arizona s electricity future...five things to remember 1. net/energy available for work”...
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Arizona’s Electricity Future
Nancy LaPlaca LaPlaca & Associates
laplaca.nancy@gmail.com 480-359-8442
November 14, 2013
Who Am I?
! ASU: Bachelor Fine Arts, J.D., College of Law ! 3.5 years as Policy Advisor to AZ Corporation
Commissioner Paul Newman ! Staff co-chair for the Environment Committee
at the National Association of Regulatory Commissioners
! 3 years as public interest intervener at Colorado Public Utilities Commission
! 5 years Congressional staff for AZ Representatives Morris K. Udall and Karan English
! 6 years (total) at AZ Court of Appeals, AZ Supreme Court, State Senate, Criminal Justice Commission
! Management and technology consulting ! Love to hike, swim, sing and play guitar and
piano; read and listen to books.
Agenda
! Background and Key Concepts ! AZ's Electricity Mix ! The AZ Corporation Commission (ACC) ! What does electricity "cost“? ! Coal and Natural Gas in AZ ! Huge Jobs Potential -- and Possible Threats-- to AZ’s
Clean Energy Future ! Regional Clean Energy: Integrating Large Amounts of
Distributed and/or Clean Energy ! The ACC and the public sector
Five Things To Remember
1. Net/Energy Available for Work” declining. 2. AZ imports 90% of electricity fuels. No one knows
what fuel will cost in the future, can rise quickly. 3. Solar, wind have higher up-front but lower long-
term costs, less risk. 4. Electricity production: from large, central-station to
distributed, closer to load; business models under growing stress.
5. Damages from “externalities” such as water and air pollution, mortality, lost work days, childhood asthma are known; a range of costs could be included in the “cost” of electricity.
Background: Key Concepts
ENERGY v CAPACITY " Energy = kWh, MWh – usable energy " Capacity Factor = output over time
Why is this important? Because power plants have different capacity factors: " Nuclear: 93% Capacity Factor (CF) " Coal: 80% CF " Wind: 30-40% CF " Solar: 20-23% CF (in AZ) " Geothermal: 92% CF
Energy, Electricity and “Net” Energy
! Energy: liquid transportation fuels ! Electricity: coal, natural gas, nuclear, solar, wind, hydropower
" Currently not much overlap, but will change as we “electrify” transportation with light rail, electric cars, etc.
! Net Energy = the energy left after using energy to drill, mine, transport, compress, combust, build, etc.
! Also called E-ROI (Energy Return on Investment) ! Energy costs are going to rise: Do we invest in renewables,
with higher capital costs, or fossil fuel plants, with increasing fuel costs and high Operation and Maintenance?
! “Externalities” increasingly important: global warming, water scarcity; also enormous health effects from fossil fuels we’ve ignored for decades
! Environmental justice issues: local, U.S., global
The easiest-to-get resources are extracted
first. Example: deepwater v. onshore
drilling for oil.
Energy Slaves?
! ~8 calories of oil embedded in every single calorie of food delivered
! Renewable energy (solar, wind) not as dense, not ‘on demand,’ need storage.
! We will likely electrify transportation
! One Barrel Oil = 25,000 hrs human labor
! 25,000 hrs human labor = 12.5 yrs work
! At $20/hr = $500,000 of labor/barrel
! Oil at $110/barrel = 6 cents/kWh, or 500 times cheaper than human labor.
Agenda
! Background and Key Concepts ! AZ's Electricity Mix ! The AZ Corporation Commission (ACC) ! What does electricity "cost“? ! Coal and Natural Gas in AZ ! Huge Jobs Potential -- and Possible Threats-- to AZ’s
Clean Energy Future ! Regional Clean Energy: Integrating Large Amounts of
Distributed and/or Clean Energy ! The ACC and the public sector
What Is AZ’s Electricity Mix?
