Split to California energy politics (from kWH Grid Solar)

jonr · November 2018

> I think there should be a pricing model that signals users to put load on the grid.

Absolutely. Skip right over fixed time of use models and go straight to this. It will reduce pollution and grid stress, even at the same annual average $/kWh.

Pricing clearly suggests that combined cycle gas, hydro, wind and utility scale solar are the future (the mix depends on how you account for pollution costs).

BB. · November 2018

There are all sorts of real life pricing models out there... You can write a 30 year contract for your mortgage... Or you can rent your money by the month (credit cards), or by the week (your local check cashing store).

With power, we had long term pricing (months to year+ to change rates--The state PUC would guarantee the utility reasonable returns and for widows and orphans to buy utility stocks for stability). Or with the new electronic/networked power meters, you can get charged for power with 24 hour forward pricing.

Go down to the gas station for nearly time of day pricing... Or own an airline and write 3 year contracts for fuel deliveries.

California's Prop 13 (reduced and fixed proper tax rates for long term property owners) was an attempt to stop (at the time) rapidly rising property taxes. California voters had tried other methods to limit state and local government spending--And this was just another attempt. I still remember my parents (before Prop 13)--Full time decent paying job, 3 kids, worried that they could not afford to live in our home in a few more years from property tax increases (loan on home, $100 per month--Property taxes were several times the mortgage payments). After Prop 13 passed, they were able to retire (and pass on their home).

Property tax with P13 around $600 per year (current), without would have been (1.2% Prop 13/US average rate) $8,400 to $16,800 (2.4% New Jersey top US rate) per year... Of course, our property values could have been much less than the crazy $700,000+ for a smallish 2-4 bedroom home in the suburbs. But who could predict a "what if" for California home pricing with different tax rates and economics without 42 years of Prop 13.

California June 2018 median priced home is ~$600,000 vs US average of ~$265,000....

https://www.businessinsider.com/california-home-price-hits-record-high-2018-6

Just like California "deregulation" of the 1990's, selling power with "long term" pricing contracts (state PUC takes months+ to set pricing) and utilities forced by law to buy power without anything longer than 24 hour forward pricing "contracts"--Made some money as power prices were falling (at the expense of utility customers)--But took utilities very close to bankruptcy and ended up with $40 Billion 40 year state bond to pay for summer power when energy prices skyrocketed.

Much of the financial industry makes its money arbitraging between long term and short term risks.

I would highly recommend that when you make a home loan/purchase, you do not finance it through the local check cashing service. My sibling purchased a home with a mortgage that resets its rates after 7 years--I fear what is going to happen with now on retirement income (I begged at the time to get a fixed long term mortgage--At a time of historically low mortgage rates).

Similar for building infrastructure for electrical/natural gas utilities... There is nothing wrong with long term pricing, payment, and financing models to create market stability. And some sort of stability in your life.

-Bill

jonr · November 2018

> There is nothing wrong with long term pricing

When it is backed by long term costs. Otherwise, it creates a risk of bankruptcy - which would shift costs to the wrong people (like consumers).

Dave Angelini · November 2018

jonr said:

> There is nothing wrong with long term pricing

When it is backed by long term costs. Otherwise, it creates a risk of bankruptcy - which would shift costs to the wrong people (like consumers).

The consumers will just have to go to another state if they don't like the pricing. And, they are!

Dave Angelini · November 2018

Be careful up there Bill ! I just heard the SF bay area has the worst air quality in the world right now. Think of the really bad places on this planet and the bay area is the leader

Probably not what the environmental folks had in mind. Another quote I heard "when we closed our california forests to business one of the leaders who I will not name said if the forest all burn it is better than polluting the air"

Estragon · November 2018

Seems capping prices without capping costs is a thing in CA...
https://www.cnbc.com/2018/11/16/fire-plagued-ca-wont-let-insurers-cram-through-big-rate-hikes.html

Ampster · November 2018

Dave Angelini said:

Be careful up there Bill ! I just heard the SF bay area has the worst air quality in the world right now. Think of the really bad places on this planet and the bay area is the leader ..........

The smoke extends all the way down the Central Valley to Tejon. A few days ago, I drove from Sonoma to LA. I had not seen blue sky for a long time, but when I started up the Tejon Pass the sky was blue all the rest of the way to LA.

BB. · November 2018

Sacramento is much worse.

South of San Francisco is not as bad...

Just depends on wind patterns.

Bill

Ampster · November 2018

BB. said:

There are all sorts of real life pricing models out there... You can write a 30 year contract..........

I think I agree with your premise about pricing. When I think about the market for power there are elements that are different than other commodities. One of those is storage. You can easily and cost effectively store soybeans and many commodities including petroleum products. Electrical power can not be store as easily. Also, unlike soybeans, demand for electricity is time defendant down to the hour of use. With more renewables supply has also become a function of time related and other events like seasons.

I have not seen any great examples of a good working price model for electricity. Part of this is because regulated monopolies and the regulators are slow to change. Another part is that technology is changing and there are some emerging models that are attempting to shift demand, some through pricing (TOU) and some through demand response incentives like Ohm Connect.

