Utilities Shocked as More Companies Self-Generate Power.

September 18, 2013

I wrote not long ago about the developing trend in companies generating their own power. It’s not because their greenies, its because it makes them more green stuff.

This is a freight train gaining speed….

Wall Street Journal:

On a hill overlooking the Susquehanna River, two big wind turbines crank out electricity for Kroger Co.’s KR -0.57% Turkey Hill Dairy in rural Lancaster County, Pa., allowing it to save 25% on its power bill for the past two years.

Across the country, at a big food-distribution center Kroger also owns in Compton, Calif., a tank system installed this year uses bacteria to convert 150 tons a day of damaged produce, bread and other organic waste into a biogas that is burned on site to produce 20% of the electricity the facility uses.

These two projects, plus the electric output of solar panels at four Kroger grocery stores, and some energy-conservation efforts are saving the Cincinnati-based grocery chain $160 million a year on electricity, said Denis George, its energy manager. That is a lot of money that isn’t going into the pockets of utilities.

From big-box retailers to high-tech manufacturers, more companies across the country are producing their own power. Since 2006, the number of electricity-generation units at commercial and industrial sites has more than quadrupled to roughly 40,000 from about 10,000, according to federal statistics.
Experts say the trend is gaining momentum, spurred by falling prices for solar panels and natural gas, as well as a fear that power outages caused by major storms will become more common.

The growing number of companies that are at least partly energy self-sufficient is sending a shudder through the utility industry, threatening its revenues and growth prospects, according to a report earlier this year by the Edison Electric Institute, a trade association for investor-owned electric companies.

State and federal regulators say they are worried that utilities could end up with fewer customers to pay for costly transmission lines and power plants.Utility executives, meanwhile, are asking themselves a disquieting question: “Am I going to just sit here and take it and ultimately be a caretaker of a museum, or am I going to be part of that business” that’s emerging, said Nick Akins, chief executive of American Electric Power Co., a big Ohio-based utility. AEP is considering helping its customers install their own generating facilities.

Many “clean energy” projects also qualify for federal and state subsidies. In the case of solar installations, there is a 30% federal tax credit, which is set to drop to 10% in 2017. Government officials say a shift to greener energy resources is good since it reduces the output from coal-fueled power plants, which produce about 40% of the nation’s electricity and are the most polluting.

But analysts say the importance of subsidies has been waning, overshadowed by steep declines in the cost of power-generating equipment. For example, the cost of solar modules—the biggest single component in a rooftop solar system—has dropped about 80% in the past four years, to about 65 cents a watt from about $4 a watt, said Galen Barbose, a senior researcher at the lab.

Companies also are turning to wind turbines and technologies like fuel cells, batteries, small natural-gas turbines and reciprocating engines, which are natural-gas-fueled cousins of the auto’s internal combustion engine.

Recommend going to the link, reading the whole article, and bookmarking it.

36 Responses to “Utilities Shocked as More Companies Self-Generate Power.”

  1. Gingerbaker Says:

    “State and federal regulators say they are worried that utilities could end up with fewer customers to pay for costly transmission lines and power plants.”

    A capitalistic business model doesn’t work anymore for utilities. Most utilities are supposed to be non profit entities – why should customers be paying for electricity when the sun and wind are free? Why should businesses and homeowners be spending their own capital to install solar and wind – when that should be the mission of the utilities?

    Taxpayers should own their utilities. Taxpayers should own their renewable energy infrastructure. They should pay for it with their taxes. And then enjoy the resulting free electricity.

    The fact that we could all be paying rock-bottom wholesale infrastructure costs and building our new renewable energy future in an intelligent and coordinated fashion is just gravy.


    • Most utilities are supposed to be non profit entities – why should customers be paying for electricity when the sun and wind are free?

      Coal and iron are just as free, all you have to do is dig them up, separate them from the stuff you don’t want, and ship them.  Oh, wait, that’s not free.  Neither are PV cells and wind turbines, and especially not batteries.

