Author Archives Laura Arnold

Gov. Snyder wants Michigan to generate more electricity from renewable sources of energy

Posted by Laura Arnold  /   April 02, 2015  /   Posted in Uncategorized  /   No Comments

Michigan Gov. Rick Snyder Carves Out Own Niche Inside GOP

By PATRICK O'CONNOR

Gov. Rick Snyder is, for now, more focused on balancing the demands of his rural, urban and suburban constituents than making a splash on the national stage. Pictured, Mr. Snyder speaks about using cleaner sources of electricity at the Detroit Electrical Industry Training Center in Warren, Mich., on March 14. Associated Press Don’t expect Michigan Gov. Rick Snyder to provoke the kind of media firestorm that has engulfed his neighbor to the south, Indiana Gov. Mike Pence. That’s because Mr. Snyder, a fellow Republican, seems almost allergic to hot-button political debates.And yet, that aversion hasn’t stopped the soft-spoken Michigan governor from carving out his own provocative niche inside the GOP as a Republican who often seems eager to stray from the party’s conservative orthodoxy.
 

The Michigan governor proudly supports controversial education standards known as Common Core. He has tried to avoid fights with organized labor. And he wants to see his state generate more electricity from renewable sources of energy. [emphasis added]

Mr. Snyder’s latest crusade is a May ballot measure that would increase Michigan’s sales tax by one percentage point to generate more money for the state’s crumbling roads. The former accountant frames the debate in economic terms: good roads are much cheaper to maintain than bad ones.

“It’s a good investment,” he said during a recent interview with the Wall Street Journal.

In an era of heightened partisanship, Mr. Snyder represents something of a throwback – the centrist Midwestern governor more focused on balancing the demands of his rural, urban and suburban constituents than making a splash on the national stage.

Rick Snyder, after all, is no Scott Walker, the Wisconsin governor who parlayed his landmark fight with the state’s public-sector unions into near front-runner status for the Republican presidential nomination.

Mr. Snyder, for example, is unapologetic in his support for Common Core, arguing high standards are better than low ones – a view he shares with former Florida Gov.  Jeb Bush, one of the leading contenders for the GOP nomination. Mr. Snyder, who said he has discussed the issue with Mr. Bush, likes to remind voters that under the program states and local school boards have the flexibility to design their own curriculum. And he mocks Republicans, like Texas Sen. Ted Cruz, who call for its repeal.

“There’s nothing to repeal,” he said. “It was done by the states.”

And unlike Mr. Walker, Mr. Snyder has tried to avoid fights with Michigan’s powerful labor unions. One big exception was his decision to sign right-to-work legislation, prohibiting any requirements that would force workers to pay union dues. But more recently, he has opposed Republican efforts to repeal a state law that sets compensation for construction workers on government projects.

Mr. Snyder also expresses concern that the country’s anti-tax fervor may occasionally go too far. “Government should have a limited role, and it needs to be extremely efficient about using its resources,” he said. “But there is an appropriate role for government to make investments, particularly in infrastructure.”

The Michigan governor is one of the few Republicans to refuse to sign Americans for Tax Reform President Grover Norquist‘s pledge not to raise taxes. “I don’t sign pledges like that,” he said. “If you’re going to govern, you have to have flexibility to make those decisions.”

And unlike other governors, Mr. Snyder is skeptical of using tax credits to lure business to Michigan, worrying about the long-term loss of tax revenue. He said he warned one chief executive looking to move jobs to Michigan that if he wanted some kind of tax credits, they would have a very short conversation.

Of all the Republican governors in the Midwest, Mr. Snyder may have the lowest profile but he has one of the best track records when it comes to job creation. Michigan’s unemployment rate has dropped from 11.2% when he took office to 5.9% today, the lowest since 2001, and the nearly 400,000 private-sector jobs the state has added since he became governor is the fifth highest tally in the country and the best in the Midwest.

Given Mr. Snyder’s obvious aversion to conflict, he isn’t one to critique other officeholders, but the contrast between his governing style – “relentless positive action” – and that of other governors, including Mr. Walker, is obvious enough.

“Scott has done some very good things,” he said in the recent interview. “I’m proud to say, in over four years as governor, I have not fought with a single person, and I haven’t blamed anybody. I’ve stuck to this problem-solving approach. And I think it’s really allowed us to do things in a very positive way.”

