Neil McAndrews & Larry Lawrence, Enterprise Risk Consulting, LLC
Austin, Texas
 
In a previous piece, The Solar Tsunami, we explored how the market is experiencing the most rapid and disruptive technological changes we have ever witnessed in the power industry, with solar now competing against all other forms of energy and often winning by a large margin.  In this piece, we look at the burgeoning renewable energy efforts in the global corporate sector.
 
Oilprice.com recently published an article on RE100 [“More Than 50 Global Companies Commit To 100 Percent Renewable Energy”], an organization focusing on a collaborative initiative of influential businesses committed to 100% renewable electricity.  Many consumers still perceive the renewable industry as a “green” niche industry.  However, RE100 members are not niche “green” companies; they are mainstream global corporate leaders, including:
 

• Adobe
• Biogen
• Coca-Cola
• Goldman Sachs
• Google
• Ikea
• Johnson & Johnson
• Microsoft
• Nestle
• Nike
• P&G
• SAP
• Starbucks
• Swiss Re
• UBS
• Unilever
• Walmart

 
Companies joining RE100 are encouraged to set a public goal to procure 100% of their electricity from renewable sources of energy by a specified year.
 
As the private sector accounts for around half of the world’s electricity consumption, RE100 has put forth the goal of switching the demand to renewables to accelerate the transformation of the global energy market and aid the transition to a low carbon economy.
 
Many RE100 companies signed the Paris Pledge for Action at the recently concluded COP21 conference in Paris conducted by the Climate Action group and the United Nations Environment Programme (UNEP).   Climate Action and UNEP’s goal is to limit the global temperature rise to less than 2 degrees Celsius.
 
The pledge states ““We welcome the adoption of a new, universal climate agreement at COP21 in Paris, which is a critical step on the path to solving climate change. We pledge our support to ensuring that the level of ambition set by the agreement is met or exceeded.”
 
Green alliances such as RE100 are now taking center stage.  The oilprice.com article states that if all 50+ of the current RE100 members convert to using 100 percent renewable electricity, it could lead to an increase of 90.1TWh of renewable electricity generation, which would be equal to almost 1 percent of the total electricity usage by the industrial sector around the world.
 
The RE100 website states “Over the last few weeks several RE100 companies have announced plans for switching to renewable electricity. For example, Unilever has set a goal to source 100% of its electricity from renewables by 2030 – including all grid electricity from renewables by 2020. Meanwhile Coca-Cola Enterprises and ING joined RE100, each committing to go 100% renewable by 2020.”
 
Oilprice.com quotes Paul Polman, the CEO of Unilver, a RE100 member, as saying “The consequences … will be felt in banks, stock exchanges, board rooms and research centres as the world absorbs the fact that we are embarking on an unprecedented project to decarbonise the global economy.
 
Part of the RE100 mission is to keep the marketplace aware of current global trends in corporate demand for, and investment in, renewable power.  They also share the business case for renewables and showcase business action, including the most popular renewable power technologies, and which industries are the biggest investors with the best financial returns.
 
One of the key comparative advantages that these companies are employing is the distributed nature of many renewable technologies.  This flexibility, especially in emerging markets, provides a leapfrogging advantage compared to traditional central station paradigms.  It is not just the carbon avoidance advantage, but the flexibility in scaling of the resource that produces advantages.
 
The renewables tsunami is building.  In the current environment of low fossil fuel prices, which puts downward pressure on the price of all energy sources, now is the best time to join the wave and embrace renewable energy. 

© Copyright 2016 Enterprise Risk Consulting, LLC

Neil McAndrews and Larry Lawrence, Enterprise Risk Consulting, LLC
Austin, Texas
 
Our utility consulting clients offer varying responses when the topic of local residential solar is raised, ranging from disdain to enthusiastic acceptance.  Regardless of attitude, local residential solar is here to stay and will be coming to a municipality near you.  Residential solar can provide many benefits to distribution utilities, and we suggest that it is more productive and beneficial to embrace the inevitable than to ignore or fight it.
 
(Note:  the following discussion is ERCOT-specific but many of the general principles are applicable to other regions.)
 
Residential solar installation provides measurable savings that accrue to the distribution utility under today’s regulatory and pricing environments. The savings are from multiple sources and include peak shaving, lower energy costs and environmental credits. 
 
Our perspective in this piece is from the utility acting as a passive interest in the solar investment. It is in utilities’ interest for residential solar to be installed up to a penetration limit. Our objective is to summarize the benefits to help provide a framework for developing incentives, or rate reductions, that are costless to the utility. Most importantly, our summary shows that current incentives offered by many electric utilities to install solar are likely to increase solar penetration in Texas.
 