! Total in-state generation: ~27,000 MW (27GW) ! Total in-state consumption: ~16,000 MW
" 40-50% coal " ~30% natural gas " ~22% nuclear " ~4% hydro
" AZ: less than 2% of electricity used in-state is solar ! Total in-state solar: 1,300-2,000 MW ! However, ~50% of the output is sold to California
AZ: Electricity by Source 2012
Solar electricity generation: not enough!
Lots of coal electricity!
AZ: Only 1-2% of Non-hydro Generation is Renewable in 2011
17 states were less than 1% RE in 2001, including AZ
Only 4 states less than 1% RE
in 2011, including AZ!
http://www.eia.gov/todayinenergy/detail.cfm?id=5750
Arizona Republic, CO2 Pollution Soars in Ariz., new study says, Shaun McKinnon, 11/13/09; http://www.azcentral.com/arizonarepublic/news/articles/2009/11/13/20091113air-carbon1113.html
Includes GHGs from
exported power.
Agenda
! Background and Key Concepts ! AZ's Electricity Mix ! The AZ Corporation Commission (ACC) ! What does electricity "cost“? ! Coal and Natural Gas in AZ ! Huge Jobs Potential -- and Possible Threats-- to AZ’s
Clean Energy Future ! Regional Clean Energy: Integrating Large Amounts of
Distributed and/or Clean Energy ! The ACC and the public sector
AZ Corporation Commission (ACC)
! One of 7 states with a constitutional Comm’n ! One of 13 states with an elected Comm’n ! The ACC has absolute authority over energy policy ! Most states: Governor appoints Utilities
Commissioners ! In my experience, nearly every other state has more
transparency, and easier access to information. ! Complex process, need a lawyer or a lot of time,
energy and guts to participate meaningfully. ! Key: it’s all about underlying assumptions such as
fuel costs, discount rates, cost of capital, value of ‘externalities.’
Agenda
! Background and Key Concepts ! AZ's Electricity Mix ! The AZ Corporation Commission (ACC) ! What does electricity "cost“? ! Coal and Natural Gas in AZ ! Huge Jobs Potential -- and Possible Threats-- to AZ’s
Clean Energy Future ! Regional Clean Energy: Integrating Large Amounts of
Distributed and/or Clean Energy ! The ACC and the public sector
Source: Energy Darwinism, Citi GPS: Global Perspectives & Solutions, October 2013
GAS
-
FUEL
C O A L
NUCLEAR FUEL $ $ $
$ $ $
$ $ $
$ = Financing Costs
Fuel Costs
Lazard’s Levelized Cost of Energy Analysis 2012, Subsidized v Unsubsidized
http://www.raponline.org/event/the-importance-of-effective-energy-efficiency-cost-effectiveness
Adding Up The Costs of ALL Coal Regulations Would Triple the Cost of Coal Power.... But see next slide…
20
APS’ RW Beck Study on the Value Of Distributed Energy
Operating Impacts and Valuation study
RW Beck study says the value of distributed solar is 7.9 to 14.11 cents/kWh in avoided costs for fuel, trans-mission, line losses, etc.
Why Do the Costs of Electricity Vary So Much? ! Different “capacity factor” for each type of
plant: solar generates electricity during the day, natural gas has high and volatile fuel costs, coal compliance costs are increasing.
! How much are fuel costs increasing/yr? ! How much will nuclear decommissioning? ! How much will the cost of solar, wind and
other clean energy solutions decrease? ! What about water supplies?