Mr. Snyder has been mentioned as a possible contender for the Republican presidential nomination in 2016, but with the field starting to emerge, the Michigan governor has dropped out of the conversation. He plays coy on the subject of his own presidential ambitions, saying he would decide after the May vote on raising the state’s sales tax. He is also recovering from a tear of his Achilles tendon.

“I’ve got an Achilles and an election in May,” he said.

But after that, he plans to tour the country promoting Michigan’s revival – and presumably himself.

Wayne, Randolph and Henry Counties (IN) Could Get EDP Renewables Wind Farms

Posted by Laura Arnold  /   April 02, 2015  /   Posted in wind  /   No Comments
wind turbine.jpg

Wayne, neighbor counties could get wind farms

Bill Engle, bengle@richmond.gannett.com5:43 p.m. EDT April 1, 2015

A Texas-based firm will study portions of Wayne, Randolph and Henry counties in the months ahead looking for a site to build one or more wind farms.

Two representatives of EDP Renewables, Jeffrey Nemeth and Chris Brooks, outlined plans to study east-central Indiana during a presentation to the Wayne County Commissioners on Wednesday.

EDP is the firm that built the Headwaters Wind Farm in Randolph County that was completed in December 2014.

“It could be that we would build one in each county or one that straddles all three counties,” said EDP project manager Jeffrey Nemeth. “We just don’t know at this point. We are in the very, very early stages of development, and there’s a lot of studying to do.”

Nemeth said there also is a possibility that, after study, the firm would elect not build in this area.

“Right now, it’s too early to tell,” he said.

The firm is based in Houston, Texas, with offices in Indianapolis and Chicago. It built the wind farms that straddle Interstate 65 in White County, north of Lafayette.

That sprawling locale is actually four wind farms that include 303 turbines and produce 500 megawatts of electricity. Nemeth said initial plans in this area are to build a wind farm that includes 100 turbines and produces 200 megawatts, which is the same size as the current farm in Randolph County.

Nemeth said the Randolph County project involved 180 landowners.

“We’ve had a great experience with property owners in Randolph County,” he said. “We had significant support, strong landowner support.”

If the firm did build in Wayne County, it would construct 300-foot towers that would stretch to 495 feet with blades fully extended.

Nemeth said the first steps include studying the county’s wind ordinance, zoning laws, wildlife and construction costs before contacting homeowners and building a tower to test wind speed.

“When we build a farm, we make a significant investment in the project and we are here for the next 30 years,” he said.

Nemeth said a ballpark estimate of the project costs is $1.5 million to $2.2 million.

“But that’s just an estimate. It depends on construction costs and where the turbines come from,” Nemeth said.

He said landowners receive financial compensation for placing turbines on their land and his company has “a neighbor agreement” that offers a financial incentive to neighbors within 1,500 feet of the farm.

When asked how soon construction might start, Nemeth said, “It might be one and a half years or 10 years or never.” He said that decision will be influenced by whether the company has a taker for the electric power being produced.

One reason the Headwater farm moved so quickly was that the power company AEP “wanted 200 megawatts.”

“These projects are obviously influenced by a utility who wants to buy the power,” Nemeth said.

His firm does not currently have a request from a utility company to buy additional power.

The commissioners were pleased to hear of the project.

“We want you to know that we are excited about this project,” said Commissioner Mary Anne Butters. “We welcome you, and we hope you will keep the lines of communication open.”

Bob Wotherspoon, who lives north of Richmond, has long been a proponent of wind energy. He told the EDP representatives, “I have 40 acres of ground for the test site.”

“I just want to ask how we can speed this up because I’m here to help you,” Wotherspoon said.

Staff writer Bill Engle: (765) 973-4481 or bengle@pal-item.com. Follow him on Twitter at http://twitter.com/billengle_PI.

 

SeekingAlpha: Duke Energy-The Dark Side of Solar Energy; An Investment Perspective

Posted by Laura Arnold  /   April 01, 2015  /   Posted in solar, Uncategorized  /   No Comments

Summary

  • Duke Energy, a regulated utility, is considered a safe investment.
  • However, solar energy poses an existential threat to Duke Energy.
  • Updating antiquated policies may determine if solar and utilities can coexist.

Abstract:

Electric companies, such as Duke Energy (NYSE:DUK), are considered safe investments.

However, the industry faces existential threats as Washington D.C. aggressively promotes renewable solar energy.

