Monday, September 18, 2017

Grid Defection: Environmentally Unjust and Bad for Renewable Energy in the Long Term

By Casille Systermans, Policy Extern
Image Credit: NREL

Solar power is a rapidly growing industry with the potential to provide significant environmental and economic benefits to society. One solar technology option that is becoming more affordable and more widely available is solar-plus-battery systems, which allow home or business owners to install solar panels with a battery back-up on their property. These systems have the potential to allow energy customers to produce all the energy they need on site. This in turn gives customers the option to disconnect or “defect” from the electricity grid entirely. While increasing the amount of solar-plus-batter systems providing energy in the United States is certainly a positive thing, grid-defection is a separate issue and it is important to consider the major environmental justice concerns associated with large-scale grid defection, as well as the potentially negative consequences large-scale grid defection can have on the long-term goal of achieving an entirely renewable energy grid.  

When customers defect from their utility, the utility company loses a customer and ultimately sells less energy. If grid defection becomes wide spread and utilities lose a large portion of their customer base, they will likely end up having to raise rates for the customers that remain to pay for their stranded costs. As rates rise more and more, more customers will be financially incentivized to defect from the grid, causing the utility’s customer base to shrink further and rates to rise even more. This is commonly referred to as the utility death spiral.

The problem with this scenario is that the customers who remain with the utility are more likely to be low-income customers who cannot afford the up-front cost associated with solar-plus-battery systems. Low-income communities and families already have disproportionately high energy cost burdens and are more likely to be negatively impacted by the pollution associated with traditional fossil fuel energy sources. Transitioning to a renewable energy system should not exacerbate environmental justice concerns by placing the burden of this transition on marginalized communities. Large-scale grid defection has the potential do just that by leaving the poor with the bill for large fossil resources and grid infrastructure that were built to benefit everyone.

It is possible to mitigate the economic harm to poor communities caused by large scale grid defection by charging customers to defect, requiring the utility to absorb their stranded costs rather than raise rates or adopting other mitigation policies. However, the impact on poor communities is not the only potential problem associated with large scale grid defection. In the long-term, large-scale grid defection could lead to a sub-optimal energy system.

Solar-plus-battery systems have the potential to be hugely beneficial in facilitating a transition to a fully renewable energy system and expanding use of solar-plus-battery systems does not require grid-defection. Instead, solar power and battery power should be part of comprehensive energy reform.  Distributed generation is essential to achieving an 100% renewable energy grid and instead of viewing solar-plus-battery systems as a threat to traditional utilities, they should be treated as a key part of a larger renewable energy transition plan.

Renewable energy advocates and utility regulators need to consider environmental justice concerns when they choose which policies to pursue and how best to encourage a renewable energy transition. Poor and minority communities are more likely to be affected by pollution and environmental degradation and it is unfair to ask those same communities to pay higher energy rates so that others can defect from the grid. Solar and battery power are only going to become more prevalent and it is essential that the energy community encourages and manages that growth in a just manner.

Wednesday, September 13, 2017

Abandoning Evidence-Based Policy Decisions, Trump Makes a Bad Deal for America

By Natascha Smith, Energy Fellow
Flooding from Hurricane Harvey outside Beaumont,
Texas. Credit: Dominick Del Vecchio, FEMA

When most of us are faced with a major decision we like to consider our options. Whether you hit the net for online reviews or turn to the trusty pro-con list, we all want to feel like we made the best decision possible given the information before us. Shouldn’t we expect our government to do the same? When we elect officials to represent us in Washington D.C., we hope that they will put themselves in our shoes, weighing all the pros and cons, and making the best decision they can with the information they have. Nevertheless, President Trump has done the exact opposite. On August 15th, Trump issued a new executive order rolling back the Federal Flood Risk Management Standard and abandoning evidence-based policy decision-making.

