In Six Months, We Might Lose It All: The Federal Energy Regulatory Commission (FERC)

FERC
(Source: Investopedia, Madelyn Goodnight)

The April 23rd blog ended with the following paragraph:

I will wait until I read the new FERC report on the issue and start next week’s blog addressing the international aspects of these issues. Specifically, how developing countries hope to generate the resources to finance the transition. Without their cooperation, the energy transition is bound to fail and all of us will suffer the consequences.

As promised, the report came out on time, last week. Below is the fact sheet of its findings:

Fact Sheet |Building for the Future Through Electric Regional Transmission Planning and Cost Allocation

FERC’s new transmission and cost allocation rule, Order No. 1920, continues the essential work of the Commission – ensuring a reliable grid – by requiring the nation’s transmission providers to plan for the transmission we know we will need in the future.

This rule adopts specific requirements addressing how transmission providers must conduct long-term planning for regional transmission facilities and determine how to pay for them, so needed transmission is built. The final rule reflects more than 15,000 pages of comments from nearly 200 stakeholders representing all sectors of the electric power industry; environmental, consumer and other advocacy groups; and state and other government entities.

The grid rule contains these major elements:

  • Requirement to conduct and periodically update long-term transmission planning to anticipate future needs.
  • Requirement to consider a broad set of benefits when planning new facilities.
  • Requirement to identify opportunities to modify in-kind replacement of existing transmission facilities to increase their transfer capability, known as “right-sizing.”
  • Customers pay only for projects from which they benefit.
  • Expands states’ pivotal role throughout the process of planning, selecting, and determining how to pay for transmission facilities.

Long-Term Regional Transmission Planning

More specifically, the rule requires each transmission operator to:

  • Produce a regional transmission plan of at least 20 years to identify long-term needs and the facilities to meet them.
  • Conduct this long-term planning at least once every five years using a plausible and diverse set of at least three scenarios that incorporate specific factors and use best available data.
  • Apply seven specific benefits to determine whether any identified regional proposals will efficiently and cost-effectively address long-term transmission needs.
  • Include an evaluation process to identify long-term regional transmission facilities for potential selection in the regional plan.
  • Include a process giving states and interconnection customers the opportunity to fund all, or a portion, of the cost of a long-term regional transmission facilities that otherwise would not meet the transmission provider’s selection criteria.
  • In the event of delays or cost overruns, reevaluate long-term regional transmission facilities that previously were selected in a regional transmission plan.
  • Consider transmission facilities that address interconnection-related needs identified multiple times in existing generator interconnection processes, but that have not been built.
  • Consider the use of Grid Enhancing Technologies such as dynamic line ratings, advanced power flow control devices, advanced conductors and transmission switching.

How to Pay for Transmission

The grid rule contains these cost-allocation provisions:

  • Before applicants submit compliance filings, they must open a six-month engagement period with relevant state entities.
  • Applicants must propose a default method of cost allocation to pay for selected long-term regional transmission facilities.
  • Applicants may propose, a state agreement process that lasts for up to six months after a project is selected for participants to determine, and transmission providers to file, a cost allocation method for the selected facilities.

Enhanced Transparency, “Right-Sizing” and Interregional Transmission Coordination

The grid rule requires transmission providers to:

  • Be transparent regarding local transmission planning information and conduct stakeholder meetings during the regional transmission planning cycle about the local process.
  • Identify opportunities to modify in-kind replacement of existing transmission facilities to increase their transfer capability, known as “right-sizing,” when needed.
  • Give incumbent transmission owners a right of first refusal to develop these “right-sized” replacement facilities.
  • Revise existing interregional transmission coordination processes to reflect the new long-term regional transmission planning reforms.

Order No. 1920 takes effect 60 days after publication in the Federal Register.  Compliance filings with respect to most of the rule’s requirements are due within 10 months of the effective date, while filings to comply with the interregional transmission coordination requirements are due within 12 months of the effective date.

The media response was immediate. I am including two examples: one from the NYT and one from Forbes:

NYT: New Rules to Overhaul Electric Grids Could Boost Wind and Solar Power

The Federal Energy Regulatory Commission approved the biggest changes in more than a decade to the way U.S. power lines are planned and funded.

Federal regulators on Monday approved sweeping changes to how America’s electric grids are planned and funded, in a move that supporters hope could spur thousands of miles of new high-voltage power lines and make it easier to add more wind and solar energy.

The new rule by the Federal Energy Regulatory Commission, which oversees interstate electricity transmission, is the most significant attempt in years to upgrade and expand the country’s creaking electricity network. Experts have warned that there aren’t nearly enough high-voltage power lines being built today, putting the country at greater risk of blackouts from extreme weather while making it harder to shift to renewable sources of energy and cope with rising electricity demand.

A big reason for the slow pace of grid expansion is that operators rarely plan for the long term, the commission said.

The nation’s New Rules to Overhaul Electric Grids Could Boost Wind and Solar Power are overseen by a patchwork of utilities and regional grid operators that mainly focus on ensuring the reliability of electricity to homes and businesses. When it comes to building new transmission lines, grid operators tend to be reactive, responding after a wind-farm developer asks to connect to the existing network or once a reliability problem is spotted.

The new federal rule, which was two years in the making, requires grid operators around the country to identify needs 20 years into the future, taking into account factors like changes in the energy mix, the growing number of states that require wind and solar power and the risks of extreme weather.

Grid planners would have to evaluate the benefits of new transmission lines, such as whether they would lower electricity costs or reduce the risk of blackouts, and develop methods for splitting the costs of those lines among customers and businesses.

“We must plan our nation’s grid for the long term,” said Willie Phillips, a Democrat who chairs the energy commission. “Our country’s aging grid is being tested in ways that we’ve never seen before. Without significant action now, we won’t be able to keep the lights on in the face of increasing demand, extreme weather, and new technologies.”

Forbes: Renewables Will Skyrocket Under New Transmission Policies

The transmission system must modernize and expand to meet the demands of the 21st Century. Indeed, the growth of artificial intelligence, data centers, and electric vehicles — powered by green energy — means the country must at least double regional transmission capacity.

That’s why the Federal Energy Regulatory Commission (FERC) voted 2-to-1 Monday to modernize the nation’s long-distance high-powered transmission policies — geared to meeting the Biden Administration’s decarbonization goals and to harden the grid to withstand extreme weather that could wreak havoc on local economies.

The changes have multiple ramifications: It will help with backstop authority—or the ability to build transmission when progress slows. Over the next decade, it will lead to considerably more renewable energy and noticeably less coal-fired power. For both reasons, litigation will abound, although the regulatory commissioners considered that before approving the new policies.

FERC also revised its backstop authority. That means the feds can intervene if the states fail to push through vital — log-jammed — projects. “FERC’s backstop siting rule will help ensure that no one state can veto transmission lines that are in the general interest of the nation,” says Cullen Howe, senior advocate for the Natural Resources Defense Council.

The Energy Department will play a key role in the implementation:

The Biden administration on Thursday finalized a rule meant to speed up federal permits for major transmission lines, part of a broader push to expand America’s electric grids.

Administration officials are increasingly worried that their plans to fight climate change could falter unless the nation can quickly add vast amounts of grid capacity to handle more wind and solar power and to better tolerate extreme weather. The pace of construction for high-voltage power lines has sharply slowed since 2013, and building new lines can take a decade or more because of permitting delays and local opposition.

The Energy Department is trying to use the limited tools at its disposal to pour roughly $20 billion into grid upgrades and to streamline approvals for new lines. But experts say a rapid, large-scale grid expansion may ultimately depend on Congress.

Under the rule announced on Thursday, the Energy Department would take over as the lead agency in charge of federal environmental reviews for certain interstate power lines and would aim to issue necessary permits within two years. Currently, the federal approval process can take four years or more and often involves multiple agencies each conducting their own separate reviews.

At approximately the same time, news came from Florida, focusing our thinking on the immediate future. In six months, depending on the results of the national election, all of this progress may evaporate into thin air and we may again find ourselves powerless to fight climate change:

Florida’s state government will no longer be required to consider climate change when crafting energy policy under legislation signed Wednesday by Gov. Ron DeSantis, a Republican.

The new law, which passed the Florida Legislature in March and takes effect on July 1, will also prohibit the construction of offshore wind turbines in state waters and will repeal state grant programs that encourage energy conservation and renewable energy.

