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Ten years ago, in 1998, New Mexico’s largest investor-owned utility, PNM, solicited bids to build a 5 megawatt solar electric power plant. Had the project gone forward, it would have been the world’s largest operating solar-electric power plant. But the project was stopped when 28 small solar companies in New Mexico, including my own, filed an objection.

As members of New Mexico’s Solar Energy Industries Association, each of us had mixed feelings about stopping a project that would surely bring attention to our state’s solar industry. But the more we learned about the project, the clearer it became that we needed to intervene.

The $50 million dollar price tag for the project was to be paid by ratepayers – financed over 20-years. But the cost of solar equipment at that time was falling every year, so we showed that by building smaller plants each year, we would end up with three times the installed solar capacity. Taking out a 20-year loan on equipment that falls in price every year makes no sense, but the project marched on anyway.

PNM was moving into the solar business – our business – with no risk, we argued, because they were allowed to bill all of their costs to ratepayers. This, while we were building solar power systems that needed PNM’s permission before they could be interconnected – permission that could be denied at any time, including after a system was built and ready to operate. Again, our objections were cast aside.

We filed a freedom of information request for the bids that had been submitted on the project, and found that the contract for the power plant had been awarded to the company that had received the lowest score on technology. It turned out that that company already had a contract with one of the members of the evaluation committee, but even this conflict of interest was not enough to stop the project.

So what finally put an end to PNM’s quest to build the world’s largest solar power plant?

We asked one, final, simple question about the project: What was PNM planning to do with the solar energy produced by the plant? It turned out that after collecting money from ratepayers to cover 100 percent of the costs for the plant, PNM was going to sell the solar energy to back to us. That did it – the project was mortally wounded when news of the double-billing hit the streets.

Now, ten years later, investor-owned utilities are contemplating another solar power plant – this one about 20-times the size of the last one. It’s too early to tell whether the same mischief will take place, but we can say with certainty that this project is based on the same, poor premise of putting investor-owned utilities in control of renewable energy.

This, while Denmark and other countries nationalize their power grids, modernize them to eliminate central control so that they can accept more renewable energy, and then promulgate feed-in tariffs to encourage small, independent companies to build renewable energy.

We can, and we must, do the same in the United States.

A video newscast containing this story is posted here.

Higher utility bills are tickling the limits of people’s ability to pay, and some investor-owned utilities (IOU’s) find themselves in poor cash positions as they struggle to collect on overdue accounts. Xcel Energy of Colorado now disconnects 600-650 customers daily, and reports that nearly one in five of its customers – or about a quarter million accounts – are in arrears. Xcel’s delinquent receivables are now a record $40 million. (Story – USA Today)

Public Service Company of New Mexico is having its own share of troubles as it tries to raise cash in the wake of a plunging stock price. PNM’s stock has recovered a bit from a low below $9 in March, but shares are still worth less than half the $35 they sold for a year ago. PNM shed its gas business in Santa Fe to raise cash, and is looking to sell other assets as well. They hope to fix their troubles by investing another $1.7 billion over the next 5 years, and concern about the rate impact of that investment has prompted Santa Fe to look into creating a public power authority.

Much of the trouble for IOU’s began with deregulation, when utilities confessed that the assets they were holding would be much less valuable in a competitive environment. Nobody could be expected to compete with 1960’s technology running at sub-thirty percent efficiency, could they? Now as these same utilities seek another big round of investment, investors and regulators are wary. Will we get competitive investments this time around?

There are good reasons to believe the answer is “no”. If anything, the regulatory landscape has tipped even further in favor of utilities. Most notable is the new trend toward revenue guarantees that ensure utility investments can be recovered in rates even as throughput drops on the system. But investors must be wondering why they should buy assets that can be so easily bypassed with distributed generation.

Besides, investors have better opportunities in the emerging “clean tech” sector, where distributed generation and load management technologies have made bi-directional, internet-style grids a reality. The Nordic countries still lead with their “active grid” technology, wherein connected resources actively participate in the health of the network, and soon enough these companies and their investors will pry open the U.S. market.

If active grids do get built here in the U.S., where would it leave our utilities? Waving their revenue guarantees in front of legislators and demanding a bailout, is my guess. It’ll have to be the taxpayers, because ratepayers will have left the system en masse to create active grids that can operate in parallel or stand-alone at will , delivering much higher efficiency.

