Xcel Energy and other utilities of the future

CO_Electricity_Generation_2001-2014The case for reforming how states regulate electrical utilities

by Allen Best

Colorado climate activists are not entirely sure what to think of Xcel Energy. Plaudits to the state’s largest utility, which delivers 60 percent of the state’s electricity, or a swift kick in the pants?

That ambivalence was evident in a recent seminar in Boulder sponsored by New Republic magazine. Even Heather Bailey, who is in charge of the City of Boulder’s effort to break away from Xcel, allowed that Xcel is “not a bad utility. In fact, they’re actually pretty good.”

Bill Ritter

Bill Ritter

Former Gov. Bill Ritter also tip-toed around criticism. Xcel had been supportive of energy transformation when he was governor, he said, when asked about efforts by the City of Boulder to get a divorce from Xcel. “It will be determined in the courts,” he said.

But when questioned further by Jeffrey Ball, a contributing writer about energy to New Republic, Ritter was more forthright, if general in his response.

“We have to remake the entire business model for utilities,” said Ritter. “Technology is at least 10 years ahead of the utilities, and the utilities are 10 years ahead of the regulatory model.”

Government regulation of investor-owned utilities, he went on to say, must be reformed to reward utilities for energy savings and for delivering electricity from all-renewable sources.

“I think the utilities in this country understand what is coming,” said Ritter. “They just don’t know how to get there with the current regulatory model.”

What about the net-metering fight? Ritter pointed out that Minnesota, where Xcel is the dominant electrical provider, has worked through the dispute. But again, the problem is how utilities are regulated, not the utilities themselves.

“It’s a political fight, and we need to get inside the regulatory world to convince (PUC) commissioners and state legislators that this transition is occurring,” said Ritter, who is now director for the Center for the New Energy Economy. He cited work to reform utility regulation in New York, Minnesota, Arizona, and Massachusetts.

The net-metering dispute is at the very core of the dispute about the utility of the 21st century. With net metering, utility customers who generate their own electricity from solar panels and other renewable sources can put their excess energy into the grid. The question is whether and how much those customers should be paid for the electricity they provide.

At issue is whether small-scale electrical providers should pay for the maintenance of the electrical infrastructure to which they are connected. For the solar industry’s perspective, see the Solar Energy Industries of America website.

A greater challenge than roof-top solar, said Ritter, is how to monetize saved energy. Utility revenues currently are predicated on how much power they sell. But how do they make money on people buying less energy. But there is “all sorts of potential around saving energy,” he said.

CO_Electricity_Generation_2004Storage will amplify the challenges as customers can store their own energy, minimizing energy purchases but remain connected to the grid—just in case.

New business models are making their way into distributed generation of electricity. Just this year, said Ritter, 80 percent of solar installed on rooftops in Colorado last year was owned by third parties, like SolarCity.

CO_Electricity_Generation_2014Bailey, Boulder’s executive director of energy strategy and electric utility development, sketched efforts by the city to decarbonize. In 2007, the city became the first in the nation to specifically adopt a carbon tax, applying it as a surcharge on carbon-based utility bills. So far, it has contributed $14 million toward energy-based programs.

It is working, she said, “but it’s not enough. The only way the city can reduce carbon emissions 80 percent will be to sever its ties to coal-based electricity. That was the conclusion of city residents in 2011 when they voted to pursue independence from Xcel. “Without being able to eliminate coal, we cannot achieve our goals,” said Bailey.

Xcel has made fast strides since 2004, when it tried to block a 10 percent renewables mandate. Since then, it has changed its stance. In an interview last week with Bloomberg Finance & Commerce, Xcel chief executive Ben Fowke said the company expects to exceed its 30 percent mandate in Colorado but also Minnesota. He said that wind energy is coming in cheaper than natural gas over the next two decades.

But coal still provides 60 percent of electricity in Colorado altogether, while natural gas has 22 percent of the market share, wind 13.5 percent, and the remainder coming from various other renewables. Despite all those roof-tops, solar barely registers.

Alison Burchell, a co-founder of a Boulder-based activist group, Clean Energy Action, which has sought to be thorn in the side of Xcel, described Boulder as an effort to be a model for other communities.

“If we do a good job, we will make a difference on the broader scale,” she said.

Bailey also alluded to the same idea when she mentioned that Boulder is part of a group of municipalities, both in Colorado and nationally, exploring acceleration of decarbonization.

What to make of natural gas?

But is getting off all fossil fuels the highest priority? Like Ritter, several mainstream environmental groups have forged relationships with the natural gas sector. They see natural gas as a bridge fuel, as it has only half the carbon dioxide emissions of coal.

Natural gas has one problem, however. Its essential component is methane, which remains in the atmosphere for a much more brief time than carbon dioxide but has far more powerful heat-trapping properties. Leaks during drilling and transmission can offset any gains over coal.

Dan Grossman, a state legislator for 10 years before joining the Environmental Defense Fund, has helped broker Colorado’s nation-leading regulations governing natural gas to minimize unintentional releases.

Instead of pursuing a dogmatic, anti-fossil fuel agenda, he said, his group has chosen a “pragmatic approach” to cleaning up fossil fuels. The goal, he said, is to address carbon, “which is the brass ring, but we need to address the short-term climate impacts of methane.”

Narrowly pursuing a fossil free-future, he said, is “leaving too much on the table.”

A drilling rig in Colorado's Wattenberg field north of Denver. 2013 photo/Allen Best

A drilling rig in Colorado’s Wattenberg field north of Denver. 2013 photo/Allen Best

But natural gas remains a fossil fuel, and Ritter acknowledged the challenge of stranded assets in the future as we try to throttle back combined-cycle natural gas plants to meet carbon reduction goals. The very difficult conversation with the coal industry will have to occur with the natural gas industry, he said. Greenhouse gas reduction of 80 percent “is going to be very hard to do with the build-up of natural gas.”

The New Republic’s Ball wanted to know what people thought about the upcoming international talks about greenhouse gas reductions in Paris.

Grossman said that China’s announcement in September that it would adopt a cap-and-trade market-based mechanism to effectively put a price on carbon was “huge.” But more than just pledges, he said, what matters is how developed countries assist developing countries in ways that avoid emissions.

Speakers also made the point that elections matter. “We need to make sure that people who won’t talk about climate change and clean energy experience something on election day that is unpleasant,” said Ritter.

 

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About Allen Best

Allen Best is a Colorado-based journalist. He publishes a subscription-based e-zine called Mountain Town News, portions of which are published on the website of the same name, and also writes for a variety of newspapers and magazines.
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