The legislation also deletes requirements that state agencies use climate-friendly products and purchase fuel-efficient vehicles. And it prevents any municipality from restricting the type of fuel that can be used in an appliance, such as a gas stove.

The legislation, along with two other bills Mr. DeSantis signed on Wednesday, “will keep windmills off our beaches, gas in our tanks, and China out of our state,” the governor wrote on the social media platform X. “We’re restoring sanity in our approach to energy and rejecting the agenda of the radical green zealots.”

It all depends on us, whether we lose the ability to fight our contribution to global climate change (remember our “self-inflicted genocide”), or we are able to amplify our efforts to mitigate and adapt to the changes. I will try in future blogs to record our efforts on all levels, including describing where we are now and what are we at risk of losing. This blog started with FERC; the next one will proceed to the US Department of Energy.

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Minimizing the Cost of the Transition

The last two blogs tried to make the case that—without the full participation of developing countries—the energy transition away from fossil fuels is bound to fail. In the first of these two blogs (April 30th) I quoted two paragraphs from the long IEA (International Energy Agency) executive summary of the issue (Executive summary – Financing Clean Energy Transitions in Emerging and Developing Economies – Analysis – IEA).  Last week’s report referred to an oil industry source that concluded that the world is short of necessary funding for the transition by 2 trillion US$, and will likely never be able to close the gap. The dependence of developing countries on rich countries to provide the financing for this transition should be viewed as an important trigger for a catastrophic failure to complete a global transition. One way to counter such failure and promote global resilience would be to minimize the cost needed for the transition. This blog is focused on such attempts.

I will start by quoting more from the same executive summary of the IEA report that was quoted in the April 30th blog, finishing with a summary of the case studies it has presented:

The transformation begins with reliable clean power, grids and efficiency…

Transforming the power sector and boosting investment in the efficient use of clean electricity are key pillars of sustainable development. Electricity consumption in emerging and developing economies is set to grow around three times the rate of advanced economies, and the low costs of wind and solar power, in particular, should make them the technologies of choice to meet rising demand if the infrastructure and regulatory frameworks are in place. Societies can reap multiple benefits from investment in clean power and modern digitalised electricity networks, as well as spending on energy efficiency and electrification via greener buildings, appliances and electric vehicles. These investments drive the largest share of the emissions reductions required over the next decade to meet international climate goals. Innovative mechanisms with international backing to refit, repurpose or retire existing coal plants are an essential component of power sector transformations.

Action on emissions in emerging and developing economies is very cost-effective

The average cost of reducing emissions in these economies is estimated to be around half the level in advanced economies. All countries need to bring down emissions, but clean energy investment in emerging and developing economies is a particularly cost-effective way to tackle climate change. The opportunity is underscored by the amount of new equipment and infrastructure that is being purchased or built. Where clean technologies are available and affordable – and financing options available – integrating sustainable, smart choices into new buildings, factories and vehicles from the outset is much easier than adapting or retrofitting at a later stage.

Transitions in the developing world must be built on access and affordability

Affordability is a key concern for consumers, while governments have to pursue multiple energy-related development goals, starting with universal energy access. There are almost 800 million people who do not have access to electricity today and 2.6 billion people who do not have access to clean cooking options. The vast majority of these people are in emerging and developing economies, and the pandemic has set back financing of projects to expand access. Efficiency is key to least-cost and sustainable outcomes. For example, meeting rising demand for cooling with highly efficient air conditioners will keep energy bills down for households – and minimise costs for the system as a whole. Action to provide clean cooking solutions and tackle other emissions will have major benefits for air quality: 15 of the 25 most polluted cities in the world are in emerging and developing economies, and air pollution is a major cause of premature death.

One obvious step to cost-effectively increase resilience is to be more strategic with resources. A good example could be undergrounding power lines (see September 5, 2023 blog). It is an expensive proposition and not every part of the grid needs the same protections. Parts that need better protections (hospitals, military facilities, campuses, etc.) can be served by smaller mobile grids (mini- or microgrids) that can get better protection and can work either on their own or connect to and disconnect from the main grid. The only difference between mini-grids and microgrids is their size, with no sharp line to distinguish between them.

Microgrids have been discussed throughout this blog. Just put the word into the search box for a refresher on my related posts. Here are a couple good places to start: the guest blog by Elisa Wood, titled “Microgrids” (May 6, 2014), and the blog titled “Microgrids – History is Catching Up” (April 29, 2014), about our film, “Quest for Energy,” which documents the microgrid that brought electricity to a small town in the Sundarbans region in India. The description of the film in that blog omits a personal note about something that took place during our travel, so I will add it here. During our two trips to India to make the film, my trip was divided into two parts; in the first part, my wife joined me as a “typical” American tourist and we visited many popular tourist destinations. In the second part of the trip, my wife returned home, and I proceeded to Kolkata to join the team that produced the film.

At the start of the first part of our first trip, we stayed in a hotel in Delhi. There were many other Americans in the hotel. During breakfast, an American lady asked me why we came to India. I described the film that we were about to produce to her; I still remember her reaction. My memory is not good enough for a direct quote but she looked at me with an approving look and spoke about a conspiracy theory with me. I still remember the Northeast blackout of 2003. One of the stories that spread around was that in certain neighborhoods (she specified which ones), people noticed a significant increase in pregnancies after the blackout. She gave me a half-smile and concluded that I was there to prevent people from “swamping the planet” with too many Indian babies. The fear of being “swamped” by the high fertility of developing countries was more common in the second half of the 20th century than it is now and was shared by many. It can be viewed as a predecessor of “replacement theory” (see my March 5, 2024 blog), which now dominates certain circles’ discussions of immigration policies.

Racism aside, the movie, “Quest for Energy,” showed the process of the globalization of electricity use (that I have described in previous blogs), which almost always proceeds through micro- and mini-grids. The newer aspect is the use of these facilities to enhance equity and resilience in both developed and developing countries on their ways to convert to “smart grids.” This is subject to extensive research that I will describe in future blogs.

This is obviously not the only cost-effective way to participate in the energy transition.

Throughout most of my scientific career, the dream of most scientists who have done research on solar cells was to be cost-competitive with fossil fuels. We have now reached that point. Solar and wind have become the dominant global primary energy sources; both are forms of solar energy (see November 5, 2019, blog). Figure 1 shows the changes in photovoltaic prices. Most of the declining prices are triggered by China’s efforts in this field. The recent drop into negative prices, shown in Figure 1, was discussed before (see June 9, 2020 blog); it indicates that supply is starting to exceed demand.

Graph of solar panel pricesFigure 1 – Solar panel prices in US$/Watt (Source: Our World in Data)

The Chinese continue to dominate production of solar panels; this is already triggering tariffs in various quarters, which are not helpful for the global energy transition.

However, the global energy transition is still highly dependent on local politics. The political situation in the US resembles 2016 (see the December 18, 2018 blog). Perhaps the most consequential international agreement on how to proceed with the global energy transition was the Paris Agreement, which was signed in December 2015. The following year, Ex-President Trump was elected to the presidency. One of his first actions was to take the US out of this agreement, an action that slowed down the transition considerably. This year, former president Trump is again the leading Republican candidate, with a considerable chance of succeeding. If he becomes president again, there is no reason to believe that he will act differently. Next week I will focus on the US government’s role in the transition—specifically, the activities most sensitive to changes in political power.

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A Federated System with a Global Perspective: Power Grids, Security, and Climate Resilience

Previous blogs in this series (starting on March 26th) emphasized how the current global shift in electricity generation and energy supply, combined with global electrification, serves as one of the main tools for decarbonization. One key feature discussed in this series is the need to adapt the electrical grids to decarbonize the primary energy by stopping the use of fossil fuels. This means it will be necessary to enable the grids to accommodate a major increase in distributed generation of sustainable energy sources by modifying them to support bidirectional electricity flow. The shift from reliance on fossil fuels to solar energy as the primary energy source requires a shift of output of the grid from customer demand base to customer independent base (exposure to the sun). This requires a major increase in storage capabilities (see last week’s blog for examples of what happens when there is not enough storage available). Such future grids are often labeled “smart grids.” Storage aside, the present grids are already reliable; however, the modified grids will also have to be resilient to extreme climate triggers.

