ORIGINAL REPORTING, JUNE 10: HOW UTILITIES ARE TRANSFORMING THEIR FUEL MIXES
How utilities are transforming their fuel mixes; Executives and regulators weigh in on the move to renewables and natural gas Herman K. Trabish, February 2, 2015 (Utility Dive)
More than 80% of utility executives foresee distributed energy resources changing their company’s fuel mix in coming decades, according to Utility Dive’s new report, the State of the Electric Utility 2015.
Nearly as many (79%) see their companies adding utility-scale solar. A very large majority see additions of natural gas (74%) and wind (72%) changing the generation portfolio. And over three-quarters of the executives queried (77%) see a diminishing role for coal.
“Gas is now around $3 per MMBTU but I remember being hailed as a virtual genius at Edison when I signed a contract for $14 natural gas,” said former Southern California Edison vice president Jim Kelly at the recentVerdeXchange 2015 conference. “Our supply of natural gas seems assured for years to come. Many states are proclaiming they are going green by switching from coal to natural gas. It is a huge trend.”
But price is not everything. Compliance with renewables targets and mandates was the most compelling reason that 42% of the utility executives queried by Utility Dive expect more renewables in their portfolios. Another 31% say sustainability is their compelling reason for investing in renewables. Only 7% see low prices as a factor, and 9% still see no compelling reason to invest in clean energy at all.
Only 12% of those surveyed as yet have confronted emissions standards as a driving force but most recognize the Obama administration’s Clean Power Plan will begin to gain momentum later this year.
Just over a third of the Utility Dive respondents (34%) believe the Environmental Protection Agency should hold to the current 30% emissions reduction target and 2030 timetable and another 28% believe EPA should be more aggressive. 20% want the effort diminished and 19% want it scrapped.
Natural gas and renewables
With California’s new 50% renewables by 2030 proposal from Gov. Jerry Brown (D) and its sustainability-minded utility customers, the state’s electric utility leaders likely agree with the survey findings except on the subject of emissions standards.
To achieve California’s mandate and meet its ahead-of-the trend AB 32-driven emissions reduction requirements, renewables and efficiency are high on their list.
“The studies the California Air Resources Board (CARB) has seen indicate everything will have to be electrified and the electricity will have to come from renewables,” said CARB Chair Mary Nichols. “It is pretty hard to see how in 2050 California can be burning much of anything if it is going to meet its goals.”
On the other hand, Southern California Gas has put forward some reasonable ideas about renewable natural gas, Nichols acknowledged. “Diversity is important and we cannot afford to be completely dependent on any one source of supply, given the geopolitical and environmental uncertainties.”
But it has to be renewable diversity, Nichols told Utility Dive. “Yes, renewable methane, renewable gasoline, renewable electricity, but whatever it is, it will have to be renewable.”
“Natural gas is sweeping the fuels markets on the national level,” California Energy Commission Chair Robert Weisenmiller agreed. But methane leakages must be resolved and pipeline explosions are unacceptable. “One San Bruno is way too much,” he said of the San Francisco disaster that cost eight lives.
The role of utilities
“Utilities are enablers of distributed generation,” California Public Utilities Commission (CPUC) Commissioner Carla Peterman observed. “Consumers don’t want to be off the grid. They want to get on the grid in a more actively engaged way. They want solar and they want to sell their power to other consumers as well as to provide ancillary services for the grid. But they want a simple interface, which requires a complex infrastructure behind it.”
The tension between utilities, distributed energy resources (DERs) developers, and consumers is because they all want to be heard, Commissioner Peterman said. “Utilities want to be heard on things that need to be addressed like over-generation and cross subsidies. Customers and developers want it heard that the product can be good for the grid and offset peak demand.”
It is the job of regulators and policy makers to bring them to the table to work those things out, she said.
“The assumption that DERs are anti-utility is a mental block,” said NRG Energy VP Robyn Beavers. “Utilities could easily jump into it.”
The just-introduced AB 197 from Democratic Assemblyman Eduardo Garcia is one of the first official previews of how California will realize Brown’s 50% proposal. Coincidentally, it seems to validate Beavers’ observation and the Utility Dive respondents’ conclusions.
The bill would:
-make statutory a requirement that investor owned and publicly owned utilities get 50% of their power from renewables by 2030
-obtain through the CPUC a cost-benefit evaluation of all renewables as base-load and grid support resources
-make statutory the California Loading Order that requires utilities to meet load first, if feasible and cost-effective, through energy efficiency, demand response, and renewables before procuring other generation
How much success Garcia and his allies have in pushing the bill through the state legislature remains to be seen, but given the strong Democratic majority in the state, it seems a safe bet that some form of Gov. Brown's renewable energy targets will be passed by lawmakers. If anything is to derail their plans, it may be unexpected technological change more than political contention.
“Things in this industry change very slowly and then they change very fast,” Renewable Funding LLC CEO Cisco DeVries, who originated the property-assessed clean energy (PACE) concept. “We are pivoting toward that fast change right now.”