EEnergy Informer - Energy Economics · 5 August 2017 EEnergy Informer Page 5 This, however, is inconsistent with other statistics, which suggests that China has already reached peak

August 2017 EEnergy Informer Page 1

Electricity’s Future: Fossil fuels no match for renewables

Investment by technology, 2017-2040

Source: New Energy Outlook 2017, Bloomberg New Energy Finance,

15 June 2017

19

In this issue

� Renewables Crowding Fossil Fuels Out Of Power Market 1

� Breaking Records: Renewables Unstoppable 6

� Cars Running Out Of Gas 8

� Surviving The Solar Eclipse 9

� Innovation, Disruption And Utility Business Model 10

� Half Of US Nuclear Reactors Losing Money 15

� The Rise of Ethical Investing 16

� Trump’s Energy Week Excludes Green And Clean 19

� Coal Mining Jobs To Die For, Literally 20

� Clean Coal Suffers Another Blow 21

� DOE’s Report Dead Before Arrival 23

� Readers write 27

� Recently published: Innovation and Disruption at the Grid’s Edge 29

`

Renewables Crowding Fossil Fuels Out Of Power Market Bloomberg says renewables are $7 Trillion global business

n mid-June, Bloomberg New Energy Finance (BNEF) released its New Energy Outlook 2017. The NEO is full of superlatives on the stunning rise of renewables. It is not only worth a read, but it deserves digestion followed by deliberate reflection. For those who have been bragging about the ascent of renewables for some time, it provides clear vindication (following article). For renewable

skeptics, including the Trump Administration, it provides evidence that they may be fighting a losing battle in trying to rejuvenate coal and other fossil fuels by reducing and removing environmental regulations (article on page 19). The renewable train has already left the station and is gaining speed.

For those in the fossil fuel industry – particularly coal, and to a lesser degree oil – it offers an opportunity to internalize, perhaps think about a “Plan B”. For the environmental community and those concerned about climate change, it provides a glimmer of hope and optimism that future trends are moving in the right direction, even if not fast enough for some. For the financial community, it suggests that the time has arrived to seriously consider ethical investing and variations thereof (article on page 16).

According to the NEO 2017, renewables will account for nearly 3/4th of global investment in power generation between now and 2040. BNEF estimates that $10.2 trillion will be spent globally on power generation in the next 22 years, $7.4 trillion of which will be on clean energy.

I

EEnergy Informer The International Energy Newsletter

August 2017

EEnergy Informer August 2017

Vol. 27, No. 8

ISSN: 1084-0419 http://www.eenergyinformer.com

Subscription options/prices on last page

Copyright © 2017. The

content of this newsletter is

protected under US copyright

laws. No part of this

publication may be copied,

reproduced or disseminated

in any form without prior

permission of the publisher.

2August 2017 EEnergy Informer Page 2

Fossil & nukes: Crowded out of market

Global cumulative installed capacity, 2016 (LT) & 2040 projection (RT)

Source: New Energy Outlook 2017, Bloomberg New Energy Finance, 15 June 2017

Not over: Dropping cost of solar PVs, 1976-2017 in $/W

Source: New Energy Outlook 2017, Bloomberg New Energy Finance, 15 June 2017

Seb Henbest, lead author of the BNEF report said, “This year’s report suggests that the greening of the world’s electricity system is unstoppable, thanks to rapidly falling costs for solar and wind power, and a growing role for batteries, including those in electric vehicles, in balancing supply and demand.” BNEF expects $2.8 trillion to be invested in solar by 2040, resulting in a 14-fold jump in capacity; wind is projected to get $3.3 trillion and a 4-fold increase in capacity. According to Henbest,

“As a result, wind and solar will make up 48% of the world’s installed capacity and 34% of electricity generation by 2040, compared with just 12 and 5% now.” “We anticipate renewable energy reaching 74% penetration in Germany by 2040, 38% in the U.S., 55% in China and 49% in India.”

For renewable skeptics, including many who continue to insist that they will always play a marginal role relative to baseload coal and nuclear power (article on page 23), these findings may be hard to swallow, or be dismissed. For hardware vendors like GE,

Siemens, ABB, Mitsubishi Heavy

Industries, it means rapidly shifting focus towards wind and solar. It must be music to the ears of wind turbine makers such as Vestas, GE, Goldwind, major Chinese solar PV manufacturers and a host of new entrants in energy

storage business including Tesla, Sonnen and their Chinese counterparts.

The main driver for the pivot to renewables is incessant technical innovations coupled with falling costs and economies of scale all along the value chain, from manufacturing components to financing, installation and integration. Renewables, after receiving generous subsidies for decades, mostly in Europe and America, are now cost-competitive in many markets – give or take a little.

Bloomberg’s NEO 2017 highlights 10 big energy trends:

• Solar & wind will dominate the future of electricity;

• Solar challenges coal;

• Cost of onshore wind falls, offshore wind even faster;

• China & India lead in renewable energy investment;

• Batteries & storage improve renewables’ reach;

• Electric vehicles boost electricity consumption;

• Rooftop solar remains popular;

• Coal has reached point of no return;

• Gas is a transition fuel – mostly to back up renewables; and

• Power sector’s emissions peak by 2026.

While none of this is new, its cumulative effect is overwhelming. �


What the world needs: Flexible generation, demand response &

storage, in GW

Source: New Energy Outlook 2017, Bloomberg, 15 June 2017

Decentralized: Australia, Germany, Japan & Brazil

Decentralization ratio


BNEF report states that the levelized cost of electricity (LCOE) from solar PVs, now almost a quarter of what it was in 2009, will drop another 2/3rd by 2040. According to Henbest,

“By then (2040) a dollar will buy 2.3 times as much solar energy than it does today. Solar is already at least as cheap as coal in Germany, Australia, the U.S., Spain and Italy. By 2021, it will be cheaper than coal in China, India, Mexico, the U.K. and Brazil as well.”

While solar gets a lot of space in the BNEF report, wind is not to be dismissed. The report forecasts that LCOE from offshore

wind will “slide a whopping 71% by 2040, helped by development experience, competition, reduced risk, and economies of scale resulting from larger projects and bigger turbines.” It says the cost of onshore

wind will fall 47% over the same period, on top of the 30% drop in the past 8 years. The reasons include bigger, more efficient turbines as well as improved operating and maintenance procedures – telltale signs of a maturing technology and experienced work force.

Not surprisingly, BNEF highlights China and India as the two leading investors in what it calls “a $4 trillion opportunity for the energy sector.” China is expected to account for 28% and India 11% of global investment in power generation by 2040. The Asia Pacific region is expected to get nearly as much investment in generation as the rest of the world combined with roughly 1/3rd going to wind and solar each, 18% to nuclear, leaving a mere 10% for coal and gas. If this is not a reversal of fortunes for coal, gas and nuclear, this editor does not know what is. That, of course, assumes that BNEF’s projections hold between now and 2040. With so much investment expected in variable renewable generation the role of energy storage is on the rise. Who could disagree?

“We expect the lithium-ion battery market for energy storage to be worth at least $239 billion between now and 2040.”

The report says, “Utility-scale batteries increasingly compete with natural gas to provide system flexibility at times of peak demand.”

What is surprising, at least to this editor, is the projected contribution of distributed storage. BNEF projects small-scale batteries, the type installed by households and businesses alongside PV systems, to account for 57% of storage worldwide by 2040. OK, perhaps not exactly 57%, but a


Coal in decline: Projected coal generation in the US & the EU (LT) & Asia (RT)


Germany shows that it can be done: Hourly dispatch 2017 (LT) & 2030 (RT)


significant percentage. In Germany, for example, a growing number of new distributed solar PV installations, both commercial and residential, are already accompanied with distributed storage. Electric vehicles (EVs), of course, are also predicted to play a growing role as the technology matures and costs drop moving EVs mainstream as echoed by Volvo’s recent announcement (article on page 8). This will be a double bonus for the electric utilities everywhere not only because it increases sales but also because it provides a convenient way to store some of the solar generated electricity during mid-day hours in EV batteries.

