11779Re: [hreg] The Rise of Distributed Generation . . .
- Mar 6, 2014Thing that is rough for the utils is that Solar "cherry picks" the premium prime time power. At least rough for the Commercial Generation side. In the present open market PUC Texas areas, however, that is profitable to the Grid Operators and Retail Providers.
Power is more valuable during the day, and that premius has traditionally paid to keep the lights on all night, when power goes worthless on the market level. Less folks buying during the day makes it hard to cover the night-time bills, as far as generation goes.
Wind -- especially West Texas -- is so mis-matched to the actual use patterns, it has a negative value at times -- the Wind Operators have to PAY the grid to take the power.
But overall the only real long term hope is to shift some of the transportation load off of Internal Combustion Engines and towards Electric Motors -- but the industry already knows that as well. And no, that does not require ANY batteries or other storage.
But from the article below -- yeah, local voltages CAN shift up and down some due to DG, but all DG are required to auto-disconnect when local grid voltages get too high or too low. The part of the AC frequency varying . . . that is just silly. All Grid Tied Generation is rock-steady 60 Hz. Many even use any variance as a method of detecting loss of Grid Power and auto disconnect if the frequency even shifts slightly.
Overall, kind of a Look At Me, Drama Piece.
On Thu, 3/6/14, Violeta Archer <violetatx9@...> wrote:
Subject: [hreg] The Rise of Distributed Generation . . .
To: "firstname.lastname@example.org" <email@example.com>
Date: Thursday, March 6, 2014, 1:47 PM
Here's an update on the current state of
affairs with distributed power generation.
The Rise of
Distributed Generation Threatens Utilities
In the late
1980s, the band R.E.M. achieved pop music fame by claiming,
it's the end of the world as we know it. Utilities
should heed their warning. Distributed generation (DG) could
be the end of utilities as we know them today. Or, as we at
Morningstar like to say, DG could destroy utilities'
economic moats.Warren Buffett first coined the term economic
moat to conceptualize a firm's competitive advantage or
lack thereof. We now assign ratings as wide, narrow, or none
to the more than 1,500 companies we cover worldwide. Firms
with the widest economic moats demonstrate strong
competitive advantages that produce sustainable,
above-average returns for investors. Firms with no economic
moats have a limited ability to control the returns they
earn for investors. Utilities tend to fall in between those
two extremes. We typically assign them narrow economic moat
ratings. In most cases, utilities' centralized networks
and regulation prohibit competition, but their capped rates
limit investors' returns. In the long run, we expect
most utilities will earn returns in line with what investors
should expect from firms with similar risk profiles.But DG is breaching utilities' economic
moats. The electric utilities industry group Edison Electric
Institute (EEI) recently identified DG as the largest
disruptive threat to utilities' business models and
financial health. We agree. Utilities' centralized
network monopolies break down when customers become
self-sufficient competitors. The cost-of-service regulatory
model that allows utilities to earn at least their cost of
capital in the long run also breaks down when fewer and
fewer customers pay for maintaining the centralized network.
For power producers, centralized baseload generation loses
its value as DG saps network demand.DG leads to the so-called death spiral. As more
customers adopt DG, utilities' costs to maintain and
operate the grid are spread across a smaller demand base,
raising customer rates and increasing customers'
economic incentive to cut the cord. Ultimately,
utilities' earnings and cash flows will shrink, making
interest and dividend payments less certain. This death
spiral ends when investors — equity and credit — are
left holding a purse of dormant power plants and copper
wires.Timing is a key part of the rating system. Public
policy and regulation are key factors that affect how long a
utility can maintain its economic moat. Net metering, tax
benefits, and technological innovation support DG adoption
and could dramatically shorten utilities' competitive
advantage periods. Utilities in areas with DG-friendly net
metering rules could find their economic moat closing more
rapidly than utilities in areas with less-accommodating net
metering policies. Many European utilities have suffered
from shrinking competitive advantages as renewable energy
feed-in tariffs, emissions caps, and anti-nuclear sentiment
explicitly or implicitly subsidized DG. U.S. tax policy is a
key variable in the coming years. So what should utilities do? Amid the doom and
gloom, we think there are opportunities for utilities to
protect or even widen their economic moats:Extract value from the centralized
grid. Utilities' centralized grids remain
a key part of the DG value proposition. DG users must be
connected to a centralized grid to collect net-metering
revenues, a critical offset to DG installation and
maintenance expenses. DG users also need connections to
centralized grids for backup power if they don't have
energy storage. A typical solar DG user relies on the grid
for energy during most hours of the day, with a relatively
small period of time when it is a net seller.Utilities can also extract value from their
centralized networks by helping integrate DG.
Infrastructure-support revenue, which utilities could
collect from DG users, would help mitigate lost revenue from
falling demand. German utility RWE is pursuing a similar
strategy after renewable energy and DG growth decimated its
legacy power generation earnings. It now aims to help
customers manage and integrate renewable energy rather than
invest in centralized generation. Improve regulation. In the
near term, the best way for a utility to protect its moat
against DG is to work with regulators to create constructive
rate structures and educate regulators about the threat DG
poses. Regulators in Arizona, California, and Colorado have
shown willingness to address DG, specifically net metering
deficiencies. Those policies could serve as templates for
other states as DG spreads. Vertically integrate. Some
utilities have embraced DG through investments in rooftop
solar, DG financing, and self-generation technology.
Utilities can offer competitively priced clean-energy
options that prevent customers from seeking these services
elsewhere. Utilities' strong balance sheets and existing
customer relationships should give them an advantage against
smaller newcomers. The technical challenges of incorporating DG will
likely slow the erosion of utilities' economic moats in
the near term. Converting the electricity grid from one-way
flows to two-way flows to support net-metering will be
expensive and time-consuming. Without careful management,
power flowing onto the grid will cause fluctuations in
voltage and frequency, creating reliability problems and
safety concerns. But as we look out to the next decade,
utilities that refuse to adapt could find themselves singing
their swan song.Source: http://www.renewableenergyworld.com/rea/news/article/2014/03/the-rise-of-distributed-generation-threatens-utilities
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