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The 5 Pillars of Energy Democracy

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Exciting changes are on the horizon for our century-old utility structure as solar power, energy storage, and electric vehicles open new avenues for utility customers to produce their own power and control their energy use. Utilities are scrambling to remain relevant in this technological firestorm, and energy wonks are envisioning a new business model – Utility 2.0 – that keeps utilities afloat as their customers “cut the cord.”

This presentation suggests we seize this transformational moment – and the $364 billion in annual electricity revenue – to move beyond Utility 2.0 to 3.0, to energy democracy.

View a video recording of this presentation at ilsr.org

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The 5 Pillars of Energy Democracy

  1. 1. E N E R G Y D E M O C R A C Y B E Y O N D U T I L I T Y 2 . 0 T O John Farrell February 5, 2015
  2. 2. T H E P R E L U D E
  3. 3. Per  capita  electricity  use Average  annual  retail  electricity  prices Interstate  transmission  spending Wind  and  solar  power  capacity c1900 199019801970 2000 2010 Sources:  World  Bank,  EIA,  US  Census,  SEIA,  LBNL “GOLDEN AGE” • Regulated  monopolies   • Profits  from  sales   • Profits  from  new   power  plants   • “bigger  is  better” SHOCK & COMPETITION STABILITY DEREGULATION • PURPA  allows  non-­‐ utility  generation • Prices  rise   • Sales  slow   • Competition  starts • Prices  fall   • Demand  rises • Independent   producers  rise,  as   do  interstate   transactions • Feds  open  wholesale   market   • States  adopt   renewable  standards   and  net  metering   • Some  states  introduce   competition  for   generation  and  retail   sales • Wind+Solar  go   exponential   • Demand  flattens TRANSITION • States  offer   “decoupling”   • States  adopt  energy   efficiency  standards RULE CHANGES MARKET CHANGES T H E U . S . E L E C T R I C I T Y T I M E L I N E Today’s turmoil isn’t the first change in the U.S. electricity system
  4. 4. Per  capita  electricity  use Average  annual  retail  electricity  prices Interstate  transmission  spending Wind  and  solar  power  capacity c1900 199019801970 2000 2010 Sources:  World  Bank,  EIA,  US  Census,  SEIA,  LBNL • Regulated  monopolies   • Profits  from  sales   • Profits  from  new   power  plants   • “bigger  is  better” SHOCK & COMPETITION STABILITY DEREGULATION • PURPA  allows  non-­‐ utility  generation • Prices  rise   • Sales  slow   • Competition  starts • Prices  fall   • Demand  rises • Independent   producers  rise,  as   do  interstate   transactions • Feds  open  wholesale   market   • States  adopt   renewable  standards   and  net  metering   • Some  states  introduce   competition  for   generation  and  retail   sales • Wind+Solar  go   exponential   • Demand  flattens TRANSITION • States  offer   “decoupling”   • States  adopt  energy   efficiency  standards RULE CHANGES MARKET CHANGES “GOLDEN AGE” T H E U . S . E L E C T R I C I T Y T I M E L I N E
  5. 5. Per  capita  electricity  use Average  annual  retail  electricity  prices Interstate  transmission  spending Wind  and  solar  power  capacity 1980 2000 2010 Sources:  World  Bank,  EIA,  US  Census,  SEIA,  LBNL “GOLDEN AGE” • Regulated  monopolies   • Profits  from  sales   • Profits  from  new   power  plants   • “bigger  is  better” SHOCK & COMPETITION STABILITY DEREGULATION • PURPA  allows  non-­‐ utility  generation • Prices  rise   • Sales  slow   • Competition  starts • Prices  fall   • Demand  rises • Independent   producers  rise,  as   do  interstate   transactions • Feds  open  wholesale   market   • States  adopt   renewable  standards   and  net  metering   • Some  states  introduce   competition  for   generation  and  retail   sales • Wind+Solar  go   exponential   • Demand  flattens TRANSITION • States  offer   “decoupling”   • States  adopt  energy   efficiency  standards RULE CHANGES MARKET CHANGES T H E U . S . E L E C T R I C I T Y T I M E L I N E c1900 19901970
