The Market Path to Green Energy

jesse_morris

Jesse Morris with the Rocky Mountain Institute shows off the headquarters building’s rack of batteries. By storing electricity and drawing upon it at optimum times, RMI qualifies for advantageous rates from its electric co-op.

Economic forces increasingly favor wind and solar. Creating the right regulatory incentives could accelerate the adoption of renewables, says the Rocky Mountain Institute. 

by James A. Bacon

Consolidated Edison, the utility that provides New York City’s electricity, confronted a challenge in the summer of 2014. Forecasts showed that demand for electricity in parts of Brooklyn and Queens would overload the company’s electric grid by 69 megawatts on the hottest summer days by 2018. The traditional solution would have been to build a sub-station at a cost of $1.2 billion.

Wondering if there might be a better way, Con Ed solicited ideas for alternative solutions. So far, it has gotten 80 suggestions. Some were so good that the company plans to employ a portfolio of techniques — mainly energy-efficiency measures, fuel cells and neighborhood-scale solar — to shave off 52 megawatts at a cost of only $200 million, according to Inside Climate News.

Although 2018 is still two years away, early indications are positive. The so-called Brooklyn-Queens Demand Management project is being watched widely as an example of how energy efficiency, solar power, battery storage and other green energy strategies can not only reduce carbon-dioxide emissions but save rate payers money.

That’s just one example of how innovation is blasting apart the traditional electrical utility model, says Jesse Morris, a principal with the Rocky Mountain Institute (RMI), whom I chatted with when I visited Aspen, Colo., earlier this month. (Sad but true, my idea of a vacation includes meeting policy wonks in the places I’m visiting.) RMI bills itself as a market-oriented, environmentalist think tank. Re-conceptualizing the electric grid is one of RMI’s main missions. And Morris is one of RMI’s leading thinkers on the subject.

I wondered if RMI was thinking about things we should be thinking about in Virginia. Meeting me in RMI’s net-zero energy headquarters building in Basalt, Colo., Morris outlined three “big, disruptive trends” he sees transforming the electric grid.

The Internet of Things (IoT). The Internet is permeating everything; every new appliance, device, sensor and actuator is being assigned an IP address, and each device is capable of talking to the others. As a result, businesses can track energy usage with unprecedented precision, generate unprecedented volume of data to analyze, and control systems with unprecedented precision. When millions of thermostats, lighting systems, hot water heaters and other energy-consuming devices are connected, managing the demand side of the electricity system is getting easier and easier.

Declining cost of enabling technologies. The cost of generating solar power and wind power is dropping steadily. Renewables are economically competitive with conventional energy sources in geographic “pockets” around the country, and those pockets are growing. Meanwhile, progress is being made in related technologies such as lithium ion batteries which can store excess electricity production from wind and solar and release the power when needed most. “The cost trajectory of batteries is incredibly promising,” says Morris.

Corporate demand. Many corporations are insisting upon green power. Indeed, environmentally sensitive companies like Amazon Web Services are driving the demand for solar power in Virginia where the company is building many of their energy-intensive data centers. “Last year,” says Morris, “more solar and wind farms in Virginia and North Carolina were deployed by corporations than utilities.”

While the grid of the future isn’t here yet, says Morris, it is coming. At present most experimentation is occurring in places like Hawaii, California and New York where there is a strong commitment to green power and high electric rates make it easier to justify investing in alternative approaches. But change is occurring everywhere. Con Ed’s Brooklyn-Queens project shows that the potential exists to save literally billions of dollars.

The Brooklyn-Queens approach to electricity infrastructure is not pervasive, he says, because state regulations don’t encourage most utilities to think like Con Ed. Power companies make money by building stuff — power stations, transmission lines, sub-stations, distribution lines, and the like — and earning a Return on Equity on their outlay of capital. Approaching a problem as Con Ed did, which saves the expenditure of $1 billion, doesn’t help a traditionally regulated power company grow. Regulators need to change rate structures to incentivize companies to economize like Con Ed.

