Could Increased Electricity Usage be the Answer to Climate Change?

Greenhouse gas emissions from the transportation and heating sectors

Fossil fuels used in the production of electricity produce 28% of our greenhouse gas emissions. One would think that reducing our electricity usage would reduce our greenhouse gas emissions. But, some experts suggest that just the opposite is true. They say that we can reduce our greenhouse gas emissions by increasing our electricity consumption for electric vehicles and heat pumps.

Reducing electricity usage would reduce the greenhouse gas emissions associated with the production of electricity. However, electricity is not our only source of greenhouse gas emissions. 

Source: USEPA

We use fossil fuels for 90% of our transportation requirements. And we use fossil fuels for almost all of our residential and commercial heating requirements. This usage accounts for 29% and 12% of greenhouse gas emissions respectively. We can reduce greenhouse gas emissions in these sectors only by reducing their use of fossil fuels. In both cases electricity is the only available alternative to fossil fuels.

Electric Vehicles

Many experts view electric vehicles (EV) as the best way to reduce greenhouse gas emissions in the transportation sector. And state and federal governments are already offering incentives for drivers to purchase EVs. However, only 2% of new cars sold in America are EVs. Buyers have been slow to embrace EVs because of the following:

  • Time it takes to charge the vehicle;
  • Range of driving on a single charge;
  • Cost as compared to conventional cars; and
  • Lack of charging stations.

The automobile industry is working on these issues. And it will probably resolve them within the next several years. However, even if the American public fully embraces EVs, there is a question of the extent to which EVs will actually benefit the environment.

EV tailpipe emissions (including emissions associated with electricity used to charge the battery) are less than conventional auto tailpipe emissions. But tailpipe emissions are not the only source of greenhouse gas emissions. The “well to wheel” emissions – that is, tailpipe emissions plus the emissions from electricity required to produce the automobile – must also be considered. And, because of the electricity required to produce the EV battery, it takes more electricity to produce an EV than to produce a conventional auto.

Based on today’s mix of electricity production facilities the “well to wheel” emissions for EVs may actually be greater than for conventional autos. We will not, therefore, get the full benefit of EVs until more electric production is converted from fossil fuels to renewables.

Heat Pumps

Historically, we have used fossil fuels for almost all of our space heating requirements. But, during the 1970s there was a perception of a natural gas shortage. Without the availability of natural gas we started to use heat pumps fueled by electricity for space heating. After natural gas was once again readily available, heat pumps fell out of favor. In many cases the heat pumps installed in the 1970s were removed and replaced by conventional fossil fueled furnaces. Today, we get virtually all of our space heating from furnaces fueled by natural gas, oil or propane.

Now, with fossil fueled furnaces identified as a source of greenhouse gas emissions, heat pumps are getting a new lease on life. Heat pumps operate in the same way as air conditioners. In an air conditioner the hot air inside the home is transferred to a coolant which is condensed and compressed to transfer the heat outside. In a heat pump the hot air outside the home is transferred to a coolant which is condensed and compressed to transfer the heat inside. Although it may seem counterintuitive, outside air that is as cool as 32 degrees Fahrenheit contains enough hot air to be useful in a heat pump operation. When the outside air goes below 32 degrees the heat pump must use some type of auxiliary heating system to heat the indoor air.

The following video explains the operation of a heat pump:

Heat pumps operate on electricity. And electricity generation produces greenhouse gas emissions. However, even with today’s mix of electric generation facilities, the greenhouse gas emissions from the electricity used to run a heat pump are less than the greenhouse gas emissions produced from a fossil fueled furnace. And the greenhouse gas emissions associated with heat pump usage will further decrease as more electric production is converted from fossil fuels to renewables.

Conversion to EVs and Heat Pumps

No one is going to ask us to immediately replace our conventional autos and fossil fueled furnaces with electric vehicles and heat pumps. In fact, until more of our electric generation comes from renewables the electrization of the transportation and space heating sectors might have limited benefits. Therefore, conversion to electric vehicles and heat pumps should occur over the next 10 or 20 years in parallel with the greening of electric production.

