Archive for the ‘Electricity’ Category

Older Entries »
h1

From the upside down market view of Houston Chronicle columnist Loren Steffy

May 22, 2012

Michael Giberson

Loren Steffy, business columnist at the Houston Chronicle, is frequently a sensible guy. But his writing gig seems to require him to announce the sky is falling on a regular basis, so you have got to be a little careful when reading him. What else can you say about a column that cites a day (May 9, 2012) during which ERCOT wholesale power prices rose from $23 MWh around midnight to about $32 MWh as an omen of ill things to come? He says unnamed traders are “seeing suspicious activity in the spot markets.” Unnamed traders also “worry that the volatility will get worse.”

Really?

For just a little historical context, consider prices during May 2010: on average prices began about $26 MWh, dropped below $20 in the early going, but ran up to an average of $75 MWh during the afternoon peak.

Or how about May 2009? The first hour of the day the price averaged $35 MWh, dropped to $15 in the early morning hours and rose to $55 MWh at the afternoon peak.

These price patterns are even more extreme than the numbers Steffy is worried about. So maybe Steffy’s message is that the whole market has been tangled up in suspicious activity for years – why else would he say “we can only conclude that deregulation has become expensive nonsense.”

Only, if I want to buy into Steffy’s expensive nonsense story, I have got to ignore a bit of reality: average prices in ERCOT have been falling.  Prices in 2004 averaged about $45 MWh.  Power prices followed natural gas prices up in 2005, down a little for a few years then way up in 2008, down again in 2009, and back a little higher in 2010. In 2011 the average price in ERCOT was around $40 MWh.

Now here we are in 2012, years of “suspicious activity” later, and low natural gas prices continue to provide low electric power prices. By the way if you understand how the ERCOT market is supposed to work, and you realize the role natural gas-fired generation plays in Texas, then all of this makes a good deal of sense.

“Suspicious activity”? “Deregulation has become expensive nonsense”?

Before I buy Steffy’s conclusion that the sky is falling, I think I’ll get a second opinion from Henny Penny or maybe Goosey Loosey. I would ask the Unnamed Traders for a quote, but I don’t think those guys have done their homework.

NOTES: My beginning prices are an unweighted average of the four interval prices in the balancing energy market from midnight to 1 AM for each of the four geographic zones in ERCOT in 2009 and 2010. The other prices noted are similarly averages for all four zones over an hour. The market design has changed since May 2010 in ways that don’t much matter at the level of aggregation we’re talking about here, though it makes exact comparisons trickier.

I’m not quite sure how Steffy’s price numbers were calculated – he reports getting them from a trader. When I look at ERCOT real-time market settlement point prices from May 9, 2012  (http://www.ercot.com/content/cdr/html/20120509_real_time_spp) it looks like my May 2009 or 2010 numbers. Averaging the HB_HUB_AVG price for each hour: prices start the day about $16 MWh, peak at $55 MWh about 5 PM, and drop back to $18 MWh at the end of the day.

Posted in Electricity, Energy markets | Leave a Comment »

h1

New Jersey solar installers seek “Endless Summer” at ratepayer expense

May 20, 2012

Michael Giberson

A crisis is coming for the New Jersey solar power installation industry. Stringent solar power purchase requirements imposed on electric utilities (i.e. on electric utility ratepayers) has turned the state into the nation’s second largest for solar power capacity installed, behind only sunny California.

But now that installed capacity is sufficient to meet current requirements, the installation business is expected to drop way off.  (The purchase requirements actually increase each year through 2021, but the rate of growth is slowing.) That expected drop off has lobbyists for both the solar power industry and unionized solar installers descending on the state capital, pleading for imposition of still higher purchase requirements on electric power consumers. The rallying cry has been to “save the jobs” created by the solar power purchase mandate.

Here is one report, “NJ looking to rescue ailing solar industry“:

New Jersey has long been known as the Garden State, but during the last five years, it could have easily been known as the Solar State from all the sunlight-absorbing panels that have cropped up nearly everywhere.

They’re on the roofs of schools, churches, municipal buildings and sewage treatment plants. They’re in farm fields and attached to utility poles. Even one of New Jersey’s trademark diners recently went green and installed panels.

But all is not well with New Jersey’s once-thriving solar industry, which has grown so big, so fast, that it’s now in danger of collapsing on top of itself.

The industry’s future could hinge on the work of the state Legislature during the next several months as lawmakers look to craft a bailout bill that rescues the solar market and the thousands of jobs it created.

A bailout bill was approved by the Senate Environment and Energy Committee on Thursday, but Bill S 1925’s chances of becoming law are far from certain as it relies largely on making power companies buy more electricity from solar generators.

Critics warn that doing so could mean higher bills for the state’s ratepayers. Supporters say without government help the entire industry will likely collapse.

