Friday, June 26, 2009

Evolutionary Ecological Design

Evolutionary Solar CollectorNearly all known life is powered by the sun. A recent press release by the Mitsubishi Corporation announcing the development of a highly-integrated organic photovoltaic (OPV) module gives us a glimpse of our future in which energy solutions are grown to gather, rather than mined to be melted or burned.

For now, we must promote the economical solutions that exist. Not only because of their current economy, but because they are promising leads or catalysts for a sustainable energy future. For energy solutions, economy comes down to life-cycle cost-per-watt[1]. Any particular technology will remain a nifty toy until cost parity with extant solutions is reached. Even if a technology proves itself in the field, inordinate expense will consign it to its niche(s). Scarce, hazardous, or intractable materials; exorbitant energy requirements for production; and/or untamed complexity can conspire to keep a technology a promising curiosity.

Organic and biological technologies in conjunction with the practice of ecological design techniques, such as biomimicry, promise to help overcome today’s constraints. Despite the designs of Monsanto and their ilk, we can look forward to someday freely sharing ‘seeds’ that will ‘grow’ into systems that gather and concentrate energies other than food calories. The day may come when money does grow on trees.

That day may be brought closer through the convergence of organic technologies and ecological design with yet another crucial design method derived from biology: evolutionary computation.

Bill Gross, the founder of Idealab, has made a fascinating presentation on genetic algorithms - a particular application of the evolutionary computation method - as applied to the design of a solar collector. While elegant, this design remains a somewhat static, mechanical solution. Dynamism and adaptability are hallmarks of life. Organic and biological technologies allow these central attributes to be incorporated into more flexibly responsive designs. This joining of biotechnology, evolutionary computation, and ecological design is evolutionary ecological design.

This approach to design should be applied not only to technological solutions, but also to organisms of social policy. As Rate Crimes has stated before in the context of analyzing the design of rate schedules, energy policy is the design for society. Astounding technologies, beautiful design, and even magic will remain bereft of power in the face of bad public policy.

Energy policy should be informed, consistent, and adaptable. Today, it is too often rigidly reactionary in defense of atrociously bad decisions born of a dangerous status quo. By applying modern design techniques, this blundering beast may be encouraged to evolve into a more graceful creature.

[1] Cost accounting should be comprehensive, but we have a spectacular collective talent for deluding ourselves by ‘externalizing’ and hiding real costs.

Wednesday, June 24, 2009

School of Red Herring

School of Red HerringOpponents of solar energy are fond of piscine arguments. Most particularly, they have a taste for those of the specious species clupea rubrum, the red herring. Floundering about in the school of red herring is the least nimble and toothless argument that solar energy requires subsidies to be economical.

The analyses described in Money from the Sun show that even without incentives, in sunny climes such as that enjoyed by Arizonans, supplemental solar electric energy realizes investment returns equivalent to comparable, low-risk traditional investments. This was the case in 2004 when the avoided cost of electricity from the utility grid was at an historical low in Arizona, and before much of the financial system was revealed to be illicit.

Rate Crimes has revealed the long-standing economic manipulations required to repress the value of solar energy and other energy conservation strategies in Arizona. Solar energy would require no subsidies in a market free of manipulations, and where enormous existing investments had not themselves been made possible by perhaps the greatest example of domestic public largess to a single industry in U.S. history: the Price-Anderson Nuclear Industries Indemnity Act. Further enormous subsides to the competing traditional fuel industries include tax allowances for depletion and depreciation.

The sun and the wind do not qualify for depletion allowances. If subsidies are required for solar, wind, other truly renewable energy sources, it is only because they must begin rising from the cold underwater far below where the red herring swim.

Monday, June 22, 2009

A Comedy of Scale

The annual operating costs for the Palo Verde Nuclear Generating Station are on the order of $350 million. These costs include fuel, maintenance, and operation. The 2009 costs for the distributed energy portion of the Renewable Energy Standard and Tariff (REST) rules are on the order of $17 million. Solar electric energy is only one of many possible components of this $17 million. The costs for the solar fraction are smaller by at least an order of magnitude than the costs to operate Arizona’s nuclear power plant.