Again, nothing new, except the potential scale of growth. BNEF estimates that EVs will account for roughly 12-13% of electricity generation in Europe and the US by 2040. According to Henbest, “Charging EVs flexibly, when renewables are generating and wholesale prices are low, will help the system adapt to intermittent solar and wind.”

The growth of EVs is expected to push the cost of lithium-ion batteries by 73% by 2030 – which will further bolster their commercial appeal. As in any zero-sum game, growth for one player comes as a loss to the others. In this context, the rapid rise of renewables is bad news for other forms of generation, particularly more polluting ones such as coal. But nuclear also suffers because coal and nuclear are both baseload technologies, traditionally running flat out at high capacity factor 24/7. In a future dominated by variable renewable generation, what is coveted the most is storage and/or flexible generation – the type that can fill any voids left by renewables as sun sets, is covered by clouds, or variations in wind due to changes in wind speed and patterns, as in the famous California Duck (visual on page 5).

Neither coal nor nuclear are particularly good at this, further eroding their future viability. For this, as well as other reasons, BNEF says, “Coal-fired power collapses in Europe and the US.”

“Sluggish demand, cheap renewables and coal-to-gas fuel switching will slash coal use by 87% in Europe and 45% in the US by 2040.”

Coal generation in China – currently accounting roughly half of global coal demand – is expected to grow by 1/5th over the next decade reaching a peak in 2026, according to BNEF.


This, however, is inconsistent with other statistics, which suggests that China has already reached peak

coal and will experience gradual decline over time. For example, BP, in its latest Annual Review of

Energy, covered in July 2017 issue of this newsletter, says that global coal consumption has already peaked and is heading towards sustained decline (visual bottom right).

The rise of interest in ethical

investing (article on page 16) and global commitments to the Paris Accord suggest that coal’s fortunes are likely to suffer even further and faster. BNEF says, “Globally, we expect 369 GW of planned new coal plants to be cancelled, a third of which are in India, and for global demand for thermal coal in power to decline by 15% over 2016-40.” Not only will fewer new coal-

fired plants be built, but the existing ones are likely to be retired at a faster rate, and the remaining ones used less frequently and extensively. This pattern is already evident in the US, notwithstanding President

Trump’s rhetoric to the contrary (following article). Another noteworthy observation in the BNEF report is to explain the emerging role of natural gas as a transition fuel, “but not in the way most people think.” The report predicts $804 billion in new investment and 16% more natural gas capacity by 2040, but it critically points out that:

“Gas plants will increasingly act as one of the flexible technologies needed to help meet peaks and provide system stability in an age of rising renewable generation, rather than as a replacement for baseload coal.”

The US, however, may be an exception due to its plentiful supply of cheap gas – which means natural gas will fill some of the gap created by retiring coal plants, especially in the near term. Bloomberg says that despite a pro-coal stance taken by President Donald Trump, “the economic realities over the next 2 decades will not favor US coal-fired power, which is forecast to see a 51% reduction in generation by 2040. In its place, gas-fired electricity will rise 22% and renewables 169%.” � Bloomberg Report

California Duck: Mid-day dip in net load, followed by evening peak

Mid-day solar generation has to be accommodated with growing penetration

Source: CAISO

BP says coal’s future is in the past Coal consumption by region

Source: BP statistical review of World energy June 2017


Breaking Records: Renewables Unstoppable Evidence suggest the rise of renewables are consistently under-estimated

enewable skeptics, not unlike climate change skeptics, manage to find evidence that supports their existing beliefs. Not much can be done to change their minds. Like any projection, Bloomberg’s predictions (preceding article) to 2040 may be off, but there is growing evidence suggesting similar growth trajectories for renewables in different parts of the world.

In the US, for example, the Energy Information Administration (EIA) acknowledges that:

• Generation from wind and solar – utility- and small-scale – alone exceeded 10% of total US generation in March 2017 (visual below), for the first time in history;

• Renewables are growing faster than predicted – no surprise – and

• Renewables now exceed nuclear generation – this happened a lot faster than was predicted. Counting all renewables (i.e., biomass, geothermal, hydropower, solar and wind) accounted for 19.35% of net US electrical generation during the first quarter of 2017. As recently as 5 years ago, the EIA was predicting that US would not reach the 20% renewable mark before 2035. The 20% renewables, in other word, has been achieved nearly 20 years ahead of the EIA projections. Another stunning milestone was reached, also in 2017, when EIA reported that - for the first time since the beginning of the nuclear era - renewable energy sources are exceeding nuclear generation. EIA reported that renewables surpassed nuclear generation: 21.60% vs. 20.34% in March, and 22.98% vs. 19.19% in April 2017. Moving forward, renewables are expected to continue to expand while nuclear output is projected to remain flat or gradually fall over time. Renewable output for the first third of 2017 increased by 12.1% compared to 2016 whereas nuclear output dropped by 2.9%. The US nuclear fleet is expected to decline as more units retire (article on page 15). Planned retirements known to date total 7,274 MW. The 4 new reactors under construction total 4,468 MW – assuming they can be completed due to the announced bankruptcy of Westinghouse. There are already calls to stop the 4 unfinished reactors rather than spend billions more to complete them.

R

First in history: Wind and solar exceed 10% of US generation

Source: U.S. Energy Information Administration, Electric Power Monthly


Even if all 4 reactors currently under construction are ultimately completed, US nuclear capacity will decline by at least 2,806 MW by 2025. If these projects are cancelled, nuclear capacity will decline by at least 7,274 MW, accounting for loss of roughly 57,000 TMWh/year of generation. As reported by Ken

Bossong, Ex. Dir. of the SUN DAY Campaign,

renewables, in contrast, are experiencing strong growth. Comparing the first 4 months of 2017 to the same period in 2016, solar grew by 37.9%, wind by 14.2%, hydropower by 9.5%, and geothermal by 5.3%. According to the EIA, US generation from fossil fuels (i.e., coal, natural gas, petroleum) dropped by 5.2% during the first third of 2017 compared to 2016. "In light of their growth rates in recent years, it was inevitable that renewable sources would eventually overtake nuclear power," noted Bossong, adding, "The only real surprise is how soon that has happened – years before most analysts ever expected." US, of course, is not alone. The UK, not generally recognized as a renewable powerhouse, continues to break renewable generation records with stunning spread and frequency. On 11 June 2017 – a windy, sunny, Sunday – UK network operated with 70% non-carbon electricity – setting an all-time record for low carbon intensity in power production, below 100g of CO2 per kWh. On that same afternoon, according to the National Grid, solar PV met 8.1% of the UK’s power needs, with wind at more than 25%. This follows a day in late May 2017 when solar briefly outshone the nation’s 8 nuclear power stations, and the country’s first coal-free day since the Industrial Revolution.

At noon on 7 June, 19.3 GW of renewables provided 50.7% of network’s load, another noteworthy milestone.

