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Thread: What happens when customers stop needing electricity?

  1. #1
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    What happens when customers stop needing electricity?

    California wants to make all new residential construction net zero by 2020. That's right - every new home built after 2020 must produce more power than it uses over the course of a year. For commercial construction the target is 2030.

    Utilities will still be needed even after this transition. But what is the business model to allow a utility to act as a giant battery and provider of last resort to power customers who are simultaneously power producers? I have a few ideas, as I've been expressing in my Electronomics blog. But I'm looking for your opinions too.

  2. #2
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    My agency is transitioning to a fixed fee for the electrical connection and customer charge. These fixed charges recover the capital and O & M components of the service connection based on panel/meter size and the actual cost to read the meter and generate a bill. Actual energy usage is currently billed on a multiple tier rate schedule with limited time-of-use rates available. Energy in excess of consumption is paid at the avoided cost of our renewable generation portfolio. The intent is to de-couple the fixed cost portion of the rate from the energy portion of the rate.

    When net-zero homes come on line, the utility will recover the cost to provide the connection and service the account from the fixed charges. The excess generation will be passed through to other customers. Transitioning to time-of-use rates is planned to address the cost of generation variation from interval to interval.

  3. #3
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    The Missing Link

    When Congress deregulated the US electric utility industry, they knew what to do with the power plants. Even a bunch of technically illiterate lawyers knew a smokestack when they saw one, and they defined an economically viable role for the future merchant power producers (that utility-scale renewables are riding today). They could also relate to the retail side of the business because they all get utility bills, and they did OK with that too. But they had no idea what Transmission and Distribution was or how it fit in, and T&D has continued to be the often-ignored and historically under-invested stepchild of the industry.

    The irony of this is that with the proliferation of new generation technologies, especially the intermittent renewables at the merchant power end of the market (primarily wind) and at the end user's end (primarily PV solar), and falling natural gas prices which are opening up new opportunities to arbitrage gas and electric rates with on-site distributed generation the future business model for the utilities my be primarily in the T&D part of the business bridging the power "sources and uses" and acting as a trading platform and delivery system for them. This isn't too different from the internet where the content providers are now almost completely separate from the content carriers and end users mix and match at will.

    Unfortunately, the electric utilities are almost completely oblivious to this mega-trend and culturally allergic to it. Exhibit Number One being the bumbling attempts to build Smart Grid in their image rather than embracing it as the tool to bring them into the 21st century. Exhibit Number Two follows, which is what do they do with a house that needs no net electricity on an annual basis, but wants to use the grid to buy and sell electricity daily? Looks like a terrific business opportunity to me, more like a mortal threat to them.

  4. #4
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    To go Net-Zero

    True unbundling is needed if people go Net-Zero. This means that the delivery charge and the cost of energy should be completely unbundled. Yes, we have all heard of this before and many utilities are alady doing this to some extent. However, the question to ask is - should the customer still pay for the full weight of the grid deliery charge if hey are only using it for a portion of the time. or should they pay for a portion of the grid charge only.

    Consider this - What happenes if a significant percentage of people go net zero. It is almost unfair for them to pay the full delivery charge when they are not using the full system with all of its bells and whistles. Should we go with some kind of a capacity factor, useability factor or something. If that happens, what would be the rate for the people who are fully connected to the grid. I assume their delivery charges would go up significantly.

    Bottom line - there is a lot to think of here. No easy solutions.

  5. #5
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    Fixed Cost Will Be High

    Please understand that the fixed cost component will prevent this from occurring. Since the design of these homes will do little to reduce the fixed cost of serving them power, the new model will require the utilities to increase the service charge to an unattractive level. Why? Because the infrastructure will still need to be designed and built for these homes' peak demand requirements. Unless these homes are designed to be off-the-grid, the utilities will not avoid any of these fixed costs. Let's be honest, do you really expect utilities to supply you a home back-up generating system at no cost?

  6. #6
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    net zero home

    You have to be very careful with the interpretation of Net Zero. A home/facility can generate more energy than it uses on any given day or throughout a year using enough solar pv between the hours of 10am and 4pm but unless it has some form of storage it will need the grid to supply all other hours and it will require backup for those cloudy days. This same home/facility will also need the grid to provide a source for selling whatever it generates. The only way for a home/facility to ditch the grid is for it to become totally self-sufficient (storage and generation) on its own or to become part of a microgrid that itself is fully self sufficient.