      What is ESPECIALLY not free is the grid which transports power and regulates the voltage and harmonic content, matches supply to demand, and everything else.  These things have not historically been billed separately to many customers (though time-of-day rates are spreading rapidly).  But demanding regulation, reactive power, and everything else from the grid while not purchasing its wattage is freeloading.  Somebody will pay for it, or it will go away.  You can recognize this while you have it, or get a rude surprise.  As the song goes, “you don’t know what you’ve got ’til it’s gone.”

      The fact that we could all be paying rock-bottom wholesale infrastructure costs and building our new renewable energy future in an intelligent and coordinated fashion is just gravy.

      Perhaps you should look at the price of a stand-alone RE system which will meet the needs of your house before you make that judgement.  Then add the maintenance costs (money and labor).  You’ll quickly find that “rock bottom” is far too expensive for all but the rich.


      • My electric utility charges me a $5 monthly service connection fee. If that fee has to double or triple to cover the cost of maintaining the grid for solar PV so what? I don’t think that this is a deal breaker. It wouldn’t have affected my decision to install solar & I’m hardly rich.


        • My electric utility charges me a $5 monthly service connection fee. If that fee has to double or triple to cover the cost of maintaining the grid for solar PV so what?

          What if a maximum-demand-based fee became the majority of your bill?  What if much of the rest was based on things like maximum demand at particular load periods (perhaps with negative pricing for minimum off-peak demand!), with a relatively small amount based on actual net consumption (mapping to fuel consumed)?

          A lot of the expense of “electricity” isn’t the fuel to generate it, but the network to move it, the plants required to generate it on demand and the types of plants required to respond to variations in demand as fast as they occur.  In a grid with a lot of people adding grid-tied PV, some of those expenses are going to increase.  You may not actually save any money overall.  If you have to cut nuclear and CCGT to install simple-cycle gas turbines because of faster variations in net demand, you may even burn more fuel.

          If you run your PV system purely on batteries, you are doing all your own buffering and power conditioning.  That is a good thing.  But how many cloudy days in a row can you take before losing your ability to do normal activities?  If this loss scales up to entire regions, the economic cost can be huge.  At some point, you can’t endure it.

          It wouldn’t have affected my decision to install solar & I’m hardly rich.

          I’ve got a wind turbine I intend to install when I get done refurbishing it, and it won’t make a huge difference in anything.  Maybe they’ll allow me net metering, which would be nice.  But if I ever intended to run my house standalone, I’d have to shell out a lot for batteries, inverters and other things.  I’ve thought about this but it’s probably beyond the capabilities of my checkbook at this time.  Well beyond.

          A PV system at $1/peak watt is probably $4 per average watt, maybe $5 or more.  It may not be the best thing even for carbon-free power.  If we had a carbon tax instead of a heap of RE preferences and subsidies, I bet things would look a lot different.

      • Gingerbaker Says:

        ” Neither are PV cells and wind turbines, and especially not batteries.”

        I never said they were free, did I? I said taxpayers should buy ownership of their new infrastructure with tax monies.


        “What is ESPECIALLY not free is the grid which transports power and regulates the voltage and harmonic content, matches supply to demand, and everything else.”

        I never said it was free, did I? n the other hand, the grid we have is already paid for. We need to upgrade it, not completely replace it, and… ” taxpayers should buy ownership of their new infrastructure with tax monies.”

        “Perhaps you should look at the price of a stand-alone RE system which will meet the needs of your house before you make that judgement. Then add the maintenance costs (money and labor). You’ll quickly find that “rock bottom” is far too expensive for all but the rich.”

        Which was exactly my point, which I have made numerous times here: rooftop solar is full retail price solar, not wholesale; rooftop solar is an example of the wrong people bearing the cost of our renewable future.

        Congratulations – you have won the Misinterpretation Trifecta.


        • I never said they were free, did I?

          Let me quote you back at yourself:

          why should customers be paying for electricity when the sun and wind are free?

          Because the equipment to capture it is neither free to purchase nor free of maintenance costs, and unlike conventional generation it requires mass energy storage in order to match the supply to demand.  Neither changing that demand curve nor failing to serve it will be cheap either.