Records, as Olympic athletes know too well, are for breaking. The same obviously applies to new renewable records, now breaking with regular frequency around the world. �

Electricity Monthly

7 decades for hydro, 1 for wind to reach 80 GW

Source: U.S. Energy Information Administration, Preliminary Monthly Electric Generator

Inventory

Solar: From zero to 100 GW in 10 years

Source: http://reneweconomy.com.au/wp-content/uploads/2017/03/image002.png


Cars Running Out Of Gas The pace of EVs market gain is hard to ignore

he speed with which electric vehicles (EVs) are gaining on internal combustion engines (ICEs) is another stunning development catching automakers and oil companies by surprise. In early July 2017, Swedish Volvo, owned by China’s Geely Holdings Group, announced that it would phase out all ICE cars by 2019 focusing entirely on EVs and hybrids. Among many getting a jolt was

Tesla – which will increasingly be facing fierce competition in what is emerging as a crowded EV market with multiples of new models and offerings at ever lower prices. While as recently as 2011, there were barely a handful of fully electric or plug-in hybrids available in the huge US market – 17.5 million cars were sold in the US in 2016 less than 1% of which were EVs – the current number is around 50 and rapidly growing. Moreover, an increasing number of the new models are in the below $35,000 price range, making them affordable to many car buyers and in direct competition to traditional cars running on diesel or petrol. Volvo’s unambiguous announcement made headlines. But more notable is that virtually every major automaker is shifting towards EVs including giants like Toyota, VW, Daimler, and others who envision selling millions of EVs by 2025. Even more notable is the rapid uptake of sales in key markets around the world. According to Edmund Reid, a partner at Lazarus Research in London, the latest UK figures for June 2017 car sales indicates a 29% rise in the total number of EV and hybrid vehicles sold, with pure electric rising 38% and hybrid 24% while all new cars sold fell 4.8%. Electric and hybrid vehicles accounted for 4.4% of new car sales in June 2017 compared to 3.2% a year earlier (visual above). Reid said, “We expect EVs to follow an S-shaped adoption curve, with a number of key markets including the US, China and the UK at an inflection point where electric cars move mainstream,” adding:

“I am amazed at how blind most people seem to be to (the uptake of EV sales). It is a fundamentally better product: cheaper to run, quieter, no air emissions, more responsive, and more reliable. It is another classic case of people being conditioned by their past, which makes them blind to the present and oblivious to the future.”

The EV’s sheer pace of advancement is reinforced by regulatory and policy push coming from across the world, including in many developing countries. India’s Power Minister, Piyush Goyal, for example, recently announced that the country will phase out all petrol-powered cars out of the market by 2030, stating, “By (that date), not a single petrol or diesel car should be sold in the country.” In the meantime, India, like China, is shifting its power generation sector away from heavy reliance on coal, also vowing to refrain from building new coal plants after 2022 while investing in 175 GW of renewable capacity by the same date. India’s announcement, if implemented, is

T

EV growth trajectory Global stock of EVs, in 1000 left scale, and in UK, right scale

Source: IEA, Lazarus Research


far more significant than that of Volvo’s. France has also vowed to phase out petrol cars, as have a number of other countries and cities. Oil executives and oil exporting countries like Saudi Arabia who have long prospered on continued oil demand growth must be getting a jolt as well. Imagining a world with more EVs powered mostly if not entirely on renewable energy, and some natural gas, is radically different than the one they are used to. The supremacy of oil, already challenged, will dwindle. It is a matter of time. If Volvo won’t make any more petrol cars and India phases them out by 2030, oil majors need to start working on “Plan B.” Paris Accord, with or without the US, only adds to the urgency. � UK sales data from the Society of Motor Manufacturers and Traders (SMMT)

Surviving The Solar Eclipse Loss of solar generation should be manageable

n the old times, people would panic when the moon would get between the sun and the earth, engulfing all in its path in total darkness. As 21 August approaches, the moon’s shadow will streak across North America, starting in Oregon and ending in the Carolina’s. While no panic is expected, grid operators across America are preparing for the loss of solar power – which will be noticeable in

certain regions more than others. The California Independent System Operator (CAISO), for example, expects to lose as much as 6 GW, the equivalent of six 1 GW nuclear reactors, as the solar eclipse blocks roughly 58-76% of the solar radiation in the 10 to 10:30 am period, more in the north, less in the south as indicated in map below. As recently as a decade ago, solar eclipse would have had a marginal impact on the US power supply. In 2000, the country had as little as 2 GW of solar capacity; the figure today is closer to 43 GW and rapidly rising. In case of California, where roughly half of all US installed solar capacity resides, the impact will be more than marginal. In early March this year, utility-scale solar alone provided more than 40% of CAISO’s net load during the mid-day hours. CAISO says it is ready to make up for the loss of solar-generated power with hydroelectric and gas-fired generation. It will need to ramp up and down as much as 100 MW of substitute energy per minute during the eclipse. Anyone interested to see how the grid operator will manage the rapid loss of solar-generated power can virtually watch it on CAISO website. If anything is going to crash on 21 Aug, it may be CAISO’s website, overwhelmed beyond its normal capacity to handle the surge of onlookers. �

I

Solar Eclipse: No problem

Source: CAISO


Innovation, Disruption And Utility Business Model Like other established businesses, utilities ripe for disruption

y now the narrative on the rapid transformation of the electricity sector driven by the 3Ds – decentralization, de-carbonization and digitization – is well-known. Far less, however, is known about how this transformation is going to materialize, when and who may be the ultimate winners as the incumbent’s traditional business models are disrupted. Not surprisingly, there are

as many predictions on the end game as there are analysts and experts following the developments. Writing in a recently published book titled Innovation & Disruption at the Grid’s Edge, this newsletter’s editor makes the following rather obvious observation:

“… innovation and disruption enabled by new technologies – notably information &

communication technology (ITC) – are transforming the electric power sector at an unprecedented pace … allowing a growing number of previously passive consumers to become active prosumers.”

Prosumer, of course, refers to a consumer who is consuming part of the time and producing at other times, say a homeowner with rooftop solar panels. He adds,

“These empowered prosumers … can reduce their dependence on the services traditionally delivered by the assets and infrastructure upstream of the meter by increasing their reliance on distributed energy resources (DERS), which by definition, are provided, consumed and possibly stored locally.”

You need not be a rocket scientist to guess what happens next.

“With the expected emergence of affordable storage, some prosumers can go a step further by becoming prosumagers; this they can accomplish by storing the excess generation for use at later times. With zero net energy (ZNE) buildings a virtual reality, it is not farfetched to envisage some prosumagers operating virtually independent of the grid for the most part, relying on the network only sporadically, for balancing services and reliability.” Is this a big deal? As described in other chapters of this edited volume further described at the end of this newsletter, it is indeed. The rapid transformation of the electric power sector has barely started, but an outline of how it may evolve and who will be the winners and losers is beginning to emerge. Future prosumagers, enabled by clever intermediaries offering yet to be developed open platforms accessible through ubiquitous mobile devices are likely to disrupt the incumbent utilities’ business model just as Uber and Airbnb disrupted established players in their respective industries.

B

On the market: Solar tiles to cover exterior of buildings

Prosumage: Stand-alone solar light

generates & stores energy totally

off-grid


Sioshansi, capturing the flavor of contributions of other scholars, experts and academics to this compendium, goes on to say:

“Add a host of new intermediaries with sophisticated capabilities who can aggregate flexible loads and distributed generation – which can be effectively bid into wholesale markets – and one can see the power of aggregation enabled by automated machine-to-machine (M2M) communication. Advances in artificial intelligence (AI) are likely to lead to proliferation of services offered by such intermediaries who can provide valuable services to grid operators and distribution networks while better managing energy consumption and reducing participants’ energy service costs.”

He adds,

“But innovation and disruptions don’t end there. There is increased interest in transactive energy and peer-to-peer (P2P) trading facilitated by platforms that allow consumers, prosumers and prosumagers to better manage their consumption, distributed generation and storage, and not just internally but with their neighbors and among their peers. While many regulatory obstacles remain to be resolved, the distribution network physically connecting the participants is already in place.”

“Bitcoin and Blockchain technologies – among others – offer new opportunities for such transactions to take place among and between consumers using the existing distribution network and related infrastructure.”