National Renewable Energy Laboratory Innovation for Our Energy Future
Two-thirds of Energy From Coal Plants Lost as Heat; Natural Gas Combined Cycle More Efficient
Generation and
distribution
Inefficient gas appliances
Inefficient electric
appliances
Waste Waste Waste
Fuel for electricity
Natural gas
Power, light, and
usable heat
02458605
Source: A Micro-Grid with PV, Fuel Cells, and Energy Efficiency, Tom Hoff, Clean Power Research.com
AZ Imports 90% of Fossil Fuels
! Imports all natural gas; $1.5 to 2.5 billion/year on natural gas for electricity and heating
! Imports 66% of coal; coal imports $500 million/year; total coal costs $900 million/year
! AZ TOTAL electricity fuel costs/year:
$2.5 - 3 billion ! Retail electricity costs in AZ 2010:
$7 billion http://www.eia.gov/state/seds/data.cfm?incfile=/state/seds/sep_sum/html/
rank_pr_cl_es.html&sid=AL
Agenda
! Background and Key Concepts ! AZ's Electricity Mix ! The AZ Corporation Commission (ACC) ! What does electricity "cost“? ! Coal and Natural Gas in AZ ! Huge Jobs Potential -- and Possible Threats-- to AZ’s
Clean Energy Future ! Regional Clean Energy: Integrating Large Amounts of
Distributed and/or Clean Energy ! The ACC and the public sector
ARIZONA AVERAGE COAL COSTS 2004-2011
The average cost of coal in AZ is up
8%/year from 2004-2011
Coal By The Numbers
! U.S. utilities purchase ~$40 BN/yr coal ! $40 BN coal = $160 BN coal-fired
electricity ! $160 BN/yr in coal-fired electricity = $187
BN/yr in health damages alone, plus ! $530BN/yr total damages for life-cycle of
coal per Harvard School of Public Health Study
• http://thinkprogress.org/climate/2011/02/16/207534/life-cycle-study-coal-harvard-epstein-health/
Coal’s Externalities / True Costs
Dr. Paul Epstein, Harvard study, Feb. 2011 “Full Cost Accounting for the Life Cycle of Coal”,
Coal-fired power plants produce 50% of U.S. electricity. Coal costs the U.S. $500B annually over its life cycle (extraction, transport, processing, and combustion)
• $74B in public health burdens in Appalachian communities • $187.5B from health costs of cancer, lung disease, and respiratory sickness in other parts of the U.S. • $29.3B from mercury impacts • $205B from carbon emissions’ climate impacts on land use, energy consumption, and food prices • $18B from the costs of cleaning up spills of toxic waste, the impact of coal on crops, property values, and tourism Externalities would raise costs of electricity from coal-fired plants, from $0.10 / kWh to $0.28 / kWh, shifting it from one of the cheapest sources of electricity to one of the most expensive.
Cost of Natural Gas - More Volatile Since 2000
Hurricane Katrina
Oil at $147/barrell
NYMEX Cost Of
Natural Gas
11/13/13: $3.61
Coal, Electric Utilities Spend Heavily on Lobbying
http://www.motherjones.com/environment/2012/04/beyond-coal-plant-activism?page=3
Health Effects from Burning Fossil Fuels are Enormous
Health Benefits = 30x Cost of Clean Air Emissions Controls
http://www.epa.gov/air/sect812/feb11/graphicsstack.pdf
Costs
Benefits
$72.5 billion for Fossil Fuels
$12.2 billion for Wind and Solar
Total 10-year spending: $645 million
AZ Renewable Energy Standard (RES) is 15% by 2025
Year Requirement
2008 1.75 %
2011 3.00 %
2014 4.50 %
2017 7.00 %
2020 10.00 %
2024 14.00 %
After 2024 15.00 %
AZ’s RES means that 15% of the kilowatt-hours generated by regulated utilities come from ‘clean energy’: solar, wind, biomass, solar hot water, concentrating solar etc. by 2025… AZ’s RES is far lower than Colorado (30% by 2020), California (33% by 2020), Nevada (25% by 2025) New Mexico (20% by 2020)
RPS Policies
Renewable portfolio standard
Renewable portfolio goal
www.dsireusa.org / February 2012
