Category Archives: Solar Energy

Utilities Should Lead the Change

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I have worked in the telecom industry as head of marketing, in customer care and as a business consultant — I saw what happened there. More recently, I have also seen some of the best and the worst of stakeholder communications at electric utilities — including while I directed a large smart meter deployment, a very challenging activity for customer relationships. Beyond the obvious like using social media, online self-support, and efficient call center operations, There is one thing that electric utilities should do to improve their chances to maintain healthy customer relationships as the industry is transforming: lead the change.

“Someone’s going to cannibalize our business — it may as well be us. Someone’s going to eat our lunch. They’re lining up to do it.”

That was Alectra Utilities CEO, Brian Bentz, speaking at the Energy Storage North America in 2017.[i]

Utilities have a choice: lead change or have change done to them. The latter might hurt customer satisfaction more than the former.

Like telephone companies of the past, electric utilities could try to forestall the coming change, or even to reverse it, hoping to get back to the good old days. In fact, this is rather easy, as there is a lot of inertia built in a utility, often for good reasons: public and worker safety, lifelong employment culture, good-paying unionized jobs, prudency of the regulated investment process, long-lasting assets, highly customized equipment and systems, public procurement process, dividends to maintain for shareholders, etc. For utility executives, effecting change is never easy.

In the end, however, resisting change is futile. Customers are able to start bypassing utilities by installing solar panels and storage behind meters, keeping the utility connection as a last resort. It is just a matter of time before the economics become good enough for many industrial, commercial and residential customers, with or without net metering. Customers will do it, grudgingly, but they’ll do it. This will also leave fewer customers to pay for the grid, sending costs up and stranding assets, therefore increasing rates for customer unable to soften the blow by having their own generation, further antagonizing the public… A death spiral of customer satisfaction.

So, what should utilities do? Here are three examples of utilities that have embraced change and made it easy for their customers to adopt change:

  • Green Mountain Power (GMP) in Vermont helps customers go off the grid. Combining solar and battery storage, the Off-Grid package provides GMP customers with the option to generate and store clean power for their home that would otherwise come from the grid.  The Off-Grid package is customized for each customer and includes: an energy efficiency audit, solar array, battery storage, home automation controls, and a generator for backup. Customers pay a flat monthly fee for their energy.[ii]
  • GMP is also deploying up to 2,000 Tesla Powerwall batteries to homeowners. Homeowners who receive a Powerwall receive backup power to their home for US$15 a month or a US$1,500 one-time fee, which is significantly less expensive the US$7,000 cost of the device with the installation. In return, GMP uses the energy in the pack to support its grid, dispatching energy when it is needed most.[iii] Not surprisingly, results of a recent GMP customer satisfaction survey showed that customer satisfaction continues to rise.[iv]
  • ENMAX proposed to use performance-based regulation to the Alberta Utility Commission (AUC). The AUC set the regime in 2009. performance-based regulation has since then been expanded to other Alberta utilities. ENMAX stated that a number of efficiency improvements and cost-minimizing measures were realized as a result of its transition to a regulatory regime with stronger efficiency incentives. ENMAX indicated that it would not have undertaken these productivity initiatives under a traditional cost of service regulation.[v]
  • PG&E selected EDF Renewable Energy for behind-the-meter energy storage. The contract allows EDF RE to assist selected PG&E customers to lower their utility bills by reducing demand charges, maximizing consumption during off-peak hours, and collecting revenue from wholesale market participation. [vi]

References:

[i]         As reported by UtilityDIVE, https://www.utilitydive.com/news/alectra-utilities-ceo-someones-going-to-cannibalize-our-business-it-ma/504934/, accessed 20180102.

[ii]        See https://www.greenmountainpower.com/press/green-mountain-power-first-utility-help-customers-go-off-grid-new-product-offering/, retrieved 20171229.

[iii]        See https://www.tesla.com/blog/next-step-in-energy-storage-aggregation, retrieved 20171230.

[iv]       see https://www.greenmountainpower.com/press/green-mountain-power-survey-shows-customer-satisfaction-continues-rise/, retrieved 20171230

[v]        Performance Based Regulation, A Review of Design Options as Background for the Review of PBR for Hydro-Québec Distribution and Transmission Divisions, Elenchus Research Associates, Inc., January 2015, page A-25.

[vi]       See http://www.energystoragenetworks.com/pge-selects-edf-behind-meter-energy-storage-contract/, retrieved 20171230.

