What U.S. Policy Makers, Utilities, and Consumers Can Learn from Europe s Clean Energy Initiatives

Transcription

1 What U.S. Policy Makers, Utilities, and Consumers Can Learn from Europe s Clean Energy Initiatives National Accounts Conference April 1, 2014 Richard McMahon Vice President, Energy Supply and Finance Edison Electric Institute

2 Edison Electric Institute The Edison Electric Institute (EEI) is the association that represents all U.S. investor-owned electric companies. Our members provide electricity for 220 million Americans, operate in all 50 states and the District of Columbia, and directly employ more than 500,000 workers. With more than $85 billion in annual capital expenditures, the electric power industry is responsible for millions of additional jobs. Reliable, affordable, and sustainable electricity powers the economy and enhances the lives of all Americans. EEI has 70 international electric companies as Affiliate Members, and 250 industry suppliers and related organizations as Associate Members. Organized in 1933, EEI provides public policy leadership, strategic business intelligence, and essential conferences and forums.

3 Lessons Learned from Germany (and other OECD countries) Subsidies were too generous (Level of subsidies was too high for the market, did not follow technology cost reductions, particularly in solar power) Growth of renewables was too rapid (Grid and markets cannot not adjust quickly enough to the rapid deployment of renewables, particularly wind and solar) Impacts Reduction in wholesale prices adversely impacts generators and the reliability of the grid Increase in retail electricity prices adversely impacts consumers and competitiveness Multiple redesigns of the incentive programs adversely impacts the renewable industry Additional investment needs in the T&D networks will further raise costs

4 Overgenerous Subsidies The Economist, 12 October 2012 EEG surcharge: Share of subsidy FIT paid for by customers in their electricity bills, the difference between the total FIT tariff and the wholesale price of electricity. EEG cost per year: Total annual cost of the EEG surcharge. Total disbursements to renewable energy providers in addition to their proceeds from wholesale markets. Source: German Federal Ministry of the Environment, Nature Conservation, Building and Nuclear Safety /

5 Germany Installed 7 GW of PV Capacity Per Year Total Renewable Installed Capacity, MW Annual Installed Capacity (MW) Share of Renewable Energy in Electricity Generation, % Source: German Federal Ministry of the Environment, Nature Conservation, Building and Nuclear Safety

6 40 B to Expand the Transmission Grid The Grid Development Plan, 2013 Existing grid 2013 Target grid 2023 Source: Bundesnetzagentur Grid Development Plan 2013

7 Wholesale Market Prices Plunged Forward peak prices Source: European Energy Exchange - EEX

8 Thermal Plants Are Becoming Uneconomical Electricity generation at E.ON's Irsching natural gas power plant Source:

9 A New Role for Thermal Plants, A New Way to Operate the Grid Source: The Economist, 12 October 2012 Grid operator interventions to stabilize the grid Source: Fraunhofer Institute for Solar Energy Systems Source: TENNET

10 Residential Retail Prices Soared Source: Agentur für Erneuerbare Energie (

11 Impact on the Economy Is electricity becoming a luxury good? German Competitiveness Threatened by High Energy Costs

12 Not Meeting the Goals Germany s environment agency reported that the country s carbon emissions went up again, rising by 1.2% in The environment minister said that Germany may miss its target of reducing carbon emissions by 40% in 2020, compared with 1990 levels, an astonishing admission from a country that spent 16 billion subsidising renewable energy last year. Source: The Economist, Politics this week, March 22, 2014

13 Lessons Learned for the US WE WANT AFFORDABLE RELIABLE ENVIRONMENTALLY SOUND

14 Utility Investment in Perspective 2012P 2013P $100 B Utilities lead in capital intensity and $80 B expenditures $60 B 22% $40 B $20 B $0 B ($ Billions) 15% % 12% 6% 7% 6% 6% % 37% 21% 17% Generation Distribution Transmission Gas-Related Environment Other Actuals Projections (July 2012) Projections (Oct. 2013) Source: Fitch Ratings, Corporate Capex Study: Growth Stalls in 2013, October 25, 2012.

