Can America’s Regulators Reinvent Fire?

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"Can America’s Regulators Reinvent Fire?"

Amory Lovins, author of "Reinventing Fire." (Photo: Judy Hill/RMI)

By Adam James

This week the National Association of Regulatory Utility Commissioners heard from Amory Lovins, founder of the Rocky Mountain Institute, about his new book “Reinventing Fire.” One of his key messages was that the vast majority of changes that need to occur in transforming the energy system lie at the state regulatory level.

Amory had an excellent summary as to what such a regulatory wish list would look like:

  • Equality in interconnection: Ensuring that renewables have an opportunity to compete on equal footing by accessing the grid.
  • Supporting entrepreneurial activities at the edge of the grid: Regulations allowing new market entrants to creatively compete with incumbent utilities.
  • Moving ahead on net metering 2.0: Net metering is absolutely essential to capturing the true value of renewables. However, there are very real problems with compensation to utilities and cost-shifting to other customers that do need to be addressed. Integration with dynamic pricing and behind-the-meter PV will require regulatory innovation.
  • Aligning rate structuring and business models: On the topic of regulatory innovation, utilities need to be given the incentives to make the kinds of forward looking investments which will lead to climate stabilization (i.e. investing in renewables and efficiency).

On this last point, it is important to remember that since utilities are highly unlikely to make investments that undercut their rate base, it will be crucial to find a way to prevent leaving utilities overly reliant on the “fixed cost” portion of utility bills (which reflect sunk costs in infrastructure, centralized generation, and operations and management) while the “variable costs” (how many KWh are consumed) shrink with the introduction of net metering, dynamic pricing, and behind-the-meter solar PV. There needs to be a radical realignment of incentives to shift utilities to a “network management” role, and push for distribution systems that move towards an overlapping microgrid model. Rocky Mountain Institute did excellent work on this here.

Lovins walked through a very compelling, and integrated, vision for what the American electricity sector could look like. A fundamental premise of this vision is that by 2050 we will have to replace America’s electrical infrastructure. The process of upgrading the grid will cost approximately $6 trillion no matter what technologies we include. The question, then, is do we continue down the path of centralized, fossil fuel dependent infrastructure- or do we begin investing in decentralization, microgrids, efficiency and smart energy management?

The difference, Lovins notes, between these technology pathways are the risks associated with each. As Lovins put it, America faces a multiple choice test. Do we want to:

A) Die by oil wars
B) Die from climate change
C) Die from nuclear holocaust
D) All of the above
E) None of the above

I will admit, I am personally biased towards whichever technology pathway allows for “E.” By Lovins estimation, pursuing “E”, will require an integrated approach to all four energy sectors: electricity, transportation, buildings, and industry. This approach has to harnesses innovation in design, policy, and technology to solve real world problems. The result? An energy system that runs on 80 percent clean energy.

The virtue of a holistic vision is that innovations in one sector, such as electric vehicles in transportation, can then intersect with the innovation in another sector (electricity) where these vehicles would increase grid flexibility. There are other innovations, such as policies that increase the rates of efficiency adoption in the rest of the United States to those already seen in the Pacific Northwest, which are by their nature isolated — but do have a wide range of benefits by reducing overall energy demand.

Looking out at the audience of a few hundred, many of whom are decision-makers and high level advisors in every state in America, Lovins concluded by noting that “each state has a piece of the prize.”

He is dead right. State regulators have the ability to harness policy innovation and enable technology adoption at more rapid rates, all in a way that can ensure incumbents continue to have a revenue stream and new market entrants have a shot. But, they will have to be creative and not fear bucking the entrenched system. They will have to have some courage and be willing to make forward-looking, progressive decisions on the dockets that come in front of the Public Utility Commission. They will have to listen to and support new coalitions between ratepayer advocates, environmental groups, and do-good utilities. From a cost-benefit perspective, there is an excellent business case for making investments in a clean energy future. However, there will be times when state legislators and regulators have to look past their short term to determine what is best for their state in the long run.

This, as Lovins expressed, is the challenge of reinventing fire. We have made tremendous strides as a civilization thanks to fossil fuels and a centralized grid architecture. Our old fire gave us a quality of life that is leaps and bounds past what our predecessors were accustomed to. Reinventing fire will require harnessing new energies, in smarter ways, to ensure that future generations are given the same opportunity.

Adam James is a Special Assistant for Energy Policy at the Center for American Progress. You can follow him @adam_s_james or email him at ajames@americanprogress.org

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12 Responses to Can America’s Regulators Reinvent Fire?

  1. Mike Roddy says:

    Lovins is right in encouraging state initiatives, but conceding this power to them will result in continued balkanization of our energy system. Many states such as Georgia, Utah, and Missouri are wedded to coal. Their legislatures are corrupt, and can be expected to resist changes such as a smart grid and carbon taxes.

