Las Vegas solar threatened by Nevada Power

[MrAureliusR]

Check this out:

http://www.cbc.ca/news/technology/las-vegas-solar-power-1.3485909
http://www.theguardian.com/environment/2016/mar/07/las-vegas-casinos-solar-power-nevada-energy

“The PUC has simply made up rules as it goes along so as to discourage any applicants from exiting [NV Energy’s] service,” Wynn lawyers stated in a January judicial appeal. (MGM and the Las Vegas Sands are considering their options.)

These articles gave me a lot to think about when it comes to renewable energy. My first, visceral, reaction was that the utilities now have a huge burden taken off their grid -- can't they just deactivate certain transformers that were supplying the casinos and have the money saved from providing the casinos compensate for their leaving? Why should they be forced to buy from the grid if they don't want to? They get threatened by the utility company -- if you don't stay with us, we'll have to charge more for residential consumers, and we'll drastically cut rates to those providing solar energy to the grid. Not to mention we'll charge you exorbitant "exit" fees, a load of horse crap on its own. But isn't that self-defeating? If I was told a large company in town went solar, and that meant I had to pay a huge increase in hydro, you'd better believe I'm buying a giant solar system to fight back.

The utility companies need to find a way to work with the switch to solar, not against it.

[jeremy]

you'd better believe I'm buying a giant solar system to fight back.

I didn't know solar systems were up for purchase; but I guess you might be able to get pluto now that it got downgraded... 

[MrAureliusR]

you'd better believe I'm buying a giant solar system to fight back.

I didn't know solar systems were up for purchase; but I guess you might be able to get pluto now that it got downgraded... 

LOL. Awesome catch.

Check out this quote, sums up the situation perfectly --

"Nevadans are thus subsidizing NV Energy’s green investments while it lobbies against private rooftop solar installations by their customers."

[station240]

Power company vs casinos, huh.
Given the casinos have more money, this should be interesting.
Round 1 

[SeanB]

So, instead of going totally off grid, leave a single light attached to the meter, and pay the bill for it. If they charge more than to other industrial or commercial customers then there is a good starting point for a lawsuit claiming the charges are extortion.

[CatalinaWOW]

There are real economics and engineering to be done around this argument.  There are real costs associated with providing and maintaining a grid utility system.  Those costs are only loosely tied to the costs of supplying energy over that grid.  Anyone who lives more than a few feet away from the currently existing grid is painfully aware of the incremental cost of that last quarter mile or mile to their service location.

A technically pure solution to the problem would be to have a separate electric distribution company that was solely responsible for distribution of power.  You would pay that company to connect to that distribution system, and pay monthly costs that would represent amortized cost of installation, maintenance and profit.  While there might be a fee structure for quantity, for most residential customers this would be a flat monthly bill whether they used (or sold) power or not.

Other companies would supply power to the grid, and bill users base on their costs.  Might be solar, gas, coal, nuclear, wind or whatever.  A variety of contracts could be written to reflect both cost and demand as a function of date and time.  Some customers would select sources based on sustainability.  Others would opt for the simplicity of a fixed unit price with no control over source of energy.

The reality is that engineering and economics will be among the last things considered in resolving this issue.

[djacobow]

I agree with everything CatalinaWOW said, and I think he covers the separation of grid and energy well, essentially, if load departs the utility economically, but continues to use the infrastructure, it should go without saying that there should be a way for them to continue to pay for that. Determining what that should be, of course, is not always so easy. Transmission is generally easier, as FERC mandates open-access charged for the use of transmission lines. The distribution stuff is harder and their will naturally be a "negotiation" between the owner of the infrastructure (utility) and the user.

I'll add in my own $0.02 about another issue:

Exit fees to leave the utility are not unreasonable in concept. Of course, they might be too high, but conceptually they are  fair.

You have to understand what utilities are. They are legal monopolies, in which a company has entered into a regulatory compact with the state. The utility is granted a monopoly over a service territory in exchange for two basic things. The first is the "Obligation to serve." This means the utility is on the hook to serve power to anybody who wants power in their territory, according to their standard tariffs. The second is that that the utility will be subject to economic regulation (price regulation) by the state. That is, they won't be able to set their own prices.

