storage systems which are compatible with new utility solar limitations, albeit at less favorable economics.
My guest on this week’s Energy Show is Marco Mangelsdorf, CEO of Provision Solar on Hilo. Marco has been installing solar since 2000 – and has an abundance of insights and advice for solar installers and customers throughout the U.S.