The Federal Flood Risk Management Standard, updated by President Obama by executive order in 2015, required the federal government to account for sea level rise and increased flood risk caused by climate change before constructing new infrastructure. The Obama Order, which only regulated federal projects, gave agencies three options when siting projects. Agencies could  consider the best available climate change science in their siting decision; build infrastructure two feet above the 100-year flood elevation standard, with critical infrastructure, like hospitals, five feet above the 100-year flood elevation standard; or build infrastructure at the 500-year flood plain level.

Trump’s new plan for streamlining the federal permitting process includes returning the Federal Flood Risk Management Standard to the standards set in 1977. These standards require agencies to consider only the outdated 100-year and 500-year flood elevation standards when siting new projects. Rolling back a common-sense protection like this serves as yet another example of President Trump eliminating his predecessor’s climate change policy on every level imaginable.

Despite the shortsightedness of rolling back infrastructure protections when extreme weather events are becoming increasingly common, Trump continues to find support for his increasingly outrageous actions (rollback). Representative Ralph Abraham (R-Louisiana) supports Trump’s rollback of the Federal Flood Risk Management Standard even though Louisiana experienced severe flooding in 2016, which caused over $10 billion in damage. While Rep. Abraham calls this catastrophic flooding an “isolated event,” severe weather events are becoming the new normal. Shortly after Rep. Abraham issued his statements, Hurricane Harvey dumped almost 10 inches of rain in Louisiana and nearly 50 inches of rain on Houston. At its peak, Houston’s flooding covered an area as large as New York City and Chicago combined. While Hurricane Harvey is being called a “500-year flood,” in reality this is the third “500-year flood” event that Houston has experienced in the past three years.

How can this be?  Michael Mann, Distinguished Professor of Atmospheric Science at Pennsylvania State University, explains that climate change has intensified severe weather events so much that we need a new set of guideposts. While the chance of severe weather events occurring is calculated based on how frequently such events occurred throughout history, a “500-year flood” refers not to a length of time, but rather to the 1-in-500 chance of such a flood occurring each year. Likewise, a “100-year flood” has a 1-in-100 chance of occurring and a “1,000-year flood” has a 1-in-1,000 chance of occurring in a given year. Professor Mann and other atmospheric scientists agree that these historical projections are no longer accurate because climate change is shifting the baseline. He analogizes the increased frequency of floods and other severe events to playing with loaded dice.

With severe weather events becoming more common, it becomes even more important to construct infrastructure with climate change in mind. It is not only socially irresponsible to ignore climate change; the financial impact is potentially devastating. Experts are estimating it could take nearly $200 billion to repair damage caused by Harvey, and the taxpayers will be picking up a large chunk of that tab. Eliminating requirements for agencies to make evidenced-based policy decisions when constructing infrastructure is irresponsible and may leave taxpayers footing the bill for projects that are vulnerable to severe weather events that are almost certainly going to get worse.  For a man whose presidential platform consisted of touting his business acumen, by encouraging agencies to ignore the best available climate science when making infrastructure siting decisions, Trump made a bad deal for America.

Monday, July 24, 2017

Reforming ODOE Will Benefit Everyone

By Melissa Powers, GEI Director and Jeffrey Bain Faculty Scholar and Professor of Law, Lewis & Clark Law School

Ten years ago, Oregon began to position itself as a leader in climate change and energy policy. Governor Ted Kulongoski recognized the economic potential in renewable energy and he sought to establish Oregon as an epicenter for clean energy technology and business. He persuaded several international energy companies, including Iberdrola Renewables, Vestas, and SolarWorld, to make Oregon their U.S. headquarters. He also encouraged the Oregon Legislature to adopt a series of policies that aimed to advance the state’s climate and clean energy leadership. In relatively short order, Oregon became one of the leading developers of wind energy and one of the top states for clean energy employment. For a short time, it seemed that Oregon could become a clean energy powerhouse that would profit from in-state renewable energy development and from exporting innovative technologies, renewable energy, and expertise to other states.

