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Utilities ramp up fight against solar. BRING IT ON!

In case you haven't noticed, there has been a significant ramp up recently in new stories with a common theme:  "Utilities are working to limit the growth of solar."  Here are a few excerpts from several news channels along the theme.

On March 25, 2015, former Representative Barry Goldwater Jr. (a republican?!) wrote this piece for the website The Hill in which he calls a spade a spade.  The piece is titled, "Slandering solar is not about protecting taxpayers, but protecting the utility's monopoly status."  He references recent actions in Arizon at SRP and APS to slander and charge customers utilizing solar with additional fees.

On March 27, 2015, the site ecowatch.com released a piece detailing recent activity by the notorious Koch brothers on moving to limit the growth of solar energy in at least four states.  The Koch brothers are also notorious for political spending and many have surmised their solar smear campaign  has deeper roots into the upcoming presidential election cycle.

Last is an interactive piece released today on green tech blog GreenTechMedia.com which asks the question if utilitiy companies should even be allowed to own rate-based (meaning the price of electricity can change) residential solar (meaning the panels on your roof).

At the surface, this all looks pretty scary for those who look towards a solar future.  For years the utilities have dismissed solar as nothing more than an annoying feature for some hobbyists, but with the continued strong growth in the industry and the momentum that federal incentives for solar are likely here to stay, utilities are now starting to sweat.  They know more than anyone that they are not ready for a solar future.  They are waaay to fat, dumb and happy to have to actually compete in business.

Unfortunately for utilities the powers of economics do not appear to be on their side.  If they move to "penalize" solar adopters with fees, whether substantiated or not, they are simply adding value to that most mythical of energy consumer:  The Grid Defector

Here is the conundrum for utilities. They have a massive infrastructure set they have to maintain through revenue from rate payers.  As infrastructure ages and inflation increase, the cost of maintaining such large physical infrastructure will only go up.  It ages, needs to be serviced, replaced, all the while the cost of labor in the US increases.  So, expenses are pretty much always going up, year over year.  Meanwhile, some of their customers have decided to start generating their own power through solar.  This means they are sending less money to the power company and the end of every month.  Therefore, if electricity prices were to stay the same, the amount of revenue headed to the power company is going down.  So, expenses are going up, revenue is going down.  That is not good for business.

So, to counter the rise in expenses and fall in revenue, utilities have to raise the price for electricity.  But, this further increases the value of having solar to manage some of your generation, so even more people are encouraged to go solar.  Revenue continues to fall, prices have to go up, so forth and so on.

Right now solar is very affordable, with solar panels costing about $1/W, inverters about $0.5/W and installation from $1-$2/W.  So, for a 2kW system on a house, you are looking at $4k-6k, of which many companies are willing to finance for the life of the system.  However, there is another part of the solar future which is also getting very affordable, very fast.  This is the storage component.  Many manufacturing companies are racing to develop storage which can work directly with solar to provide a total power solution.  As this gets cheaper, the mythical Grid Defector is more and more empowered to defect and go 100% solar for their needs.  Partner this with increasing fees from a utility company and the Grid Defector only becomes more powerful!

Overall, the battle over residential electricity primarily will likely end in a mix of storage, micro-grids, electric cars but most certainly solar.  What is interesting today is that utilities have many choices in front of them.  If they choose to try and stop the economics of solar, they will undoubtedly lose much like land lines lost to cellphones.  If they wise up and look for ways to include (or even reward) solar adoption while shifting their business plans, they will be rewarded.

The choice is theirs, and it seems to be starting right now.
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Price of Oil has collapsed along with the US domestic production fantasy

A Saudi Oil Minister is widely credited for saying, "The stone age did not end for lack of stone.  The Oil Age will end long before the world runs out of oil."  Now, no one is sure that the recent turbulence in oil markets is the "beginning of the end" for black gold, but there are some very interesting things happening right now that are worth tying together.  First and foremost, the oil market is very much getting a crash course in Economics 101: Supply and Demand.

It is news to nobody that new oil extraction techniques such as hydraulic fracturing have expanded oil production volumes in areas and countries once thought to forever be minority producers.  The clearest example of this is domestic US production in areas such as the Bakken formation.  But, as is with any "new" technology, it is generally more expensive than traditional technology, at least to start, meaning it only makes business sense when the market for oil is high (say ~$100/barrel).  But have you seen the pumps recently?  The price of oil at the end of the trading day today was $43/barrel. Well, that is quite a deep hole (pun intended) in the business plan.

So whats happening?  Well, first, lets talk about demand.  In a world driven by constant stable growth for goods and services, a strong, steady demand for any product is more then desired, it is necessary.  Oil is no different, and unfortunately for oil producers the global demand for oil has not been all that great.  There are a few reasons for this, but one I feel is worth mentioning is the relationship between emissions and economic growth.  Historically, the level of global emissions from fossil fuels and amount of economic growth have been closely correlated.  Cheap energy is used as fuel for industry which produces more goods and services, raising more revenue and thereby increasing total economic output.

But in 2014 there was a blip.  In a recent report from the International Energy Agency states,"Data from the International Energy Agency (IEA) indicate that global emissions of carbon dioxide from the energy sector stalled in 2014, marking the first time in 40 years in which there was a halt or reduction in emissions of the greenhouse gas that was not tied to an economic downturn."  Well, that's kind of a big deal, because a "halt or reduction" in emissions implies less fossil fuel is being burned, which implies lower demand for fossil fuel.