“We have a crisis, and the crisis is this: If the market stays the way it is, there will be no new projects in the future, and the ones out there now will fail,” Sen. Robert Smith, D-17th of Piscataway, said Thursday at the onset of the lengthy hearing on the bill, which drew hundreds to the Statehouse, many of them union members who work in the industry.

At issue is the market for the electricity that solar panels produce, which has crashed during the last year because of an oversupply of solar development.

Under state law, utilities must obtain part of their electricity from solar generation. To do so, most must buy solar renewable energy credits, or SRECs, from solar panel owners.

The market for the credits originally boomed and helped New Jersey become the nation’s second-largest solar power producer behind California. All that development caused a glut in the market that has seen SREC prices decline from $650 or more in 2010 to less than $100 at times this year.

“We’ve become a victim of our own success,” Smith said. “We’ve had so much solar built in New Jersey that the market for SRECs has crashed.”

Historical SREC values are charted at the Flett Exchange.

The crash in the value of an SREC has cut into revenues projected for private businesses and public schools that have had solar panels installed. Banks have become less willing to loan for solar projects as subsidy revenues have dropped off.

A bill circulating to bail out the industry would both increase the mandated purchases, cap the size of solar projects built, and require projects gain approval from state regulators before they are built. The bill has failed, or at least stalled, on the issue of regulator review – the industry wants all existing projects exempted from regulatory review while the Governor’s office and some others insisted on no exemption.

All hope is not lost for the industry, even should the legislature fail to raise the cost imposed on ratepayers in order to bail out the New Jersey solar industry. The chairman of the New Jersey Board of Public Utilities has said if legislators don’t act then the BPU might simply impose a higher solar mandate on its own authority.

BACKGROUND: For an extended assessment of solar power incentives in state Renewable Portfolio Standards see Ryan Wiser, Galen Barbose, and Edward Holt, “Supporting Solar Power in Renewable Portfolio Standards: Experience from the United States,” Lawrence Berkeley National Laboratory, Berkeley CA, October 2010. LBNL-3984E.

Posted in Electricity, Energy markets, Environmental policy, Regulation | Tagged , , | 5 Comments »

h1

Quotation of the day … from Keynes

May 4, 2012

Lynne Kiesling

I am attending an electricity markets workshop that we are holding here at Northwestern, about which I’ll have more to say later, but for now I wanted to capture a quotation of the day (apologies to Don Boudreaux for using his meme):

The difficulty lies, not in the new ideas, but in escaping from the old ones.

-John Maynard Keynes (1936)

Hung-po Chao from ISO New England used this quote in his talk, with reference to what I think of as the crucial need to clear the overgrowth in the regulatory underbrush, and the perverse incentives that underbrush creates (and the special interests that perpetuate it).

Posted in Economics, Electricity | Tagged , | 2 Comments »

h1

Austin Energy wants an electric power rate hike

April 30, 2012

Michael Giberson

Deep in the heart of the competitive wholesale and retail electric power market that is (the ERCOT system in) Texas lies a little island of small-scale socialism: the municipal electric utility called Austin Energy. While power prices are dropping all around the state due to low natural gas prices, in the Texas state capital Austin Energy is seeking a rate increase.*

Austin has long been a bit out of step with the rest of the state, so this could serve as just another opportunity for “real Texans” to poke fun at the aging hippies that have taken control of the capital’s city government.

Instead, however, you should read Martin Toohey’s excellent article in the Austin American-Statesman, “As natural gas prices dip, Austin Energy rates still to increase.” For many years the city utility has pursued a policy of fuel-source diversification. As the article explains, it is easier to see the value of a diversification plan when natural gas prices spike, and harder to see the value when natural gas prices drop sharply.

*Note that the link goes to a live (i.e. periodically updated) price chart which shows the average prices of one-year fixed rate prices in the Houston area. Similar price effects are present elsewhere in the state. Currently the price chart shows a drop from just over 10 cents/kwh during most of 2011 to about 9.5 cents/kwh in April 2012.

Posted in Electricity, Energy markets | Tagged , , , | Comments Off

h1

Pat Wood: The Texas Tribune Interview

April 23, 2012

Michael Giberson

Pat Wood, the former FERC chairman and former Texas PUC chairman, was interviewed recently by The Texas Tribune. Wood is surely one of KP‘s favorite ex-regulators, so of course we’re linking to the interview. Here’s just one bit:

Wood: … There is also a lot that can be done, particularly on the energy demand side. By that I mean more aggressive conservation programs where you let market signals encourage customers that have the ability to shut down for a certain small amount of hours in the day to get paid to do so.

TT: Do you mean even individual consumers can potentially do more — or be helped to do more — to save energy?

