green lecture series: rethinking local energy choices and costs
TRANSCRIPT
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Rethinking Local Energy Choices & Costs
Abhilash “Abhi” Kantamneni| Engineer, Michigan Tech Keweenaw Research Center.
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Overview
Present Context
• Costs
• Consumption
• Sources
How did we get here?
• Legislative Acts and Impacts
Looking Forwards
• Policy Perspectives
Rethinking
• Individual
• Community
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8 Investor-Owned Utility Companies
9 Rural Electric Cooperatives
41 Municipal Electric Utilities
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Source: http://www.michigan.gov/mpsc
4 Investor-Owned Utility Companies
3 Rural Electric Cooperatives
19 Municipal Electric Utilities
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Utility Electric Rates
OC
REA
ALG
ER D
ELTA
UP
PC
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PR
ESQ
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ISLE
WEP
CO
GR
EAT
LAK
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DTE
ELE
CTR
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ALP
ENA
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WER
CO
NSU
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TRI-
CO
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CH
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YLA
ND
MID
WES
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THU
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AEP
MI AVERAGE RESIDENTIAL ELECTRIC RATES 2013[$/KWH]
MI Average: $0.14/kWhSource: MPSC Utility Company Annual Reports 2013
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Average Residential Electricity Retail Rates by State (2013)
StateAverage Price
[$/kWh]
Hawaii $0.37
New York $0.19
Alaska $0.19
Connecticut $0.18
Vermont $0.18
New Hampshire $0.17
California $0.16
New England $0.16
Middle Atlantic $0.16
Massachusetts $0.16
New Jersey $0.16
Michigan $0.15Source: www.eia.gov
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Average Residential Electricity Retail Rates by State (2013)
StateAverage Price
[$/kWh]
Hawaii $0.37
Houghton $0.21-$0.24
New York $0.19
Alaska $0.19
Connecticut $0.18
Vermont $0.18
New Hampshire $0.17
California $0.16
New England $0.16
Middle Atlantic $0.16
Massachusetts $0.16
New Jersey $0.16
Michigan $0.15Source: www.eia.gov
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Utility Electric Rate Increases
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MI AVERAGE RESIDENTIAL ELECTRIC RATE INCREASE 2001-2013
MI Average: 74%
Source: MPSC Utility Rates Summary
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Annual Consumption MI Average: 8MWh/Year
OC
REA
ALG
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ELTA
UP
PC
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PR
ESQ
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ISLE
WEP
CO
GR
EAT
LAK
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DTE
ELE
CTR
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ALP
ENA
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CO
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TRI-
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MI AVERAGE RESIDENTIAL ELECTRIC CONSUMPTION 2013 [MWH/YEAR]
Source: MPSC Utility Company Annual Reports 2013
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Utility Fuel Source Summary
Fuel Source USA OCREA UPPCO Region
Coal 39.10% 63.80% 54.11% 59.43%
Nuclear 19.18% 23.10% 23.08% 25.36%
Gas 27.57% 5.50% 8.90% 9.77%
Oil 0.67% 0.10% 0.50% 0.55%
Hydroelectric 7.07% 3.40% 9.55% 0.65%
Biofuel 0.00% 0.00% 0.45% 0.49%
Biomass 0.92% 0.10% 0.41% 0.45%
Wind 4.11% 2.80% 2.50% 2.75%
Wood 0.48% 0.10% 0.44% 0.49%
Other 0.71% 1.10% 0.50% 0.44%
Solar 0.20% 0.00% 0.02% 0.02%
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Present Context Review
Local > Region > Country
Local < Region < Country
Local = Region > Country
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How did we get here?
