Decoupling limitations & Solutions: Decoupling Part 3

When would decoupling be “anti-consumer?” If the future means selling less power, then less rate revenue means recovering past investments in coal power plants (now stranded assets) becomes impossible.  Investors will not earn their allowed returns.  Time to remove utility returns from the MONOPOLY board!  Decoupling solves this problem, and that’s exactly why some consumer advocate groups don’t like it.  Some claim the utilities made bad long term investments, so their investors should suffer the consequences of continuing to buy coal!  Maybe, but keep in mind, customers always bear the burden of the bad decisions made by the regulated monopoly.  Others rightly claim that decoupling alone only guarantees returns for the utilities and does nothing to lower rates for consumers. Decoupling alone does not encourage utilities to value demand management over production.  It only makes them indifferent to energy efficiency or alternative energy sources like DG.  Decoupling alone merely protects

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Why decoupling? Smarter renewable tech ahead!

Why Decoupling? The near future grid will be unrecognizable.  According to a recent report by GTM research, 9 out of 10 solar systems will be paired with storage by 2023.  Smarter tech ahead has a mean result of lower electric rates, decreased revenue, and the ability of customers to go “off line,” means utilities could soon be in a desperate state.  Without decoupling, we’ll see a world of mergers, hostile take overs, grid defection, and business crisis. At least in New Mexico, PNM recognizes that investing in the lowest-cost of power supply (solar + storage) is their best option.  However, real competition will continue to come from distributed generation (DG), including residential, commercial, and community solar systems.  Soon renewable energy technology will enable large power users to rely on microgrids through the addition of solar plus storage systems.  Once the utility starts losing the large industrial users, they will inevitably raise

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Decoupling Series: What is a regulated territorial monopoly?

This is part one of a three part series on the past, present and future of utility regulation alongside the growing renewable energy industry.  REIA supports introducing a decoupling mechanism to PNM because it will change the way utilities do business in New Mexico.  If you’re interested specifics about the rate case, that information is here. Status Quo Blues:  Regulated Territorial Monopolies Utilities set up as regulated territorial monopolies for a couple of reasons.  As utilities began, they needed enormous initial investment, a barrier to entry requiring government intervention.  With high fixed costs, utilities also needed large numbers of customers to obtain a meaningful return on investment.  Because competition created crisscrossed electric wire madness, the government allowed monopolies to form.  Competition usually discovers the optimal way to produce services to maximize profit and efficiency, so a monopoly does not naturally work to a customer’s advantage.  As a result, monopolies have potential

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Part 4- The solution, decoupling

decoupling

This is part 4 of REIA-NM’s ongoing NM Rate Case series. Click here for part 1. Click here for part 2. Click here for part 3.   There is a situation where solar and electric utilities can be friends.  A different revenue model, called decoupling, allows utilities to profit from the number of customers served instead of the amount of power they sell.  This removes solar and energy efficiency as a threat to revenue.  It also allows utilities to increase profit by increasing reliability, efficiency, and service.  A decoupling regulation allows the utility to recoup fixed costs and ideally, earn extra rewards for achieving environmental targets desired by their customers.  California, where decoupling began in 1981, uses 55% less energy that the national average, even though the population grew.  A growing population means more customers to serve for the utilities.  California leads the nation in solar installations as well, and

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Nevada Regulator, PUC, Gets It Wrong, Big Time.

utility deathspiral infographic PUC

Nevada Regulator (PUC) eliminates “retail rate” net metering for new and existing customers.  This is probably the most anti-solar regulation that we’ve seen so far.  In New Mexico, current solar customers enjoy net metering, which means the solar generates electricity and then turns the meter backwards in an equal 1 to 1 rate exchange.  A system sized offset to annual usage means the annual electricity used is around zero.   Taking away net metering means that solar customers pay more for their electricity than the amount they get paid to generate it from their solar investment.  In Nevada, the proposed change from 11.6 cents per kWh to 5.5 cents per kWh is a big hit.  To make matters worse, the PUC approved additional fixed charges, a number the regulators left up to the utility to determine.  According to Greentech Media, “Solar companies say the changes will lower net metering compensation