Similar German policies, which advocated for renewable energy, resulted in large losses for German utilities that focused on fossil fuels.

Duke Energy, which has a large stake in fossil fuels, may not be a safe investment as the United States enters into a brave new world of renewable energy generation.

Company Overview

Duke Energy is in the electric generation, transmission, and distribution business. The company has a total capacity to generate 57,500 MegaWatts of electricity. The company's energy portfolio primarily consists of fossil fuels, broken down into 38% coal, 38% fuel, 17% nuclear and 7% hydro/solar. The company maintains 262,900 miles of distribution wires and 32,400 miles of transmission wires. The company services 23.0 million residents and generates $23.9 billion in revenues. Duke Energy's activity is best summarized by the figure below. The slide was provided courtesy of Origin Energy.

For retirees, Duke Energy is considered a safe investment. The company has a healthy payout ratio and a high dividend yield. According to the company's earnings call, Duke Energy has a sustainable payout ratio of 65%-70%. The company has a dividend yield of ~4.0% and a historical dividend growth rate of ~2.0%. The side below, on Duke Energy's dividends, is provided courtesy of Duke Energy.

The Disruptive Potential of Solar

However, solar energy poses a threat to Duke Energy. While solar energy only generates 1% of the electricity in the United States, it is the time of day at which it generates electricity which causes the biggest troubles for utilities.

Under the current system, electricity prices spike during peak hours in the afternoon and early evening. Companies, like Duke Energy, make all of its money during peak hours. But the afternoon is when solar generation is strongest. Net-metering policies allow solar to receive grid priority. Therefore solar grabs a majority of the peak demand.

Accordingly, gas/fuel power plants, which provides peak energy, is the first to suffer the effects of solar energy. Unfortunately, Duke Energy's portfolio comprises of 38% of gas/fuel. The figure below, provided courtesy of Citigroup, demonstrates how solar has stolen the peak of electricity demand, when the prices are the highest, and displaced gas/fuel-fired capacity.

Duke Energy has realized the disruptive potential of solar and has started its own solar program. The company purchased REC Solar for $225 million. REC Solar provides comprehensive solar and energy solutions nationwide.

However, Duke Energy's solar leasing program cannot adequately compete with solar leasing programs from companies such as SolarCity (NASDAQ:SCTY) because of Washington D.C.'s net-metering policy. Net metering allows SolarCity's customers to "resell" excess solar energy back to utilities at retail prices, while Duke Energy's solar leasing program only allows customers to "resell" excess solar energy at lower wholesale prices. Provided below, from Duke Energy's website, is Duke Energy's solar leasing policy on net metering.

Therefore, it is important to monitor the changes in net metering policies, which could allow Duke Energy's solar leasing program to become more cost competitive. Furthermore, policy changes could replace antiquated pricing structures and allow utilities to adequately recover costs from customers with solar panels that intermittently utilizes the electric grid. The Edison Electric Institute, which represents all investor-owned utilities on Washington D.C., proposes the following changes to net-metering policies:

Net metering policies and rate structures in many states should be updated so that everyone who uses the electric grid helps pay to maintain it and to keep it operating reliably at all times. This will ensure that all customers have safe and reliable electricity and that electric rates are fair and affordable for all customers. Current state net energy metering policies that compensate at the retail price for electricity sales to the utility are outdated and need to be updated to align with today's technology and the ongoing transformation of the grid.

German Solar Initiatives Lead to Utility Losses

The disruption of solar technology has already unfolded in Germany. Germany's largest utility, E.ON (EOAN) lost 3.2 billion euros last year. RWE (RWE), one of Germany's largest utilities, lost 1.3 billion euros last year. According to the economist:

The decline of Europe's utilities has certainly been startling. At their peak in 2008, the top 20 energy utilities were worth roughly €1 trillion ($1.3 trillion). Now they are worth less than half that. Since September 2008, utilities have been the worst-performing sector in the Morgan Stanley index of global share prices. In 2008 the top ten European utilities all had credit ratings of A or better. Now only five do (The Economist).

Furthermore, E.ON, Germany's largest electric company, has cut its dividend. Shareholders of the company received a $0.17 dividend in 2014, down from $1.1 in 2013.

Germany's renewable energy policies are the primary culprit of the country's proliferation of solar technology. This policy increased solar capacity in Germany from 4GW in 2007 to 33GW in 2012 as shown below. The following charts were provided courtesy of Citigroup.

