Future of Electric Models

The past lessons have gotten us to this point. We know that the electric utility market is in a state of flux, and with this comes some pretty significant challenges, as well as opportunities. For the past 100 years, electric utilities have balanced safety, reliability, and affordability to provide service to their customers. The Regulatory Compact provides oversight, and in return, utilities are able to earn a return on the electric grade assets in which they invest. Some of the biggest changes include the influx of distributed energy resources, whose adaption is encouraged by tax credits, net metering, and other incentives.

The incorporation and integration of massive amounts of data and more active involvement from customers and third parties, including a potential competition to utilities, is also reshaping this market. At the same time, there is no room for error or slippage when it comes to providing electricity that is safe, reliable and affordable. The electric grid continues to be a major backbone in ensuring these three things. Right now, even as you're watching this, regulators are trying to figure out how to compensate utilities in the future for the value of the grid in a changing world.

We live in a wonderful time because there are so much technology and so many advancements being made. But at the same time, there are some that are affordable and effective that can be adopted early, and then there's others that the costs are high. But the technology keeps going on, and as greater production happens, the costs go down. So we live in a really exciting time. Technology is not free. And so it's a matter of which technologies to deploy, which one's are cost effective, and safe and reliable. 

There's been a lot of discussion by regulators, and utilities, about how an industry, that was
founded on a centralized approach, can accommodate or transform to include more decentralization. As you've seen, thinking about the complexities of how this industry works is really important. Preserving the electricity we have become so dependent upon. There are a number of business models already in place right now. Some electric utilities own generation, transmission, and distribution. That's a very traditional vertically integrated approach. Others manage only the transmission and distribution systems. And in Texas, independent power producers market electricity to users.

Many electric industry executives see value-added opportunities around distributed energy resources. But there is no clear path forward for a business model that makes the most sense. In the state of the electric utility study, utility executives were asked which model they thought would be the best for the utility sector moving forward. 28% said that they thought the vertically integrated utility model made the most sense. This means utility, again, on generation, transmission, and distribution and monitors reliability. 

Future of Electric Models

In this model, there is a regional transmission organization, OTO, or independent system operator ISO, of the transmission system. And that means there could be no preferential treatment given to the utility versus competitive generators. In fact, if you ever visit a utility that is vertically integrated, the transmission group is always kept physically separated from the other operations areas, as in, behind locked doors. Now, 24% of the executives picked the model that was specified in the New York plan. This means like the vertically integrated utility model, including a transmission that I described, and the utilities act as a platform provider for the distributed resources over the distribution system. Now the same proportion, 24%, picked an RTO/ISO model, and that means a regulated utility owns

the transmission and distribution. But unregulated companies provide generation. And then there is an RTO/ISO that operates the transmission grid. Fewer, 13% pick the retail
electricity market model.

This is the same as the RTO/ISO model I described. And then there are unregulated companies that provide electricity retailing services. Now 11% pick the IDSO model and that means the RTO/ISO model plus an independent distribution system operator. And they operate the distribution grid and
monitor reliability. Now in the same study utility executives were asked about what they thought was the best way for utilities to manage lost load from both distributed energy resources or from customers buying it from a third party. 38% recommended that the industry change rate structures to better recover those fixed costs. In other words, to reflect the value of the assets that are used. That's no small feat because you know how capital intensive this business is.

Some of the things they specifically gravitated towards were rates that varied in accordance with the time of use, meaning charging more during peak hours. Some also thought increasing the fixed charge would be the best approach. 27% said they thought it would make sense for utilities to offer customers renewable energy services, for example, community solar and green pricing programs. Coming in close behind, 26% said utility should petition regulators to change the traditional utility revenue model altogether. Electric utilities worry whether the ambitious approaches will be able to truly balance distributed energy choice with affordability, safety, and reliability.

Crystal ball, what's the future of the utility in the next, some people say 10 years, I think that's a shorter frame, as fast as technology is moving today, it could be three to five years what does it look like And at least for me, I'm already starting to see it with some of the projects that we're doing, and the small solar on the rooftops of a lot of our members. The grid used to be a one way grid. Power would come from the power plants, from out in the middle of nowhere, come into our substation, and
then flow down to the customer. And now we have little generators all over our service territory. So number one, our grid's got to be able to accommodate two-way flow of electrons, which it didn't need to before.

The other thing is we need to probably implement more of a storage. When we're making lots
of solar energy at noon, what we need to do is be able to store that energy, shift it six hours. So that when everybody comes home and they're watching television and cooking dinners, I can take that
energy that was made at noon and delivered to our consumers at six. It really is the key for renewables to turning it into gold. It's my opinion that movement of energy from one time period to another. I think the utility of the future is going to have to have that.

Basically, we're just a grid and I see us as being kind of the middleman with a bunch of people using
energy on our grid and a bunch of people producing energy on our grid. And we're the ones they're linking everybody up with everybody else. And that's a more sophisticated grid than what we have today. And we talk about infrastructure in this country, this is one of the infrastructures that
I think really needs to be focused on. It's also going to be a benefit to the solar industry because until I get this more sophisticated grid, I will have limits as to the amount of solar that I can bring into the system. At any particular location. So I would encourage that the solar industry actually helps the utility industry lobby government to support the infrastructure of the grid, improving it. Because at the end of the day, our improved grid means more solar can be deployed, which is helpful for
the solar industry at the end.

I think what we see in our society a lot are folks that are unhappy with the pace of change, and
folks want to change overnight. Typically though, decisions that happen overnight are rarely good and you look at the net outcome of where we're at, and utility space. We have the cleanest, most reliable, most economical, affordable and agile products and services in the electric utility space in the world. I think we're getting it right for both parts and we can continue to have some vigorous
debate on the margins about what on to change and where we need to head in the future. But, when you look at the end results, we're sitting here in the well-lit space right now. Students watching this, whether watching it home or watching it in a classroom. They're watching with dependable power
making it all happen at relatively affordable rates, depending on where they're sitting and that's a good thing.

To meet the utility of the future question, one of the things Xcel Energy has done here in the Colorado jurisdiction is, is we're broadly talking about what we're calling the R energy future initiative And we have three components of the Our Energy Future Initiative. And we sat back, and we looked at what do we think our utilities should be. What service should we be providing
to our customers five years from now, ten years from now. We came back and said there are three
things we really need to focus on. The first thing we need to focus on is customer choice. Being able to give our customers a little bit more control and little more choice about what they're looking at, how they're looking to consume their energy.

Giving them more information about it so they know more about how they're driving the costs of energy. Secondly, we need to be embracing the technology that's developing in our areas. So in our industry, we've had a lot of technological innovation in the past several years, and it's going to continue on into the future. How do we bring that into the fold in a way that makes sense for our customers and really embraces? And then finally, we want to provide those choices and we want to embrace that technology, but you've gotta balance that with economic development. We need to make sure that we're empowering our states to have strong and robust economic development to attract businesses so that our citizens can be employed by those businesses. And to attract people that can come and work in those businesses, and they want to live in our areas. So it's a balance of the three that we're really looking at and is really important to us. The utility of the future is going to
have more choices for its customers. It's going to be a little bit more adept and nimble at adopting those technologies and presenting those options to its customers in a way that makes sense.

The fact is that the cheapest integration solutions, the cheapest way of solving the intermittency problem if you want to see it as a problem, are obviously going to be found if you've got an entity that can look across the entire system, look at all of the resources available in the system. And integrate the different operating characteristics of all those resources, you need an orchestra conductor, which is I think the best way to understand one of the most important functions that utilities have. If you don't have an orchestra conductor, you end up with the absurd situation where the individual solar and wind developers are called upon to provide their own energy storage on their own sites. And in some parts of the world and in some parts of the country, that's actually happened. But it greatly increases the cost of the resource. And what on earth would be the reason for thinking that the onsight solution would be less costly than the whole cluster of solutions that are available to an orchestra conductor that can look out over a much bigger system?