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NM rate case issues and overview part 3

arizona rate cases

This is part 3 of REIA-NM’s ongoing NM Rate Case series. Click here for part 1. Click here for part 2. Currently, it seems a solution for the utility will be a fixed cost “fee.”  However, customers will have less incentive to use less energy, or invest in alternative energy.  Fixed fees only ensures the utilities can recoup their expenses and profit. It will not recoup the “costs” of rooftop solar or energy efficiency to the utility, it will just eliminate a projected long term problem that more and more solar customers present for utilities.  In what’s referred to as load defection, solar customers use less energy and pay lower power bills–so the financial forecasts for utilities looks grim.  In Arizona, for example, where utilities had an access fee imposed on solar customers and approved by their regulatory body, solar installations decreased by 96%. It devastated the industry, companies went

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NM rate case issues and overview part 2

PNM interconnections

This is part 2 of REIA-NM’s ongoing NM Rate Case series. Click here for part 1. Last year’s NM rate case, submitted by the utilities in New Mexico, asked to impose an “access fee” for solar customers. REIA-NM and a number of other organizations, successfully argued against such a traditional solution to the problems arising in and stemming from their traditional business model which has failed to adapt to new technologies  The utilities claimed that solar customers should pay their fair share for the electricity they use at night, when the sun isn’t shining.  However, this “fee” doesn’t recoup any real expense to the utility.   In New Mexico, solar energy generated by customers makes up less than 1% of total generation.  In addition, many studies show that the benefits that solar customers add to the grid  outweigh the additional costs any night time generation may cost. It is an

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NM rate case issues and overview- part 1

public regulations commission

The current rate case conflict between the solar industry and the electric utilities, centers around utility regulation and the traditional business model of utility investing in fuel generation and transmission.  The utility then asks the regulating body (the PRC in New Mexico) to approve a rate case which consists of the costs plus a 10% profit. Since the electric utility companies’ revenue is tied to retail sales (customer rates), anything that reduces that return, like increased efficiency or solar electric power, becomes a bottom line problem. When the legislature mandated the utilities add renewable energy to their portfolio, the utilities complied.  It has set up a conflict.  The PRC wants to keep rates low for consumers, the legislators want more renewable energy, and the utilities need to recover large investments in infrastructure and fuel costs. Currently, rate increases are the only way to recover costs. If fuel costs keep going up, and the

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An Overview of the Photovoltaic Industry part 2

photovoltaic industry

Continued from “An Overview of the Photovoltaic Industry part 1″ Click here Lean engineering principles focused much of these competitive market efforts of doing more, with less. Four examples come to mind: Silicon wafer thicknesses (used within PV modules) are only 25% of what they were in the 1990’s. A PV module now vs. 2008 (with the same physical dimensions) can produce 25% or more power. PV module array mounting systems use significantly less aluminum than 10 years ago. PV module mounts now feature integral bonding between metal components for safety. Finally, at the end of 2016, the nationwide 30% federal income tax incentive will be reduced to only 10% for businesses and eliminated altogether for residential systems. This will immediately reduce the size of the possible customer base and will reduce the affordability of PV systems with the US. Many feel the industry should and will stand on its

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#SaveSolarNM Needs You

Looking for a tax deductible donation to give to this holiday season? How about #SaveSolarNM, the campaign organized by REIA-NM, the Renewable Energy Industries Association of New Mexico? We are working to create jobs, build an industry, and promote clean renewable energy, while at the same time creating new power solutions for the health and future of all New Mexicans. What does that mean? It means that REIA-NM is finding solutions to make solar more available to more people, supporting the local renewable energy industry, and contributing to a cleaner, brighter future. We engage in legislative action, lobbying for clean energy, and presenting bills to prolong the tax credits. We engage utilities to find solutions so more customers can enjoy solar power. We engage the public to inform them about issues that affect solar. We track technological advancements in renewable energy. Our members maintain ethical business practices. But we can’t

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