US Solar Initiatives Lead to Utility Losses

More startling is that Washington D.C. have passed similar solar energy initiatives. The Renewables Portfolio Standards (RPS) policy will increase solar capacity, in the U.S., from ~20GW to ~93GW in 2035. The slide below provides Washington D.C.'s RPS policies as described by The Berkeley Lab.

In Closing

Duke Energy may not be a safe investment as the U.S. enters into a brave new world of renewable energy. Duke Energy makes the bulk of its profits during peak hours, in the afternoon, when prices are the highest. However, these profits are eaten away by solar panels. These profits will be further eroded as Washington D.C.'s initiatives, namely the renewable portfolio standard, will increase solar capacity from 20GW to 93GW in 2035.

Similar renewable energy initiatives, in Germany, resulted in the proliferation of solar technology. Similar antiquated electricity pricing policies did not allow utilities to be adequately compensated for providing electricity when solar could not. The confluence of these factors resulted in large losses in German utilities.

Therefore, it is important for an investor to monitor how Washington D.C. restructures its net-metering policies and the renewable portfolio standards. Changes to these policies may allow renewable solar energy to grow hand-in-hand with utilities.

Ideally, solar energy would provide energy during the day and utilities would provide energy during the night. Furthermore, utilities would ideally be adequately compensated for providing energy, when solar energy is not available.

Duke Energy Indiana Contribution for Battery Storage Due to OUCC Settlement Agreement

Posted by Laura Arnold  /   March 31, 2015  /   Posted in Edwardsport IGCC Plant, Office of Utility Consumer Counselor (OUCC)  /   No Comments

solar panels wind turbines

The research will include installing energy storage systems at two schools served by Duke Energy in Indiana, probably schools that already have renewable-energy installations on site.
 

Duke Energy gives $1M to Indiana battery center for energy storage research

 UPDATED: Mar 30, 2015, 11:34
, Senior Staff Writer-Charlotte Business Journal
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IndianaDG: As Paul Harvey used to say, here is the rest of the story. Just in case you read the News Release we posted here on this story and wondered about the background on this announcement. 

Duke Energy is contributing $1 million for research at the Indiana Battery Innovation Center on using battery storage with rooftop solar and small wind turbines.

The funding makes good on an agreement Charlotte-based Duke (NYSE:DUK) made with the Indiana Office of Utility Consumer Counselor in 2012 as part of a settlement of cost overruns at Duke’s Edwardsport gasified coal plant.

The research will look at ways battery storage can be used with smaller sun and wind installations to maximize the power available from such projects and integrate them more easily with the power grid.

School storage

The effort will include installing energy storage systems at two schools served by Duke Energy, preferably with renewable-energy sources already on site. The systems will test the benefits of energy storage and serve as a learning lab for students. The schools have not yet been selected.

“Through this new partnership between the OUCC, (the innovation center) and Duke Energy, Indiana will continue to grow the public/private partnerships necessary to bring together the talent and resources to make our state a leader in energy storage,” says Indiana Lt. Gov. Sue Ellspermann, who announced the grant Monday.

Testing through 2016

Duke Energy Indiana President Doug Esamann says the research is aimed at resolving an inherent problem with distributed generation from small independent sources.

“Electricity is a unique commodity because it must be produced at the exact time it’s needed,” he says. “Technology that can store energy is a way to advance renewable energy sources such as wind and solar which are clean, but not always available when power is needed.”

The innovation center expects to begin testing the benefits of storage with small solar and wind projects this fall. The school programs will begin in the winter. Testing will continue through 2016.

Settlement deal

Cost overruns at the Edwardsport plant raised the operation's total cost from the initial $2 billion estimate to about $3.5 billion.

In 2012, Duke worked put an agreement with the state's consumer counselor to limit the portion of the plant construction charged to customers to $2.6 billion.

As part of that agreement, Duke agreed to with the counselor’s office to fund $1 million in clean-energy research. That is the money being given to the battery center.

Mother Jones: Are Solar-Powered Homes Jacking Up Everyone Else’s Electric Bills? True or false?

Posted by Laura Arnold  /   March 30, 2015  /   Posted in solar, Uncategorized  /   No Comments

Solar power is cheaper than ever—but utilities are trying to discourage people from using it.