So the future of renewability, as they say, is very bright. And we are really looking forward to continued deployment. It has been, if you look at the recent history, we've doubled the capacity of deployment every year and investment as well. So that I believe will continue and the technologies will continue to get cheaper, and more efficient, and more optimal. But I think one of the really interesting things about renewables is they become a greater and greater part of the energy mix is that we're really going to start seeing more decentralization and what some people have called the democratization of energy. So just as the internet has brought changes to the music industry and the transportation industry, it's bringing changes to the energy industry. And we're going to see
more distributive energy, people with solar panels in their homes, small wind turbines, utility building utilities scale power plants in different areas and communities.

Depending on the resources, we'll see geothermal, we'll see small hydro that takes energy from pipes and conduits in different ways from decentralized energy and we're going to see more and more of this become more of a community industry based mix. And people will really be able to understand how the energy is generated, they will be interconnected with how they use energy and then how it's actually generated themselves. So we going to see the utilities and the energy industry really
become much more dynamic, much more integrated, much more customer driven and customer focused. As the renewables and other types of energy become more and more part of our lives.

To sum it up, technology improvements and cost reductions, and distributed solar and energy storage, mean the likelihood of their increased integration into the existing grid. Electric utilities are looking at these and developing products and programs to benefit customers. At the same time, they know the importance of regulation to handle these changes in a way that protects reliability and affordability. The fact remains, we as customers demand all of this.

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Clean Electrical Power Planning For the Future

One of the things to watch, because it will hold a significant impact on the future of this industry and
its model, is the Clean Power Plan. This plan was a cornerstone of the Obama administration's focus, on mitigating climate change. It has also has been a lightning rod. As you may recall from a previous lesson where we touched on it, the plan called for cutting carbon dioxide emissions from coal-fired electric plants by 32 below 2005 levels. And states needed to meet this goal by 2030. A really critical part of the plan is that the EPA plans to regulate power plant emissions under this act. Each state has its own specific goals to meet under the Clean Power Plan. Almost half of the states
in the US are using. And the case against the Clean Power Plan is compromised of 38 separate cases. I know you're thinking that math doesn't add up, but the states aren't the only ones suing. Utilities and
coal companies have also issued lawsuits.

The states believe this plan is illegal and even unconstitutional, and feel that it is a way to
reorganize the US electric grid. They also believe it's an all-out attack on the coal industry that will drive electricity costs, sky high. The EPA fired back saying, the plan will lead to lower residential bills. Remember how earlier we talked about the fact, that states had jurisdiction over electricity generation and distribution? Well, this gets to the very heart of the controversy. The states are protecting their authority, to regulate carbon emission for their states. New Jersey Environmental Protection commissioner, sums up many of their concerns in three words, unprecedented regulatory overreach.

With the EPA, they're clearly looking at increasing and more restrictive standards, specifically on coal fire generation. But not just coal. When you look at where regulation is in the extractive industries, well that impacts any sort of baseload power we have in this country. And it drives cost. One of the frustrations I think the industry has with the EPA right now, is sort of the laundry
list of regulations.

Before one is finalized, you are met with an additional regulation. And there's no harmony between them. And the cross counting of benefits, counting the benefits of one regulation under the requirements of another. And really, that is an area where I think our country is really ripe for some reforms and just some common sense rethinking. That you can accomplish the same goals and achieve the same ends, without as being disruptive to industry and business as we are right now. because frankly, a lot of companies when they're looking at making long-term resource decision, their hands are tied. Because you just don't know what the regulatory future looks like in this country, because of the volume and diversity of regulations coming at US EPA right now.

The EPA defends its position saying, carbon emissions from coal fire plants represent a huge threat to the health and welfare of the US citizens, because of the impact on climate change. They support their right to do this because they have regulated other forms of air pollution from power plants, and other sources for decades. Now, on the other hand, some states, cities, and scientists support the plan. And they say that since pollution and emissions don't respect state borders, that the EPA's plan will help ensure emissions are truly reduced across the US. In February of 2016, the US Supreme Court
issued a stay of the Clean Power Plan. A legal stay means that a judicial proceeding is temporarily stopped. They can either be temporary or indefinite.

This means that the Environmental Protection Agency is not allowed to enforce any of the requirements of the rule until all of the lawsuits against it have been resolved. The outcome of this controversy will have considerable impacts on all of us. Meeting the standards would mean more renewables, greater promotion of energy efficiency and a greater reliance on natural gas. Of course, you know that natural gas is not without its own controversy, namely fracking. There's no magic bullet and the sound bites that come out of the media and social media, just don't do this issue justice. It's one that bears a closer look by all of us since the impact will be so significant.

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NET METERING - Future of Electricity

We talked in an earlier article about distributed generation. As a reminder, this is when electricity is generated near the location where it's being used. We also talked about the fact that with some energy sources being used for generation being more intermittent, for example, the sun doesn't shine all the time and the wind doesn't blow at the optimal speed all the time, you know that a connection to the grid is still needed. Otherwise, these customers would not have electricity 24/7. Another reason the grid is still needed is that many users sell energy back to the utility. And for this, you need a good connection.

They benefit in two ways, one is when their generation is not operating, obviously the greatest providing them power. But the grid also supplies them the capacity for their storage. Essentially, they're storing energy in the system and then using it when they have loaded and their generation is no longer on. So, there are two benefits there for customers with solar generation. 

Back in the 70s, there was a push by the government to increase penetration of rooftop solar. This is the genesis of net metering which is an approach to charging customers with rooftop solar. This approach was designed to encourage adoption and so it served to make rooftop solar more affordable through subsidies. Fast forward to today and solar rooftop penetration is going strong. So the question is being asked, does it still need government subsidies to grow, or could and should this market be able to stand on its own? At the center of the debate is the fact that those who don't have solar are subsidizing those who do. Let's dig into this in more detail.

So for a residential customer that has some solar generation, the watt outer meter runs forwards and backward, depending on whether or not the customer's using more load than the solar is producing or when the sun isn't shining. Or it runs backward when the load at the house is not enough for, is too much for, not enough for the solar capacity that's coming into the system. So the meter runs both ways. So, when the meter runs backward, there are negative kilowatt hours, and then when it runs forward there are positive kilowatt hours. So, according to the commission rules, customers can install a system up to about 120% of their annual kilowatt hours. So, if a customer has one these systems where it's designed and it actually produces 120% of their annual kilowatt hours, then the meter in large terms, ran backward 120% of the time. And so, what happens then is utility didn't get paid any money for the system that's being connected and then has to pay the customer for the energy that was produced in the system.

NET METERING

Net metering is approached a little differently in every state. Usually, here's how it works. Customers with rooftop solar or other distributed generation get credit for the extra electricity they sell back to the grid. Utilities are generally required to buy this electricity at the full retail rate. Now if that same utility were buying power on the open market from other utilities, they would pay wholesale rates. But net metering specifies that the utilities must buy the power at a retail rate or a premium rate

from net metering customers. The net, it's more expensive. Also, all of the fixed costs of the poles,
wires, meters, advanced technologies, and other infrastructure still has to get covered somewhere. So the bottom line is that the net metering customer doesn't pay for this stuff, but they use it. So, who pays for it? Customers without distributed generation or rooftop solar.

So when you take a look at the bill and it says a service charge, it's all over the place. Well, what's included in that service charge? And then we start talking about residential customers as it relates around to the energy rate. And this is where we get into a lot of these conversations about net metering, what's the cost-effectiveness? Who's paying for what? Are they paying their full share or not?

Right now there's a pretty heated discussion going on about the need to relook at net metering. At the heart of the discussion is how to ensure fair compensation for solar companies as well as utilities.

Then you turn the corner, evolution of technology, you come to the solar industry. You have the rooftop installations. They're using what is known as net metering. Net metering is you measure the amount of energy that's coming out of the home, you measure the amount of the energy that's being consumed by the home, and you get to net the two together. The problem is, is that the infrastructure
that's still behind that, that's based on them, how much is everybody using at the same time, is still needed, is still being utilized, but because of that netting, it isn't necessarily being paid for. And so that's, once again, back to that debate that's raging across the country right now on how do you really balance these factors and the benefits that come from the installations? What's going to happen? And we have, I think, still a number of years before we really know what the outcome of that debate is.