It should also be noted that the current electric generation mix is geared towards meeting a peak demand that occurs on hot summer afternoons when air conditioners are in use. The increased electric consumption associated with the electrization of the transportation and heating sectors could cause a shift in the electricity load curve. This shift will have to be accommodated as new generating plants are added to the system.

Author

I. David Rosenstein worked as a consulting engineer and attorney in the electric industry for 40 years. At various times during his career he worked for utility customers, Rural Electric Cooperatives, traditional investor owned regulated utilities and deregulated power generation companies. Each of his posts in this blog describes a different aspect of the past, present or future of the electric industry. 

What is a Microgrid?

Definition of a Microgrid

The Electrical Grid is defined as “the electrical power system comprised of generating plants, transmission lines, substations, transformers, distribution lines and end-use customers.” A Microgrid can be viewed as a miniature version of the Electric Grid. Specifically, a Microgrid is defined as “a localized group of interconnected generation resources and end-use customers that operate as a single controllable entity.” For more technical details on Microgrids see Microgrids at Berkeley Labs.

Some Microgrids consist of only a single electric user’s distributed generation and consumption. An industrial site, an educational institution or a hospital would be a good site for a single user Microgrid. Other Microgrids consist of the distributed generation and consumption of a community of electric users. This second type of Microgrid is often referred to as a milligrid. The important point, however, is that Microgrids must be controlled and operated as unified systems.

The following video describes how a Microgrid works:

Benefits of a Microgrid

The critical feature of a Microgrid is that the operator monitors and controls all of its distributed generation and electric customer usage. Microgrids are interconnected to the larger electric grid and viewed by the interconnecting utility as a single customer point of interconnection. Microgrids can purchase back-up power from the utility and it can sell excess generation to the utility. However, in the event of an outage on the utility system the Microgrid can disconnect and operate as an “electrical island”.

Electric customers participating in a Microgrid receive the benefits of a secure source of electric supply, efficient operation of their distributed generation and reduction in transmission line losses. The benefits available from Microgrid operation are similar to those that a utility might gain from installation of the Smart Grid.  However, it is easier to implement a Microgrid because of its smaller scale and the voluntary interest of the participants.

While utilities are starting to get into the business of operating Microgrids many are now being operated by non-utilities. The ability to operate the Microgrid as an electrical island raises the possibility that the operator may, at some point, opt to simply disconnect from the utility system if they no longer see advantages from further connection. This potential for disconnection is one of the concerns raised in the Post entitled What is the Smart Grid?

Author

I. David Rosenstein worked as a consulting engineer and attorney in the electric industry for 40 years. At various times during his career he worked for utility customers, Rural Electric Cooperatives, traditional investor owned regulated utilities and deregulated power generation companies. Each of his posts in this blog describes a different aspect of the past, present or future of the electric industry. 

What is the Smart Grid?

Electric Consumption and the Arab Oil Embargo

Prior to 1973 the electric industry encouraged customers to consume electricity. More consumption meant more efficient large central station generating plants. More large central station generating plants meant lower operating costs and lower electric prices. And lower electric prices fueled the post-war economic boom.

But the 1973 Arab Oil Embargo was a wake up call. While coal or nuclear fuel were used for most large base load plants the smaller plants used to meet peak customer demand were fueled by foreign oil. And deliveries of that foreign oil could cease without notice. Thus, reliability of electric service was, at least in part, subject to the whims of foreign powers. After the Oil Embargo it was no longer good policy to just encourage electric consumption.

Confronting the System Peak

Electrical consumption throughout the day looks like following graph of typical load curves. This graph shows that, especially in the summer, usage peaks towards the late afternoon.

Typical daily load curve
Source: fsec.ucf.edu

Reducing the system peak reduces use of the oil-fueled peaker units. Less reliance on peaker units means less dependence on foreign oil, fewer emissions from oil-fired generation and lower cost electricity. The industry and its regulators now seek ways to “shave the peaks”.