          The fact that we could all be paying rock-bottom wholesale infrastructure costs

          If that’s what you believe, prepare for a life of bitter disappointment.  But please, become an object lesson if you wish; all I ask is that you don’t impose your schemes on me.

          rooftop solar is full retail price solar, not wholesale; rooftop solar is an example of the wrong people bearing the cost of our renewable future.

          Yet it’s rooftop solar which is touted as eliminating the need for electric transmission and the cost of land.  When both a thing and its opposite are claimed to be the recipe for perfection, you know the proponents haven’t a clue.

      • greenman3610 Says:

        poet,
        please don’t play dumb.
        wind is free, sun is free.
        the reason many utilities are buying wind as opposed to natural gas turbines is
        to hedge against the historic volatility of natural gas, because the price of wind is known 25 years down the road – that is – free.


        • please don’t play dumb.

          Irony.

          wind is free, sun is free.

          Then why haven’t utilities been running on them since Edison?  Concentrating solar power engines date back to the early 20th century (maybe 19th, I’d have to dig up Farrington Daniels again).  Humanity has been using wind to do work for centuries, long before Newcomen.  The first commercial-scale wind turbine hit the grid before the first controlled nuclear chain reaction.  Yet despite this, few utilities install them unless they are mandated AND subsidized.

          the reason many utilities are buying wind as opposed to natural gas turbines is to hedge against the historic volatility of natural gas, because the price of wind is known 25 years down the road – that is – free.

          No, except for a few special cases* utilities buy wind because of legal Renewable Portfolio Standards (mandates) and “must take” provisions.  The RE generators receive subsidies or a feed-in tariff, leaving the utilities to eat the costs of managing the greater and faster variability of the remaining load.

          Managing a great deal of that requires one of two types of generator:  hydro, or gas.  Hydro is essentially maxed out in the lower 48.  Gas means not just carbon emissions, but exposure to wildly-varying market prices for fuel.  At the $13/mmBTU industrial price peak of 2008, 1 kWh produced in the most efficient simple-cycle gas turbine on the market (the GE LMS-100) at its median 43% efficiency costs a whopping 10.3¢ just for the fuel.  $13/mmBTU is about what we can expect when LNG exports push N. America prices up to world rates.

          All of this is pretty obvious to people with a bit of info.  Meanwhile, our public officials are working to push paid-for nuclear plants off the grid even though they’ll sell at contract rates of 5¢/kWh for terms of years and have essentially no carbon emissions at all.  Fuel costs well under 1¢/kWh but if you’re concerned about future prices, you can literally stockpile fresh fuel in a warehouse (low-enriched uranium can’t go critical without a moderator).  This is insane.

          * Kodiak Electric Association is one of those cases.  Its grid was all hydro and diesel, and wind fit seamlessly into the mix due to the very rapid response of the rest of the generation.  This is not the case with much else; even gas turbines take several minutes to start and have limits on ramp rates and the number of thermal cycles.

    • Bruce Miller Says:

      Germany has experienced a massive transmission loss reduction! decentralization of electric sources is a good thing! Even harder targets for terrorists? Lighter cheaper transmission lines, fewer of them?

  2. Bruce Miller Says:

    Now we have the horse on the right end of the cart! America moves into the twenty first century! True right across the North American Continent now, except for Ontario Canada where folks are so goddammit rich they can afford to ‘turn their noses up” at Wind Turbines and still pay world prices for foreign oil. Imagine being so rich as to afford “choices” like that!


  3. Cities and towns are also building solar PV systems. My little town of Maynard, MA (home of DEC) has a 1MW system installed on our old landfill. And frankly, we have room for at least that much more on the roof of The Mill, and on a lot of other buildings, too.

    The town of Douglas, MA has a 5MW system going in, and the town of Concord, MA has some very large installations underway – and they plan on a total of 25MW by about 2020.

    REI in Framingham, MA has a 210kW system over their small parking lot. If Shopper’s World next door put a system over their parking lot, it could be 10MW, I’d guesstimate?