REST Distributed to Nuclear Costs

From another perspective, the 2009 costs for the distributed energy portion of the REST are about twice the combined annual compensation for the CEO’s of the utilities regulated by the Arizona Corporation Commission.

REST Distributed to CEO Compensation

Questions of Constitutional jurisdiction aside, it seems - on the face of it – a rather ridiculous exercise to challenge the value of the REST, and downright laughable to describe the rules as “draconian renewable energy requirements.”

It is difficult to defend a rather disappointing investment in our children’s clean energy future. Yet, for now, ‘it’s all we got’ in a sun-soaked state where dark clouds instantly gather over any faint glimmer of leadership.

Friday, June 19, 2009

Kabuki Theatre

Arizona Corpulent Kabuki Mask

The topics discussed by Rate Crimes, for the most part, have been technical, and somewhat arcane. It has been necessary to lay a firm foundation for the ongoing exposé. This approach may imply an objectivity that is not intended. Rate Crimes attempts to maintain accuracy and to achieve clarity. Objectivity is not a value held dear. After all, how much objectivity should a platform titled, “Rate Crimes”, pretend? Dissent in the face of enormous inertia - not objectivity - is the Grail.

To be explicitly clear, Rate Crimes advocates the rapid adoption of solar energy in order to achieve a simple majority of the energy mix in the American Sun Belt of the Desert Southwest before today’s newborn attain their legal majority. This may afford the next generation the opportunity to bring solar energy to a supermajority of their energy mix, and effectively eliminate toxic sources of energy within their lifetimes.

Because of its extraordinary solar resources, its current toxic energy mix, and a number of other factors, this goal must particularly apply to the state situated at the center of the sunny Desert Southwest: Arizona.

Kabuki Theatre is a more topical discussion that may illuminate the pertinent arguments.

Rate Crimes has criticized the Renewable Energy Standard & Tariff (REST) rules established by the Arizona Corporation Commission (ACC) as being far too generous to the “natural” monopolies ossified into their rigid paradigm of central generation. Considering the inertia faced by the Commission, the REST could be celebrated as a victory. Yet, this slender triumph would be stripped away by forces that might appear to some to be imperceptive.

The Goldwater Institute has brought suit against the ACC on the grounds that “it has expanded its powers beyond its constitutional jurisdiction” by adopting “sweeping new rules requiring utilities to derive a specified share of their power from alternative sources.” The Institute claims that, “The [REST] rules have resulted in rate surcharges to residential and business customers that will total millions of dollars.”

The ACC was established under the Arizona Constitution with limited power to regulate utility rates. From the direct evidence of swelling electricity bills, and from Rate Crimes’ analyses, it should be obvious that the Arizona Corporation Commission has failed to regulate utility rates to any ends but to those that benefit the energy regime.

It should also be obvious that, no matter what, terminal electricity consumers (i.e. residential ratepayers), even with the flexibility afforded by home ownership, end up paying the real (and abstruse) cost of electricity through the hidden tax of higher costs for goods and services supplied by the captive and overcharged small business sector. Prestidigitation, indeed. Still, it is surprising that the Goldwater Institute would apparently fail to recognize this, and then blame the scant promotion of solar energy by a few ACC stalwarts as the culprit for what they believe are inordinate and inequitable energy costs.

The Goldwater Institute’s lawsuit reinforces the perception that the ACC is an independent regulatory body. There is much activity generated by the “fourth branch of Arizona government”, but there are few evidential results to confirm this hypothesis.

The Arizona legislature’s creation of the Residential Utilities Consumer Office (RUCO) also reinforces this perception. Even if RUCO has controlled apparent utility costs to any extent for residential ratepayers, it would not be surprising if the costs passed through to hapless homeowners and renters by the subsequently overcharged small business sector did not correlate with the costs for operating RUCO over the past quarter century.

The evidence does show that the ACC is a machine constructed and/or shaped for the purpose of prodigally consuming time in order to maintain a narrowly profitable status quo. These pirates sail seas with quarterly horizons. If the Goldwater Institute was honestly concerned about equitable energy costs, then they would be suing the electric utilities for the multi-million dollar annual compensation packages awarded to their CEOs, or alternatively donating their lawyers’ fees to an energy fund for renters.