Morris sees the electric grid evolving from the Big Grid paradigm built around large power stations connected by a web of transmission lines into a Distributed Grid that accommodates many small energy producers, including even homes decked out with solar panels. The transition will be tricky because power companies are obligated to ensure the reliability of the system as a whole, which isn’t easy to do when wind and solar power are subject to the vagaries of the weather. But emerging technologies and business models are making the grid more flexible than ever before.

He points to Bidgely, a Silicon Valley company, which has developed a way to determine what appliances homeowners are using by analyzing the flow of data through the electric meter. Bidgely’s technology eliminates the need for comprehensive energy audits. Homeowners can see immediately how they are consuming electric power, which gives them the means to alter their consumption profile by changing the time of day, for example, they run their dishwashers and driers. Once upon a time, demand-side management was seen as a way for utilities to shave their peak consumption, typically late in the afternoon on summer days. Now it can be seen as a tool for more closely matching demand with the fluctuating supply of renewables.

Typically, electric utilities have focused on the supply-side of the equation because the supply of electricity is what they control. “Now we’re focusing on the demand side,” says Morris. To reach a future where 80% of electricity comes from renewables will take a lot more than battery storage, which adds a significant layer of expense. “That’s the easy answer,” he says. It takes a bit more imagination to figure out how to shift the electric load, which costs almost nothing.

Morris estimates there are 47 million electric hot water heaters in the country. If there was a way to tell those heaters not to consume electricity when demand was at its peak, it would permit a massive load shift. Another idea might be to pre-cool houses before people get home and turn on their other appliances.

The proliferation of electric cars offers both perils and possibilities. “It could be bad if everyone plugged in their cars when they got home” at the same time they were flipping on their big-screen TVs and cranking up the air conditioning, Morris says. But it would be a wonderful thing if they delayed re-charging their cars. If utilities could communicate with the car batteries and either charge them or draw from them as needed, enough economic value might be created to begin paying people to recharge their cars late at night.

To make these things happen, regulators need to create the right incentives for electric utilities and for homeowners. Right now, this is not a discussion we’re having in Virginia, where the debate over the next-generation electric grid is focused overwhelmingly on the supply side — how quickly to shift from fossil fuels to wind and solar. Without more flexibility on the demand side, there are limits to how much wind and solar Virginia’s electric grid can absorb without creating reliability issues. Perhaps it’s time to expand the conversation.

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19 responses to “The Market Path to Green Energy

  1. I am curious. Did you address the issue you and others have often brought up here that solar is not “dispatchable”, not available 24/7 to RMI?

    The water-heater thing – I get my electricity from REC and I’ve had one of those water heater switches for at least 10 years – and they incentivize it by offering free water-heater repairs.

    but in terms of shaving peak demand – we already know how to do that also – smart meters – that increase the cost of electricity at high demand periods – the same way that HOT lanes increases the tolls at peak demand.

    This is truly a free market concept and also one that meets the Jim Bacon rule that we pay for what we use and when Dominion has to fire up more generation – the folks who need it are the ones who should be paying for it and the folks who have installed energy saving appliances should be rewarded by not charging them more.

    and I have a question to TomH, Acbar – others who know – if reading this.

    Can combined cycle gas plants running for baseload – ramp up and down more quickly than nukes or coal? Do they sit in between coal and nukes and peaker gas plants in their ability to respond to peak demands or are they largely like coal and nukes and not able to follow demand?

    thanks

    • I just got back from a 3 day Board retreat in Highland County with no cell or internet connection. I’m sorry for the delayed response.

      The RMI representative was answering the question about solar being non-dispatchable. When utility people argue against solar as not being dispatchable they are responding from the mindset of needing more generation to follow increases in load. The RMI guy was responding that when solar output declines we now have methods of quickly and easily reducing load to match the new lower output. This also achieves a match between supply and demand but in a way completely different from the traditional utility methods.

