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The New Realities of Solar and Storage

The combination of increasingly inexpensive solar panels and lithium-based batteries is a powerful one. Look no further than the Solar Impulse 2, a completely solar-powered plane that can fly through the night on its batteries. Piloted by two Swiss explorers, Impulse 2 is attempting to fly around the world without a drop of fuel and it is already nearly halfway there.

While solar-powered air transport may still seem quite outlandish, we are already seeing how solar and storage may meet the energy needs of consumers and utilities.

It is hard to ignore just how far solar production has come in the last 10 years – just take a look at the Solar Energy Industries Association’s latest report on the solar market. In 2005,  the United States installed roughly 80 MW of solar photovoltaics (PV). 5 years later, in 2010,  falling costs increased PV installations 10 times over – for a total of ~ 850 MW. In 2015, PV installations are on track to hit 8100 MW this year – 100 times the amount installed in 2005 and nearly 10 times the 2010 amount!Solar Growth

New solar projects like the Poudre Valley’s 8 MW installation will actually decrease costs for consumers, in Poudre’s case costing consumers 15% less than base-load power, according to the Poudre Valley Rural Electric Association. To get systems like these up and running, solar now employs more than 175,000 – more than tech giants Google, Facebook, Apple and Twitter combined.

New solar projects like the Poudre Valley’s 8 MW installation will actually decrease costs for consumers, in Poudre’s case costing consumers 15% less than base-load power.

With 32% of new electrical generating capacity in 2014 coming from solar, and more than half of new capacity – 53% – generated by wind and solar, the need for energy storage when the sun isn’t shining or the wind isn’t blowing, is greater than ever.

Energy storage is growing at a blistering pace. GTM Research expects storage to grow 250% in 2015, with over 220 megawatts of new storage deployed. Tesla’s new Powerwall gets much of the media attention with 38,000 reservations for its new battery. While tens of thousands of these new batteries will go to powering grid storage projects in Southern California,  a multitude of other companies – storage startups like Coda and Stem,Korean giants LG, Samsung, and Sharp, and American industry leader AES – are already offering and installing storage solutions. Even Mercedes-Benz is selling energy storage!

Competition like this means that applications to fulfill California’s energy storage mandate are flooding in: one recent 74 MW project received over 5,000 MW in bids.

What does exponential growth of solar and storage mean for our grid? Already, it means that big customers, like hotels or manufacturers with peak demand charges, and residential customers in the most expensive markets, like Hawaii, are installing storage “behind the meter” to avoid demand charges and high retail rates.

For utilities, cheaper storage means rapidly available dispatchable capacity and frequency regulation “in front of the meter”. Batteries’ ability to provide these ancillary services has led Southern California Edison to announce it would install 250 MW of batteries to replacing aging gas peaker plants. In some cases, utilities are plugging batteries right into the aging shells of retired coal plants, like Duke Energy’s storage installation in Ohio, taking advantage of existing transmission lines running into the hulking old coal facilities.

In some cases, utilities are plugging batteries right into the aging shells of retired coal plants, taking advantage of existing transmission lines running into the hulking old coal facilities.

Coal Plant Home for Batteries
Future Home for Batteries? CC BY

Perhaps most exciting, Texas utility Oncor, has proposed spending $5.2 billion on 3 to 5 gigawatts of storage to pair with economical wind and solar resources in Texas.

Solar-powered airplanes? Old coal plants housing new batteries? Utilities proposing massive amounts of storage paired with wind and solar? These – at least the latter two – are our new realities. All of a sudden the future of a renewable-dominated grid looks a whole lot brighter. Are we ready to embrace it?

 

The What and Why of Carbon Budgets

If you’ve been paying much attention to the climate policy discussion over the last few years, you’ve probably heard mention of carbon budgets, or greenhouse gas (GHG) emissions budgets more generally. Put simply, for any given temperature target there’s a corresponding total cumulative amount of greenhouse gasses that can be released, while still having a decent chance of meeting the target. For example, the IPCC estimates that if we want a 2/3 chance of keeping warming to less than 2°C, then we can release no more than 1000Gt of CO2 between 2011 and the end of the 21st century.

The IPCC estimates that if we want a 2/3 chance of limiting warming to less than 2°C, then we can release no more than 1000Gt of CO2 equivalent between 2011 and the end of the 21st century.

