Spray On Solar

Don’t count on this anytime soon. Buy some rooftop panels. But it is ideas like this that eventually make the difference. From YushoStudios via YouTube

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Wind In The Rural Landscape

This piece is from AWEA’s Why I Like Wind Power series. From AmericanWindEnergy vis YouTube

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What Dark Snow Means

Short and powerful. From greenman3610 via YouTube

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CLIMATE CHANGE AND THE EYE OF THE BEHOLDER

Emotional Response to Climate Change Influences Whether We Seek or Avoid Further Information

May 15, 2013 (Science Daily)

“Sixty-two percent of Americans now say they believe that global warming is happening, but 46 percent say they are "very sure" or "extremely sure" that it is not. Only 49 percent know why it is occurring, and about as many say they're not worried about it…Because information about climate change is ubiquitous in the media, [Z. Janet Yang, PhD, assistant professor of communication at the University at Buffalo and Lee Ann Kahlor, PhD, associate professor of public relations and advertising at the University of Texas, Austin,] looked at why many Americans know so little about its causes and why many are not interested in finding out more.

…What, Me Worry? The Role of Affect in Information Seeking and Avoidance …[found those] who had negative feelings toward climate change -- feelings marked by states of fear, depression, anxiety, etc., -- actively sought more information about climate change…[and] saw climate change as having serious risks, and considered their current knowledge about it insufficient…”

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“…Those driven by a positive affect toward climate change -- an emotional state marked by hopefulness, excitement, happiness, etc. -- actively avoided exposure to additional information on the issue…[and] said climate change presented little risk to nature and humans, and they viewed their knowledge about climate change as sufficient.

“…The researchers say the study results…[suggest] that risk communication about climate change might benefit from…Arousing a sense of curiosity and debunking false beliefs about ecological risks so people are not complacent about what they already know…Highlighting potential negative consequences and fostering a positive attitude toward learning about climate change…Monitoring the audience's social environment and its perceived ability for finding and understanding information about climate change…Promoting optimism that human action, such as reducing greenhouse gas, could actually combat the consequences of climate change…”

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WHERE NEW ENERGY NEEDS TO BE

Siemens study: Europe can save EUR 45 billion in its pursuit of renewables

May 15, 2013 (Siemens)

“Building and expanding renewable energy installations in the wrong locations is costing EUR 45 billion in unnecessary investment…Potential savings on a magnitude of 4-5 times the annual investment in solar and wind power plant construction in Germany are possible…If installations were built at the sites in Europe that offer the highest power yields, some EUR 45 billion of investment in renewables could be saved by 2030…

“In an ongoing study, Siemens is working in cooperation with the Technical University of Munich to examine energy systems worldwide with the aim of ascertaining their utilization rate of resources, reliability of supply, sustainability and cost-efficiency. Based on the realization that billions are being wasted every year as a result of inefficiencies in worldwide energy systems and markets, the study intends to precisely identify and quantify these losses, and to propose solutions…[at] the World Energy Congress (WEC), to be held in Daegu, South Korea in October 2013.”

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“Siemens has spotlighted four main levers for optimizing energy systems worldwide that can be more or less effective depending on the regional characteristics of the power grids and the power plant fleet…[1]Local optimization of renewable power installations…[2] Enhancing the efficiency of the power system as a whole…[3] Improvements in the power plant mix…[and, 4] More use of electric power for energy needs…

“Energy systems around the world vary broadly owing to their regional conditions, and are constantly changing…Siemens is examining these regional situations with allowance for predicted future developments, and identifying the implications for neighboring energy markets. One of the aims is to determine what approaches are most suitable from national and global economic perspectives for creating reliable and sustainable energy systems with high efficiency but still at affordable power prices…”

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KUWAIT’S POSSIBLE SOLAR

Kuwait’s solar journey comes to light

Jenny Muirhead/Heba Hashem, May 10, 2013 (CSP Today)

“…Despite being the third-biggest producer in the Organization of Petroleum Exporting Countries (OPEC), Kuwait’s long-standing dependency on fossil fuels is expected to backfire by as early as 2017…[A]bout four years from now, oil revenues will no longer outweigh Kuwait’s spending…Kuwait is actively planning to harness renewable energy…The country aims to produce about 1% of its electricity from renewables by 2015; 10% by 2020 and 15% by 2030. Projects now are underway to use CSP in a variety of applications, including a hybrid power plant, enhanced oil recovery, and as part of a renewable energy complex…

“Kuwait’s most advanced solar power project has been under a feasibility study by Japan’s Toyota Tsusho Corporation since 2007. Consisting of a 60 MW trough solar collector, Al Abdaliya Solar Plant will be part of a 280 MW Integrated Solar Combined Cycle (ISCC) system – integrating a parabolic trough collector with a gas turbine – and will be located in Al Abdaliya Desert, west of Kuwait…Kuwait’s second planned CSP project will also employ parabolic trough technology, as part of a 50 MW plant within the 70 MW Shagaya Renewable Energy Complex. The demonstration plant will use dry cooling and large capacity molten salt thermal energy storage…The tender for the project’s EPC contract, however, has been delayed since September 2012…”

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“…Chevron, which has operated four oilfields in the onshore Partitioned Zone (PZ) that lies between Saudi Arabia and Kuwait since 1949…is now exploring ways of using solar energy for enhanced oil recovery…A pilot solar plant may start at the end of 2013…in attempt produce the steam needed to pump heavy crude from Chevron’s Saudi Arabia oilfield, and a final investment decision is expected to be made this year…Chevron’s project would use solar power in conjunction with burning natural gas for the steam flood development…

“…Kuwait has the highest direct normal solar irradiance in the GCC region, with solar radiation levels peaking at above 8,000 kilowatt hours a square metre…Although no plans have been announced yet for solar subsidies or minimum local content requirements…[there is a draft] renewable energy strategic plan through 2030…CSP could clearly play a dynamic role in Kuwait’s future energy mix, where it can be used in food production, desalination systems, enhanced oil recovery, water heating, autonomous or stand-alone power generators in remote areas, as well as in security applications…[I]f the new shale oil and gas explorations do not distract it from its renewable energy objectives, Kuwait could easily become a regional leader…”

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WHAT INDIA WIND NEEDS

Wind energy dropped 1,500 MW due to withdrawal of incentives; Association asks govt to restore generation-based incentives and accelerated depreciation for the industry

May 16, 2013 (Press Trust of India via Business Standard)

“…Indian Wind Power Association (IWPA)…asked the government to restore generation-based incentives and accelerated depreciation for the industry, which witnessed a dip of 1,500 MW in generation during 2012-13…Wind energy is the cheapest source of electricity in the country. The current installed capacity is 19,000 MW.

“…[The dip followed] removal of…accelerated depreciation (AD)…[which] is based on investment. If a company invests Rs 100 then Rs 80 it can take back as tax incentive. Under the scheme for wind power, a GBI (Generation Based Incentive) of 50 paise per unit of electricity fed into the grid is provided for a period not less than 4 years and a maximum period of 10 years…’

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“…AD provides cheaper and non-polluting electricity with no annual escalations…[R]einstatement of GBI has been announced during the Budget 2013-14. Its form and structure is yet to be announced.

“According to various reports these incentives were scrapped as many developers took incentives to save tax and after the completion of incentives either neglected or abandoned the wind farms altogether.”