So the industry is changing. That puts pressure on the regulatory side. For the last 100 years, most of utility fixed costs have been recovered in variable rates because it worked. And because there was either consistent load or increasing load. With the distributed generation that turns it upside down and the variable amount of usage or sales is declining for many utilities which puts pressure on them to recover their fixed costs in different ways, and then that creates some backlash. 

The cost of producing solar power has gone down since net metering was first rolled out. The original purpose was to incent market growth. With that in mind, state legislatures and utility regulatory commissions are looking at outdated net metering policies. The solar industry has countered saying
that the subsidies aren't material and that the prevalence of rooftop solar helps to alleviate the strain on electric grids during summer days when demand soars. What we do know is that increased penetration of distributed energy technologies, particularly solar, is creating a fundamental shift in the US electricity system, and public policy must respond to this. Policy over the previous one way
street approach no longer suits this complex market.

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Future Electric Vehicles Technology

Let's talk about another hot topic, electric vehicles. The US electric industry has significantly
focused on electric transportation. This includes electric vehicles and charging stations to modeling the way by changing out some of their own fossil fuel power utility fleet vehicles for those that require electricity to run. There are some plug-in hybrids that have an electrical motor powerful enough to produce electricity beyond just for use in that vehicle. That means the power can be exported, so there you have it, storage, PG&E in California has done some amazing work with their own plea incorporating vehicles that can service generators to power their worker's tools and potentially even an entire neighborhood. Right now utilities use generators in areas that are down and connect these generators to grid sections to bring neighborhoods online one at a time. And they're looking at the plugin hybrids to fill this role. While this is extremely exciting news, we do need to keep in mind that at this point, it's more for isolated applications.

Most people that are really earnest about climate change will say that the first step is to decarbonize
the electric sector. In other words, have a larger percentage of renewable resources so that the carbon footprint is fairly small. And we're already there in the northwest. The step two that they will usually
point to is electrifying transportation. If you really want to make an impact on the carbon footprint of our society, you need to go after transportation and electric utilities want to be part of the solution. And I think electrification of transportation is a worthwhile effort. There are a lot of institutional barriers though, that keep utilities from participating. There are, in some cases, laws or regulations that prohibit utilities from encouraging electrification. In some cases, there are regulatory tests of cost-effectiveness. Just how far you can go to try to promote electrification of transportation, so it's not an easy thing. But that's a realistic second step for making a significant impact on climate change efforts. 

National Renewable Energy Labs is doing some extensive research on EVs. I was able to take a look at one of these projects in their lab. 

So this vehicle in this lab is being used to understand how vehicles interact with a residential system. So when you're plugging your electric vehicle in, how does it interact with the grid? How does it interact with the home and a building? And so, that's why we have this little vehicle here in this lab. We do a wide variety of research on electric vehicles, everything from developing the battery systems, the drive trains, the overall system of the vehicle itself and to prove its efficiency. And then also how to improve the different types of charging operations as well.

We're working on building energy codes in our states and cities. We're working on transportation
policy to increase support for mass transit systems to increase support for electric vehicles which is
an energy efficient and clean vehicle technology that's just emerging in the marketplace. We're quite, Bullish on the future for electric vehicles. Moving off of petroleum fuels, on to electricity for our cars and trucks.  There's no doubt the future is getting more exciting when it comes to EVs. This is one for us to keep an eye on.

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Electric Regulation and Environment

The state plays such an important role in this industry and in particular with environmental policy. Let's start with something called Renewable Portfolio Standard or RPS for short. Basically what an RPS does is it requires that a certain percentage of electricity that is sold to customers has to come
from approved renewable energy sources. These differ by state as you would have imagined. The state has different overall goals with some being mandatory and others being voluntary. Within states themselves, some different goals are applied based on the size of the utilities, whether or not they're an IOU versus corp or annuity. Often times the coops and the immunities have lower targets than the IOUs. But some common themes exist.

Most have some type of penalty if the utilities don't make the goal. They often have the option for the utilities to use renewable energy certificates or RECs to meet that goal. Let's hear more about RECs
from one of our experts.

So in terms of where we stand in the world, Colorado is a real leader. We have the National Renewable Energy Lab for the United States. They host hundreds of delegations from all over the world to go there and take a look at energy. In Colorado, we've also been a leader in terms of policy. In 2004, we're the first state in the United States to actually have the citizens vote upon an initiative to have 10% of our electric generated by renewable energy. So, we're a leader in terms of the renewable portfolio standards. Other states have followed, other states had renewable portfolio standards but didn't have it come from the voters. So it was a real Interesting to have a groundswell to earn a 52% vote to get that started. But again it comes back to Colorado has so many of all renewable resources and also a balance of fossil fuels. That we are, we're like a global petri dish. >> The Berkeley Lab publishes an annual report that details where states are with respect to having and meeting their RPS.

As a national lab this is a really good source of information. As you can see from this map, as of the time of this report 29 states have RPS policies in place. Most are well on their way to meeting them. In looking at this map you may think you can easily eyeball it to see which states are more aggressive than others but that's not really the case at a glance at least. You aren't really comparing apples to apples. More like comparing a combo platter to another combo platter. The requirements are so
different from one another. And this map doesn't necessarily, immediately lend itself to the discussion of what the incremental change would be for the states. Some states have more renewable or
other types of generation than others due to the problems of that resource located within the state boundaries. For example, Washington state has lots of water and, therefore, hydro.

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For those not intimately familiar with utilities, one of the tidbits of information I get about utilities is something that many states have called a Renewable Portfolio Standard. And that tends to increase over time and it defines an amount of renewable power that has to be part of their overall mix or
portfolio of power. That little bit of information can be misleading. For example, the state of Washington has a renewable portfolio standard says we have to get 9% of our power from renewable resources today. In 2020 that would grow to 15%. California will be at 33% in 2020. So you might expect that wow, California is much more renewable than the state of Washington. It's misleading though because the standard, at least in Washington and Oregon, and I know other states, does not include existing or older renewable resources. And so the state of Washington, based on reports to the state, something like 67% of the energy is renewable. But we're only 9% new renewable. And so it's a little misleading and a little confusing. So, we're actually more renewable, more sustainable power supply than California, but you wouldn't know that by just looking at the Renewable Portfolio Standard numbers.

We're focusing on the US but the RPS type approach is also found globally. Countries in Europe, Asia, and South America do something pretty similar. Now is a pretty logical time to talk about what a feed-in tariff is, which is also an approach found frequently abroad. A feed-in tariff guarantees
the purchase of all renewable energy, regardless of what it costs. The reason many people prefer the RPS approach over feed-in tariffs, as you can imagine, is because the RPS depends on the private market to make it work and supporters like the idea of this spurring competition and innovation. While the overall goal of the states is to protect the environment, how it's done is beyond
just the goal setting. States will have a different focus on carve-outs, multipliers, or some combination of the two. To keep it simple, a carve-out means that the state has specific requirements about the renewable energy source.

For example, there may be a solar carve out. This means that there is a specific goal for electricity generation coming from solar panels. Distributed generation is also a focus area of a number of carve-outs. You can see that carve-outs, either with or without a multiplier, are the most prevalent. A multiplier might exist to give more credit, and therefore, more attention, to certain ways of meeting the goals. For example, one might encourage early installation of renewable energy or in-state manufactured components. Another multiplier may assign a higher value, say, to solar or distributed generation, or maybe even wind. Critics of the multiplier say that this can cause an imbalance in the portfolio mix which, as you know, is not something that this market benefits from.

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Utility Policy by State

We've talked a lot about some aspects of federal energy policy in terms of its impact on the electricity market. And it's really important to what changes will happen and what must occur. But if electricity regulation and policy were a wedding, state regulation is the bride. What do I mean by that? State regulators call many of the shots when it comes to electricity regulation. They often take center stage and it's always been like that. In the very beginning of this course, you saw that in the crash history animation lesson, that 100 years ago, this market was set up so that states could make the call when it comes to electricity within their state boundaries. This was done because of the natural monopoly status of the utilities and also as a way to make sure the local utilities met the needs of their residents and businesses. And they also wanted to make sure that the utility would continue to meet state goals, which generally include things like economic development and environmental protection.