    Anybody who’s house has decent exposure can either lease a system for very low down payment, or purchase a solar PV system. In states with SREC’s, this would pay for itself in 5-10 years.

    Electric Car(s) + Solar PV = Perfect Match

    http://smg.photobucket.com/user/NeilBlanchard/media/Maynard%20MA%20Solar%20PV%20Array/Ways%20to%20Get%20Off%20of%20Oil/DSCF0780_zps8aac78d7.jpg.html?sort=3&o=3


  4. It sounds as if the utilities are going to have to be in the transmission/distribution business vs. the generation business. I’m still not sure how this is going to play out for folks who aren’t well sited for generating ALL of their energy need. Or, to put it another way, there will probably always be folks who need to buy energy from someone else rather than produce it themselves (pay to have it produced on site). What are those folks going to do? Pay more for electricity?

    Sounds similar to the grow-your-own-food vs buy organic vs buy conventional food conversation. I have the space and the time to grow some of our calorie intake on our suburban lot. But there’s no way we could grow all of our own calories on site for both space and time reasons. So we can buy organic, but we pay more, or buy conventional, and support deeply broken ag systems (factory farms, oil-dependent chemical fertilizers, etc.).

    Somehow this energy transition seems to have a greater potential for disruption than the food transition. If I couldn’t grow, or buy organic, I could still find food somewhere. I have a job, I won’t go hungry. But what about power? Is it the same idea? I can buy ‘green’ power through my utility (and pay more) just like buying organic. But if I couldn’t afford it (or afford to make my own power on the roof) I could still buy conventional electrons.

    Just thinking through these ideas…thanks for posting these sorts of articles.


    • It sounds as if the utilities are going to have to be in the transmission/distribution business vs. the generation business.

      Unless you are also going to provide reactive power, regulation, spinning reserve, and dispatching services, you are going to have to buy these from the utility.  You may be unaware of them because they don’t appear on your consumer bill, but if you try to do without them you’ll quickly find yourself blacked out.

      Somehow this energy transition seems to have a greater potential for disruption than the food transition.

      It’s much worse than that.  Inexpensive, reliable electricity is the foundation of industrial civilization, and well-intentioned ignoramuses are setting us up for a total systemic collapse.  Or maybe they’re not ignorant; there are people actively promoting the desirability of a collapse.  Ponder that.

      • andrewfez Says:

        Perhaps a bit like trying to lower the height of a three legged table by sawing through one leg at a time, whilst there is delicate china on top.

        Yet there are models that show a finished product: The wind is always blowing somewhere, thus an overbuild (3x) could go a long ways in satisfying a baseline and chasing the demand curve:

        http://www.sciencedirect.com/science/article/pii/S0378775312014759

        Further filling in discrepancies (area under demand curve versus area under acute supply curve) with EV batteries, geothermal, etc. would help…

        Redesigning everything for efficiency seems like the best thing to do regardless of what’s happening upstream. It’s profitable, and it reduces costs and time needed to retool upstream:

      • andrewfez Says:

        And didn’t Guy McPherson say something along the lines of, ‘only total economic collapse can reduce emissions well enough to ensure survival of the human species’?

  5. redskylite Says:

    In case it is of interest to any reader – I lived in the United Arab Emirates for many years, and the oil rich Emirate of Abu Dhabi (which has around 80 years of extractable oil reserve left), is now actively developing, promoting and using solar technology around the Middle East and Africa, has started converting it’s own desalination plants to solar energy, and has built a whole new city as a template for energy renewable resource, which I follow with interest on Facebook: https://www.facebook.com/masdar.ae?fref=ts for anyone interested they have a website http://www.masdar.ae/en/ They are a fairly academic nation and generally realise the perils of industrialisation and fossil fuel usage, that they themselves have unfortunately contributed to.

    regards


    • KEPCO is building 5.6 GW of nuclear generation in the UAE, which will have a capacity factor over 0.9 if operated as well as the Koreans do their own.  How does this compare to your RE projections for the area?  Will there be any e.g. desalination services provided in the bargain?

