Electric utilities! They are to me what sideboobs are to Huffington Post -- I just can't stop writing about them.
A couple of days ago I posted a brief introduction to utilities and the way they currently work. The take-home lesson is that current regulations give utilities every incentive to build more infrastructure and sell more power, but very little incentive to cut costs or innovate.
The situation is no longer working for us. We need rapid, large-scale innovation in low-carbon electricity systems, and we need it now. It's time to fundamentally rethink the utility business model.
I hope you'll indulge me just one more scene-setting post before I finally get to the long-awaited post on solutions. Today we're going to take a look at the way electricity has typically gotten from generator to customer, the electricity "value chain," so we can better understand which parts need to change. This is a complicated topic, to say the least, but I'll do my best to break it down in the simplest terms I can, with the proviso that I'm glossing over lots and lots of important details.
The electricity value chain
OK. Think of the electricity value chain as having three basic links:
Last week, I posted on the fight between electric utilities and solar advocates over rooftop solar power. Today, I want to pull back the lens and begin to tackle the bigger question: How should utilities work? What's the right way to provision and manage electricity in the 21st century?
There's very little public discussion of utilities or utility regulations, especially relative to sexier topics like fracking or electric cars. That's mainly because the subject is excruciatingly boring, a thicket of obscure institutions and processes, opaque jargon, and acronyms out the wazoo. Whether PURPA allows IOUs to customize RFPs for low-carbon QFs is actually quite important, but you, dear reader, don't know it, because you fell asleep halfway through this sentence. Utilities are shielded by a force field of tedium.
It's is an unfortunate state of affairs, because this is going to be the century of electricity. Everything that can be electrified will be. (This point calls for its own post, but mark my words: transportation, heat, even lots of industrial work is going to shift to electricity.) So the question of how best to manage electricity is key to both economic competitiveness and ecological sustainability.
It's time to start talking about utilities. I, your courageous blogger and servant, am going to attempt to lay out, at a high level, how utilities work and why, the challenges facing them, and what a utility more suited to the 21st century might look like. It's a complicated problem, but I think the basics are approachable by ordinary citizens, who very much need to get involved and speak up on these issues. Occupy PUCs! (You'll get that joke after you read my next few posts.)
Tom Steyer spent years as a wildly successful hedge fund manager, a vigorous philanthropist, and a sought-after funder of Democratic politicians, but most of that activity took place beneath the public radar.
In August 2010, he and Taylor signed the Giving Pledge, vowing -- as with Bill and Melinda Gates and Warren Buffett -- to give away at least half their fortune, which in their case runs to $1.2 billion. Later that year, Steyer poured $5 million into a winning campaign against California's Prop 23, which would have rolled back the state's seminal global warming legislation. In November 2011, he co-founded the Advanced Energy Economy, a trade association of clean energy businesses. In October 2012, he resigned from his hedge fund to pursue social change full-time. Also in 2012, Steyer crafted, and spent $32 million to back, California's Prop 39 -- which voters approved in November, closing a tax loophole benefiting out-of-state corporations and directing half of the resulting revenue to clean-energy initiatives.
Most controversially, in March of this year, he dove headlong into electoral politics, pouring scorn and threatening to pour money into a Mass. Democratic senate primary campaign against Stephen Lynch, a supporter of the Keystone XL Pipeline. Lynch's opponent Ed Markey won, but Steyer's involvement drew fire. Markey himself disavowed the hardball tactics and political operatives everywhere clutched their pearls.
We met with Steyer when he came through Seattle, for a chat about climate, politics, and money. (This interview has been lightly edited for length and clarity.)
Q.What first engaged you on climate and energy in such a significant way? Was there a turning point or moment of clarity?
A. I don't think there was a big epiphany. But getting involved in the No on 23 campaign in 2010 was an incredible education for me in how human beings think about this, how they relate to it, and what moves them on it. It definitely corrected a bunch of my preconceptions as to who cared and why they cared. People's image of environmentalism is very different from the actual Americans who care about it. That Latinos care the most about environmental issues is not a popularly held view in the U.S., but it consistently polls that way.
The conflict between electric utilities and distributed energy -- mainly rooftop solar panels -- is heating up. It's heating up so much that people are writing about electric utility regulation, the most tedious, inscrutable subject this side of corporate tax law. The popular scrutiny is long overdue. So buckle up. We're getting into it.
There's a short-term problem and a long-term problem. The former is about how electricity rates are structured, specifically how utilities compensate (or don't) customers who generate power with rooftop solar PV panels. The latter is about developing an entirely new business model for utilities, one that aligns their financial interests with the spread of distributed energy. The danger is that fighting over the former could delay solving the latter.
Today, let's dig into the fight at hand. It's about utility rates, specifically "net metering," yet another nerdy green term no one understands. I will endeavor to make clear what it is and why the fight over it is so damn interesting and exciting. Exciting, I tell you! Wake up!
People are always lamenting the lack of small-scale, practical legislation that can address climate change without getting mired in polarized culture wars. Problem is, when legislators introduce bills like that, they're often completely ignored. It's the sexy, controversial stuff that gets attention.
So, in the name of bucking that trend, let me call out a bill just introduced by California Rep. Scott Peters (D). It's called the Super Pollutant Emissions Reduction Act, or SUPER Act. It's not particularly earth-shattering, but it is smart, and well-targeted. Basically, it would create a new federal task force to track, coordinate, and rationalize the various scattered efforts underway to reduce so-called "super pollutants."