The issue that I started to address in the last two blogs (starting on April 23rd) is who is going to pay for all these changes. Last week’s blog tried to make the case that since electricity is becoming universal, the question of who pays is universal as well. This includes both developing countries and “rich” developed countries (where most people are not rich). Equity becomes a primary question. Last week’s blog ended with a paragraph that starts with the following line: “An unprecedented increase in clean energy spending is required to put countries on a pathway towards net-zero emissions.” The emphasis was on developing countries. The issues of the need for increased resilience and the related costs were not addressed but will be in this blog.

The difference between resilience and reliability needs clarification; Figures 1 and 2 should help.

As shown in Figure 1, reliability relates to expectations that power will be available on demand—whenever a customer wants it—while resilience relates to the speed of power restoration after unexpected disruptions.

Figure 1 – Definitions of resilience and reliability (Source: Energy in Depth)

As shown in Figure 2, reliability is generally related to changes in demand. Most often, these  originate from common changes in consumer usage, making them highly probable and relatively predictable. In contrast, resilience has to do with cuts in power delivery; these have a much lower probability, meaning that the disruption is usually much more unpredictable.

Figure 2 – Conceptual relationships between reliability, risk, and resilience with respect to the probability and magnitude of events addressed (Source: ResearchGate)

Unpredictable disruption can be triggered by extreme climate events such as hurricanes, floods, or heatwaves, or by human disruption (whether intentional or not). Below are some examples of the two classes of triggers:

Natural

The two Axios publications given below both refer to Figure 3 from the Department of Energy, which lists the number of extreme climate events that caused major grid disruptions in the US over the last 24 years:

Zoom in: Extreme weather accounted for about 80% of all major U.S. power outages from 2000 to 2023, the nonprofit research and communications group Climate Central reports.

  • Such outages are defined as affecting at least 50,000 homes or businesses, or cutting service of at least 300 megawatts.
  • The majority of weather-related outages are due to severe weather like major thunderstorms, followed by winter weather and tropical storms and hurricanes.
  • The report notes hurricanes can cause long-lasting outages, accounting for most of these types of outages through 2022.

The intrigue: Wildfires and heat waves, two of the hazards most clearly linked to human-caused climate change, are becoming more problematic, Climate Central found.

  • Extreme heat accounts for a smaller share of outages but creates acute public health hazards when it does occur.

  • And wildfires have accounted for about 2% of weather-related outages during this period, with more than half of these instances occurring during the past five years.

  • Climate science studies have shown that human-caused global warming is leading to larger, more intense wildfires. In addition, wildfire seasons are getting longer across the U.S. and Canada.

  • Some of these outages were preemptive safety shut-offs by utilities to try to avoid sparking a blaze on days with extreme fire weather conditions.

Figure 3 – Share of major power outages attributed to extreme weather
(Data: Climate Central via U.S. Department of Energy; Note: Major power outages affect at least 50k customers or interrupt service of 300 megawatts or more; Outage events can cross state lines; Map: Kavya Beheraj/Axios)

We can see that in comparison with the US overall average of 80.2%, the largest areas with the most prevalent outages (>90%) attributed to extreme weather are on the Southeast Coast and in the South. However, the state that is the exception to these trends is Michigan.

Michigan is a national outlier for its number of major power outages since 2000, a new report from nonprofit research and communications group Climate Central found.

Why it matters: Electricity outages will become more common as extreme weather events — many driven by climate change — wreak havoc on the country’s aging power infrastructure.

  • Outages and lengthy restoration times can cost the economy billions of dollars.

The big picture: While the South and Southeast have experienced the most extreme weather-related power outages during the past two decades, Michigan (174) has experienced more major power outages than any state other than Texas (264).

  • 2% of the local outages were attributed to extreme weather, while southern states like Alabama and Georgia blame outages on extreme weather nearly 99% of the time.

The intrigue: The states with the most reported weather-related significant power outages during the 23-year time frame were Texas, Michigan, California, North Carolina and Ohio, according to the report.

  • Researchers found that long-duration outages, which most frequently affected socially and medically vulnerable populations, tended to occur in Arkansas, Louisiana and Michigan.

Through Hostile Force

KYIV, April 27 (Reuters) – Russian missiles pounded power facilities in central and western Ukraine on Saturday, increasing pressure on the ailing energy system as the country faces a shortage of air defenses despite a breakthrough in U.S. military aid.

The air strike, carried out with long-range missiles, including cruise missiles fired by Russian strategic bombers based in the Arctic Circle, was the fourth large-scale aerial assault targeting the power system since March 22.

There is little we can do to mitigate the second type of trigger. However, the threats of major natural triggers are increasing to a degree that they are becoming almost predictable (in other words, on Figure 2’s graph, they are moving to the left and their probability is increasing).

Can we all afford the changes to the power grids that are necessary to facilitate the energy transition? A related question is whether the global inequity in such a transition’s affordability will kill it.

One major mechanism to help equity in payment is the Loss and Damage mechanism advanced in the last two COP meetings (See November 27, 2022, blog), under which the rich countries pay developing countries for damage caused by anthropogenic climate change. However, the issue of attribution to climate change that would trigger payments is yet to be settled, as the next publication will show.

Payment

Since January, swathes of southern Africa have been suffering from a severe drought, which has destroyed crops, spread disease and caused mass hunger. But its causes have raised tough questions for the new UN fund for climate change losses.

Christopher Dabu, a priest in Lusitu parish in southern Zambia, one of the affected regions, said that because of the drought, his parishioners “have nothing”- including their staple food.

“Almost every day, there’s somebody who comes here to knock on this gate asking for mielie meal, [saying] ‘Father, I am dying of hunger’,” Dabu told Climate Home outside his church last month.

The government and some humanitarian agencies were quick to blame the lack of rain on climate change.

Zambia’s green economy minister Collins Nzovu told reporters in March, “there’s a lot of infrastructure damage as a result of climate change”. He added that the new UN-backed loss and damage fund, now being set up to help climate change victims, “must speak to this”.

But last week, scientists from the World Weather Attribution (WWA) group published a study which found that “climate change did not emerge as the significant driver” of the current drought affecting Zambia, Zimbabwe, Malawi, Angola, Mozambique and Botswana.

Instead, they concluded that the El Niño phenomenon – which occurs every few years with warming of sea surface temperatures in the eastern Pacific Ocean – was the drought’s “key driver”. They said the damage was worsened by the vulnerabilities of the countries affected, including reliance on rain-fed farming rather than irrigation.

The follow up from the oil industry indicates that we have long way to go:

Investments in the energy transition are falling way short of what is needed for its success. The fresh warning comes from BlackRock, which said annual investments in the shift away from hydrocarbons need to almost double from their current record levels. But it’s getting less likely this would ever happen.

In a new edition of its Investment Institute Transition Scenario, the bank said that moving the transition forward would require more money from both public and private sources and that, for its part, would require “alignment between government action, companies and partnerships with communities,” according to Michael Dennis, head of APAC Alternatives Strategy & Capital Markets at BlackRock, as quoted by CNBC.

BlackRock mentioned the $4-trillion figure as the necessary sum to be invested in the transition annually back in December when it released the original IITS. The amount was as impressive then as it is now, not least because it was double the amount of earlier investment estimates. What makes it even more impressive is the fact that last year’s record transition investments came in at less than half that, at $1.8 trillion.

The next blog will focus on attempts to minimize the cost of major power disruptions by differentiating grids in terms of vulnerability.

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A Federated System with a Global Perspective: Equity and Resilience of Power Grids in Developing Countries

As was shown in a previous blog, the global spread of electricity is a recent phenomenon that took place in the second half of the last century and the beginning of this century. In approximately the same time span, the world has started to realize that we need to replace fossil fuels as the primary energy source that drives our energy needs. This is a costly transition. Figure 1 shows that in terms of new investments, developing countries are doing a better job than developed countries. Considering the fact that the nominal GDP/capita of developed countries can be more than 30 times higher than that of developing countries, the question is how they do it. This blog will focus on the equity part, while next week’s blog will focus on the resilience part of the same issue.