The upshot for me is there will be a lot of market disruption in the foreseeable future.

Dave Angelini · November 2018

I just saw on KGO a video of where the bay bridge is suppose to be.

BB. · November 2018

The original model...

Rough utility costs for wholesale power:

2.5 cents per kwh for wholesale generator power loads

15 cents per kwh regular price for variable wind power

15 cents per kwh for utility scale battery storage

?? Cents per kwh base line generator hot standby to support almost 100% of wind load.

So running upwards of 30¢ per kwh for would've"green power".

One system was created by capitalism, the other by government.

It has been done for electricity for over 100 years just fine. Just a few years of government, and we have massive outages and uncontrolled pricing.

Don't get me wrong, basic air quality laws have made breathing better for those of us in the USA and elsewhere.

But exporting our polluting industries to China and India, et.al., has not been great for their peoples.

Bill

Ampster · November 2018

Original model?
You lost me at, "wholesale generator loads"

Ampster · November 2018

I didn't realize wind energy cost that much. I have heard of some new utility scale solar coming in around $0.05 per kWhr.

BB. · November 2018

I was starting with a pricing model (original was costs from traditional power plants, the new model was subsidised green power generator pricing)... And drifted away.

The pricing is a rough amount that utilities are currently paying for power from the generators (not including distribution costs).

I was doing this on my phone... Not great for doing a "thought piece".

-Bill

jonr · November 2018

New wind and utility scale solar are about the same price as combined cycle gas. But add too much of the first two and then you need some batteries (pushing cost to perhaps $.09 per kWh).

New nuclear, coal or residential scale solar are a waste of money.

Estragon · November 2018

Production costs vary quite a bit depending on location and assumptions (eg long run cost of capital).

https://www.windpowermonthly.com/article/1455361/tipping-point-2017-wind-cost-analysis

BB. · November 2018

I would believe utility scale solar could (or even has) come down to the $0.05 per kWH pricing. Not a bad price comparison with existing base load power plants (and who can predict the variable price of fuels in the future).

And sun is relatively predictable. Still need base load or other power systems (storage?) to make up for times when the sun does not shine.

And systems like solar do cause issues when mixed with large base load power plants (coal, nuclear) that take something like 12 to 24 hours to come up to full power--When solar is only good for something like 6-8 hours a day, cycling the large/efficient/slow to respond base load power plants--A real headache here. Run plants at speed when there is no power need (solar producing)--Waste of fuel. Spend 1-2 days cycling base load plants up and down around 8 hours of solar production--Not really possible or, at best, really hard one the plants (thermal cycling can be (and usually is) a bigger factor in failures than running steady state at high temperatures).

Now that leads us to Natural Gas fired turbines (peaker, combined cycle, etc.) that have relatively fast startup and shutdown, and can be very fuel efficient. As long as natural gas is cheap and plentiful--Probably not a bad solution. But no guarantees that NG will remain cheap and plentiful--And there are those against fracking (hydraulic fracturing of hydrocarbon containing rock formations with high pressure fluids/chemicals to improve movement of fuels to the well)--Some states and federal lands don't allow fracking.

A quick electrical utility history slide show (dated 2001). Some interesting historical information (like when Natural Gas and Fuel Oil were, more or less, regulated from use by utilities in the 1970's... How times change:

http://www.history.vt.edu/Hirsh/KJT-screen.pdf

-Bill

Ampster · November 2018

I remember Redi Kilowatt from when I was a kid. I also remember Gold Medalion homes with heating wires in the ceiling. I have lived in a couple of those homes and when I got my first electric bill in the winter I went out and bought an electric blanket that was a whole lot more efficient than that ceiling heat. I still own one of those homes as a rental but when I lived there I put solar on the roof, installed a heat pump water heater and an induction cook top. I only paid the minimum fixed charges for power after installing solar.
That slide show was interesting but things have changed a lot since 2001. I don't see the same economies of scale as suggested and I no longer believe energy generation is a natural monopoly. Telephone and cable used to be thought of as natural monopolies and look how that has changed. I still think distribution of electrical energy has some economies but with Distributed Energy Resources and Micro Grids it has become a different business model that needs a great deal of adjustment. The method of guaranteeing a return on investment only insures that the Investor Owned Utilites keep buying more assets so the denominator drives up the numerator in that fixed rate model. That means more revenue for the IOUs regardless if they have the optimum allocation of assets.

bill von novak · November 2018

jonr said:

> I think there should be a pricing model that signals users to put load on the grid.

Absolutely. Skip right over fixed time of use models and go straight to this. It will reduce pollution and grid stress, even at the same annual average $/kWh. Pricing clearly suggests that combined cycle gas, hydro, wind and utility scale solar are the future (the mix depends on how you account for pollution costs).

Agreed! Real time pricing by the hour with a simple method of getting the signal (a URL with easily accessible hour-ahead pricing.) That would use market forces to quickly "fix" the power market, without the sort of coordination we need now for DR.

Split to California energy politics (from kWH Grid Solar)

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