In the context of monopoly - nominally “natural”, or not - the chant of “free market” is a tired mantra. There is no free market here. There is central planning. The only question that remains is, “Who does this planning serve?” As has been said here before, rate schedule design, as a central tool of energy policy, is the design for society; at least, for a society with seemingly unbounded appetite.

So why is the Goldwater Institute injecting themselves into this elaborate and bewildering dance of masks and hidden meaning? Is it to constrain an unruly performer who has broken character? Was even a slight promotion of solar energy too much to countenance? Is RUCO too ineffectual in their role to any longer maintain the illusion? Is the Institute performing under their own illusion that their ‘free market’ faith represents salvation? Is the Institute the narrative voice standing outside the action to reveal to us the antagonist’s motivations of extraction and distraction? Are the only protagonists present in the theater sitting in the audience?

Sotto voce. Wakiri masu ka?

Wednesday, June 17, 2009

Shell Game

Arizona Shell GameIn Arizona, with its abundant solar resource, supplemental solar electric energy has long been an extraordinary investment . . . at least, in the residential sector. In the commercial and industrial sectors, the electricity rate schedules are structured to defeat the value of solar energy and other energy management strategies.

It seems a strange twist to defeat the value of solar energy for the sectors that are most active - and therefore whose energy demand is highest - during the middle of the day when the Arizona sun is blazing.

It is a revealing twist. Residential consumers are terminal energy consumers. Unlike businesses, they cannot pass on their costs through increases in prices for goods supplied and services rendered.

Large commercial and industrial electricity consumers in Arizona enjoy a generous subsidy because their average cost of electricity is much lower than for the other sectors due to the declining block structures of the commercial rate schedules. Therefore, the largest electricity consumers have too little incentive to implement energy management strategies in order to avoid these low costs. Small businesses pay a much higher average cost for electricity. However, the rate plan structures still defeat the value of solar energy for them.

Furthermore, small businesses who might best take advantage of the benefits of solar energy, and subsequently lower the local grid infrastructure costs, suffer from greater constraints compared to larger businesses. Small businesses more often have limited freedom of action because they do not own their property; they have fewer man-hours to dedicate to special projects; they have less diversity of skills; and they have far less available capital. They are a captive energy market.

The illusion that residential energy costs are kept low has been reinforced by the presence of the Arizona Residential Utilities Consumer Office (RUCO). Despite the freedom of action and investment advantages enjoyed by homeowners, the real cost of electricity is hidden in the increased costs of goods and services provided by Arizona’s small businesses. Renters enjoy no advantages. Effectively, a hidden tax has been created.

Perhaps ironically, the presence of RUCO may be contributing to the delayed adoption of solar energy and energy conservation.

Tuesday, June 16, 2009


Rate Crimes exists to explain how and why the tipping point for solar energy has been stalled for at least a decade. Because solar energy has myriad benefits, it is crucial to the future of our society. Any intentional delay of its widespread adoption is a crime of national and even global consequence. Arizona sits at the center of the Sun Belt in the American Southwest. Arizona today is air-conditioned predominantly with coal, gas, and nuclear energy. It is unnecessarily a generator of enormous entropy.

Note: Full resolution versions of all the images may be viewed by clicking on the thumbnails.

The bulk of Arizona’s population is centered around its capitol city, Phoenix. Phoenix is situated in the Sonoran Desert below the mountains to the north and east that provide much of the water that slakes the thirst of nearly five million people living in what is commonly known as the Valley of the Sun. The Valley enjoys an average of 334 days of sunshine per year. The average high temperatures are over 100 °F (38 °C) for almost five months each year.

These millions and the sweltering summers put a demand on the electricity grid that peaks at above ten gigawatts. The population’s monthly average peak demand for each hour of the day varies each month.

Arizona Monthly Average Aggregate Electricity Demand by Hour

The summer months of May through October have a consistent demand pattern with a maximum peak demand that occurs at about 5:00 p.m. The minimum peak demand occurs at the opposite point in the turn of the globe at about 5:00 a.m.

Arizona Summer Monthly Average Aggregate Electricity Demand by Hour

The winter months of November through April also have a consistent demand pattern that is relatively flat with two small maximum demand peaks that occur at about 8:00 a.m. and 8:00 p.m.

Arizona Seasonal Average Aggregate Electricity Demand by Hour

Solar energy could play an important role in diminishing demand.