      • redskylite Says:

        I see that the Saudi solar desalination plant project is producing 10-12 megawatts of power which is of course humbled by the nuclear option. If you are interested in this project, I add a link for more information on solar powered desalination plants, as being rolled out in the GCC states.

        http://arabianindustry.com/construction/news/2013/aug/26/solar-powered-desalination-plant-in-saudi-to-be-completed-by-end-of-this-year-4423276/

        best regards Bob

      • greenman3610 Says:

        arabs building nukes. are these good arabs or bad arabs? I would like a list of countries that can build nukes without us bombing them – I’m having trouble keeping it straight.

        • redskylite Says:

          I can assure you the U.A.E Arabs are good Arabs, U.S.A and others are keen to do business with them (and make lots of money) and jointly exploit their Poil reserves (Exxon and Mobil with Shell, BP. Total ). Although I was way off your topic (sincere apologies), I was just trying to show that R.E (and enthusiasm for it) was not confined to the West, Not all Arabs are involved in war like Syria and Iraq and I am extremely sorry if you have that preconception. Unfortunately my original point was steered towards the nuclear option of 5.6 gw and not the 84gw RE option, which I was trying to show, I now wish I had kept quiet and just read the USA news as usual.


        • PWRs and BWRs are useless for creating weapons material.  The threat is not power reactors, but uranium enrichment (even chemically pure plutonium is no threat if is denatured with enough Pu-240 to push its spontaneous fission rate too high for weapons use).

          A country full of AP-1000’s, buying its fuel from any willing and competent enricher and fabricator, is no threat to anyone (except the coal and natural gas lobbies).

    • Bruce Miller Says:

      My Question: 80 years of extractable oil left, by who’s estimation? We know well that these numbers have been “massaged” in the past?

      • redskylite Says:

        By the Geologists and petro-science technicians, that used to be my colleagues (when I worked there) – they participate in exploration and extraction and operate the fields and understand the oil field characteristics very well with various tools. It is not a political statement but one based on Geology and expertise.

        • andrewfez Says:

          80 years doesn’t say much about the volume. And conversely, volume doesn’t say much about the lifespan. Does the 80 years happen in a function with a negative rate of return off the peak, that every year less and less volume is pulled up? (Lots of those oil curves look like that.) Or is the 80 years based on present production only, that year after year they can get the same amount up? (Lots of resource time statements imply such.)

          • redskylite Says:

            Wikipedia puts it at “92 billion barrels (14.6×109 m3)” and estimates 93 years of reserve, the 80 year estimate was based on the OPEC cartel agreed production rate in the 1990’s. I think we could agree they have less than 100 years left and economically would be reluctant to become a importer. This may explain their enthusiasm for Solar and Nuclear energy apart from academic concern over AGW. Certainly the oil operations is a joint exercise involving USA, Britain, Holland, France and Portugal (Exxon/Mobil, Shell, BP, Total and Partex). So all these countries profit from the resource. Not sure if the locals were better off as simple fisherman but they now are enjoying their Ferraris, BMW’s and Mercedes. Not sure how worried they are about climate change but they have a considerable University and academic centre in Al Ain and I am sure there is concern, like most places on our planet. I know they are diversifying and are looking beyond oil as 100 years is an exceedingly short period in time. Wish David Rose and the like could appreciate that.

          • redskylite Says:

            Hope I am not becoming a boring old man (I’m between 65 – 70), but to truly exhaust this topic OPEC state that the entire U.A.E have 97.80 billion barrels (this includes all the 7 Emirates), so the wikipedia figure of 92 bb looks reliable. The current daily production is 2.7 – 2.9 million barrels a day.

            link to the OPEC page on the U.A.E.

            http://www.opec.org/opec_web/en/about_us/170.htm

  6. redskylite Says:

    I don’t live or work there any more and I am aware of the nuclear plants too, it is very geologically stable there and sheltered from tsunamis (so I see no reason why not), and of course they are aware their own oil resources will be depleted in around 80 years. As they experience nearly 365 days of unbroken sun a year it makes good sense to exploit the sun as much as possible. I know that Saudi Arabia started its first solar-powered sea water desalination plant this year in Al-Khafji, near the Saudi border with Kuwait and U.A.E are planning to do the same. I do follow the masdar project with great interest and they have made sales around the middle east and Africa.