Today, however, Oregon’s climate and clean energy progress has stalled. Only one small new wind farm has come online in Oregon since 2012, our wave energy industry is limping along, and we are on track to greatly exceed our greenhouse gas emissions goals. Our growing solar energy industry is at risk due to the pending expiration of existing incentives and changes to key solar programs. Unless we change course, by creating an administrative framework to guide and implement our climate and energy policies, we will cede our leadership to other states.

Thanks to the work of state and local lawmakers, agency employees, renewable energy industries, clean energy advocates, and the public at large, Oregon has a number of clean energy and climate policies in place. However, under our existing system, agencies implement specific policies on a piecemeal basis, and no single agency has responsibility for developing a bigger-picture strategy or ensuring that agencies coordinate their activities. This piecemeal approach is inefficient and often ineffective. For Oregon to regain its status as a clean energy powerhouse, we need an administrative structure that is capable of guiding Oregon through an ever-changing technical, economic, and political landscape.

Some lawmakers have begun to recognize the importance of effective policy administration. The legislature considered, but ultimately failed to pass, HB 2020, a bill that would have turned Oregon’s Department of Energy into the Department of Energy and Climate (ODEC). This reconfigured agency would have been responsible for developing a comprehensive climate and energy strategy for the state. It would also have coordinated the activities of the dozen state agencies involved in administering Oregon’s climate and energy laws. Finally, HB 2020 would have created a board to oversee ODEC’s work and provide ODEC with additional expert resources and insight. In short, HB 2020 would have created a long overdue administrative framework to ensure that Oregon’s many climate and energy policies work as expected. Although HB 2020 was not perfect, its passage was necessary for Oregon to regain and retain its status as a clean energy and climate leader. Its adoption would have benefitted all Oregonians through improved governance and economic returns. Let’s hope that Oregon’s lawmakers focus on passing HB 2020 or a bill like it during the next legislative session.

Monday, May 1, 2017

Transmission, Part III: Alternative Solutions

By Joni Sliger, Energy Fellow
Distributed generation, like this solar facility in Hawaii,
could reduce the need for new transmission lines.
Credit: SunPower / NREL

Our electricity system depends on transmission infrastructure, and our clean energy future may well depend on the development of new and upgraded transmission lines. This blog series has explored the significance of the transmission system and one way (forming an RTO) to manage the system better for greater regional benefits. This final post explores three ways to advance a clean energy future while minimizing the need for new transmission investments.

1. Build Locally

One way to reduce the need for new transmission is to produce more electricity locally. Our current transmission system carries electricity to us from power plants that may be hundreds of miles away. While it may be desirable to build some lengthy transmission lines to reach distant renewable energy sources, the need for new lines can potentially be offset by siting power sources near demand.

One way to build local is to encourage distributed generation, such as rooftop solar. This requires encouraging individuals and businesses to produce their own renewable energy on-site. For example, in Oregon, one key policy driving rooftop solar is the Residential Energy Tax Credit. If the legislature fails to extend the tax credit beyond its 2017 sunset date, Oregon is likely to see fewer rooftop solar installations and more need for costly transmission investments.

2. Invest in New Technologies, like Ocean Energy

Ocean energy, including wave energy and tidal energy, is an under-developed resource that would enable much more local energy production along the coasts.  As I’ve discussed previously, over half of the U.S. population lives within 50 miles of a coastline. According to the Bureau of Ocean Energy Management, wave energy alone could feasibly meet almost a third of the U.S.’s energy needs. Oregon could build short transmission lines out to ocean energy facilities along its coast instead of building lines hundreds of miles long to reach out-of-state resources, like wind farms in Wyoming.

At the forefront of marine energy development, Oregon has enacted a policy position that recognizes the importance of ocean energy. In 2015, the legislature passed a law (now codified as Oregon Revised Statute § 757.811) to mandate that “any regional planning processes . . . adequately consider the transmission of electricity from ocean renewable energy.” While more research and development is needed to bring more ocean energy sources online, Oregon has taken one important step towards smarter transmission planning through this law.