Arizona Seasonal Average Aggregate Electricity Demand and Solar Resource by Hour

However, solar today supplies only a miniscule portion of the energy required to meet an enormous demand.

Arizona Summer Average Aggregate Electricity Demand and 2009 Solar Production by Hour

The peak availability of solar energy precedes the summer maximum peak demand by as much as four or five hours. Until energy storage becomes less expensive, even west-facing solar arrays cannot resolve this issue. Much of this delayed energy consumption is due to thermal lag. Heat is absorbed by buildings and their surroundings during the hottest time of the day. This heat must be shed to maintain interior comfort. Today, much of this cooling is accomplished by burning coal, gas, and uranium to power electric cooling systems. Much of this cooling need is due to structures that are poorly designed, and poorly oriented for the desert environment. There has also been lack of attention to exterior energy management solutions such as shade trees.

Arizona Summer Average Aggregate Electricity Balance by Hour

The same situation exists during the winter but at a much lower level.

Arizona Winter Average Aggregate Electricity Balance by Hour

Solar energy represents a potentially enormous clean energy source.

Arizona Summery Average Aggregate Electricity Savings by Hour

The electric utilities serve their purposes by focusing on the difference between the maximum peak demand and the current inability of solar energy to lower it significantly. However, the rate schedules of these very same utilities not only directly defeat the value of solar energy but also defeat it indirectly and doubly by diminishing the value of energy management solutions that would lower the peak energy demand.

Arizona Summer Average Aggregate Electricity Savings by Hour

Rather than promote solar energy at the very center of the Sun Belt, the Arizona electric utilities and their partners have chosen to squander limited, unmanageably toxic, and increasingly expensive resources for immediate gain rather than to extend the availability of these resources to future generations who might use them with greater wisdom.

Saturday, June 13, 2009

Arizona Solar Electric Watts per Capita

Arizona, even with its extraordinarily abundant solar resource, delivers only a meager three watts of nominal photovoltaic installed capacity per capita. Three watts for each person in Arizona.

From the inverse perspective, each 100-watt photovoltaic module in Arizona is shared by thirty-three people. The smallest supplemental solar electric system that proves economical for a typical home is approximately 1,000 watts. An Arizona home with ten, 100-watt modules on its roof would feel quite crowded sheltering 330 people. In Arizona today, satisfying the demands of 330 housemates would require a large amount of electricity generated by distant coal and nuclear power plants.

Arizona generates approximately 37 percent of its electricity from coal, 32 percent from natural gas, 25 percent from nuclear, 5 percent from hydroelectric, and less than 1 percent from renewables[1]. While each Arizonan annually receives about seven (7) kilowatt-hours of electricity from photovoltaics, each receives more than six thousand kilowatt-hours from coal, five thousand from natural gas, and another four thousand from nuclear. All tolled, more than two orders of magnitude more electricity is delivered to Arizonans from sources other than solar.

33 Arizonans with their solar module

Three dozen Arizonans share their single 100-watt module.

This situation exists today despite the fact that solar electric energy has long been an excellent investment. Repressive rate plan structures have defeated the value of solar energy for many years; and defeated it most for those with the greatest capital resources.

[1] Energy Information Administration (

Friday, June 12, 2009

Sun Belt Rate Plan Survey

Of the hundred largest electric utilities (by customers served), fourteen are located in the sunny Southwest (excluding the unregulated utilities in Texas).

Of these fourteen, three have commercial rate plans with structures that defeat the value of solar energy and energy conservation measures. These utilities are: Arizona Public Service, Salt River Project, and Tucson Electric Power. All are Arizona utilities.

El Paso Electric Company (ranked 112) also has such a rate plan structure. El Paso Electric shares ownership of the Palo Verde Nuclear Generating Station located about 50 miles west of downtown Phoenix, Arizona.

Electric Utility




Declining Block

Demand Period

% Palo Verde

Arizona Public Service







Salt River Project







Tucson Electric Power







Los Angeles Dept. of Water & Power







Pacific Gas & Electric Co







Sacramento Municipal Utility District







San Diego Gas & Electric







Southern California Edison







Xcel Energy







Public Service Co of NM







El Paso Electric Co







Nevada Power







Sierra Pacific Power Co







Oklahoma Gas & Electric Co







Rocky Mountain Power







Sources: Department of Energy, Energy Information Administration, “Annual Electric Power Industry Report (2007)”. Utilities’ published rate plans.

