grid defection

How Green Mountain Power Makes Grid Defection Work for Them

(3BL Media/Justmeans) — Why would a utility company encourage its customers to produce their own power with the ability to completely disconnect from the grid? The fact that one New England power company is doing just that, and doing well as a result, is a testament to just how convoluted the electricity game has become, now that rooftop solar has literally turned everything upside down.

For starters, it’s not your average utility. Vermont’s Green Mountain Power (GMP) was founded in 1997 with the mission to “use the power of consumer choice to change the way power is made.” They are “committed to sustainability every step of the way,” and offer only products with an environmental benefit and … a zero-carbon footprint.”

Green Mountain Power, the first energy utility to become a certified B-Corp, is a wholly owned subsidiary of GazMetro, a publicly traded Canadian corporation. Earlier this year, GMP was named one of Fast Company’s ten most innovative companies in the energy sector.

On their website’s home page, they advertise Tesla’s Powerwall battery.

The idea of encouraging customers to put solar on their rooftops and install Tesla Powerwall batteries, so that they can run independently, was the brainchild of Mary Powell, who became CEO in 2008. Powell was recently named one of the 25 most influential women of the Mid-Market by CEO Connection, based on her ability to influence innovation and change. She recognized that by allowing customers to produce their own power during peak daytime hours, when the sun is shining, the utility could reduce the amount of external power that they purchase from the regional transmission system, at the time when it is most expensive. The utility also has the ability to draw power from the network of residential batteries when needed. This give-and-take system, in which provider and customers essentially work together to ensure that demand is met, also saves the utility the expense of investing in large scale energy storage.

Renewable Energy’s Growing Pains

(3BL Media/Justmeans) — A recent article in The Economist, called A World Turned Upside Down, portrayed a rather gloomy outlook for renewable energy. This was not because of shifting political winds, as some might expect, or the oft-repeated fact that the sun does not shine at night. Instead, the authors pointed to two discrete facts. First, building out the infrastructure required to reach critical mass for renewables will be enormously expensive. Second, the economics around the receipt and delivery of electricity are changing dramatically, largely due to the impact of renewables. While the two facts themselves are indisputable, the conclusions drawn from them are less so.

The story goes on to point out how utility revenues are falling. Renewables cost much less to operate, which brings prices down. Plus, when people put solar panels on their roofs, they no longer need to buy power from utilities, at least not during the peak sunshine hours. However, they still expect the utility to provide power to them when the sun goes down. That requires a lot of resources on the part of the utility that someone needs to pay for.

In many ways, the issue is analogous to—though slightly ahead of—what will soon be playing out on the highways. Money to maintain the roads is largely collected from state and federal taxes on gasoline. As more people shift to efficient hybrids or fully electric cars, less money is collected for road repairs, while the amount of driving remains roughly the same. This is an issue you can expect to hear more about in the future and it will likely cause some consternation, though I don’t expect to see getting rid of EV’s widely supported as the solution.

It’s also important to note where the analogy falls apart. Roads are maintained largely by the government as public infrastructure and paid for through taxes. Most of the electric grid is owned and maintained by private interests that are expected to show a profit each quarter. This difference is the current point of pain.

Utilities Dive into Home Energy Services and Products

(3BL Media/Justmeans) - We’ve written in the past about the challenges facing the utility industry, with Barclay’s downgrading the entire industry as a poor investment prospect. The phenomenon of grid defection, customers cutting their ties with the utility in favor of a solar array with batteries, or a grid-tied system enabled through net metering is taking its toll on profitability. Traditional electric utility business models have rather suddenly become an endangered species. Not that the companies will necessarily disappear. Some might, of course, but those that remain will look very different than they do today.

Take a look at NRG, one of the nation’s largest power companies, operating in the Midwest, that has traditionally burned coal for about a third of its power. CEO David Crane, who has a degree in Public Policy from Princeton and a law degree from Harvard, has apparently seen the writing on the wall. The company has taken dramatic steps over the past year including natural gas conversions and plant closings to reduce its dependence on coal. One plant is even being converted to run on low-sulphur diesel. When combined, these changes will result in a 25% reduction of coal purchases.

There was a time not long ago when such moves would be considered iconoclastic for such a staid industry. But that is just the beginning of this latest chapter in the NRG story. Last week NRG announced the acquisition of Goal Zero, a manufacturing start-up that produces small solar charged battery packs. Their products are popular in big box sporting goods stores, ranging from solar powered speakers for camping to 1250 Watt-hour solar home generators.

“It allows us to expand the opportunity of solar,” said Crane. “Our ultimate goal is to energize people wherever they are.”

It sounds reasonable enough, though it’s a big move for a utility company to start selling consumer products. That might just be what it takes to stay afloat in this changing world.

Will Electric Utilities Become the Next Dinosaurs?

((3BL Media/Justmeans) - We ran a piece a week ago about Barclay’s downgrade of the utility industry. The move cited fears of rooftop solar undermining the industry profitability the way that internet downloading has disrupted the music business. Once people have solar on their rooftops, they will buy considerably less electricity from their utilities, using it only as a dynamic storage mechanism, providing power when none is available from the sun. Solar panels are most effective at mid-day when air conditioning needs are highest, which is also the time that utilities can charge the highest rates to their commercial customers.

As the cost of battery storage system continues to fall, more customers will disconnect from the grid altogether, a phenomenon known as “grid defection.” Some analysts have raised the specter of a “death spiral” for the industry, where, as more customers defect from the grid, utilities will be forced to raise prices, encouraging even more customers to defect.

But according to Leia Guccione of Rocky Mountain Institute, You don’t want to defect because the greatest value comes from staying connected. When you’re off the grid, you need to invest in redundancy and into oversizing the system, so you end up taking a penalty that ranges from 10 to 50 percent of the cost of the system.”

However Guccione writes in her blog, “Because grid parity arrives within the 30-year economic life of typical utility power assets, the days are numbered for traditional utility business models.”

A new report entitled The Future of the Utility Industry and the Role of Energy Efficiency by the American Council for an Energy Efficient Economy (ACEEE) also puts these concerns into perspective. The study “estimates future electric sales under several scenarios, concluding that in the coming two decades sales will either be level, increase modestly or decrease modestly.”

 The authors find, after reviewing more than 50 papers and other studies, that a death spiral is unlikely, even under the most extreme example. The most optimistic scenario (from the industry perspective) shows a growth rate in electricity sales of about 0.7% per year through year 2040. Worst case is an annual decline of about 0.39% over the same period. That works out to an overall drop in electricity sales of about 10%. While that is hardly good news for the industry, it hardly signals its demise, either.

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