The main weapon in the fight to shave the peaks has been demand side management programs. These programs encourage customers to reduce their consumption during the time of the system peak. The demand side management programs have succeeded in reducing customer peak demand. However, primarily because of the increased air conditioning load, the peaks remain.

The Smart Grid Will Turn Utility Service to a Two-Way Street

Many in the industry now believe that the Smart Grid will both revolutionize peak shaving capability and help to resolve numerous other challenges facing utility operations.

Electric service has, historically, been a one-way street – utilities generate electricity and transmit it their end-use customers. The Smart Grid will make electric service a two-way street. Utilities will still deliver electricity. But they will also use new technologies to monitor and control all aspects of the electric system. This includes their own transmission and distribution systems as well as customer-owned distributed generation and storage and all components of customer usage.

With the consent of their customers the utilities will be able to control customer owned distributed generation and usage to most efficiently manage their system for the benefit of all. The following video shows how the Smart Grid will work:

The Benefits of the Smart Grid

The potential benefits of the Smart Grid include the following:

  • Utilities will deliver real time pricing information to customers who will be able to respond by reducing consumption during high cost periods of the system peak.
  • With customer consent utilities will be able to directly reduce individual customer usage during the time of the system peak.
  • When peak usage is reduced, either through customer action or utility action, generation costs are reduced for the entire system.
  • The utilities will be able to dispatch and use customer owned distributed generation and electrical storage to meet peak demand when needed by the system.
  • Incorporation of customer owned generation and electrical storage will reduce emissions from central station power plants and reduce transmission losses.
  • Power quality required for digital applications will be improved.
  • Outages, no matter what their cause, can be immediately detected and fixed.

Financing the Smart Grid

It is generally accepted that adoption of a Smart Grid will benefit the utilities, their customers and the public in general. Components of the Smart Grid will, presumably, be installed by the utilities and become part of utility operations.

In a study conducted in 2011 the Electric Power Research Institute (EPRI) estimated that the cost of the Smart Grid would be $476 billion. EPRI also estimated that the payback would be 2.6 to 6.0 times that amount.

Utility costs are typically passed along to customers in the form of higher rates. However, even though there are clearly benefits to be gained from the Smart Grid, there is a question of whether the Smart Grid costs should be treated like other utility costs.

Many electric customers already have the option of terminating their utility service by using distributed generation or participating in a micro-grid. If their utility rates increase because of the cost of the Smart Grid they may opt to disconnect from the utility to avoid the higher rates.

The benefit of the Smart Grid comes from the utility having access to customers that remain on the grid. If customers start to leave the system to reduce their costs the utility will have access to fewer customers. Thus, the benefit will be reduced and there will be fewer customers to share the Smart Grid costs. See the paper entitled Paying for the Smart Grid by Luciano De Castro and Joisa Dutra for an in depth discussion of financing the Smart Grid.

This financing issue will have to be resolved before we can receive all the benefits that the Smart Grid promises  to provide.

Author

I. David Rosenstein worked as a consulting engineer and attorney in the electric industry for 40 years. At various times during his career he worked for utility customers, Rural Electric Cooperatives, traditional investor owned regulated utilities and deregulated power generation companies. Each of his posts in this blog describes a different aspect of the past, present or future of the electric industry. 

Is a Carbon Tax the Answer to Climate Change?

Increasing Interest in a Carbon Tax

Fossil fuel combustion causes 82% of the greenhouse gas emissions in this country.  Those that believe that human activity causes climate change agree that we must reduce those emissions. While there is no consensus on how to achieve these reductions support has been growing for a carbon tax. See the Environmental Defense Fund’s explanation of a cap and trade program, which is another viable method to reduce greenhouse gases.

Pollution from power plant that could be reduced with carbon tax
Source: butane.chem.uiuc.edu

A carbon tax is a fee imposed on the burning of fossil fuels. Such a fee forces users of carbon-based fuels to pay for the detrimental impact on the environment of their use.  For a detailed explanation of how a carbon tax might be used to reduce greenhouse gas emissions visit the Carbon Tax Center web site.