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THE "RESEARCH" IN CLIMATE CHANGE DENIAL

How climate change denial works

Myrrdin, May 14, 2013 (AmericaBlog)

“…[In its Global Warming is Over story, the] Daily Mail attempted to claim (with the subsequent aid of Fox News, of course), that recent data proved that global warming had ended. Or, at best, Fox claimed, scientists were conflicted about whether global warming was still happening…[N]either claim was true…[The Daily Mail chose] a short-term period in which temperatures had cooled, and ignored the longer-term warming that has been happening…[S]ince the early 80s, even the cooling is warming…

“…[T]his graph from Skeptical Science [shows] how the climate change deniers manipulate the data. If you only look at a given 8 -year or so period, it looks like the temperature trend is downward. It isn’t until you look at all the data spanning the last 40 years that you realize the trend is quite clearly in the direction of global warming:..[T]he reporter was aware of the data from 1980 to 1996 that refutes his argument. But he chose to only show the data from 1997 to 2012.”

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“Looking at the complete data series shows why. It shows absolutely no hint of the alleged ‘plateau’ in temperatures…Temperatures were hotter in 1997-8 because of the El Niño event, which is a cyclic phenomena that causes temperatures to spike up. La Niña events have the opposite effect, causing temperatures to cool. So reporter Rose chose a year when El Niño caused temperatures to rise at the beginning of his ‘plateau’ and a La Niña event at the end.

But when you look at the past 62 years, even taking El Niño and La Niña events into account, it’s clear that the overall average global temperature is warming…It’s difficult to believe that the Daily Mail’s error happened by accident. Especially when the reporter talked to experts who made clear that the problem is long-term warming, not what may or may not happen in the short term (i.e., the difference between “weather” (short term) and “climate” (long term))…A “mistake” like this can only happen by searching through vast quantities of data, and then cherry-picking the data points that tell the story the propagandist wants to tell while ignoring all the rest…The real climate change hoax is being perpetrated by those who claim it never existed in the first place.”

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HOW WOMEN MAKE A DIFFERENCE

Women in the Wind Industry; “It is going to take all the talent we can find and the best ideas that are out there.”

Herman K. Trabish, May 13, 2013 (Greentech Media)

“…[A]n as-yet-unreleased NREL study show women make up approximately 20 percent to 25 percent of the wind workforce. Most work in administrative and human resources roles…[ Kristen Graf, Executive Director ofWomen of Wind Energy (WoWE) believes] we will be better off if the workforce is more reflective of the overall long-term customer base…

“…[T]hose numbers are much more the case in the high-tech industries…About 41 percent of lower-level STEM jobs are held by women, Graf said…But by the time women in the industry hit their mid-to-late-30s, some 51 percent leave, and very few ultimately end up at the very top…Graf noted [five reasons, including]…Hostility in the workplace…The isolation of being a lone woman among men…The disconnect between workplace demands and women’s preferred modes of dealing with problems and conflicts…The added domestic responsibilities that many women have…The lack of clear advancement paths…”

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“…[A Catalyst study comparing the performance of Fortune 500 companies with no women on their board and companies that have three or more women board members…[showed ones with more women showed significantly better returns on sales, invested capital and equity…WoWE’s mission, Graf said, is the education, professional development and advancement of women in the industry. What that is intended to achieve, she added, is to bring more women to the table, build a more diversified wind industry workforce and, as a result, build a more robust renewable energy economy.

[Kristen Graf, Executive Director, Women of Wind Energy:] “This industry, right now especially, needs innovative policy and financing methods. That is going to take all the talent we can find and the best ideas that are out there…Without a doubt, the greater presence of women is a solution…It is not that women have a particular perspective but chances are good that they have some sort of different perspective.”

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POLITICS AND THE EPA

GOP Tactics Delay Confirmation of EPA Administrator

Angela Garrone, Esq., May 13, 2013 (CleanEnergy.Org)

“…[M]oments before a scheduled vote on the confirmation of Gina McCarthy to become Administrator of the Environmental Protection Agency, Republican members of the Senate Environment and Public Works Committee staged a boycott…[reportedly because] McCarthy had not sufficiently responded to five important ‘transparency requests.’ McCarthy had, however, answered 1,079 oral and written questions in earlier confirmation hearings…Despite both McCarthy’s exceptional background as Assistant EPA Administrator from 2009-present and as Commissioner of the Connecticut Department of Environmental Protection from 2004-2009, Republicans have decided to use any means necessary to try to roadblock McCarthy’s appointment…[but] it seems unlikely that Republicans will do more than delay McCarthy’s appointment…

“Senate Democrats were outraged at the boycott…Senator Barbara Boxer, chair of the Environment and Public Works Committee…[said it] shows how obstructionist they are…McCarthy has a history of crafting clean air regulations that not only protect the public health but also include significant industry input – ensuring that emissions standards are low enough to protect health but reasonable enough so that industry is able to comply.”

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“Senator Boxer…promised to schedule a second vote on McCarthy’s nomination…[and] has considered changing committee rules if it is the only way to push McCarthy’s nomination through. Changing committee rules, however, could give the GOP a reason to filibuster McCarthy’s nomination on the Senate floor.

“Along with Ms. McCarthy’s confirmation vote, Republicans also stalled the Senate vote…[on] Energy Secretary nominee Ernest Moniz…over [South Carolina Republican Senator Lindsay] Graham’s concerns about a federal program in his state which turns weapons-grade plutonium into fuel. The Senate Committee on Energy and Natural Resources, however, approved the nomination of Dr. Moniz…The only senator voting against Dr. Moniz’s in committee was another Republican South Carolina Senator, Tim Scott…Graham has since lifted his procedural block on the Senate vote…”

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THE ENORMOUS LED OPPORTUNITY

The Next Apple Will Be in LED Lighting

Lisa Ann Pinkerton, May 14, 2013 (Technica)

“…Looking at the landscape today, energy-efficient lighting, namely LEDs, is the next major market to reap the benefits of going digital…Historically, such inflection points have proved to open a wide array of new markets, business models and product capabilities…Even Steve Job’s former counsel Randall Sosnick is betting on LEDs. Now CEO of NEXT Lighting, he’s producing highly-innovative, reliable and affordable LED replacements for commercial florescent lighting…

“…Just as the iPhone did for mobile computing, NEXT Lighting’s innovative design can serve as a platform for a new wave of lighting applications without the need to completely replace fixtures…Cree has managed to get its consumer LED bulbs down below $10 a piece and Phillips isn’t far behind…These are just a few of the many market convergences that indicate the tipping point for LEDs is here…Over the past 10 years, LED lighting as grown at a tremendous pace. The LED manufacturer Cree witnessed over 150% growth rate since 2007…[S]mall startups like Albeo Technologies have seen revenue climb 620 percent since 2009, to over $10.5 million in 2011. Their recent acquisition by GE Lighting is just another indicator…”

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“…Since 2011 alone, the LED industry has seen a nearly 30% drop in prices…[W]ith increasing market demand, higher energy costs, and improved technologies and you have a perfect storm…of classic inflection points…Street lighting is considered a gateway application…The potential energy savings of LED is upwards of 40 percent for most municipalities…[and] the cost of installing an LED street light is very similar to sending a bucket truck to change a bulb…

“…Pike Research says…unit shipments of LED street lights [will] rise to more than 17 million by 2020…[C]ommercial/industrial applications will follow…[and then] the residential market will blow the space wide open…Lighting represents 19 percent of global electricity….McKinsey & Company [said] nearly $25 billion (conservatively) is expected to go LED by 2020…Unlike the sheer luck of investing in Apple when it was $16 a share, the writing is on the wall for LED market expansion…”

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TODAY’S STUDY: THE NEW INTELLIGENT ENERGY EFFICIENCY

Intelligent Efficiency: Innovations Reshaping the Energy Efficiency Market

Stephen Lacey, April 2013 (Greentech Efficiency)

How energy efficiency is evolving into “intelligent efficiency”

The last two major economic revolutions were caused by the convergence of two factors: communications and energy.

