WEST LAFAYETTE, Ind. - Duke Energy Corp. Chairman Jim Rogers, regarded as one of the most dynamic executives in the utility industry the past two decades, returned to Purdue University on October 24, 2013 for a talk as part of the Discovery Lecture Series.
Did you miss Jim Roger's speech at Purdue University this fall?
A Purdue-based group has released a study that predicts an unprecedented rise in future electricity rates coupled with a stagnation in energy demand.
The State Utility Forecasting Group, a state-funded panel of researchers based at Purdue University, predicts a 32-percent increase in Indiana’s electricity rates by 2023. The report predicts the rise in rates, coupled with an increase in energy-efficient programs, products and buildings, will lead to a stagnation in energy demand over the next 20 years.
The group attributed three factors to the projected rate increase: costs associated with more stringent Environmental Protection Agency rules, costs associated with additions and modifications to power plants and costs associated with the resources needed to meet electricity demands.
“This is something we've never seen before: essentially no growth in electricity,” said Douglas Gotham, the group’s director, in a prepared statement.
The group prepares the report every two years for the Indiana Utility Regulatory Commission. The group announced the findings today in a news release after presenting the report on Dec. 20 to the commission.
Call Star reporter Chris Sikich at (317) 444-6036. Follow him at Twitter.com/ChrisSikich.
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Here is an excerpt from the report. The report contains lots of information and data.
Table 1-1. Annual Electricity Sales Growth (Percent)
by Sector (Current Forecast vs. 2011 Projections)
| Sector | Current (2012-2031) | 2011 (2011-2029) |
| Residential | 0.37 | 0.71 |
| Commercial | 0.33 | 0.89 |
| Industrial | 1.29 | 2.11 |
| Total | 0.74 | 1.30 |
Maybe the electric utilities are right, for a change. Maybe net-metering—the ability to run your kilowatt-hour meter backwards, with solar panels on your roof or a windmill in your backyard–is not the best policy for America, or for Americans. (See related, “As Solar Power Grows, Dispute Flares Over U.S. Utility Bills.”)
But the utilities’ populist appeal to fairness and equality is disingenuous. When did electric utilities ever care about justice–or the poor?
If they are right about net-metering, it’s for all the wrong reasons.
They want to stop solar photovoltaics (solar PV) now. They want to put it in the grave before it takes even more market share from their comfy business. Climate change and future generations be damned.
The utilities are under threat as never before. They see what’s happened in Germany, where utility profits are plummeting as Germans take more and more control of their own electricity generation. Utility companies will be ruined if they let that happen here. So now’s the time to kill net-metering and with it rooftop solar PV while they still can.
Maybe we should let them.
I can hear the howls of derision from the usual suspects: the solar PV industry, the solar leasing companies, and their sycophants in the advocacy community.
Yes, we should fight a rearguard action to keep the utilities and their legions of attorneys fully engaged. In the meantime, while the utilities are busy snuffing out net-metering, we can bypass them altogether and implement a far superior policy that will put a lot more solar on people’s roofs—solar that people can own themselves, independent of the banking industry offering them deals “to good to be true.”
After all, one of America’s most revolutionary energy policies was introduced in 1978 when the utilities were too busy trying to kill another competing industry to notice as the Public Utilities Regulatory Policy Act (PURPA) passed Congress.
PURPA allowed independently-owned renewable generators to be connected to the grid. Suddenly, the grid was no longer the utility industry’s sole domain. PURPA said you could connect your solar PV system to the grid, but it didn’t spell out how much you would get paid for your electricity.
PURPA laid the foundation for what came next—a policy that not only allowed you to connect to the grid, but that also set the price, a “tariff” in utility jargon, that you would be paid for the electricity you fed into the grid—feed-in tariffs, or FITs.
Feed-in tariffs are the alternative to net-metering and their time has come. FITs have been likened to PURPA on steroids and they are as American as apple pie. It was a crude feed-in tariff that launched renewable energy in California during the early 1980s. In that program, you could connect your biomass, wind, or solar plant to the grid, get paid a fixed-price for ten years, and then get paid a floating price for another twenty. And it worked—spectacularly. For two decades following that first feed-in tariff, the Golden State generated about 2 percent of its electricity from wind energy alone.