In this case, it is the first thing that makes exit fees appropriate. The utility has made investments: short-, medium-, and long-term in order to serve their existing loads. Those could be contracts to buy power for certain price from merchant generators, contracts to buy fuel at certain prices, and even the construction and ownership of power plants and transmission lines. Essentially, those investments are made on behalf of customers, and it is reasonable that customers who want to stay in that service territory and exit the system pay the cost of unwinding their share of those contracts. This should be a one time cost.

Obligation to serve also has another little switch to it. Say the casinos sign up with some energy services company to procure wholesale power on their behalf, and all is good until due to mismanagement, the energy services company goes bankrupt for one reason or another -- maybe taking on too much risk and energy prices drop. Boom the casinos call the utility and say "put us back on the bill" and the utilities must by law take them. Except now the utility has to start to contract, overnight, for all that new power. (Now, physically, that power should be available, since it was should have been contracted for by the ESCO in the first place but the merchant generators, now holding worthless contracts from a bankrupt ESCO are in a great position to extract a pound of flesh from the utilities now knocking at their door. This is the sort of thing that happened in the CA power crisis.)


Of course, a utility is going to try to run that cost up as high as they can to discourage exit, and it is the PUC's job to see that the exit fees are fair and appropriate, but I think you will be hard pressed to find a PUC in the US that would let a major load depart one of their utilities without an exit fee of some kind. Without it, the remaining customers would get shafted, and the PUC has a responsibility to them as well.

[Seekonk]

Read an article where the power companies want the solar panels to face west instead of south.  It is later in the day when power companies can actually use excess power from homeowners.

[mtdoc]

Read an article where the power companies want the solar panels to face west instead of south.  It is later in the day when power companies can actually use excess power from homeowners.

That is not an unreasonable idea although it would mean less ROI for the panel owners so they would need a higher compensation per Kwh from the utility company.

Because panels are so cheap now, many people -especially off gridders are installing multiple arrays - some facing east, some west, some south, etc to take advantage of a full days solar insolation.  It's cheaper to do and with less headaches than using trackers.

[Kilrah]

These articles gave me a lot to think about when it comes to renewable energy. My first, visceral, reaction was that the utilities now have a huge burden taken off their grid -- can't they just deactivate certain transformers that were supplying the casinos and have the money saved from providing the casinos compensate for their leaving?

The thing is that the generation and distribution equipment has been designed and sized for a given set of long-term predictions and likely have to be paid off over decades, now if demand drastically reduces they sure can deactivate things but it's still equipment that has been purchased, probably has to be paid off for another decade or 2, yet won't generate any revenue anymore.

BUT that's entirely the power company's problem for not making the right decisions with regards to what their customers wanted. Didn't want to invest in solar? Well we did your job, eat your losses now, not our problem.

[djacobow]

The thing is that the generation and distribution equipment has been designed and sized for a given set of long-term predictions and likely have to be paid off over decades, now if demand drastically reduces they sure can deactivate things but it's still equipment that has been purchased, probably has to be paid off for another decade or 2, yet won't generate any revenue anymore.

BUT that's entirely the power company's problem for not making the right decisions with regards to what their customers wanted. Didn't want to invest in solar? Well we did your job, eat your losses now, not our problem.

I understand that's how you and many people feel about it, but, at least in the US, that's not the law today. 18 CFR 35.26 is the relevant US code. I draw your attention to section (c)(vii)
(https://www.law.cornell.edu/cfr/text/18/35.26)

I tried to outline the rationale for this rule above, but it boils down to the fact that utilites are not normal companies and they do not make investment decisions as normal companies do. They make them according to rules, regulation, oversight, and not before prior approval of their local public utilities commission. PUC's vary much on how "hands on" they are. I don't know the Nevada situation very well, but in California, the CPUC has been rather directive in utility investment and contracting decisions.