So, Melissa Day, as you know, electricity was developed in the late 1800s and early 1900s. And what happens is, is they naturally formed as monopolies. And so in our society, we have many areas and sectors that are competitive, but we do have a few that are monopolies. And in these cases, many of the states, or almost all of the 50 states, have created public utility commissions that go again, way back to the 1800s, to go ahead and regulate these monopolies. Obviously, one company can't go ahead and build electric generation and transmission through the power lines and have everyone held captive and charge them exorbitant rates. So, public utility commissions go ahead and monitor the monopoly-like companies.

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State regulation, which is handled by the public utility commissions, is responsible for approving a lot of critical decisions. When I think about a license to operate for electric utilities PUCs are the first thing that comes to mind.

As a regulated utility, we have multiple layers of regulation. Primarily, you're going to be looking at the federal level, which they're looking at wholesale transactions. And then you have the retail level and the state level. So in Colorado, we have the Colorado Public Utilities Commission. Each state across the country usually has some kind of public regulation commissioner, public utility commission. They may have a slightly different name in each of the states. 

PUCs are responsible for overseeing retail sales to end users, that's us. As well as the businesses that use the electricity, which is all of them, and that includes approving rates. They also oversee the low voltage distribution lines, where the power plants and transmission lines are sited, meaning where they're located. One of the biggest issues in this area is that neighborhoods can protest the placement of a transmission or distribution line. And they often do. We all want reliable electricity and most people want to live in a state that is growing from an economic development standpoint. But, often, we don't want to see the poles and wires in our backyards and parks. And as we've talked about before, burying distribution lines is not always possible from a technical or from a cost perspective. Interestingly, the PUC does not have responsibility for hydroelectric facility siting, licensing, safety, or recreational use. This is the responsibility of FERC. Even before the modern electric grid, the US federal government has overseen national water resources. 


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The other thing the PUCs oversee is the utilities for the portfolio of generation types to serve customers. A utility files a plan of what resources they intend to use, whether it's coal, natural gas, and/or renewable energy. The PUC is then responsible for approving the mix being planned by the utility. You already know that state government in the form of public utility commissions approve or disapprove what utilities can charge. 

So, we won't spend any more time on that, I know you've got it. So, who watches over the PUC? It's worth noting even the PUCs are regulated. Each state has a legislature that reviews changes to utility laws, rules, and regulations. It's a pretty extensive system of checks and balances. It's worth taking a deeper dive into individual state's focus on the environment which we will tackle in the next article.


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Aging grid & the rise of Federal Transmission Regulation in Electric Future Industries

We've been talking about the grid, which includes the network of the 300,000 to 450,000 miles of transmission lines, depending on who you ask. Whether it's the lower number or the higher number, if we stretched it end to end, that's a distance that is longer than it is from Earth to the moon. Which only about 250,000 miles in case you're wondering. That is a lot of wires, poles, and equipment over long distances of diverse terrain to maintain. Add to that, the grid also includes substations, transformers, and distribution lines. And I'm sure you can appreciate the amount of expertise and effort it takes for our lives to stay on. And to pinpoint and fix a problem if one arises in all sorts of weather is really difficult. I've had the opportunity to go on a lot of ride alongs in my career, and something I've always found interesting is the fact that the linemen can always point out the older equipment. It's kind of like hanging out with a docent in a museum. That is from the 1950s, over there, that is from the 1920s.

The fact is parts of the grid are getting old. It doesn't mean it's not valuable, it doesn't mean it's not reliable. It just means that we need to pay attention to continuing to invest in our grid and the policies that influence this process. It's kind of like your car while no one ever says, wow, I love what you did with your oil change. Or hey, those new struts are pretty sweet. We know it's important to maintain our car, so we don't end up on the side of the road. Well, the electric system is the same way. As our country and the world have become much more dependent on electricity and the grid has expanded. It becomes even more important than ever to maintain and replace what we have, and this includes the older infrastructure. We can all have the slick and cool gadgets we want. But if you think about it, having a strong backbone is the key to providing reliable and save electricity. Utilities know stuff happens when it comes to reliability. Equipment can fail, cars, unfortunately, hit poles. And no kidding squirrels are super cute, but they have been known to take down entire neighborhoods. And those aren't squirrels on steroids, they are just plain old squirrels. You've heard me compare the grid to a system of roads before. It's a good analogy to start us out, but electricity doesn't really work like trucks or cars on road. Vehicles follow the specific route as you know which is the road, at least that's what we hope that everyone follows the rules of the road.


Electricity though moves through the wires based on the laws of physics. If it's been awhile since you've taken physics, I'm talking about the path of least electrical resistance. Also at this point in time, power can't be stored cost-effectively on a large scale.

Operations of a power utility are more complex than they were many years ago. Today, we do wholesale trading on an hourly basis, as well as further ahead. We also operate our hydro facilities. We try to balance the reservoir balance against a load of our costumes and the market prices as they move.

This moves that utilities are constantly monitoring and adjusting generation to make sure everything is operating as it should. If you ever had a chance to see a control room. It's really impressive with screen upon screen of real-time data, and experts making sure our light is always on or responding to liabilities issues really quickly. This data is really important for system reliability and it is used to manage electricity, within a company service territory. And even more interestingly to coordinate
electricity with other players. A lot of people compare this to an orchestra leader making sure all of the instruments play their parts at the right time. In the early 60s, a lot of utilities had already voluntarily started coordinating their generating plants and transmission systems. This really helped with strong reliability in keeping costs low. Then in the mid-60s, a big blackout happened in the Northeast.

When I say big, I mean big, an incredible number of people were out, 30 million were impacted. What's even more mind-boggling was the cause. Reportedly a perfect storm originated from a failure of one piece of equipment at a hydroplane and things went south from there. Enter the North American Reliability Council or NERC which was created as a result of this incident to improve
reliability by making sure utilities and transmission providers coordinate to avoid and minimize such big outages.

While significant weather events like snow, rain, flooding and even wind can and due cause reliability problems, the increased coordination between electric companies have made big outages much rarer. Of course, when we're out in our house, it doesn't feel like that does it? It feels like a pretty big deal. The thing I find really interesting about NERC is that until 2005, the reliability standards were actually voluntary. Now keep in mind the utilities and transmission companies have a vested interest in keeping the grid up, which you know now requires a lot of science and know how.

In 2003, there was another pretty significant blackout. 50 million people were impacted, you'll never believe what caused it. A downed transmission line that had brushed against overgrown trees. This is exactly why electric companies spend a significant amount of effort on vegetation management or
as we know it, tree trimming. So the next time you witness a utility going about trimming the trees, you now know the reason behind it. And you know that a problem that occurs over there, can impact thousands or even millions of customers.

NERC was renamed to the North American Reliability Corporation, from Council. And they were empowered to develop specific reliability and operational standards to make sure the power system is operating in a way that is reliable and safe. The FERC or Federal Energy Regulatory Commission actually does the enforcing of the standards that NERC develops. I bet I know your next question. So what happens if utility doesn't comply with the standards?

Well, it's a big deal, if a company fails an auditor if a violation is detected following an incident. There are significant financial penalties and sanctions associated with non-compliance. So on top of it not being desirable by the utility itself to have reliability issues, because their customers get pretty mad, they would also face some very tangible penalties. Many companies have developed specific job functions that deal solely with NERC compliance because it is just so important. This enforcement falls under FERC's bigger role in regulating bulk or big power systems that move
electricity across state lines. And this includes the rates transmission owners charge for this transmission of high power electricity service. Texas, which is one of the grids I mentioned when we were talking earlier is a little bit different. Because it operates almost like an island and it's not connected to anyone else. FERC also oversees wholesale electricity sales.