      The combined cycle units being turbine based can respond faster than the boiler based technologies of nuclear and coal. The combined cycle plants can significantly vary their output within tens of minutes to an hour. The single combustion turbine plants (peakers) can respond within minutes.

  2. Thanks for taking the time to go to RMI on your vacation!

    I am not the one to answer your question Larry but gas is fast starting so can complement renewable intermitents. Nuclear and coal are slow starters.

    I would just like to add a bit to Jesse’s descriptions …
    We have all heard of the Duck curve … the summertime peak energy use in the late afternoon shows a rapid rise … the duck’s neck … in energy use. That turns out to be just a bit after solar intensity peaks, so solar with storage would do some very good things to the duck’s neck, making dramatic cuts in peak demand. There are some studies out there that say that with lots of DER – PVSolar the duck’s neck bends down to the ground, demand turning negative. Trouble is that peak energy can also be sold at higher rates at some utilities.

    There is another answer to those summer peaks hours … offshore wind, which actually works in synergy with solar to meet peak demand.

    http://onlinelibrary.wiley.com/doi/10.1002/we.1524/full
    “The results here suggest that a vast reservoir of peak-coincident wind sits near a large population center.” … Prime locations for peak-power generation: New England and Mid-Atlantic … The continental shelf of the USEC extends out especially far in the regions off Massachusetts, New Jersey, Delaware and Virginia, with depths of _50 m being found as far out as 80 km. This shallow water, combined with an exceptional OWE resource, a large coastal population, an aging and congested land-based grid, low severe-hurricane risk and relatively high electricity prices, makes this an ideal location for large OWE farms.”

    The other piece I would like to add to the discussion … a very recent study on the declining costs and additional benefits of developing offshore wind.

    The OWC study … http://www1.udel.edu/udaily/2016/mar/offshore-wind-energy-costs-031516.html
    March 15, 2016–A new study by the University of Delaware’s Special Initiative on Offshore Wind (SIOW) reports that a commitment by Massachusetts to develop offshore wind (OSW) energy at a scale of 2,000 MW, combined with ongoing technology and industry advances, will lower previously projected costs for the clean energy source by as much as 55 percent in the next decade. ”

    “The cost reductions are driven by state policy committing to build a sequence, of projects as well as “learning effects,” as develops skilled workforce grows locally as the Massachusetts Market develops.”
    The jobs creeated and industry developed are well paying jobs.

  3. After doing a little searching around – I think I’ve found the answer to the combined-cycle question about how fast they can ramp up or down:

    ” A resource’s flexibility is in its ability to meet three types of “operational needs,” according to the California Independent System Operator:

    steep up or down system ramps that can happen many times a day and vary by month or season;

    sharp up or down intra-hour system variability that can vary by month or season; and

    second-to-second regulation service to maintain system frequency.

    “The need today is to retrofit existing plants with new gas turbines like the ones GE makes with quicker start and faster ramp capabilities and higher efficiency,” acknowledged Center for Energy Efficiency and Renewable Energy Executive Director V. John White. “They make it possible to NOT use them when renewables are available and bring them on to meet peak load.”

    http://www.utilitydive.com/news/a-users-guide-to-natural-gas-power-plants/259104/

    Not theoretical – real plants in operation right now:

    ” The El Segundo Energy Center is a natural gas-fueled, combined-cycle generating facility located near Los Angeles, CA. The plant produces 550 megawatts (MW) of efficient and flexible electricity to the California grid – enough to supply power to nearly 450,000 homes. The fast-start, rapid response power generation employed by El Segundo delivers more than half of its generating capacity in less than 10 minutes and the balance in less than 1 hour, allowing it to back up and enable greater use of intermittent renewable technology.”

    note the size of this plant 550 mw, one third the size of the VDP plants at Brunswick and Greensville.