“Microgrids, another promising emerging technology, offers individual customers and/or a collection of customers to better manage their consumption, distributed generation and storage, allowing them to operate independent of, or parallel to, the super-grid …”

The implications of such developments on the incumbents in the utility sector are beginning to be felt and speculated. But what has been experienced to date, say 5+ GW of distributed solar rooftop generation in California and even more in Australia, do not begin to count as even the tip of the iceberg compared to what may follow. As the consumer, to prosumer to prosumager scenario unfolds, as many expect, the definition of electricity service and – more important – how it is priced – will undoubtedly undergo radical transformation. Viewed in this context, bundled retail tariffs – designed for the one-directional networks of the past century with passive consumers – which is still prevalent nearly everywhere in the world, is clearly outdated. Volumetric tariffs no longer capture the emerging value proposition offered by the grid – which offers connectivity, balancing services, frequency control, voltage stability and 24/7 reliability most coveted by increasingly sophisticated prosumers or prosumagers rather than delivering a large volume of kWhs.

Elon Musk & Patrick Pouyanne think alike: Integrated electricity services

Source: Tesla unveils residential solar roof and new Powerwall battery, Utility Dive, 28 Oct

2016


This suggests that the power sector is on a path not unlike that of mobile phone industry where most users pay a fixed monthly fee based on a 2-year contract with a network service provider. While the analogy is not perfect – e.g., currently electrons cannot be delivered without copper wires – it is clear that mobile phone service is increasingly about connectivity and access to the network rather than the volume or frequency of calls. Subscribers choose a provider on the basis of the ubiquity and reliability of its network access, the strength of the signal, bandwidth and speed. They are rarely charged on a per-call or per-minute basis. The cost of service is much better reflected, and collected, through a fixed fee almost regardless of the volume of service. The same goes for garbage collection and many other services where the fixed costs account for the overwhelming percentage of cost of service. Another reason why electricity service is moving in this direction is the fact that as the proportion of renewable generation on many networks increases, the cost of electrons – the commodity portion of service – is rapidly falling, eventually approaching zero, occasionally going negative. The kWhs are already relatively cheap and getting cheaper over time. Charging based on volume is outdated and will become unsustainable as a means of covering the cost of the delivery network. Moreover, with the advent of zero net energy (ZNE) buildings, the volume of consumption in many places is flat or falling. The implication is rather clear: tariffs based exclusively or primarily on volumetric consumption are unlikely to deliver sufficient revenues, nor do they make much sense. Moving towards the inevitable end, however, is not easy for a number of reasons:

• The path and pace forward looks different to different stakeholders who are often competing with conflicting views and perspectives;

• The incumbents don't like being disrupted and/or becoming irrelevant; and, most important

• The regulators, who control all aspects of the business in most markets, are having a difficult time following the rapid technological changes taking place, let along being in a position to lead or encourage innovation.

This is evident, for example, in the current piecemeal and fragmented treatment of distributed energy

resources (DERs) and net energy metering (NEM) in various parts of the US. The value and/or the cost of DER resources, poorly understood, need to be better monetized and reflected in future tariffs, which must increasingly account for the bi-directional flows of electrons based on time, location and their value or impact to/on the distribution network. Consider the following examples:

Integrate solar into the design from start, rather than as an “add-on” later on

Source: Onyx


• A solar rooftop panel feeding a huge surplus – in excess of local consumption – to the distribution network on a cool, breezy, sunny day is not adding much value in a place like California, with its famous “Duck Curve” illustrated on page 5;

• By contrast, an electric vehicle or distributed storage device of any shape, form or size, taking unneeded excess electrons from the same circuit, and injecting it back after sunset, is providing a highly valuable service.

Current tariffs and regulations, with a few exceptions, do not fully or even partially recognize, monetize, reward or penalize for the vastly different cost/value of such resources. The good news is that regulators in states including California, Hawaii and New

York – with the latter’s pioneering reforming the energy vision (REV) – are beginning to address how the changing role of the distribution network will redefine the role of stakeholders, including better clarity on who can do what, when and where and under what types of rules, rewards and investment recovery. A number of such issues are covered in Innovation & Disruption at the Grid’s Edge.

In the book’s Preface, Michael Picker, the President of California Public Utilities Commission (CPUC), says he has “… chosen to focus actively at the CPUC on more tangible tasks that can deliver benefits quickly, rather than questioning the fundamental nature of utility business models,” adding,

“The overarching philosophy I have followed in pursuit of more distributed energy future can be described as ‘Walk, Jog, Run.’”

With so much on his plate, so to speak, the measured approach is understandable. Picker goes on to say,

“The vision we (the CPUC) are pursuing is that, over time, DERs will be able to benefit from ‘stacking’ multiple value streams.”

Stacking, of course, refers to the fact that DERs, depending on when, where and how they feed or withdraw from the network, imply costs or value, often from multiple sources, as the examples of the solar PVs and EVs (above) described. In this context, stacking entails improved monetization of the multiple benefits of DERs while – paradoxically – acknowledging their increased demands on the distribution network – for example, with high concentrations of PVs and/or

Vanishing electricity demand growth: It is contagious

Source: Poyry

Future is distributed: Apple’s new headquarter is zero net energy


EVs on certain distribution circuits. California’s regulators are already sensitized to the new realities of DERs and other innovations and disruptions taking place at the so-called grid’s edge referring to the intersection of the distribution network and customers’ meter and beyond- or behind-the-meter. On this, Picker adds:

“Targeting DERs to high-value locations also necessitates development of a tool to highlight areas of the distribution grid where DERs can provide location-specific values, such as distribution capacity deferral and voltage support.’

Likewise, in the book’s Introduction, Audrey Zibelman, former Chair of the New York Public Service

Commission and now the CEO of the Australian Energy Market Operator (AEMO), explains that:

“The crux of the utility changes contemplated in REV (reforming the energy vision) can be summarized into the following 5 areas, many of which are touched upon by authors of the [book’s] following chapters:”

• Creation of a Distributed System Platform (DSP);

• Promotion and encouragement of innovation;

• Regulation of the earnings model;

• System information and transactive markets; and,

• Fair and cost effective universal access. Two other regulators, Paula Conboy, Chair of Australian Energy Regulator (AER) and Johannes

Mayer, Head of Competition & Regulation at E-Control Austria, echo similar sentiments in the book’s Foreword and Epilogue, offering perspectives from Australia and Austria, respectively.

The key question for the incumbents in the business, retailers, distribution companies, generators and gentailers, is how to survive – and hopefully thrive – the transition and the disruptions. That is the proverbial $64,000 question. The Future of Electricity: New technologies Transforming

the Grid Edge, a report by the World Economic Forum in collaboration with Bain & Co. released in March 2017 and previously covered in the June 2017 issue of this newsletter, offers 4 broad recommendations for utilities, network operators and the regulators in moving forward:

• Redesign regulatory paradigm;

• Deploy enabling infrastructure;

• Redefine customer experience; and

• Embrace new business models. The challenge is how to implement the sensible words into actionable strategies given the many moving parts and the complicated and highly unpredictable regulatory environment in which many utilities operate. With so many moving parts, uncertainties, and pitfalls, it won’t be easy. �

Future is Distributed

Source: The future of electricity: WEF, March 2017


Innovation and disruption at the gird’s edge, published in May 2017 by Academic Press, is further described at

the end of this newsletter including the Table of Contents. Copies may be ordered with 30% discount using Code

ENER317, shipping included, at

https://www.elsevier.com/books/innovation-and-disruption-at-the-grid-s-edge/sioshansi/978-0-12-811758-

3?start_rank=1&producttype=books&sortby=sortByRelevance&q=sioshansi

Half Of US Nuclear Reactors Losing Money Low wholesale prices challenge the nukes

uclear power has not had much good news for quite some time. Even the die-hard nuclear proponents are finding it difficult to maintain a glimmer of optimism. And the latest study by Bloomberg New Energy Finance (BNEF) makes a sad story even more gloomy. The study, released in June 2017 claims that 34 of the 61 nuclear plants operating in the US are losing

money. If existing ones are losing money, what hope is there for any new reactors? The demise of nukes is not because they are slacking off, operating inefficiently, unreliably, unsafely or have operational flaws. They are losing money because the wholesale prices in markets across the US are too low. And that can be blamed on cheap and plentiful natural gas, zero-marginal cost renewable

generation rapidly penetrating markets and virtually flat demand due to improvements in energy

efficiency. The BNEF reports that nuclear plants receive between $20 and $30 per MW/h for electricity produced while it costs them an average of $35 per MW/h to operate. The problem, according to BNEF is pervasive, applicable to nearly all the reactors owned by Exelon,