15 Building Renewable Power Non-Hydro Renewable Sources More than Double between 2012 and 2040 Non-hydro generation, Billion kwh Source: DOE Energy Information Administration, Annual Energy Outlook 2014, Early Release, December 2013

16 The Electricity Mix is Evolving Source: Department of Energy, Energy Information Administration

17 The Electric Distribution System In Transition Customers are gaining new distributed energy resource options, including DG. The structure and operation of distribution systems will change as smart infrastructures are built out and new DER technologies are deployed. Ultimately, power will flow in 2 directions across distribution systems. Supporting a safe and reliable grid infrastructure is critical to the deployment of new technologies. Source for graphics: EPRI, The Integrated Grid: Realizing the Full Value of Central and Distributed Energy Resources, February 2014

18 The Grid at the Center of the Transition Services and Benefits of the Grid Energy transfers and transactions: buying from and selling back to the grid Balancing supply and demand Voltage and frequency control services Energy back up Picture: Inhabitat.com

19 And Making It All Happen Transforming the Grid Utilities are deploying advanced grid technologies that harden the grid and enable increased penetration of renewables, demand response, electricity storage, and electric vehicles. Synchrophaser technologies, automated feeder switches and supporting sensors, voltage regulators, communications equipment, smart meters, etc. Source for Photos: Schweitzer Engineering Laboratories, AES Energy Storage, EEI

20 Commercial Customers are Adopting Distributed Generation EPA Green Power Partnership, Top 10 Customers With On-Site Generation Name Annual On-site Green Power Usage (kwh) On-site % of total Electricity Use* On-site Resources Purchased Green Power (kwh) Wal-Mart Stores, Inc. 174,835,668 1% Biogas, Solar, Wind 576,596,124 U.S. Department of Energy 110,914,391 2% Biomass, Geothermal, Solar, Wind 587,574,708 Apple Inc. 101,506,667 16% Biogas, Solar 435,887,000 BMW Manufacturing Co./Greer, SC Facilities 70,883,601 38% Biogas 0 Coca-Cola Refreshments 41,328,558 5% Biogas, Solar 0 Kohl's Department Stores 36,529,000 2% Solar 1,500,000,000 University of Missouri 32,106,000 13% Biomass, Solar, Wind 20,977,000 City of San Jose, CA 31,227,330 16% Biogas, Solar 0 SC Johnon & Son, Inc. 23,508,000 13% Biogas, Wind 31,500,000 City of San Diego, CA 20,344,825 8% Biogas, Small-hydro, Solar 0 Source: EPA Green Power Partnership

21 Top Corporate Motivations for Adding DG Financial Incentives (88%) Corporate Goals/Public Image (88%) Lower Electricity Bills (75%) Improved Reliability (63% Independence from the Grid (19%) Other (19%) Source: EEI Survey

22 The Value of Fuel Diversity The January 2014 Polar Vortex Fuel diversity helps to protect consumers from contingencies such as fuel unavailability and fuel price fluctuations A variety of generation sources helped maintain reliability during the Polar Vortex Image Source: NASA Record storage withdrawals helped meet increased demand for natural gas. Dual-fueled generators were able to rely on oil during times of gas pipeline constraints. The nuclear fleet operated at 95% capacity at the height of the polar vortex. (NEI) Coal plants, many currently slated for retirement, were employed to help meet demand. Regional wind generation was strong, providing PJM with 3,500 MW while electricity prices averaged more than $500/MWh. (AWEA)

23 Conclusion It is vital for our nation to have a diverse supply of safe and reliable electricity. The U.S. electric grid delivers a valuable product essential to all Americans. The electric power industry is leading the transformation to make the grid more flexible and more resilient to meet the growing demands of our digital society. Everyone who uses the grid should help pay to maintain it and keep it operating reliably. Electric rates should be fair and affordable for all customers.

24 Thank you! Richard McMahon