Guest Post by Willis Eschenbach
Reading my Sunday paper today, I find the following:
Customers Can Sell Back Solar Power.
The Los Angeles District of Water and Power will allow customers to sell back excess solar energy created on their own equipment.
Described as the largest urban rooftop solar program of its kind in the nation, the so-called feed-in-tariff program would pay customers 17 cents per kilowatt hour for energy produced on their own equipment. The DWP has already accepted more than a dozen applicants and will be taking dozens more as it accepts contracts for up to 100 megawatts of solar power through 2016.
My prediction is that this whole thing is going to turn into what we used to call a “righteous goat-rope” when I worked in Alaska. The problems with the proposal were spelled out before the vote by the Ratepayers Advocate, Fred Pickel. According to reports, he “told commissioners that 17 cents per kilowatt hour was above market rates and could force significant rate increases on DWP customers. Higher DWP bills could drive jobs away.”
Well yeah, duh. The Commissioners knew that, so they were careful to give Fred a fair trial before they executed him and voted for their proposal instead. This shows that it’s good for the LA DWP to have a “ratepayers advocate”, it gives the Commissioners someone to ignore, which is always fun, and that way they can say that they considered all sides of the question.
Figure 1. Retail electricity rates, in US cents, for 2010. SOURCE
What is wrong with the moronomic math of the Commissioners of the Los Angeles District of Water and Power? Figure 1 suggests some of the answers.
The problem is that in order to break even, the Los Angeles District of Water and Power (DWP) has to sell the power at more than it cost the DWP to buy it, transport it, buffer it with adequate backup, and deliver it to the eventual customer. As a result, their sale price will be more than seventeen cents per hour.
How much more? Well, that’s kind of difficult to calculate. But we can look at some of the issues and make some first-cut estimates.
First, getting the power from the rooftops. Certainly for some installations the DWP will have to install interconnects to their main backbones. And even for residential installations, a sunny day can put a huge load on a local distribution network. Remember, that network was never designed to handle excessive amounts of power, particularly heading upstream. In addition, DWP will have to install a variety of wireless reporting instrumentation for the control of the intelligent network, to keep it from going off the rails. I’d guess the cost to upgrade local networks and provide intelligent interconnects and controls would be on the order of a cent per kWh.
Then we have to look at the question of backup. Solar is notoriously variable. When the clouds come over, output drops massively and pretty instantaneously. That power needs to be replaced, immediately, from some other source. That means that you will have to both purchase and install peaking power that is equivalent to the amount of solar that you are adding to your system. This need for immediate response is often met these days by huge diesels, which can respond much faster than gas turbines to power variations. But whether the backup is gas or diesel, it is going to be two things—inefficient and expensive. It has to be inefficient because you have to keep it running, at minimum load and in an inefficient range for the engine/turbine, all the time. Engines are designed to run at maximum efficiency under full load conditions, and elsewhere in the range they are much less efficient. You can’t shut the backup off, and to make it worse, most of the time you’re running at maybe 10% of the nameplate capacity. No bueno.
I discuss the levelized cost of various generation systems in “The Dark Future of Solar Electricity“. I’ll use the costs of conventional combined cycle gas as an example for the backup of the solar. The capital costs for CCG are about two cents per kWh, and the running costs are given as five cents per kWh. It won’t be running all the time, though, so we’ll take running costs at two cents per kWh. That’s a combined cost of four cents per kWh for the backup.
Finally, the electricity has to be delivered to the ultimate customer. The price of operating this transmission network is usually referred to as a “wheeling cost”. I would expect the wheeling cost to be on the order of a cent or two per kWh.
So we have seventeen cents for the power purchase. We have a penny for the intelligent network upgrade to handle the power, about four cents capital plus running costs for the backup generator, and we’ll call it another penny for wheeling costs to be conservative, although if their network is old the wheeling cost may be higher.
That gives a total out-of-pocket power cost to the DWP of about twenty-three cents per kWh of power delivered to the ultimate customer … but wait, it gets worse. The DWP still needs to both cover their administration costs, and to have funds to re-invest in upgrading plant and equipment as the years go by. So they’ll need maybe 20% above the raw costs to cover overheads and investments, which puts the sale price for the power on the order of twenty-seven, twenty-eight cents per kilowatt hour … might be a bit more, might be a bit less, this is an estimate, but that’s the range.
Of course, they likely won’t ask any single customer to pay that much. Instead, they’ll quietly spread the expense over all of their customers near and far, and it will be reflected in a price increase across the board.
Unfortunately, as you can see by the colors in Figure 1, California already has the most expensive electric power with the exception of the New England states, and this will only make it worse. Power in CA is far more costly than in any of its western neighbors. This is a result of California’s colossally foolish policy of requiring a certain percentage of renewables … plus an even more idiotic policy of not counting hydroelectric power as a renewable.
But wait, it gets worse. We used to have the “20% renewable by 2020” goal for our electricity, which is why the California power cost is already up to fourteen cents per kWh as shown in Fig. 1, and part of why people were fleeing the state even then.
But when Jerry Brown assumed the imperial governorship, he decided by fiat that the new policy should be:
20% renewable by December 31, 2013
25% renewable by December 31, 2016
33% renewable by December 31, 2020
And that, dear friends, that means that you can stick a fork in California, we’re done. By the time that the 33% renewable policy is implemented statewide, all Californians will be paying the twenty-five cent per kilowatt-hour price that the LA folks are test-marketing right now. And meanwhile, the neighboring states are ending up with the businesses that are fleeing California like cockroaches from the light, in part because electricity and fuel costs are so high that a business can no longer afford to run a factory in California.
As I have mentioned elsewhere, expensive energy is always a bad idea. It turns out that in California, it’s a lethal idea, it will both kill businesses dead and be very hard on the poor.
w.
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Willis:
Cry me a river — here in Ontario, Canada, the provincial government pays about $0.45 per KWH — but only because it finally realized that $0.80 was waaayyyy tooo expensive for Solar Power. So please, can we trade rates?
See here:
http://www.solarpowernrg.com/index.php/rebates/45-ontario/60-ontario-solar-fit-program.html
and Here:
http://fit.powerauthority.on.ca/what-feed-tariff-program
And via our very own CBC:
http://www.cbc.ca/news/canada/toronto/story/2012/03/22/ontario-wind-solar-electricity-rates.htm
l
March 22, 2012
Ontario’s Liberal government announced Thursday it would lower the premiums it pays for future wind and solar energy projects, but electricity bills will keep rising.
The province will drop the guaranteed rate for small rooftop solar projects from 80.2 cents per kilowatt hour to 54.9 cents, while larger solar installations will get between 34.7 cents and 44.5 cents a kWh.
The amount guaranteed for power from industrial wind turbines will drop from 13.5 cents per kilowatt hour to 11.5 cents, regardless of the size of the wind farm.
Ontario Power Generation, the government-owned utility, is paid 5.6 cents a kWh for nuclear power and between two cents and 3.5 cents per kWh for power from its hydro-electric facilities.
It could be a lot worse. Be glad it is not. We routinely pay nearby US states to take our wind and solar over production — that’s right we pay those high rates — then pay Americans to take the unneeded energy.
Cheers!
Willis:
For even more fun go here and track down articles by Parker Gallant:
http://freewco.blogspot.ca/2013/01/ontario-spin-week.html
Look for the search box on the right hand side…
And you will dredge up a wealth of material
http://freewco.blogspot.ca/2013/01/conservation-or-consternation.html
Learn the whole woeful story of how Ontario forces it’s own citizens pay the FIT rate — yet will happily sell the power to the USA for the Wholesale rate — typically $0.025 per KWH.
An article in the Ottawa Citizen on Boxing Day indicated Ontario was the only place in North America forecasting negative growth in demand for electricity for 2013-2022 and carried quotes from an Ontario Power Authority (OPA) spokesperson on the reason. Chuck Farmer, director of planning policy had this to say about Ontario’s position: “It’s really because the growth is being offset by energy efficiency in one form or another and I think that’s quite a success story.” Ontario’s ratepayers know that “energy efficiency” is another way of saying “conservation” and it is impossible to open up your hydro bill without finding coupons or energy efficient rebate offers or an offer to pick up your old fridge for free. In Ontario we hear ads on the radio, see them on TV and find them in newspapers and webpages and they all all aimed at helping us save energy.
