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Posts Tagged ‘solar-energy’

Oklahoma SB 1456: It’s Not Really a Sun Tax

Sun ,15/06/2014

asolar Oklahoma just passed and signed into law SB 1456, meant to allow power companies to assess an extra fee on  distributed generation (DG) customers who install renewable energy systems and hook to the power grid for backup. It is not really a tax as the extra fee will go to the power company instead of the state. The law was designed to discourage the investment in renewable energy by private individuals, but it may have unintended consequences for the power companies pushing the law.

Fairness:  The rationale for SB 1456 is based upon fairness arguments which have two very erroneous assumptions. It assumes it is not fair (1) that DG customers are being subsidized by other customers and (2) that DG customers cause an extra burden on the power grid. Research shows that states which encourage DG customers have found they provide a small positive benefit both to other customers and to the power grid.  Research (see below) indicates that distributive energy generation may require fewer upgrades to the power grid, benefiting all customers. Customers who use the grid for backup are required to have a net energy metering (NEM) contract with the power company. Under those agreements, they still pay a customer fee, which defrays the cost of infrastructure, and they are usually not reimbursed for any extra power they produce, essentially providing free energy for the other customers. The power companies agree that we should encourage people to use less energy as AEP/PSO’s states its mission is to “help customers use less energy and spend less for it”. Is it fair then that customers who cut their energy use in half by installing extra insulation are appreciated while those who cut their energy use in half by installing solar energy are charged an infrastructure fee? To be fair, DG customers should be charged as any other customer for the electricity they use and they should be compensated fairly for the excess energy they provide. 

ALEC: Since the author the law is AJ Griffin, my State Senator, I contacted her about the rationale for the law. She provided me with a document called Facts and Fiction, which was very similar to the rationale developed by the American Legislative Exchange Council (ALEC) to discourage the development of renewable energy. At their Chicago meeting last year, ALEC adopted discouraging the spread of renewable energy as one of its goals. Their plan to do this was by weakening renewable portfolio standards (RPS), by claiming that it would make electric rates go up, and by promoting the idea that those who install their own solar panels were “free riders” who did not pay their fair share of infrastructure costs.

When I asked Senator Griffin if she was a member of ALEC, she said that it she had attended one of their events, which turned out to be a trip to Alberta, but she did not know if she was a member or not. ALEC is apparently a very secretive organization. She denied that ALEC had anything to do with the bill, and I believe her, as she is apparently unaware of the connection.  Sen. Griffin told me the Facts and Fiction rationale, which was distributed to the legislators in support of the bill, was prepared by a group of people who represent the electric cooperative and the investor owned power companies. It is no wonder that it was very biased toward the position of the power companies.

Senator Griffin told me she had help writing SB 1456 from Kenny Sparks at the Oklahoma Association of Rural Electric Cooperatives. When I contacted him, he said that the idea of the bill had grown out of discussions with a consortium of power producers in Oklahoma which included representatives from investor owned companies. He said electric companies were worried that distributive generation might eventually increase their costs. One of the investor owned companies was AEP/ PSO, which is a member of ALEC, and the impetus and the rationale for SB 1456 likely came from them. Mr. Sparks told me that neither the consortium, nor the group which developed the Fact and Fiction rationale for SB1456, had a representative from any renewable energy group. It also apparently did it  consider the research which shows that private investors in renewable energy provide a net benefit to the other customers.

Research: There has been credible research which establishes that there is a net benefit to all electric customers in states where net energy metering has been encouraged. A study by Crossborder Energy in 2014 found NEM allows utilities to avoid costs of generation and fuel, maintenance and upgrade of transmission and distribution infrastructure, transmission losses (which account to 7% of losses), capacity purchases, and compliance with renewable energy standards. The study concluded,” The cost which utilities avoid when they accept NEM power exported to their grid shows that NEM does not produce a cost to nonparticipating ratepayers; instead it creates a small net benefit on average across the residential markets.” While it does cause power companies to have to adjust their loads accordingly, NEM reduces peak loads, transmission losses, and the need for new power plants.  In California, the study found NEM “delivers more than $92 million in annual benefits to non-solar customers”.