Entergy and FirstEnergy, the 3 largest nuclear operators. And if the big and experienced operators cannot manage to run their nukes profitably, what hope is there for the rest? Acknowledging the problem, Entergy says US nuclear generators are facing financial challenges due to sustained wholesale power price declines and other unfavorable market conditions. In May 2017, Exelon, the owner of the Three Mile Island Nuclear Generating Station in southeastern Pennsylvania, announced its intention to retire the plant in 2019 unless the company is given assistance by the state to help keep the plant financially viable. This is the 6th announced nuclear retirement in the past 7 years According to the Energy Information Administration (EIA), 5 nuclear plants that retired in the past 4 years had a combined capacity of nearly 5 GW. In other developments, in late July, Georgia Power and Southern Nuclear announced they will assume

N

One by one they go

Source: U.S. Energy Information Administration, Nuclear power plant data, Nuclear Regulatory

Commission, and IAEA Power Reactor Information System


project management of the 2-unfinished nuclear reactors in Georgia from Westinghouse, which has filed for bankruptcy protection – indicating that they wish to continue with construction. It is a fateful decision opposed by many who say the best option is to cut losses and abandon the half-finished nukes. The reactors may turn out to be money-losing white elephants when and if completed. Toshiba has agreed to pay $3.68 billion for Units 3 and 4 of the Southern Company’s Vogtle Plant, already 3 years behind schedule and $1.3 billion over budget. � 14 June - Bloomberg

The Rise of Ethical Investing Slowly, socially responsible investing is getting traction

nvestors chronically worry about their hard-earned money, where and how to invest their savings, how much they may need when they retire, and so on. Add concerns about environmental causes, climate change, social justice, and sustainability to the list of worries and that leads to the rise of ethical investing. The fact that a growing number of investors – affluent millennials and women in

particular – appear to sleep better at night knowing that their savings are doing no harm or possibly some good is the main driver. And if they can earn decent returns while being socially responsible, why not? Apparently, that is not difficult. According to an article in The Wall Street Journal (19 June 2017), evidence suggests that socially responsible investments can outperform others over the long run. The WSJ refers the MSCI KLD 400 Social Index reporting that since 1990, it has returned an avg. of 8.4% a year, vs. 7.6% for S&P 500 index, a broad measure of US stock market performance. That may not sound like a lot, but accumulated over a decade or more even small variations in the compounding rate can make a huge difference. What is more is that apparently, investors don’t have to sacrifice returns to be socially ethical – whatever that means. While still in its infancy, ethical, socially responsible, or environmentally sustainable investing can no longer be dismissed as irrelevant or inconsequential. Growing concerns about climate change, loss of

biodiversity and natural habitat and short-sided pursuit of profit regardless of its longer-term environmental impacts are on the rise. There are already telltale signs of pressures building on heavily polluting industries that a cleaner image can improve their bottom line (box on page 17). The environmental and climate activists have found that their message is beginning to resonate with more investors who are environmentally conscious and who – in turn – can exert pressure on publicly traded companies they invest in. Another prime target are insurance companies. If they refuse to insure heavily polluting companies – e.g., due to their increased risk exposure to climate change – then it puts increased pressure on such companies to reduce their polluting activities. Activists turned up at a meeting of insurance CEOs at the Ritz Carlton Hotel in San Francisco in June 2017 with a banner that read: “The World’s Best Insurance? Keeping Coal in the Ground,” interrupted the opening session of the gathering while a plane displaying the message, “Insurers:

Unfriend Coal Now” flew overhead. The “unfriend” resonated with the local press coverage, being close to Facebook’s headquarter in nearby Silicon Valley. Tess Geyer, a local climate activist, said: “……insurance companies have warned about climate risks for more than 40 years, yet they continue to insure and invest in coal projects to this day. This has to stop.

I


Our best insurance is to keep fossil fuels in the ground.” The San Francisco protest was part of a global campaign to pressure insurance companies to stop insuring coal mining and coal power projects coordinated by the Unfriend Coal Coalition, which is supported by a growing network of activists and environmental organizations around the world. Canadian tar sands facing strong headwind

Extracting oil from tar sands, abundant in places like Alberta and Venezuela, is not easy – and comes at a high

cost, environmental as well as economic. With price of oil at historical lows, who needs the negative publicity that

comes from the heavily polluting tar sand oil?

While the low price of oil is most likely the main driver, shedding the bad public image associated with tar sands

must also be playing a role, especially after the Paris Climate Accord ratified by 195 countries.

In June 2017, the Energy

Information

Administration (EIA)

reported that an

examination of the annual

reports of 68 publicly

traded oil companies

indicated that their

aggregate proved liquids

reserves declined in 2016

for the 2nd consecutive

year. Moreover, the

decline in proved reserves

was heavily concentrated

in a few companies that

reduced their estimated

reserves from Canadian oil sands projects.

The 68 oil companies included in the EIA analysis are listed on US stock exchanges and consequently required to

report their proved reserves annually to the Securities and Exchange Commission (SCE). Collectively, their

production represents about 25% of the global total. �

Many non-governmental organizations (NGOs), including 350.org, Rainforest Action Network, Greenpeace, Friends of the Earth, are exerting pressure on the top 25 global insurance companies to:

• Stop insuring coal projects and divest from coal companies;

• Move away from other extreme fossil fuels (described below); and

• Increase investments in clean energy sources. These efforts, while spreading, have a long way to go to make a dent in massive investments in the energy sector. In June 2017, a report released by Rainforest Action

Network, BankTrack, Sierra Club and Oil Change

International, in partnership with 28 organizations around the world, revealed that, despite recent gains (table on right), the world’s biggest banks and financial institutions continue to fuel climate change through the financing of what they

At such low oil prices, who needs the negative image of polluting tar sands?

EIA’s website at: https://www.eia.gov/todayinenergy/detail.php?id=31592.

Extreme Fossil Fuels: Falling but not fast enough

Year Funding for extreme fossil fuels

2014 $92 billion

2015 $111

2016 $87

Source: Rainforest Action Network et al, June 2017


call extreme fossil

fuels. It said, “… despite this

overall reduction, banks are still funding extreme fossil fuel projects at a rate that will push us beyond the 1.5 degrees climate change limit determined by the Paris Climate

Agreement.” To meet the targets of the Paris Accord,

the report said,

“While the drop-off is a move in the right direction, it is vital that this become an accelerating trend and not a blip…….”

According to Lindsey Allen, Ex. Dir. of Rainforest Action Network, JPMorgan Chase was the worst culprit by investing $6.9 billion ‘into the dirtiest fossil fuels on the planet.”

“On Wall Street, they are number one in tar sands oil, Arctic oil, ultra-deepwater oil, coal

power and LNG export.” It added, “For a company that issues statements in favor of the Paris Climate Accord, they (Chase) are failing to meet their publicly stated ambitions.” The report, Banking on Climate Change, ranks bank policies and practices related to financing in the most carbon-intensive, financially risky, and environmentally destructive sectors of the fossil fuel industry. Yann Louvel, BankTrack's climate and energy campaign coordinator said, "There is simply not enough time left for more excuse-making, more fiddling at the policy edges and more egregious bank investments in extreme infrastructure projects like pipelines that transport tar sands oil.” Nobody, no matter how big or powerful, is immune to this type of name-calling and public pressure. The pressure on extreme fossil fuels is spreading beyond the rich countries of the west as China, India and South

Korea, to name a few, are attempting to reduce their coal consumption. The new President of South Korea, Moon Jae-in, for example, has announced his commitment to phase

Are your investments ethical?

