December highlights on cost of renewables, transition away from gas

Renewables are cheaper.  PV costs are $1.99/watt installed with no subsidies.  Zach Shahan (9/20): the average cost of a rooftop solar power system in the United States is $2.19/watt whereas Tesla is now offering rooftop solar power for $1.49/watt across the country. (Both prices are the price of an installed solar power system after taking into account the US federal tax credit for solar, which is 26% of the cost of the system.) A difference of 69 cents per watt is a big deal. That’s $4,140 on a 6 kilowatt system, or $6,900 on a 10 kilowatt system.  Musk explained their low prices: “Solar panel cost is only ~50 cents/Watt. Mounting hardware, inverter and wiring is ~25 cents/Watt. Installation is ~50 cents/Watt, depending on system size. “The other solar companies spend heavily on salespeople, advertising and complex financing instruments. We do not.” Steve Hanley: Tesla is doing for rooftop solar what Henry Ford did for making automobiles — offering a “one size fits all” package that substantially reduces sales and engineering costs as well as a  lowest price guarantee that includes installation.   an average customer buying a large system in California will make their money back in only six years by reducing their electric bill, ultimately making an average of $88,000 over the system’s lifetime,” Tesla says.  “In New Mexico, that same system will make an average of $55,000 over its lifetime and in Vermont, $47,000. All systems, in all states, generate more value than ever when purchased with cash or financed with a solar loan. Savings will vary based on state laws and local utility rates. We also offer low-cost subscription solar for a fixed monthly payment in six states that you can cancel anytime. Tesla rooftop solar design page, type in some basic information, and Tesla will take it from there. Permitting, arranging for the installation, connecting your solar system to your home, and creating the necessary leasing or loan paperwork will all be done for you. Adding a Powerwall can reduce or eliminate a monthly utility bill. Charles Bucknam is with EEI as well and is familiar with costs of Tesla solar and battery alternatives.   From Jacobson: How reducing transmission and distribution losses 1% can reduce fossil use 1.6 to 5.4% (pdf).

Most scientists believe that if we want to avoid 1.5 degrees C global warming since the early 1900s and its catastrophic consequences, the only practical way is to eliminate 80% of energy and non-energy emissions by no later than 2030 and 100% by or before 2050 (Dec 2020).  The Production Report just out says natural gas production needs to drop by at least 3% per year (as opposed to the CO GHG Roadmap which calls for increased production of 30% this decade).  Fair shares analysis is that ours/US/Colorado’s should drop by twice that.  Natural gas results in enormous carbon dioxide, methane, and air pollution emissions, both during its mining and use. In addition, it is a limited resource, is used significantly in centralized power plants, is often mined then shipped across country boundaries, and has mining and water pollution risks. As a result, natural gas damages climate, human health via air pollution, and energy security, and infrastructure will be stranded, increasing costs and threats by all counts.  Due to the efficiency of electricity over combustion and other factors, such electrification will reduce worldwide energy needs about 57%. Although overall energy requirements will decline, electricity requirements will be about 90% greater than today. Thus, more energy will be electricity. Electricity is the new oil.  If done intelligently, costs can be recouped in about 7 years and produce more jobs than currently.  This will also help our regional air pollution problem.  CBS Jan 2020: Denver Ranks 4th For Air Pollution In U.S.