Another important study  was performed at the request of the Vermont legislature and carried out by the Vermont Department of Public Service. They were charged with determining if there is a cross-subsidization with net metering and other retail customers and to examine any benefits or cost of net metering systems to the distribution and transmission system.  The report addressed the specific ratepayer benefit as well as the statewide, societal benefit of solar net as: “Avoided energy costs, including costs of line loses, capacity costs, and avoided internalized greenhouse gas emission costs.; Avoided regional transmission costs.; Avoided in-state transmission and distribution costs.; Solar coincided with times of peak demand and market price suppression.; And an additional benefit explicitly not covered in the study is the economic multiplier associated with the local investment and job creation created from the local manufacturing and installation of net metering systems. “ Even considering subsidies, the report found that solar net metering was a net-positive for the state of Vermont.

It appears from these studies that net energy metering provides a benefit to the states which encourage the installation of solar and wind generation by private individuals. That benefit even extends to other customers.

Unintended Consequences: Though SB 1456 was an anticompetitive bill designed to discourage private investment in renewable energy, it may not turn out that way. Upon signing the bill Gov. Fallin attached a letter requiring “the Corporation commission to conduct a transparent evaluation of distributed generation consistent with the Oklahoma First Energy Plan. It also said, ” This evaluation mandates inclusion of all stakeholders including representatives of the solar distributed wind energy industries and utilities.” and “A proper and required examination of these other rate reforms will ensure an appropriate implementation of the Oklahoma first energy plan while protecting future distributed generation customers.”

The Oklahoma First Energy Policy encourages development of wind and solar energy, but it relies heavily on the increasing development of our natural gas resources. However, fracking and the associated disposal wells may be related to the increased incidences of earthquakes in Oklahoma. Oklahoma is now in the process of replacing some of its coal-fired power plants with natural gas plants. It would be prudent to encourage a greater development of renewable resources in case a definite link was established between fracking activities and earthquakes, which might greatly curtail Oklahoma’s production of natural gas.

Some electric co-ops , such as Oklahoma’s Indian Electric Cooperative, apparently recognize the value of net energy metering. The company allows net metering customers to accumulate credit for excess power and pays them at the end of the year for any excess credit at the wholesale rate, essentially treating them as any other power provider. If the Oklahoma Corporation Commission would adopt a similar model and require that NEM customers be compensated for the excess power they produce, it would greatly encourage private investments in renewable energy installation. It seems it would be in Oklahoma’s best long-term interest to encourage private investment in renewable energy, and SB 1456 may be the vehicle for that to happen.

(C) 2014 J.C. Moore

What Does the Solyndra Bankruptcy Mean?

Tue ,20/09/2011

 No one knows for sure why the solar panel manufacturing company, Solyndra, went bankrupt or what it means, but Congress is now investigating the matter. Though it will be useful to know what went wrong, bankruptcies in these tough economic times are not unusual. It is not clear why Congress is investigating the matter, but if the investigation is used for political purposes, it may delay our development of renewable energy resources. This could further hurt our economy and actually cause the loss of jobs.

In spite of the fact that the Solyndra bankruptcy may have cost 1000 jobs, that is a small amount compared to the hundred thousand plus workers who now work in the solar energy business in United States. Solar energy is one of the fastest growing industries and the graph above from this article estimates that the use of solar energy will increase fivefold by 2020. If the United States does not invest in the production of solar panels, it is almost certain that other countries will. China has set aside $34 billion to be invested in the production of solar panels. The $500 million in loan guarantees to Solyndra is rather small compared to that amount.