Source: Banking on climate change, Fossil fuel report card 2017, by Rainforest Action Network, BankTrack,

Sierra Club and Oil Change International

Ethical investing: Miniscule, but growing

Source: Arabella Advisors, Dec 2016


out all coal and nuclear power stations, a major shift in the country’s energy policy. He said, “We will abolish our nuclear-centered energy policy and move towards a nuclear-free era,” adding, “So far, the country’s energy policy focused on low prices and efficiency. But this should change now with our top priority on public safety and the environment.” Coal, of course, gets low marks when it comes to public health and the environment. A recent study by Harvard Medical School, for example, found that the true cost of coal is three times more than its apparent or current market cost, making it one of the most expensive forms of energy. At its latest annual meeting held in South Korea in June 2017, The Chinese-led Asian Infrastructure

Investment Bank (AIIB), announced that the bank would not be investing in coal. Its Vice President Thierry de Longuemar confirmed that the bank plans to stay away from financing coal-fired power plants. In a speech, AIIB’s president, Jin Liqun, said the bank will have an important role to play as a facilitator and supporter of the Paris Agreement, and that the bank is “actively working to facilitate our clients’ transition to a less carbon-intensive energy mix.” Ethical investing, you may say, is getting traction even if no one really knows what it exactly entails. The old and tired argument that the only option is cheap coal or poverty no longer resonates, even in developing countries such as Bangladesh, which are extremely vulnerable to sea level rise. If China-led AIIB can focus on sustainable energy, how much longer can the likes of JPMorgan Chase continue to justify investing in coal? �

Banking on Climate Change Report

Trump’s Energy Week Excludes Clean Or Green Trump’s energy agenda scarcely mentions renewables

ttempting to bring a resemblance of normalcy to an otherwise chaotic White House, President Donald Trump has tried to focus on a hot topic each week. The last week of June was Energy Week, during which he declared, again, an end to ex-president Obama’s

“war on coal” and a new age of US energy dominance. It rhymes with his favorite slogan, “Make America Great Again” and had all the usual Trumpian trimmings – rolling back Obama-era regulations on coal, oil and shale gas production and environmental restrictions to protect the environment. In a speech at the Department of Energy (DOE), he indicated that he wanted to resurrect two dead or dying energy sectors, nuclear and coal, open more federal lands and offshore sites to oil and natural gas drilling. It was the sort of speech former vice president Dick Cheney – whose energy vision was dig, glow and

burn, referring to coal, nuclear and oil/gas – would wholeheartedly endorse. But that was not the end of it. Trump proceeded to self-congratulate his decision to pull the US out of the Paris climate

accord, endorsed by 195 countries, and made glowing references to the Environmental Protection

Agency (EPA) decisions to rescind much of what Obama had tried to do to reduce US carbon emissions and other provisions to protect the air the Americans breath and the water they drink. The president noted:

A

Source: The Economist – 1 July 2017


“We don’t want to let other countries take away our sovereignty and tell us what to do and how to do it.”

Swimming against the flow, Trump stood out as the only world leader at the G20 Summit in Hamburg, Germany in July on its single-handed opposition to the Paris Accord. As for his DOE speech, there was barely a mention of renewable energy, energy efficiency or energy-

related R&D while promising expedited approval of pipelines, LNG export terminals and related infrastructure. The president’s energy message was unequivocal, his vision exclusively focused on extraction, production and consumption. The reaction to his message – as is often the case – was immediate and predictable. The environmental community – not a big fan of his agenda – were universally outraged. Rhea Suh, president of the Natural

Resources Defense Council (NRDC), expressing the sentiment of many, said, “Trump’s dirty energy nightmare is a wake-up call for the country,” adding:

“We get the (environmental) harm … and the big oil, gas and coal take the profits.” Contrary to Trump’s assertions, US has enjoyed increased energy production under Obama and a significant boost in renewable energy, now supplying 10% of the country’s electricity (article on page 6). Other aspects of the president’s agenda also appear to be based on alternative facts, mostly or totally divorced from reality. As noted in articles in this issue, coal and nuclear are in decline, incessantly losing market share to renewables in the power sector. Clean coal technology appears no closer to reality (article on page 21). Few oil or gas companies are seeking access to additional federal land to dig for coal, oil or gas – they already have more than they need. Oil pipelines already approved are finding few takers. Most annoying to Trump, however, must be the backlash following his decision to pull the US out of the Paris Accord. During his Energy Week, US mayors meeting at their annual convention in Miami, FL, approved a resolution calling for 100% renewable energy in cities across America by 2035. Commenting on the mayors’ resolution, Sierra Club Ex. Dir. Michael Brune said, “What better way to kick off Donald Trump’s energy week than with a message from our nation’s mayors that cities are ready for 100% clean and renewable energy.” It was another sign of the times: a divided country led by a divisive president. As noted by The

Economist in a special report on a divided country (see cover on page 19), Trump’s loyal supporters approve of everything he says and does while his detractors don’t like either. �

Coal Mining Jobs To Die For, Literally A stiff price for saving a few dying jobs

or reasons that baffles many experts and non-experts alike, the Trump Administration seems overly keen on coal, doing all it can to revive coal mining jobs and prevent old, inefficient and heavily polluting coal-fired plants from retiring. As explained elsewhere in this issue, the Administration appears to have picked a losing battle and seems committed to pay a stiff price to

deliver on campaign promises. In a blog post on 12 June 2017, titled Coal Mining: Jobs to Die For? Maximilian Auffhammer, a professor at University of California at Berkeley, examines the health effects of coal mining and burning.

F


It is not a pretty picture. Referring to a 2013 MIT study, he says pollution from coal electricity generation causes 52,000 premature deaths annually, mostly from the fine particles associated with coal-fired generation leaving out morbidity and damages to ecosystems including agricultural production. Auffhammer points out that coal-fired generation creates on average 5 times the pollution of natural gas per unit of output. More telling is a back-of-the-envelope calculation that leads him to conclude: “Someone dies each year for everyone to two coal mining jobs,” adding, “Yes. You read that right. Let that sink in. To be completely fair here, we are assuming that coal is being replaced with some happy shiny non-polluting renewable energy source.” Using a 2014 IMF study that calculated the social costs of coal from air pollution – excluding CO2 or climate change related costs – Auffhammer estimates the external costs of US coal mining at $1.79 million per coal miner. Given that there were about 50,000 jobs in coal mining in the US at the end of 2016 it amounts to roughly $900 billion.

“Let that number sink in for a second. To the extent that these costs are not priced or regulated, they are considered as an implicit subsidy to fossil fuels.”

Which brings us to the title of his blog: Coal Mining: Jobs to Die For? � 12 June, Coal Mining: Jobs to Die For?

Clean Coal Suffers Another Blow Much hoped for solution is no panacea for coal

or some time, proponents of coal in the US, Australia, and many other coal-dependent economies, have put their faith in the promise of so-called clean coal technology, also

referred to as carbon capture and sequestration (CCS). The basic idea – it comes in many varieties and flavors using different technologies – is to capture most if not all the carbon associated with coal combustion and store it somewhere, usually in a sealed underground cavern or reservoir. In some varieties, the coal is decomposed with the carbon captured The fundamentals are known and have been successfully demonstrated on laboratory scale. The challenge is to scale it up to commercial size while keeping the costs manageable. And that, to put it mildly, has

F

Coal’s diminishing market

Source: U.S. Energy Information Administration, Short-Term Energy Outlook (April 2017)

Coming Soon: Wind to top coal in Texas ERCOT’s energy mix for all of 2016, in %

Source: ERCOT


proven to be a challenging nut to crack. The coal lobby in the US and elsewhere says it is only a matter of time, more R&D funding, and more patience. The anti-coal lobby calls the whole idea a farce and dismisses clean coal as and an oxymoron. Speaking at Bloomberg New Energy Finance conference in April 2017, Former New York Mayor Michael Bloomberg called carbon capture “total bullshit,” a “figment of the imagination" and “nonsense.” Undaunted, Southern Company, a vertically-integrated utility with subsidiaries serving the Southeast US, which operates in states with no organized wholesale markets, decided to give clean coal technology a try. One of its subsidiaries, Mississippi Power, embarked on an ambitious project to develop and demonstrate the viability of the concept. The 582 MW integrated gasification combined cycle (IGCC) plant in Kemper County, Mississippi was designed to convert locally mined lignite to synthesis gas, then applying a new technology, capture and store up to 65% of the plant’s carbon emissions. The plant was projected to be placed in service in May 2014.