Graph: Developing countries invest more in renewable energyFigure 1 – Developing countries invest more in renewable energy (Source: Statista)

I was fortunate to observe a small part of both electrification and energy transitions. As I mentioned in some previous blogs (see February 24, 2015), more than fifteen years ago, I worked with a group of friends on a film about a society in a remote part of a developing country (India) as it transitioned from a mainly hunter-gatherer existence to an electricity-driven, modern civilization. The result was a series of short documentaries, including: “Quest for Light,” “Quest for Energy,” and “Beyond the Grid” (see April 29, 2014). When we produced the films, people told us how much they paid for the new electricity. It turned out that they paid considerably higher prices than people on the “mainland.” One of the reasons for this discrepancy was that most of the electricity that was generated on the mainland was produced using coal as the primary energy source, while electricity that was generated in Gosaba (this small town in the Sundarbans region, see the original blog or the movie) came from burning trees from the mangrove forest nearby and planting new trees to compensate. When we asked the people if they didn’t mind paying more, the unanimous answer was that they saw Bangladesh across the Bay of Bengal and they knew the impact of relying on coal, including catastrophic consequences on their weather. They understood that they could not rely on coal burning for generating new electricity. The filming was done 15 years ago.

Today Colombia, another developing country (2022 GDP/Capita $6,624) is introducing the following new plan to finance its electricity generation:

BOGOTÁ, Colombia (AP) — Colombia’s government on Tuesday rolled out new incentives to reduce electricity consumption in the South American nation, which has been hit by a severe drought that has diminished the capacity of local hydroelectric plants and brought officials close to imposing power cuts.

The ministry of mines and energy said that in the following weeks homes and businesses that exceed their average monthly electrical consumption will be charged additional fees for every extra kilowatt-hour used, while those who use less electricity than usual will be rewarded with discounts.

To put a broader perspective on the issue, it became a focal point of a global efforts in the yearly COP (Conference of Parties) effort to mitigate and adapt to climate change. Facilitating global agreement to transfer resources to help developing countries in the energy transition became a key condition for these countries’ full participation. Global energy transition away from fossil fuel is impossible without participation of developing countries. Specifically, this issue was the focal point of COP27, which was discussed in a previous blog (November 29, 2022):

UN Climate Change News, 20 November 2022 – The United Nations Climate Change Conference COP27 closed today with a breakthrough agreement to provide “loss and damage” funding for vulnerable countries hit hard by climate disasters.

As is described here, the all-important implementation of this agreement has been deferred until COP28, with the meeting of an established “transitional committee” to happen no later than March 2023. We obviously will return to this issue.

Last year, Muhammad Siddiqui, a Pakistani student of mine, wrote a guest blog (January 3, 2023), “Guest Blog: Loss & Damage Funds and the Developing Indian Subcontinent.”

In 1985, the International Atomic Energy Agency (IAEA) issued a short report on this issue and in 2021 the International Energy Agency (IEA) issued its latest report. The IEA report is long; the table of contents is shown below:

1.0 Executive summary

 2.0 Setting the scene

3.0 The landscape for clean energy finance in EMDEs

4.0 Financing clean power, efficiency and electrification

5.0 Financing transitions in fuels and emissions-intensive sectors

The executive summary alone includes more than 20 paragraphs, from which I will only cite the following:

Emerging and developing economies are set to account for the bulk of emissions growth in the coming decades unless much stronger action is taken to transform their energy systems. With the exception of parts of the Middle East and Eastern Europe, their per capita emissions are among the lowest in the world – one-quarter of the level in advanced economies. In a scenario reflecting today’s announced and existing policies, emissions from emerging and developing economies are projected to grow by 5 gigatonnes (Gt) over the next two decades. In contrast, they are projected to fall by 2 Gt in advanced economies and to plateau in China.

But a massive surge in clean energy investment in the developing world can put emissions on a different course

An unprecedented increase in clean energy spending is required to put countries on a pathway towards net-zero emissions. Clean energy investment in emerging and developing economies declined by 8% to less than USD 150 billion in 2020, with only a slight rebound expected in 2021. By the end of the 2020s, annual capital spending on clean energy in these economies needs to expand by more than seven times, to above USD 1 trillion, in order to put the world on track to reach net-zero emissions by 2050. Such a surge can bring major economic and societal benefits, but it will require far-reaching efforts to improve the domestic environment for clean energy investment within these countries – in combination with international efforts to accelerate inflows of capital.

I strongly recommend that all of us read and try to act on the full report. 

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A Federated System with a Global Perspective: Equity and Resilience of Power Grids

High voltage power lines against a cloudy sky

Power lines in the Netherlands with a dark cloud cover (From September 5, 2023, “Utility Pricing”)

Happy Earth Day and happy birthday to both my wife and this blog. Climate Change Fork is now 12 years old!

The top figure and Figure 2 of this blog are carry-overs from previous blogs that dealt with different aspects of modern power grids. A simpler example based on bi-directional interactions of a single home with central utility was shown and discussed a month ago (March 26, 2024) when I started the discussion on net metering. The price and resilience of smart grids are becoming central issues both in rich countries and developing countries.

An example of the need for security resiliency was mentioned in a recent article in the NYT from which I am citing two key paragraphs:

When power stops, life grinds to a halt. Lights go out. Sewage treatment stops. Clean water stops. Electric cars, buses and trolleys stop. Elevators stop, trapping older and disabled people. For many, home heating, refrigeration, cooking and clothes washing stops, along with medical devices such as oxygen generators.

Even though the world’s dependence on electricity for all of this and more is growing, power grids are still legitimate military targets, according to both international law and our own military rule book. But there are small, promising signs that could be changing. Early last month, before Russia’s most damaging assaults, the International Criminal Court in The Hague concluded that the country’s pummeling of Ukraine’s power system had already crossed the line and issued arrest warrants for a pair of senior Russian commanders, Adm. Viktor Nikolayevich Sokolov and Lt. Gen. Sergei Ivanovich Kobylash, whose units are accused of launching the missiles. (Russia has denied committing war crimes.)

Electric grids are now playing an increasingly important role in all aspects of our lives, and as a result, we are more vulnerable to security threats from actors who want to do us harm. In addition, there is now the relatively recent and increasing danger of catastrophic weather impact that plays a central role globally. An important solution can involve burying the high-voltage lines in the ground. National Grid provides a review article, with some concrete examples.

Electricity pricing mechanisms in the US are summarized below:

In the “old days” prior to some of the organizational changes brought about by the FERC actions, electricity prices were often set by utility companies and approved by state utility commissions. The rates were often determined based on the concept of cost recovery. The more that the utilities spent on infrastructure and generators for production, the more returns could be “justified.” Those returns were, for the most part, set as a percentage of the total approved investment cost (rate base). While these types of returns provided limited risk for utility investors, from a consumer’s perspective, there was too little incentive for efficiency and conservation activities that would serve to lower consumer prices.

The FERC has tried to provide that incentive by requiring segmentation of the business operations of electrical distribution, transmission, and generation, even if those operations are performed by the same corporation. The purpose for this segmentation is to take the financial risk of constructing expensive generators off the electric consumer and place that risk on the shoulders of investor-owned corporations. For instance, Exelon, a very large utility company in the United States, owns generators, grid transmission equipment, and distribution companies that distribute electricity to individual consumers (e.g., PECO, ComEd). However, the FERC requires Exelon and other similar organizations to create organizational-structural-financial barriers within their companies. In practice, these companies are barred from sharing operational information between their generation portfolio and their transmission portfolio. This division is intended to ensure that everyone who uses the grid is treated fairly and doesn’t have an advantage, one over another. And that’s really where competition comes into play, because as the generator businesses compete for a share of the electricity market, competition drives down the cost of electricity for all consumers.

https://www.ferc.gov/  Federal Energy Regulatory Commission

FERC will update their guidelines shortly (May 13th):

April 19 (Reuters) – The U.S. Federal Energy Regulatory Commission (FERC) will announce on May 13 its plan to speed up the development of long-distance transmission lines to meet rising power demand and bring a backlog of planned clean energy projects to the grid.

The long-awaited plan is part of reforms to upgrade the country’s aging electric transmission system to keep up with power demand and a shift from fossil fuels to renewable energy.