3. Leverage Existing Infrastructure, like Railroads, for Transmission Lines

Electrifying the railroad system offers another way to develop the transmission we need while minimizing the cost and environmental impacts. Instead of paying for expensive siting procedures to, for example, minimize impacts on wildlife, we can leverage the existing railroad system by integrating new transmission lines into the railroads. Electric lines can carry more electricity than the trains need, allowing the railroads to serve as both a clean transportation strategy and a ready transmission solution.

A campaign called Solutionary Rail is advocating for railroad electrification as a way to revitalize rural communities, provide a ‘just transition’ for railroad workers needing employment as the industry moves away from predominantly shipping fossil fuels, and to provide the key transmission infrastructure we need to connect to distant renewable energy sources.  For example, the campaign is pushing first for the electrification of the BNSF Northern Transcon line between Seattle and Chicago. Electrifying this line could provide several benefits, including the transmission necessary for distant wind farms in Wyoming to reach power-hungry urban centers, like Seattle.

Electrified railroads are already a possibility; about half the rail lines in Europe are electric. Even just using existing railroad rights-of-way as a place to co-site transmission lines would facilitate an easier siting process. The U.S. should start looking to the future and invest, for the benefit of its environment, its economy, and its communities.

To attain a clean energy future, the U.S. needs to invest in its transmission system. By building locally, investing in new technologies like ocean energy, and leveraging existing infrastructure like railroads, we can build a better transmission system and a better world. 

Monday, April 24, 2017

Transmission, Part II: A Western RTO?

By Joni Sliger, Energy Fellow
"Photoshop art created from two NREL-Image Gallery
photos of sunset view of electrical power towers combined
with wind machines."
Credit: NREL and Raymond David (Photo Illustration)

A shortage of transmission capacity is a major constraint to the development of renewable energy resources, as I noted in my first blog post in this series on transmission. The Western Interconnection suffers from this shortage—termed a transmission constraint—as well as from transmission congestion, though not as much as other areas of the U.S. do, according to the Department of Energy’s 2015 National Electric Transmission Congestion Study. (The Western Interconnection is the aggregated grid that connects each transmission and distribution system together in all or part of the fourteen western continental states as well as parts of Canada and Mexico.) This post explores one popular idea for improving transmission systems in the West: forming a western Regional Transmission Organization (RTO).

What is an RTO?

An RTO is a third-party entity that manages the transmission systems of every participating utility within the RTO’s territory. (The term RTO is often used interchangeably with the term independent system operator, or ISO, despite some technical differences. As noted below, an RTO might take the form of an ISO.) An RTO balances the grid by managing the dispatch of electricity generation and by operating several wholesale power markets (such as a ‘day-ahead’ market and a ‘spot’ market). As I discussed in my last post, balancing the grid is vital to maintain the proper frequency and to avoid power outages. Ten RTOs now operate in parts of North America, such as the California ISO (CAISO). Together, they manage about two-thirds of the electricity sold in the U.S.

For a third party to manage the transmission system as an RTO, the Federal Energy Regulatory Commission (FERC) must approve it. FERC encourages the “voluntary interconnection and coordination” of electric facilities, such as by RTO formation, pursuant to FERC’s mandate in Section 202(a) of the Federal Power Act of 1935 (currently codified at 16 U.S.C. § 824a) to provide for a more efficient electricity system.