Another argument, by the way, for allowing utilities to recover stranded costs, is that without such abilities, utilities would tend to be overly cautious, resulting in underinvestment and perhaps ultimately leading to reliability problems. Keep in mind, utilities cannot invest in new ventures to find new revenue, so much of their thinking is about how to maintain their existing revenue for the least cost. I'm not making that argument, just relaying that it gets made. The counterargument is that, to varying degrees, utilities don't make money from selling power [in California, the do not at all], but from owning things and getting a rate of return on those investments, so they always have an incentive to own thing. The counter-counter argument is that that might apply to physical assets, but it would not help with (insufficient) long-term contracting. And so it goes...

How does it work in Switzerland?

[Kilrah]

Another argument, by the way, for allowing utilities to recover stranded costs, is that without such abilities, utilities would tend to be overly cautious, resulting in underinvestment

Well on the other hand this situation shows that this might be getting a bit obsolete. I believe that given the speed things go at nowadays energy production needs to do just like everything else and start moving from planning huge plants based on a 50+ year life cycle and the capacity to cover the expected evolution of the consumption during that span towards smaller "just what we need now" solutions that make use of the newer advancements and with a shorter life, not to delay adoption of the next great thing that could come in only 10 years.

Keep in mind, utilities cannot invest in new ventures to find new revenue

How does it work in Switzerland?

OK, if it's that way it makes some sense... Completely differently here, power companies are just normal public companies, they can and do invest anywhere they like and most even own parts of or entire companies/plants in other countries.

[DimitriP]

Essentially, those investments are made on behalf of customers, and it is reasonable that customers who want to stay in that service territory and exit the system pay the cost of unwinding their share of those contracts.

When I'm making money of off "those contracts", and have use of the Sempra company jet,  I 'm sure I will agree with you completely.And so will my team of lawyers.

In the meantime, I'll dissagree completely.

If you switched to using carrier pigeons to send out messages and canceled your internet connection, what would a reasonable fee be ?

[djacobow]

Well on the other hand this situation shows that this might be getting a bit obsolete. I believe that given the speed things go at nowadays energy production needs to do just like everything else and start moving from planning huge plants based on a 50+ year life cycle and the capacity to cover the expected evolution of the consumption during that span towards smaller "just what we need now" solutions that make use of the newer advancements and with a shorter life, not to delay adoption of the next great thing that could come in only 10 years.

I agree with this. The next 50 years will be very different from the last 50.

I also want to restate something I said above that's a bit misleading. Of course, a utility company can create a subsidiary that does other stuff, but that would be an unregulated business, there would be no obligation to serve, and there would be no rights for stranded asset recovery, no guaranteed rate of return. Basically, it would be a separate entity owned by the same parent. Moreover, rules would require that the companies be operated separately with no sharing or personnel or information with the regulated portion of the entity. I don't know if that unregulated business could compete with the regulated business, but I suspect not, because by definition, it is the regulated entity that has a monopoly over that territory. But I am sure they could go into an unregulated market next door and compete, for example.

[djacobow]

When I'm making money of off "those contracts", and have use of the Sempra company jet,  I 'm sure I will agree with you completely.And so will my team of lawyers.

In the meantime, I'll dissagree completely.

Sorry, I did not mean to express an opinion at all about whether this is right, fair, good, etc. I am simply suggesting that your team of lawyers would prevail in court, because that's what the law says. That's on the principle. Of course, they could still fail to get recovery for a stranded asset if the PUC determines that the utility screwed up -- like they did not apply standard due diligence, a reasonable person could have identified the mistake in the investment strategy at the time the decision was made, the utility was negligent, information was purposely withheld from the PUC when the investment was decided, etc. PUCs have administrative law judges who make these sorts of determinations for a living.

If you switched to using carrier pigeons to send out messages and canceled your internet connection, what would a reasonable fee be ?

Well, Internet is not subject to economic regulation, so I don't think it's a great comparison. Nobody ever told a US Internet company "if you want to sell Internet in our state, your must offer it, at the same rate, to anyone, anywhere, no matter what you have to build to get it there," but that is (to a first approximation) exactly the deal the utility industry has. (They can charge for the final interconnection up to a certain amount, I believe. I don't really know how it works; I'm sure it varies.)

Maybe telephony would be more apt. However, I don't really know anything about it. Maybe someone else here does.