In California, PG & E's proposed new rates would be harmful....

Today's post: Wednesday, 4-7-2010

We need an 80% reduction in fossil fuel use by 2050 to avoid the worst global warming effects. And, practically speaking, we need to also double our electricity generation and double the useful work done per unit of electricity & other energy sources as well during that same time to have a decent economy.

At some point, the oil that we’ve been using to power much of our economy will begin to run low enough that our world economy will shrink due to lack of supply or excessive costs or both.

And, once the demand for oil picks up again with the apparent economic recovery or supply begins to plateau or drop, the prices will again go back up. That will cause more hard times economically unless we have enough alternative sources of energy to turn to.

Further, it’s extremely clear that the most supported and economically beneficial solution to add energy that does not use oil nor burn fossil fuels to release more CO2 into air that already has too much is to build massive amounts of new renewable energy production, particularly those that generate electricity & to dramatically increase energy efficiency and reduce the amount of energy that is now wasted.

And, of those, the more important long range solution is to build massive amounts of new renewable energy generation.

Today’s post:

This recently came to my attention because of the very negative media coverage of
PG E’s recent rate proposal to California’s Public Utilities Commission.

There are two grave problems with their proposal.

I. They switch away from the current rate structure that incentivizes energy conservation and the building of renewable energy sources for electricity generation and has a track record of success in those two ways to one that does not do so.

That is totally wrong and is more than adequate grounds for having their new rates denied.

II. They do not propose rates with much of a total increase overall to deal with several issues they should be funding soon but are not adequately funding now as far as I’ve read.

By itself that is troubling but not sufficient to decline their new rates.

But, it suggests that PG & E has not thought through what it should be doing to position itself well for the future or it would be asking for a slightly greater overall rate increase to begin to fund those actions.

I think the people in the California Public Utilities Commission should be asking PG & E why it has not asked for a slight overall rate increase to begin to fund those actions.

But the most important thing is that our PUC turn down PG & E’s new rate structure that they have recently proposed.

I. The problem is that the heaviest users of electricity in California are those who live in the warmest and hottest parts of the state who use abundant amounts of air conditioning during the warmest and hottest summer days.

The current rates are high enough for such users to incentivize retrofits to these buildings that both prevent heat from entering them in other ways and better insulate them. Preventing the heat from getting in dramatically reduces the cost of using electricity to pump the heat out after the fact.

The current rates are high enough to cause such users to install solar energy on their buildings and on canopies over their parking lots. And, since such installations produce the most electricity in California during hot, sunny weather, that dramatically reduces the load on electricity generated by burning natural gas. That reduces the likelihood of brown outs during peak demand because the solar electricity also peaks at that time. Lastly, this set of things removes a good bit of the pressure on PG & E to build more natural gas burning electricity generation capacity and gives them time to build more solar that feeds into the grid.

Each of these things are what PG & E AND the State of California should be doing and expanding for the reasons I just explained. But adding in the desirability of combating global warming and protecting the economy from collapse when we reach and pass Peak Oil by increasing energy efficiency and building much more sources for renewable energy and it is essential that we continue to incentivize this with the current rates.

The current rate structure provides enough incentive to do them we are making some progress towards getting them done. These current rates therefore are benefitting PG & E and the State of California.

I very strongly suggest that the PUC turn down these new rates for these reasons. They are MUCH worse than the current rates.

II. PG & E’s proposed rates do NOT have much of a total increase overall to deal with several issues they should be funding soon but are not adequately funding now as far as I’ve read.

For example, with somewhat higher rates such as an increase overall of 1 % plus inflation for the next 5 years but using the existing rate structure, PG & E could fund some of the following things that they perhaps should be planning to do. (Given the importance of the things on the following list, a larger increase would be helpful but more than this modest increase during a severe recession would not be wise.)

1. They could offer slightly lower rates to homeowners and businesses and other groups that retrofit their building with much better heat proofing and insulation and/or that buy much more efficient air conditioners and/or that install onsite solar photovoltaic arrays.

2. They could work with a large bank to and add some funds to both make these loans safer for the bank and that subsidize lower rates to the people making these energy efficient upgrades.

The combination of those two things would double down the incentives to large users of electricity in hot and sunny areas in California. They would use perhaps half as much energy AND get a small extra price break.

Since that will get more energy efficiency and renewable energy installed, it will make the supply of summer electricity more reliable and allow PG & E the time to build more solar thermal and solar photovoltaic installations instead of adding more natural gas burning plants to generate electricity.

3. PG & E could work out a joint financing program with communities that adapt the Berkeley plan to make these retrofits more affordable and the loan to go with the property but also use this plan to participate in the savings created so that the installation of solar or Bloom Energy’s new fuel cells by individuals and groups at their site or location makes PG & E some money instead of removing that electricity from PG & E’s revenue stream.

In addition, PG & E and some good electrical engineers should work out a safe way for such users to be able to continue their energy use off the grid during times when the grid is temporarily shut down. This will also increase the incentives, particularly for businesses and medical facilities to add such distributed generation. I understand this is not currently allowed or safe. But there are reasons that the technical and procedural solutions to make this possible should be put in place immediately or very soon.

4. If the United States does build more nuclear reactors it may be safer for security reasons, for earthquake safety, and for reasons of political feasibility to build them in Arizona, Nevada, or Utah. But PG & E can and should be funding planning to support the building of such reactors if they are built and guarantee some electricity purchases in exchange for access to the electricity once it is available.

5. Between added energy efficiency, far more solar generated electricity, and perhaps new some nuclear, PG & E should be making and beginning to fund some plans for the sharp increase in people using their electricity to power vehicles over the next 20 to 30 years. Far more all electric vehicles and plug-in hybrids are already on their way. And, that trend will at least double as we begin to approach peak oil.

(The Kuwaiti’s just did a credible analysis that suggests this will happen in 2014 just four years from now. The real economic impact may take another 10 or 20 years to have large effects.

But clearly the time to make plans to deal with it is now.)

6. Given Bloom Energy’s new technology that uses natural gas to efficiently make electricity with no release of oxides of Nitrogen or particulates, PG & E should be funding projects to see if some of its existing natural gas burning plants might be replaced by this technology and that future plants built to generate electricity from natural gas use this technology.

7. But there is an even more significant development from this technology. At some point in the next 10 years this technology will be used to substitute for gasoline burning and diesel burning engines in hybrids and plug-in hybrids. So it’s a bit longer range, but PG & E should be funding some plans in two directions. First, to deal with increases in the price of natural gas due to this increased demand which may happen worldwide and perhaps to plan to be a provider of natural gas or natural gas and electricity fueling stations for these vehicles in their service area.

8. PG & E should at least double the amount of installations of large solar thermal and solar photovoltaic energy farms and to build the power lines needed to bring the electricity from some these plants not already near transmission lines.

That set of things will take some money to design well and to test, let alone to roll out. But PG & E should be asking for at least some new money to begin the process by asking for some moderate overall rate increases now.