Solar Energy Spurs a Power Struggle

[bananas]

Source: Wall Street Journal

Disputes over the use of small-scale solar power are flaring across the nation, with utilities squaring off against solar-energy marketers over rules for the growing technology.

<snip>

At issue in an Iowa lawsuit is whether solar-system marketers can sell electricity in territories where local utilities have exclusive rights to customers. Such an arrangement isn't allowed or is under dispute in many states, limiting solar firms to sales of panels to homeowners and businesses.

<snip>

Judge Carla T. Schemmel, overturning an Iowa Utilities Board decision, said Eagle Point could sell solar electricity to the city without encroaching on a utility's lawful turf. She noted that the city would still need to buy electricity from Alliant when the sun isn't shining. "Eagle Point is neither attempting to replace (the utility nor) sever the link between (the utility) and the city," she wrote. "It is simply allowing the city to decrease its demand for electricity from the grid."

<snip>

The ruling was a defeat for Berkshire Hathaway Inc.'s MidAmerican Energy Co. unit as well. MidAmerican, another Iowa utility that had sided with Alliant in the case, told the judge in January that if the utilities lost, it could lead to "a proliferation of solar installation in the state."

<snip>

Read more: http://online.wsj.com/article/SB10001424127887324069104578527682342015380.html

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"a proliferation of solar installation" - I like that!

Note: although the article is paywalled, it can be read free by searching google for "Solar Energy Spurs a Power Struggle" and clicking on the link to the wsj site from there - they apparently check the referrer field and allow you to read it if you click through from google.

[bananas]

1. "a proliferation of solar installation"

I like that phrase so much, I had to repeat it!

And I wanted to make sure anyone who didn't read past the first paragraph got to see it!

MidAmerican, another Iowa utility that had sided with Alliant in the case, told the judge in January that if the utilities lost, it could lead to "a proliferation of solar installation in the state."

[rurallib]

3. Mid-American just dropped plans to build 2 nuclear reactors

in Iowa following protests.
Gee - maybe the sun can fill the void.

[Posteritatis]

18. That really is a hugely telling turn of phrase, isn't it? (nt)

[silverweb]

2. Free enterprise!

[font color="navy" face="Verdana"]Isn't this a fine example of it in action?

All the squawking from the big utilities is proof that they really hate free enterprise, despite all their lip service when it suits them.

[awoke_in_2003]

12. Yea, it is...

but we are a backwater, 3rd world nation- even if we have the most powerful military on the earth. We are a country of stump dumb hicks.

[agent46]

4. "local utilities have exclusive rights to customers"

Would someone please explain this to me. I thought big energy was into the whole free market capital game. Had no idea someone was granting them exclusive rights to local energy markets.

[Psephos]

6. Power has traditionally been seen by economists as a "natural monopoly."

So, a utility is granted sole supplier status, in exchange for heavy regulation of operations and prices.

The idea is it would be wasteful and inefficient to have multiple suppliers of power to a city. Power generation is a hugely capital-intensive business. Duplication means that capital can't be put to other, better uses.

Technology is leading to questioning whether many natural monopolies are still worthy of monopoly status. This seems like a good case.

The power company capitalized its system based on an assumption of steady revenue from its captive market to pay down its capital investment. It's arguably unfair to change the rules after the utility spends the money.

What they'll do is raise rates to cover losses, if solar takes a big enough bite. The utility's fixed costs remain the same, regardless of how much electricity they sell. The state regulatory board would likely approve such a hike.

[elleng]

9. Good explanation, Psephos.

[greiner3]

10. "The utility's fixed costs remain the same, regardless of how much electricity they sell."

But if they get granted said hike(s), wouldn't that also allow solar energy companies to raise their rates?

The higher a Kw costs, the more solar generating companies will build more and more solar arrays, which in turn would make it necessary for the utility company to have to raise rates again, and again...

I understand the existing utility company has fixed costs, such as the infrastructure for the delivery of energy via power lines.

But eventually the utility company will find it more profitable to get out of the power consumption side of the business.

Their cost to produce a Kw will be so much more than solar farm/windmill and/or any up and coming mass system to produce power commercially.

It is then that the utility will be a lot more profitable than it is now because they will no longer have nearly as many government regulations and just charge more and more for the transmission of everyone else's energy.

This system works for fast food franchisees and the corporations they represent.

The actual corporation makes no direct profit off of sales.