• Renewable Energy Standard
• Energy Optmization
• Net Metering
MI Public Act 295
• Electric Choice LimitationMI Public Act 296
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MI Public Act 295 (2008) Overview
Renewable Energy Standard
(RES)
10% of all retail electric sales for all
utilities in MI to come from renewable
sources
Energy Optimization Program (EO)
Authorizes EO surcharge on monthly
bills to finance customer Energy
Efficiency upgrades
Net Metering Program
On site renewable electric generation
with credits for monthly excess
generation
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Renewable Energy Standard
(RES)
All utilities on track to meet 10% RES by
2015
Cost of Generation from renewables
50% the cost of new coal generation
Energy Optimization Program (EO)
All utilities met or exceeded near term
targets
Cost of energy conservation 10%
the cost of new coal generation
Net Metering Program
Total customers self generating increases
from 20 to 1500
Total installed self generation increases
from 300*kW to 13,300kW
MI Public Act 295 (2008) Impact: Positive
* estimated
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Renewable Energy Standard
(RES)
MPSC currently makes no
recommendation
Bill to expand RES to 22% currently
pending
Energy Optimization Program (EO)
MPSC currently makes no
recommendation
Net Metering Program
MPSC Solar Working Group
makes 3 recommendation
s
Expand Net Metering to state
wide 50MW
Credit on net generation
Credit on generation
Several bills pending
Remove 1% cap
Allow community renewable generation
Allowing payment in lieu
of credit
MI Public Act 295 (2008): Moving Forwards
* estimated
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MI Public Act 296 (2008): Overview
Limits Electric Choice
Only 10% of utilities retail sales
may seek alternative supplier
Creates Exception for
Mining
Iron ore mining or processing not
subject to choice limits
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MI Public Act 296 (2008) Impact: Negative
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• Single line High-voltage transmission and low-voltage distribution are economical.
• High-capacity line minimizes capital costs and losses
• Transmission and distribution are natural monopolies.
Generation: Presque Isle Power Plant (PiPP) owned by WEPCOTransmission: American Transmission Company (ATC)Distribution: Upper Peninsula Power Company (UPPCO)
Source: www.econlib.org
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State Regulation: Michigan Public Service Commission (MPSC)Regional Regulation: Midwest Independent System Operator(MISO)Federal Regulation: Federal Energy Regulatory Commission (FERC)
Source: www.econlib.org
• Utility serves ALL customers in the area
• Utility maintains reliability and dispatches generation
• Utility designs rate structures to distribute costs (Cost of Service Study)
* Some coops, like REA have voluntarily chosen to regulate their own rates.
• Govt. grants utility monopoly over a service area
• State commission approves utility rates*
• State guarantees “fair” return on equity and “prudently” incurred expenses
• ‘Return on Equity’ high enough to attract capital, but low enough to be economical
Government Responsibilities Utility Responsibilities
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State Regulation: Michigan Public Service Commission (MPSC)Regional Regulation: Midwest Independent System Operator(MISO)Federal Regulation: Federal Energy Regulatory Commission (FERC)
Source: www.econlib.org
• Utility serves ALL customers in the area
• Utility maintains reliability and dispatches generation
• Utility designs rate structures to distribute costs (Cost of Service Study)
* Some coops, like REA have voluntarily chosen to regulate their own rates.
• Govt. grants utility monopoly over a service area
• State commission approves utility rates*
• State guarantees “fair” return on equity and “prudently” incurred expenses
• ‘Return on Equity’ high enough to attract capital, but low enough to be economical
Government Responsibilities Utility Responsibilities
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Problem: Electric Utility Markets are a “Zero-Sum Game”
Rates = Generation + Transmission + Distribution + Administration + Return on Equity
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YEAR UPPCO PRESS STATEMENTS*(emphasis mine)
UPPCOREQUEST (Annual)
MPSC DECISION
ROE [%]
2013“covering expenses for several
improvement projects and inflation”
$7,883,410$5,819,583(25% less)
5.80%
2011“Fund safety improvements to
McClure, Bond Falls, Victoria, and Prickett dams to comply with federal
standards”
$7,701,288$4,200,000(46% less)
6.27%
2010“Hydroelectric projects, Reduced electric
sales, increased cost for reading meters monthly, General inflation”
$15,559,133*$8,868,706(43% less)
7.12%
2009
“Hydroelectric facility upgrades, Cost of capital, Low sales growth, It's been three years since our last base rate increase” $12,182,239
$6,499,934(47% less)
7.83%
2006“inflation, new customer service system,
improve system reliability, and increased generator maintenance”
$6,230,897$3,813,000(42% less)
N/A
2005“recover costs associated with improving
service quality and reliability and managing rising employee and retiree
benefit costs”
$4,547,800UPPCO
withdraws request.