The reason the IPCC and many other scientist types use carbon budgets instead of emissions rates to describe our situation is that the atmosphere’s long-term response to GHGs is almost entirely determined by our total cumulative emissions. In fact, as the figure below from the IPCC AR5 Summary for Policymakers shows, our current understanding suggests a close to linear relationship between CO2 released, and ultimate warming… barring any wild feedbacks (which become more likely and frightening at high levels of atmospheric CO2) like climate change induced fires vaporizing our boreal and tropical forests.

Carbon Budget vs. Cumulative Warming
Figure SPM.5(b), from the IPCC AR5 Summary for Policymakers.

What matters from the climate’s point of view isn’t when we release the GHGs or how quickly we release them, it’s the total amount we release — at least if we’re talking about normal human planning timescales of less than a couple of centuries. This is because the rate at which we’re putting these gasses into the atmosphere is much, much faster than they can be removed by natural processes — CO2 stays in the atmosphere for a long time, more than a century on average.    We’re throwing it up much faster than nature can draw it down.  This is why the concentration of atmospheric CO2 has been marching ever upward for the last couple of hundred years, finally surpassing 400ppm this year.

So regardless of whether we use the entire 1000Gt budget in 20 years or 200, the ultimate results in terms of warming will be similar — they’ll just take less or more time to manifest themselves.

Unfortunately, most actual climate policy doesn’t reflect this reality.  Instead, we tend to make long term aspirational commitments to large emissions reductions, with much less specificity about what happens in the short to medium term.  (E.g. Boulder, CO: 80% by 2030, Fort Collins, CO: 80% by 2030, the European Union: 40% by 2030).  When we acknowledge that it’s the total cumulative emissions over the next couple of centuries that determines our ultimate climate outcome, what we do in the short to medium term — a period of very, very high emissions — becomes critical.  These are big years, and they’re racing by.

Is 1000Gt a Lot, or a Little?

Few normal people have a good sense of the scale of our energy systems. One thousand gigatons. A thousand billion tons. A trillion tons. Those are all the same amount. They all sound big. But our civilization is also big, and comparing one gigantic number to another doesn’t give many people who aren’t scientists a good feel for what the heck is going on.

Many people were first introduced to the idea of carbon budgets through Bill McKibben’s popular article in Rolling Stone: Global Warming’s Terrifying New Math. McKibben looked at carbon budgets in the context of the fossil fuel producers. He pointed out that the world’s fossil fuel companies currently own and control several times more carbon than is required to destabilize the climate. This means that success on climate necessarily also means financial failure for much of the fossil fuel industry, as the value of their businesses is largely vested in the control of carbon intensive resources.

If you’re familiar with McKibben’s Rolling Stone piece, you may have noticed that the current IPCC budget of 1000Gt is substantially larger than the 565Gt one McKibben cites. In part, that’s because these two budgets have different probabilities of success. 565Gt in 2012 gave an 80% chance of keeping warming to less than 2°C, while the 2014 IPCC budget of 1000Gt would be expected to yield less than 2°C warming only 66% of the time. The IPCC doesn’t even report a budget for an 80% chance. The longer we have delayed action on climate, the more flexible we have become with our notion of success.

Unfortunately this particular brand of flexibility, in addition to being a bit dark, doesn’t even buy us very much time. If we continue the 2% annual rate of emissions growth the world has seen over the last couple of decades, the difference between a budget with a 66% chance of success and a 50% chance of success is only ~3 years worth of emissions. Between 50% and 33% it’s only about another 2 years. This is well-illustrated by some graphics from Shrink That Footprint (though they use gigatons of carbon or GtC, instead of CO2 as their unit of choice, so the budget numbers are different, but the time frames and probabilities are the same):

Carbon-budget1

Like McKibben’s article, this projection is from about 3 years ago. In those 3 years, humanity released about 100Gt of CO2. So, using the same assumptions that went into the 565Gt budget, we would now have only about 465Gt left — enough to take us out to roughly 2030 at the current burn rate.

There are various other tweaks that can be made with the budgets in addition to the desired probability of success, outlined here by the Carbon Tracker Initiative.  These details are important, but they don’t change the big picture: continuing the last few decades trend in emissions growth will fully commit us to more than 2°C of warming by the 2030s. 2030 might sound like The Future, but it’s not so far away.  It’s about as far in the future as 9/11 is in the past.