Forms of a carbon tax are already in effect or proposed in numerous countries including England, Ireland, Australia, Chile, Sweden, Finland and New Zealand. Forms of a carbon tax are also in effect in 10 states. And several bills have been introduced in Congress which would implement a national carbon tax.

How a Carbon Tax Would Work

There are numerous versions of a carbon tax. However, in this Post I will focus on a form of the tax that is assessed at the time that fossil fuels are mined or imported into the country. Presumably, those that pay the tax will pass the cost along in their sales price. Ultimately, the cost of the tax will be reflected in the of the price of gasoline and electricity.

The tax would also affect the cost of certain plastics that use fossil fuels but capture the carbon and do not emit greenhouse gases. This use of fossil fuels does not add to greenhouse gas emissions. Therefore, most carbon tax proposals provide credits for such plastics that zero out the cost of the tax.  

Impact on the Price of Electricity

Electric power production from coal, oil and natural gas causes one-third of the greenhouse gas emissions associated with fossil fuels. If a carbon tax is enacted the cost of electricity produced by coal, oil and natural gas will undoubtedly increase.

Opponents of a carbon tax base most of their opposition on the impacts that these price increases could have upon the economy.  For a good argument against a carbon tax see the article entitled 10 Reasons to Oppose a Carbon Tax on the American Energy Alliance web site. For a detailed discussion of the impact of a carbon tax see the paper entitled Effects of a Carbon Tax on the Economy and the Environment prepared by the Congressional Budget Office.

Opponents of the carbon tax contend that the cost of the tax will simply be passed along to electric customers in the form of price increases. However, such an argument does not fully consider the operation of deregulated markets that govern most of today’s electric consumption.

In the competitive markets each regional Independent System Operator (ISO) manages a power exchange where electricity is bought and sold. Hundreds, or even thousands, of generating plants participate in each of these ISO markets. These plants operate on fossil fuels, nuclear or renewable resources.  They all hope to sell their production to the market at or above their operating costs.

Each ISO follows a set of rules that dictates the order in which it will purchase power from these plants. These rules require the ISO to dispatch the plants in reverse order of their cost of production. Thus, during hours when electric consumption is low the ISO will dispatch only the lowest cost production. The ISO will dispatch higher cost production only during hours when consumption increases.

The following graph shows how an ISO dispatches different types of generation at different prices as consumption varies throughout a 24 hour period:

Carbon tax could impact economic dispatch position of fossil fuel plants
Source: pjm.com

As can be seen from the above, the ISO dispatches low cost renewable and nuclear power during low usage hours.  The ISO adds more expensive natural gas combined cycles, coal and combustion turbine oil plants only during higher usage hours.  

If a carbon tax causes the fossil fueled plants to become expensive it would certainly increase the price of electricity during hours when those plants are in operation. However, there is good reason to believe that the fossil fueled plants’ hours of operation may decrease. Their increased operating costs should increase opportunities for additional renewables to compete, and be dispatched, at price levels that are lower than the new cost of fossil fueled generation. This would limit the use of fossil fuel generation to hours when consumption reaches very high levels. In other words, the carbon tax would increase renewable generation and reduce the hours in which high priced fossil fueled generation is in use.

The Level of the Carbon Tax

One argument against a carbon tax is that it constitutes a political decision to force certain behavior – in this case reduced use of fossil fuels. However, it could also be argued that the current failure to recover the societal cost of carbon usage from its users constitutes a political decision to subsidize the use of fossil fuels.

The Environmental Defense Fund estimates that the detrimental societal cost of carbon usage is currently around $40/ton of carbon dioxide. Other estimates are both higher and lower. However, whatever the true cost of carbon emissions, it would seem that that cost should be borne by the carbon users rather than by society in general. Implementation of a carbon tax that at least equates to the societal cost of carbon usage would not be a new political decision. It would reverse an existing political decision to subsidize fossil fuel use.

