Long term isn’t nearly as long as it used to be for electrical utilities
by Allen Best
Remember the phone you used 20 years ago? It probably wasn’t a cell phone. Just one-fifth of Americans had cell phones in 1997. And nobody wandered around with their face stuck in a smart phone. They came along in 2007.
Now, the electrical world is spinning rapidly, and it appears both technologies and business models are on the verge of major changes. But what will those changes look like?
For an exercise in crystal-ball gazing, former Colorado Public Utilities chairman Ron Binz assembled a diverse panel at the Colorado Solar Energy Industries Association conference on March 15. None made a case for the status quo.
Two participants were from cooperatives that serve primarily rural areas in Kansas and New Mexico. Another individual represented investor-owned Xcel Energy, which has a national reputation as being almost the progressive in its class. A member of the Boulder City Council, which has been plotting a divorce from Xcel because it isn’t innovating rapidly enough, was on the dais. And there was also a chemical engineer from the National Renewable Energy Laboratory who is helping direct the drive to dramatically improve efficiency of solar panels.
Binz, a skilled interrogator, kept the questions moving rapidly, circling this giant elephant of a subject. The rapid pace of imminent change was revealed in several responses.
Alice Jackson, vice president for strategic revenue initiatives for Xcel, said her company can’t yet figure out how to get to 100 percent renewables. “It’s just not feasible. It’s not economic. But it’s moving in the right direction,” she said. However, she added, instead of 40- to 50-year investments, as Xcel did when it constructed coal-fired power plants, it’s now signing contracts of 15 to 25 years for wind and solar.
NREL’s Greg Wilson also talked about shorter planning horizons. He suggested rapid changes in manifestations of the changing climate could swing public opinion very quickly. He cited the example of a sudden collapse in property values following a major flooding event in a place like southern Florida. Many climate scientists think a low-pressure system could produce a Superstorm Sandy-type event in the next decade, he noted, with property losses in excess of the $50 billion caused by Sandy.
“If I were a public utility, I would be very careful,” he said. “Long-term planning now is on the order of 10 years, it’s not 30.”
Wilson also talked about rapid advances in technology. Efficiency of a garden-variety roof-top solar panel now stands at about 16 percent. Some get to 22 percent, though. There’s a major technical hurdle to be cleared but getting to 35 percent efficiency is “absolutely possible” and work funded by the Department of Energy is now underway to accomplish that gained efficiency.
Cheap, more efficient PV combined with thermal storage may also change how we heat buildings, he suggested. Washington University in St. Louis has a net-zero heating system now being tested.
But then there’s this: electricity can be converted into chemicals, including methane and hydrogen. “We’re not just talking about electricity. We’re talking about chemical power,” said Wilson, responding to a question on storage technology. The upshot of still uncertain potential is that “many people in the utility sector don’t even know the technologies that will be available to them in 15 to 20 years.”
The business models may change, too. Serving a four-county area from Taos, N.M., Kit Carson Electric last July severed its relationship with Tri-State Generation and transmission, an old-style wholesaler that is invested heavily in coal-fired production.
Luis Reyes, the general manager, said breaking the contract cost Kit Carson $37 million amortized over five years. But in its new relationship with Guzman Energy, Kit Carson customers will pay about the same but will have the liberty to invest much more robustly in renewables. After five years, he said, Kit Carson expects to be paying 45 percent less than it would be paying Tri-State, which has continued to raise its rates each year.
“The generation and transmission model is done. I think the model is broken. We have to think differently,” he said. Kit Carson expects to rapidly ramp up solar generation in its service area, with a goal of achieving 34 percent of total generation from solar by 2022.
Co-op directors need to recalculate where they’re headed every 10 years, said Reyes.
The most important take-away thoughts for me were those by NREL’s Wilson. We may think we know the technologies that will take us into the future, but then who among us realized how transformative the smart phone would be in 1999? Certainly not me. I may be one of the few people who does not own a smart phone, but I am aware of how profoundly it has changed how we live.
He suggested that the technologies that will deliver us into the lower- or no-carbon future perhaps have not yet been invented.
But Wilson also mentioned the accelerating effects of a warming atmosphere and our oceans and suggested an event in the next 10 years that makes further dilly-dallying look foolish. We mostly shrugged off Superstorm Sandy while climate scientists argued about how much of the flooding in New York City could be attributed to the human-induced heating of the atmosphere.
At some point, we will have a weather event that will galvanize a more forceful federal response. Think of it as a Pearl Harbor moment. The United States had ostensibly remained neutral even as China, Germany and Italy advanced on other countries. Then came Dec. 7, 1941, and look at how rapidly the United States mobilized.