In the 1800s, the convergence of printing technology and steam power created the fi rst form of mass communications – bringing with it sweeping changes in literacy and education. In the 1900s, the convergence of radio and television with electricity and the oil-powered combustion engine created the modern consumer-based society we know today.

We are now on the verge of a third revolution, argues economist Jeremy Rifkin. This one will be abetted by the convergence of the internet and distributed energy, creating new ways to do business, communicate, and build wealth. Rifkin calls this a “new economic paradigm for the 21st century.”

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This new paradigm is already reshaping the way we think about energy efficiency. All around us, embedded in every commercial building, manufacturing facility and corporate campus, is a vast, untapped energy resource: efficiency. In the past, that resource was hidden, ignored or misunderstood by the companies sitting on the potential, and recognized only by a small group of energy professionals.

But with dramatic advances in web-based monitoring, real-time data analytics and utilities using peak pricing, that hidden resource is now becoming something tangible – an asset that companies can measure, manage, procure and sell.

This isn’t the stale, conservation-based energy efficiency Americans often think about.

“In the past, energy efficiency was seen as a discrete improvement in devices,” says Skip Laitner, an economist who specializes in energy efficiency. “But information technology is taking it to the next level, where we are thinking dynamically, holistically, and system-wide.”

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This emerging approach to energy efficiency is information-driven. It is granular. And it is empowering consumers and businesses to turn energy from a cost into an asset. We call this new paradigm “intelligent efficiency.”

That term, which was originally used by the American Council for an Energy-Efficient Economy in a 2012 report, accurately conveys the information technology shift underway in the efficiency sector.

The IT revolution has already dramatically improved the quality ofinformation that is available about how products are delivered and consumed. Companies can granularly track their shipping fleets as they move across the country; runners can use sensors and web-based programs to monitor every step and heartbeat throughout their training; and online services allow travelers to track the price of airfare in real time.

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Remarkably, these web-based information management tools are only now coming to the built environment in a big way. But with integration increasing and new tools evolving, they are starting to change the game for energy efficiency.

Although adoption has been slow compared to other sectors, many of these same technologies and applications are driving informational awareness about energy in the built environment. Cheaper sensors are enabling granular monitoring of every piece of equipment in a facility; web-based monitoring platforms are making energy consumption engaging and actionable; and analytic capabilities are allowing companies to fi nd and predict hidden trends amidst the reams of data in their facilities and in the energy markets.

This intelligence is turning energy efficiency from a static, reactive process into a dynamic, proactive strategy.

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We interviewed more than 30 analysts and companies in the building controls, equipment, energy management, software and utility sectors about the state of the efficiency market. Every person we spoke to pointed to this emerging intelligence as one of the most important drivers of energy efficiency.

“We are hitting an infl ection point,” says Greg Turner, vice president of global off erings at Honeywell Building Solutions. “The interchange ofinformation is creating a new paradigm for the energy efficiency market.”

Based on our conversations with a wide range of energy efficiency professionals, we have identified the five key ways intelligent efficiency is shaping the market in the commercial and industrial (C&I) sector:

• The decreased cost of real-time monitoring and verifi cation is improving project performance, helping build trust among customers and creating new opportunities for projects;

• Virtual energy assessments are bringing more building data to the market, leveraging new lead opportunities for energy service professionals;

• Web-based energy monitoring tools are linking the energy efficiency and energy management markets, making efficiency a far more dynamic off ering;

• Big data analytics are creating new ways to fi nd trends amidst the “noise” ofinformation, allowing companies to be predictive and proactive in efficiency;

• Open access to information is strengthening the relationship between utilities and their customers, helping improve choices about efficiency and setting the foundation for the smart grid.

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At its core, energy efficiency is still about the nuts and bolts of changing equipment and improving the physical components of a facility. Information is not a panacea and is not a substitute for the physical integration of new systems. But it is becoming the glue binding the holistic, system-wide approach that is starting to defi ne the intelligent efficiency business.

“It is rapidly becoming much cheaper to measure efficiency and analyze that data alongside lots of other information so companies can actually take action,” says Robert Hutchinson, managing director of the Rocky Mountain Institute. “These information technologies are transforming the efficiency business. They are incredibly powerful.”

Driven by the convergence ofinstantaneous communication and distributed energy resources, the world is entering a new phase of economic growth. The evolution ofintelligent efficiency parallels that larger shift that is now underway. In this report, we detail crucial pieces of that shift…

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The revolution in energy efficiency

“When energy revolutions occur, they require communication revolutions that are agile enough to manage them,” says economist Jeremy Rifkin about the emergence of a third industrial revolution. “You can’t really do one without the other.”

This precisely describes the conditions driving innovation in intelligent efficiency. As communications technologies become mature enough to create meaningful change – perhaps even revolutionary change – in the built environment, a vast number of companies are setting the stage for a new economic paradigm based on distributed energy.

The companies and technologies mentioned in this report represent only a tiny sliver of the ecosystem ofinnovation in the intelligent efficiency sector. There are thousands of companies working to bring low-cost software, cutting-edge equipment, and innovative business models to the efficiency market.

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“This is a world where entrepreneurial, venture-backed companies are colliding with goliaths,” says McKinsey’s Stefan Heck. “This is a really dynamic time as a lot of these technologies compete. In many cases it isn’t clear how it will play out.”

Which companies fail and which succeed may alter the course of specifi c technology adoption. But it will not shift the macro trend underway: the built environment is getting smarter and companies are using the vast new reams ofinformation to increase their level of sophistication in how they deploy projects. In turn, utilities and other energy providers are getting deeper insight into how their customers operate, further boosting the potential for efficiency.

Historically, energy efficiency was a one-dimensional process that involved replacing discrete pieces of equipment. But with instant communications and deep analytical capabilities, efficiency is becoming an ongoing process – one that is connecting energy management, storage, distributed renewables, and traditional efficiency sectors to create a dynamic market. It is also enhancing project performance as real-time monitoring allows for ongoing adjustment and verifi cation across broad portfolios of facilities.

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“Think about what a paradigm shift that is,” says Allen Friefeld of Viridity Energy. “It’s a diff erent way to think about the traditional efficiency customer.”

Energy efficiency is also stereotypically known as being “boring.” That is no longer the case. Intelligent efficiency is making energy visible, turning retrofi ts from something a company “does” into something a company manages like any other physical asset.