Where Will the Revenues Go?

Revenues from a carbon tax could be substantial. Estimates are that a modest tax of $15/ton of carbon dioxide would result in $80 billion in tax revenues. There is a question of how that $80 billion should be used. Suggestions include using the funds to reduce the national debt, using the funds to finance renewable generation projects, and using the funds as tax credits for low income families to partially offset the increased costs of gasoline and electricity caused by the tax. Any carbon tax legislation will have to include the answer to the question of where the tax dollars go.

Author

I. David Rosenstein worked as a consulting engineer and attorney in the electric industry for 40 years. At various times during his career he worked for utility customers, Rural Electric Cooperatives, traditional investor owned regulated utilities and deregulated power generation companies. Each of his posts in this blog describes a different aspect of the past, present or future of the electric industry. 

Is the Utility Death Spiral for Real?

Causes of a Utility Death Spiral

For over 100 years the government has guaranteed utilities a reasonable operating profit. However, current conditions have led utilities to the precipice of a death spiral.

The regulatory compact, embedded in all state public utility acts, requires utilities to provide reliable service to their customers in exchange for a government guarantee of a reasonable return on utility investment. What could be a better promise for a business? Provide a necessary service to customers and receive a steady and reliable return for investors. 

But now there is talk of a utility death spiral. A death spiral can be defined as “a situation that keeps getting worse and that is likely to end badly with great harm or damage being caused.” Is this even possible?

Well the fact is that not only is it possible, it is probably true. Utilities have invested in infrastructure that provides a necessary service. Their government approved rates include recovery of, and a return on, that investment in infrastructure.  

But customers are responding to these rates by installing distributed generation like rooftop solar. This self-generation reduces, or even eliminates, purchases from the local utility. And even though sales go down, the fixed costs of the installed infrastructure remains the same. And those fixed costs have to be recovered from remaining customers. Those costs will be recovered over fewer sales and rates for those sales will inevitably increase.  

Rooftop solar is contributing to the utility death spiral
Source: weforum.org

As rates increase more customers will decide to install their own distributed generation. This further reduces sales by the utility and increases rates for remaining customers. If nothing is done to check this utility death spiral the infrastructure costs will either be paid by the poorest customers who can least afford to install distributed generation or will not be paid at all sending the utility into bankruptcy.

Utility Response to the Death Spiral

Some utilities have responded to the death spiral by seeking to hold on to the status quo. To retain sales, they have opposed government incentives to customers that tend to overprice the value of distributed generation. And to make sure that they recover their fixed costs, they have proposed to “decouple” recovery of fixed costs from sales-based charges. Where decoupling has been approved the utility recovers its infrastructure costs through a fixed customer charge paid by all customers no matter how much electricity they use. 

The utilities’ tactics effectively reduce the benefits of distributed generation for customers. Customers hoping to get the full benefit of distributed generation will opt to disconnect from the grid. At one time disconnecting from the grid would have been almost unthinkable. However, now more and more customers can disconnect by purchasing small scale storage to back up their distributed generation or by joining a micro-grid. The following video describes the operation of such a micro-grid: 

If the utility tactics that seek to stop the death spiral force customers off the grid they will not stop the utility death spiral. They will instead exacerbate it.  

As described in the Post entitled What is the Smart Grid? utilities can achieve significant efficiencies for the entire system if they use a Smart Grid to gain the ability to monitor and control customer owned distributed generation. In other words, it is in the public interest for the utilities to keep customers on the grid and to take advantage of their efforts to use distributed generation. It will be up to utilities and policy makers to determine how the utilities will be able to both meet the public interest and to thrive financially in an environment where their traditional source of revenue (selling and/or transmitting energy) is shrinking. 

For more information on utility response to the death spiral see the Deloitte article entitled Beyond the math: Preparing for disruption and innovation in the US Electric power industry.

