Re-energizing the Electrical Grid
Peter Sinclair and Cathy Kunkel discuss emerging possibilities for fighting climate change: a combination of locally-owned affordable solar and utility scale wind energy to replace the electrical grid
SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to The Real News Network. I’m Sharmini Peries, coming to you from Baltimore.
Utility companies provide electricity for all of us. The U.S. electrical grid is a very complicated system, because it is a patchwork of state and federal regulations. Each state has slightly different regulations, and utilities that regulate typically operate in multiple states. According to a recent report from the green investment advocacy group SIRIS, the electric utility industry is transforming from an industry of monopolies to a market-based, clean-energy, competitive system driven by consumer choice.
Now, what does that mean? Does that mean utility-grid solar energy and wind energy for all of us? What does it mean to switch from monopolies to a market-based clean-energy system driven by consumer choice?
To help us unpack the players, the policy, and whether there’s really a major reorganization of utilities to address the climate crisis is Peter Sinclair and Cathy Kunkel. Cathy Kunkel is a fellow at the Institute for Energy Economics and Financial Analysis, and Peter Sinclair is a videographer with the Dark Snow Project.
Thank you both for joining us.
CATHY KUNKEL, FELLOW, INSTITUTE FOR ENERGY ECONOMICS AND FINANCIAL ANALYSIS: Thanks for having me.
PERIES: So let me start with you, Kathy. What does all this mean, monopolies to a market-based clean energy? And what choice do consumers really have here?
KUNKEL: Yeah. Well, I mean, like you said in your intro, a lot of this differs from state to state. But about ten years ago, a number of states, starting with California, started to deregulate their electricity market, so that instead of having a monopoly that controlled the generation and the transmission and delivered power to your house, the idea was that power plants would compete with each other to provide power, and so customers could have more choice in terms of where they got the power from. And in some states, that has worked out to–in order–and enabled people to choose green power providers. It has also enabled, for example, cities like Cleveland, Ohio, to bundle all of their electricity demand in the city and bid it out for 100 percent renewable energy to supply the city. So it’s definitely opened up new opportunities for consumers who want to have more opportunities for renewable energy.
It’s also–the flipside of it is that it’s also created more opportunities for utilities that want to sort of manipulate the competitive markets to gain more control. And, I mean, the California electricity crisis ten or 15 years ago was a sort of prime example of generating companies being able to game the system and cost customers tens of millions of dollars in unnecessary power costs.
PERIES: And, Peter, why is it important for us to look at utility companies? Who are the big players? What is the potential role for transforming to a truly green economic and electrical grid?
PETER SINCLAIR, VIDEOGRAPHER, DARK SNOW PROJECT: Well, I’ve just come from a couple of conferences where I talked to some very well-informed industry insiders. And one of the comparisons that is being made is to the transition that we saw from landline telephones to cell phone-based technology in the last 15, 20 years. The big players, the big players in landline phones, the ones that held on to their monopoly position did not do so well. The ones that embraced the new technology and embraced the competitive environment are still with us today.
And so we’re in a new landscape where we’re going to see some utilities, the ones that don’t want to deal with the new technology, particularly solar, the panels that people are putting on their roofs all over the West in the South, those that don’t deal with that and find ways to encourage people to deal with that are not faring well in the new environment.
PERIES: Tell us about why there’s such a complicated regulatory system in the United States.
KUNKEL: Yeah. So the history of electric utility regulation is rather interesting, because in the early 1900s most of the electric utilities in the U.S. were publicly owned. They were municipal electric light companies. And the private electric utility industry was trying to get more of a foothold. And they actually promoted the idea of state-by-state regulation to all these different states, but the basic argument being, like, set up these regulatory commissions that will allow us to operate, and since we’ll be regulated, we won’t be able to exploit people. But privately the companies were saying, you know, and also the regulatory commissions will be under-resourced and easily captured. And in many cases that is proven to be the case. And so, many regulatory commissions are less interested than others in actually putting a firm hand on what the electric utilities are doing.
PERIES: And, Peter, what’s your take on the regulatory systems we have?
SINCLAIR: Well, everything Cathy said is true. However, what’s changing is that the actual performance of the new technologies, solar and wind in particular, has been proving to be so compelling and so positive–. For instance, I talked to a utility regulator from here in Michigan just last week, and she told me that five years ago we assumed that, for instance, wind power was going to be much more expensive than it has actually proven to be. And it’s coming in now about a third–the newest contracts are about a third of what we expected five years ago. And in large part that’s because the wind is proving to be much more reliable, has a much higher capacity, at least here in Michigan–they originally thought these turbines would be generating power only about 30 percent of the time, and now many of them are found to be generating about 50 percent of the time. And then that technology is improving rapidly, and we can expect it to continue to improve.