Thursday, June 11, 2009

Solar Derated

If electricity from the grid was free, then an investment in on-site solar electricity generation would have little economic value. Because energy comes from the grid at great apparent and hidden costs, solar electricity has extraordinary value. However, the economic value of solar electricity generated on-site is determined by the retail cost of the least expensive competing energy whose purchase can be avoided. The economic value of solar electricity is not necessarily determined by the price you pay for electricity under your currently subscribed rate plan. Rather, it is determined by the plan with the least expensive energy for your consumption pattern from all the rate plans available in the market for your sector and for which you are qualified to subscribe. This is true for an investment in any energy management strategy.

For any particular rate plan, the avoided cost value of solar electricity can be visualized, just as can be the average monthly retail cost of electricity. Here is the average monthly retail cost of electricity per kilowatt-hour for commercial ratepayers under the Arizona Public Service (APS) E-32 commercial rate plan:

APS E-32 average monthly retail cost of electricity per kilowatt-hour for commercial ratepayers

Here is the average monthly avoided cost value per kilowatt-hour under the Arizona Public Service (APS) E-32 commercial rate plan for electricity generated on-site by a solar electric energy system providing 10% of kilowatt-hours consumed:

APS E-32 average monthly avoided cost value per kilowatt-hour

The key observation Рand the linchpin of the Rate Crimes expos̩ Рis that the avoided cost value of solar electricity and other energy management strategies has long been dramatically lower than the retail cost of electricity under particular rate plans.

Combining the two visualizations above into a ratio of avoided cost to retail energy cost produces this visualization:

APS E-32 ratio of avoided cost to retail energy cost

The avoided cost value of solar electricity is half that of the retail cost of electricity for a great portion primarily because of the uncontrollable billing demand, and a precipitous declining block rate structure compounded by the uncontrollable billing demand being used as a multiplier for the extents of the expensive initial block.

Wednesday, June 10, 2009

Avoided Blocks

When an electricity rate plans incorporates a block structure there are important ramifications for avoided costs. In an inclining block structure, electricity is first purchased at a relatively low price until the upper limit on the initial block is reached. Electricity purchased in subsequent blocks is increasingly more expensive. In an inclining block structure, the electricity generated by a supplemental solar electric energy system first eliminates electricity purchases from the most expensive block.

Solar eating into an inclining block rate structure

Conversely, in a declining block structure, the electricity generated by a supplemental solar electric energy system first eliminates electricity purchases from the least expensive block.

Solar eating into a declining block rate structure

In order to achieve maximum return on investment from a solar electric energy system – or an investment in any energy management strategy – it is important to eliminate the most expensive purchased energy.

The visualization for the average summer monthly retail electricity cost for the Arizona Public Service (APS) E-12 standard residential rate plan (with an inclining block structure) exposes an almost flat pricing scheme, but an investment in solar will first eliminate expensive energy.

The visualization for the average summer monthly retail electricity cost for the Arizona Public Service (APS) E-32 commercial rate plan (with a declining block structure) exposes a pricing scheme that slopes down as both consumption and demand increase. An investment in solar under this rate plan will first eliminate the least expensive purchased energy.

Also, in the APS E-32 commercial rate plan, not only can solar not control billing demand, but the uncontrollable demand is used as a multiplier for the first block of the most expensive purchased energy!

Double whammy!

Tuesday, June 9, 2009

Billing Demands

In discussions on the topic of energy, the term ‘demand’ carries multiple meanings. When referring to an individual consumer’s measured moment of maximum electricity consumption within the monthly billing period, the term billing demand is used to distinguish this from the aggregate community demand as faced by the electric utilities. Billing demand is measured in kilowatts (kW). Community demand is measured in megawatts (MW), or gigawatts (GW).

Electric utilities are very concerned about peak demand (or peak load) periods in which inordinately higher supplies of electrical power must be delivered over a sustained period to the community. These periods may occur on daily, monthly, seasonal, yearly, and climatic cycles.