Gas heating replacement with electric heat pumps.  Mike Henchen (RMI) writes about this transition.  Early moving states act for different reasons. (In CO, in addition to our state law that is not being implemented, the physical leaks and risks Sen. Tammy Story and a CNG Safety Director/whistleblower have working on will likely be a factor). The 2018 Merrimack Valley gas explosions forced this conversation to the forefront in Massachusetts; at the urging of the attorney general’s office, gas utilities will develop a plan to transition their business.  The CA PUC opened a rulemaking that will eventually “manage the state’s transition away from natural gas-fueled technologies to meet California’s decarbonization goals.”  Also, a report released in April by E3 and the University of California, Irvine found that it is in the economic self-interest of some gas consumers to switch to electricity.  Over time, gas demand will decline as the transition continues, putting upward pressure on gas rates and bills.  If a hodge-podge of customers begin leaving the gas system on their own, without a managed plan, the state would have to maintain the cost of the entire gas system without being able to retire any assets, or the costs associated with them, until everyone has left —​ and customers who remain on the system will have to pick up those costs, which becomes unaffordable, at a certain point. Around 40% of the state’s population are renters and may not have the control or upfront cash to, for instance, buy a heat pump, causing a huge equity and economic problem.  The other issue is transitioning gas workers, the desire for highly skilled gas workers taking care of the system until they are no longer needed and are taken care of/supported in that transition.  Meanwhile, pipeline injection of renewable natural gas remains much more expensive and time consuming.  Finally, the current system, predicated on burning gas in perpetuity, no longer meets the needs of society. Gas use must decline dramatically in the coming years in order to limit global warming to just 1.5° C. Regulators will have to create a new system that expands carbon-free electricity and electrification of transportation and vehicles as quickly as possible.  In New York, a prolonged battle over National Grid’s proposed gas pipeline into Brooklyn and Queens prompted regulators to change the way utilities plan new gas investments. NY Public Service Commission also ordered ConEd to measure the likelihood of various climate risks between 2020 and 2080.  In NC Vote Solar challenged Duke Energy Corp.’s grid modernization plan and asked the North Carolina Utilities Commission to require power companies in the state to consider climate change.  In a settlement in that rate case, the utility agreed to start a climate risk and resilience working group and to include stakeholders to look at how the company could incorporate climate data. The company may also conduct an assessment and compile a resilience plan. Under tort law, utilities could be considered liable for violating a “duty of care” if challengers can demonstrate that a company’s lack of preparation directly harmed customers. As advancements in the burgeoning field of attribution science allow experts to draw links between climate change and specific weather events, and more granular data draws a clearer picture of at-risk areas, advocates can more clearly show that utilities should have been aware of risks and acted to protect their infrastructure (Climatewire, Nov. 3). “They are liable for that because there was a foreseeable risk that they should have done something about,” said Webb, the lead author of the Columbia report. Now regulators are envisioning a future with a dramatically reduced role for gas and are planning to manage that transition safely and equitably. Rate proceedings are a path of approach to deal with the issues because they happen regularly as utilities turn to commissions to recover the costs of their investments. Ron Bennet and Mike Henchen are familiar with home heating replacement costs.  Laurent Meillon is an expert in solar thermal. The gas system is vulnerable, especially to climate change and natural disasters. Electrification is a fundamental strategy to achieve both climate adaptation and mitigation, and requires deep and early investment by the state, air districts, counties, and cities. To support decarbonization of the residential and commercial end uses served by gas distribution utilities, regulation must evolve, through considering combined electricity and gas planning, resilience, the PUC role in capacity planning, and planning for gas infrastructure retirements.  Electrification is needed for reliability, especially in wildfire-prone areas. Further, building electrification will help us ride out hotter and longer heat waves. Electrification for Climate Resiliency by Rachel Golden, Sierra Club.  

Microgrids. Wildfires are making the need for microgrids more evident and a microgrid bill is a possibility this session.  Large, fossil fuel systems carry large risks, whereas distributed and clean/unpolluting and non-explosive ones are much better for health and safety. In addition to utilities, new industry players want in:  energy-storage giants like Tesla and LG Chem Ltd.; makers of battery controls, like Schneider Electric and Siemens AG; companies that make battery-control software, like Stem Inc. and Growing Energy Labs Inc.; global conglomerates with power divisions, like Caterpillar Inc. and Trane Technologies; and pure-play microgrid builders like Advanced Microgrid Solutions and Scale Microgrid Solutions. The typical system is getting smaller, which usually makes it simpler and faster to build. Another accelerant for microgrids is a new rule that the Federal Energy Regulatory Commission approved 9/20; Order No. 2222 allows energy from distributed resources like solar arrays and batteries to be sold into wholesale regional energy markets (Energywire, Sept. 18). – Microgrids spred as ‘grid gets worse and worse’ 10/28/20)  Tesla is also operating 120 microgrids, modular and capable of over-the-air updates on the way to 1000 in the not so distant future.   

