Navigant Research Blog

Negawatt Leadership in the Pacific Northwest

— November 24, 2015

In the Northwest, one of the most important and influential energy stakeholders is the Northwest Power Conservation Council (NWPCC). The 1980 Northwest Power Act authorized Idaho, Montana, Oregon, and Washington to develop a regional power plan and fish and wildlife program to balance the Northwest’s environment and energy needs. The heart of the NWPCC’s mission is to preserve the benefits of the Columbia River—which is home to more than 40% of total U.S. hydroelectricity—for future generations. The NWPCC develops a plan, updated every 5 years, to ensure the region’s power supply and to acquire cost-effective energy efficiency. The process relies on broad public participation to inform the plan and build consensus on its recommendations. While not statutorily obligated to comply directly with the plan, utilities generally follow its spirit, which is often in the public’s interest financially and is also a key enabler for utilities to meet their renewable portfolio targets.

Excerpts from the Plan

It is frequently pointed out that energy efficiency is almost always the lowest cost option for procuring new power, and the NWPCC upholds this with the release of each power plan. Take, for example, the following two excerpts from the most recently released Draft Seventh Power Plan. The first highlights exactly how cost-effective energy efficiency is in the Northwest and emphasizes why the region has flourishing energy efficiency solutions providers:

 “In more than 90 percent of future conditions, cost-effective efficiency met all electricity load growth through 2035. It’s not only the single largest contributor to meeting the region’s future electricity needs, it’s also the single largest source of new winter peaking capacity.”

The second excerpt illustrates the powerful combination of natural gas displacing coal and energy efficiency:

“A key question for the plan was how the region could lower power system carbon dioxide emissions and at what costs. The Council’s modeling found that without additional carbon control policies, carbon dioxide emissions from the Northwest power system are forecast to decrease from about 55 million metric tons in 2015 to around 34 million metric tons in 2035, the result of retiring the Centralia, Boardman, and North Valmy coal plants by 2026; using existing natural gas-fired generation to replace them; and developing about 4,500 average megawatts of energy efficiency by 2035, which should meet all forecast load growth over that time frame.”

The following chart is from the Draft Seventh Power Plan showing new resource development for Oregon, Washington, Idaho, and Montana.

Seventh Power Plan Resource Portfolio

Dexter Blog(Source: Northwest Power & Conservation Council)

The 5-year plan is not a cure-all, and is not even technically enforceable, but it does highlight the unique attributes of the Pacific Northwest, not only from a natural resource perspective, but also from a cultural perspective. Though maybe not as flashy as its regional counterparts in California, the network of negawatt providers in the region (ranging from the NWPCC down to the actual implementers) have done a remarkable job at realizing the potential of energy efficiency today and at embedding these solutions into the future.


Do Cities Need Large Hydro to Go 100% Renewable?

— November 11, 2015

Cities are becoming increasingly proactive in setting targets for their utilities to shift from fossil fuel power generation to renewable energy resources. There are currently three cities in the United States that run on 100% renewable energy, and there are 96 cities globally that have pledged to accomplish the same feat. Although only small cities in North America have made the transition thus far (including Aspen, Colorado; Burlington, Vermont; and Greensburg, Kansas), large cities such as Vancouver, Canada and San Francisco, California have also set targets to transition to 100% renewable energy. While these cities are using significant amounts of solar and wind energy resources, having access to large hydropower generation is a luxury common to cities with 100% renewable generation goals. Vancouver, for example, has been using hydropower to supply about 90% of its electricity throughout 2015.

Hydro: Helpful but Unnecessary

Nevertheless, regions without access to hydropower are able to both economically and technically transition to renewables, according to researchers and engineers from Stanford University and University of California, Berkeley. The universities developed a state-by-state plan under The Solutions Project that shows how each state could convert to 100% renewable energy by 2050. Using Colorado as a non-hydroelectricity-intensive system example, the state would need to get the vast majority of its electricity from wind and solar, specifically 55% of its electricity from wind power and 40.8% from a variety of solar applications (including 15% from concentrating solar power [CSP] plants, 17.6% from solar PV plants, 4.2% from residential rooftop PV, and 4% from commercial/government rooftop PV). Geothermal (3%) and a very small amount of hydroelectric (1.2%) would constitute the remainder under the plan.

According to the study, transitioning Colorado’s energy resources in this way would create over 70,000 construction and operation jobs, save $7.4 billion in avoided health costs per year, and would provide annual energy cost savings of $312 per person in 2050. The Solutions Projects seems to demonstrate that even in states with little or no hydroelectric electricity supply, it is still technically and economically feasible to transition to 100% renewable energy.

Economic Opportunity, Not Sacrifice

Of the 96 cities that have pledged to decarbonize their electricity supply, 86% believe taking action on climate change presents an economic opportunity. According to the 2015 Smart Energy for Smart Cities report from Navigant Research, that economic opportunity will be substantial; the global smart energy for smart cities technology market is expected to grow from $7.3 billion in revenue in 2015 to $20.9 billion in 2024.