In the structures of rate plans, there is often a billing demand component. This is more frequently a component of commercial rate plans, and less frequently a component of residential rate plans. In commercial rate plans, the typical duration of the period of measurement is fifteen or thirty minutes. When it occurs in residential rate plans it often has a longer duration. Frequently, the duration in residential plans is thirty minutes or an hour.

It is crucial to recognize that the billing demand measurement period can begin at any moment during the monthly billing cycle: day or night, weekday or weekend, holidays, emergencies, etc. This is the case for each measurement period even when a rate plan incorporates multiple distinct billing demand periods, as in some time-of-use (TOU) plans.

Arbitrary Timing of Billing Demand Measurement

A roving onset for billing demand measurement results in unpredictability: Thereby, defeating energy management strategies by diminishing their economic benefits. Most energy management strategies are designed to decrease energy consumption. By doing so, one might conclude that demand is also diminished. This is true for the majority of moments. However, one must account for anomalous peaks. An anomalous peak may begin at any moment within the monthly billing cycle. An example would be an extravagant holiday party with a multitude of guests and live music. You may have controlled your peak demand everywhere else throughout the entire month, but your tenth anniversary celebration will explode your electricity bill and devalue your investment in energy management. Less extreme examples abound. In order to affect billing demand, energy management measures must quell every potential peak of billing demand.

In combination with roving onset, the duration of the measurement period is an important magnifying factor. While a longer duration tends to soften the effects of short-lived anomalies, a shorter duration magnifies their effects.

The effect of local demand on a community’s aggregate demand is negligible. A community’s aggregate, peak demand is more closely correlated with aggregate local consumption, rather than aggregate local maximum demands. Local demand primarily affects the capacity requirements of the nearby grid. Controlling these requirements better controls the utility’s costs and therefore may lower the overall cost of energy. Rate plans should be designed to achieve this laudable goal. Yet, narrow measurement periods that diminish the predictability of energy management measures, and thereby their economic value, act in opposition to this goal most egregiously in just those areas where small businesses tend to congregate.

Solar energy is a consistent and reliable form of energy generation in Arizona. Its generation pattern correlates well with the community’s aggregate energy demands. Aggregate solar energy may be occasionally diminished due to weather, but in this circumstance the community’s aggregate demand also decreases. Yet, locally, fifteen or thirty minutes of overhead clouds will prevent solar from cancelling peak billing demand for that month.

Solar energy may not consistently match the consumption pattern of a particular business. These consumption patterns vary dramatically both across and within businesses. A solar electric energy system that is properly sized will perform effectively in reducing consumption. However, there is an inverse relationship between the size of a business and solar’s ability to diminish demand. Large businesses with highly-regular, primarily midday operations and larger solar electric systems are more likely to experience a predicted reduction in their maximum demand. Small businesses most often will not.

In practice, solar and other energy management strategies have little effect on billing demand because of the structures of rate plans. One mistake, on unusual event, one brief rise in demand and you will pay.

In the Arizona Public Service (APS) E-32 commercial rate plan the demand is “based on the average kW supplied during the 15-minute period of maximum use during the month.

Someone is betting you’ll slip up.

Sunday, June 7, 2009

Block Structure

Electricity is often sold to ratepayers in variously priced ‘blocks’. In any plan but the rudimentary “flat rate” plan, each block (but the last) has an upper limit on the amount of electricity purchased at that particular price. Each block may be limited by a fixed amount or calculated based on a multiplier. This multiplier is often based on billing demand.

In a declining block rate structure, the initial amount of energy that you purchase from the utility is the most expensive per unit of energy. The electricity in each one, or more, following price blocks is less expensive than that in the prior block. Some utilities tout this as a “volume discount.”

Declining Block Rate Structure

In the inverse structure - an inclining block rate structure - the initial amount of electricity purchased is the least expensive per kWh. Thereafter, the price of electricity increases for each subsequent block.

Inclining Block Rate Structure

The slopes of the surfaces in the Rate Crimes visualizations are artifacts of the corresponding declining and inclining block structures of the rate plans. In the retail electricity cost visualizations, each value is the summer monthly average retail cost of electricity for a particular amount of consumption and a particular billing demand. It is important to recognize that each plotted value is an average of the cost of electricity from multiple price blocks.