Now on to supply.  Usually when demand for a product wains, the supply must also slow down as not to collapse the market for the product.  But, this is really not possible for oil, partly because it is not just businesses who are producing and selling the product.  Governments produce oil too.  Like Saudi Arabia.  And what is the primary goal of a Government?  To stay in power.  Therefore, a government who is also an oil producer does not act with the same motivations as a business, but with the motivations of a government.  Case in point is Saudi Arabia, the biggest power player in OPEC, has decided that even with the wain in oil demand, they will not be cutting production.  Supply will stay ample.  Therefore, supply trumps demand.... and prices fall.

And now we get to explore the effect of this situation on various oil business.  Here are a variety of links on the various effects.  First, oil companies are now trying to inventory their oil in hopes of a stronger market (relatively soon) where they are not losing as much money (or maybe even making money).  This has caused a boom in storage companies.  It has also caused a recent "rally" (or what you could call a dead cat bounce) to fizzle leading to even lower prices.

Oil Price as of March 19, 2015

So what does all this mean?  Simple, if your oil production business plan is built around $100/barrel oil, then your business plan is currently ruined and it makes no sense for you to operate.  The enhanced recovery techniques that once promised a resurgence of domestic energy independence are currently very very noncompetitive.  There is no way a consumer of oil would pay top dollar for American production with international oil at these price levels.

I hope your 401k is devoid of fracking companies.  If not then you better sell, right NOW.



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ANOTHER WEEK WITH NO RENEWABLE ENERGY EXPLOSIONS

This really is a funny world we live in.  Without evening looking for news on the hidden cost / dangers of fossil fuels (outside of the long term climate change and environmental risks) I casually (one on TV, one on the radio) came across two news stories showing the extreme risks that exists in an economy and transportation system based on fossil fuels.

First, in West Virginia a train derailed earlier this week and caused 20 tanker cars to catch fire.  It has been burning for over 24 hours, billowing thick black smoke and soot into the nearby community.  Oh, and it derailed into a river, so there is also serious risk of water contamination based upon the success of pending clean up measures.  A Reuters update on this news story is at this link here, including a video of the massive fire.

Second, just today at the ExxonMobil refinery in Torrance, CA, an explosion visibly ripped apart structures and sent ash and debris into the nearby community.  It injured upwards of four workers and shut down the plant for at least the day, and likely much longer.  A NBC Los Angeles story is at this link if you care to take a look.

Does it seem at least a little funny to anyone else that we so casually put up with these types of events when renewable energy is, even today, so available to get us out of the fossil fuel based transportation and energy paradigm?  Are we so desensitized to these environmentally and socially awful accidents that these event alone are not enough to push us in a mad rush towards a renewable generation + storage + electric vehicle future?  I don't know about you, but I personally get a sick feeling in my gut every time I see thick black smoke pouring from yet another fossil fuel based disaster.

Whatever your feelings, just know that today you do have choices as a consumer of transportation products and energy, and these choices will only get better for you, the consumer, as time goes on.  Hopefully we can move towards a system where these types of accidents are just stories from the past, like hearing stories of westward settlers decimating the American buffalo population through over hunting.

Oh, one last piece of news.  There were no reported renewable energy explosions this week.  This leaves the all time count for renewable energy explosions at zero.  Please check in next week for an update on the count.
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Funnies break


A cartoon by Tom Toro
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Does nature need a price tag??

In Season 13, Episode 3 of the NPR radio show RadioLab, there was a segment titled, "How Do You Put a Price Tag on Nature?"  The segment was about a group of researchers in 1997 who attempted to place a value on the natural processes of the world.  Their answer.... $142 trillion.  Just for reference, the 2013 total World GDP was $75 trillion.  Put another way, all of the economic effort of all of humanity on the planet produces barely 1/2 the value of all natural process (back in 1997 that is.  It has undoubtedly gone up since then).

When published, this research caused more controversy over the fact that it was placing economic value on what many believe to be priceless, the raw beauty, brutality and truth of nature, than any values that were actually assigned to natural processes.  But another way to think about this is to use such economic analysis as a starting point for making real progress towards actual carbon policy.  Let me use a story to illustrate my point.

Recently in discussing the topic of emissions with a friend, I mentioned how I understand the need of modern society and the modern economy to use fossil fuels.  I think most pragmatic environmentalists understand that.  However, what I don't understand is why a power company using coal, who produces carbon emissions known to contribute to global climate change, is "charged" the same amount as the emissions from a solar panel.  That amount is $0, and that amount seems very unfair, given the KNOWN environmental impact of emissions.  Therefore, my beef was not with the concept of fossil fuels, it was with the practice of "free emissions" into a global economy where it is a fact that emissions cause problems which cost money (through pollution, climate change, ect).

Therefore, I said, the solution is easy, producers of carbon emissions need to pay a tax for the privileged of polluting.  My friend's response was simple.  Who decides the amount of this tax?

This is a good question, which requires first that the topic of emissions be taken seriously (which government (at least Federal Government) is currently unwilling to do) and second that a debate start around the cost of carbon.  While placing a value on natural processes (such as extraction of carbon from the atmosphere!) can seem uneasy, it bares exploration to see if it can bridge a gap between two areas currently very far apart, the natural world and the human economic engine.  These worlds have to come closer together to ever make real meaningful progress on emissions control from a policy perspective, which will definitely be necessary in a world looking to do some serious clean up over the next 50 - 100 years.
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