The local economic benefits of creating an active grid that supports local, independent energy producers are too great to ignore any longer.

Note: For basic information on feed-in tariffs, visit:

http://en.wikipedia.org/wiki/Feed-in_Tariff

 

 

Feed-in tariffs are generally funded by adding a charge to customer utility bills, so the idea that feed-in tariffs can reduce electricity rates is somewhat counterintuitive. But if your electric power system is inefficient – and most are – a well designed tariff can be a powerful tool for reducing rates or, at a minimum, stabilizing rates against future increases.

Electricity rates are determined primarily by the cost of operating and maintaining the electric power system. There are caveats, of course, but for the most part utilities add up their costs and bill them to customers. In the case of investor owned utilities, an allowable profit is added and also billed to customers.

So how much does it cost to operate and maintain an electric power system? That depends, more than anything, on what utilities buy with the money they spend. All other things being equal, a utility that invests in high-efficiency equipment and builds an efficient system will have lower rates than one that buys inefficient equipment and builds an inefficient system. Efficient systems run cooler, last longer, and use less fuel to deliver the same amount of energy. If you want to minimize system costs, high efficiency is essential.

One of the strongest arguments for feed-in tariffs is that they stimulate investments in equipment that raises system efficiency. Recipients of the tariff – generally independent energy producers – earn higher profits with efficient equipment and processes. A well structured tariff can also encourage placement of new equipment in strategic locations such that overall system efficiency is increased. In that case, even though the tariff is funded by an added charge on the bill, the resultant gains in efficiency can be enough to bring rates down.

Communities considering a feed-in tariff should determine whether efficiency improvement opportunities exist on their electric power system. If the majority of the energy comes from distant coal or nuclear plants, with supplemental energy provided by gas turbines, overall system efficiency is likely below 30 percent. Throwing away 70 percent of the energy in the fuel means there are lots of opportunities to raise efficiency.

Feed-in tariffs also promote more efficient investments for meeting load growth. Instead of constantly adding new, remote generators and upgrading lines for more capacity – the expensive way to do it – a tariff can be designed to promote additions of strategically located resources that obviate or delay line upgrades and generation additions. Such strategic measures generally have lower capital costs, and they further improve system efficiency. Denmark and the Netherlands have perhaps taken strategic system architecture further than anyone, shutting down nearly all of their inefficient central power plants in favor of many smaller plants that cooperate to serve nearby loads efficiently and without reliance on bulk power shipments over a massive wires infrastructure.

There are many reasons for considering a feed-in tariff, including to support the independent energy producers that live and work in your community, and to accelerate implementation of renewable energy. But if your power system is inefficient, a well designed feed-in tariff can improve efficiency enough to either reduce rates or, at a minimum, to insulate a community against future rate hikes. With rapidly rising fuel costs and an increasingly uncertain economic climate, the time for feed-in tariffs is here.

Every day, an enormous amount of energy arrives at the earth from the sun. Energy from the sun builds balanced and resilient ecosystems, enabling millions of species to coexist and evolve.

Every day, a tiny amount of energy is pulled out of the earth. Energy from oil, gas, and coal is used to build systems so destructive that millions of species are now threatened.

Is there something in the nature of these energy sources that accounts for the different results? Can we identify any characteristics of the sun’s energy that contribute to its propensity to build robust living systems, or find characteristics of hydrocarbon fuels that tend to build imperiled ones?

This website examines the parallels between energy infrastructures and social structures, and looks at the ways energy policies shape society. Centrally controlled energy systems are essential for maintaining centrally controlled political power, and those with a hand on the switch control the power. Although this is often acknowledged, the reduction of it is rarely uttered: if we want power to reside with the people, we must literally put the people in charge of the power. Democratic energy policies are essential if we are to have democratic governance.

Throughout the world, communities are empowering themselves by building energy systems that are owned and managed by the local community. Entire regions are becoming more secure not through military or political means, but by building community-based energy systems fueled by locally available resources.

There are no fuzzy green solutions to the energy predicament we are in, and we need to get beyond the point of talking about minor course corrections. Instead, the energy discussion needs to be reframed around building communities that can once again live in harmony within the larger community of life on the planet. This is the challenge of our times.

I hope you enjoy the site, and I look forward to hearing from you!

   - Mark Sardella