A schematic diagram of a smart grid, compatible with the requirements of the energy transition anchored on sustainable energy sources, was described in a previous blog and is shown again in Figure 2 below:

smart grid diagram

Figure 2 – Schematic diagram of energy distributed through a smart grid and microgrids (From July 14, 2020, “School Energy Use: Smart Grids”)

It is obvious that this transformation is going to be expensive, and the question that is always raised is who will pay the price. It should also be obvious that now with the almost global transition to electricity, power should be available to both rich and poor countries. It is also clear that these issues are political and that they should be solved with global broad agreement.

One particular approach to address the equity issues in power distribution is being tried in California, as I described in the April 9th blog:

The controversial plan to require California’s three biggest utilities to start charging their customers based on how much money they make has been shelved by state regulators — at least for now.

Instead, the California Public Utilities Commission is proposing a less radical — if not necessarily less controversial — approach to complying with a state law demanding that it examine new rate structures to reduce the burden of rising electricity rates, a problem that will only deepen as the state further embraces electrification.

That proposal? Reduce per-kilowatt-hour rates but institute a fixed charge of $24.15 per month for most customers of utilities Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.

The more general situation in the US was summarized by AI (through Google) and is shown below:

The US federal government has provided $145 billion in subsidies to support energy research and development (R&D) for nuclear power and fossil fuels since 1950. In 2016–2022, 46% of federal energy subsidies were for renewable energy, while 35% were for energy end uses. In 2022, households could receive a tax credit of up to 10% to cover the cost of insulation materials and other energy efficient improvements, such as energy-saving windows and doors. They could also receive a $300 tax credit for purchasing efficient heating and cooling equipment.

The essence of the AI description comes from an EIA (Energy Information Administration) report titled “Federal Financial Interventions and Subsidies in Energy in Fiscal Years 2016–2022.”

I will wait until I read the new FERC report on the issue and start next week’s blog addressing the international aspects of these issues. Specifically, how developing countries hope to generate the resources to finance the transition. Without their cooperation, the energy transition is bound to fail and all of us will suffer the consequences.

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A Federated System with a Global Perspective: Part 2

Before moving on to global perspectives of electricity generation, I want to talk about a recent perspective that appeared in last week’s NYT Climate section.

The article makes the point that the recent growth in the use of electricity in the US, which I described in last week’s blog, requires a significant increase in the grid capacity in the US. It also gives an example of how to achieve this:

One of the biggest obstacles to expanding clean energy in the United States is a lack of power lines. Building new transmission lines can take a decade or more because of permitting delays and local opposition. But there may be a faster, cheaper solution, according to two reports released Tuesday.

Replacing existing power lines with cables made from state-of-the-art materials could roughly double the capacity of the electric grid in many parts of the country, making room for much more wind and solar power.

That’s an interesting idea and might be worth a try.

I will shift now to the part of the energy system that was missing from the CCNY conference described in last week’s blog: the global perspective. The anthropogenic triggering of climate change, caused by changes in the chemistry of the atmosphere, is a global phenomenon. All components of governance worldwide need to be involved in minimizing the impacts. Figure 1 shows two graphs, published by the EIA (Energy Information Administration), that summarize global electricity use.

Graphs of world net electricity generation by source.

Figure 1 – World net electricity generation (Source: Institute for Energy Research)

The changes in global electricity production in 2022 are summarized by the Enerdata yearbook:

The share of electricity in final energy consumption remained stable at 20.4% in 2022 (+3 point compared to 2010).

In 2022, the share of electricity in global final consumption remained stable at over 20%, despite a 0.3 point increase in the BRICS. It has increased by 3 pts. since 2010 (17%), as an increasing share of electricity is used in industry, residential and services sectors, and more recently, in the road transport sector with the development of the electric vehicles fleet. Since 2010, electrification has increased at a steady pace in Asia (+6.8 pts.), spurred by China (+10 pts. to over 27% in 2022), India (+3.9 pts. to 18%), and Indonesia (+5.4 pts. to 14%, despite a 2.6 pts. drop in 2022). It has also increased in the Middle East (+2.8 pts. since 2010 to nearly 17%), with significant growth in Kuwait, Saudi Arabia and the United Arab Emirates, and in Latin America (+2 pt. to over 18%, especially in Chile and Mexico, which have been promoting renewables). Electrification has remained broadly stable in North America at around 22%, in Europe (+1 pt. to over 21%, despite a 3 pts. growth in Türkiye), in Australia (24%) and in Africa (10%). In Russia, it has dipped by 1 pt. since 2010 to 13%. The share of electricity in final consumption is particularly high in Norway and Sweden, which benefit from large hydro resources (47% and 33%, respectively).

Table 1 summarizes the situation in the 10 most populous countries, which account for more than 57% of the global population. The US is the only developed country on the list. All the rest are either developing or middle-income. Over one generation or so (starting around 1990), access to electric power has almost universal, apart from some Sub-Saharan African countries, as represented in the table by Nigeria. However, even with such high numbers, 133 million citizens of these 10 countries—mainly people who live in rural areas—have yet to gain access to electrical power. The global number without access to electricity is 665 million; most of them are in equatorial Africa.

Table 1 – Changes in the share of population with access to electricity as % of total population

Table with change in access to electricity by percentage of population from 1990-2020

Reference for access to electricity: Wikipedia

Reference for Population (2024): Worldometer

I addressed some of the issues with providing electricity access in India in previous blogs, starting with a blog on April 29, 2014, that discussed microgrids. I will return to that issue in next week’s blog, which will be focused on the accessibility of electric power in both poor and rich countries.

We are approaching the end of the global transition to sustainable energy, as well as a universal transition to accessibility to electric power. As shown in Figure 1, the current available electric power is still strongly dependent on fossil fuel, which fills up the atmosphere (and the oceans) with greenhouse gases that contribute to catastrophic global climate change. We need to amplify our efforts at decarbonizing our electric power. We are in the process of learning how to proceed. In some cases, it’s not obvious.

We are starting to get examples in which the shift to sustainable primary energy sources exceeds the capacity of our grids, as mentioned in the NYT piece I referenced above. Another recent example is Poland:

Grid operator PSE is struggling to manage Poland’s growing share of PV and has ordered the third curtailment of renewable energy capacity within a month.

“Due to the oversupply of generation in the National Power System and the need to restore the regulatory capabilities of the National Power System, PSE is introducing a non-market reduction in the generation of photovoltaic sources on March 26, 2024,” PSE said in a brief statement this week.

It has announced three one-hour curtailments of 1,201 MW, 1,877 MW and 1,711 MW from 11:00 am to 2 pm.

This is the grid operator’s third renewable energy curtailment this year. All of them have taken place in March, with the latest one specifically referring to PV installations alone.

On Tuesday morning of this week, around 10 am, photovoltaics produced and fed 9.7 GWh of electricity into the grid, according to the energy.insrat.pl portal. This represented around 45% of the total electricity production in the country, making solar the nation’s biggest energy source, followed by coal at around 27%.

In other words, for the third time this year, they had so much sustainable energy that they couldn’t use it all because the system could not support the surplus. The call to expand the grid does not apply only internally in a country but, as in Poland’s case, internationally. I will return to this issue in a later blog.

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A Federated System with a Global Perspective: Part 1

This series of blogs was initiated by two conferences that were organized by my school, with a focus on the ongoing energy transition (decarbonization of the energy sources) from fossil fuels, which emit greenhouse gases that have a toxic impact on the climate, to sustainable energy resources that have fewer detrimental effects. One conference, titled “2024 NYC Solar + Storage Installer Workshop” was specifically targeted at local NYC solar and storage installers. I am referring to it as the “installers conference.” The second conference, titled “NYC Future Energy,” was targeted to a broader audience and I am referring to it as the “CCNY conference” to emphasize that this meeting was mainly organized by CCNY (City University of New York), one of the senior colleges of CUNY.

The last two blogs were focused on the installers conference, with an emphasis on the bidirectional movement of electricity between a centralized generation (electric utility) and distributed generation of electrical power. The bidirectional movement of electric power is often called “net metering.” This and the following few blogs will focus on the CCNY conference. The CCNY conference (NYC Future Energy Conference) was based on the US federated governance system, so there were representative leaders of organizations running throughout the federated energy management. These include the US Department of Energy, the Department of Energy Protection of the City of New York (DEP), the Sustainability Office of CUNY, CCNY’s Schools of Architecture and Engineering, Con Ed (the main public utility of NYC), and NYC community representatives and independent companies such as TRC. NYSERDA, the energy arm of NYS, was not included there but was present at the installers conference. The only representation that was missing in this discussion was the global component. Next week’s blog will be dedicated to this component of the federated energy management structure. The CCNY meeting also showed very active participation of students through a dynamic poster session. To my great surprise, contributions of electrochemistry and photoelectrochemistry, in which I have a lifelong interest, played a major role in these presentations.