The project’s original cost was estimated around $2.4 billion, net of $245 million in grants from the US Department of Energy (DOE) and other favorable provisions from the Mississippi regulators. That figure didn’t include the cost of the lignite mine and additional hardware including the cost of the CO2 pipeline and storage facilities. In late May 2017, after 3 years of delays, the company announced that the project’s costs have now climbed to $7.5 billion and said that the facility “is not currently fully operational.” An earlier analysis had concluded that “projected long-term natural gas prices, and to a lesser extent an increase

in operating costs of the project, negatively impact the economic viability of Kemper.” Translated into plain English: The plant cannot compete with current, or projected, low natural gas prices.

Defending the company’s decision to proceed with the IGCC technology, Southern Co.’s CEO Thomas

Fanning explained to analysts – with some justification – that, “When we had this plant certificated, we all thought that gas prices were going to be double digits and there was some spread that were way higher than where we are now.” In plain English: Sorry, we guessed wrong. Perhaps, but to bet so much money – ratepayer money – on an unproven technology seems like a poor decision in retrospect. Making matters worse for Southern Co. is the fact that the fate of its 2 unfinished nuclear plants in Georgia (article on page 15), also hang in the balance, as well as the balance sheet, now that Westinghouse Electric has filed for bankruptcy protection. Knowing what he knows today, Mr. Fanning, one would assume, probably wishes he had not started either venture.

An analysis done by the Mississippi Public Service Commission (MPSC) concluded that the Kemper IGCC is only economic with much higher natural gas prices moving forward – not a likely scenario in view of the US shale gas bonanza.

The plant, which has been generating power since August 2014 using natural gas, has “a lower net present value of life cycle costs than the Kemper IGCC.” Again, English translation: Everyone will be better off with Kemper running on low-cost natural gas – forget the IGCC component.

Who needs coal?


Following the latest revelations, MSCP gave the parties 45 days to sort things out. Unsurprisingly, the operator of the plant announced that they no longer plan to utilize coal at the facility, running it instead on cheap natural gas. Having spent 7 years and $7.5 billion, the operators decided that the coal gasification process was more complicated – and expensive – than initially assumed. Coincidentally, at about the same time, two European power companies France’s Engie and Germany’s Uniper have also decided to withdraw from a test project to capture and store carbon dioxide generated by one of several major new coal plants in the Netherlands – another setback for “clean coal” technology. Reuters reported that the two companies informed the Dutch government they no longer intended to participate in the CCS project, the biggest of its kind in Europe. Anyone hoping for a viable CCS technology at a cost that would compete with today’s low natural gas prices – especially in the US – must wait a while longer. �

DOE’s Report: Dead Before Arrival Rick Perry’s reliability concerns appear unfounded

n April 2017, the US Energy Secretary Rick Perry requested his staff to produce a report on the importance of baseload generation in maintaining the US grid’s reliability. He expressed “concerns about the erosion of baseload resources.” When the head of DOE tells his staff empathically that he is concerned about “erosion of baseload resources” in the US generation mix, and President Donald

Trump talks incessantly about US “energy dominance” and the administrator of the Environmental

Protections Agency (EPA), Scott Pruitt, rescinds existing and proposed environmental regulations affecting power generation, what do you think will come out of the DOE staff’s report? Unsurprisingly, the DOE’s staff report was correctly identified as a thinly veiled attack on the growth of renewables now dominating new investment in the power sector universally, as reported in related articles in this issue. The agenda of the Trump Administration and many Republicans in both houses of Congress is to support fossil fuels – coal, oil, shale, natural gas – and nuclear energy and they see renewables, energy

efficiency and environmental regulations as obstacles to this agenda. Forget about Rick Perry’s “concerns” about the erosion of baseload generation. What Perry asked his hapless staff was, give me a report that says US should ban or slow investment in renewable generation so that we can revive a dying coal industry while producing more oil and shale gas and, by the way, don’t worry about the environmental consequences since the US is no longer part of the Paris Accord on climate change and – another big bonus – a defanged EPA is no

I

Coal: Crowded out of market

Source: Advancing Past Baseload to a Flexible Grid, prepared by The Brattle Group

for NRDC, June 2017


longer going to intervene, enforce the existing regulations or get in the way of doing business. Don’t worry, be happy.

The environmentalists and the renewable energy lobby were quick to recognize the plot for what it was and decided to expose it as best and as fast as they could. A flurry of reports, studies and Op-ds surfaced before the DOE’s staff had a chance to complete their own report. And as this editor sees it, the verdict is out before the DOE could provide Perry with what he wanted to hear, more alternative facts. Among the studies that refutes Rick Perry’s “concerns” is a 26 June report by The Brattle

Group, a consultancy, that – among other things – called the concept of baseload power as increasingly antiquated, bordering on irrelevant, to an emerging future grid that is

progressively getting greener, cleaner and more decentralized while maintaining high levels of reliability. Growing levels of variable renewable generation is a challenging issue for grid operators, no doubt, but the solution to this problem is not more polluting baseload coal or even non-polluting baseload nuclear. The solution to more variable renewable generation is

• More flexible generation – not baseload coal or nuclear;

• More price responsive demand;

• More energy storage, both utility-scale and distributed;

• Better interconnected grids with increased diversity of renewable resources;

• Organized markets spread over wider geographical footprint; and

• Smart distribution networks that better integrate local distributed energy resources (DERs) with variable utility-scale renewable generation.

This is the recipe that countries like Germany and Denmark, with high renewable penetration levels are pursuing. And their grid’s are far more reliable than those of the US, at least as measured by the average minutes of outages per year. In similar vein, another report by The

Analysis Group prepared for Advanced Energy Economy (AEE) and the American Wind

Energy Association (AWEA), also released in June 2017, points out that Mr. Perry – as well as Mr. Trump and his supporters – are looking in the wrong place if they are truly concerned about the reliability of the grid.

Who needs baseload?

Source: Advancing Past Baseload to a Flexible Grid, prepared by The

Brattle Group for NRDC, June 2017

Renewables gaining ground

Source: Electricity Markets, Reliability and the Evolving US Power System, June 2017


Among many noteworthy findings refuting Perry’s concerns, The Analysis Group report highlights the experience of ISO-New England, which had less than 2% of its generation from coal in 2016. Did the lights in New England flicker due to lack of baseload coal? Commenting on the subject, ISO-NE’s CEO, Gordon van Welie, recently stated: "...coal is now largely irrelevant in New England...and everyone else says we need coal to maintain resilience? That just doesn't compute for me.”

ISO-NE’s CEO went even further, unequivocally stating that he has no concern that additional

renewables would adversely affect the grid’s reliability:

"The current market design should ensure adequate resources to meet the reliability standards that the resulting resource mix appropriately complements the operational capabilities and variability of renewable resources."

Of course, statements such as this are not what Mr. Perry and his cohorts want to hear, and they are unlikely to be persuaded otherwise. The Analysis Group’s report says

“There is little doubt that the transition under way in the (electric power) industry will lead us to a power system resource mix and consumption patterns quite different from what the industry has grown accustomed to in recent decades.”