The benefits can be divided into the following categories.
 
Peak Shaving
•          Avoids 4 CP demand charges
•          Avoids Congestion Revenue Right purchases
 
Cost Saving
•          Avoids on peak higher power purchase prices
 
Environmental Credits
•          Produces Renewable Energy Credits (RECs) or avoids the purchase of RECs
 
Transmission Savings.  The largest potential savings are avoided transmission costs. In ERCOT, four coincident peak (4 CP) 15-minute intervals, one for each summer month, are averaged and then multiplied by the total annual transmission cost rate. Peak shaving from local solar production will reduce the total eligible amount of summer peak load.
 
Energy Savings.  Local solar production can offset the need for higher cost energy purchases during solar production hours.  Off-peak energy will be at a lower cost but will still be purchased by the utility, resulting in a lower average power purchase price for the utility.
 
Congestion Savings.  Solar helps avoid congestion costs and thus it avoids the purchase cost of Congestion Revenue Rights (CRRs). This is very similar to energy savings in that the same outcome occurs because the utility would avoid the risk and the number of CRRs that need to be purchased. Less on-peak demand drives lower load amplification, and leads to a more uniform load profile and an increased load factor. The cost for CRRs declines because on-peak CRRs are avoided.
 
Environmental Savings.  Local solar production can reduce load that will be removed from consideration for carbon allowance requirements, avoiding environmental costs.  You do not have to pay if load is not measured because of net metering.  And even if a net metering process is not involved, the load is served by a zero emission resource.
 
The result of these savings is that a utility could provide a substantial energy subsidy that at worst would be cost neutral.  Our estimates are that subsidies of 2.0 to 2.5 cents per kWh could be achieved.  Detailed calculations for our estimation process are beyond the scope of this piece, so please contact us for more details and assistance in integrating these incentives into a proactive renewable energy development plan and rate structure.

© Copyright 2015 Enterprise Risk Consulting, LLC

Neil McAndrews and Larry Lawrence, Enterprise Risk Consulting, LLC
Austin, Texas
 
Solar is like a Tsunami and it is coming to a utility near you. Many folks still characterize the solar industry as a niche industry; that it is simply a West Coast thing or a Green thing.  That it can’t hope to compete with conventional power.  All of these prevailing public perceptions are about to be challenged because the assumptions are no longer true. 
 
The reasons are manifold, but it comes down to price and performance. We at Enterprise Risk Consulting have had years of experience in the conventional power industry. Nothing in the last 50 years compares with the market changes we are now experiencing. Solar competes against all other forms of energy, and in many cases, wins by a large margin. It all depends on the quality of installation, the solar irradiance, the regulatory jurisdiction and whether it is utility scale or distributed scale.
 
A Tsunami sweeps all before it and solar is the mother of all waves. The wave started in California with large subsidies and grandiose targets related to the “California Solar Initiative” in 2007. Rapid technology improvements and industry installation standardization have dramatically reduced costs. PV module costs plummeted in 2011-2014. This built the wave from a regional swell to a gigantic disruptive technology. 
 
The California Solar Initiative program is now fully subscribed and has surpassed all of its targets - ahead of schedule. The program also produced by-products in the form of billion dollar businesses like SolarCity and Vivint - new companies with economies of scale for installation and inventive new financing and ownership plans.
 
We have witnessed great marketing moments in the past.  The introduction of iconic products that define an era: the Ford Mustang, the IBM Selectric, the PC, the cell phone, the Ipod, and smart phones.  These have spun off huge ancillary businesses. iTunes to feed the Ipod for example. California innovation in solar is next, and is now being marketed to the rest of the country and the world. 
 
Because of the drop in the cost of the underlying technology, large installations are now commonplace.  Enterprise Risk Consulting has already helped establish power cost leadership for new power supplies covering entire Texas cities using predominantly wind and solar resources. That is how we know that the Tsunami is here in Texas. Not because we forecast it, but because it has already crashed on Texas shores. Texas is scheduled to grow its solar installations by more than 1000% between 2015 and 2016. Other states are next.
 
Renewables are not the same supply risk we dealt with in the past.  Managing renewable resources is not for the faint of heart, or the uninitiated.  We urge you to surf the wave, or at least seek higher ground and avoid being washed away.  We have learned many useful procedures to select renewable resources and to integrate them into a power supply portfolio. Many of the portfolio optimization techniques are relatively well established and we are using them to successfully manage renewable intermittent resources.

© Copyright 2015 Enterprise Risk Consulting, LLC