Author

I. David Rosenstein worked as a consulting engineer and attorney in the electric industry for 40 years. At various times during his career he worked for utility customers, Rural Electric Cooperatives, traditional investor owned regulated utilities and deregulated power generation companies. Each of his posts in this blog describes a different aspect of the past, present or future of the electric industry. 

Distributed Generation – an Old Idea Reconsidered

Development of Central Station Generation

In 1882 Thomas Edison brought electric light to an office building located in New York’s financial district. He used electricity generated at a dynamo located close the point of use. While he did not know it at the time, his use of a small generator located close to the point of use would one day be referred to as “distributed generation.”

Edison's first form of distributed generation
Edison’s Pearl Street Generating Station
Source: alchetron.com

Edison hoped to “light the world” with duplicates of his business model. However, his use of multiple small generators was expensive and inefficient. George Westinghouse saw the shortcomings of Edison’s system. With Nicola Tesla’s help Westinghouse developed an alternating current system that used large remote central station generating plants. Westinghouse used transformers and long distance high voltage transmission lines to deliver the electricity generated by these plants . Because Westinghouse’ system was much more efficient than Edison’s he won the Electric Current War.

Remote central station power plants using a complex delivery system of transmission lines are now the standard in the industry.  And distributed generation fell out of favor for more than 100 years.

Flaws of the Central Station Model

The current system is not, however, without its own problems. The fossil fueled central station plants emit pollution and greenhouse gases. And, because of their size, the central station plants must be added in large chunks, often before they are needed by utility customers.

The transmission system used to deliver the power is also an issue. It requires rights-of-way in controversial areas, is maintained by utilities with varying levels of commitment to that maintenance, is subject to potential outages due to weather, faulty equipment and terrorist attacks and results in energy losses of as much as 10%. Even with these flaws, however, for more than 100 years, Westinghouse’ system has been used for the delivery of reliable and affordable electric service.

Reconsideration of Distributed Generation

Reliance on large central station generation may, however, be changing. Distributed generation, similar to what Edison used in his early lighting systems, may be an efficient substitute for at least some portion of the current system.

Distributed generation can come in the following forms:

  • Back-up generation that ensures continued operation during an outage of the larger grid. Many health care facilities have historically used this type of distributed generation. But more residential and commercial facilities are starting to adopt its use.
  • A combination of generation sources (possibly including small scale thermal generation along with one or more renewable resources) that can provide service to a major institution such as a university, a hospital or a government campus, as well as the surrounding community. This is sometimes referred to as a micro-grid. It can operate either along with, or independent from, the larger grid.
  • Site specific generation, such as an industrial facility’s cogeneration plant or residential roof top solar panels where a portion of the energy generated can be sold to the larger grid.
  • Behind the meter generation where the output is used solely to reduce the owner’s purchases from their local utility.
Rooftop solar as distributed generation

Source: weforum.org

The United States Department of Energy paper entitled The Potential Benefits of Distributed Generation and Rate-Related Issues That May Impede Their Expansion provides a more detailed discussion of the various forms of distributed generation.

Distributed Generation Can Provide Both Individual and System Benefits

Customers who see a benefit are likely to install distributed generation for their own use. But, distributed generation can also provide benefits to the overall utility system in the form of reduced losses, reduced pollution from central station thermal plants and improved system reliability.  There should be a way to encourage installation of distributed generation to provide these benefits. But, utilities like to rely on their own large scale generation plants. So, historically, they have discouraged customers from installing distributed generation.

In recent years, however, regulatory agencies have reduced the utilities’ ability to discourage customer installed distributed generation. And utilities seem ready to capitalize on the potential benefits.

Utilities will not, however, fully realize the system-wide benefits of distributed generation until they fully incorporate their operation into their system operations and planning. And that will not occur until they fully implement the Smart Grid.

Author

I. David Rosenstein worked as a consulting engineer and attorney in the electric industry for 40 years. At various times during his career he worked for utility customers, Rural Electric Cooperatives, traditional investor owned regulated utilities and deregulated power generation companies. Each of his posts in this blog describes a different aspect of the past, present or future of the electric industry.