Most wholesale markets are actually competitive. So what FERC does is allows companies that are selling at wholesale markets the ability to sell power at whatever the market will pay. Like us as consumers in competitive markets like the cell phone industry, we can choose who to buy our service from. And because there are multiple players, they know that they have to keep costs there or they risk losing business to the competition. This is something that many people don't know about, and that's because we are retail purchasers of electricity, not wholesale customers. In other words, electric providers aren't able to influence the prices in the market. So then the wholesale customers or the
market are ultimately setting the rate. They do this by choosing to purchase from that provider or not. If you're getting flashbacks to price theory in economics, then you're on the right path. That being said, some companies actually do have the ability to influence rates and this is called market power. So for these companies, FERC sets up a maximum price they can charge. Like we heard in the rates lesson, in the absence of true competition, the rate or the price is regulated.

Now we know FERC's role, but let's talk about what they can't do. Things the FERC cannot do is
make transmission system owners build new lines. They also can't tell states that have ruled not to allow transmission that they need to allow it. Let me give you an example of this. A state might decide that they don't want transmission lines running through one of their state parks, and the FERC
cannot readily force them to do this. This can get messy when we consider the transmission lines run across state boundaries. There may be a plan to run a transmission line across several states to connect a state to an affordable power source. But if just one state decides that it's not going to happen when they have the right to veto it.

As I'm sure you can guess, states prioritize their own residents. So do they always place value on getting customers the best deal on electricity in a state over there, not necessarily? A big topic of discussion in the industry is not that there is a shortage of electricity generation. It's that there is congestion on the transmission grid. Where do we fall into this equation as customers? Often citizens and communities do not want transmission limes in their conceptual or real if you're back into open space, backyard. This means, the delay of construction or even the outright cancellation
of the transmission project. Which as you know might be a project that is being done to support economic growth, reliability or affordable electricity. The interesting thing is that there are
state and federal mandates that call for large-scale wind generation and solar power. And we know that this is not located in populated areas. Without the transmission to move the electricity this poses a problem as I'm sure you can imagine. Add to that the fact that wind, in particular, is very variable as is the sun. This means the electric utilities have to balance the power source back to those control rooms I told you about on an ongoing basis. Speaking of natural resources, we'll talk more about federal regulation and the environment in the next article, So for more, Keep visiting Smartelectricfuture.blogspot.com.

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Electrical Technology & Customer Expectation for Power Sector

Technology is one of the areas that gets a lot of attention. And also is surrounded by a lot of confusion as to what can and cannot be done today and why. I will tell you that some of the most
innovative technology is being developed behind closed doors. Especially by entrepreneurs as well
as federal laboratories supporting commercialization efforts in this space. It's being worked on, but there's not a lot of information about it because developers are looking for the dream of introducing something truly revolutionary and won't reveal trade secrets. From what I can tell you, some of them are airware. Meaning there's nothing really there yet other than a promise of potential once it's commercialized. And some of them, if developed, well, can really revolutionize how we think about and use our electricity.

What do we know about how the intersection of technology and customer expectations can reshape a market? Well, we have already seen some changes in other industries that might give us a hint as to what could happen.

Think about what some of us that are old enough to actually remember landlines saw happen in the telecommunications industry. As you can imagine, telecom is another asset-intensive and heavily regulated industry. In fact, there's a lot of overlap between electricity and telecommunications regulatory bodies and oversight. Looking at this could provide some hints as to where this industry may go. It used to be that phone companies provided wired service to people's homes nearly universally.

Now, I'd venture to guess that some kids today have never even seen a landline and wouldn't know what to do with a corded phone. I happen to live with a few of those vertically challenged and technically gifted people known as kids. Now how many of us don't even have a land line, but only have a mobile phone? In case you're curious, the Center for Disease Control did a pretty
comprehensive study about just that. And right now, it's less than half.

As an aside, if you're wondering why the Center for Disease Control would even track it, it's because they were looking to figure out how many US households had access to 911 Emergency Response services. To get back to our example, our expectations of what phone service meant to us, as well as what we've valued in it, changed. And the telecommunications companies changed along with it. A pretty clear picture of how expectations change is obvious in the messages or promises the phone companies were putting out to the market versus how they're currently talking to you and to me as customers.

Telecommunications companies used to stress call quality and clarity above all else
in their advertising. Now, how many of you have cell service that is always available and always clear? I'd bet not many. And if you do, please tell me who you use. You can even see it in the cell phone companies' advertising now. It often features maps showing where their service is available, sometimes even in direct comparison to the competition. Why is this? It's because this is what matters most to the markets, and cell phone companies know it. Our rules for these companies have changed. We now value being able to bring our cellphone anywhere we are over the sound
quality of the calls we make.

We also want enough functionality to support our critical applications. Pokemon Go anyone? And as proof, that's what the ads are stressing. But is the electricity market the same way? Now that many of us expect and get always available electricity service, would we really be okay with accepting anything less?

From all the research I've seen, not many at all would tolerate this, and it would be a tough sell to all but some small customer segments. But could this change? Maybe, but I think since we are already so reliant on our electricity that type of change would occur in more specific customer pockets versus
a more ubiquitous market. That's my personal opinion, but what do you think? I would love to hear your opinion on our discussion boards

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Pace of Change, Technology and Regulation in Electrical Future

With a few article behind us, I know you've made the connection that 100-year-old industry that's
obligated to serve everyone. Whose business practices are shaped by its surrounding geography and climate, and is highly regulated, doesn't really lend itself to being an exactly bleeding edge. That's actually good news for us as consumers. We demand and let's face it, pretty much get reliable electricity 24/7. For Smartelectricfuture.blogspot.com web-blog of Electrical Engineering & it's future, I am going to write an article about the Electrical Future's pace of change, its technology and regulation. 

Think about when new technology comes out in other areas, there are always some hiccups. Patches on your software and phone apps, you tolerate them. Interruptions in your electricity? I'm pretty sure you're not going to be as generous of spirit, to put it nicely. 

I had the opportunity to go across the country and have conversations with various customers,
with various stakeholder groups. And one of the things that I hear quite frequently is well utilities are just so in the past. We're slow, we're large, we're lumbering, it takes us a long time to change. What I would say is that on two levels, one, sometimes that’s a good thing. Because in society when you're
talking about a life essential, you don't want it to change overnight. 

You also want it to be a reasonable cost to all of the citizens of the state and of the communities. You have to take into account the fact that everybody is treated as the same when it comes to electricity and provisions. But they don't all have the same incomes. So, you've got to make sure that it's accessible to everyone, or make it as accessible as you possibly can. So, when a utility makes a decision, it's not just to adopt the latest fad. And, you wouldn't want your utility to necessarily adopt the latest fad, because it might be too early in a process, and be too expensive. We look to balance both the new technology that's coming at us and the availability of it and the benefits that it brings
to our customers with the economics of that technology and how it's going to impact the cost in our customer's bills. Finding that balance is what is key when you're adopting new and different things. So while we may be lumbering at times, it's not necessarily always a bad thing.

But there is some movement especially more recently, and it is happening at a pace that industry
insiders agree is pretty quick compared to what they've seen in the past. Even if they don't agree on whether or not the Pace of Change is too slow or too fast, a lot of the Pace of Change is dictated by the regulatory framework And the availability of technology. Utilities, as you know, are subject to a lot of regulation. We dove into how rates are set, but that's just one piece of the puzzle. New technology is being developed, but can it handle the scale of what we require as customers? And are we okay with the potential increased costs and decreased reliability, at least initially? And something else that is very important is whether or not the rules are right to encourage utilities to adopt and integrate new technology given they need to balance environment, cost, and liability. The combination of these really dictates changes and the pace of those changes. 

For the upcoming posts, I'm going to focus on the United States regulatory framework primarily. focusing on the regulatory frameworks across the globe is really an enormous scope. And I don't know that it would lend much to our primary goal of helping you understand that for all electricity markets, the underpinning of regulation is a key driver of the pace of change. With that, let's begin our lesson and learn about how technology, customer expectations, and regulation, fit together.

