Panel of speakers talk about utilities of the future
by Allen Best
Coal now provides 66 percent of electricity in Colorado. How about 20 years from now?
No shocker here: All four speakers at an environmental forum held in Denver recently agreed that coal will recede, although they differed greatly in their predictions: from a high of 40 percent to a low of just 5 percent of total generation.
And as for solar? For all the panels you see, it generates just 0.3 percent of Colorado’s electricity right now. But even the most conservative estimate envisioned 7 percent by 2034. One speaker optimistically predicted a full 25 percent of generation.
What’s holding things back? In wind, not much. The giant farms of the Great Plains are delivering generation for $28 to $30 per new megawatt hour capacity. That compares to $45 to $46 per megawatt for fossil fuels, according to Tom Plant, one of the speakers.
But more important than the precise energy mix may be the new business model that must necessarily emerge.
“It’s not a question of if it will happen, but a question of when it will happen,” said Bob Lachenmayer, Denver-based smart city manager for Schneider Electric, an international energy-management company.
In the first half of the 20th century, the business model that took shape relied upon central production such as from giant coal-fired power plants. Utilities, whether privately owned or public, earned revenues in a straight-forward transaction based on the amount of electricity sold. This business model holds no inherent place for efficiency in use of electricity by customers and tends to discourage small-scale local production unless specific measures, such as rebates and net-metering, are ordered.
Now, we’re seeing calls for local production, what is called distributed generation, a more sophisticated electrical grid that allows greater communication between supply and demand, and, of course, a shift away from fossil fuels, especially coal, in favor of more integration of renewables.
All these themes were discussed in the Dec. 2 presentation sponsored by the Alliance Center, the building in Denver’s LoDo district that is home to many of Colorado’s environmental organizations.
Jerry Marizza, new energy program coordinator for Brighton-based United Power, one of Colorado’s 34 electrical cooperatives, was most cautious in predicting change. Even so, he sees transformation. The existing grid can accommodate up to 30 percent renewable energy, but beyond that more changes are needed: a smarter grid, improved storage, and larger amounts of distributed generation.
He also said that utilities are in the best position to solve the energy puzzle and that utilities should be treated like businesses. He did not explain what he meant by that.
Plant, a former state legislator who is now affiliated with the Center for the New Energy Economy at Colorado State University, continued the theme but added that the regulatory environment needs to be adjusted if utilities are to do “what we want them to do.”
Utilities, he went on to say, need a new business model. “We can’t ask utilities to do what is contrary to their business model.”
Plant, who also ran the Colorado Energy Office for several years, then held up a smart phone and spoke about the many applications developed for their use. The smartphone creators don’t necessarily create the aps, he said. They only create the platform.
Utilities need to be seen in a comparable way, he said. They will provide the platform, but others will figure things out about how we produce and consume electricity.
David Hurlbut, a senior policy analyst with the National Renewable Energy Laboratory, stressed that policy and regulation “at some point have to be translated into price signals.”
He also spoke for the need to create aggregators, to assemble customers into groups of value to utilities, by creating economies of scale.
“Doing it on your own means a lot of work, requires a lot of know-how, a lot of savvy about what is going on in your house,” he said. This, he added, is particularly true of coalescing the benefits for middle-class people.
But again, regulatory revision—and hence new business models—are needed, said Hurlbut, who worked as senior economist for the Public Utility Commission of Texas from 2000 to 2006, a time when Texas created jumped ahead of many states in the nation with policies designed to incentivize and integrate wind energy.
The need for energy storage was also stressed. With improved storage, solar and other renewables will reach price parity with fossil fuels “in not that much time,” said Plant.
Subsidies for solar should instead be redirected to both energy storage and smart-grid development, both of which would support expansion of solar, said Marizza.
Larchenmayer suggested storage already exists in the form of Chevy Volts, through their batteries. But once again, a new business model is needed.
If systems are devised that reduce energy needs to 20 percent of present demand, the infrastructure of the electrical grid must nonetheless be maintained. How that infrastructure is maintained and paid for is the conversation that needs to be conducted.
“It’s really hard to get into a conversation that they are not used to having,” said Larchmayer, referring to the utilities. But, he added, the conversation must get underway. “We don’t have 10 years to figure this out,” he said. “It’s here today.”
NREL’s Hurlbut made much the same point, but in a different way. He pointed out that the 10 leading states for wind generation also happen to have below-average electricity rates.
“You can’t get to that paradigm shift if you don’t want change,” he said.
In other words, energy change is not so much a technological challenge as a political challenge.
This was a high-level conversation, crunched into not much more than an hour. It could easily have gone a half-day—and, it probably should.