Wood: They could, but if you went from the current penetration we have today, which is focused on the largest customers, to then focus on the medium-sized customers  — and by that I mean grocery stores, shopping centers, Target, customers like that — you can pick up a whole lot more responsive load before you need to get to the residential customer. The residential customers comprise about 40 percent of the [electrical] load at peak. Industrial and commercial are each about 30 percent. That’s a lot of lower-hanging fruit to pick before you get to residential.

And in discussing this, I’m not saying that Target would have to bid to shut down a store to get paid; it would maybe curtail 20 percent of its demand from 4 to 6 pm [when electricity usage peaks].

This capacity tightening may force that day to come sooner rather than later, which I think is a great thing for Texas, to latch onto this smart-grid investment that we’ve been making statewide over the past couple of years into a level of demand responsiveness that really moves our grid to 21st century capability well ahead of the other states.

Wood also addresses the lack of incentives to build new plants in Texas, the prospects for wind and solar in the state, energy storage, and among other things the role of the Public Utility Commission after the state “moved the dial from 10 to 4 in terms of regulation.”

Posted in Electricity, Energy markets, Environmental policy, Regulation | Tagged , , , , , | Comments Off

h1

Micro-hydropower potential in man-made waterways

April 19, 2012

Michael Giberson

Earth Techling reports on the release of the latest report in the U.S. Department of Interior’s efforts to identify opportunities to develop small-scale hydropower projects within the DOI’s current water delivery systems in the Western United States. The goal of DOI’s project was to inventory potentially valuable locations and then invite developers to consider investing in projects. The most recent report indicates an annual potential for as much as 1.5 million MWh of energy to be generated.

Details from the Earth Techling summary:

These are all micro hydro sites, ranging in potential capacity from 125 kW to about 26 MW installed capacity. Fish would not be endangered because they are largely municipal water conduits.

The total clean energy produced would be equivalent to replacing one 260 -300 MW coal power station.

Since the hydropower projects probably would generate less power than the waterway itself uses, it might be more economical to consume the power ‘behind the meter’ rather than producing power for sale elsewhere. Possibly, however, the locations where the waterway uses power and the locations with good hydropower potential are distant from each other, so then sale off system could be more economic.

The DOI’s webpage for the project has several reports.

(The Earth Techling post ends with an odd political slam at Republicans, seemingly wistful for the good ol’ days of grand projects like the Hoover Dam. Apparently the inability to ram project’s down a region’s throat from the halls of government can be a bit constraining to people with big dreams.)

Posted in Electricity, Technology | Tagged | 2 Comments »

h1

Smart meter cybersecurity and moral panics

April 19, 2012

Lynne Kiesling

In March I wrote about Adam Thierer’s paper on technopanics — “a moral panic centered on societal fears about a particular contemporary technology” — and I argued that we should bear the moral panic phenomenon in mind when evaluating objections to smart grid technologies. In the past two weeks we’ve seen news articles on this topic: according to the FBI, smart meter cybersecurity is loose enough that hackers have been able to hack into smart meters and steal electricity.

Chris King from eMeter has done some digging into this question, and writes at Earth2Tech suggesting that the problem is old-fashioned criminal human behavior, not any technology-specific security failure:

Upon a closer look, this situation is not so much about smart meters as it is about criminal human behavior. Former Washington Post reporter Brian Krebs explained that it was not actually the smart meters themselves which were “hacked.” The meters’ own security measures were not breached.

Instead, criminals accessed the smart meters by stealing meter passwords as well as some devices used to program the meters. This is more like stealing a key and opening a door, rather than breaking the lock on the door.

These criminals were former employees of the utility involved, and of the vendor who provided the smart meters. These people were paid (bribed) by customers to illegally reprogram the meters so that those meters would record less energy consumption than actually occurred. This is not fundamentally different from bribing human meter readers to under report consumption — which happens often in some developing countries.

Which brings us back to Adam’s original point: why are we so willing to accept the technopanic argument? Why are so many people so suspicious of new technology, and so willing to give up both the consequentialist potential benefits and the moral defense of individual liberty and impose controls and limits on technology?

Posted in Economics, Electricity, Technology | Tagged , , | 2 Comments »

h1

NYT Energy For Tomorrow Closing Plenary video

April 16, 2012

Lynne Kiesling

Last week the New York Times hosted a conference called “Energy For Tomorrow”, and they have made video from all of the sessions available; there are several sessions discussing energy efficiency, natural gas, renewables, etc. I watched the closing plenary on Friday, for which the topic was subsidies in any or all energy industries (sorry, WordPress and the embed code aren’t playing well together). Among the speakers it features Rice economist Amy Myers Jaffe  (to whom we have linked here before), as well as friend-of-Knowledge Problem Branko Terzic from Deloitte Consulting.