For any query, you cancomment below. Watch this video lecture regarding this article for more clearification.

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Electrical System & Energy Efficiency

Electrical Energy Efficiency

In this article that I am writing for Smartelectricfuture.blogspot.com, we're going to talk about energy efficiency which in some respects is an unsung hero. I want to start out by acknowledging that while in a previous lesson I talked about how customers as a whole, want electricity that's available to them 24/7 and at an affordable price. Not all customers want the same things. In fact, there are a number of indicators that can predict what we tend to prioritize when it comes to electricity. For instance, for a business, electricity is an operational expense that directly impacts your bottom lines. In households, there can be very different priorities based on income, age, and even political affiliation. So one size does not fit all in an industry that has an obligation to serve all.

Concept of Electrical Demand and Consumption

Energy efficiency is one of those rare things that can fit most. Before we jump in with both feet, I want to help you understand the difference between Demand and Consumption, two very important concepts. Electric companies plan how much power they need by looking at peak demand. Peak demand is when the most power is being used. Let me give you an analogy. If you look at your car, your speedometer tells you how fast the car can go. While your speedometer might say your car can go over 100, mine says it can go 180. For a maximum speed, you likely won't do that or at least I hope not because then you'd be a real ticket magnet. Anyway, just because you regularly, hopefully, don't go that fast, there might be a team when you need that extra speed.

Example of Demand and Consumption

For example, to pass a truck on the highway to avoid an accident. Another car-related example is the parking lot in your local mall. Most of the time all of the spaces are not taken up but over the holidays, what happens? More people shopping, more cars, more spaces filled up, the mall developer built the parking lot for peak demand which is holiday shopping. While I'm using the cars as an example, I'll also tell you about consumption. Consumption's like your car's odometer. You know the cars mileage tracker, it tells you how far you've gone. Now, this isn't a perfect example of course but hopefully, it helps you understand the difference between peak demand. Which means you could use your air conditioning, refrigerator, charge your iPad, and do the laundry all at the same time while not sitting in the dark unless you choose to, and consumption which is how much you use. While the previous examples used, miles per hour and miles, and even how full a parking lot is a measurement. Electricity consumption is measured based on kWh and demand is measured in kW.

What Electrical Efficiency is?

Now that we understand energy use, energy efficiency's a pretty simple concept. It means reducing electricity use. This appeals to a broad range of customers because it offers environmental benefits as well as the plus of being easier on our wallets, right? We use less electricity it impacts the environment less and then we spend less money. This isn't likely a surprise to anyone watching this. What might surprise you is the fact that electric utilities actually do things to help their customers reduce electricity use. I know when I first joined the industry it surprised me. Coming from a highly competitive telecommunications industry, I distinctly remember sitting in a meeting having to practically sit on my hand to prevent myself from asking, excuse me, but why would an industry want to sell less of its own product? That made absolutely no sense to me. I mean think about it. When have you ever seen an ad coming out of a beverage company that says, hey, you might want to slow down, you're drinking way too much soda? Not going to happen.

Conversation and Energy Efficiency

Some people question, why are you in the business of pushing conservation and energy efficiency programs when really, you're in the business of selling electricity. And it's a really good question. We've been in the energy efficiency business since 2008, and our customers have saved more than a billion-kilowatt hour from programs specifically designed by our utility. There are a few different things, a few different ways that we think this is important. One, we know affordability is an issue for many of our customers. We know that it's critical to help them save on their energy bills, and these programs can help them do that in many ways. We also have to build for peak demand periods. So, we're putting assets into the ground power plants that don’t run all the time. That just deliver energy peak time periods and that's an expensive way to deliver energy. So, some of our programs specifically address trying to shave that peak so we can at least delay putting power plants and additional infrastructure in the ground. And that's important to us.

Useless Energy for Decades

Well, electric utilities have been encouraging their customers to use less energy for decades. And it's not just talking, they walk the walk. They offer customers financial incentives like low-cost loans, appliance and equipment rebates and even energy-efficient products like light bulbs and shower heads. These initiatives are known in the industry as Demand-Side Management. Let me give you an example. If you've ever taken advantage of a rebate your utility provides you to purchase a new furnace, dishwasher or other energy efficient appliance, you're benefiting from a demand side management program. For business, we're talking some pretty big projects potentially, including lighting erector fits, building automation upgrades, and HVAC system improvements. A utility will typically help identify opportunities by conducting a pretty comprehensive energy audit. Using one of their energy experts who typically has an engineering background. By installing devices, equipment or appliances you're reducing how much electricity you're using from that point forward. At least when it comes to those particular devices. I had the chance to talk to Howard Geller, executive director of the South West Energy Efficiency Project which is a public interest organization that promotes energy efficiency.

 Energy efficiency is using less energy to power our lights, power our appliances, power our vehicles get the energy services that we desire, using less energy.
 

Now that you know how they do this, let's get back to the question of, why they do this. As you now know, most utilities are highly regulated by State and local jurisdictions. And they receive a government incentive to encourage these programs.

How it helps to Save Energy?

Utilities are actually helping their customers save energy, and buy less electricity or less natural gas. Utilities across the United States have these programs that are often called demand-side management programs or energy efficiency programs. And the utility is doing this to reduce energy waste, to help their customers lower their utility bills. By saving energy and just improving the customer satisfaction among their customers. Saving energy is less costly than supplying energy from a new coal-fired power plant or gas-fired power plant or wind turbine or a group of wind turbines that we call a wind farm, or solar power, solar PV photovoltaic power, usually cost $0.2 to $0.4 per kilowatt hour to save electricity through more efficient lights and appliances and so forth while all these other forms of electricity supply cost $0.6, $0.7 or more per kilowatt hour.

Reduced Environmental Impact

Regulators have done this to encourage reduced environmental impact, especially recently, but also to help avoid the cost and the time needed to build new power plants in response to increase usage. Electric Utilities also have programs that encourage their customers to use less energy during very specific times. They will target high energy usage or peak times. These programs are a little different from what I've just talked about because they focus on having the consumers using less energy during a pretty specific time frame. That is when the usage is highest or at its peak.

Demand Side Management Program

The demand-side management programs are something that we've had in the municipal utility space since the beginning. Obviously, early on, it was seen most notably with our industrial customers, where it was in the utility's advantage to ensure that we could move demand around to sort of meet our system's availability and our system's capacities. But we're seeing it more and more move down over the last six or seven years, even into the residential space.

Reduce Energy Uses at Residential Customer Side

The idea is try to reduce at peak. So, one of the programs that work really well is the, for residential customers, is the cycling of air conditioning. The company gives you a rebate and then they put a device on your air conditioner to cycle the air conditioner, to keep everybody's house cool, but they don't have all the air conditioners coming on at the same time. And they're trying to reduce their demand, and the company wants them to reduce their demand at peak as well, but that's more towards motor controls, more efficient motors, more efficient lighting, more efficient equipment that the commercial customers are using. So, they're more based on equipment and lighting where residential is more intended for peak air conditioning use.

Demand Response from Industries

In the industry, these are called demand response. Some people consider it a subset of demand-side management. Let me give you an example. Picture, it is a record-breaking hot summer day. With scorching temperatures. It's a Monday. Businesses and homes all have their a/c blaring, manufacturers are producing goods and products. Offices and businesses downtown are trying to keep cool. Well now, picture an unlikely, but possible event boom. Just like that, a generation unit goes down, and this causes a supply shortage. Now, what happens? Well, let's just say that if utilities didn't have a really comprehensive demand response plan in place like they do, this could get ugly really fast. Let me give you an example of demand response in action. There's a hotel in your area and it has over 600 guests’ rooms, some great meeting space, and a really nice restaurant. As you can imagine, they use a lot of electricity. They would work with the utility to figure out what could get turned off if a situation like I had described arose. So, it could be things like turning off some non-essential lighting, or maybe turning off the ice machines. The hotel could also do things like postponing running their dishwashing and laundry operations because they're pretty extensive.

