Saturday, July 21 , 2018, 9:22 am | Fog/Mist 65º


Tam Hunt: Crowdsourcing Energy Is an Idea Whose Time Has Come — Again

Crowdsourcing is taking off in almost every area one can imagine — including energy. In fact, crowdsourcing energy was one of the first areas to be crowdsourced, but under the very unsexy name, “feed-in tariff.” Congress passed the first crowdsourcing of energy law, under the also-very-unsexy name, the Public Utilities Regulatory Policy Act (PURPA), in 1978.

PURPA required states to create programs under which utilities offered a set price to anyone who could produce power from a “qualifying facility,” which included renewable energy like wind or solar power. The price was made public beforehand and long-term contracts were offered. These features created the market certainty that, lo and behold, created the first boom in renewable energy in the world, right here in California, in the 1980s and early '90s.

PURPA was responsible for an “embarrassment of riches,” as the California Public Utilities Commission described it at the time, in terms of a boom in renewable energy projects. This era created the global wind industry, which has now reached 300 gigawatts of installed capacity. This is enough power for about 100 million California-size homes. That’s real power, made possible through a policy that essentially crowd-sourced power.

A couple of decades later, Germany’s similar policy did the same thing for solar power. We’re now at about 100 gigawatts of solar power installed worldwide, enough for about 20 million California-size homes. Solar is growing much faster than wind nowadays, so solar will probably surpass wind in a few years.

Germany’s energy miracle — it has reached more than 20 percent renewable electricity in a bit more than a decade — was made possibly by policies that unleashed the ability of every Joe and Jane farmer to make money from selling power to the grid.

This is the essence of what a feed-in tariff is, the essence of what crowdsourcing energy is. The crowd is big in Germany, with more than 1.1 million homeowners, landowners and businesses selling solar power from systems 10 kW and below. A 10 kW system can fit on a small barn roof. Almost 1 million of these systems were installed in just the last four years.

Germany has now installed almost 35 gigawatts of solar, in just a dozen years. This is enough solar to at moments supply 40 percent or more of German peak power demand, and about 5 percent of total system power.

In fact, solar PV was the largest source of new generation in Europe in 2011 and 2012. This is remarkable for a technology that has been pooh-poohed for decades as an inconsequential plaything of environmentalists. A recent report from the International Energy Agency found that 61 percent of solar installations in 2012 were driven by feed-in tariffs. There is now a global crowd that has been literally empowered as mini-utilities by feed-in tariffs.

Another very impressive recent example of the ability of crowds to produce substantial amounts of energy even more quickly can be found in Japan. After the Fukushima nuclear disaster in early 2011, which led to the entire nation’s fleet of nuclear plants being shut down, Japan created its first broad-scale feed-in tariff. This new policy is on track to produce more than six gigawatts of solar power in 2013. That’s as much power as a large nuclear plant. It takes at least a decade to build a new nuclear plant, and this has been achieved with solar power in just one year.

Comparing solar installations over the last decade in different jurisdictions. (Source: various)
Comparing solar installations over the last decade in different jurisdictions. (Source: various)

What About Costs?

Just as important, these policies have helped dramatically reduce prices for these technologies. It’s a virtuous cycle: as feed-in tariffs help deploy solar and other renewables at scale, the prices are reduced, and the reduced prices make it possible to deploy even more solar at less cost.

Some observers criticize the German example as an expensive exercise in “renewables at any cost.” The prices paid did indeed start at a fairly high level, but prices have come down dramatically in recent years — to just 12 euro cents per kilowatt hour in 2013 for systems between 40 kW and one MW, from 55 euro cents per kilowatt hour in 2004. That’s a reduction of almost 80 percent in nine years.

The cost of solar power has fallen about 10 percent for every doubling in capacity over the last few decades. We are now at the point where solar power can compete with fossil fuels — without subsidies — for peak power. And we are not very far at all from competing with even nonpeak power, particularly as energy storage technologies undergo the same transformation that the wind and solar power technologies have experienced. Scale is the best way to reduce prices for any technology, so as storage technologies get deployed at scale it is all but certain that costs will come down dramatically.

Wind power has also come down in cost dramatically. A recent study from Lawrence Berkeley National Laboratory, which produces annual reports on the wind and solar markets, found that the cost of wind power has fallen 39 percent in low wind speed areas in the last six years. This is because turbines are getting bigger and, in particular, longer blades are being used to harvest more wind. The cost has fallen a bit less in higher wind speed areas. Wind power has been competitive with wholesale power rates for a number of years now, so cost is not an issue for wind power.

What Happened to California?

While California pioneered the crowdsourcing of energy in the 1980s and ’90s, the federal law changed and state policies also changed. We now have no feed-in tariff in California. We do have the California Solar Initiative, which is a different type of crowdsourcing of energy. It’s been highly successful at its stated goals, but as I wrote recently, and as the above chart shows, it’s significantly less ambitious than what has been achieved by similar jurisdictions like Germany, Italy, Japan or China.

For California to return to its lead on energy issues, we should look again to the crowd. By offering a cost-effective feed-in tariff, with set rates under a long-term contract, we could unleash a second energy revolution. If Germany, with solar resources on a par with Washington (that is, really bad), can achieve 1.1 million distributed solar energy systems in a bit more than a decade, imagine what California can achieve with similar policies?

California’s top energy policy focus should be a cost-effective feed-in tariff that unleashes the power of the crowd to create a distributed and highly resilient electrical grid. If costs are limited to what power would otherwise cost from natural gas power plants, why wouldn’t utilities be required to consider any and all offers from renewable energy producers?

This is what I mean by a cost-effective feed-in tariff. This cost-effectiveness criterion undermines the automatic critiques of those who are suspicious of feed-in tariffs as too expensive. The bottom line is that there is nothing that requires feed-in tariffs to offer above-market rates. I’m simply suggesting a market rate should be offered and we’ll see how the renewable energy market — the crowd waiting to be unleashed — responds.

Community Choice

Community Choice is a policy created in 2001 (Assembly Bill 117) that allows communities to take control of their electrical generation. It’s a middle ground between full investor-owned utility control (like PG&E or Southern California Edison) of the power grid and full publicly owned utility control (like in Los Angeles or Sacramento).

Community Choice is about to take off in California and other states. Marin County, the first Community Choice jurisdiction in the state, offers consumers 50 percent renewable energy at no extra cost compared to PG&E. Marin also now offers a feed-in tariff for projects up to 1 MW. Their first feed-in tariff project is a solar facility at the San Rafael Airport.

More important, Marin County is now allowing other cities and counties to join in its Community Choice umbrella, which should make the process far less burdensome and time-consuming for new jurisdictions to take control of their power mix.

As Community Choice takes off around California, it is all but certain that these jurisdictions will crowdsource as much energy as possible. Allowing homeowners and businesses to make money by selling renewable power to the grid is an obvious crowdpleaser and will do much to increase support for Community Choice. This option should set off a virtuous cycle of competition between investor-owned utilities like PG&E and Southern California Edison to see who can crowdsource the most energy and thereby curry good will from their ratepayers.

It’s an interesting time for energy in California and I hope before too long policymakers will finally recognize the virtues of crowdsourcing energy under the German model — which began as a California model until we unwisely renounced that earlier highly successful approach.

— Tam Hunt is owner of Community Renewable Solutions, a consultancy and law firm specializing in community-scale renewables. Community Renewable Solutions can help developers navigate this complicated field and provide other development advice relating to interconnection, net metering, procurement and land use. Click here to read previous columns. The opinions expressed are his own.

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