    The US will only change when utilities from red states feel the pressure. We don’t need to perpetuate their dirty fiefdoms.

    • Not just at the state level, Mike. There is also the TVA, and they are not just a fiefdom, maybe a Duchy? Someone needs to watch them carefully… and someone does.

      http://norsworthyopinion.wordpress.com/

    • Sasparilla says:

      It’s also good to keep in mind, now that climate legislation at the Federal level has largely been euthanized – the Koch’s and their political front organizations supposedly are turning their eyes and money to State and Local level politics on a coordinated level.

    • Mulga Mumblebrain says:

      Under capitalism,’freedom’ boils done to the liberty of money, and those who possess great amounts of it, to shape and contort society in accordance with their psychological preferences. The only way to achieve ‘democracy’ in any shape is to equalise money, ie political, power, by a radically egalitarian social dispensation. To say that the capitalist states are heading in the precise opposite direction, and that resistance to my modest proposal will be ‘determined’ is an understatement.

      • Paul Scott says:

        @Mulga makes a valid point, to say the least. While in the past, it’s been hard to envision the path to a mostly oil-free life, these days it’s pretty easy, and incredibly affordable.

        Disclosure, I sell the Nissan LEAF and solar energy.

        Two years ago, there were about 3,000 electric vehicles in the U.S. Today, there are over 75,000. If you look at the reports from owners, they are record setting. Everyone who drives these cars knows the truth. They LOVE the car. It changes your life in a good way.

        These cars are exceptional in that you can install a solar PV system on your roof, or sign up for your utility’s renewable energy program, and essentially drive on sunshine for the rest of your life.

        The cost of solar is cheaper than grid power in many states.

        For about $6,000, you can buy enough solar PV to generate enough electricity to drive 12,000 miles per year. And it’ll last for decades. The average internal combustion driver spends $2,900 per year for gasoline. In ten years, that’s $29,000 – IF the price of gas doesn’t go up at all over the next ten years.

        My ten year old panels paid for themselves over two years ago. For the rest of my life, I can run my home and my car on sunlight – for free.

        Consider the macro economics. In 2010, Californians spent about $55 billion for gas and diesel. About 90% of that left the state. Half of that left the country. We’re losing $50 billion per year from our economy, a massive gushing wound that, worse yet, goes to the Koch Brothers and their ilk. They use our money against us. When you get an EV, you never give them another dime.

        Think about that. Do the math.

        By the way, the cars’ driving characteristics are superior to gas burners. You really have to drive a Volt or LEAF, or especially the Tesla Model S, to know what I mean. Do it.

  2. Ken Barrows says:

    Reinventing fire, indeed. But will the reinvention lead to greater net energy or less? If less, we won’t be as wealthy. Of course, that’s a small price to pay to save climate chaos.

    • Mulga Mumblebrain says:

      Who are ‘we’, Ken? As it is, ‘wealth’ is distributed with ferocious and worsening inequality.

      • Ken Barrows says:

        Good point. We 99% won’t be as wealthy. Under current conditions, we 90% won’t be as wealthy.

        • David Smith says:

          I don’t understand. I thought wealth was tied more to productivity than consumption. If the same amount of energy is utilized with greater efficiency or effectiveness then greater wealth would result.

          • Mulga Mumblebrain says:

            ‘Wealth’ is tied to greed, which is why it is so concentrated amongst the elite. These days, the returns from investment in ‘wealth production’ being insufficient to feed elite greed, they prefer the ‘wealth extraction’ process, which is why the financial sector is increasingly dominant, particularly in the Anglosphere. The 90% have little ‘wealth’, getting by on stagnant incomes and debt. What ‘wealth’ they possess is most often just the family home, often heavily mortgaged. Even that meagre wealth is under threat, best evidenced in the USA in the fall in, the already paltry, household wealth, of Black and Hispanic households, by around 50% since 2007.

  3. SecularAnimist says:

    The real challenge to the utilities and regulators is that electricity end-users are going to continue to deploy distributed photovoltaics on an ever-larger scale, at an ever accelerating rate, as costs continue to plummet.

    To the utilities, this will look like a dramatic reduction in demand — especially peak demand. Indeed, in some areas, the times that now have the greatest demand for grid power — hot sunny days — will become the times of lowest demand for grid power, since that’s when solar generation peaks, and more and more PV end-users will be running their meters backwards.

    And it’s going to happen whether the utilities like it or not, whether they are ready for it or not.

    • Paul Scott says:

      I installed a PV system over ten years ago and shortly after, bought an EV. My PV system paid for itself over two years ago, so for the rest of my life, I get free energy to run my house and car, all from sunlight. The ROI is well over 10%, and as gas prices go up, my ROI rises. I can’t tell you how good that feels.

      EV pricing is dropping fast. the first used Volts and LEAFs are already on the market at very affordable pricing and they’ll only get cheaper, yet they operate perfectly for many years.