Since then, Europeans picked up the renewable energy torch, particularly in Denmark, where last year the Danes generated 43 percent of their electricity from biomass and wind energy, and in Germany.
Germans don’t use net-metering, and yet last year they produced one-fifth of their electricity from wind, solar, and biogas. No, the Germans use feed-in tariffs. They saw what we accomplished decades ago then set out to adapt and refine the concept. The result is a modern system of feed-in tariffs that has catapulted Germany to the front ranks of renewable energy development—rooftop solar PV included.
Numerous other countries around the world have followed suit, adopting feed-in tariffs of their own making. In fact, more countries use feed-in tariffs than use net-metering.
Most significantly, more renewable energy—by far–has been developed with feed-in tariffs than has been installed through net-metering. The International Energy Agency found in a recent study that only 2 percent of solar PV worldwide was installed primarily through net-metering. The numbers are just as lopsided for wind energy, biogas, and other renewables.
What sets modern feed-in tariffs apart from those developed in California during the early 1980s—and from net-metering–is that the price paid for electricity from different renewable sources differs as well.
In the old California system, a wind farm was paid the same price as a biomass plant or a solar plant, even though they were quite different from one another. The same is true today with net-metering. Each technology that runs the kilowatt-hour meter backwards is effectively paid the same price, the retail price of electricity, regardless of how much the electricity actually cost to produce.
In the modern or “advanced” system like that used in Ontario, Canada, wind energy is paid one price and rooftop solar another. Each technology is paid a price that reflects the average cost of generating electricity with that technology.
This approach decouples the price paid for renewable energy from both the wholesale and retail prices of electricity. Feed-in laws essentially bypass all the ideological theory and arcane mumbo-jumbo that obscure electricity rate-setting in the US.
For each technology and each application, prices are determined so as to provide a fair and reasonable rate of return. This enables anyone—anyone who wants to invest in building the infrastructure that will power America in the 21st century–to profit from renewable energy.
It is this simple idea—to pay a fair price for renewable energy—that has enabled German citizens to build and own nearly half of all the wind turbines, solar PV, and biogas plants in the country. Individual German citizens—not their utility companies–have invested more than $100 billion in renewable energy. They have done so because they are paid a fair price for their electricity and because they can install the size, type, and amount of renewables that is the most economic for them and the best fit for their communities.
Net-metering served a useful purpose in the dark days of the Reagan-Bush-Clinton era. Net-metering then was a call to arms for hobbyists and guerrilla solar activists out to prove a point–solar works, your meter will run backwards, and the lights will stay on.
But net-metering was never intended to be a policy for the industrial development of renewable energy. It alone can’t do that. Retail electricity prices in North America are simply too low to make rooftop solar PV, for example, profitable without hefty subsidies.
Why run your kilowatt-hour meter backwards at 10 cents per kilowatt-hour when it costs you 20 cents to 30 cents per kilowatt-hour to generate it with solar PV? Without federal or state subsidies, net-metering seldom makes any economic sense, even today with the rapidly falling cost of solar PV.
Net-metering was an appealing policy at one time, because it gave politicians the perfect cover for appearing to take action on the public’s demand for renewable energy, while doing nothing of substance to threaten entrenched electric utilities’ political and economic power.
Thus, politicians would typically set a low limit on the amount of renewables that could be installed in a region under net-metering—often just a few percent. They certainly wouldn’t set the limit at anything like what the Germans (5 percent solar PV) or Italians (7 percent solar PV) have already accomplished.
Moreover, they typically also limit the size of any individual installation, often a paltry 10 kilowatts, and sometimes—when they’re generous–up to 2 megawatts. (We certainly wouldn’t want to rock the utility’s boat, now, would we?)
Worst of all, net-metering limits renewable development to an existing “meter”. This precludes “greenfield” sites that don’t already serve a utility customer, a further restriction on who can use net-metering and how big a renewable project they can build.