What are super pollutants, you ask? They are greenhouse gases that produce much more warming, molecule-for-molecule, than carbon dioxide. However, unlike CO2, they have a short atmospheric lifecycle. When emitted, they hang out up there for anywhere from a few days to a few years and then drop back to earth. They include: black carbon, tropospheric ozone, methane, and hydrofluorocarbons (HFCs). Think of them as the Fast & Furious of the greenhouse-gas world.
I didn't set out to spend all week endorsing Jonathan Chait posts, but he's got a follow-up to the cover story he wrote last week and, well, I endorse it. Like Chait, I continue to believe that Obama's EPA will issue CO2 standards on existing power plants. At the very least, there's no dispositive evidence that it won't. And I too believe that those standards are the most important piece of Obama's climate legacy, if not his overall legacy.
But Chait passes over a key fact that, to my eternal puzzlement, plays little role in the discussion about EPA rules. Quite simply, EPA is legally obligated to issue these rules.
Several people have asked me what I think of Jonathan Chait's new column in New York magazine: "Obama Might Actually Be the Environmental President." Apparently some folks are quite upset about it and think it's terrible, though I'm not entirely sure why.
Seems to me Chait mostly gets it right. He's right that Obama has made much more progress on climate and clean energy than he gets credit for. He's right that Obama has mostly done it through the stimulus bill and a series of low-key regulatory actions, rather than through high-profile "green" fights. In the high-profile green fights that have been had, cap-and-trade and Keystone, Obama has disappointed, and is disappointing, and promises to further disappoint many greens, but Chait is right that the disappointment has unfairly tarred the whole presidency. He's right that greens' harsh judgment is born of a sense of desperate urgency about the scale of action necessary.
And -- perhaps more controversially -- Chait is right that the decisions Obama makes on Clean Air Act authority in his second term are more significant, in carbon terms, than the much more high-profile decision he's going to make on the Keystone XL pipeline. (Glad to see Chait call out NRDC's ingenious proposal to make carbon regulations do serious work at low cost.)
What I think has my friends upset, and where they differ, is Chait's overall assessment: that Obama is therefore "the environmental president." The question here is -- as it is for every historical figure, but especially Obama, and especially on climate -- compared to what?
Last week, I argued that people shouldn't be so gloomy about carbon-trading systems, despite the hue and cry around the European Union's Emissions Trading System (ETS) right now. One example of a carbon-trading system that seems to be doing just fine is the Regional Greenhouse Gas Initiative (RGGI), which currently involves nine states in the U.S. Northeast.
RGGI is pretty modest as these things go. It only covers power plants, and only those 25 megawatts or greater. (There are 211 covered plants at the moment.) Its first three-year trading period ended at the end of 2011.
Thus far, it seems to be working as planned -- better than planned, actually. Over the 2008-11 period, CO2 emissions from covered plants were down 23 percent compared to the three years prior. That's 126 million short tons of emissions eliminated.
In fact, over 2008-11, RGGI power plants came in 33 percent under the cap set by the program. (In 2012, they came in at 45 percent below the cap.)
The United States and 140 other countries have signed or otherwise associated with the Copenhagen Accord, in which it is agreed that the nations of the world should "hold the increase in global temperature below 2°C, and take action to meet this objective consistent with science and on the basis of equity." For there to be a chance -- even just a 50/50 chance -- of limiting temperature rise to 2°C, global greenhouse gas emissions must peak by 2020 (earlier for the developed world) and fall by 9 or 10 percent a year every year thereafter.
Nothing like that has ever been done. Not even close. No major energy transition has ever moved that quickly. Carbon emissions have never fallen that fast, not even during the economic collapse brought on by the demise of the USSR. Getting to change of that scale and speed is not a matter of nudging along a natural economic shift, as clean energy cost curves come down and fossil fuels get more expensive. That scale and speed seem to demand something like wartime mobilization.
That metaphor gets used a lot. I've used it many times myself. But is it apt? And what would it mean to take it seriously? There's been lots of academic attention to the technology side of rapid, large-scale mitigation, but little attention to the governance side. How could a country engineer such a transition? What powers and institutions would be necessary?
A little less than two years ago, I wrote a post called "the medium chill," about efforts by my wife and me to step off the "aspirational treadmill" and accept some material constraints in exchange for lives with more free time, relationships, and experiences. It has gone on to be my most popular post ever. I don't know if it got the most hits, but it has solicited the most feedback, by a wide measure. It is one of very few posts I've ever written that is regularly mentioned to me by Normal People, i.e., people outside my online circles of green wonks and political obsessives. Several people have told me it gave them a way to express something they'd already been thinking, which is pretty much the nicest thing you can say to a writer.
Anyway, in some modest way, it resonated. Since Grist's theme this past month has been "happiness," my editor asked me to revisit the essay and talk a little about how my thinking has (or hasn't) changed. So here goes. Pardon me if this is a little discursive and rambly -- and by a little I mean a lot.
If I had to sum up, I'd say that I'm more skeptical/cautious about one part of my post and more committed than ever to the rest of it.
First, the part I'm more skeptical about. In my post, I cited research showing that above a certain level of income, money brings no further happiness. This is known as the Easterlin paradox, based on the work of USC professor Richard Easterlin. Those who want government to focus on quality of life rather than GDP (like me!) are very, very fond of citing this research, to the point that it's become a bit of a cliche, something "everyone knows."
The problem is that Easterlin got it wrong -- or at least, it sure looks like he got it wrong. I was going to round up some of the new research on this, but Dylan Matthews already did it for me. He sums up: