Latin America to install 9 GW of solar power over the next 5 years, NPD Solarbuzz
Latin America to install 9 GW of solar power over the next 5 years, NPD Solarbuzz
This is a good article which echoes our discussion about utilities refusing to embrace the very strategy that is their best natural path to a future; build a distributed network architecture and push renewable generation out to the customer location.Vested interests and a monopoly mindset require powerful forces to uproot. The good news is that those forces are many and getting stronger every day.Montyhttp://www.renewableenergyworld.com/rea/blog/post/2014/09/a-trillion-dollar-taxpayer-bailout-of-electrical-utilities-2030-outlook?cmpid=SolarNL-Saturday-September13-2014
2030 Outlook: A Trillion Dollar Taxpayer Bailout for Electrical UtilitiesLead image: Bailout sign via Shutterstock
After bailing out Wall Street in 2008, are Americans ready to provide a one trillion dollar bailout to our electric utilities in 2030? Even though worldwide demand for energy is estimated to rise 41 percent by 2035, Barclays recently downgraded their outlook for utilities. The question we should ask ourselves is what does it mean when you downgrade a trillion dollar industry? Will this mean that billions of dollars invested in utilities today through pensions, stock holdings and your bank's investments will be lost? And can utilities, and the country, prevent this value destruction from occurring?
Renewable generation such as solar power is being produced at costs that are rapidly decreasing. Solar systems are becoming so simple that, with a little instruction, my accounting team was able to install a solar power system. This is good for the world, but not necessarily good for an established industry, like utilities.
Industries are famous for side-stepping large infrastructure businesses and leaving them to wither.
- Small, low cost mini-mills replaced large-scale steel makers.
- Cell phones replaced standalone Global Positioning Systems (GPSs).
- Uber and similar on-demand car services are currently replacing taxis.
Distributed generation is becoming cheaper and easier to install, leading to growth rates in the residential space of 60 percent per year. Installed solar capacity across the U.S. has grown 418 percent since 2010 and could quadruple from today's level to 50 GW by 2017. The price of solar has come down and technology risk is no longer a concern. If your utility company charges $0.18/kwh and a reputable solar installer sells power at $0.13/kwh, isn't the preferred option fairly obvious? In short order, solar systems will be as prolific as solar water heating is in Israel.
Utilities, by their very nature, are not creatures of change. Their highly capital intensive investments are depreciated over thirty years – they are used to having a captive, monopolistic audience, and they aren't known for customer experience or innovation. The way they increase their revenue is through population growth and increased power prices (3-5 percent on average a year). But today, electricity costs from coal are going up and solar power costs are coming down. Moreover, as people move away from coal power to cheaper solar power, utilities will have to charge their customers more in order to cover their infrastructure costs.
If nothing changes, this is a losing battle for utilities. A utility that doesn't adapt loses credibility quickly, as its customer base dwindles and its highly leveraged infrastructure needs cash. Who would want to invest in a highly leveraged industry with a shrinking market? If current trends continue, many utilities could soon face bankruptcy. It's a toxic combination of high capital requirements and fading demand. And make no mistake: power infrastructure is not cheap.
While some utilities like Southern California Edison have implemented strategies to capitalize on this shift, most haven't. Instead, they've tried to fight it by appealing to regulators to add additional fees to solar or persuade legislators to overturn renewable portfolio standards.
How can utilities win?
First, utilities can embrace solar and benefit from the fact that they have a low cost of customer acquisition because they have a captive audience. Utilities can also be the broker of all energy services for the home if they decide to expand their product line. If they invest in providing the funding behind solar financing and owning the generation and storage assets installed in homes and businesses, they are right back in their utility role, but now using a new generation of asset class.
Second, they can continue to secure revenue through grid connection charges for infrastructure use.
Third, utilities don't have to be innovation leaders; they can use their current asset base and low cost of capital to either partner with or purchase companies who can innovate for them.
Other companies have repositioned and reinvented themselves to deal with technological shifts that threatened their monopoly power. AT&T didn't vanish after its antitrust suit and the advent of the Internet and cell phones. Railroads figured out ways to survive after the invention of cars, long-haul trucks and airplanes. Utilities can make it if they adjust to the changing environment. However, if they don't, there is huge potential for another major bailout that would not only impact utilities, but also the pensions that invest in them, the taxpayers who would have to provide their bailout, and the homeowners who might encounter energy instability and insecurity. As with the banks during the financial crisis, the most successful (and innovative) members of the utility industry will buy up struggling utilities at a discount and then use them as channels for their services.
Whatever happens, there will be winners and losers. Those utilities that lose will be bought at a discount by the dominant players, rolled up, and optimized to drive product effectively through their channels. As these aged and debt-laden structures attempt to adapt, we may see a bailout or debt forgiveness, similar to that of the banks in 2008. Or it may mean that like other industries, the unsuccessful are bought by the successful, debtors negotiate what they can, and the channel is optimized with new services, processes, and fees.Sent from my BlackBerry 10 smartphone.
SAN FRANCISCO -- California and Quebec, which together created the largest carbon market in North America this year, may come away empty-handed as they woo northeastern U.S. states to join their system.
States including Vermont, which Quebec's premier said yesterday is particularly interested in uniting, are members of a Northeast group that has been operating an emissions-trading system since 2008. And they've shown no signs of abandoning that cause, said Kelly Speakes-Backman, chair of theRegional Greenhouse Gas Initiative known as RGGI.
"We've had no discussion of any states leaving RGGI, either to go to California or elsewhere," Speakes-Backman said yesterday by telephone from Baltimore. "I don't see it as being realistic, especially as far along as we are. We have a good working relationship."
While carbon markets are gaining increasing attention in anticipation of a federal rule curbing power-plant emissions, California has yet to find another U.S. state to join the economywide trading system it established last year and expanded to include the Canadian province of Quebec on Jan. 1. Quebec Premier Philippe Couillard said in an interview Sept. 23 that it was in talks with New England governors about joining and that Vermont expressed particular interest in integrating markets.
Couillard described a California-Quebec market in an interview at Bloomberg News's headquarters in New York as "not ideal" and said his government was "working very hard to recruit new partners" in Ontario and the Northeast while California's regulators work with Oregon and Washington state.
California Air Resources Board Chairman Mary Nichols traveled to Denver for a private meeting in July with regulators from 12 other Western states to discuss how they could work together on the emissions cuts proposed by the Obama administration.
Obama's plan, released in June, would reduce carbon-dioxide pollutants from power plants 30 percent from 2005 levels by 2030 and offers incentives to states who develop regional systems, including an extra year, until 2018, to comply. The Environmental Protection Agency is expected to issue a final rule on the emissions cuts in June.
"The states have a variety of different approaches and levels of enthusiasm for this," Stanley Young, spokesman for the California air board, said by telephone yesterday from Sacramento. "We stand ready to work with them to help achieve those targets."
RGGI's system will probably appeal to those states seeking only to meet the EPA's power-plant rules, said Jon Costantino, a Sacramento-based senior advisor for the law firm Manatt, Phelps & Phillips LLP. He said the California-Quebec market will attract those who want to take "the full plunge" into a system that regulates everything including power plants, oil refineries and cement factories.
California is "the whole enchilada whereas RGGI is not," said Costantino, who was previously climate change planning manager at the state's air board. "Even deciding to just sort of half-link with a state would be a major policy call that California has to think about."
Vermont has held "preliminary discussions" with Quebec about how to align carbon-pricing programs, Justin Johnson, deputy secretary of the state Agency of Natural Resources, said by e-mail yesterday.
"We believe that carbon markets will be stronger if we bring in more players," he said. "We have no interest in leaving RGGI, we are more interested in further developing in carbon market in our region and others."
Fully merging the carbon markets run by California, Quebec and RGGI poses "real questions" given the different scopes of their programs, Speakes-Backman said. California and Quebec regulators have expressed similar concerns.
Nichols said at a conference last year that RGGI is a "different enough" program to make a link complicated. Couillard described the price of carbon credits traded as part of RGGI's system as "very low."
RGGI allowances, each permitting the release of a metric ton of carbon dioxide, sold for $4.88 each at the group's most recent auction. California permits sold for $11.50 each at its latest sale in August.
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