Embracing energy efficiency as a dynamic resource is still a new concept for many businesses. But it is happening. Just like new drilling techniques and surveying capabilities are unlocking previously inaccessible resources in the oil and gas sector, information technologies are uncovering a deep well of efficiency reserves and reshaping the way companies think about how they use energy.

We have just begun to scratch the surface of what intelligent efficiency can deliver.

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QUICK NEWS, May 15: MINNESOTA’S SOLAR AMBITIONS IN CONTEXT; RHODE ISLAND’S FIGHT OVER OCEAN WIND; VC MONEY FOR SMART GRID STEADY

MINNESOTA’S SOLAR AMBITIONS IN CONTEXT Minnesota’s Proposed Solar Standard in Comparison

John Farrell, April 25, 2013 (Institute for Local Self-Reliance)

“Some Minnesota legislators are getting a little weak-kneed listening to utility lobbyists make hugely ironic claims about the cost of the proposed solar standard and thinking about how much solar this is…Time for some context.

“The originally proposed 10% solar energy standard might have been ambitious by national standards, but the current 4% by 2025 target (with municipal utilities and cooperatives exempted – boo) might earn Minnesota the rank of #5 in solar sometime after 2020, if no one else joins the fray…”

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“…California and Hawai’i aren’t pictured because the former is already at 1.7% solar and the latter is approaching 3%, with such favorable economics that they don’t need a standard to drive adoption.

“Minnesota’s solar economics will be similarly robust in about eight years, but it’s the near term opportunity to establish a market and build manufacturing capacity to serve the Midwest that makes the standard a crucial piece of the state’s energy future.”

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RHODE ISLAND’S FIGHT OVER OCEAN WIND Block Island Gets First Chance To Weigh In On Wind Turbines

Judy Benson, May 10, 2013 (McClatchy News Service via Hartford Courant)

“...[A public meeting] offered the first chance in two years for [Block Island] residents to publicly take a side on the 30-megawatt turbine wind farm proposed for a site 3 miles off the southeast shore. It also was the first litmus test of island support since the $300 million project to erect five 650-foot turbines entered the permitting phase…The project is on track to be the nation's first offshore wind farm, though similar turbines have been operating in Denmark, Germany and elsewhere for several years…

“With an audience of about 100 of their neighbors, 24 speakers said Providence-based Deepwater Wind's proposal would benefit the island economically and environmentally, while setting an example for the rest of the country…Another 12 speakers argued that the turbines would compromise the views that are a main asset of the island's tourism-based economy and expressed skepticism and mistrust of Deepwater Wind. Three others did not express outright support or opposition but instead urged caution as the process proceeds…Several speakers qualified their support with admonitions that decision-makers ensure the company sets aside adequate funds to decommission the turbines when they no longer produce power…That point also was made by the Town Council in its letters of support…The five-member council supports the project 3-2…”

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“The hearing was called by the state's Department of Environmental Management, which is considering an application from Deepwater to dredge about 20 miles of trenches for cables connecting the five turbines to Block Island, and from there to landfall at Narragansett Town Beach and on to a National Grid substation…[A Narragansett hearing] drew a similar turnout, but more of the speakers were opposed…The cable to Narragansett would be Block Island's first power connection to the mainland, a $20 million to $40 million infrastructure upgrade the island has been seeking for 20 years.

“…[T]he Narragansett Town Council voted to put off until June 3 negotiations with Deepwater over easements..for the cable…[Deepwater] said that in response to concerns raised in Narragansett, it will propose [to underground the proposed cable]…Several Block Islanders supporting the wind farm said the reality of climate change convinces them that the island must do its part…[and] urged opponents to look beyond their concerns about views to the bigger picture…Maya Veldman Wilson, a school-aged resident…read a poem calling the turbines ‘heroes of the future’ and ‘giants’ that speak through the wind…’They only spin. They don't hurt anybody,’ she said…”

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VC MONEY FOR SMART GRID STEADY VC Funding in Smart Grid Sector Remains Flat in Q1 2013 with $62 Million…Pace of funding largely unchanged for last five quarters

May 2013 (Mercom Capital Group)

“…Smart grid venture capital (VC) funding in Q1 2013 totaled $62 million in nine deals. The quarter’s funding was nearly identical to the first quarter of 2012, when the same amount was raised by smart grid companies but in 10 deals instead of nine. With the lone exception of home security and automation company Alarm.com’s $136 million raise in Q3 2012, the pace of funding has remained largely unchanged for the past five quarters…

“The Top 5 VC deals in Q1 2013 raised a combined $52 million. The top two VC deals each raised $15 million. Cylance, a provider of cyber security products for the infrastructure industry, raised $15 million from Khosla Ventures and Fairhaven Capital in a Series A round, and Sentient Energy, a developer of advanced grid monitoring solutions…raised $15 million in an undisclosed round from Foundation Capital…”

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“There were only four M&A transactions in Q1 2013. One of the transactions; Toshiba Corporation’s acquisition of privately-held energy management company Consert, was disclosed for a total of $11 million. Last quarter, $22 million in M&A activity was disclosed in the same number of transactions.

“Despite a rather slow quarter, the smart grid sector saw a rare IPO. Silver Spring Networks, a provider of smart grid products and services to utilities, raised $81 million by offering 4.75 million shares at $17.”

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TODAY’S STUDY: HOW OIL MARKETS ARE MANIPULATED

Competition in Global Oil Markets: A Meta-Analysis and Review

Andrew P. Morriss & Roger E. Meiners, April 2013 (Securing America’s Future Energy)

Abstract

The OPEC cartel has affected the oil market for four decades. An unstable cartel representing the interests of the major oil exporting nations, OPEC has at times been effective in forcing up the price of oil and, thereby, allowing the export nations to obtain a significant premium captured by national oil companies on behalf of their sovereigns. At times, this means a transfer of wealth from oilconsuming nations to oil-producing nations totalling hundreds of billions of dollars more than what the competitive-market price of oil would suggest. When the cartel has failed in its objective, the price of oil has collapsed, possibly lower than would have been the case were the market not subject to cartelization. The instability of the cartel means the price of oil has been highly variable over time, making it difficult to predict the future direction of oil prices. A review of the literature indicates that there is a general consensus that the oil market is greatly affected by the cartel. That is, the international market for oil is not a free market.

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Introduction

In the earliest days of the international oil trade, a small number of oil companies, including Standard Oil, vigorously competed for market share. Those firms dominated both international trade in petroleum and access to reserves. Public policy debates centered on the dangers of private monopolies controlling the market. Today, traditional for profit companies no longer control the vast majority of the world’s oil reserves. Instead, an international cartel (the Organization of Petroleum Exporting Countries or OPEC) has the ability to influence the supply of oil. State-owned national oil companies (of both OPEC members and non-members) hold the vast majority of proven reserves.

The problem of monopoly remains, although the economic concerns about pricing are now mingled with concerns over the motivations of companies responsive to governments rather than investors.

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Due to the importance of oil to the world economy, international oil markets have attracted considerable attention from economists and policy analysts. Numerous studies (we summarize more than 200 scholarly articles, reports, and government investigations in this document’s appendix) have been devoted to attempting to describe the economic structure of the petroleum market. This report examines this literature in search of a consensus on the key features of the oil market’s structure. We conclude that there is a consensus that the global oil market deviates in important ways from the competitive model and that these market anomalies have significant economic impacts and so are relevant for policy makers.