PERIES: So this should make it much more affordable for us to have clean energy. So then what does it mean? What do utility companies mean when they’re saying a market-based, consumer choice driven option?
SINCLAIR: Well, that varies from state to state. And in some states–you could say, maybe, California–they’re really kind of making it easy and sort of greasing the skids for people to say, put solar panels on the roof. Other states around the country are–the utilities are trying to set up barriers like extra charges that they want to apply to people who would like to have solar panels.
And, interestingly, people both on the political left and the political right are fighting very hard against that, because for the left it resonates in terms of clean renewable energy, but for the right it resonates in terms of what they’re calling energy freedom, my freedom to generate my own energy.
PERIES: And you think some people are actually going to choose coal that pollutes the air?
SINCLAIR: No. I think the problem–coal has so many problems right now that I am telling people that if any coal plant that is not already currently under construction is probably not going to be built in the United States. And Cathy indicated that they’re having problems in places overseas as well. So the future for coal is not a rosy one.
PERIES: And that is because?
SINCLAIR: Well, it’s because of multiple factors, a big part because of the new competition from renewables. But also, you know, the story we’ve heard about 200 years’ supply of coal here in the United States is a little bit misleading, because the coal is there in the ground, but we’ve reached a point where you have to dig deeper and deeper and pull more rock off it to get to it, which is an expensive process. So if you want coal at the price that we’re willing to pay, then that’s in short supply. And so that’s really changing the–. [crosstalk]
PERIES: Give us a picture of what utility scale options there are and what local options may look like.
KUNKEL: Yeah. So, like you were saying, I mean, there’s kind of a tension here between renewable energy that is owned by utilities as large-scale versus the distributed and local options, which the utilities perceive as much more threatening to them, because utility rates are based on recovering the investments that utilities have already made in generation. And so if more and more people are using less energy because they’re generating it themselves and they’re buying less from the utility, that is really–.
PERIES: What does that mean, generating at themselves? How does that work?
KUNKEL: Like putting a solar house panel on your house, for example, or on your school, or having a community band together and put up a wind turbine that’s locally owned, which is not all that common in the U.S., but is extremely common in somewhere like Germany and elsewhere in Europe. Those kinds of things are quite threatening to the utilities’ business model. And so some utilities are reacting to that by kind of embracing it and trying to be the ones that own that local generation. So, for example, NRG is a major electric utility that wants to get into the distributed generation business and basically own solar power panels on people’s houses that people could rent from them, for example. And then other utilities, their strategy is a more political strategy to just try to stifle that kind of distributed generation. For example, Arizona is attempting to roll back laws about solar to make it much less economically attractive for people to put solar on their houses. And many other states have been pushing things like that as well. So that’s kind of the real political battleground right now, and a lot of stakes around distributed solar is utilities trying to impose new fees and reduce incentives for people who want to put solar on their homes. And then, as Peter was saying, both left and right of the political spectrum, people fighting back against that and saying, no, the technology is here; like, we have the right and we should have the freedom to generate our own power.
PERIES: And, Peter, you’ve been to a number of conferences talking about these issues recently. Tell us what are sort of the more dominant thoughts on this goal, massive utilities scale or local?
SINCLAIR: I think it’s very important to realize that the Edison Electric Institute, which is the think tank that utilities themselves have set up to tell them what’s going to happen in the future, the Edison Electric Institute in the last year has produced a major report that said the model that utilities have lived by for the last hundred years is going to go away, ’cause the new technologies, particularly distributed solar and wind and other types of renewables, are going to break that model. So the question for utilities is: are they going to be–try to get out in front of that? Or are they going to try to drag their feet? You know the old joke about the American auto industry back when, for instance, the Japanese first became competitive is every time there was a new government regulation, the Japanese would simply hire engineers, and General Motors would hire lawyers. And some utilities are hiring engineers and being proactive, and some are just hiring lawyers to see if they can drag their feet.
PERIES: Well, I thank you both for joining us.
SINCLAIR: Thank you.
KUNKEL: Thank you.
PERIES: And thank you for joining us on The Real News Network.
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