Solar water heating eligible * † Extra credit for solar or customer-sited renewables
Includes non-renewable alternative resources
WA: 15% x 2020*
CA: 33% x 2020
NV: 25% x 2025*
AZ: 15% x 2025
NM: 20% x 2020 (IOUs) 10% x 2020 (co-ops)
HI: 40% x 2030
Minimum solar or customer-sited requirement
TX: 5,880 MW x 2015
UT: 20% by 2025*
CO: 30% by 2020 (IOUs) 10% by 2020 (co-ops & large munis)*
MT: 15% x 2015
ND: 10% x 2015
SD: 10% x 2015
IA: 105 MW
MN: 25% x 2025 (Xcel: 30% x 2020)
MO: 15% x 2021
WI: Varies by utility; ~10% x 2015 statewide
MI: 10% & 1,100 MW x 2015*
OH: 25% x 2025†
ME: 30% x 2000 New RE: 10% x 2017
NH: 23.8% x 2025
MA: 22.1% x 2020 New RE: 15% x 2020
(+1% annually thereafter)
RI: 16% x 2020
CT: 27% x 2020 NY: 29% x 2015
NJ: 20.38% RE x 2021 + 5,316 GWh solar x 2026
PA: ~18% x 2021†
MD: 20% x 2022
DE: 25% x 2026*
DC: 20% x 2020
NC: 12.5% x 2021 (IOUs) 10% x 2018 (co-ops & munis)
VT: (1) RE meets any increase in retail sales x 2012;
(2) 20% RE & CHP x 2017
KS: 20% x 2020
OR: 25% x 2025 (large utilities)* 5% - 10% x 2025 (smaller utilities)
IL: 25% x 2025
29 states + DC and PR have
an RPS (8 states have goals)
OK: 15% x 2015
PR: 20% x 2035
WV: 25% x 2025*† VA: 15% x 2025*
DC
IN: 15% x 2025†
Renewable Portfolio Standards
24 States Generate More Clean Electricity Than AZ! # Why? # Because the U.S. has nearly 6 times more wind
than solar – 60 GW wind v. 10 GW solar PV and CSP or Concentrating Solar Power).
# In most other states, solar is far more expensive than in AZ because they don’t generate as much electricity per installed watt of solar.
# See www.dsireusa.org/library by Justin Barnes, 3/6/12, RPS Update at Renewable Energy Markets Association webinar.
Solar in New Jersey v. Arizona
New Jersey ! 1,119 MW of solar energy currently installed ! 2012: $1.3 billion invested ! Average installed price down 27% from last year. Arizona ! 1,250 MW of solar currently installed ! 2012: $590 million invested ! Average installed price down 1% from last year. Why? ! NJ PUC committed to solar, Hurricane Sandy driving more clean
energy, higher rebates even though AZ solar generates electricity 20-23% of hours/year v. NJ 15% of hours/year.
http://www.seia.org/policy/state-solar-policy
AZ’s Commercial Sector Small Relative to CA and NJ
Total Installed Solar Power Per Million People Low In the U.S. Relative to Germany, Spain, Czech Republic –
even Canada!
Worldwide Solar Installations 2011
Saa http://cleantechnica.com/2012/12/11/renewable-energy-big-pic-including-34-charts-graphs/
Germany has 15x more solar per person
than the U.S.!
http://news.nationalgeographic.com/news/2013/08/130816-colorado-river-drought-lake-powell-mead-water-scarcity/#close-modal
National Geographic 8/16/13 Feds Slash Colorado River Release to Historic Lows
Colorado River 1999
Colorado River 2013
http://cdn.photo.lasvegassun.com/media/img/photos/2013/09/18/Waterlevels_web__.jpg
AZ Reservoirs: at 45.7% Capacity
http://climas.arizona.edu/swco/sep2013/arizona-reservoir-volumes
NM Reservoirs: at 16% Capacity
http://climas.arizona.edu/swco/sep2013/new-mexico-reservoir-volumes
Lake Mead: Minimum Depth for Generating Power: 1065-1050 Feet ! http://serc.carleton.edu/earth_analysis/
image_analysis/introduction/day_5_part_1.html
Water To Cool Power Plants = 50% of U.S. Water Withdrawals
! The U.S. Geological Survey (USGS) reports that 53% of all fresh surface water withdrawn for human use in 2005 was used by power plants.
! In 2009 the water footprint of U.S. electricity was approximately 42 gallons per kilowatt hour (kWh) produced.
! Average U.S. household requires 39,829 gallons of water for electricity; five times more than direct residential water use.
! 13% of total electricity used to move, treat and heat water.