Since the early 1970s the oil market has frequently been significantly affected on the supply side by strategic market intervention by oil-producing countries. In particular, the oil market has periodically experienced the consequences of cartelization as a result of OPEC’s strategy over the past 40 years. As any cartel would, OPEC members have attempted to restrict output. It is generally recognized that Saudi Arabia, the largest oil exporter, is the lynchpin of OPEC. For example, in January 2013 the Saudis announced that they had cut production five percent in December. Immediately after, “Light, sweet crude oil for February delivery on the New York Mercantile Exchange rose 72 cents, or 0.8%, its highest settlement since Sept. 18.” Since the details of the deliberations of the organization are known indirectly through commentary, leaks, and after-the-fact disclosures, the exact role of the Saudis is not known. What is clear is that OPEC has had periods of spectacular success in restricting supply sufficiently to force prices up significantly. Of course, it has also had periods during which it has been much less successful.

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Whatever the particulars ofits operations, when OPEC is successful in imposing artificial scarcity, it forces demanders to move up the demand curve and, more importantly from the suppliers’ perspective increases profit margins for the oil producing countries. Because OPEC’s success at this strategy varies with political conditions within and among OPEC member states, factors such as the amount of non-OPEC supply, policies in consuming countries, and the costs of competing forms of energy, OPEC is not able to behave as a stable, textbook monopolist would. Thus an important part of understanding OPEC’s influence on world oil markets is to recognize that its influence varies considerably across time in ways that are difficult to predict.

Basic economic theory has long explained that monopolists seek to reduce output below the competitive equilibrium to force the price above the competitive market price. Monopolies have other ill effects, including reduced innovation and internal inefficiencies. (In this regard, economist J.R. Hicks noted in 1935 that “the best of all monopoly profits is a quiet life.”

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When a cartel is successful in acting as a monopolist, prices are less variable. Price gyrations reduce demand for the product, injuring the monopoly’s long-term profits and harming customer relations. Particularly where a cartel faces competition from substitute goods, it must pay attention to the impact of price on long-term demand. Not surprisingly, such demand considerations are a constant worry for OPEC, which fears demanders will diversify out of oil products if prices rise too high or become unpredictable. OPEC’s long term interest is therefore in a price that is high enough to provide its members with substantial economic rents, but not so high as to reduce the total economic rents it is able to collect over time by encouraging diversification out of oil by demanders.

Unfortunately for OPEC, it is regarded as an unstable cartel whose members are known to “cheat” on the legally unenforceable gentlemen’s agreements that have been made about production restrictions. Hence, it does not consistently restrict supply even from its member nations. Of course, non-member oil exporters have even less of an incentive to comply with cartel efforts to limit production. As the history of oil prices indicates, at times OPEC, perhaps often due to Saudi actions, is effective at keeping the price artificially high; at other times the price has dropped to levels not profitable for some producers over time. That is, oil markets frequently experience significant price swings not seen in similar markets for other commodities. For example, we can compare oil price gyrations with coal prices. Coal is a carbon-based energy source competitive with oil in several markets, but we do not see price swings in the coal market comparable to those we see in oil. An important reason is that there is no coal cartel.

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As competitiveness in international oil markets varies over time, prices rise and fall in response to sellers’ changing degree of market power. This source of supply intervention means oil markets are more volatile than they would be in either a competitive market, or a stable, monopolistic market. Ifinternational oil markets more closely resembled a textbook competitive market, prices would often have been lower than they were during periods of high prices in the past four decades. Ifinternational oil markets more closely resembled a stable monopoly, prices likely would have been higher than they were during periods of low prices. In short, oil markets switch back and forth from more competitive to less competitive market structures due to the politics of OPEC and other non-market factors. This adds to the overall price volatility of the market, a significant disadvantage for consumers and potential investors in both the development of new, higher cost oil supplies and substitutes for oil as it makes investment decisions less easy to predict.

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In addition to OPEC, there are other major differences between international oil markets and more competitive commodity markets. Beginning in the 1950s, an increasing amount of global oil reserves have been controlled by national oil companies (NOCs). These companies differ from private companies because the NOCs must respond to non-market considerations related to domestic and international politics, not just market forces. For example, the Venezuelan national oil company, Petroleos de Venezuela (PDVSA), only hired supporters of Hugo Chavez and the company serves as the primary revenue generator for the government. A market with major suppliers that are not primarily governed by market forces differs significantly from a competitive market made up of suppliers driven by the profit motive.Even before the rise of the NOCs, much of the world’s oil reserves were controlled under concessions negotiated between the major oil companies (often acting as cartels) and producer state governments. In many respects, there was no real international oil market under the concessions, since the buyer-side of the market had been effectively cartelized through the oil company consortia. With the addition of a major supplier cartel and the shift of reserves to non-profit-maximizing firms, the current international oil market bears almost no relation to the classic conception of a competitive market in which supply and demand determine prices.

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This report reviews the elements of the oil market, the economic consequences of these deviations from the competitive model, and examines the literature on oil markets to provide a non-statistical meta-analysis of scholarly publications. The papers, reports, and other materials collected and reviewed allow us to summarize the collective wisdom ofindependent researchers over many decades, rather than only report our own assessment of the competitive nature of the petroleum industry. Before getting to the review of the literature, we provide a brief overview of the economics of the oil industry…

A Short Primer on Energy and Petroleum...Are We Running Out of Oil?...Simple Model of the Cost of Oil Production…Who Owns and Makes What?...Monopoly Elements in a Market…The Costs of Monopoly…Elasticity of Demand…Cost of OPEC Action…Does Anti-Trust Law Matter?...

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Conclusion

This paper reviewed decades of research exploring the question: how competitive are global oil markets? Much of that work is summarized in the following appendix. We found that the issue has witnessed significant discussion over the past four decades, starting with the oil price hikes of the early 1970s. The collective conclusion of hundreds of studies is that the OPEC cartel has utilized its ability to force oil prices substantially above competitive levels. Conversely, oil companies operate under competitive conditions, as no one private firm has more than a trivial share of the oil market. Most oil is under the control of governments (par- ticularly the governments of OPEC member nations) through national oil companies. Such governments have strong incentives to attempt to restrict oil supply to force up prices and to maximize their revenues. Their ability to accomplish this varies over time with changes in political and economic factors. As a result, over the years we have seen oil prices rise and fall dramatically.