It’s encouraging to hear that global CO2 emissions remained the same in 2014 as they were in 2013, despite the fact that the global economy kept growing, but even if that does end up being due to some kind of structural decoupling between emissions, energy, and our economy (rather than, say, China having a bad economic year), keeping emissions constant as we go forward is still far from a path to success. Holding emissions constant only stretches our fixed 1000Gt budget into the 2040s, rather than the 2030s.

If we’d started reducing global emissions at 3.5% per year in 2011… we would have had a 50/50 chance of staying below 2°C by the end of the 21st century. If we wait until 2020 to peak global emissions, then the same 50/50 chance of success requires a 6% annual rate of decline.  That’s something we’ve not yet seen in any developed economy, short of a major economic dislocation, like the collapse of the Soviet Union.  And unlike that collapse, which was a fairly transient event, we will need these reductions to continue year after year for decades.

Growth-rates2

The Years of Living Dangerously

We live in a special time for the 2°C target.  We are in a transition period, that started in about 2010 and barring drastic change, will end around 2030.  In 2010, the 2°C target was clearly physically possible, but the continuation of our current behavior and recent trends will render it physically unattainable within 15 years.  Barring drastic change, over the course of these 20 or so years, our probability of success will steadily decline, and the speed of change required to succeed will steadily increase.

I’m not saying “We have until 2030 to fix the problem.”  What I’m saying is closer to “We need to be done fixing the problem by 2030.”  The choice of the 2°C goal is political, but the physics of attaining it is not.

My next post looks at carbon budgets at a much smaller scale — the city or the individual — since global numbers are too big and overwhelming for most of us to grasp in a personal, visceral way.  How much carbon do you get to release over your lifetime if we’re to stay with in the 1000Gt budget?  How much do you release today?  What does it go toward?  Flying? Driving? Electricity? Food?  How much do these things vary across different cities?

Featured image courtesy of user quakquak via Flickr, used under a Creative Commons Attribution License.

A Decoupling Update

So, it’s been quite a while since our last long policy post, focusing on utility revenue decoupling in connection with Xcel’s current rate case (14AL-0660E) before the Colorado PUC.  That’s because we’ve been busy actually intervening in the case!

A Climate Intervention

We filed our motion to intervene in early August.  As you might already know, in order to be granted leave to intervene, you have to demonstrate that your interests aren’t already adequately represented by the other parties in the case.  Incredibly, CEA’s main interest — ensuring that Colorado’s electricity system is consistent with stabilizing the Earth’s climate — was not explicitly mentioned by any of the other parties!

In our petition we highlighted our mission:

…to educate the public and support a shift in public policy toward a zero carbon economy.  CEA brings a unique perspective on the economics of utility regulation and business models related to mitigating the large and growing risks associated with anthropogenic climate change.  In addition, CEA has an interest in transitioning away from fuel-based electric generation in order to mitigate the purely economic risk associated with inherently unpredictable future fuel costs.

…and we were granted intervention.  So far as we know, this is the first time that concern over climate change has been used as the primary interest justifying intervention at the PUC in Colorado.  In and of itself, this is a win.

A Long and Winding Road

Throughout the late summer, we spent many hours poring over the thousands of pages of direct testimony.  Especially Xcel’s decoupling proposal, but also (with the help of some awesome interns), the details of the company’s as-of-yet undepreciated generation facilities — trying to figure out how much the system might be worth, and so how much it might cost to just buy it out and shut it down (were we, as a society, so inclined).

Early on in the process, the PUC asked all the parties to submit briefs explaining why we thought it was appropriate to consider decoupling in the rate case, whether it represented a collateral attack on decisions that had already been made in the DSM strategic issues docket, and how it would interact with the existing DSM programs.  We pulled together a response, as did the other intervening parties, and kept working on our answer testimony — a much longer response to Xcel’s overall proposal.  The general consensus among the parties that filed briefs, including CEA, SWEEP, WRA, and The Alliance for Solar Choice (TASC, a solar industry group representing big installers like Solar City) was that decoupling was not an attempt to roll back previous PUC decisions related to DSM — and that addressing it in a rate case was appropriate.  Only the Colorado Healthcare Electric Coordinating Council (CHECC, a coalition of large healthcare facilities and energy consumers) told the PUC that decoupling ought to be considered an attack on previous DSM policies.

The PUC staff unfortunately came back with a reply brief that disagreed and suggested, among other things, that maybe it would be better if we just went with a straight fixed/variable rate design to address utility fixed cost recovery.  Never mind the fact that this kind of rate would destroy most of the incentives customers have to use energy efficiently.

And then we waited.