Ontario also has “smart meters” which were touted by our Liberal government as energy savers when introduced by then Minister of Energy, Donna Cansfield in 2005. Minister Canfield said: “By helping Ontarians make smart choices about how and when they use electricity, we’re helping them save money and making the most of our electricity supply.” Ms. Cansfield promised to couple that “with a pricing structure that reflects the cost of power production at certain times of day and year, allows consumers to make informed decisions about their electricity use. This will save money for Ontario consumers and reduce the strain on the power system at peak periods.”
The “pricing structure” referred to by Minister Cansfield, begat time-of use (TOU) pricing reputedly to allow us all to save money. Just prior to that announcement the OPA had been created and Minister Cansfield in the November 3, 2005 press release indicated that they would appoint Ontario’s first “Chief Energy Conservation Officer.” Almost exactly one year later the appointee to that position; Peter Love, (part of the Bruce Lourie circle) delivered a speech to the Empire Club about conservation and opined on how it would all save us money. Included in his speech were the words; “When it comes to being of benefit to the economy, electricity conservation has a multiplier effect. It truly is a gift that keeps on giving.” The OPA has led our publically owned energy sector companies in spending billions of ratepayer dollars to entice us to save energy as Minister Canfield envisaged and as so persuasively stated by Peter Love.
It’s 1984 — all over again… How much was your chocolate ration increased?
Bahh Humbug!
It makes the 2,2 cents per kWh subsidy for wind (production tax credit) which was extended in the “fiscal cliff” legislation, seem minuscule by comparison. I bet they’ll be back, hat in hand, looking for more.
Yes–electricity prices will necessarily skyrocket. And still they voted for him. Incredible!
This kind of foolishness is typical of any system that is driven totally by ideology.
If its electricity they’re after, then they would be insane.
But if its power over people and perhaps a ploy to buy up California cheaply… hmmm?
And these strange money juggling systems do seem to loan themselves, almost by design, to money washing. Washing out of the ratepayers pocket and being deposited in the regulators paws, for safe keeping of course.
Still the best response to this, was Spain or Italy where the State Utility found themselves buying Solar electricity at night and or wind power from sites with no wind.
But whats a little corruption amongst friends.
WillR says:
January 14, 2013 at 8:22 pm
Dang, dude, I stand properly rebuked. Forty to eighty cents per kilowatt-hour? That’s insane.
w.
If the $0.17 is paid in excess of the power use of the producer, as seems to be implied, how often would it actually be paid? With an air conditioner demand to be met before the $0.17, it would seem to me to be not much. It also seems that what ever excess was produced, it would not get far back into the system, as other nearby users would use that power, reducing their draw from the main trunk high voltage lines.
One generator turning down to idle as standby is a false dichotomy. Rather than turning down one to idle, the utility would turn down multiple units say for example four units turned down from 75% to 50%, according to where the demand is in relation to the generators available.
Willis
In NSW Australia we have a similar scheme. There is a tax payer funded subsidy to install solar panels (which has caused price gouging by suppliers/installers) and then originally a 60c feed in tariff for excess power. This has caused massive increases to the price of electricity (retail rate is tiered based on consumption and is approx 24c for first 350kWh, 25.5 for next 350 kWh, and then 34c anything above.
The state government has now wound this back for new applicants (firstly to 45c and now I believe 35c as people who covered there roof with panels were costing the rest of society dearly – especially those who can least afford it)
We now also have a Carbon Tax (Federal level). There is a political gimmick where supposedly 9/10 of households are compensated for the cost of power increases. However, everything that consumes energy (which is virtually everything) has gone up in price, some votes are bought by transferring tax payers money (less the overhead of administering another tax) and then foreign made goods are purchased because they are relatively less expensive (and getting more so).
Australia has become so expensive. There is very little manufacturing (without government subsidy). If we didn’t sit on a mountain of coal and iron ore we would be a 3rd world country.
Our Prime Minister was an active participant of a student branch of the Communist party during University (which she now denies and says she just did clerical work for them), however is a proud former member of the Fabian society.
Wealth creation is ignored (or even demonized) with the primary government focus being blatant wealth redistribution. We are making ourselves poorer and hurting the poorest the most.
The last state Labor (Democrat) government in NSW introduced a 60 cents/kWh feed in tarriff which the incoming Coalition (Conservative) goverment scrapped. My complaint was that while I could afford to instal rooftop solar (a 10kW system) it would paid for by those who could neither afford a system nor the increased rates. In 5 years household tarriff has increased from 11 cents to the current 32 cents and here we are sitting on some of the biggest steaming coal deposits in the world. Much of our increases were caused by renewable energy targets and now the carbon tax. Network charges have also increased due to overdue upgrades and maintenance. The Feds are under fire for the imposition of the RET and Carbon tax and retalliate by saying the states are gold plating the distribution system. Trouble here is the Feds are the ones demanding the higher reliability standards. Left wingers always have a problem with maths and even more problems with money. They invariably spend more than they have, promise more than they can deliver then find some else to blame.
Have you taken into consideration “time of use” pricing? What are those Los Angeleans paying during “Peak” hours?
@ur momisugly Chris4692
Trouble with that is normal efficiency is around 80% Nameplate rating.
50% just gives you more units running inefficiently
The comparison with retail price is not correct, as solar power without backup does not replace replace any conventional power stations, nor any transmission lines, nor management overhead.
Worse, it increases cost at conventional plants if those are not longer used 24/7.
In fact it replaces only fuel. Fuel costs for coal, gas or uranium are in the range of 0-2 cent/kWh.
This is what occurs in Australia, and we have very expensive electricity.
$400AUD/quarter is quite normal. $700-$1000AUD is not uncommon.
The effect of paying more than market rate is those that aren’t fortunate enough to be able to install solar panels end up subsidising those who are.
Our government launched a 3-pronged attack on consumers. 1. They offered incentives to install solar panels. 2. They regulated the tariff and forced generation companies to pay more than market price. 3. They offered incentives to electricity generation companies to upgrade infrastructure.
If you count the generation targets then it could be a 4-pronged attack.
After this multi-pronged attack we have some of the highest electricity prices in the world. Only recently has the government woken up to what was going on and removed the incentives and tariff regulation. Tariffs are now set by individual agreement between the consumer-generator and a generation company who will buy their energy. Tariffs for consumer-generated electricity are also now far below market price.
But the damage has been done and I can’t see how prices will ever fall back to normal levels. This is the new era of needlessly expensive energy.
Certainly could be worse. Some parts of Australia have a 45.7 cent per kWh feed-in tariff that also applies to the power generated and used directly in the home – ie to all the power produced. Madness upon madness. Source: http://www.actewagl.com.au/Product-and-services/Offers-and-prices/Prices/Residential/ACT/Feed-in-schemes/ACT-feed-in-scheme.aspx
Our stupid gov’t introduced the FIT in July last year at a rate of 42 Yen ($ 0.50 then) per kWh, being roughly twice the market rate (20 – 25 Yen or $0.25 – 0.30). I foresee its collapse in a few years.
Germany has done a very similar experiment already. They now have set a record for solar power (I found the number 4,000,000,000 kWh or the equivalent of 20 nuclear power stations). This is still only 4 % of the total electricity consumed in Germany. Germany got to this point by a government policy which worked like that: homeowners could get an inexpensive government loan for the purpose of installing solar panels, plus a guarantee that they could sell any excess electricity back to the grid for a very good price which was guaranteed for 20 years. The cost was to be distributed evenly between all consumers of electricity.
As a result of this, electricity in Germany is quite expensive… About 0.30 $ per KWH. This price includes taxes, amortization of initial investments etc. Moreover electricity is traded on an exchange which makes the whole thing rather opaque. However, they anticipate that production costs of solar versus fossil fuel derived electricity should be about equal within about 5 more years.
http://en.wikipedia.org/wiki/Solar_power_in_Germany
The name “Fred Pickle” brought up memories of past utility battles when I worked with Fred. Fred “knows the territory”. There is another way to get roughly the same number at which you arrived, Willis. The average wholesale price of the current mix of generation at the trading hubs is less than 4-cents per Kwh. If the typical California user is now paying 14-cents per Kwh, 10-cents of that bill is for “fixed utility costs” including already contracted capacity sources that go on regardless of the source of the power. If the utility pays 17-cents, at the fence, for solar power to which you must add 10-cents in ongoing fixed costs, you arrive at 27-cents per Kwh. Add in a premium for additional “spinning reserve” that intermittent solar power requires (if you expect reliable results when you hit the light switch) and you’re well above your calculated 28-cents.
WillR,
Thank you. For once I get to benefit from green idiocy.
Here in sunny South Australia we pay sliding rates for electricity from $0.30c to $0.40c per KWh. I have a 4.8KW solar system and receive $0.53.9c/KWh (44c from Oz Govt + 9.9c from the supplier) feed-in to the grid.
After 2.5 years I have received over $6,000 in feed-in rebates with $2,700 of that being cash-in-hand, the remainder paying for the power I use.
I am one of over 100,000 solar installations in SA whereas the government estimated around 10,000 when the plan was announced. OOPS! Big hole in the budget so new installations only get 17c/KWh, which has slowed down the installation rate but they are still going in everywhere.
South Aust is also the state with the largest installation of wind power.
In March 2012 it was estimated that SA would have the highest electricity rates IN THE WORLD (http://www.adelaidenow.com.au/news/south-australia/power-prices-to-be-highest-in-the-world/story-e6frea83-1226305741810) but I haven’t seen any updated figures to see if we have achieved that dubious honour.
Of course, whenever there is a politician being asked why prices are so high, the green initiatives (solar, wind and a carbon tax) are never included; it is the eternally money-hungry suppliers who are at fault.
Then we have the likes of our PM, Julia Gillard, attempting to have her cake and eat it too.
Seems to me that power in Honolulu in 2010 was around $.33, not $.24 as you show.
Willis, you are lucky b******* ……
Australia: …..average household electricity prices for the year ending June 2012 of 24.8 c/kWh
(…still …. a bit better off than the Canadians…)
http://www.euaa.com.au/wp-content/uploads/2012/04/FINAL-INTERNATIONAL-PRICE-COMPARISON-FOR-PUBLIC-RELEASE-19-MARCH-2012.pdf
http://www.euaa.com.au/wp-content/uploads/2012/03/EUAA-Press-Release-0112-Australian-Electricity-Prices-Among-the-Highest-in-the-World-21-March-2012.pdf
After the advent of the ‘Carbon Tax’ in Australia night time electricity costs 12c/kwh and peak afternoon time electricity costs 60c/kwh. We have a roof-top solar electricity generator and sell the excess to NSW electrical generation at 60c/kwh. The elevation of all these prices is the only tangible result of the ‘Carbon Tax’ as the weather is running along here just as it ever did. I must say that while we think the situation is ridiculous, we are grateful for the financial relief in the face of regressive taxation by the government..
In New South Wales, Australia, the government was subsidising solar power to the tune of 60c/kWh. This was paid based on electricity generated, not just on what was exported to the grid (no joke).
People who could afford the capital outlay covered their roofs in panels and are paying them off quickly, thanks to the taxpayer. This scam soon became oversubscribed and the rate dropped to 20c/kWh late 2010.
This sort of rorting has helped force up the electricty costs in NSW to huge levels.
If you want to look at government subsidied green stupidity, Australia makes a great case study. A good start is the government subisdised roof instulation (Pink Batt) scam/scheme where the Federal Goverment put free ceiling insulation in “every” house in Australia as part of a “spending stimulus” during the GFC. The government wasted over $1 billion, 4 people died from dodgy operators, organised criminal gangs rorted the system due to poor administration (invoices were paid on houses that had no work done on them!), houses burnt down from poorly installed insulation, the insulation industry was decimated overnight when the pin was suddenly pulled on the scheme. It was a circus. A further $500million or so was spent rectifying the substandard work and aduiting for compliance to building codes. Taxpayers money wasted, for no tangible environmental gain. It also rewarded people for being too lazy to install ceiling installation in the first place.
Moronomics of the highest order!
Yup. We’ve reversed evolution. Time for another ice age…….
🙂