Oil suppliers do not like “low” oil prices set through a competitive market; despite this, com- petition breaks out at various times that are not easy to predict, just as the success of efforts to enforce price hikes are not always predictable. When they are high for sustained periods, it is evidence of the ability of OPEC to restrain supply sufficiently to force price up. These price gyrations impose transition costs on firms and consumers forced to respond to price changes. The costs of adjustment do not appear to have been quantified by researchers, but are undoubtedly significant. The cost of price spikes is primarily borne by oil buyers who pay high prices for fuel, thereby transferring substantial wealth to foreign sovereigns…

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QUICK NEWS, May 14: HUGE BUFFETT WIND BUY IN IOWA; THE VALUE OF ARIZONA’S SUN; MINNESOTA LOVES WIND

HUGE BUFFETT WIND BUY IN IOWA MidAmerican Energy will invest $1.9 billion in wind projects in Iowa

William Petroski, May 8, 2013 (Iowa Politics)

“…MidAmerican Energy will make a $1.9 billion investment in Iowa for wind energy projects that will be the biggest single economic investment ever in the state…MidAmerican officials said no sites have been selected yet…MidAmerican Energy Co. will add up to 1,050 megawatts of wind generation, consisting of up to 656 new wind turbines, in Iowa by year-end 2015…The wind expansion will enhance economic development and provide in excess of $360 million in additional property tax revenues over the next 30 years…Landowner payments totaling $3.2 million per year also are expected…

“…[T]he expansion is planned to be built at no net cost to the company’s customers and will help stabilize electric rates over the long term by providing a rate reduction totaling $10 million per year by 2017, commencing with a $3.3 million reduction in 2015, MidAmerican officials said…MidAmerican Energy began building wind projects in 2004. To date, 1,267 wind turbines [and 2,285 megawatts of wind generation capacity] have been installed in Iowa, representing a total investment of approximately $4 billion. [It is No. 1 in wind ownership among rate-regulated utilities] In light of the recent federal wind production tax credit extension, the company said it is asking to expand its wind generation capacity…”

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“MidAmerican Energy estimates that by January 2016, when all new wind generation is expected to be operating, it may be capable of generating approximately 39 percent of its retail generation output through wind generation during that month…If the expansion is approved by the Iowa Utilities Board, MidAmerican Energy will own and operate approximately 3,335 megawatts of wind generation capacity in Iowa by year-end 2015, officials said…

“…[C]ompanies such as Facebook and Google want clean energy, so the move also could attract new developments…[T]he project will keep Iowa on track to generate 10,000 megawatts of wind power by 2020, and will help support jobs at turbine-component businesses and blade manufacturers…The utility’s project will boost Iowa’s overall nameplate wind generation, from all sources, by 20 percent, to 6,000 megawatts from 5,000 megawatts currently…The U.S. Department of Energy has estimated that Iowa would have to produce 10,000 megawatts of wind energy by 2020, and 20,000 by 2030 to meet environmental groups’ goal to have the country produce 20 percent of its power from wind by 2030.”

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THE VALUE OF ARIZONA’S SUN New Study: Distributed Solar Energy Provides $34 Million in Benefits to Arizona Ratepayers

May 10, 2013 (Solar Energy Industries Association)

“…[D]istributed solar generation (DG) and net energy metering will provide Arizona Public Service (APS) customers with $34 million in annual benefits…[according to a study] by the Solar Energy Industries Association (SEIA)…Using data from APS’ 2012 Integrated Resource Plan and other APS data, the study examines the costs incurred and the benefits generated by distributed solar over the useful life of a distributed solar system -- 20 years. This is consistent with how APS approaches long-term resource planning.

“The study found that for each dollar of cost, DG provides $1.54 worth of benefits to APS customers. The net benefits for APS customers will amount to $34 million per year beginning in 2015. Benefits include savings on expensive and polluting conventional power and power plants; reduced investments in transmission and distribution infrastructure; reduced electricity lost during transportation over power lines, as distributed solar power is generated and consumer locally; and savings on the cost of meeting renewable energy requirements…”

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“Net metering is a popular consumer policy in place in 43 states that empowers homes, businesses, schools, and public agencies to install solar while helping the economy and other ratepayers. As a result of thousands of Arizonans’ choice to adopt rooftop solar, a competitive solar energy industry employs 9,800 Arizonans today…

“…Arizona boasts the most solar per capita of any state in the nation with 1,097 megawatts (MW) of solar capacity. Beyond making a smart energy choice, this study shows that these customers’ investments provide financial benefits to all APS customers. Overall, Arizona ranks 2nd in the country for most installed solar, with enough capacity to power 139,000 homes. In 2012 alone, $590 million was invested in Arizona to install solar on homes and businesses…”

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MINNESOTA LOVES WIND New Poll Finds Minnesota Power Customers Overwhelmingly Support Clean Energy And Energy Efficiency, Shift Away From Fossil Fuels In Minnesota; As Minnesota Power Sets Its Long-Term Energy Plan, More than 8-in-10 Customers Say “We Need to Fundamentally Change the Way We Get Our Energy”

May 1, 2013 (Sierra Club)

“…[A new poll] shows that voters in the Minnesota Power service area overwhelmingly favor using clean, renewable energy sources…as Minnesota’s long-term energy plan – otherwise known as its Integrated Resource Plan (IRP) – is under review by the Minnesota Public Utilities Commission. As the utility plans the next 15 years ofits energy mix, more than 8-in-10 voters…[favor a fundamental change is needed in the way Minnesota gets energy] by modernizing the electric grid to maximize energy efficiency and wind and solar energy use…

“In February, Minnesota Power announced that it will stop burning coal in one unit at its Taconite Harbor plant, and convert units at its Syl Laskin coal plant to burn natural gas in the next few years. Rather than phasing out coal at unit 4 at its Boswell plant, the utility announced plans to invest more than $350 million to retrofit a unit at the plant to comply with modern pollution standards.”

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“According to the poll, three-in-four voters agree that ‘Minnesota utilities should reduce our need for coal and other fossil fuels by increasing energy efficiency and using more clean, renewable energy.’ Almost eight in ten voters (79 percent) support phasing out Minnesota’s oldest coal-burning power plants and replacing them with greater use of clean, renewable energy and energy efficiency…More than two-thirds of voters polled reported that they are concerned about the health risks…from Minnesota Power’s coal-fired power plants…[and 61 percent] are concerned about climate change…

“Aside from popular support for phasing out coal-fired power plants, the poll also found that voters in the Minnesota Power service area were in favor of setting clean energy goals and undertaking large-scale efficiency efforts to conserve energy and…[76 percent] support ensuring that electric utilities in Minnesota get at least 10 percent of their electricity from solar power by the year 2030…Eight in ten voters (83 percent) polled also support incentives for Minnesota’s largest energy users to become [20 percent] more energy efficient…”

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TODAY’S STUDY: THE VALUE OF SOLAR WITH STORAGE

An Analysis of Concentrating Solar Power with Thermal Energy Storage in a California 33% Renewable Scenario

Paul Denholm, Yih-Huei Wan, Marissa Hummon, and Mark Mehos, March 2013 (National Renewable Energy Laboratory)

Executive Summary

Concentrating solar power (CSP) with thermal energy storage (TES) is a dispatchable source of renewable electricity generation. However, the dispatchability of this resource is limited by the availability of solar energy. This makes it challenging to quantify the value of CSP and provide comparisons to alternative generation sources.

The California Independent System Operator (CAISO) has prepared a number of analyses of the grid operational challenges associated with the state’s 33% renewable portfolio standard (RPS). These analyses, which used a commercial production cost model, created a publically available database of the CAISO system. This database can be used as a basis for analyzing the potential value of CSP with TES in California.

This analysis used the “Environmentally Constrained” 33% RPS scenario database in the PLEXOS grid simulation tool to estimate the value of CSP in avoiding conventional fossil generation, and compared this value to other sources of generation. To perform this analysis, we created a baseline scenario and added four types of generators, each in a separate scenario. The four generator types were photovoltaic (PV), a baseload generator with constant output, a CSP plant providing dispatchable energy, and a CSP plant providing both energy and operating reserves. Each generator added the same amount of energy (about 1% of annual demand) for an equal comparison of their value. In each case, we calculated the difference in production costs between the base case and the case with the added generator. This difference in cost was attributed to the added generator as its operational value to the system.