In the 1990s, FERC began taking significant action to promote RTO formation, when grid management grew increasingly complex as more independent power producers (IPPs) (that is, non-utility electric generators) began seeking transmission access and as some states began restructuring their monopolistic electricity sectors. In 1996, FERC issued Order No. 888 to require that transmission owners provide access to transmission to others on the same terms as they provide to themselves. This is called ‘open access transmission’ and discourages discrimination against IPPs. FERC noted one way to comply with this order would be to have an ISO manage the grid, where the ISO offers everyone the same terms. Order No. 888 thus described several “principles” to guide the formation of ISOs. The term RTO arose after the issuance of Order No. 888. In 1999, FERC promoted RTOs (which it said could take the form of ISOs) in Order No. 2000, which required all transmission owners to propose an RTO for FERC’s approval, report on efforts to form an RTO, or explain why the owner had not pursued participation in an RTO. Order No. 2000 also described the key characteristics and functions of an RTO. FERC does not require a “‘cookie cutter’ organizational format” but will review any proposal that meets its standards.

In short, an RTO is a FERC-approved third-party entity that manages the grid.

What are the Benefits of Having an RTO?

FERC promotes RTOs as a way to encourage a more competitive marketplace, which should theoretically reduce electricity rates for consumers. The ISO/RTO Council notes four major benefits are greater reliability, efficiency, transparency, and market innovation. For example, most renewable energy sources (other than those necessary to comply with a state’s Renewable Portfolio Standard) have been built in RTO territory, where intermittent suppliers, such as solar and wind power generators, enjoy a more favorable market. Short-term markets, such as a spot market, enable intermittent suppliers to sell power as they generate it.  

Another noted benefit is that RTOs eliminate a pricing inequity known as “pancaked rates.” To deliver power, producers must buy transmission services. When the transmission owners operate separately, each can charge a producer for using its transmission system. The pile-up of charges is known as rate pancaking. The total fee may be too high for a producer to afford to use transmission and therefore hinders long-distance transmission, even if necessary to get rural renewable power to power-hungry demand centers. The expense of facing pancaked rates rises with the number of systems one crosses; when one is participating in an RTO, one pays for transmission services but only from the RTO. Rates are not pancaked, which is a major benefit of RTO participation. Indeed, FERC describes the elimination of rate pancaking as a “central goal” of its RTO formation policy.

Additionally, an RTO enables greater efficiency by, for example, consolidating balancing areas. A balancing area is the territory within which an entity (called a balancing authority) must balance the grid to ensure reliability. A balancing area may be as small as an individual utility’s territory. By participating in an RTO, that utility can join its balancing area (or “footprint”) to those of other participants. As can be seen in the following map of the United States, each RTO manages its regional territory as a single balancing authority.  An RTO thus creates a geographically broad wholesale power market that enables participants to buy and sell power produced throughout a large area. This means, for example, that an excess of wind power produced in one state could quickly and easily be transmitted to serve demand in another state.

Credit: Energy Information Administration

Is a Western RTO Possible?

As one can see in the map above, most of the West is outside of RTO territory. CAISO only operates in portions of California and Nevada. Recognizing the potential benefits of forming an RTO, entities in the West have been discussing forming a western RTO. Such discussions are not new. In the early 2000s, there was a proposal called “RTO West.” However, the proposal failed, in part because of the California energy crisis and because of opposition to changing the Bonneville Power Administration’s operations (and potentially raising its very cheap rates). Nevertheless, efforts to form a western RTO continue today.

I have blogged previously on a proposal for PacifiCorp to join CAISO, which could enable more renewables to come online and save consumers money at the same time. Proponents continue to push to expand CAISO and form a western RTO. As an example of the incremental success, this past February, the Balancing Authority of Northern California agreed to participate in CAISO’s Energy Imbalance Market (EIM) starting in 2019. (Though an EIM does not offer all the benefits of an RTO, it has provided significant economic benefits to participants). Unfortunately, the election of (pro-coal) President Trump and concerns about maintaining state control have dampened some efforts to form a western RTO, but proponents promise to persist.

Hopefully the movement to expand CAISO and form a western RTO continues to spread and will bring the benefits of an RTO to the West. Until then, renewable developers may continue to face the unnecessary costs of pancaked rates, for example.