The Arizona Public Service (APS) E-32 commercial rate plan incorporates a declining block structure. Therefore, the slope falls as kilowatt-hour consumption increases. The slope also falls as billing demand increases. Here is the visualization for retail cost per kilowatt billing demand for the same rate plan:

APS E-32 Average Summer Monthly Retail Cost of Electricity per Demand

In the visualization for the Arizona Public Service (APS) E-12 standard residential rate plan the slope climbs as consumption increases. There is no demand component in this rate plan.

Block pricing is one technique that allows for rate plans to be structured in order to pursue economic, social and political goals.

Saturday, June 6, 2009

Electricity Rate Plan Visualization

It is crucial that energy costs be accurately accounted in order to establish valid policies. Yet, in any forum where energy is discussed, retail energy costs are typically presented as an average, or as a range of values. Even in conversations amongst economists, engineers, scientists, business leaders, policy makers, and others who help guide our energy future, superficial valuations proliferate. Blunt statements of cost nearly always exclude associated economic, competing, and externalized costs. More dangerously, such simplification disguises a complex and telling reality.

Electricity is sold variously to three major economic sectors: residential, commercial, and industrial/large commercial. Other sectors exist (nonprofit, schools, government, institutional), but sales to these sectors are either peripheral, or resemble the industrial sector. For example, large universities are given discount pricing similar to that enjoyed by large industrial customers. The utilities provide several energy rate plans in each sector.

The salient elements of the structures of electricity rate plans are consumption (obviously), billing demand, (daily) time-of-use, season, basic fees, and subscription. It can be daunting to understand the interactions between these elements that result in the real - rather than apparent - cost of electricity.

Energy consumption is measured in kilowatt-hours (kWh). It is simply the total amount of electricity consumed during the billing cycle (usually, one month). If the rate plan structure has a ‘time-of-use’ component, then electricity consumption can be billed at different rates at different times of the day, and also on different days of the week. Usually, electricity is less expensive during the weekend. Sometimes, electricity is also less expensive on holidays. Prices can also vary across seasons. Seasonal pricing usually depends on regional climate.

If consumption is the steady filling of the pool with a garden hose, then demand is extinguishing a blazing home with a fire hose. It is the interval of peak energy consumption during some day of the month when all the gadgets are turned on. Demand is measured in kilowatts (kW). In the APS E-32 rate plan, the demand is “based on the average kW supplied during the 15-minute period of maximum use during the month.” This 15-minute period may occur at any time, day or night, and on any day of the month. The maximum demand is also likely to change from month to month, and from season to season.

Here is the average monthly retail electricity cost per kilowatt-hour plotted across both monthly kilowatt billing demand and kilowatt-hour consumption for the Arizona Public Service (APS) E-32 commercial rate plan during the summer season:

APS E-32 Average Summer Monthly Retail Cost of Electricity
APS E-32 Average Summer Monthly Retail Cost of Electricity for Small Businesses

The first chart displays values for the entire 0-to-3,000 kW range of possible demand for the APS E-32 rate plan. Ratepayers with demand greater than 3,000 kW are subscribed to the E-34 commercial rate plan for the largest industrial energy consumers. The second chart displays a very small range of values under the E-32 rate plan below 20kW demand for which the plan has no billing demand component, only consumption. Therefore, the surface slopes only along the consumption (kWh) dimension. Only demand to consumption ratios that fall between ten and ninety percent are plotted.

In contrast is presented the average monthly retail electricity cost per kilowatt-hour for the Arizona Public Service (APS) E-12 standard residential rate plan during the summer season. Because this plan has no billing demand component, the average monthly cost per kWh is plotted only across kilowatt-hour consumption:

APS E-12 Residential Average Summer Monthly Retail Cost of Electricity

Notice that the slope tilts in the direction opposite to that in the commercial rate plan.

Be aware that the average monthly price at each point is only for a particular billing period. The average price paid during the next month may well be different.

It is vitally important to understand the rate plan structures in order to understand the avoided cost value of solar energy and other energy management strategies.

Tuesday, June 2, 2009

Central Planning

“It is true that liberty is precious; so precious that it must be carefully rationed.” – Joseph Stalin

No ideas for you!