N/A
2002
“Our last rate increase was granted in 1993 and was phased in over two years,
1993 and 1994” $9,938,841$4,868,158(51% less)
N/A
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High Utility Costs
Businesses defect/downsize
Unemployment increases
Households can’t pay
bills
Electric sales decrease
Utility increases
rates
Grid Death Spiral
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State & Federal Legislation
Unforeseen Impacts
Local communities disadvantaged
Top Down Approach Pitfalls
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1955• Presque Isle Power Plant
(PiPP) built by Cliffs
1980• PiPP sold to WEC.
• Iron Ore Mining CompanyCliffs:
• Generation Utility based in WisconsinWEC:
• Coal fired Power Plant in Marquette, MI. Net Generation: 431MWPiPP:
Source: WNMU Public Broadcasting
Source: www.geo.msu.edu
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2000•ATC is formed
2001•MISO is formed.
• Independent System Operator (ISO)
• Maintains Reliability in Midwest Region
MISO:
• Nation’s first transmission only utility
• Builds and maintains Transmission in WI, UP
ATC:
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2004
• MISO and ATC create SSR Tarrifs
2008• MI PA 296 passes
• System Support Resource
• Gen. Units that HAVE to run to ensure grid reliability (92%/8% - WI/UP)
SSR:
• Regulates MI Electric Utility Markets
• Electric Choice limited to 10% of retail sales and iron ore mining Facilities
MI PA 296:
Source: http://www.michigan.gov/mpsc
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May 2013•Cliffs move from WEC to Integrys
Aug 2013•WEC notifies MISO of PiPP Closure
Oct 2013•MISO designates PiPP as SSR
Feb 2014•MISO agrees to pay WEC $52,230,000/year
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Mar 2014• PSCW sues MISO at FERC
July 2014• FERC orders MISO to do ‘load shedding’ study
• Wisconsin Regulatory Authority
• Oversees public utilities, serves public interest PSCW:
• Federal Energy Regulatory Commission
• Regulates interstate transmission of electricity, gas and oil.FERC:
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Aug 2014•MISO completes ‘load-shedding’ study
Nov* 2014•FERC schedules final settlement call
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Rethinking: The Bottom Up Approach
Drive Legislative change
Prototype and replicate
Community self determination
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Georgetown University Energy Prize Quarterfinalist: Houghton County
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What is GUEP? ($ 5,000,000)
•Quantitative (aggregate gas and electric consumption over 2 years)
•Qualitative (community engagement and involvement)
•Sustainability (planning for our energy future)
The $5 million GUEP challenges small- to medium-size towns, cities, and counties
to rethink their energy use and implement creative strategies to increase
efficiency.
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Category Points
Competition Performance
25
Innovation 15
Replication 15
Future Performance 10
Equitable 10
Education 10
Overall Quality 10
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Goals
Efficiency Alternatives Education Equitable
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Residential
Gas: 10%
Electricity: 10%
Municipal
Gas: 10%
Electricity: 10%
Efficiency Goals: 2016
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Energy Goals
2016
• Meet Net Metering Capacity
• Self Generation up by 500%
2025
• 25% Renewables
• 50% Regional Generation
2040
• 50% Renewables
• 100% Regional Generation
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Education Goals: 2016
10
0%
School Districts Energy Plan
Develop Energy Curriculum
Community Reached
Service Orgs
Churches
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Equal Access
Income
Age
Location
GenderVeteran Status
Ethnicity
Housing
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Houghton County will be a
model for rural communities
in creating an affordable,
sustainable, and community-
driven energy landscape to
support a vibrant regional
economy and high quality of
life for all its members.
Houghton County will be a model for rural communities in creating an affordable, sustainable, and
community-driven energy landscape to support a vibrant
regional economy and high quality of life for all its members.
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Georgetown University Energy Prize Quarterfinalist: Houghton County
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Thank You!
www.facebook.com/HoughtonEnergyEfficiencyTeam /
www.HoughtonEnergyEfficiency.com
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Contact Information
Abhilash Kantamneni
221 Rekhi HallMichigan Tech1400 Townsend DriveHoughton MI
www.SolarizeHoughton.org