USGS: Thermoelectric Power 48-53% of Total U.S. Water Withdrawals
http://pubs.usgs.gov/circ/2004/circ1268/htdocs/text-total.html
Public Supply: 11%
Domestic: Less than 1%
Irrigation: 34%
Livestock, Mining and Aquaculture: Less than 1% each
Industrial: 5%
Thermoelectric Power: 48%
Source: Burning Our Rivers, The Water Footprint of Electricity, by Wendy Wilson et al
April 2012 http://www.rivernetwork.org/sites/default/files/BurningOurRivers_0.pdf
Water Intensity of Electricity Generation
0
500
1,000
1,500
2,000
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Oil/gas
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Coal, I
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carb
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carb
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Solar C
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cooli
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gal/M
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Conventional Generation
Emerging Technologies
Renewables
Source: Western Resource Advocates “The Energy-Water Nexus: A Case Study of the Arkansas River Basin” 2008
Water Intensity of Electricity Generation
Agenda
! Background and Key Concepts ! AZ's Electricity Mix ! The AZ Corporation Commission (ACC) ! What does electricity "cost“? ! Coal and Natural Gas in AZ ! Huge Jobs Potential -- and Possible Threats-- to
AZ’s Clean Energy Future ! Regional Clean Energy: Integrating Large Amounts of
Distributed and/or Clean Energy ! The ACC and the public sector
Local v. Out-of-State Dollars
$73 of $100 spent
on locally-owned biz
stays local; while only $43 stays if non-
local.
AZ Solar Economic Potential: 6,000 -8,000 MW
Source: http://thinkprogress.org/climate/2012/04/30/473744/three-charts-that-illustrate-why-solar-has-hit-a-true-tipping-point/
! 6,000 – 8,000 MW x $2.5 to 3 million/MW = $15-18 BILLION
! To put this in
perspective, AZ spends $2-3 BILLION/year on fuel
! Solar would displace
fuel costs forever!
! If fuel costs stayed at $3 billion/year, and solar costs continued to fall, AZ could pay for the build-out with 5 years of fuel payments!
Cracks in the Current System # Germany: 59% renewable peak, grid fine. 10/30/13
# Solar/wind means less power from coal, nuclear; don’t “cycle.” # Solar steals peak demand, along with peak profits.
! Germany's RWE: “massive erosion of…prices caused by solar PV” “may…threaten the company's survival.” " RWE's share price has lost one-third of its value over 3 years.
# Coal replaces natgas when the cost is $3.50-4.00/MMBtu. # Natgas at $3.61 on 11/12/13.
# Net Metering is a big battle in many states: Idaho, Georgia, California, Texas and Colorado. # Idaho and Georgia PUC made pro-solar decisions. # AZ still in the balance, likely to add $20/month fee for solar.
Source: http://www.greentechmedia.com/articles/read/Germany-Hits-59-Renewable-Peak-Grid-Does-Not-Explode
Cracks in the Current System
! Lots of talk about the utility “death spiral” and the need for a new business model.
! Utility profits based on volume rather than value. ! Very high fixed costs for utilities:
" Nuclear has high labor costs; coal has high compliance costs; production costs rising.
" As more people put on solar, less people to pay for coal. # Fukushima: Huge unresolved issue with spent fuel that
needs to be moved; very difficult and potentially dangerous. 23 U.S. nuclear plants with same design.
http://www.renewableenergyworld.com/rea/news/article/2013/10/major-european-utility-set-for-dramatic-transformation?cmpid=WNL-Friday-November1-2013
What Are the Obstacles to More Clean Energy in AZ?
# Determine what is a solar kWh “worth”? 4 cents (utilities) or 22 cents (solar)
# Monopoly utilities “own” geographic territories, so reduced competition.
# AZ’s Renewable Energy Standard is very low. # Utilities currently lose money on clean energy and
energy efficiency, so have no financial incentive. # Economics of solar/wind different than coal, nuclear or
natural gas: clean energy costs are all up-front, while fuel-related costs are ~70% of lifetime fossil plant costs.