Cycling

For you and I are homeowners, let me use a different example. Of course, we would have a much smaller impact individually, with their more residential customers than business customers and this can really add up. A lot of utilities will pay you to install a device that can turn on and off your central air conditioner. This is called cycling and many people don't even notice it's happening except, of course, because the utility lets them know.

Not Generate Energy Itself

Really, the most cost-effective thing you can do to improve energy use is to actually not have to generate the energy itself because you're not demanding it. That's the first thing you'll want to do and then you move on to the renewables and other types of clean energy. So, demand-side management is a very important part of overall energy and electricity systems.

Demand side management definitely does not get the kind of attention it probably deserves, which is kind of a shame because it's so important for our system.

So, it's actually the utilities are often incentivized, or it's actually good for them to reduce that peak power. They would love if power was generated if demand was the same across day and night but that's not the way it works. So, the demand side management is important to them, so that they can be using the most cost-effective power. And not have to use the peaking power that's the most expensive for them. So, it's really a dialogue and a relationship between the consumer, the customer, the utility and the public utility and the regulators.

These energy efficiency programs over time can really add up to significant energy savings. Electricity use would be 10% higher if it hadn't been for the utilities efficiency programs. And that 10% savings translate to about $1 billion of economic benefits for customers.

Case and Point, enroll has a lab that focuses on testing consumer-oriented efficient products. I had the opportunity to tour this facility and I learned a lot.

We have a laboratory that we actually have equipment such as washers, dryers, microwaves even electric cars. Things that you would have in a home. And we use that equipment to better understand how the demand operates. So, we can have them all start up at once. We can operate them at different times. And we can look at the way smart meters integrate with that to be able to manage the demand related to that particular equipment. So that facility looks like, I won't say it looks like a home, it looks like a bunch of equipment all stacked up together. But it's highly instrumented, and then it's linked up to a model or a system that simulates the way it would integrate with the grid.

Regardless of whether they work at an energy efficiency public interest organization, at a utility or at an innovation-focused national lab. The experts agree that getting more efficient in our own use is, a step not to be overlooked.

Energy Efficiency at Rooftop Solar or Windfarm

Energy efficiency is a lot less visible and glamorous than rooftop solar or wind farm. It's a lot of small measures and hidden measures. More efficient light bulbs, a more efficient water heater in the basement. More efficient compressor in your refrigerator. You tend not to see it, it's not so visible, and so it just isn't as often as sexy as putting a solar system on your roof. You're not going to impress your neighbors with a more efficient water heater or furnace. But it's very practical, it's very cost-effective. The energy efficient water heater or furnace will payback a lot faster than the solar panel on your roof.

To sum it up, energy efficiency, while it's been around for a long time, holds even more important as customers seek an advancement in environmental protection. While renewable energy gets a lot of the press, energy efficiency programs will continue to evolve, especially with smart technology, and will become even more important.

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Electric is not your grandparent's Utility

How Somethings are Changing in the Electrical Industry

This module is called not your grandparents utility. And that's because it focuses on how some things are really changing in the electric industry. But I'm thinking if it wasn't such a mouthful, we might be better off calling it not your grandparent's utility and maybe not even yours. Because that's what we're going to be talking about in this section. It's going to be the possibility and the likelihood of some pretty significant changes occurring in the elective industry. We've already talked about the fact that for the past hundred years; this industry has run pretty seamlessly. In fact, probably if we ask the average person where's your electricity come from? They'd say, the outlet? The thing is, even though it's so important to our comfort, having a healthy economy and so much of what we do is dependent on it. 

Let's be totally honest,

we don't really give it much thought. I know I don't. I don't wake every morning and say yah. Thank you electric grid, and the utility that operates it. Without you my coffee maker wouldn't work, and I'd have no coffee, and people around me would suffer. I mean, the fact is, we probably don't think about it much at all, unless it's out, and then that's, pretty much, all we're thinking about, when is it going to come back on the values kind of hidden, we think more about the things that use the electricity like our cell phones, like our air conditioner, then the electricity itself. beyond when the power is out even if we look at our bills and some customers don't like one third millennials we may think about our electric company when we open our bill and we think it's just too high. But generally, thinking about electricity ranks pretty low, would not you agree? In the previous post I am hoping it really struck with you that well it appears pretty to us- there are a lot of moving parts, including the infrastructure and equipment, organizations and regulators that make it work.

There is so much changing right now and so many possible directions this industry may go, Of course, no one knows for sure, but I can say that what's coming will not be your grandparents' utility. In fact, what we'll see in the future isn't even likely your utility. 

Things are changing, and they have to accommodate new technology and customers' increasing interest in choice. And we all know that reliable service is non-negotiable You've earned your stripes by coming this far and learning some of the fundamentals of how this industry works. And I'm excited to open your eyes to more information about how this industry could evolve in the not too distant to future. 

There's a lot of confusion and debates. Experts argue over how the industry should evolve and what a realistic timeframe would be. No matter what the outcome, you can be sure that it will touch your life in some way, and that's why I'm glad you're joining me to learn more about it. I hope you enjoy watching this module as much as I enjoyed the process of creating it. See you in the next article with something new about the Electric Industry, it’s history and the future. Cheers and keep visiting at SmartElectricFuture.blogspot.com

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Design & Future of Solar Energy For Electrical Generation

Let's move on to solar. I know you've seen solar panels because they're one of the most conspicuous forms of energy right now. But do you know how a solar panel actually makes electricity? Basically, the sun hits the panel and then converts the photons into electrons of direct current or DC electricity. These electrons float out of the solar panel and into an inverter. The DC power is then converted
into alternating current or AC.

AC power is what's used when we plug in our stuff. The cost of PV has gone down, and that means it's grown a lot. Solar can take a lot of forms, from utility-scale or large solar or community solar, that can power many homes and businesses. Two individual panels on folks' rooftops.

Rooftop Solar System

Let's start with just rooftop solar and that's where individual homeowners will decide to purchase a solar system, put it on their house. Normally, they're trying to offset their utility bill that we send them and that process works really smooth because of the convenience of the meter that we use for those systems either goes forward or backward. And you can be sitting in your house watching television and your television's being supplied by the solar. And then a cloud comes over, and all of a
sudden, you're being supplied by the grid. And you, inside your house, have no idea what that switch occurred, or it could occur many, many times.

There's no switches or anything, there's no blinks, flickers, nothing. It's seamless as to how the energy is supplied to your various electrical appliances. And that is important because most people don't want to be inconvenienced, they don't want their television show interrupted because a cloud came over or anything like that, so that kind of convenience is very important. Those home's systems typically get a nice federal tax credit. People do want to offset their utility bill, and that's primarily why they do that.

Now, community solar, and just for a moment I'll brag that United Power was the first community solar in the state of Colorado back in 2009, but in that particular case, we have a remote location where we have a little solar farm, and consumers can actually purchase those panels, lease those panels. And all of the energy that, that panel makes is credited on their normal home bill. So it's as if the panel was sitting on their house, but it's not and the benefit to that is, and I don't know the exact percentages but I'll say that maybe 20 to 30% of the homes in our service territory are solar ready which means that they have enough roof space, southern exposure, and no shading. That means that various people that couldn't participate in the solar because they don't own a home could actually buy a panel, or lease a panel on the community solar farm, and participate in solar, get the credit
as if it was in their home, and that's the other 70% that we were able to work with because of community solar. A pretty good idea, it allows everybody to participate in solar at some level no matter what. Now, the utility-scale solar and many utilities have a legal requirement to have a certain amount of renewable generation. They're encouraging utilities to put as many solars they possibly can on the system and we can agree with that.

However, on the other side of the coin, our members and customers still ask us to keep the rates as low as possible. And so, actually, the utility scaled solar as you see out in this field is really the most cost-effective and puts more solar on the system quicker than trying to support the small solar on the homes type thing. So, at least at United Power, we think of it as a balanced approach again.