All of this came about due to the changes that the energy transition is going through as we shift to electric power. Here is how this was recently summarized by the New York Times:

Many power companies were already struggling to keep the lights on, especially during extreme weather, and say the strain on grids will only increase. Peak demand in the summer is projected to grow by 38,000 megawatts nationwide in the next five years, according to an analysis by the consulting firm Grid Strategies, which is like adding another California to the grid.

“The numbers we’re seeing are pretty crazy,” said Daniel Brooks, vice president of integrated grid and energy systems at the Electric Power Research Institute, a nonprofit organization.

In an ironic twist, the swelling appetite for more electricity, driven not only by electric cars but also by battery and solar factories and other aspects of the clean-energy transition, could also jeopardize the country’s plans to fight climate change.

To meet spiking demand, utilities in states like Georgia, North Carolina, South Carolina, Tennessee and Virginia are proposing to build dozens of power plants over the next 15 years that would burn natural gas. In Kansas, one utility has postponed the retirement of a coal plant to help power a giant electric-car battery factory.

Burning more gas and coal runs counter to President Biden’s pledge to halve the nation’s planet-warming greenhouse gases and to generate all of America’s electricity from pollution-free sources such as wind, solar and nuclear by 2035.

Figure 1 – The new estimated surge in electric power use in the US (source: The New York Times)

As the NYT piece emphasizes, this comes from the mandated shifts in federal policies to sustainable energy sources. As most of us experienced recently, federal policies can change in an instant depending on who holds power and we have a presidential election in November this year.

Another big reason for the shift to electric power was mentioned in a recent article in the Washington Post: “Amid record high energy demand, America is running out of electricity,” which put part of the blame on the recent growth of artificial intelligence (AI), which requires a great deal of electrical energy to train:

Vast swaths of the United States are at risk of running short of power as electricity-hungry data centers and clean-technology factories proliferate around the country, leaving utilities and regulators grasping for credible plans to expand the nation’s creaking power grid.

The soaring demand is touching off a scramble to try to squeeze more juice out of an aging power grid while pushing commercial customers to go to extraordinary lengths to lock down energy sources, such as building their own power plants.

“When you look at the numbers, it is staggering,” said Jason Shaw, chairman of the Georgia Public Service Commission, which regulates electricity. “It makes you scratch your head and wonder how we ended up in this situation. How were the projections that far off? This has created a challenge like we have never seen before.”

To focus on the required changes that are now needed in the electrical grid to satisfy these needs, I will quote the changes to the mission statement of the organization that sits at the top of US federal energy governance: the Department of Energy (DOE):

On October 18, 2023, the Department of Energy (DOE) announced up to $3.5 billion for 58 projects across 44 states to strengthen electric grid resilience and reliability across the United States, all while improving climate resilience and creating good paying union jobs. These projects will leverage more than $8 billion in federal and private investments as part of the Grid Resilience and Innovation Partnerships (GRIP) Program, funded through the Bipartisan Infrastructure Law and administered by DOE’s Grid Deployment Office (GDO).

The GRIP projects will tackle a range of grid needs to increase resilience and reliability across the country, with a few major trends popping up across the various selections. They include:

  • Wildfire prevention and resilience: State-of-the-art technologies will protect the grid from wildfires and prevent wildfires caused by aging infrastructure. Smart grid investment will help predict, identify, and address problems earlier and improve real-time responses to threats.

  • Neighborhood resilience: Microgrids that expand renewables and distributed energy resources will allow consumers to keep the power locally on even when the grid experiences outages.

  • Lower energy bills and increased clean energy: DOE is making critical investments in our grid without passing costs down to consumers, all while enabling cleaner energy sources, less pollution, and an easier time installing solar panels or plugging in an electric vehicle at home.

  • Investments in disadvantaged communities: Through Community Benefits Plans, all GRIP projects have outlined strategies to leave lasting impacts on local communities beyond infrastructure upgrades alone, including locally focused economic development and thousands of good-paying, union jobs.

In addition, the DOE recently issued a blueprint of how to decarbonize the American building sector, the main energy user in most cities:

WASHINGTON, D.C. — The Biden-Harris Administration yesterday released Decarbonizing the U.S. Economy by 2050: A National Blueprint for the Buildings Sector, a comprehensive plan to reduce greenhouse-gas (GHG) emissions from buildings by 65% by 2035 and 90% by 2050. The U.S. Department of Energy (DOE) led the Blueprint’s development in collaboration with the Department of Housing and Urban Development (HUD), the Environmental Protection Agency (EPA), and other federal agencies. The Blueprint is the first sector-wide strategy for building decarbonization developed by the federal government, underscoring President Biden’s whole-of-government approach to cutting harmful carbon emissions and achieving the nation’s ambitious clean energy and climate goals.

One of the key issues that was discussed at the CCNY conference was how to price the new grid. California is experimenting with pricing that could make the transformed energy affordable to everyone:

The controversial plan to require California’s three biggest utilities to start charging their customers based on how much money they make has been shelved by state regulators — at least for now.

Instead, the California Public Utilities Commission is proposing a less radical — if not necessarily less controversial — approach to complying with a state law demanding that it examine new rate structures to reduce the burden of rising electricity rates, a problem that will only deepen as the state further embraces electrification.

That proposal? Reduce per-kilowatt-hour rates but institute a fixed charge of $24.15 per month for most customers of utilities Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric.

The proposal would add smaller fixed monthly charges of $6 per month or $12 per month to customers who are signed up for two different special rate programs for low-income earners. This carveout for low-income ratepayers is distinct from the income-graduated proposals that were under consideration.

Fixed charges are common features of utility bills across the country, the CPUC noted in a fact sheet accompanying the release of its proposed decision on Wednesday. That’s because utilities pay for a lot of fixed costs that aren’t tied to how much electricity customers use, and fixed charges are one way to recoup those costs.

Future blogs will further explore this issue.

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Distributed Generation, Net Metering, and VDER

Figure 1 – Characteristics of 16 distributed generation utilities in the US (Source: “Quantifying net energy metering subsidies,” from the Electricity Journal; there may be a pay barrier for the full PDF article)

Last week’s blog started from the broader perspective of our personal decisions and how we ensure our energy supply without damaging the environment that we live in. I started to address this issue in response to a meeting that my university (CUNY) organized to help solar and storage installers do their work. The title of this conference was “2024 NYC Solar + Storage Installer Workshop” and it was a continuation of last year’s conference under the same name (2023 instead of ’24). That conference (given via Zoom) was targeted at “installers” but all of us count as decision-makers about installation. If you try to install solar cells yourself, you become an installer. A few days after that meeting, CCNY (City College of New York), a senior college in CUNY, organized a related meeting, this time in person, titled “NYC Future Energy” that I attended as well. That meeting is summarized here. As I proceed, I will refer to the first meeting as the installers meeting and to the second as the CCNY meeting. The two meetings will serve me in the next few blogs.

Last week’s blog started with individual decisions that we make to go solar and ended with an admission that collectively we don’t yet fully comprehend the best way to make the transition to distributed energy sourcing and we are experimenting with the details (at least in the US). One of the strongest incentives for many of us to put up solar collecting facilities (whether direct solar, e.g., photovoltaic or indirect, e.g., wind) is the payback from the utilities for excess energy that we are not using. The map that starts this blog shows in some detail the present situation in 16 US states.

If you are inclined to install a solar facility to supply you with some of your needed energy, have a look at “Steps for Going Solar” in last week’s blog. The first item on this list suggests:

  • Contact a solar installer – Receive at least a few different quotes to compare pricing, customer references, and financing options.

Don’t try to “economize” on this step, the process is complicated and confusing and seems “designed” to discourage self-help. The main presenters in the installers meeting were representatives from the NYC Building Department and the NYC Fire Department. You need to get permission to install the devices and the instructions on how to fill the forms are full of abbreviations that the installer must master. The reasoning is simple to explain, in the context of approval of the fire department, whatever you install cannot be an obstacle in case of a possible need for fire extinguishing. Conflicts here might cost lives.