It points out that, “The recent changes (in the US generation mix) result from a combination of forces …” most important the persistently low cost of gas and the falling cost of renewables. These forces

“… have lowered wholesale electricity costs in most parts of the US, and have contributed to recent declines in consumers’ overall cost of living.”

Mr. Perry: Don’t worry, lights are not flickering

Source: Electricity Markets, Reliability and the Evolving US Power

System, June 2017

More renewable, and not less reliable

Cumulative capacity additions

Source: Electricity Markets, Reliability and the Evolving US Power System, June 2017


On the central issue of whether the changes in the mix of generating resources could undermine power system reliability, it says, and we have paraphrased:

• “The system will inevitably continue to change in the future as it has in the past …”

• … and “As this occurs, it will be important to continuously evaluate the reliability implications …” on the system; and

• “Fortunately, existing FERC, NERC, ISO/RTO, state, and utility planning and regulatory functions ensure that evaluation will occur and that reliability will be maintained.”

In other words, Mr. Perry need not worry. Both reports, hastily prepared and released prior to the so-called Energy Week, (article on page 19) were intended to unveil President Trump’s main energy agenda, which is heavily focused on fossil fuels at the exclusion of renewables and energy efficiency and disregard for environmental impacts of fossil fuel investment, extraction and consumption. Commenting on the Brattle Report, Kevin Steinberger of Natural Resources Defense Council (NRDC), an environmental NGO, said, “The reality is that baseload power is not a technical term and is not needed for grid reliability.”

Instead of focusing on baseload power, he said, grid operators today are concerned about having “flexible” generation resources, including quick ramping gas-fired power plants, demand response programs, and energy storage. Energy, as everyone recognizes, is heavily political and politicized. The same is true in Germany, phasing out its perfectly safe nuclear reactors by 2022, in Japan, unable to bring its remaining nuclear reactors back on line, in Australia, with its polarized views on the future of coal vs. renewables and the reliability of the grid as described in the Finkel Report, covered in July 2017 issue.

In a 16 June Op-Ed in San Francisco Chronicle titled Renewable energy no threat to electric grid as

Trump aides claim, David Hochschild, a commissioner at the California Energy Commission (CEC) and David Olsen a member of the California Independent System Operator (CAISO) Board of Governors wrote, in part,

“US Energy Secretary Rick Perry recently signaled that the Trump administration may soon seek to undo all state and local renewable energy policies across the country on grounds that clean technologies such as wind and solar power pose a threat to grid reliability and, therefore, jeopardize national security.”

“While a convenient myth for the fossil-fuel industry, this is nonsense.”

“What happens when the wind doesn’t blow, or the sun doesn’t shine? To answer that question,

Don’t blame renewables for outages

Source: Electricity Markets, Reliability and the Evolving US Power System,

June 2017


one needs to examine the many countries that have more renewable energy than we do.” Looking at Germany and Denmark for clues they point out that,

“… both nations have electric grids that are 10 times more reliable than America’s. Germany and Denmark average 23 and 24 minutes of customer outages per year respectively, while the US averages 240 minutes per year.”

Customer outages, of course, are not generally caused by capacity shortfalls in generation or reliability issues on transmission lines, but shortcomings of the distribution network, the low-voltage local poles and wires that connect customers to the much more reliable high-voltage network. And this is where Rick Perry’s reliability concern must focus, not on baseload coal. As this newsletter was being finalized an “unofficial” draft of DOE’s report was leaked to the press – as happens in Washington, DC, with regular frequency these days. It apparently contradicts what Mr. Perry had wanted to hear and had specifically asked his staff to conclude. From what this editor has been able to learn, the unofficial draft, already delayed several times apparently due to internal conflicts about what it should or should not conclude – says renewable power sources are not undermining the US electric grid’s reliability and stating that the grid is as reliable as ever. The official report, which is expected to be the “politically-correct” version of the leaked draft may simply skip many of the study’s inconvenient truths before it is released to the public. The Trump Administration has already decided what it wants to hear and say – alternative facts – and is unlikely to be persuaded by the real ones. � Market Reliability

Flexible Grid

http://bit.ly/SFChronicleletters.

Readers Write

he article on the German Electricity Paradox in the July 2017 issue received a few comments. A long-time subscriber, Dr. Laurens De Vries of Delft University of Technology wrote, “As always, I’m enjoying your newsletter. However, I wonder if it’s correct that Germany’s greenhouse gas emissions are not falling, as you write in the newsletter.” Referring to website for

Germany’s Ministry for the Environment (below), and other sources, which show “that emissions from the power sector have dropped by nearly 10% in 10 years, which means that the Energiewende has more than offset the increase in emissions that is caused by the nuclear phase-out.” The correction is appreciated. The article on California Regulators Examine Rapidly Changing Retail Landscape, elicited the following from Gary Ackerman, Executive Director, Western Power Trading Forum: “You asked the right question: ‘And there lies the key concern: that the most populous state in the union is rushing ahead without a coherent plan towards an uncertain retail electricity future. Should this be a cause for concern?’ And then you went soft on the answer. I think this is the biggest unanswered question of which the CPUC seems to be blissfully unaware.” Noted. � UBA URL

T


Recently published:

Innovation and Disruption at the Grid’s Edge

Special 30% discount offer for EEnergy Informer subscribers

EEnergy Informer subscribers are entitled to a 30% discount when ordering copies of the just published book,

Innovation and Disruption at the Grid’s Edge, with further details provided at the end of this month’s newsletter.

The link below will take you directly to the publisher's website and a 30% discount code ENER317, which you can

apply at checkout, free shipping included. Please share with others who may be interested in ordering a copy.

https://www.elsevier.com/books/innovation-and-disruption-at-the-grid-s-edge/sioshansi/978-0-12-811758-

3?start_rank=1&producttype=books&sortby=sortByRelevance&q=sioshansi

EEnergy Informer subscription prices

EEnergy Informer is available by subscription only at the following options/prices:

Subscription type Annual price

• Regular subscription $450

Single reader, no distribution

• Discounted subscription $300

Small business, single reader, no distribution

• Limited site license $900

Distribution limited to 4 readers in same organization, single location

• Unlimited site license $1,800

Unlimited distribution within same organization including multiple locations

• Student subscription $150

Limited to students & qualified solo professionals (Please inquire if you qualify for this special discounted price)

How to subscribe to EEnergy Informer

To extend existing or start new subscription to EEnergy Informer visit

website www.eenergyinformer.com under toolbar SUBSCRIBE TO

EENERGY INFORMER and select the appropriate price. You will be

prompted to provide credit card details, which are securely handled

through PayPal. You will get an instant electronic transaction receipt

and we will get notification of payment. You do NOT need a PayPal

account and need NOT be a current PayPal user.

If you require a customized invoice &/or prefer to wire funds directly

to our bank, please contact us at [email protected]. If you are

paying with a check, it must be in US$, payable to EEnergy Informer

and mailed to 1925 Nero CT, Walnut Creek, CA 94598, USA. Any

questions or if you experience problems with the PayPal payment

system, kindly notify us at [email protected] or the editor at

[email protected].�

EEnergy Informer

Copyright © 2017

August 2017, Vol. 27, No. 8

ISSN: 1084-0419

http://www.eenergyinformer.com

EEnergy Informer is an independent

newsletter providing news, analysis,

and commentary on the global

electric power sector.

For all inquiries contact

Fereidoon P. Sioshansi, PhD

Editor and Publisher

1925 Nero Court

Walnut Creek, CA 94598, USA

Tel: +1-925-256-1484

Mobile: +1-650-207-4902

e-mail: [email protected]

Published monthly in electronic format.

Annual subscription rates in USD:

Regular $450

Discounted $300

Limited site license $900

Unlimited site license $1,800

Student/special rate $150



Documents

EEnergy Informer - Energy Economics · 5 August 2017 EEnergy Informer Page 5 This, however, is inconsistent with other statistics, which suggests that China has already reached peak