PLEXOS dispatches the hourly energy inflow of solar energy in the CSP plant to minimize the overall system production cost. The model considers the interaction of the California system with the rest of the Western Interconnection, and new generators within California can therefore affect the dispatch of coal, gas, and other generators throughout the West.

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The operational value of each generator is associated with avoided fuel (and associated emissions) as well as reduced operations and maintenance (O&M) and power plant start costs. In addition to operational value, generators add capacity value to the system that can be estimated by examining generator operation during periods of high net demand. The CSP plants in this study provided energy during essentially all high net demand hours, implying a capacity credit similar to a conventional dispatchable resource. The corresponding value is typically determined by a proxy resource, such as a combustion turbine, or alternative market-based mechanism. In this analysis, we use a low capacity cost of $55/kW-yr and a high cost of $212/kW-yr.

Table ES-1 Summarizes the value estimated by combining the operational results from the PLEXOS simulations with capacity value estimates for each technology.

Overall, the analysis demonstrates several properties of dispatchable CSP including the flexibility to generate during periods of high value and avoid generation during periods of lower value. Of note in this analysis is the fact that significant amount of operational value is derived from the provision of reserves in the case where CSP is allowed to provide these services, adding about $17/MWh. This represents a substantial change in operational practice, including frequent operation at part-load. The incremental value of CSP with TES in this scenario was $30/MWh to $51/MWh compared to a baseload resource, or $32/MWh to $40/MWh compared to PV. This range depends on both the ability of CSP to provide operating reserves and the expected cost of new capacity.

This analysis also indicatesthat the “optimal” configuration of CSP may vary as a function of renewable penetration, and each configuration will need to be evaluated in terms ofits ability to provide dispatchable energy, reserves, and firm capacity. As the net load variability increases with more renewable generation, CSP plants with different solar field sizes, amount of storage, and ramp flexibility may be best suited to enable integration of these variable-generation (VG) resources. This will also change the value proposition for CSP with TES. Future analysis will consider these elements under alternative RPS scenarios, including higher fractions of energy derived from renewable resources.

In summary, NREL has implemented a methodology for evaluating the operational impacts of CSP systems with TES within the PLEXOS production cost model. This model was used to quantify the additional value provided by this flexible resource as compared to baseload or VG resources. The model can be used to investigate additional scenarios involving alternative technology options and generation mixes, applying these scenarios within California or in other regions ofinterest.

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Introduction

The California Independent System Operator (CAISO) has performed a number of analyses of the grid impacts and operability of various scenarios associated with meeting California’s 33% renewable portfolio standard (RPS) in 2020 (CAISO 2011a). These scenarios, developed by the California Public Utilities Commission (CPUC), have included various amounts of concentrating solar power (CSP). However, to date, the CSP plants in the scenarios evaluated by the CAISO have not included significant amounts of dispatchable thermal storage. As of early 2013, contracts with such plants have been approved and there is increasing interest in the potential benefits offered by plants deployed with thermal energy storage (TES). CSP with TES is a dispatchable source of renewable energy and can provide valuable grid flexibility services including the ability to shift energy in time and provide both firm capacity and ancillary services. This flexibility can potentially aid in integrating variable-generation (VG)sources such as photovoltaics (PV) and wind and further reduce the overall production cost in a system when compared to a renewable portfolio of equal energy but without TES.

This document describes a preliminary evaluation of CSP with TES in the CAISO system, based on one of the scenarios developed for the 33% RPS study.CSP with TES was incorporated into the PLEXOS production cost model, and the differences in production cost were analyzed for the CPUC’s “Environmentally Constrained” scenario. Specifically, the incremental value of CSP with TES providing about 1% of CAISO demand was evaluated, and was also compared to PV and a baseload resource providing the same amount of energy. It should be noted that this work does not evaluate any of the capital or operational costs of any of the technologies evaluated.

Overall, the analysis demonstrates several properties of dispatchable CSP including its ability to generate during periods of high value and avoid generation during periods of lower value. Of note in this preliminary analysis is that significant operational value is derived from providing ancillary services that require frequent operation at part-load…

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Results…Overview of CSP Operation…

Operational Value

The qualitative overview of CSP operation presented in section 3.1 can be translated into the actual impact on system production costs. The operational value of each technology represents its ability to avoid the variable cost of system operations using the resource mix assumed in the scenario. The CAISO model tracks operational costs in four cost categories—operating fuel, variable O&M, start-up costs, and emissions costs. Operating fuel includes all fuel used to operate the power plant fleet while generating and includes the impact of variable heat rates and operating plants at part load to provide ancillary services. It does not include any penalties associated with loss of load or reserve violations, because there was no shortage of energy or reserves in any of the simulations.

Table 3 summarizes the results from the production simulations. It provides value per unit of energy delivered, calculated by dividing the difference in production cost by the total energy delivered to the grid by each technology.

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Table 3 demonstrates a relatively small increase in the operational value of an energy-only CSP plant compared to a baseload resource (about $6/MWh) or a PV plant (about $12/MWh), but a much greater difference when the CSP plant is able to provide reserves. Adding the ability to provide reserves increases the operational benefits of CSP by about $17/MWh, or a difference of about $22/MWh compared to the baseload resource and about $29/MWh compared to PV. A large fraction of the difference between the CSP plant with reserves and PV is the cost of starts, with PV increasing the net variability and reserve requirements, which increase the number of thermal plant starts. We assume CSP does not add to system reserve requirements and displaces thermal unit starts when providing energy, ramping, and providing reserves.

As discussed previously, several simplifying assumptions were made when simulating CSP, and these could have an impact on the calculated value, particularly in the case where CSP provides operating reserves. The assumption of a flat heat rate overestimates the performance of CSP at part load. This has little impact on the plant when providing only energy services, because the plant operates at nearly full capacity most of the time. However, when providing reserves, the plant operates at part load most of the time, and often operates at its assumed minimum. We examined the possible impact of part-load impacts by applying a polynomial heat-rate curve from Kearney and Miller (1988), where the efficiency at 40% load is about 7% lower than at full output. This curve was used to calculate the reduction in energy sales based on the marginal energy prices generated in the case with CSP. The reduction in CSP value was about $0.8/MWh.

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The operational value calculated here does not include any costs associated with CSP operation. These include variable O&M, costs associated with CSP plant starts (excluding energy losses), and impacts of operating the plant at part load, including constant ramping during provision of regulation and load-following reserves.

The majority of the avoided costs is derived from reduced fuel use and associated emissions. The PLEXOS model tracks the total fuel used by all generators in the entire Western Interconnection. As discussed previously, the PLEXOS model generated by the CAISO includes the entire Western Interconnection, and there is substantial interaction between California and other Western states. The avoided fuel per unit of added generation can be tracked in the same manner as avoided costs. In each case, the total annual fuel offtake can be summed and compared to the case without the added generator. This difference is then divided by the total annual generation to produce the values in Table 4.

Of obvious note is the fact that a generator located in California can avoid a substantial amount of coal generation despite there being no significant coal-fired generators within California. This is due to a combination of factors including the inherently interconnected nature of the Western Interconnection, significant imports of electricity into California, and the modeling assumption of least-cost dispatch throughout the West.