With all the restrictions on net-metering, many Americans are prohibited from installing and owning their own solar, wind, or biogas power plants where they want to and of the size that works best for them. Net-metering locks out apartment-dwellers and renters from participating in the renewable energy revolution.
Net-metering is not–nor can it ever be–a comprehensive renewable energy policy. If we take climate change seriously, net-metering simply won’t get us where we want to go: massive amounts of renewables in the ground, and quickly. Net-metering will never give us “plus energy” houses or “plus energy” buildings, because we often literally have to give our surplus electricity to the utility company for free. How fair is that?
Yes, net-metering has served a purpose. And yes, we should not abandon it without a strong comprehensive renewable energy policy to replace it.
But the time has come from Americans to break free of the straight jacket imposed by net-metering. It is time to liberate Americans from the tyranny of utility-company control of our lives and from the politicians and regulators who serve these companies. It is time to free Americans of all walks of life–from rich to poor, from conservative to liberal, from rural to urban—to produce renewably generated electricity when they want, where they want, and in the amount they want—and to do so for a profit. What could be more American?
As the late German politician Hermann Scheer, one of the co-founders of Germany’s modern system of advanced renewable tariffs, frequently said, the time for half-measures–for timid responses–is past. There is no time to lose.
The owner of a northern Indiana wind farm says Duke Energy Indiana Inc.—which had agreed to buy energy the 87-turbine operation produces—breached its contract, “proving disastrous.”
Benton County Wind Farm LLC, based in Earl Park, is suing Duke in federal court in Indianapolis for unspecified damages, claiming the power company has not honored its agreement.
The suit alleges the company’s actions have resulted in the wind farm “frequently [being] forced to curtail operations. As a result, the Wind Farm’s electrical output and revenues have been sharply reduced.” But many of the details of Duke’s alleged contract breach are redacted in the 23-page complaint.
An executive for one of the wind farm’s parents, Orion Energy Group in Oakland, Calif., would not say whether the alleged payment shortcomings put the farm’s future in jeopardy.
“If it was not significant, we would not have filed the complaint,” said Jim Eisen, Orion’s general counsel.
A Duke spokeswoman would only say, “We’re reviewing the filing.” The utility’s attorneys had not filed an official court response to the lawsuit by IBJ deadline.
In 2006, the companies set up a 20-year contract in which Duke would buy 100 megawatts of electricity the wind farm produces once it went online in 2008. A 2007 agreement gives another 30 megawatts to Vectren, but Vectren’s obligations are “not an issue,” according to the lawsuit.
Orion Energy Group LLC began running the wind farm in 2008 as the state’s first commercial-scale operation. The farm’s 87 turbines tower over the 350-resident town of Earl Park northwest of Lafayette.
The wind farm has needed Duke’s business from its launch to cover the construction costs, the company says in its lawsuit. The project cost about $150 million.
Duke signed up to receive the energy as it was looking to diversify its energy portfolio with more renewable resources. The utility began searching as early as 2004 for a developer to build a 100-megawatt wind farm.
“Clean, carbon-free, wind-generated energy is a good addition to our power sources,” Jim Stanley, then-Duke Energy Indiana’s president, said in a statement soon after the wind farm began operating.
“The agreement was the first significant, long-term purchase of wind power in Indiana. It’s also a boost to the local economy.”
Duke takes the electricity and sells it onto the power grid through Midcontinent Independent System Operator Inc. in Carmel.
“The MISO re-sale prices are affected by many factors and fluctuate constantly, often within a single hour,” the lawsuit says. “Under the [contract], Duke bears all risks arising from these market fluctuations.”
Duke has to pay a fixed price, the amount of which was redacted from court records, to Benton County Wind Farm, regardless of what Duke earns reselling through MISO. Duke is only excused from its obligation to pay the wind farm in “narrowly defined” emergencies, the lawsuit says.
MISO’s pricing system and a glut of wind energy appear to be at the root of the court case.
A computer algorithm bases prices on two “significant factors”: bids that utilities submit when selling energy and costs relating to congestion on the grid.