An important incentive to install distributed energy in your house or your business is the desire to save money. When you are connected to the grid for your energy needs, your utility payment consists of two categories: fixed costs and direct payments to the utility for the amount of energy that you use. Your utility’s job is to supply you with as much energy as you need. If you replace utility supply with direct (or indirect, e.g., wind) solar energy, you depend on availability. To synchronize your energy availability with your energy needs, you will need either to equip yourself with an enormous energy storage capacity or use your utility for storage and be compensated for the energy that you send. As was mentioned in last week’s blog, the ability to return some of the energy to your utility and be compensated makes the connection with your utility bidirectional. As was also mentioned last week, the process of returning some power to the utility in exchange for compensation is called net metering.

The first two paragraphs of the introductory figure’s source describe net metering in more general terms than the short description that I provided in last week’s blog. It also comes from the perspective that net metering is a calculated subsidy for those who set up distributed generation (DG):

Net energy metering (NEM) is the policy available in many states that promotes customer-owned distributed generation (DG) resources (such as solar photovoltaic panels or PVs) by compensating DG owners for each kWh of generation at the retail rate. NEM policies were introduced when the costs of installing solar panels were much higher than they are today. The rapid adoption of PVs in recent years at an average annual growth rate of 30% from 2010 to 2018 demonstrates the effectiveness of NEM policies in helping this nascent industry take off1 .

However, as is generally true for most incentive payments delivered through rates, NEM policies create a subsidy issue from non-DG customers to DG customers. This is simply because most of the residential rates in the U.S. are volumetric in nature. Demand driven and fixed costs of power production and delivery are largely recovered on a $ per kWh basis. As a result, when a DG customer reduces their consumption of power from the grid, they bypass costs that are fixed and/or demand driven in nature, leaving non-DG customers with the burden of paying these grid costs.2 In addition, traditional NEM policy pays DG customers at the full retail rate for the export to the grid, even though exported DG power only avoids the generation cost but not the capacity cost of delivering services. NEM subsidies have grown with time as the number of customers on NEM has grown.

Distributed generation or DG, mentioned above, can be defined in the following way:

Distributed generation refers to a variety of technologies that generate electricity at or near where it will be used, such as solar panels and combined heat and power. Distributed generation may serve a single structure, such as a home or business, or it may be part of a microgrid (a smaller grid that is also tied into the larger electricity delivery system), such as at a major industrial facility, a military base, or a large college campus. When connected to the electric utility’s lower voltage distribution lines, distributed generation can help support delivery of clean, reliable power to additional customers and reduce electricity losses along transmission and distribution lines.

In the residential sector, common distributed generation systems include:

  • Solar photovoltaic panels
  • Small wind turbines
  • Natural-gas-fired fuel cells
  • Emergency backup generators, usually fueled by gasoline or diesel fuel

In the commercial and industrial sectors, distributed generation can include resources such as:

  • Combined heat and power systems

  • Solar photovoltaic panels

  • Wind

  • Hydropower

  • Biomass combustion or cofiring

  • Municipal solid waste incineration

  • Fuel cells fired by natural gas or biomass

  • Reciprocating combustion engines, including backup generators

Non-DG customers never approved such a subsidy, however, and figuring out how to structure the back payment (for power returned to the utility) is a work in progress. In last week’s blog, I started to describe the attempts in my state (NY) to create back payments that will retain some of the benefits and incentives for DG. Not surprisingly, changes in the payment structure have become a political issue. The NYS system is abbreviated as VDER (Value of Distributed Energy Resources). The broad outlines of VDER were described in the last blog, which ended with a description of the present state of the calculation (Phase 2 version). Below is a short description of how to do the calculation:

Solar Value Stack Calculator Rev 3.1
(VDER Phase Two) [XLSB]

Use the Phase Two Calculator for projects that qualified after July 26, 2018. Projects qualify when they make their 25% upgrade payment to the utility. If no utility upgrade costs are required, projects qualify when the interconnection agreement is fully executed.

Of course, when I tried this, I got a very complicated Excel spreadsheet to fill out that probably only a professional installer would be able to accomplish.

The CCNY conference included input from CUNY, NYC, and the Federal government, on how to construct a model grid. Such a construction can serve as a guideline for the ongoing energy transition. It includes the development of decarbonized electricity use that is affordable, economically viable, and resilient. Some of these issues were addressed in previous blogs but changes in our understanding require constant revisits. Stay tuned.

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Solar Installations: Net Metering and VDER

Figure 1 – Bi-directional electric grid (Source: Ipsun Solar)

The top picture in this blog illustrates a possible future electric grid that is designed to encourage the shift to decarbonized sustainable energy. Most sustainable energy sources are directly or indirectly (e.g., wind) based on solar energy, which exists independent of consumer needs. The future grid is designed to synchronize the time cycle of sustainable energy sources and consumer needs between buildings, cars, and utilities. As shown in the picture, the synchronization is based on the bidirectional flow of the electricity. The next few blogs will address various aspects of the proposed transition. The new formation is also designed to address other questions of the energy transition, including resiliency to blackouts (powering the house for a short time with a car battery), energy saving (providing refunds for unused energy), and spreading loads more evenly throughout the day to reduce demand for expensive power at peak times.

My attention to this issue increased as a result of a 2024 NYC Solar + Storage Installer Workshop that my university (CUNY) organized. The program of the workshop is shown in the following link. Since the energy transition is a process of constant change, all of us are in a constant learning mode of how best to navigate the required changes. A single workshop cannot address everything but this is a repetition of a similar workshop from last year. A previous blog (April 18, 2023) describes what I learned at last year’s workshop. Two guest blogs by Phil Gallagher (June 21, 2022, and March 21, 2023) describe his experiences of installing photovoltaic cells in his house, including his interactions with the electrical utility company Con Edison and professional installers. An older (2014) link by the sustainability arm of CUNY outlines recommended steps for installing solar cells to power a home in NYC. It addresses the bidirectional flow of both electricity and money between a customer and Con Edison, which was (and still is) the largest utility in NYC. The bidirectional flow at that time was based on net metering. As we will see below, the rules have changed in NYC over the last 10 years but net metering is still a dominant mechanism for bidirectional electricity flow in many states. I will start with the 2014 citation of New York State’s solar map cited above, which includes the bidirectional flow of power (between utility and customers) with the recommended main steps for installing solar power in a building:

Steps for going solar:

1) Contact a solar installer – Receive at least a few different quotes to compare pricing, customer references, and financing options. For a list of participating NY-Sun Incentive Installers, go to: ny-sun.ny.gov/pv-installers.

2) Sign utility interconnection (net metering) paperwork – Your installer will help determine what paperwork needs to be signed to notify your utility and local building department you are going solar. It is important to receive approval from the utility before installing the solar system to understand if there will be utility grid upgrades and additional costs.

3) Utility installs a net meter – Your electric meter will be switched to measure energy flowing both ways. This occurs within 2-4 weeks of the net metering application being approved, and can happen before the solar installation.

4) After the solar install – Please wait for interconnection approval from your utility to turn on the solar system. This is usually a letter or an email. Before your utility can grant approval, your installer must first obtain all jurisdictional permits and inspections, and provide the utility with a completed verification test form. Typically, the utility will witness the installer perform an on-site verification test for systems 25kW and greater.

5) Turn on the solar system and generate renewable energy! Please be aware meter readings are sometimes estimated when the utility cannot access the meter. Energy savings may not appear until meters can be read.

I will now shift fully to the bidirectional electricity flow between customers and power companies.

Net Metering:

Net metering is a billing arrangement between solar energy system owners (you) and utility companies. It allows solar panel owners to feed excess electricity they generate back into the grid in exchange for credits. These credits can be used to offset future electricity consumption when their solar panels are not producing enough energy to meet their needs. Net metering ensures that solar panel owners are fairly compensated for the surplus electricity they contribute to the grid.

How Net Metering Works:

The process of net metering involves the installation of a bidirectional meter that measures both the electricity supplied by the utility company and the surplus electricity generated by the solar panels. When the solar panels produce more electricity than is being consumed, the excess is fed back into the grid, and the meter runs in reverse, effectively giving credits to the homeowner. During periods when solar production is insufficient, such as at night, these credits are used to offset the electricity drawn from the grid.