The discussion was good and very informative, raising many of the aspects of the pros and cons of subsidies depending on their form and how they are implemented. Naturally, much of the discussion addressed solar and the unintended (but easily anticipated) costs illustrated by Solyndra and by Spain, whether subsidies generate more overall net benefits than a carbon tax would, and whether subsidies should focus on driving down costs and getting to grid parity or on R&D. I’ll let you form your own conclusions on those topics.

I found that Amy Myers Jaffe’s comments were the closest to what I would have said if I were on the panel. She critiques the use of subsidies very effectively, and encourages an energy policy focus on “targeting the externality” and pricing it in the market. Branko’s comments highlight the political economy of subsidies and whether subsidies are hidden or in plain sight.

Recommended for easing into your Monday.

Posted in Economics, Electricity, Regulation | Tagged , , , | 1 Comment »

h1

The Internet of things and computational energy efficiency

April 9, 2012

Lynne Kiesling

Today in Technology Review, Jonathan Koomey has an interesting analysis of computational energy efficiency. We’re all familiar with Moore’s Law — Gordon Moore’s prediction that the number of transistors on a chip will double approximately every two years — but I did not realize that Moore’s Law is also borne out in improvements in the electrical efficiency of computation. Not only do we have more and more computational capacity per unit of area, each of those increased computations is performed with less electricity per computation. Koomey’s graphic showing this result over time is striking:

If this trend continues, Koomey claims, “ the power needed to perform a task requiring a fixed number of computations will continue to fall by half every 1.5 years (or a factor of 100 every decade). As a result, even smaller and less power-intensive computing devices will proliferate, paving the way for new mobile computing and communications applications that vastly increase our ability to collect and use data in real time.”

The ability to do more work with less effort is one of the most meaningful consequences of technological change, whether we’re talking about horse harnesses, water wheels, diesel engines, or digital sensors. One of the fascinating aspects of this improvement in computational electrical efficiency is that it opens up the feasibility of lots of distributed low-power sensors that get enough electricity to operate by harvesting “background energy flows”; Koomey’s example is small weather sensors that harvest stray energy from television and radio signals to send weather condition updates every five seconds. Imagine how a distributed network of such sensors could improve severe weather preparation, for example.

In the rest of this very interesting article, Koomey discusses the research and design efforts going into achieving such energy efficiency in data transmission and taking a system-level perspective on the electricity use of an entire network of devices. He also claims, and I think he’s right, that without such energy efficiency the “Internet of things” cannot become a reality.

The “Internet of things” framing of the Internet envisions interconnected networks of devices able to communicate their states, generate more granular information, and/or trigger tasks autonomously, without human intervention. For example, right now the water filter in my refrigerator needs to be replaced, which means I go down to the basement to see if I have one (which I do), and if using it reduces my filter inventory to one, I get online and order three more. It would economize on the most scarce resource in this supply chain — my time — if the filters had RFIDs and the refrigerator had an algorithm that would implement the inventory query and ordering process for me. I still have to install the new filter, but if that installation triggered an automated query and order, I’d come home from work in a few days to find a box of three water filters, with little effort on my part. That’s an example of the potential of the Internet of things; I’m sure you can come up with more examples that you would find valuable in your own work or personal lives, and I know you can see where this IoT framework intersects with consumer-focused smart grid networks.

Of course, details matter, such as getting the interoperability rules and security right so that only refrigerators can query the filter inventory in the house (no infiltrators, including the government), and so that the refrigerator’s connection to order replacements is secure. The same applies to electricity devices in the home and the digital meter, which is why one of the important phases in the process of smart grid development is laws protecting consumer privacy and property rights in data. Innovation in both computational power and computational energy efficiency have created this potential to create more value while economizing on the scarce resources of human time and attention.

UPDATE: And check this out: carbon nanotubes that can dump heat separately from current into a separate device, which should contribute to continued gains in computational energy efficiency.

Posted in Economics, Electricity, Technology | Tagged , , , | Comments Off

h1

Greedy oil companies and charitable natural gas companies?

April 9, 2012

Michael Giberson

Oil and gasoline prices are high and so it isn’t too tough to find complaints about skyrocketing greed at oil companies. Yet at the same time natural gas prices have fallen to incredible lows (about $2.10 per MMBTU on the NYMEX this morning for May 2012). Aren’t natural gas company executives greedy too?

It is a natural question, because to a large degree, the big oil companies in the United States are also big natural gas producers; Exxon Mobil, ConocoPhillips, and Chevron are all big in both categories. So what’s the deal? Did all of these companies shuffle their greedy executives into the oil business and their publicly-spirited, charitable folks into the gas business?

Or, similarly, if speculation explains high oil prices, why doesn’t speculation also cause high natural gas prices?

 

Posted in Economics, Electricity | 2 Comments »

Older Entries »
Follow

Get every new post delivered to your Inbox.

Join 50 other followers