Local Solutions Globally Applied

A briefing on electricity appeared in the September/October issue of MIT’s Technology Review magazine. The briefing begins with a section titled, “Can Renewables Become More than a Sideshow?” The introduction concludes with some commendable exhortations, but the body contains two exasperating statements:

“The reality is that renewable power and other alternatives to fossil fuels, including nuclear, remain too expensive to compete with coal and natural gas."

… and …

“Renewables are unlikely to end our reliance on fossil fuels within the next 20 years.”

I responded with a letter to the editors that they were kind enough to print in the Letters and Comments section of the December issue:

LOCAL SOLUTIONS FOR GLOBAL PROBLEMS
Our September/October Briefing focused on the prospects for renewable power.

In “Solar Power Will Make a Difference—Eventually,” the author presumes that ubiquity is a condition for a valid global solution, but the maps of the “energy belts” on page 97 are clear enough evidence that each region must respond to energy issues in its own way. Solar power, particularly, is now an economical solution in our sunniest climes. This fact has been disguised by—among other factors—an energy pricing scheme that defeats the investment value of on-site solar energy and other energy management strategies. We can’t blame the tardiness of technology while we remain tardy in implementing transparent and equitable economic systems. The answer to the rather silly question in the opening section—“Can Renewables Become More than a Sideshow?”—is not only “Yes!” but “They must, and soon.”

This was all that could be said within the constraints of the allotted space. Many other thoughts can be explored here on Rate Crimes. Yet, if I had been permitted to express just one more idea in a periodical devoted to technology it would be that clever technology and honest economics cannot alone resolve our energy issues; humanity will be sustained only by a conscientious and comprehensive discipline of stewardship.

Big Squeeze

A special, existential absurdity accompanies the state of being a citizen of Arizona. The great, swelling, air-conditioned cities of the Southwest each attracts denizens with particular promises. The tag lines are expressive, “What happens in Vegas stays in Vegas”, “Entertainment Capital of the World”, “The City Different”, “America’s Finest City”.

Los Angeles flaunts itself. Las Vegas celebrates itself. Santa Fe examines itself. San Diego prides itself.

In Arizona is proclaimed, “The Valley of the Sun” and “The West's Most (Mid)western Town”. Living in Arizona comes only with the promise of easy winters amidst a prosaic culture. To those familiar with the Arizona milieu, there can be little wonder why Harlan Ellison’s 1970’s classic, A Boy and His Dog was set in a barren, post-apocalyptic Phoenix underlain by an insipid, predatory, subterranean Scottsdale; and why the smartest and most interesting creature in the story was a dog.

Ruling above ground today in Arizona are the vapid tenets and myopic vision of Goldwater “conservatism”. Scottsdale names its streets after such dogmacrats. The predatocracy is already firmly established in preparation for the apocalypse now being foreshadowed by Arizona’s most recent economic “malaise”.

Rate Crimes’ midsummer Executive Summary focused on the structural elements of the central analysis of the predatory economics. As the end of the year approaches it is time to recap and expand the list of predations relevant to clean, sustainable solar energy:

1. The long-standing and now unique system of repressive utility rate schedules that has long impeded the advancement of solar energy.
2. The shell game of hidden, regressive taxation that results from the rate schedules.
3. The further regressive taxation of the Renewable Energy Standards and Tariff scheme.
4. The rapid emergence of leasing programs and companies whose economic viability depends on an ephemeral and regressive incentive scheme.
5. The not so “choice” surcharges for electricity from the utilities’ “green” energy programs.
6. The hidden costs of traditional energy generation.
7. The multi-million dollar compensation for utility executives who have left Arizona ill-prepared for the impending energy gap.
8. The ludicrous kabuki theatre of Arizona energy politics wherein costly institutions exist only to maintain a distracting charade.

In A Boy and His Dog, the protagonist, Vic, is a virile, wide-eyed youth who enthusiastically follows an enchantress into the underworld to discover that he is absurdly valued only for what an impotent society can literally squeeze from him. Happily, his faithful and perceptive best friend comes to his rescue.

Woof!

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Solar-Powered Coal

Arizona’s Green Divide has a less apparent extraction of wealth from captive electric utility ratepayers and taxpayers.

These unsuspecting payers are funding the installation of solar electric systems on their more fortunate neighbors’ houses; thereby assisting their neighbors to abandon them to pay for an ever greater share of increasing utility electricity costs.