Net Metering Policy and Availability:

Net metering policies vary by state. Some states and their public utilities have established favorable regulations that support net metering, while others may have limitations or different structures in place considering the recent NEM 3.0 law that was passed in California. It is essential for homeowners to research and understand the specific net metering policies and incentives available in their area. Consulting with local solar installers or utility companies can provide valuable insights into the net metering options and requirements in a particular region.

Net Metering is not available in all states:

Net metering is not available in all states and some states do not regulate net metering at a state level, rather it is managed to the utility level. As of 2020, 34 states plus Washington D.C. and four territories have some form of net metering policies available. Six additional states do not currently offer net metering but offer other compensation outside of net metering. Five states do not currently have net metering laws and net metering policies and decisions are taken into account at the utility level.

Although more than half of the states have net metering policies, each net metering policy can be unique. Net metering policies can vary greatly, from being compensated for the full retail cost of the solar exported, receiving an amount less than the full retail cost, or not being compensated for any electricity that they send back to the grid. Solar policies can change and utilities have different policies as well. Your local solar installer should be able to provide you with the most up-to-date net metering policies for your area.

Figure 2 shows a map of the bidirectional mechanisms between utilities and customers in US states:

Figure 2 – Net Metering by State/Territory (Orange: state-mandated rules for certain utilities, Green: Transitioning to compensation other than net metering, Purple: State-mandated compensation other than net metering, Blue: No state-wide rules but some utilities do offer net metering) (Source: Solar Power World)

As shown in Figure 2, NY (my state) recently changed its bidirectional electricity flow mechanism to a different system, called VDER, which is explained below:

The New York State Public Service Commission (PSC) established the Value of Distributed Energy Resources (VDER) or the Value Stack, a new mechanism to compensate energy created by distributed energy resources (DERs), like solar.

The Value Stack compensates projects based on when and where they provide electricity to the grid and compensation is in the form of bill credits. This is determined by a DER’s:

  • Energy Value (LBMP)
  • Capacity Value (ICAP)
  • Environmental Value (E)
  • Demand Reduction Value (DRV)
  • Locational System Relief Value (LSRV)

Additionally, certain Community Distributed Generation (CDG) projects may have a Market Transition Credit (MTC) or Community Credit (CC). These elements recognize the benefits that DERs provide to the grid and society, including avoided carbon emissions, cost savings to customers and utilities, and other savings from avoiding expensive capital investments. Solar Value Stack Calculator To estimate a solar project’s revenue under the Value Stack, use the Solar Value Stack Calculator

Solar Value Stack Calculator

NY-Sun developed the Solar Value Stack Calculator to help contractors better estimate compensation for specific solar projects. The calculator combines the wholesale price of energy with the distinct elements of distributed energy resources (DERs) that benefit the grid: the avoided carbon emissions, the cost savings to customers and utilities, and other savings from avoiding expensive capital investments. Select the calculator that best fits your project.

We periodically update the calculator—please revisit this page regularly to ensure you are using the most recent version.

As is indicated in the last line, the system is still changing. The outline of what is needed to be an installer in NYC will be explored in the next blog.

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Florida and NYC: Rational Places to Live? 

Many people blame Hillary Clinton’s 2016 loss on her description of half of Trump’s supporters as “deplorables,” a term under which she included people who are racist, sexist, homophobic, xenophobic, Islamophobic, etc. One word she didn’t include in her description is irrational. In a blog titled “Human Reactions to the Climate Shift” (November 1, 2022), I accused unspecified people of irrationality based on their rush to move to states with projected high climate change impacts. I used Arizona as an example. This blog is a continuation of that theme, using contrasting trends in NYC and Florida as examples.

Figure 1 ranks major coastal cities around the world based on their vulnerability to sinking due to human-caused issues. The infographic clarifies, “Land subsidence refers to the gradual sinking of an area of land, often caused by the over-extraction of groundwater or the compaction of the ground from the massive weight of buildings above it.” One American city is on the list of the top 10 most vulnerable. Houston, Texas is number 8, with a peak subsidence velocity of 8mm/year and a median velocity of 3mm/year. The government of Indonesia has already decided to move the capital from Jakarta (number 5 on the list) to a much less vulnerable location.

Figure 1 – The world’s 10 fastest-sinking coastal cities (Source: Visual Capitalist)

Figure 2, below, is taken from a Nature paper that shows new estimates for coastal sinking in the US, using new estimates of sea level rise. The cities shown are: Boston, MA; NYC, NY/Jersey City, NJ; Atlantic City, NJ; Virginia Beach, VA; Wilmington, NC; Myrtle Beach, SC; Charleston, SC; Savannah, GA; Jacksonville, FL; and Miami, FL. One can see that the prospects for Florida (especially Miami) are not encouraging. The prospects for New York City are significantly better.

10 east coast US cities most exposed to sea level rise

Figure 2 – 10 East Coast US cities most exposed to sea level rise. (Source: Nature)

On the graph, each city is characterized by three columns (from left to right: areas, population, and properties exposed to sea level rise). Each column is additionally divided into two segments (data for 2020 on the bottom and 2050 on top).

A recent NYT op-ed by Vishaan Chakrabarti, titled, “How to Make Room for One Million New Yorkers,” describes an architectural plan to considerably increase living space in New York City without using areas prone to flooding. Figure 3 shows the unused areas in the plan. The essence of the plan is summarized below:

We found a way to add more than 500,000 homes — enough to house more than 1.3 million New Yorkers — without radically changing the character of the city’s neighborhoods or altering its historic districts.

Next, we excluded parts of the city that might be at risk of flooding in the future.

In the remaining areas, we identified more than 1,700 acres of underutilized land: vacant lots, single-story retail buildings, parking lots and office buildings that could be converted to apartments.

Figure 3 – Areas of proposed new housing (Source: NYT)

For reference, the flood map of NYC looks like this:

Figure 4 – NYC flood map (Source: Business Insider)

In contrast to the NYC plan, Figure 5 shows an area of Miami, Florida where some American billionaires have built houses. A quick look at it, combined with the data in Figure 2, makes its vulnerability to floods obvious.

Photo of Miami's "Billionaire Bunker"

Figure 5 – Miami’s “Billionaire Bunker” (Source: Forbes)

Below is a description of the area:

Locally known as “Billionaire Bunker”, Indian Creek Island on Biscayne Bay on the backside of Miami Beach is by almost every measure the most exclusive, secure, and celebrity-saturated residential enclave in America (sorry Hamptons and Palo Alto). If it had its own zip code, it would be the most expensive as well, with most properties trading hands these days for north of $40 million.

The trend of moving to Florida is not restricted to billionaires:

Freudman is one of many people who have moved to Florida in recent years. The state’s population grew 1.9% from 2021 to 2022, according to Census Bureau estimates, making it the fastest-growing state in the country. Warm weather, more affordable housing, and the lack of a state income tax are among the perks drawing movers to Florida. But some newcomers say there are also downsides to the Sunshine State, including high insurance and healthcare costs, severe weather, and a “vacation feel” that eventually wears off.

While Freudman and his wife Eva don’t regret their move, he said they’re torn on whether they want to stay in Florida long-term, particularly if they have children.

These areas that are especially vulnerable to climate change are already seeing impacts that might slow Florida’s attraction to newcomers. Home insurance bills are going up and coverage is going down:

Mark Friedlander, a spokesman for the Insurance Information Institute, a trade group, said home insurance premiums had cumulatively risen 32 percent from 2019 to 2023, while rebuilding and replacement costs had gone up 55 percent. Analysts for the group estimated that in 2023, home insurers experienced their biggest underwriting loss — the difference between collected premiums and paid-out claims — since 2011. Behind the loss were huge storms that caused more than $50 billion in damage that insurers had to pay for.

The housing market in Florida is already in trouble and the sale of condos is dramatically falling:

…even as prices dropped in some of its major metros and the number of “motivated” sellers in the state—those willing to accept a lower offer in order to sell quickly—is currently the highest in the country.

House prices at the state level have been steadily growing in the past months, with the median sale price for all homes in Florida being $404,100 in January, up 4.5 percent year-on-year, according to Redfin data.

Whether these trends indicate a return to rationality within US internal migration remains to be seen.

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