    Utilities and regulatory commissions are already recognizing the need to rethink tariffs that don't assign some cost recovery to fixed cost grid investment. At least in California solar pv pays not fixed cost charge to connect to the grid, however it isn't worth much without that connection. Things have to change and they will.

  7. #7
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    Lightbulb Missing the point - "fixed costs" are "fixed" not "variable"

    Mani,

    I strongly disagree with your comment that "it is almost unfair for them to pay the full delivery charge when they are not using the full system with all of its bells and whistles." When a consumer uses the grid they are using the full system with all of its bells and whistles! The only thing that goes away are the variable costs such as the energy that they don't use and that the utility doesn't have to generate or purchase. The fixed costs of poles, wires, O&M, etc. don't go away when consumers self-generate. If the customer doesn't pay its share of those costs, they are eventually placed on other customers in the next rate case.

    But to your statement, in fact, "net zero" means that the utilities may be using more resources than for a normal home. Net-zero generally means that a home will dump excess energy onto the grid at some point in time, then take energy off the grid at other times, all resulting in a "net" zero use. Utilities need to adjust their generation, purchases, dispatch, etc to compensate for energy being introduced at the fringe of the network. Then depending upon the actual rates and costs the question that goes to whether the power delivered to the customer when they need it equal in cost to the cost of the power taken? Who pays when there is so much energy being delivered to the utility or RTO that base load generation has to be run at less than optimal levels and the costs go up, as we've seen in both the California and Texas wholesale markets?

    To ensure that all customers are treated fairly, I think customers should see a fixed monthly charge that reflects the cost of ensuring that infrastructure put in place to provide them with electricity when and/or if they want. Those with larger homes that require larger transformers or more infrastructure should pay appropriately. Then they should pay a energy charge that reflects the cost of the energy at the time they use it. Keeping all customers on a level and equitable playing field would entail rates for delivery and receipt that reflect the utility's cost at the time of receipt or delivery. It's the utility and other customers that need "net zero" impact protection from the decision of those who would use the utility as a free storage facility for power.

  8. #8
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    Net Zero Energy Buildings Will Be Costly

    As serious as these building requirements may be on electric utilities, I would think the impact upon new construction would be even greater.

    For those of us in the utility industry such requirements will primarily affect growth. And I would think that it would have a two-fold effect on growth. One, new building construction would decline due to the increased cost to build, two, the new buildings would most likely have solar energy panels and so new additions would not have a contribution to the capacity or energy requirements of the utility.

    I would think the value of existing building that would not have to comply with such requirements would suddenly become much more valuable.

    As a utility planner/operator I think we utility people in conjunction with our customers and regulators can make these building requirement work effectivily with the existing infrastructure and customer base.

    I would think the real push back would come from those who need new buildings in order to continue to operate effective businesses. We electric utilities are only a small part of a bigger economy. If that economy has to build electrical plants embedded in their new buildings that are as expensive I know distributed non-natural gas fired resources to be, then those businesses will find expansion even more expense than do we. Putting the requirement for resources into the building footprint will probably increase the cost of providing such energy for such a building and it will be a lump sum first time cost.

  9. #9
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    Not too far off...

    Getting to net zero energy is not that difficult. I have solar on my house and it is net zero for the year. That does not mean I do not need my utility provider. I need them more than ever to absorb the power during the day and give it back during the night. Additionally, May-Sept produces 2/3s of the years power.

    I consider solar to be the primary means to produce energy in an urban envionment because is looks good, does not produce emmisions or noise, and is trouble free enough for a home owner. Unfortunatly, may homes can not do solar based on where they are at or the architecture. I see a new market emerging for utiltiies to provide "sun shares" or an ownership interest in large solar farms where some of the output could be credited to their electric bill, even though the solar is produced in a remote location.

  10. #10
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    Net-Zero Energy Customers

    Utilities will adjust to net-zero customers by using a two-tier price structure. They will sell power at a commercial rate and they will buy power back at the (substantially lower) rate that generating power costs them.

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