Recently a potential client was asking us about an oddity in their Pasadena Water and Power (PWP) electric bill. PWP has a tiered rate structure, but the most visible component of that tiering, the Distribution charge, steps up above 350 kWh of usage in any one month, but it steps down above 750! Which lead us to the question, are PWP’s electric rates regressive?
PWP’s Residential rate structure, like many utility tariffs, is a model of complexity. On your bill there are a number of obvious charges, and a few that are not so obvious. The obvious ones are on the right-hand-side of the bill and include a Customer charge, a Distribution charge, a Transmission charge, and an Energy charge. (The not-so-obvious charges include those related to public benefit programs and paying to put power lines underground.)
All of these obvious charges are tied to the customer’s usage, but only one, the Distribution charge, is tiered. At or below 350 kWh of usage per month, the customer pays just 1.5¢/kWh. Between 351 and 750 kWh of usage the Distribution charge increases dramatically all the way up to 11.65¢/kWh, nearly an eight-fold increase! Ok, the whole point of a tiered rate structure is to discourage higher use by making you pay more as your usage increases. But PWP’s rate then does something truly odd - above 750 kWh/month the rate comes down, dropping from 11.65¢/kWh to just 8.5¢/kWh! What sort of an incentive is that?
That rate design is certainly counter-intuitive, to say the least, but is it regressive? In other words, is there a point at which a large residential user ends up paying less per kWh than does someone who uses less? To find out, we modeled daily usage from 10 kWh/day all the way up to 60 kWh/day. As a reference, a typical Run on Sun client in PWP’s service area averages around 25 kWh/day. Since the Transmission and Energy charges are adjusted higher in the summer months, we broke out the overall rates seasonally as well.
Here are our results (click for larger):
The blue line is the winter rate and the orange is summer. If you use a tiny amount of energy you will pay between sixteen and seventeen cents per kWh, with rates rising sharply until you get to 25 kWh/day. Beyond that, the rate of growth flattens out markedly, but it never dips down. (That is true even if you carry the analysis all the way out to 200 kWh/day!)
Contrast this with the SCE Domestic rate - that is a truly aggressively progressive rate structure with energy charges of 14.5¢/kWh for those using within the smallest (baseline) tier of energy, going all the way up to 30.8¢/kWh for energy used in the fourth tier, which kicks in for monthly usage above approximately 900 kWh.
So no, PWP’s Residential rate is not regressive, but by flattening out the rate for usage above 25 kWh/day, it sends at best a mixed signal if the utility is trying to encourage its customers to reduce their usage.
How does this relate to solar? Well, if your usage is above 20 kWh/day you are spending at least 20¢/kWh whereas the cost of a solar power system will be less than half of that! So yes, in PWP territory - and particularly while they still have rebates in place - installing solar will still pay you big dividends.
As its moniker suggests, the Internet of Things (IoT) is about the connectivity of ‘things’, not people. Hence, managing our hyper-connected world by using data from remote sensors in our devices to provide control in a smarter, more efficient way. As nebulous and vague as the ‘Internet of Things’ is, it has been cited as the hot technology trend of the future. In a recent Business Insider report, they estimate IoT growth will increase connections from 1.9 billion devices today, to 9 billion by 2018 (see chart below).
In fact, IoT is already a reality with 24/7 connectivity to laptops, tablets, smartphones, smart TVs, gaming consoles, and even wearable devices.
One of the best known applications for IoT is the smart metering of electricity, water, and waste systems as well as integrated management of home and building systems. Building temperature, humidity, ambient light and occupancy could be monitored by sensors and used to control heating, lighting, air-conditioning, and the operation of doors and windows, etc.
Smart thermostats such as Google’s Nest allows home owners to manage their heating requirements remotely via their smartphone. Where utilities participate, users can program their biggest energy inefficient appliances (heating and cooling systems, washers and dryers, refrigerators, ovens, dishwashers, and pool pumps) to respond to varying energy tarifs and avoid peak demand periods. Sometimes demand reward credits are offered by utilities.
While these applications may make the workplace and home more comfortable and secure, the real motivation for adoption of such systems will be from potential energy benefits and hence cost savings. Avoiding peak periods would also have the broader environmental benefit of spreading demand, allowing power plants to operate more efficiently and reduce the need to build generating capacity to meet demand spikes.
But opinion seems divided over whether the Internet of Things will deliver improved energy efficiency overall. The exponential growth in the number of connected ‘things’ that all consume power could negate many of the efficiency gains of things like smart thermostats. More than $80 billion in power is wasted by connected ‘things’ according to an IEA (International Energy Agency) report. This is what is known as “vampire power”, or “vamping", and refers to energy used when devices are switched off or in standby mode. The IEA report notes the problem could result in $120 billion USD wasted by 2020 due to vamping!
One potential smart solution to vamping is to make appliances in the off or sleep mode actually power off but respond to a timer which is only responsive to the “on” switch during a portion of each second. The long term key to whether IoT improves energy efficiency lies with improving the energy efficiency of the devices themselves while at the same time providing innovative applications.