An “iPhone Moment” for Electric Utilities in 2018?

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In 1977, I worked as an electric meter reader, before going to university to earn my Electrical Engineering degrees at Polytechnique Montréal. In 2012, I was directing the largest smart meter deployment in Canada, replacing some of the same meters that I had read three and a half decades earlier. In between, I worked for 20 years in telecoms, living the Internet and wireless revolutions, and then mostly with electric utilities for the last 15 years.

As this year gets to a close, I would like to reflect on the changes that technology has brought – or could bring – to utilities and what it may mean for the future.

In 1987, telephone and electric utilities were both in the wire business – perhaps 20 AWG for telephone and 4/0 for electric, but mostly copper hanging on wood poles and serviced by a fleet of bucket trucks. Telecom companies were then telephone companies, just experimenting with wireless (the first cellular call in Canada had occurred just 2 years earlier) and the Internet was still primarily a military research technology (commercial service only started in 1989). Phone and electric utilities were highly regarded companies, imbued with a duty for public service and providing lifelong employment to their loyal employees.

By 1997, I owned a cell phone and I was running what was then the largest Internet telephony network (but tiny in comparison to today), competing with international telephone carriers. However, phone companies were in denial on the Internet, seeing us as a temporary nuisance, and trying to control user experience on cellular phones, like they had been doing for a century with rotary phones on landlines.

In 2007 the iPhone was launched. Not only did it merged the Internet and wireless phone, but it profoundly changed the business of the telecom companies. Before the iPhone, the wireless carriers were subsidizing cheap handsets to get customers to lock in for 3-year contracts and using the carrier’s proprietary and closed services. But the iPhone upsets that balance of power. Apple kept control on the user interface, given choice to consumers to buy the best apps from developers. However, by fostering more innovation, the carriers’ networks got more (not less) valuable through this change. People spent – or wasted – more time on their smart phones, generating more revenue for carriers and hardware manufacturers as network capacity expanded through successive generations of technology.

In the meantime, not that much has changed in the electricity business – my father, who worked as a dispatcher at Hydro-Québec until the 1970s, would probably recognize the network today, although he would certainly envy dispatchers using electronic maps rather than the paper ones he used.

However, 2017 has seen the rise of inexpensive solar energy and energy storage. Could 2018 have an “iPhone moment” for electric utilities? After all, the Internet brought us on-demand access to information, like energy storage is bringing us on-demand power. Wireless phones allowed us to cut the cord, and so may be distributed solar energy, at least to some extent. The parallel is striking.

Now who will be the next Steve Jobs? Elon Musk, perhaps?

All my best wishes for 2018!

The Sun for a Penny

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I recently presented at the Canadian Electricity Association (CEA) on the future of the industry. What would happen to the power industry if the cost to generate solar electricity reached 1¢/kWh? What could be the impact of a carbon tax? What are the business opportunities arising from the need for reliable power? While electric utilities have seen tremendous transitions during the 125-year history of the CEA, the current rate of development is unprecedented. To paraphrase a famous quote by Wayne Gretzky, utilities need to “skate to where the puck is going to be, not where it has been.” This presentation tried to provide power utilities with some insights into the future direction of the puck! See the presentation here: The Sun for a Penny 20170225a

The New Grid Needs to Be a Lot More Complicated

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The Old Grid used to be relatively simple, with generation following load:

Old Grid

It is now a lot more complicated:

New Grid

The grid is transforming and getting more complicated.

  • We are decommissioning fossil plants to reduce GHG emission and nuclear plants because of safety concerns.
  • There is only so many rivers, so the solution of building new hydro plants is not sufficient.
  • We are then replacing fossil and nuclear base load plants with renewables that are intermittent.
  • To compound the problem of balancing the grid, loads are also becoming peakier, with reduced load factor. Interestingly, many energy conservation initiatives actually increase power peaks.
  • To connect the new renewable generation, we then need to build more transmission. The transmission network also allows network operators to spread generation and load over more customers – geographic spread helps smooth out generation and load.
  • Building new transmission lines face local opposition and takes a decade. The only other alternatives to balance the grid are storage … and Demand Management.
  • Another issue is that we are far more dependent on the grid that we used to be. With electrical cars, an outage during the night may mean that you can’t go to work in the morning. So, we see more and more attention to resiliency, with faster distribution restoration using networked distribution feeders as well as microgrids for critical loads during sustained outages.
  • Renewable generation and storage can more effectively be distributed to the distribution network, although small scale generation and storage are much more expansive than community generation and storage.
  • With distributed generation, distributed storage and a networked distribution grid, energy flow on the distribution grid becomes two-way. This requires additional investments into the distribution grid and a new attention to electrical protection (remember the screwdriver).