Unfortunately, the US investment in solar energy may be derailed by  Congress.  In spite of the other problems facing our nation, Congress has now launched a Congressional investigation into the Solyndra bankruptcy. It would seem that the investigation is politically motivated with the goal of embarrassing the Obama administration and derailing our efforts to reduce our dependency on fossil fuel. The Department of Energy has made a number of loan guarantees for investments in green energy projects and this is the only one which has had a serious problem. A number of large and savvy investors put over $1 billion into the Solyndra, so it cannot be claimed that it was was a bad investment from the beginning or that the company was supported entirely by the Department of Energy. Also, the political ramifications are not quite clear, as this timeline for the loan approval process for Solyndra shows it started in 2005 under the Bush administration.

Note added on 11/13/2014: Although the Solyndra bankruptcy has been used for political purposes to discourage investment in renewable energy, the loan program overall  has been quite successful.  Bloomberg News reported yesterday:

The U.S. government expects to earn $5 billion to $6 billion from the renewable-energy loan program that funded Solyndra LLC, supporting President Barack Obama’s decision to back low-carbon technologies. The results contradict the widely held view that the U.S. has wasted taxpayer money funding failures including Solyndra, which closed its doors in 2011 after receiving $528 million in government backing.

(c) 2011 J.C. Moore

Robert Bryce's "Myths about Green Energy"

Thu ,13/05/2010

“Our energy needs will best be served by a mixture of traditional and alternate energy sources and we should not let Mr. Bryce’s opinions keep us from developing the alternate sources.”

Robert Bryce, a senior fellow at the Manhattan Institute, has written a number of entertaining books and articles about the energy industry. However, his latest book, “Power Hungry: The Myths of ‘Green’ Energy and the Real Fuels of the Future” (1) is an attack on “Green Energy”. It is not surprising that he is not a fan of green energy as the Manhattan Institute receives large donations from the Koch Foundation and Exxon/Mobile. That may not mean he is biased, but Mr. Bryce’s latest article “5 Myths about Green Energy” (2) would make one wonder. He uses false comparisons, misquotes, scientific inaccuracies, and the omission of pertinent facts to try to make his case. Most myths are based on a small element of truth, but what Mr. Bryce claims as “myths” are mostly true and he has had to stretch to find reasons they are myths. You can judge. His five myths are:

Myth 1. Solar and wind power are the greenest of them all. Actually, they are. If you trace the energy back to its source, you will find that all fossil fuel energy originally came from the sun’s energy. Photosynthetic green plants formed fossil fuels by converting CO2 to carbon compounds  and oxygen over many millions of years and it is stored beneath the Earth. Wind energy and hydroelectric energy come from the Sun as well and using solar energy directly cuts out carbon as the middleman. That avoids many of the problems we have today with diminishing supplies and environmental damage from fossil fuel use.

Mr. Bryce criticizes solar and wind power for the “huge amounts of land to deliver relatively small amounts of energy”. It seems a stretch when he compares the watts/area of wind farms with that of a gas well. What is the area of a gas well? And, what would he make of the Gulf oil spill that has produced no energy but covers an area the size of New Jersey? Mr. Bryce also says “Because the wind doesn’t always blow, utilities must use gas- or coal-fired generators to offset wind’s unreliability. The result is minimal — or no — carbon dioxide reduction.” Actually, no one is denying the need for back-up sources but surely the alternate energy placed on the grid reduces the need for an equivalent amount of energy from fossil fuels.

Trying to make his point, Mr. Bryce goes on “Denmark, the poster child for wind energy boosters, more than doubled its production of wind energy between 1999 and 2007. Yet data from Energinet.dk, the operator of Denmark’s natural gas and electricity grids, show that carbon dioxide emissions from electricity generation in 2007 were at about the same level as they were back in 1990 before the country began its frenzied construction of turbines.” Wrong. The truth is that Energinet.dk’s 2007 Environmental Report says that from 1990 to 2007, CO2 emissions in Denmark were not flat but had an overall reduction of 23% . For comparison, the US’s CO2 emissions rose by 19% during that time.