The wider potential of the Internet of Things is enormous and exciting. Wider ’smart grids’ could make our urban centers dynamic and responsive to energy demands, optimizing city-level energy use. As the Internet of Things continues to grow, the opportunity for bigger energy and environmental benefits from applications like smart grids could become a valuable reality assuming the overall efficiency of our ‘things’ also continues to improve.
New year, same battle.
We have reported for some time about efforts by the Investor-Owned Utilities (IOUs) like Pacific Gas & Electric (PG&E) to do what they can to make rooftop solar less attractive, if not kill it outright. This report from NPR demonstrates how that fight is playing out here in California, and elsewhere.
As we begin the new year, this story is an important reminder that supportive public policy doesn’t just happen, and there are forces arrayed against this industry that would like nothing more than to make rooftop solar - the sort that homes and businesses can use - go away completely. (Ironically, this is at the same time that utilities are investing ever more in their own solar facilities - such as this one in Colorado, or this one in California - as a hedge against carbon regulations and unpredictable fossil fuel prices.)
If we are to defend and expand the ability of average home and business owners to lower their bills while reducing their carbon footprint, we will need to be proactive this year in supporting the policies, and politicians, that allow that to happen.
Regular readers of this blog will know that solar-friendly policies are under constant attach by the utilities, especially the three Investor-owned utilities (or IOUs as they are known), PG&E, SDG&E and our own SCE. Well they are at it again, with rate proposals before the California Public Utilities Commission (CPUC) that could harm both solar and energy efficiency measures alike. Fortunately, we have an opportunity to have our say - here’s our take. (H/t our friends at CalSEIA.)
Current policies in California, most notably net metering, along with a tiered rate structure (whereby you pay more for electricity as you use more) have provided powerful incentives not only for consumers to install solar, but to also take proactive measures to reduce their energy consumption. As a result, energy use in California over the past twenty years has grown slower than the growth in population despite the explosion of new electronic devices in homes and businesses during that time. Indeed, California has lead the way for the rest of the Nation, proving that you can have a twenty-first century lifestyle and still reduce your energy demand.
In other words, these policies have been a success.
The proposals being floated at the CPUC would change rates throughout the three IOU service areas (i.e., much of California) and threaten that success. In particular, they are seeking to add a flat, monthly fee to everyone of $10 to all bills, regardless of use and to reduce the number of tiers from four to two. In addition, the rate for the lowest tier would increase, making this a double-whammy not just to solar owners, but to the poorest electric customers who will see a rise in their rates. (So much for the utilities’ concern over hurting the poor!)
Fortunately these changes are not yet cast in stone and the public, particularly advocates for solar and energy efficiency, have a chance to have their voices heard. The CPUC is holding a series of public hearings, some in the Run on Sun service area, as well as others around the state. Here are the upcoming hearings:
September 29, 2014
2:00 pm & 6:30 pmFontana City Council Chambers 8353 Sierra Avenue Fontana, CA 92335
September 30, 2014
2:00 pm & 6:30 pm?Temple City Council Chambers 5938 Kauffman Avenue Temple City, CA 91780
October 2, 2014
2:00 pm & 6:30 pmPalmdale City Council Chambers38300 Sierra Hwy, Suite APalmdale, CA 93550
October 9, 2014
2:00 pm & 6:30 pmHoliday Inn Chico – Conference Center685 Manzanita Ct.Chico, CA 95926
October 14, 2014
2:00 pm & 6:30 pmFresno City Council Chambers2600 Fresno StreetFresno, CA 93721
We are planning on attending the hearing in Temple City. If you attend one of these important hearings, please let us know about your experience in the comments.
There is a fair amount of talk lately (in nerd circles) about a graph being circulated by the utilities and the California Independent System Operator ( CALISO, the entity that manages the electric grid in the state). Known as the “Duck graph,” it is being presented as a dire prediction of impending grid instability due to the increasing role of renewable energy sources. But where some see doom and gloom, others see opportunity. Here’s our take. (H/T John Farrell at REWorld.)
Here’s the graph (credit, CALISO):
As recently as 2012, this wasn’t a duck at all as net load had two peaks, one in the morning and one late in the evening.
But look at the center of the graph: as more and more renewable sources come online, the demand during the middle of the day falls dramatically, so much so that the utilities are complaining that there will be a risk of “over generation” - producing more energy than is needed and cutting into the baseline production (from power plants like coal and nuclear that need to operate continuously to be efficient.)
Also predicted is a rather steep increase in evening demand between now and 2020.
The net result is a curve shaped much like a duck, apparently a fowl predictor of grid chaos.
Frankly, we look at that graph and see progress and opportunity. Progress in that renewables, which not so long ago were sneered at as being a, “tiny amount of energy that will never amount to anything serious,” are now completely rewriting the load curve in the nation’s most populous state. Talk about coming a long way, baby!
The opportunity, of course, is right there as well. While adding large amounts of smart storage to the grid is an obvious fix for this “problem", as we noted just the other day (see Can Renewables Power the US?), we can handle this evolving energy future in a relatively simple manner—it just requires changing how we approach the problem. Here’s the video:
We can, and will, teach this Duck to fly.