All of this costs money and forces the utilities to adopt new technologies at a pace that has not been seen in a hundred years. The new technology is expensive, and renewable generation, combined with the cost of storage, increases energy costs. There is increasing attention to reduction of operating costs and optimization of assets.

Utility-Scale Solar Report

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I finally got around to read the US Department of Energy report on utility-scale solar energy (https://emp.lbl.gov/sites/all/files/lbnl-1000917.pdf) published a couple of months ago. Here are my highlights:

  • Installation trend is compelling. Installed capacity is now 30,000 MW – about 30 times more than 5 years ago.
  • Installation costs are falling – by more than 50% since the 2007-2009 period, the lowest-priced projects being around $2/W (AC).
  • Capacity factor is now improved to 27.5%. The main factors of this variation are, in order of importance: the strength of the solar resource at the project site; whether the array is mounted at a fixed tilt or on a tracking mechanism; the inverter loading ratio; and the type of PV modules used.
  • Power purchase agreement prices have fallen. Utility scale solar PPA is now as low as $40/MWh. At these low levels – which appear to be robust, given the strong response to recent utility solicitations – PV compares favorably to just the fuel costs (i.e., ignoring fixed capital costs) of natural gas-fired generation, and can therefore potentially serve as a “fuel saver” alongside existing gas-fired generation (and can also provide a hedge against possible future increases in fuel prices).

Evolution of Energy Generation and Distribution in Canada’s Smart Power Grid – Innovation 360 Conference Panel

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On September 29, I was asked to participate on a panel titled “Evolution of Energy Generation and Distribution in Canada’s Smart Power Grid” at the Innovation 360 conference in Gatineau, Québec (http://innovation360.ca). Here is the essence of what I contributed.

By definition, in an electricity network, energy consumption plus losses equal electricity generation. This must be true at any point in time, or protection systems will shed load or trip generators.

There are 4 ways to balance load and generation:

1) Traditionally, dispatchable generators that can easily ramp up or down were tasked to follow the load. Big hydro plants and natural gas generators are particularly good at this. However, we are running of big hydro opportunities, and natural gas are sources of greenhouse gas emission, contributing to global warming.

2) Another way to balance load and generation is to interconnect with neighboring network that may not have the same load profile. Today, all of North America is interconnected in some way. However, building transmission lines is a lengthy process that typically faces major local opposition. As a result, most transmission lines run at capacity during peaks, weakening the bulk transmission system as the Northeast blackout of 2003 demonstrated.

3) In the last couple of decades, we have started to control load, like turning off air conditioning units by pager or getting large industrial like smelters to go offline for a couple of hours during a major peak. Time-of-use or market pricing are also attempts to have loads better follow available generation capacity. However, much of the conservation focus thus far has been on energy efficiency, not peak load reduction.

4) Very recently, energy storage has been getting attention. Traditionally, the only utility-scale storage technology available was pump-storage, like the Sir Adam Beck plant in Niagara, but few of those plants are possible, and they are not efficient. Going forward, batteries, either utility-scale or distributed storage, will grow, although for now utility-scale batteries are MW-class, when hundreds of MW or GW are needed.

Balancing load and generation is also becoming more and more difficult. On one hand, consumption is getting peakier, partly due to side effects of some energy saving programs, like turning down thermostats at night in the winter, and then turning them back up in early morning, just in time for the morning peak. On the other hand, wind and solar generators are replacing fossil generators, adding unpredictability to generation and taking away controllability, thus requiring even more balancing resources.

Integrating renewable into the grid is not only causing balancing problems. It also creates voltage management and protection problems. Those are solvable, but significant, engineering problems that require expensive upgrades to the electricity grid.

Ultimately, load and generation balancing, voltage management and grid protection adds costs that are ultimately born by subscribers. It therefore quickly becomes a political issue.

As a society, we have been subsidizing fossil fuels. Clearly, going forward, we will need to greatly invest in the grid if we want to limit the predicaments of global warming for our children and grand-children.