With baited breath each Wednesday morning we tuned in to the Commissioners’ Weekly Meeting, streaming live over the interwebs from the Windowless Room in Denver.  We watched regardless of whether anything related to our dear little 14AL-0660E was on their agenda.  Just in case they tried to sneak it by.  Weeks passed.  And then a month.  The deadline for submitting our answer testimony approached.

Finally on October 29th, six weeks after submitting our brief, the commissioners finally brought up the issue of decoupling at their weekly meeting and in a couple of minutes, indicated that they’d be severing it from the proceeding, with little explanation as to why.  However, because there were no details, and the order isn’t official until it’s issued in writing… we continued working on our answer testimony.  The final order came out on November 5th, and prohibited submission of testimony related to decoupling.  Answer testimony was due on November 7th.

Where to From Here?

Xcel might come back to the PUC with another decoupling proposal before the next Electric Resource Plan (in fall of 2015) .  Or they might not.  This means that a good chunk of the work that we’ve been doing since this summer will have to come to light in a different way.  So for the next few posts, we’re going to explore some of the issues that came up in the preparation of our answer testimony, including:

  • Decoupling and Distributed Energy:
    How would decoupling interact with distributed energy resources like rooftop solar?  What are the implications for utilities as the costs of those resources continue their precipitous decline?
  • Decoupling and Demand Side Management:
    How would revenue decoupling interact with demand side management programs in general — both utility and privately or locally funded — and what particular issues with Xcel’s DSM programs could decoupling address?  What issues can’t it help address?
  • Can Revenue Decoupling Scale?
    Why doesn’t revenue decoupling as a policy really scale up to the point of  taking existing generation facilities offline, or preventing new facilities from being built?
  • Decoupling as a First Step:
    Even if it can’t scale, why might decoupling still serve as a useful starting point for the decarbonization process? Can it give us a little bit of breathing room while we start the real negotiation? Or is it just another layer of financial protection for utilities who want to delay change as long as possible?
  • Realism and Equity in Carbon Budgets for Colorado:
    What is the true scope of the decarbonization challenge, in the context of the carbon budgets recently published by the IPCC in their Fifth Assessment Report (AR5), but localized to Colorado so we can actually wrap our heads around it.  Why is this conversation so hard?

Learn more about utility revenue decoupling on our resource page…

Featured image of binders (full of PUC filings…) courtesy of  Christian Schnettelker on Flickr. Used under a Creative Commons Attribution License.

Utilities Decoupling to Cover Their… Assets

Last month, Xcel Energy subsidiary Public Service Company of Colorado (PSCo) filed a rate case at the Colorado Public Utilities Commission (Docket: 14AL-0660E).  A lot of the case — the part that’s gotten most of the press — is about PSCo recovering the costs of retiring and retrofitting coal plants as agreed to under the Clean Air Clean Jobs Act (CACJA) of 2010.  However, there’s a piece of the case that could have much wider implications.  Way down deep in the last piece of direct testimony, PSCo witness Scott B. Brockett:

…provides support and recommendations regarding the initiation of a decoupling mechanism for residential and small commercial customers.

This recommendation has captivated all of us here at CEA because it could open the door to Xcel adopting a radically different business model, and becoming much more of an energy services utility (PDF), fit for the 21st century.

To explain why, we’re going to have to delve a ways into the weeds of the energy wonkosphere.

Continue reading Utilities Decoupling to Cover Their… Assets

Facing the Risk in Fossil Fueled Electricity

I recently wrote about how our risk tolerance/aversion powerfully affects our estimation of the social cost of carbon, but obviously that’s not the only place that risk shows up in our energy systems.  Fossil fuel based electricity is also exposed to a much more prosaic kind of risk: the possibility that fuel prices will increase over time.

Building a new coal or gas plant is a wager that fuel will continue to be available at a reasonable price over the lifetime of the plant, a lifetime measured in decades.  Unfortunately, nobody has a particularly good record with long term energy system predictions so this is a fairly risky bet, unless you can get somebody to sign a long term fuel contract with a known price.  That doesn’t really get rid of the risk, it just shifts it onto your fuel supplier.  They take on the risk that they won’t make as much money as they could have, if they’d been able to sell the fuel at (higher) market rates.  If the consumer is worried about rising prices, and the producer is worried about falling prices, then sometimes this can be a mutually beneficial arrangement.  This is called “hedging”.

Continue reading Facing the Risk in Fossil Fueled Electricity