Massachusetts Energy Policy: “We Are Not Cape Wind”

— October 12, 2015

It’s exciting times for Massachusetts energy policy and legislation. On September 25, the state’s investor-owned utilities (IOUs) publicly presented their Grid Modernization Plans (GMPs) for the first time. On September 29, the state legislature held a public hearing on a series of energy bills, with hopes to combine them into a single piece of legislation. These developments stand up to the breadth and depth of industry transformation that any other state is undertaking, but might be more realistic and achievable than some of the visionary ideas flowing from its neighbor, New York.

The three IOUs (Eversource, National Grid, and Unitil) proposed GMPs that attack similar issues (reliability, cost, customer engagement, and distributed energy resources) but take different approaches. Unitil is the smallest of the group and has the most straight-forward metering and infrastructure plan to meet the needs of its targeted customer base. Eversource compiled the most-comprehensive single plan, heavily focused on reliability upgrades mixed with customer engagement offerings. National Grid took a menu approach and developed four options with varying levels of investment at different price points for the Massachusetts Department of Public Utilities (DPU) to choose from. It will be interesting to see how the DPU compares the different plans and tries to achieve uniformity versus customization.

The legislative arena tends to be more colorful than its regulatory partner, leading either to more getting accomplished or little substance amidst the bombast. The auditorium that held the hearing was standing-room only, with union members, anti-gas pipeline and anti-nuclear activists, solar and wind proponents, traditional generators, and everyone in-between standing shoulder to shoulder.

Massachusetts Governor Charlie Baker hobbled into the hearing on crutches, but did not stumble while delivering his message. Energy market forces alone are not enough to meet the commonwealth’s goals regarding energy costs, carbon reductions, and climate change mitigation. ISO-New England and the utilities are focused on reliability, and generators want to sell more power. Governor Baker is taking an all-of-the-above approach including gas pipeline expansion, large-scale hydropower (with the potential to combine with wind), increasing solar limits, continuing the state’s leadership in energy efficiency, and encouraging progress in the state’s home-grown intellectual capital leadership in energy storage.

The offshore wind industry took to the stand to promote its cause as well. The topline message from the industry executives was that they are not Cape Wind. That phrase was echoed several times, as if Cape Wind was a dirty word. It was clear that everyone wanted to separate themselves from the negative sentiments hanging from that unfinished project. The executives all promoted competitive solicitations to obtain the lowest cost resources.

Now that the opening bell has been rung, it is time for the regulators and legislators to sharpen their pencils, listen to their stakeholders and constituents, and figure out the best path forward to keep Massachusetts on the leading edge of energy sector transformation.


TEP’s Program a Win-Win for Solar Proponents and Utilities

— October 7, 2015

I’ve written extensively about the solar/net metering brouhaha in Arizona over the past 2 years (you can see related blogs here and here). I’ve also previously posited (here, here, and here) that electric utilities worried about solar encroaching on their core business and profitability need to embrace solar, suggesting that if you can’t beat ‘em, join ‘em.

That is exactly what one offering from Tucson Electric Power (TEP) attempts to do. Well, sort of. My analysis indicates that the deal is pretty good for all involved.

In August 2014, TEP proposed a rooftop rental arrangement for customers in its territory whereby TEP would rent its customers rooftops and install solar panels for its own generation needs. In exchange, the utility fixes customers’ monthly bills at their current level for the next 25 years, which TEP considers to be the life of the panels. According to the company website, TEP intends to accept 500 participants in 2015 and was still accepting applicants through September. The plan has been viewed with caution—but not outright hostility—by solar advocates because TEP is subcontracting out the panel installation business rather than creating its own internal, division.

Long-Term Benefits for All

TEP’s proposal could have a substantial positive financial value to customers in its territory. Here’s why: If you run a discounted cash flow analysis, using an 8% cost of capital assumption and a 25-year time horizon, the present value of the savings that TEP customers might enjoy is substantial—assuming that electric prices in Arizona continue to rise at historic rates.

In running my calculations, I assumed a customer would start the program at the beginning of 2015 and that the current $0.12/kW cost rises 3.4% annually through 2040 (this is the average annual increase between 2003 and 2013 in Arizona).

A current $100/month TEP customer is using 852 kWh per month; a $240/month customer is using 2,044 kWh. Keep that usage fixed for 25 years, and the net present value to these customers of the fixed rate versus projected actual monthly bills ranges from more than $6,000 to more than $14,000. The nominal (undiscounted) value of the savings amount to more than $20,000 for the $100/month customer and an eye-popping sum of more than $50,000 for the $240/month customer.

Tucson Electric Power Solar Rooftop Proposal: Potential Net Benefits to Consumers

Richelle Table(Source: Navigant Research)

Even if the rise in electric rates were to fall to half of its historic rate in Arizona (1.7% rather than 3.4%), the savings to TEP rooftop renters would be $2,600 and $6,200 respectively on a present value basis, and the nominal benefits accrue to $9,000 and $21,000 for $100/month and $240/month customers. Considering the heat in Arizona, I’d be willing to bet there are quite a few $300+/month customers for whom this is an even more attractive proposal.

It Takes a Village

Solar installers in Tucson do not view TEP as a competitor because they continue to get the business. Customers do not have to worry about credit scores or qualifying for financing. TEP expands its solar generation capabilities. The deal truly appears to be a win-win-win. In fact, the financial benefits to TEP are probably the lowest on management’s totem pole. The program helps the utility meet renewables requirements and keeps customers happy—and that is worth quite a lot.


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