Instead, franchisees pay an initial 'franchise' fee and also a certain percentage of sales to the corporation for the use of its name, logos, advertising, etc...

[TheMadMonk]

13. And if you believe that, have I've got a Bridge and Opree house deal for you?

Electricity DISTRIBUTION is a natural monopoly. PROVISION is simply a matter of synchronisation with the grid phase and frequency.

I would suspect that most power monopolies were granted at a time when there was no nationwide "Grid" and the power was being generated at a locations close to the points of demand.

Now, I doubt that there are many towns not connected to the grid, and furthermore it would not surprise me at all, to learn that many of these monopolies today GENERATE exactly zero kilowatt hours locally, and simply on sell electricity sourced elsewhere.

[Psephos]

14. There are more effective ways to encourage a discussion.

Distribution and provision have traditionally been tied together in city monopolies, and as should be obvious, I was addressing a call for explanation about why this has been true.

A closer reading of what I wrote will yield my observation that technology is making re-evaluation of the government-granted monopolies a good idea. Specifically, new tech has been teasing the natural D/P partnership apart.

We've already seen this in the retail natural gas industry, where customers are increasingly able to select among a number of suppliers who use the common pipeline system. My personal experience with this has been good.

You didn't address the idea that if a utility agrees to accept close regulation in exchange for a stable market, and then invests a lot of capital to hold up its side of the deal, government should also hold up its end of the deal, until capital is recovered. Bad-faith actions by either party are in no one's interest.

I have no interest in arguing on utilities' behalf, nor on solar startups' behalf either. I have no dog in the fight ideologically. I do believe in the rule of law, and in the importance of honoring voluntarily-entered business agreements. If, for example, a utility has recovered its investment under the regulations to which it agreed, then there's no further need to continue the agreement.

From what I've seen, between vote-buying pols and rent-seeking corps, it's always the ratepayers who suffer when the elephants try to gore each other. Anyone who believes either pols or corps will look out for them is a potential customer for your bridge or opry house.

Personally, I hope to see solar energy become mainstream. I expect that as that happens, the electric utilities will follow the lead of the gas utilities, and increasingly separate the P from the D.

[TheMadMonk]

15. Close regulation? America? Boy do I have a bridge for you.

No I didn't miss your observation, about technology and re-evaluation I just thought it totally laughable, that you considered production and distribution to have ever been inextricably interlinked.

There WAS NO DISTRIBUTION when the contracts were signed. Just production and local supply. Once connected to the national grid, the contracts should have been voided on the spot, given that it would be the utility and not the town which would make that connection.

Smaller scale is almost always going to be more expensive than large. Chances are that once connected, a town utility would almost always be better off just shutting the doors and going the reseller route, buying electricity for less than they could produce it, and continuing to sell it at the same guaranteed rate as always.

[Psephos]

17. Your opinion is noted. n/t

[gtar100]

16. Sounds like whining to me.

Solar is naturally non-centralized whereas coal burning for electricity, or dams for that matter, are best operated in a centralized manner. And it makes sense why they would section off customers in that type of model. But solar is different and they will need to adopt or resort to strong-arm tactics to artificially protect their monopoly. Maybe they could figure out a way to generate the massive amounts of energy they do with coal in some non-polluting fashion and give people reason to stay with them. There is a lot of sun being wasted daily on the deserts in Utah and Nevada.

[csziggy]

5. Our electrical co-op requires exclusive rights to sell

Us electricity, at least in the original agreement I had to sign with them in order to get service. It said that ALL electricity used on our property had to be purchased from them. Laws may have changed since then, especially with the growth in use of emergency generators, but at the time I remember thinking I'd have to change the agreement terms if I ever wanted to install solar panels.

[packman]

7. Good Gawd Almighty

a proliferation of solar installation, why-WHY that could lead to clean, cheap energy then - Chaos, disorder, cat overlords, dogs running wild, women wearing pants- Great Caesar's Ghost, it's too much to bear. Next thing you know, they'll probably think about using the wind or the tides to make energy.

[love_katz]

8. LOL.

Cute post.

Welcome to DU, packman.

[DeSwiss]

11. Just like the horse n' buggy days.....

Yet even though the early cars were too expensive for most, and they made a lot of noise, in the end they won out because they didn't leave shit in the road.

- In the case these has-been energy sources, they leave their shit in the air we breathe and the water we drink and bathe in......

K&R