Duke and other power sellers had to submit price bids for traditional forms of energy, such as coal and natural gas.
Companies selling wind energy did not have to bid until recently, when the renewable resource surged in popularity in Indiana.
Wind farms popped up around northern Indiana, which has become a hot spot for the energy source.
BP and Dominion Energy started the 600-megawatt Fowler Ridge Wind Farm, also in Benton County. And the county is now home to EDF Renewable Energy’s 106-megawatt Hoosier Wind Farm.
MISO’s transmission grid wasn’t able to handle the burst of new wind energy, according to an August 2012 report by Synapse Energy Economics Inc. in Cambridge, Mass.
“This leads to costly congestion and uneconomic curtailment, or spilling, of available wind,” the report said.
An oversupply congested the grid and drove down the prices at which utilities could sell the energy, which has happened nationally. In some cases, companies have to pay to dispense their power onto the grid. They will often claim tax credits that turn their upfront losses into profits.
MISO changed its rules in March, requiring sellers to submit bids for their energy, like they did for fossil fuels.
When bids are too high, MISO’s automated system electronically signals the energy producer—in this case, the Benton County Wind Farm—and tells it to reduce its output.
The lawsuit redacts what Duke specifically did, only noting the utility “curtail[ed] electrical production by refusing to offer the Wind Farm’s power to MISO at competitive prices and then refusing to compensate [the wind farm] when the Wind Farm is directed by MISO not to produce power.”
Eisen, from parent company Orion, would not elaborate on the situation beyond what documents say.
Contract terms say the wind farm is set up to produce 100 megawatts for Duke, so Duke must buy all 100 megawatts, without refusal.
“Duke’s refusal to [redacted] or to compensate BCWF for generation lost due to Duke’s bidding practices has proven disastrous for BCWF,” the lawsuit says. “As a result, the Wind Farm has produced substantially less power than it is capable of producing with a corresponding collapse of the Wind Farm’s cash and tax revenues.”•
Brandon Baker | December 23, 2013 11:55 am
The outside of the newly opened Whole Foods on Brooklyn, NY’s Gowanus Canal contains more examples of renewable energy and efficiency than some companies have throughout their entire operations.
Solar and wind energy work together to completely power two Skypump electric vehicle charging stations and 19 LED streetlights. The Sanya SLSTM streetlights, by New York, NY-based Urban Green Energy (UGE), would remain operational during regional outages because of their natural power sources.
UGE says the streetlights and charging stations both produce more energy than they require, reducing energy consumption at the supermarket.
Solar carports, electric vehicle chargers, wind turbines and solar panels are all found at the new Whole Foods location in Brooklyn, NY. Photo credit: Urban Green Energy
“Taking advantage of the smart grid regulations available in New York State, UGE’s power systems contribute to the store’s microgrid—feeding energy to the electrical grid and taking only when needed,” the company said in a statement.
A 324-kilowatt (kW) solar array covers much of the parking lot and is expected to offset nearly 30 percent of the 56,000-square-foot building’s electricity use, or 380,400 kW hours from the grid, Earth Techling estimates. Additionally, a 157-kW combined heat and power system can provide heating and chilled water throughout the year and during grid failures.
Whole Foods full expects the store to garner LEED Platinum certification.
“We’re about 60 percent more efficient than any other grocery store in the U.S.,” according to a statement from Whole Foods’ Green Mission Team.” We’re going to be saving about 2.5 million kWh a year, which is equivalent to taking about 360 cars off the road annually.”
The Greenhouse, still in construction, will be complete in early 2014. Photo credit: Whole Foods on Facebook
The location, which also has solar carports, features a 20,000-square-foot rooftop hydroponic greenhouse to be run by Brooklyn-based Gotham Greens in 2014. The company will provide fresh vegetables throughout the year.
The store is on the Gowanus Canal, where the U.S. Environmental Protection Agency will attempt to reverse the trend of “more than 150 years of industrial waste, storm water runoff and sewer overflows” with a $506 million cleanup plan announced in September.
UGE has installed renewable-powered off-grid lighting systems in 80 countries for various Fortune 100 companies.