Power companies' beef with solar boils down to a clever payment system that was largely responsible for bringing about the solar boom in the first place—a practice known as net metering. Most solar homes aren't actually "off the grid": They stay connected to transmission lines, using regular power when their panels aren't operating (like at night). But they also feed electricity into the grid when they produce more than they can use.

Sounds great, right? Not really, say the power companies. They pay solar homeowners for their excess kilowatts—but argue homeowners aren't paying their fair share for grid maintenance. That has utilities in revolt, and the fight has reached a fever pitch in Northern California, where the state's largest utility, Pacific Gas and Electric, serves more residential solar homes than any other.

Like many utilities, PG&E charges customers on a multitiered price scheme—the more electricity you use, the more you pay per unit. That can incentivize power hogs to conserve, but it can also mean that a poor family of four in California's AC-dependent Central Valley can end up paying rates far above the national average (and what it actually costs PG&E to serve them), while a Google-employed bachelor millionaire gets a bargain. If that tech dude decides to install solar panels, he pays even less—even though he still uses the grid.

From PG&E's website:
PG&E's standard Tiered Base Plan has four pricing tiers. As you use allotted electricity for each tier during your bill period you move to the next, higher priced tier.
To save on your bill, you'll need to conserve energy to stay on lower price tiers as long as possible, as well as once you've reached higher price tiers.

How Tiers Work

Tier 1: Each monthly billing period begins at the lowest rate. While you want to stretch as far as possible, average customers use all of Tier 1 in about 15-20 days.
Tier 2: With about one third the allotment of Tier 1, Tier 2 costs slightly more (+2¢). If your Tier 1 lasts 15-20 days, Tier 2 could last another 5-6 days.
Tier 3: The rate increases dramatically (+9¢) in this tier. Customers who enter Tier 3 are consuming significant amounts of electricity.
Tier 4: Finally; if you enter tier 4, you are using more than twice your Tier 1 total, and the rate increases by an additional 6¢.
How Tiers Work Graph.

NOTE: This chart represents an above average usage customer.
The length of time in each tier depends on monthly energy usage.

To be fair, customers who generate their own electricity also save the utilities money, causing less wear and tear on transmission lines and less power lost along the way. But a study commissioned by California's Legislature found that in the Golden State at least, these benefits do not fill the hole left by lost revenue. Net metering cost the state's privately owned utilities $254 million in 2012, a price tag estimated to jump to $1.1 billion per year by 2020 as an estimated 500,000 more homes go solar.

The solar industry shot back with a study of its own, arguing that those costs are minor compared with the roughly $32 billion that California's major utilities earned in 2013 and that, for PG&E, the problem is not really caused by solar but by the huge gap—about threefold—between the company's lowest and highest rate tiers. Since solar is attractive to high-tier customers, who stand to save the most money, each one who saves by installing a system is a big blow to the utility's bottom line. Smooth out the rate tiers, the study suggests, and the problem disappears.

In the future, utilities will have to act more like grid managers, connecting power from a host of sources—like data flowing into a server from many places.

In 2013, California lawmakers told the state's utilities to do just that. PG&E's proposed solution, set to be voted on by state regulators in the spring, would reduce the number of price tiers and add a fixed monthly grid maintenance surcharge. The problem is that the fixed charge will erode the cost advantages of going solar, since you can't avoid it just by using less power from the grid. Sanjay Ranchod, a policy analyst for the solar installer SolarCity, sees the change as a sneaky way for the utilities to kneecap the competition. Imposing a fixed monthly charge, he says, is "one way you can inhibit the growth of distributed solar."

Similar battles are playing out from Utah to Wisconsin, as utilities fight to roll back net metering, restructure their rate systems, or impose special fees for solar users—and it's easy to see why power companies are sweating. The American Society of Civil Engineers estimates that the gap between the cost of maintaining the US grid and the available funds will grow by $11 billion per year through 2020, since the revenue streams utilities have traditionally relied on to pay for those costs—investments in big power plants they can recover through increased sales—are drying up.

John Farrell, a program director at the Minneapolis-based Institute for Local Self-Reliance, argues that to succeed down the line, utilities will have to act more like grid managers, connecting power from a host of sources (much like data flowing into a server from many places) and investing in technology that helps consumers use power more efficiently. "There's no outcome 10 or 20 years from now that looks anything like what utilities have been before," Farrell says. "It's going to happen anyway, and you just have to choose whether you're gonna like it or not."

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