  7. […] Utilities Shocked as More Companies Self-Generate Power6 (Climate Crocks) […]

  8. redskylite Says:

    Further information about GCC Solar development from Penn Energy for anyone who is interested in that part of the world:

    “The United Arab Emirates (UAE) and Saudi Arabia are the leading Gulf Cooperation Council (GCC) states in solar power deployment, according to organizers of the Gulf Sol 2013 industry summit, which takes place this week in Dubai.

    The GCC is a union of Arabian states that border the Persian Gulf, including Kuwait, Saudi Arabia and the United Arab Emirates.

    GCC states have a combined 84 gigawatts of solar generation in the works through 2017, Energy Matters reported. Forty-one GW of that will come from Saudi Arabia, which plans to significantly boost its renewable energy output by 2032.

    The UAE also expects to increase the amount of renewable energy it uses with 7 percent of its electricity coming from alternative sources by the end of the decade. In March, the nation officially opened one of the world’s largest concentrated solar power (CSP) plants, the 100 megawatt grid-connected Shams 1 solar plant located in the western region of Abu Dhabi.

    “Over the years, solar power has been acknowledged as the most promising source of renewable energy and GCC governments have demonstrated their keenness to shift from traditional energy sources to these low-cost and abundant alternatives,” said Derek Burston, director of the UK-based Bowmedia, which organized Gulf Sol 2013.

    More information on solar energy generation can be found at PennEnergy’s research area.”

  9. adelady Says:

    My electric utility charges me a $5 monthly service connection fee.

    They’re going to have to _seriously_ rethink their business model. How on earth can they maintain the network let alone do emergency repairs or upgrades on that kind of money?

    All our services here (South Australia) have at least 2 elements. Consumption charges, which vary according to quantities used and/or seasonal surcharges for some (water and power) and “Supply Charges” or other terms. So you can see how much you are paying for the mere fact of having a service available and separately for the items used, however small or large those uses add up to. It’s really important to keep services maintained and for customers to see the real costs of what it takes to keep them ticking over regardless of how much any individual household or person uses. In the end, when the powerlines go down you want it to be restored even if you use half or less of what others around you might use.

    It really shows up for us in the 2 quarters where we generate enough solar from the roof – and need no heating or cooling – to finish up in credit. That credit would have nowhere to go if we weren’t supplying to the grid, and that grid has to be paid for.


  10. There are big advantages to distributed solar.
    http://www.solarsouthwestflorida.com/why-distributed-solar-energy-is-better-than-utility-scale-solar/

    Although the utilities complain a lot, distributed solar PV is not the cause of their woes.
    Neither is transmission cost.

    At the moment, utitlities are suffering from overcapacity due to conservation. They would rather not blame the government for more efficient lighting standards. http://www.fitchratings.com/gws/en/fitchwire/fitchwirearticle/Slow-Growth-in?

    Meanwhile, the electric utilities have been neglecting investment in transmission.
    http://www.forbes.com/sites/williampentland/2013/01/02/the-perverse-economics-of-the-electric-grid/

    Nearly 75% of transmission lines and transformers are 25 years or older and 60% of circuit breakers are more than 30 years old, according to the U.S. Department of Energy.

    Electricity use increased by 58% between 1980 and 1999. During the same time period, investment in transmission infrastructure declined by nearly half.

    One wonders just why consumers are paying so much for this lackluster utility investment in transmission and distribution.

    Local PV is hardly utilities greatest concern. It is the threat of diminishing demand. Utilities depend on ever increasing demand to pay for generation and to deliver a rate of return on investment to their investors.

    http://www.midwestenergynews.com/2013/05/10/commentary-time-to-reconsider-baseload-power/

    http://www.emeter.com/smart-grid-watch/2012/how-fast-is-u-s-electricity-consumption-growing/


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