These captive ratepayers are also funding the electric utilities’ acquisition of environmental (a.k.a. carbon) credits.

There is an environmental credit associated with each kilowatt-hour (kWh) of electricity produced by your RE System, which represents the environmental benefits, emissions, reductions, offsets and allowances attributable to the generation of energy from your RE System. Title to and ownership of any and all environmental credits associated with your RE System will be assigned to us when we make payment of the Credit Purchase Payment to you. Thereafter, we will have exclusive title to and ownership of all such environmental credits. The calculation, use and retirement of any and all environmental credits will be in our sole and exclusive discretion. Your acceptance of the Credit Purchase Payment operates as your waiver and relinquishment of any right, title, claim or interest in the environmental credits and entitles APS to any and all environmental credits associated with your RE System from the Effective Date of this Agreement through the date that is twenty (20) years following the Commissioning Deadline (as defined below).
- Arizona Public Service agreement

These credits allow the utilities to maintain and extend the consumption of toxic fuels. Will Arizona develop the world’s first effectively solar-powered coal mine?

Solar Phunny

The City of Phoenix, Arizona Public Service, SolarCity, and the National Bank of Arizona are collaborating to bring on-site solar electricity to a few of the city’s less affluent homeowners. The Solar Phoenix program will allow 1,000 Phoenix homeowners who lack the means to purchase a solar electric system to instead lease a system. The initial program will provide more than a megawatt (nameplate) of proximally-produced solar electric energy to the citizens of Phoenix. The Solar Phoenix motto is “Energizing Phoenix with Affordable Solar Power” [emphasis mine].

Rate Crimes applauds any effort to bring the full benefits of solar energy to all the citizens of Arizona, our nation, and the world. However, bringing solar energy to 1,000 homeowners’ roofs is not necessarily the same as bringing these 1,000 homeowners the full benefits of solar energy.

As described in Arizona’s Green Divide the funding for the solar rebate programs are extracted from all the electric utilities’ ratepayers. However, only a small segment of relatively wealthy homeowners have been able to reap the benefits of the REST scheme.

The Solar Phoenix program purports to bring affordable solar energy to another slender segment of Arizona homeowners. Yet, for the privilege of using their valuable roof space, the program will deliver to lessees benefits that are far more slender than the full benefits enjoyed by those fortunate enough to be able to own, rather than lease, a solar electric energy system.

Here is how the Solar Phoenix program appears to operate within the REST program:

The vast majority of taxed citizens/ratepayers are still receiving no direct benefit from their contributions. However, they are now supporting a few more neighbors, their electric utility, the City of Phoenix, the National Bank of Arizona, SolarCity, and Arizona’s solar module manufacturer, First Solar, whose modules SolarCity is using. What percentage of the ratepayer (and taxpayer) funds that are going into this regressive economic system is reaching the lessees?

As I have been explaining for the past half-decade, solar energy in the form of electricity in our nation’s sunniest state has long been less costly (affordable!) than the electricity from traditional forms of energy generation. Yes, there are considerations that confound the rapid adoption of solar energy. However, compounding hidden taxation resulting from a regressive system of rate schedules with further regressive taxation from a supposedly pro-solar incentive program, and then playing phunny with the money through suspect leasing programs is hardly a solution.

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P.S. Aren't paintbrush circles a bit passé?

Arizona's Green Divide

There is a deep chasm in the Grand Canyon State. It is a chasm deepening so quickly as to shame the timeless workings of geology.

The Arizona Corporation Commission’s Renewable Energy Standards and Tariff (REST) rules are an inherently flawed attempt to animate a languid solar industry†. The major flaw is the process by which wealth is extracted and redistributed. Here is how it appears to operate:

Fees for the REST are assessed on each electric utility bill. All residential “ratepayers” are assessed equally based on monthly kilowatt-hour (kWh) consumption. The fee has a maximum limit. For example, a residential ratepayer is charged 0.3288 cents for each kWh consumed up to a maximum charge of $1.32 per billing period. This limit represents approximately 400 kWh of consumption.

The funds gathered by this scheme are distributed through a rebate program administered by the electric utilities. The funds are distributed to homeowners who possess the discretionary funds to purchase a solar electric energy system. These relatively wealthy homeowners gain the advantage of the rebate programs, escape electric utility costs, and therefore abandon the unfunded citizenry to pay for an ever greater portion of the increasingly expensive energy from the utilities. Furthermore, because they are escaping electricity costs, the solar overclass contributes less to future REST funding!