The relationship between imports and avoided fuel is driven by the patterns of generation, load, and CSP dispatchability. From roughly fall to spring, a significant fraction of the flat block and PV generation occurs during periods of moderate load and lower imports into the state of California (compounded by wind generation and large amounts of hydro generation in the spring). As a result, a large fraction of the flat block and PV generation avoids imports, as opposed to in-state gas-fired generation. These imports in the CAISO PLEXOS model are derived from a least-cost mix of generators, which often includes a substantial fraction of coalgenerated electricity. During the first and fourth quarters, more than half of the fuel avoided by PV is coal.24 Overall, this reduces the avoided-fuel value of PV, but increases its avoided emissions value, as observed by the higher value compared to CSP in Table 3.

In contrast, the dispatchability of CSP allows it to generate during periods of highest net demand, and it tends to avoid a higher fraction ofin-state gas-fired generation. The dispatchability of CSP also increases the overall efficiency of system dispatch by providing rapid ramp rates and reserves.By smoothing the net load in California and reducing the number of partially loaded gas plants on line to provide ramping and reserves, it can increase the output of baseload units, including out-of-state coal-fired generators. Additional analysis is required to evaluate the potential limits on the market transactions effectively simulated in these scenarios. From a technical standpoint, the actual flexibility of the coal fleet in the Western states may restrict some of the operation assumed here.

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Capacity Value

The value calculated by a production cost model only addresses the variable operational value. Both CSP and PV have the ability to provide system capacity and replace new generation. However, the actual capacity value of solar technologies depends on their coincidence with demand patterns and how this coincidence changes as a function of penetration. A previous analysis of CSP plants with 6 hours of storage in California (nearly the same configuration evaluated here) found essentially 100% capacity credit using several years of data in historical systems (Madaeni et al. 2011). Capacity credit for PV generators varies depending on the year evaluated and module orientation (including the use of tracking technology), and it falls significantly as a function of penetration (Madaeni et al. 2012, Mills and Wiser 2012).

To estimate the capacity value of CSP in the 33% scenario evaluated in this report, we examined the performance of the generators during the periods of highest price, where price is used as a proxy for highest risk. Because we use only a single year of meteorology and load data, the results presented here are not generalized results; but they do provide at least some indication of the value of different generators types to provide reliable capacity. We use the capacity factor approximation, where the capacity value is approximated by the plant’s capacity factor during a set of “risky” hours. A variety of analyses have evaluated the capacity factor approximation technique to determine the number of hours that can be used to approximate more complex reliability-based approaches (Madaeni et al. 2012). These analyses have evaluated from the top 10 hours to the top 10% of hours (876), with one study suggesting the top 10 hours is closest to more robust techniques(Madaeni et al. 2012). Figure 9 shows the average CSP capacity factor as a function of the number of hours considered using the results from the PLEXOS dispatch. For CSP with thermal storage, the number of hours considered appears to be largely irrelevant in the year evaluated. CSP plants were dispatched by PLEXOS to meet demand with essentially 100% capacity value during all high-priced hours. For PV, the capacity value is about 47% using the top 10 hours and about 40% using the top 1% of hours, using the AC rating of the PV system.

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Table 5 summarizes the capacity value estimates from this analysis. The first row in Table 5 is the capacity credit in terms of fraction of rated capacity. This value assumes an equal outage rate for maintenance across technologies. The second row translates this into an annualized value per installed kilowatt of the corresponding technology by multiplying the capacity credit by the low and high estimated annual value of a reference generator with 100% availability. There is a large range in estimates for the value of new capacity, with an extensive discussion provided by Pfeifenberger et al. (2012). We use a low value of $55/kW and a high value of $212/kW.

Row 3 of Table 5 translates this value per installed kilowatt into a value per unit of generation. This is calculated by multiplying the value per unit of capacity by the total capacity credit (to get the total annual value of the installed generator), then dividing this value by the total energy production. This introduces a somewhat counterintuitive outcome, resulting largely from the impact of SM and the use of TES, as demonstrated previously by Mills and Wiser (2012). The PV plant has about twice the installed capacity as the CSP plant to provide equal amounts of energy, and about half the capacity value per unit ofinstalled AC capacity; therefore, their net capacity value (as measured by unit of energy production) is similar.

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Total Value

The total value of the different generation sources is the sum of the operational value and capacity value. Figure 10 summarizes the values for the different cases by combining the operational value from Table 4 and the capacity value from Table 5.

The overall value of CSP in this analysis ranges from about $80/MWh to about $135/MWh. The range is driven by assumptions about the ability of CSP to provide operating reserves and the cost of alternative generation capacity. The ability to provide reserves added about $17/MWh, assuming that CSP plants have rapid ramp rates while operating at part load. The cost of new capacity (which may include consideration of the actual flexibility provided by new capacity) provides the largest range, with the high-capacity cost case adding about $39/MWh of value compared to the low-capacity cost case.

This variation in total value for a CSP plant also produces a large range in the value difference between CSP and the other generator types considered.Compared to a baseload plant, this difference ranges from $30/MWh to $51/MWh, whereasthe difference between CSP and PV ranges from $32/MWh to $40/MWh…

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Conclusions

CSP with TES creates a dispatchable source of renewable energy. However, this dispatchability is constrained by the hourly flow of solar energy. As a result, modeling its value is challenging and requires chronological simulation to assess its value in providing energy, ancillary services, and firm capacity.

In this preliminary analysis, CSP was incorporated into the CAISO’s environmentally constrained 33% RPS case and its value compared to a baseload resource and also to PV. The energy-shifting value of CSP with TES was about $6/MWh higher than a baseload resource and about $12/MWh greater than the PV resource. The difference relative to PV is influenced by the coincidence of solar supply with demand, which will change as a function of penetration and also potentially to the operational restrictions resulting from the high SM assumed in this analysis. A lower SM may be more optimal in the scenario evaluated, but the relative value of CSP and optimal CSP configuration will likely vary with the increase of renewable penetration and the decrease in coincidence ofsolar energy supply with net demand.

When CSP is allowed to provide operating reserves, its operational value increased by about $17/MWh (producing a total difference of $22/MWh compared to the baseload resource and $29/MWh compared to the PV generator). The ability to provide reserves appears to have a significant value, but will require a different operational approach for CSP—greater operation at part load and more frequent plant cycling. The additional costs of this operation, which were not evaluated here, could reduce the net benefits of CSP providing operating reserves.

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Finally, in the single year analyzed, the capacity value of CSP with TES is expected to be very high, because an appropriately scheduled CSP plant would have energy available during essentially all the highest-priced demand hours of the year. The additional value provided by CSP dispatchability will depend largely on the assumed cost of alternative capacity.

Combined, the operational and capacity value of CSP calculated in this analysis ranges from about $80/MWh to about $135/MWh. This represents an incremental value of $13/MWh to $51/MWh compared to a baseload resource, or $15/MWh to $40/MWh compared to PV.

Additional analysis is needed to provide additional validation as well as explore the sensitivity of these results to additional technologies and scenarios. The relative value of dispatchable resources such as CSP with TES would likely increase as a function of VG penetration. A key element of future analysis will include exploring alternative CSP technologies and higher renewable penetration scenarios.

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