    So California is building more plants but smaller in size, distributed – that are capable of quickly ramping up and down – explicitly so they can mesh with renewables.

    Manufacturers like GE are building and selling the fast response combined cycle turbines to meet that purpose.

  4. Another question/observation –

    If DVP wants to get natural gas to Hampton and VNG is an invested partner and VNG built HRX to cross to Hampton – why is DVP not putting a modern combined cycle plant (that CAN ramp up and down in minutes) in Hampton to replace Yorktown that CAN mesh with solar and wind INSTEAD of replacing Yorktown with a baseload Nuke Plant at Surry that also requires power lines across the James?

    So why did DVP site plants in Brunswick and Greensville when they want to bring gas to Hampton Roads and that gas could not only meet the power needs of Hampton but do it in a way so as to not need powerlines over the James at Jamestown – and do it in a way that they could incorporate wind and solar that would be in tandem with gas to mitigate the variability?

    More and more – it appears that DVP has purposely chosen to NOT transition to a distributed grid like other states are – and is instead further investing in older centralized grid configurations that are incompatible with incorporating renewables that other states are already doing right now.

    All up and down the proposed ACP -DVP had the option to build smaller combined cycle-plants that would be able to incorporate solar – both utility scale and private sector commercial and residential scale – that would also benefit those localities with jobs and access to gas and instead it’s obvious now that their intentions are to stay with an obsolete grid that cannot easily incorporate renewables and in fact, will be at risk to any widespread incorporation of renewables.

    They have purposely chosen this course of action for the future.

    We have all this talk in BR about holding government accountable.

    I’d ask – who should be held accountable for this which is clearly going in the wrong direction – and will cost ratepayers not only for the wrong path but in lost opportunities to marshal lower cost renewables.

    • By connecting to the expanded capacity of the Columbia Gas pipeline the Chesapeake/Hampton area can access the gas they want for industrial development. And with a greater connection to and modifications of the VNG line serving the peninsula, Dominion could support a new moderate sized gas fired unit sited at the Yorktown site, where transmission already exists. They might only need this to be a peaker since the Skiffes Creek transmission issue seems to be more peak load related than total energy. The peaker could be used to support an expansion of distributed solar in the region and elsewhere on the system.

      http://www.columbiagasva.com/Libraries/PDFs/MAP_-_CGV_Service_Areas.sflb

      I think the Greensville and Brunswick plants were sited where they are for several reasons: proximity to existing high-voltage transmission, moderate distance to the Transco pipeline for natural gas supply, cheap available land, reasonable distance from Dominion’s Richmond, Southeast VA and North Carolina load centers, and a perfect location to make an easy connection to North Carolina by the Atlantic Coast Pipeline, even though the ACP does not appear to be the primary source of supply for these two plants.

      “More and more – it appears that DVP has purposely chosen to NOT transition to a distributed grid like other states are – and is instead further investing in older centralized grid configurations that are incompatible with incorporating renewables that other states are already doing right now.”

      Dominion does not want to incentivize distributed solar because it reduces their revenues. They want to develop central station utility-owned solar that fits their current business model.

      • I will try to post another reference to the map that I was trying to display.
        The blue pipeline is Columbia Gas
        The green pipeline is Transco
        The red pipeline is Virginia Natural Gas

  5. here’s a modern Combined cycle plant :

    The El Segundo Energy Center is a natural gas-fueled, combined-cycle generating facility located near Los Angeles, CA. The plant produces 550 megawatts (MW) of efficient and flexible electricity to the California grid – enough to supply power to nearly 450,000 homes. The fast-start, rapid response power generation employed by El Segundo delivers more than half of its generating capacity in less than 10 minutes and the balance in less than 1 hour, allowing it to back up and enable greater use of intermittent renewable technology.

    http://www.nrg.com/generation/projects/el-segundo/?iid=RPR_NH1_2016May_ElSegundo_HPBanner

    ” “The need today is to retrofit existing plants with new gas turbines like the ones GE makes with quicker start and faster ramp capabilities and higher efficiency,” acknowledged Center for Energy Efficiency and Renewable Energy Executive Director V. John White. “They make it possible to NOT use them when renewables are available and bring them on to meet peak load.””

  6. There’s a reason RMI is located in Aspen. People don’t mind visiting!

    As for moderating the demand curve, sure, that’s a good thing, but rather than building alternative (solar) generation, the Queens/Bronx situation strongly invites energy consumption abatement initiatives — “energy savings” — more than anything. When the utility already knows the avoided cost (the cost of that new substation) is high, it can pay for a lot of load reduction by customers and still save ratepayers money. That may not suit RMI’s agenda but it’s the right thing to do.

    • re: RMI’s “agenda”

      In terms of “agendas” – one would expect RMI to be an advocate FOR one or more of the modern available technologies towards more efficient energy use – more flexible utility energy models to meet the demands of 21st century commerce.

      I would contrast that with the actions of our own DVP whose “agenda” seems thoroughly mired in defending an obsolete utility model that will eventually inflict real harm on rate-payers – and really all Virginians because we’re already seeing knowledge-based companies who are making decisions about where to locate to do business – based in part on how the utility grid functions and DVP’s recent behavior toward Amazon and others for their NEEDS for FlEXIBLE renewable energy – well, we’re darn lucky Amazon just did not head to another state but who knows how many others already went to other states or will because of the way DVP is mired so intransigently in a utility model that is not business friendly and clearly doomed.

      And the SCC and the General Assembly instead of working for the economic interests of all Virginians , perform as cheerleading lap dogs on supporting these business-unfriendly habits of DVP.

      that’s an ‘agenda’ we should be concerned about… When the utility is more concerned about their own business to the point where their actions discourage and send away other businesses – and the SCC and GA are right with them on it – we should all be concerned.

      If we are going to wean ourselves off the sequester and really work to develop a more robust private sector economy – we must have DVP providing the right kind of utility model to support it not just looking out for themselves.

      DVP needs a real attitude adjustment on their “agenda” in my view.
      Perhaps we should bring in RMI to replace the SCC.

    • Energy savings has been high on RMI’s agenda for a long time. They have been one of the nation’s leading proponents and driving forces behind major renovations such as the Empire State building and many other buildings.

      They have concentrated first on public and commercial buildings rather than residential structures because the larger buildings offer a much greater return on investment and it is easier to demonstrate the benefit of energy efficiency working with a few dozen business owners rather than thousands of homeowners. They have many resources available to help people improve their home energy savings, but most of their demonstration projects have been at a larger scale.

  7. Acbar says – “That may not suit RMI’s agenda but it’s the right thing to do.”

    How much should the reader discount the substance of the claims of this article by reason of “RMI’s agenda.” A little? A lot? None at all? To early to tell? I have no idea. But surely it’s a valid question.

    • My goal was simply to present RMI’s point of view, which is different from what we normally hear here in Virginia. As with anyone else, we should subject their claims to critical scrutiny.

      • Thank you Jim for presenting another side of the story about our possible approaches to our energy system. You are exactly right that all of the possibilities should be subject to thorough examination. But it is nice that you are introducing more concepts to examine. It is likely that we will use a blend of the old and the new. But to take advantage of the cost and environmental benefits that many of these new choices offer, we need a grid and energy system that incorporates them in an optimum way. Dominion and other utilities need help from a modernized rate structure to do what is good for the ratepayers in a way that is also good for the shareholders.

  8. [Just got off I-95 Fredericksburg to McLean, now THAT will make you wish for Aspen!]

    On re-reading my own cryptic comment I realize it requires a little more explanation. What is the Rocky Mountain Institute’s agenda? Well, their website speaks for itself, but RMI is an old hand when it comes to lobbying utility regulators and legislators. RMI has a strong bent towards utility-mediated practices, such as cogeneration and renewables generation, utility or third-party-controlled demand management, and yuppie-satisfying distributed solar generation, and a history of promoting these in such institutional forums as regulatory commissions and think-tanks. They even got one of their own on the Federal Energy Regulatory Commission. And they do a lot on the subject of new home design for greater efficiency. This is important workl; I’m not disparaging it.

    Where I don’t think they are as balanced or as strong is when it comes to promoting change at the practical level — local government [building codes] and local utility [energy savings] and volunteer [Habitat For Humanity/Christmas In April style] efforts — to bring about improvements, for example, in older neighborhoods full of older homes and less wealthy, less educated, often renting, occupants. I think that’s the future of energy efficiency in this Country: retrofitting, showing people what’s in their own best interests, educating future homebuyers what to look for, and putting solid utility money and muscle behind it because it’s usually in the ratepayers’ interests as well. Sure, there are already utility programs out there to promote energy efficient practices and energy savings for homeowners, but they are far, far from all that could be done cost-effectively.

    Obviously, utilities are conflicted about programs that reduce sales. They are even more conflicted about avoiding investment in new construction when capital is cheap and new investment is the best way to increase earnings. Utility commissions hesitate to reject requests to build new utility plant that might be needed if forecasts are wrong because the political downside of inadequate supply is so great. In my opinion, RMI, like any good consultant, knows these biases well and, subtly, or perhaps not even subtly, caters to them. IMO, RMI promotes new technology construction and new efficiencies that will sell to policymakers, but shies away from the tough work of promoting home retrofits, those less glamorous renovations of older homes that would deliver the greatest energy bill savings benefits to the utility customers that need them most.

  9. RMI might be “yuppie” but the Navy and other large consumers of grid power are not and they are speaking words very similar to RMI..

    take the U.S. Navy’s own net zero initiative – not exactly yuppie stuff:

    http://www.navy.mil/submit/display.asp?story_id=63327

  10. And where does your sponsor stand in all of this?

  11. Old houses, the elderly, renters and lower-income people are important issues, IMO. They will the most dependent on the existing system and the most affected by substantial cost/price increases in rates for electricity. I have no solutions, but we need to keep this reality in mind as public policy decisions are made.

  12. @TMT – I suppose the same folks who are opposed to rent control or housing vouchers, food stamps, subsidized water/sewer, etc would oppose subsidized electric?

    I don’t think renewable energy truly has any more or less to do with the plight of the poor than any of these other issues either and certainly not a reason to oppose renewable energy and efficiency standards.

    I just don’t buy that this is about more expensive energy to start with. Pricing is one aspect but the core issue is should we be building a more distributed grid that is designed explicitly to incorporate renewables and demand-side technologies or just stick with the status-quo centralized generation model?

    If you were to ask Amazon or Walmart or the Navy or other large consumers of electricity what kind of grid would best suit their needs – what would they say – the one that Dominion is defending or the one that RMI is promoting?

    There’s also irony here – pointed out by others – that if we are going to start seeing warmer and warmer temperatures – that they occur during the day when the sun is strongest – and solar is most efficient and most able to ameliorate demand….. that also work help the poor…

    There another irony. The bigger users of natural gas – or also the ones that want to install solar on their sites – and use the natural gas for backup electricity generation – these are things that if actually connected to the grid -could actually help the grid in high demand periods – both solar and backup generation.

    It’s bad enough that Dominion does not see opportunity for itself on these issues but it’s worse because they actually seek regulations that discourage others from adopting it.

    As usual TMT – you and I don’t see eye to eye on the wisdom of sticking with the status quo on issues. I think we must move ahead and that sticking with the status quo is harmful in that it basically mires itself in obsolescence and opportunities lost.

    Don’t get me wrong – our newest car is 10 years old… and our heat pump older than that but most every light in the house now is LED ..

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