  6. 6. Per  capita  electricity  use Average  annual  retail  electricity  prices Interstate  transmission  spending Wind  and  solar  power  capacity c1900 19801970 2000 2010 Sources:  World  Bank,  EIA,  US  Census,  SEIA,  LBNL “GOLDEN AGE” • Regulated  monopolies   • Profits  from  sales   • Profits  from  new   power  plants   • “bigger  is  better” SHOCK & COMPETITION STABILITY DEREGULATION • PURPA  allows  non-­‐ utility  generation • Prices  rise   • Sales  slow   • Competition  starts • Prices  fall   • Demand  rises • Independent   producers  rise,  as   do  interstate   transactions • Feds  open  wholesale   market   • States  adopt   renewable  standards   and  net  metering   • Some  states  introduce   competition  for   generation  and  retail   sales • Wind+Solar  go   exponential   • Demand  flattens TRANSITION • States  offer   “decoupling”   • States  adopt  energy   efficiency  standards RULE CHANGES MARKET CHANGES T H E U . S . E L E C T R I C I T Y T I M E L I N E 1990
  7. 7. T H E U . S . E L E C T R I C I T Y T I M E L I N E Per  capita  electricity  use Average  annual  retail  electricity  prices Interstate  transmission  spending Wind  and  solar  power  capacity c1900 19901970 2000 2010 Sources:  World  Bank,  EIA,  US  Census,  SEIA,  LBNL “GOLDEN AGE” • Regulated  monopolies   • Profits  from  sales   • Profits  from  new   power  plants   • “bigger  is  better” SHOCK & COMPETITION STABILITY DEREGULATION • PURPA  allows  non-­‐ utility  generation • Prices  rise   • Sales  slow   • Competition  starts • Prices  fall   • Demand  rises • Independent   producers  rise,  as   do  interstate   transactions • Feds  open  wholesale   market   • States  adopt   renewable  standards   and  net  metering   • Some  states  introduce   competition  for   generation  and  retail   sales • Wind+Solar  go   exponential   • Demand  flattens TRANSITION • States  offer   “decoupling”   • States  adopt  energy   efficiency  standards RULE CHANGES MARKET CHANGES 1980
  8. 8. T H E P R E S E N T ( S T R E S S E S )
  9. 9. 3.2 3.3 3.4 3.5 3.6 3.7 3.8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 P E A K S TA G N A N T R E TA I L S A L E S trillion kilowatt-hours
  10. 10. R I S I N G P E A K D E M A N D 75% 100% 125% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Eastern Interconnection ERCOT (Texas) Western Interconnection Combined Source: EIA, 2014 Summer Peak Demand by Grid Balancing Regions (2002 = 100%)
  11. 11. $0 $3,000 $6,000 $9,000 $12,000 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Wind Solar Source: Lawrence Berkeley Labs FA L L I N G R E N E WA B L E E N E R G Y C O S T S U.S. Installed Cost of Wind and Solar Power ($/kilowatt)
  12. 12. R I S I N G R E N E WA B L E E N E R G Y C A PA C I T Y 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Wind Solar Geothermal Installed Wind and Solar Power Capacity (Megawatts) Source: SEIA, Lawrence Berkeley Labs
  13. 13. R I S I N G R E N E WA B L E E N E R G Y S H A R E U.S. Power Plant Capacity Additions, 2003 through 1st Half of 2014 Source: EIA 0% 25% 50% 75% 100% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014H Fossil fuel Renewable
  14. 14. R I S I N G R E N E WA B L E E N E R G Y ( A N D D G ) S H A R E U.S. Power Plant Capacity Additions, 2003 through 1st Half of 2014 Source: EIA 0% 25% 50% 75% 100% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014H 21.5% 19.2% 5.8%3.1% 2.3% 0.6% 18.3% 12.4% 6.1% 6.2%3.8% 2.3% 1.8% 1.3% 1.1% 0.5%0.3% 0.1% 12.7% 6.7%56.4% 37.1% 31.9% 60.9%52.8% 53% 31.7% 15.5% 3.3% 3.1% 43.5% 44.5% 28% 44.3% 37.4% 23.3%28.8% 40.8% 57% 75% 90.4%92.9% 9.8% 4.6% 16.3% 5.9%3.7%2.2% Coal Gas Wind Small solar Big solar
  15. 15. R I S I N G R E N E WA B L E E N E R G Y ( A N D D G ) S H A R E U.S. Power Plant Capacity Additions, 2003 through 1st Half of 2014 Source: EIA 0% 25% 50% 75% 100% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014H 21.5% 19.2% 5.8%3.1% 2.3% 0.6% 18.3% 12.4% 6.1% 6.2%3.8% 2.3% 1.8% 1.3% 1.1% 0.5%0.3% 0.1% 12.7% 6.7%56.4% 37.1% 31.9% 60.9%52.8% 53% 31.7% 15.5% 3.3% 3.1% 43.5% 44.5% 28% 44.3% 37.4% 23.3%28.8% 40.8% 57% 75% 90.4%92.9% 9.8% 4.6% 16.3% 5.9%3.7%2.2% Coal Gas Wind Small solar Big solar TotalGWAdded 0 15 30 45 60 Total GW added
  16. 16. D I S T R I B U T I O N G R I D I N V E S T M E N T L A G G I N G American Society of Civil Engineers “America will see an investment gap in distribution infrastructure of $57 billion by 2020”