The promise of solar energy is not vast, distant fields of solar collectors tethered to a complex, costly, aging, fragile, vulnerable, and toxic system of energy generation and transmission. The promise of solar energy is its potential to wean us from rigid dependencies, to generate clean energy in proximity to its consumption, and to help us mature towards more conscious consumption and interdependence.

If we look more carefully at Arizona’s energy mix and the Renewable Energy Standard and Tariff (REST) rules, we discover several aspects that should be even more disturbing to advocates of solar energy. That the REST rules prescribe few penalties; that there is no enforcement; that the programs are managed by the utilities themselves; and that the utilities are approved to “recover” costs for the programs from the ratepayers, are the least concerns. The utilities have long enjoyed the happy circumstance where the people of Arizona carry the greater risk.

More disconcerting is that the percentage of “distributed” energy within the total requirements of the REST rules is negligible. The REST rules define distributed energy as,

"electric generation sited at a customer premises, providing electric energy to the customer load on that site or providing wholesale capacity and energy to the local Utility Distribution Company for use by multiple customers in contiguous distribution substation service areas."

The requirements for distributed energy within the REST rules are plotted to contrast the projected portion of centralized generation with that of distributed generation:

REST centralized and distributed generation

When centralized generation is contrasted against distributed generation the centralized plan becomes apparent:

Arizona centralized and distributed generation

In the REST rules, photovoltaics fall within a broad collection of technologies under the very, very slender category of “distributed”. There is no guarantee, only “expectations”, that photovoltaic energy will supply a portion of energy for the next generation of Arizonans.

Energy policy is the design for society.

“Ideas are more powerful than guns. We would not let our enemies have guns, why should we let them have ideas?” – Joseph Stalin

Monday, June 1, 2009

Coal-fired Air Conditioning

Rate Crimes exists to explain how and why the tipping point for solar energy has been stalled for at least a decade. The economic legerdemain is subtle, but its purpose may become clearer if we gaze into the future. The chart below displays the mix of sources of electric power in Arizona from 1990 to the present, based on Energy Information Administration data. The trends for electricity fuel sources are projected to 2030 based on Arizona Department of Commerce estimates for population. This is what the next generation of Arizonans can expect in 2030:

Several assumptions should be declared: First, it is assumed that energy consumption follows population. Circumstances can be imagined where this might not hold, but population correlates with both energy generation and consumption over the past twenty years. It is possible that when the population is increasing then more energy is consumed due to ‘thrashing’; and that when population stagnates a decrease in energy consumption per capita could result. Be that as it may, the Arizona Department of Commerce predicts that the population will continue to increase at its current rate.

Second, it is assumed that the rate at which energy efficiency improves will continue at its current pace. Even if the rate of efficiency improvements increased, then Jevons Paradox suggests that overall consumption might not decrease.

Third, it is assumed that the rate of natural gas consumption will slowly decrease due to cost and/or availability.

Fourth, it is not assumed that the first unit (of three) at the Palo Verde Nuclear Generating Station will begin decommissioning in 2025. It is very likely that the reactors will be relicensed and then continue to operate for another few decades. The results of decommissioning are displayed to reinforce the eventuality within our lifetimes.

If hydroelectric, and gas sources remain constant or diminish, then from where will the additional energy come? There are three contenders: nuclear, coal, and renewable energy. For the purpose of exhibition, I have emphasized coal. However, barring any real and rapid success with carbon sequestration, the evidence is mounting against brown coal as anything more than a way to stoke a global furnace.

The nuclear industry has recently been seeking a renaissance. However, after half a century of operation, nuclear energy still requires enormous subsidies and has not proven to be economical. The costs aside, even the morality of producing large amounts of undisposable, perpetually toxic waste is questionable.

That leaves renewable energy pitted against two entrenched energy syndicates.

The Arizona Renewable Energy Standard and Tariff (REST) is the program for renewable energy in Arizona established by the Arizona Corporation Commission. Despite extraordinary efforts by a too few, the best the REST rules can accomplish is to be a hopeful catalyst. Even if the REST rules inspire the electric utilities to accomplish all the program’s goals, Arizona will not be enjoying a clean energy celebration at the sunset. Arizona, situated at the center of the solar Sun Belt in the American Southwest, will be keeping the air conditioners blasting in 2030 by burning two to three times the amount of coal it is today.