2. Going green will reduce our dependence on imports from unsavory regimes. You would think this would be about importing 70% of our oil from the Middle East – but it’s not. It is about importing rare earth metals needed for green technology from China. Mr. Bryce does not mention that we now import the metals anyway and that reducing our use of these as catalysts in the fossil fuel industry would more than make up for increased use in green technology. Also, perhaps, we should not consider our biggest creditor “unsavory”.

3. A green American economy will create green American jobs. It’s true, as Mr. Bryce claims, that many of the manufacturing jobs for solar panels and windmills have gone abroad because of high labor costs in the US. However, for many years, the US did not have a sound energy policy and certainly did not promote the development of green energy. If the US had subsidized the production of alternate energy sources at even a fraction of what it subsidized the fossil fuel production, many of the green jobs would have stayed at home. Still, some manufacturing is done here and the installation, maintenance, and the business end of green energy cannot be outsourced.

Mr. Bryce also brings up the fact that the use of ethanol fuel only created 27,000 jobs rather than the 136,000 jobs a lobbying group predicted. A lobbyist’s claim is a strange standard to measure by and he neglects that ethanol was necessary to replace the lead and MTBE as antiknock compounds in gasoline.

4. Electric cars will substantially reduce demand for oil. While admitting that the electric car “has long been recognized as the ideal” because it “is cleaner and quieter” and “much more economical” Mr. Bryce criticize them because” the same unreliability of electric car batteries that flummoxed Thomas Edison persists today”. Mr. Bryce does not seem to realize that there have been a few improvements to batteries since Edison, such as the lithium ion battery he mentions in the article. He claims another problem is that “the GAO reported that about 40 percent of consumers do not have access to an outlet, near their vehicle at home”. Eh? Is there a serious shortage of electricians or extension cords?

He also claims that electric cars are sidelined “by physics and math”. One of Bryce’s best is “Gasoline contains about 80 times as much energy, by weight, as the best lithium-ion battery.” He neglects to say that you can use gasoline just once while the battery can be recharged hundred of times. Besides, a battery is just a storage device – one that can convert energy to work much more efficiently than an internal combustion engine.

He does say, “Sure, the electric motor is more efficient than the internal combustion engine. ” Isn’t efficiency what it is about? The internal combustion engine is about 10% efficient at converting heat to work. A fossil fueled power plant, including transmission losses, is about 25% efficient, and electric motors are about 90% efficient. Considering that, electric cars are over twice as efficient in converting fuel to work. If alternate energy sources are used to produce the electricity, we reduce our demand for oil even more.

5. The United States lags behind other rich countries in going green. Mr. Bryce says “Over the past three decades, the United States has improved its energy efficiency as much as or more than other developed countries” …” except Switzerland and Denmark, and the United States achieved it without participating in the Kyoto Protocol or creating an emissions trading system like the one employed in Europe.” He compares the reduction in CO2 emitted per dollar of GDP as a basis for this claim. He does not mention that we have much further to go. The US has 6% of the world’s population but uses over 30% of the world’s energy.

Mr. Bryce writes as if  our fossil fuel supplies will last forever and as if there are no environmental problems with their use.  His plan for alternate energy is:  “The United States will continue going green by simply allowing engineers and entrepreneurs to do what they do best: make products that are faster, cheaper and more efficient than the ones they made the year before.” I could almost agree with that if we subsidize all energy sources at the same level and charge each source fairly for pollution it produces. Our energy needs will best be served by a mixture of traditional and alternate energy sources and we should not let Mr. Bryce’s opinions keep us from developing the alternate sources.

1) Bryce, Robert, “Power Hungry: The Myths of ‘Green’ Energy and the Real Fuels of the Future,” PublicAffairs (2010)
3) http://www.energinet.dk/NR/rdonlyres/EC3E484D-08D5-4179-9D85-7B9A9DBD3E08/0/Environmentalreport2008.pdf

(c) 2010 J.C. Moore