What Are Possible Solutions? ! Provide access to the Grid: Community Solar, who
owns? ! Provide access to Capital
" Support PACE (Property Assessed Clean Energy) " Support Extension of Federal Section 1603 Cash-in-Lieu-
of-Tax-Benefit (30%) " Solar securitization happening
! Utilities: rate-base (own) solar and get a higher rate of return for clean electrons
! Include Cost of Environmental/Health Externalities " Pay now or pay later
! Consider re-evaluating “avoided cost” for utilities " Doesn’t include value of water, health benefits " Doesn’t include time-value of solar
What Are Possible Solutions?
! Increase the REST from 15% by 2025 to ? ! Level the playing field for subsidies ! Use Life-Cycle Analysis ! When Modeling, Use a Range of Costs/Risks/
Discount Rates ! Allow the use of Master Limited Partnerships for
clean energy – not just oil, gas and biofuels. ! Increase Pilot Programs for Solar Hot Water,
Combined Heat and Power, Biodigesters etc. ! Solar Hot Water is a HUGE unused resource.
Section 1603: $581 Million Worth of Projects in Arizona To Date ! Section 1603 is a cash grant in lieu of taking a 30% solar tax
investment tax credit.
! Section 1603 expired on 12/31/11.
! AZ has rec’d $581 million in Section 1603 projects, mostly solar. http://www.treasury.gov/initiatives/recovery/Pages/1603.aspx
! The Solar ITC (Investment Tax Credit) expires in 2016 and should be extended.
http://www.pv-magazine.com/news/details/beitrag/us-congress-pulls-the-plug-on-section-1603-treasury-program_100005372/#ixzz1xWjx07I9
Agenda
! Background and Key Concepts ! AZ's Electricity Mix ! The AZ Corporation Commission (ACC) ! What does electricity "cost“? ! Coal and Natural Gas in AZ ! Huge Jobs Potential -- and Possible Threats-- to AZ’s
Clean Energy Future ! Regional Clean Energy: Integrating Large
Amounts of Distributed and/or Clean Energy ! The ACC and the public sector
Regional Clean Energy: What Does It Mean? ! Lots of studies going on right now, very complex
issues in predicting what will happen if power is shared regionally
! April 2013 report on Energy Imbalance Market (Western states) that sharing power regionally would save $94-$294 million the first year. " Why? Because when utilities share power they need less
‘reserves’, i.e. backup power. " With more geographic diversity and in greater amounts,
solar and wind are more reliable. ! Bottom line: sharing power can reduce a utility’s
need for more power plants; thus reduce profits.
http://www.westgov.org/PUCeim/meetings/2013sprg/briefing/present/m_milligan.pdf
The Solar “Duck” Graph
http://www.caiso.com/Documents/Apr5_2013InitialCommentsWorkshopIssuesR11-10-023.pdf
Agenda
! Background and Key Concepts ! AZ's Electricity Mix ! The AZ Corporation Commission (ACC) ! What does electricity "cost“? ! Coal and Natural Gas in AZ ! Huge Jobs Potential -- and Possible Threats-- to AZ’s
Clean Energy Future ! Regional Clean Energy: Integrating Large Amounts of
Distributed and/or Clean Energy ! The ACC and the public sector
The ACC and the Public Sector
! Need more transparency, better website, ability to track dockets more easily
! Need more stakeholder processes ! LOTS at stake!
" Jobs " Water " Climate change " Cost of electricity
Wrap-Up
! AZ in-state electricity: 2% solar, 50% coal ! AZ sends $2.5-3 billion/year out of state for
coal/natural gas. ! Net Metering debate: what is the 'value' of a
solar kWh? ! Clean Energy needs:
" Access to capital " Access to the grid " Stable, predictable policies
Thank You!
! Please don’t hesitate to call or email me ! I love these issues and am happy to explain ! I believe in AZ’s clean energy future!
Nancy LaPlaca Laplaca.nancy@gmail.com
480-359-8442
“The future’s so bright, I gotta wear shades.” Timbuk 3
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