More links on Transition Planning, PUC Action, etc.: NY Dept of  Public Service initiated long-term gas planning procedures, including alignment with NY’s Climate Leadership and Community Protection Act. All planning must now consider non-pipes solutions. This proceeding is ongoing. Natural gas utilities are currently investing in expanding and replacing gas infrastructure based on the expectation of continued gas consumption for decades to come, an expectation that is inconsistent with the need to decarbonize buildings and eliminate GHG emissions. Most of this new infrastructure will not be useful for its expected lifetime. A new study for the CA Energy Commission demonstrates why the state needs a transition strategy for its retail natural gas distribution system.  The Challenge of Retail Gas in California’s Low-Carbon Future.  Strategies for reducing carbon emissions from buildings were evaluated and  building electrification is likely to be a lower-cost and lower-risk strategy.  Customers remaining on the natural gas system could face disproportionately high costs in the absence of a gas transition strategy.   California’s Gas System in Transition: Equitable, Affordable, Decarbonized, and Smaller by Gridworks (facilitates discussions among stakeholders) shows how a suite of local and state-wide policies resulting from California’s commitment to 100 percent clean electricity and carbon-neutrality are set to cause a significant reduction in gas demand in coming decades. At the same time, the cost of safely operating California’s gas infrastructure has risen in recent years and is set to rise again as utilities seek necessary safety upgrades and investments. Without a strategy to transition the gas delivery system, the confluence of these two trends could cause harm to gas workers, low-income gas residents, gas-dependent industries, and the broader economy. This report begins the development of that strategy, providing recommendations on how state and industry leaders can meet this challenge head on.  EDF’s  Managing the Transition: Proactive Solutions for Stranded Gas Asset Risk in California  provides guidance on how policymakers can address the transition away from gas. The report details options including strategic electrification, methods to pay for early retirement of the gas infrastructure, plans needed to decommission the gas infrastructure, and the need to have a bright line for new investments.  Also see:  Next-Generation Energy Efficiency Resource Standards VT Energy Investment Corp & NRDC developed: Driving the Heat Pump Market: Lessons Learned from the Northeast

Affordable financing could be provided in-state by a public bank (copying Earl Staelin, chair of CO and Rocky Mountain Public Banking Initiatives and Becky Long of Siegel, working on lobbying and a bill this session – need sponsors).  In addition to ongoing PV cost declines. Batteries have fallen in price from $1000/kWh to around $130/kWh in a decade and are continuing to fall.  The scale of decarbonization/electrification project alone is sufficient to sustain even further price reductions for the critical components.  We spend more on electricity ($1,496) than we do on education ($1,407). We spend more on natural gas ($409) than dental services ($315). And we spend more on gasoline ($1,929) than we do on meat, poultry, fish, eggs, fruit and vegetables combined ($1,817).  Those in these counties and with CNG spend much more, 2.5x cost of gas through Xcel.

Household cost savings and potential gains for states investing in this new trajectory.  Saul Griffith has a report on household cost savings. See the easy-to-understand technical/cost report that addresses the combination of technological solutions, appliance  and vehicle costs, regulatory  conditions, and, critically, the cost of financing, that can make this a win–win for the American public? The three main pillars of this strategy are a low price of rooftop solar, a low price of batteries, and a low cost of financing. The cost of batteries is the most crucial factor in achieving maximum household cost savings, largely because of the high capital cost of two EV batteries per household. The interest rate is also a dominating factor. 

The cost of rooftop solar and the effective COP of heat pumps are other major contributing factors to achieving cost savings. Regulatory reform that lowers the artificially high solar costs of solar should be a priority.  Savings include lower/removed risk of wildfires from explosions and gas leaks; lower maintenance costs; lower healthcare costs due to improved air quality particularly indoor air quality from stopping indoor combustion of fossil fuels; tax savings homeowners realize from the “stepped–up basis” of their homes from these retrofits; grid services that could accrue to households in helping to balance the national grid or taking advantage of time of pricing; savings realized collectively from higher water quality and environmental quality as we remove the toxins that result from fracking and other extractive industries contaminating our waterways and water tables.  Further, a study in the journal One Earth that modeled the economic and climate impacts of moving to 100 percent clean energy in the U.S. These upfront costs, however, are a true investment, with good returns and increased employment.  Seba and Dorr’s study argues that it is an unmissable investment opportunity for forward thinking states. Click here for Seba’s and Dorr’s post in Utility Dive, here for RethinkX’s full report.