  17. 17. R I S I N G T R A N S M I S S I O N I N V E S T M E N T… station equipment $0 $2 $4 $6 $8 $10 $12 $14 1997 1999 2001 2003 2005 2007 2009 2011 billions of 2012 dollars Source:  Energy  InformaCon  AdministraCon underground lines and devices towers and fixtures overhead lines and devices poles and fixtures other Actual Transmission Investment By Investor-Owned Utilities (1997-2012)
  18. 18. T H E P R E S E N T ( R U L E S )
  19. 19. N O N - W I R E S P L A N N I N G Federal process requires non-utility intervention
  20. 20. V E R M O N T E N E R G Y E F F I C I E N C Y P R O G R A M S AV I N G S EnergyEfficiencyBenefits,2010($/MWh) $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 Avoided   energy,   capacity  and   transmission Avoided   distribuIon,  line   losses,  reserves Risk  benefits,  other   adders,  water O&M,  other  fuel   savings,  low-­‐ income  adders Greenhouse   gas   emissions State-level criteria NOT considered by federal regulators Adapted from: Public Utilities Fortnightly http://www.fortnightly.com/fortnightly/2013/04/looking-beyond-transmission
  21. 21. L A R G E V. S M A L L P R I S O N E R ’ S D I L E M M A Not an actual proposal, for illustration purposes only Two ways to deliver regional reliability and energy
  22. 22. $5 BILLION LOCAL WIND+SOLAR PROJECT $10 BILLION TRANSMISSION FOR WIND PROJECT Not an actual proposal, for illustration purposes only L A R G E V. S M A L L P R I S O N E R ’ S D I L E M M A Different prices
  23. 23. $5 BILLION LOCAL WIND+SOLAR PROJECT $1 $4 $1 $2 $2 $3 $2 $10 BILLION TRANSMISSION FOR WIND PROJECT Not an actual proposal, for illustration purposes only L A R G E V. S M A L L P R I S O N E R ’ S D I L E M M A Regional cost allocation allowed Regional cost allocation NOT allowed
  24. 24. $5 BILLION LOCAL WIND+SOLAR PROJECT $1 $4 $1 $2 $2 $3 $2 State chooses transmission because it pays less $10 BILLION TRANSMISSION FOR WIND PROJECT Not an actual proposal, for illustration purposes only L A R G E V. S M A L L P R I S O N E R ’ S D I L E M M A
  25. 25. L A R G E V. S M A L L P R I S O N E R ’ S D I L E M M A $5 BILLION LOCAL WIND+SOLAR PROJECT $1 $4 $1 $2 $2 $3 $2 State chooses transmission because it pays less Region pays twice as much for same reliability and clean energy benefit $10 BILLION TRANSMISSION FOR WIND PROJECT Not an actual proposal, for illustration purposes only
  26. 26. B A L K A N I Z E D B U S I N E S S M O D E L S
  27. 27. T H E P R E S E N T ( R E S U LT S )
  28. 28. W O R S E N I N G U T I L I T Y C R E D I T R AT I N G S 0% 25% 50% 75% 100% 1970 1980 1990 2000 2011 Source: Peter Kind AAA AA+ AA AA- A+ A A- BBB+ BBB BBB- A+ A A- AA+ AA AA- BBB+ BBB BBB+ BBB BBB+ BBB A+ A A- A+ A A- A+ A A- AA+ AA AA- BBB- BBB-BBB-
  29. 29. $ 4 8 B I L L I O N AT S TA K E
  30. 30. F R E E D O M T O G E N E R AT E U N D E R F I R E States facing challenges to distributed generation (in red) Sources: Renewable Energy World, Greentech Media, IREC, Vote Solar and many more 8/26/14
  31. 31. T H E F U T U R E
  32. 32. S TAT E S P I O N E E R I N G U T I L I T Y 2 . 0
  33. 33. LOW- CARBONEFFICIENTFLEXIBLE LOW-CARBONEFFICIENTFLEXIBLE “Utility 2.0” principles or “pillars” Utility 2.0 ELECTRICITY SYSTEM
  34. 34. EQUITABLELOCAL LOW- CARBONEFFICIENTFLEXIBLE LOW-CARBONEFFICIENTFLEXIBLE LOCAL EQUITABLE “Utility 2.0” pillars With $48 billion at stake, 2 more principles needed
  35. 35. EQUITABLELOCAL LOW- CARBONEFFICIENTFLEXIBLE LOW-CARBONEFFICIENTFLEXIBLE LOCAL EQUITABLE FIVE PILLARS OF ENERGY DEMOCRACY “Utility 2.0” pillars $48 billion “Utility 3.0”
  36. 36. EQUITABLELOCAL LOW- CARBONEFFICIENTFLEXIBLE DEMAND RESPONSE MARKET ANCILLARY SERVICES MARKET E N E R G Y S T O R A G E R O O F T O P S O L A R F E E D - I N TA R I F F N E T M E T E R I N G VIRTUAL NET METERING, E.G. COMMUNITY SOLAR ENERGY STORAGE RENEWABLE ENERGY STANDARD E N E R G Y S T O R A G E ENERGY STORAGE ON-BILL REPAYMENT ELECTRIC VEHICLES W/ DG SET-ASIDE LOW-CARBONEFFICIENTFLEXIBLE LOCAL EQUITABLE POLICIES TECHNOLOGY LEGEND FIVE PILLARS OF ENERGY DEMOCRACY INDEPENDENT LOCAL GRID OPERATOR REAL-TIME PRICING SIMPLE ENERGY MANAGE- MENT “Utility 2.0” pillars
  37. 37. E N E R G Y D E M O C R A C Y I N A C T I O N INDEPENDENT LOCAL GRID MANAGER = super efficient buildings
  38. 38. www.ilsr.org D O W N L O A D T H E F U L L R E P O R T R E A D M O R E @johnffarrell

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