Can a strong, independent, sustainable solar energy industry be created based on a regressive economic scheme?

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†Why the Arizona solar industry has so long remained listless is explained elsewhere in the Rate Crimes energy blog.

Nothing New the Sun is Under

A sustainable, solar energy future was envisioned almost a half century ago. Today, long after the technological barriers have been overcome, and many years after the economics of solar energy became transcendent in the sunniest climes, artificial barriers remain in place.

All that is required in order to repress the value of solar energy and energy conservation in sunny lands is to defeat the value of such investments in the economic sectors that are most active in the daylight hours.

The electric utilities issue rate schedules for commercial ratepayers that differ dramatically from those for residential ratepayers. In Arizona, the commercial rate schedules are structured so that they defeat investments in solar energy and energy conservation.

The Rate Crimes energy blog exists primarily to explain this problem and its ramifications. However, this is hardly the first attempt in history to draw attention to this issue.

A few years after the first energy crisis, in 1977, The Sierra Club adopted a conservation policy that addressed electric utility rate structures.

“Customers should not be discouraged from owning or installing renewable resource systems by discriminating rates or charges.” – The Sierra Club, Adopted by the Board of Directors May 7-8, 1977

In the intervening decades, numerous battles have been fought to eliminate such “discriminating” rate schedules. Many of these battles were won. Yet to this day, the nation’s sunniest state remains entrenched in its repressive habits; while community and institutional memory of the earlier warnings has apparently failed.

The Energy Secretary and Congress are now championing entrepreneurship as the source of solutions for energy generation and efficiency. Let us free these entrepreneurs from under the thumb of economic oppression.

An Accident of History

A decade ago, in response to my increasing awareness of our society’s problems of economy and sustainability, I shifted my professional focus from systems analysis, architecture, and design towards renewable energy. As both a long-time resident of sunny Arizona and an electrical engineer, I was naturally attracted to solar energy.

In my first position in the energy industry I was fortunate to work closely with the most experienced solar engineer in Arizona. Not only was I able to rapidly gain a wealth of knowledge through observation and practice, but my mentor was also a talented and generous teacher.

As my knowledge of the industry grew, I began to recognize the systemic problems that prevent solar energy from thriving in and around The Valley of the Sun. Initially, I had little more than an intuitive glimpse of these problems. The journey towards understanding the pervasive nature of these problems began early this decade with a simple and somewhat selfish question, “Does it make good economic sense to remain in the solar energy industry?”

The attempt to answer this question led to many long evenings with papers, books and spreadsheets. From this work, an economic model began to develop. The answer that began to emerge was encouraging.

As the model was tested and refined, it became apparent that with existing incentives, a low-risk investment in on-site solar electric energy in Arizona often realizes returns greater than the historical, long-term average annual returns of the S&P 500. Stated succinctly, solar energy in sunny Arizona is a better investment than the stock market. Without incentives, an investment in solar energy regularly outperforms other low-risk investments.

When the results of the analyses were first presented in 2003, conservative numbers were used for the projections. One exception to this cautious practice was the aggressive $6.50 installed cost per solar watt that was employed in Money from the Sun. This article was featured in the 100th issue of Home Power magazine that was published in April of 2004. The intent of using that figure was to highlight a tipping point for the price of solar energy. The cost of solar energy had been trending down and $6.50 per watt was near the low end of costs in Arizona at that time.

One parameter that was always kept conservative was to project only a 2 percent annual average increase in utility electricity costs. Because the avoided cost of energy is a key determinant for the value of the solar investment, conservative estimates were rigorously maintained.

At the time, few expected that within a few years our financial system would nearly collapse, or that the costs of energy in Arizona would rise so quickly and so dramatically.

When Money from the Sun was published in 2004, the real cost of energy in Arizona was at its lowest in over a decade. This low price would soon prove to be very temporary. Within a year, prices began to trend upward as Arizona began to approach a looming energy gap.

Today, more than five years after the publication of Money from the Sun, with the (avoidable) cost of energy still rising, an investment in solar energy is better than ever. The meme of promoting solar energy as an investment is proliferating.

It may have been an accident of history that my initial work in solar economics was done during the historical low for energy prices in Arizona. It is no accident that solar energy remains chained to the anchor of toxic energy interests.