We want to support the small solar on the homes because that is local jobs, local businesses, contractors, and individual members that are participating in that. We like the community solar because it opens up solar for the other 70% that can't do the rooftop solar. And we like the utility-scale too because it brings a lot of renewable generation onto the grid at the lowest possible cost which, at the end of the day, helps to keep our rates lower, and stabilizes our rates over the 20 year period that this particular farm is in operation.

As with wind, there's a lot of information out there that's taken out of context. Of course, saving the planet is a big reason people choose solar. Probably a bigger reason for consumers and businesses is that it costs them less. I say them because, like wind, there's more than meets the eye to it because of the subsidies in place to encourage adoption. Taxpayers and other rate payers are most often how these are funded. 

Really what we're seeing in solar energy is that the panels have dropped in, again 85% in price in the last eight so years and that's largely due to the fact that as the installations went up, the manufacturing processes improved to be less hands-on and more automated, and more a continuous process. So they're able to produce panels at a much, much lower price than they were before which then drives
the price down for the installations, which then increases the installation and the economies of scale. So these types of early stage incentives help get the technology into the market and achieve these economies of scale until it can reach them, basically, grid parity and compete fully with other types of technologies.

Of course like every other generation source, it's not without its faults. And I bet you know enough now to see what those might be. Like wind energy which is only available when the wind is blowing, solar panels only generate electricity while the sun shining. Evenings and cloudy days are a problem. So that whole base load backup issue remains with this type of electricity production.

Baseload is critical and what that essentially means is the power that's always on, always accessible day or night. I mean it doesn't take a rocket scientist to understand that when the sun is not out, you're not getting electrons from your solar panels. When the wind's not blowing, you're not getting electricity from the wind turbines. Really, what baseload is, is that power that's always on and always accessible throughout the day. Really, you get your physics folks in here that can talk to you about the need to sort of balance the system, that you need a constant supply of electrons on the system to keep it running and operating.

What's more important though than baseload really is that sort of intermediate power, that power you can bring on when these renewable resources come on and come off. We need to have resources that we can call upon at a moment's notice to meet that gap, that energy demand. You can see it in hot summer days as the sun begins to set and the infamous Duck Curve, if you're familiar with that out of California, where your solar power starts to wane off but your demand for the evening is starting to peak. They're not necessarily perfectly aligned. You need a resource to make up that gap and what we see in the space right now is that's natural gas. You have either peaking turbines or combined cycle units that you can dispatch quickly to sort of match and marry that gap, and the power that's either coming off or conversely when it comes on.

We'll take a summer month like June, which has a lot of sunlight hours. This particular single access tracking field will basically come up to full production around 7:30 in the morning, and it will stay there, if no clouds, but it'll stay there until 5:30, 6 o'clock at night. Maximum production during that entire period where the fixed panel system is more of the traditional bell-shaped curve. It slowly comes up in the morning, and it basically peaks for about a three to four hour period, maybe between 11 and 2 PM is when its peak occurs and then it starts to go back down again. So, just being able to get more hours at a higher production is where that additional energy comes from.

It also takes a lot of real estate space to generate electricity and many homes and businesses just don't have the room. Another complaint is you can't do much with the land that the solar panels are on. So you can't multi-purpose it like you can with the wind. There are some ways around that with community and utility or large-scale solar. I had the opportunity to visit a utility-scale solar project.

Let's learn more about how utilities are integrating solar into their operations.

Yeah, this is, actually I'm kind of excited, I don't want to get into a lot of technical detail, but this is a 13-megawatt solar field. It probably could serve maybe around 3,000 homes, their entire electric needs for the year. It's on about 130 acres, and I believe there are about 160,000 solar panels associated with this. One of the unique features of at least this field is that it's a single access tracker. So, it actually follows the sun throughout the day. And because of that, it can get probably 20 to 30% more
energy than a fixed panel system. And this is kind of the new wave of how these utility sized fields are being developed. Before it was a lot cheaper to just do the fixed panel. The actual tracking device is a mechanical device that has moving parts where they can get dirty and need maintenance every once in a while, and it just wasn't cost-effective to do the single axis tracker. Until now, and we are seeing this field, it's been in operation for a couple of months now. But the production that this field
offers us first is a fixed panel system that we did a couple years ago is remarkably different. Both good. One of the unique properties of this particular field is not only that it's a single axis
tracker but it's a load following. And what does that mean?

Most solar fields are just plug and play. You plug them in, whatever energy they produce goes on to the grid and gets dispersed among the homes and businesses in the general area. What happened here is we worked with our developer, which in this case was Silicon Ranch so that because electricity has to be used when it's made, there is no storage out here. So if we don't have the load to use the energy, then these guys can't produce it. And so, this particular field is not a plug and play, it's a throttled sort of field which is a bit unique in the industry. And so, if our load goes below the 13 megawatts that this field is rated, this field will actually throttle itself down to the 11 or 10 megawatt level to accommodate the load that happens to be on the lines at that time.

Now when the load goes back up, the solar field comes back up, too. But that's a very unique thing that we worked on the Silicon Ranch, the developer on this project, to have that kind of load following, putting a throttle on a solar field. And again, that is kind of unique but very, very, very valuable to us as a utility. Obviously, we only make electricity with solar when the sun is shining. People still want to watch television at night. So we would, obviously, have to have some
sort of other types of generation so that you could do that. And I think at the end of the day that is
part of the solution as we move forward, is a balanced approach.

We can't do 100% solar and wind. We don't want to do 100% coal and natural gas. But that it's a combination of all those things that, put together, complement each other and provide the
power to people as they want to use it.

If you're going to watch a topic area after this course, I would recommend keeping
your eye on this one. I know this is one of the areas that's going to change a lot, and is going to be a catalyst for major change in the industry. Let's end our discussion of renewable energy with two energy sources that get very little attention. Biomass and geothermal. They're relatively small so we won't spend as much time on them but biomass is the oldest primary fuel source. If you remember, it's also what early electric local utilities competed against, and it's still around. Biomass works by using organic waste, whether wood or even animal waste. The biomass feedstock is then burned in
a boiler and well, you know the rest.

So the biomass co-firing program involves principally taking wood fiber and adding it to the coal stream as we burn it in small percentages up to 5% so that we can safely combust it in the boilers with the coal. In terms of greenhouse gas savings, roughly, for every ton of wood we burn,
we generate a saving of just over one ton of carbon dioxide avoided from not burning coal.

So we have dedicated ourselves to develop technology that takes waste from another sector,
puts that into something valuable so it can move on and keep adding societal and economic value.


The benefits of biomass are that it uses stuff that would otherwise have not been very useful. Unless the waste is being produced on location, it has to be transported through. Incidentally, the pulp and
paper industry is known for using this form of electricity generation with the waste they generate on site. Geothermal energy also receives so much lesser attention than its brothers and sisters. You might not even know it if you saw it. It only accounts for about 3% of renewable energy electricity. It's not a new technology and it actually uses heat from the Earth's core. Here's how it works.


Hot water is pumped from a deep underground well. The water comes back up to the surface and the temperature drops. This makes the water turn into steam and the rest is all about that spinning turban and then the generator.

Geothermal uses the energy from the earth, typically it's in areas where they have a volcanic activity or have the Earth's heat very close to the surface and it's heating up the water. So geothermal actually collect that heat and runs a steam turbine with it. The beauty of geothermal, where you have that resource, is that it is a baseload power. I mean it's a consistent power. It's not like solar and wind where you have to worry about when the sun is shining or the wind is blowing but geothermal is always going to be working. So there are some countries that are nearly 100% renewable because of geothermal power. So, and now we are starting to look at more advanced geothermal where you can work it with lower temperatures, different types of drilling, and different areas like that. So, geothermal has been a base power for many places, many locations for a long time and it's really starting to advance in some new locations and new technologies.

Links for this post;

Delta Electric Energy productivity in action
Example of System prices recent history
Solar continues to grow - Berkerely national laboratory
Utility or large-scale solar
Comunity Solar Photo
Small solar PV photo
Duck Curve CALIFORNIA ISO
Biomass plant photo
Geothermal plants photo
Geothermal is relatively small U.S. Agency

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