Florida's Distributed Energy Industry Shut-Out as Utilities Plan Huge Windfall

[ChriswUfGator]

They pay me at the wholesale rate, i.e. the same rate they pay to anyone they buy power from

Of course as a consumer we would prefer to sell our power at the retail rate... but again... at first blush it seems fair that they are paying you the same rate as other power generators that they buy from.

That is only fair once they give you a retail-rate offset for your power generated against your own usage. Otherwise, what happens is people have negative net consumption and still have to pay JEA anyway, because of the discrepancy between the billing rates. Which, IMHO, is out-and-out theft.

[Dog Walker]

No quite accurate, Chris.  If I use my power instead of JEA's during the day I am avoiding the retail rate.  It's only my surplus generation that is credited at the wholesale rate.

However, I think it would make sense for JEA to look at the cost of their necessary expansion of capacity as this area grows and consumes more.  To me it would make more sense for them to pay me slightly above the retail rate for my power because THEY HAVE NO CAPITAL COSTS INVOLVED in gaining the additional capacity.  In effect us private power producers are putting up our own money, not JEA's money in order to increase their capacity.  They don't have to issue the bonds to build or expand a powerplant.

This is the rational behind the "feed-in-tariff" concept.  The utilities save the cost of raising capital since we are doing it for them.  They are paying us some of the money they would have had to pay to their bond holders.  The European utilities have found it to be a winning formula, but they don't have bond holders to keep happy and bond issuing agencies to pay fees to.

Is JEA in the utility business or in the bond issuing business?

[BridgeTroll]

Does time of day matter?

[spuwho]

I agree that there should be more effort at promotion of distributed power in the state of Florida.

There are several forces at work that do not promote this.

- Regional Planning

If a private entity decides to start setting up distributed power on their own w/o any input to the regional power grids who forecast power usage and sharing, it can cause some chaos as regulated power grids attempt to schedule their load factors around them.

- Bond Payments

Utilities are a very high capital intensive operation. In order to get the scale they needed to reduce the cost per kWh, they needed the ability to finance in large amounts.  To get cheap bonds, they have to have a regulated rate of return to make sure that the ratepayers are getting the correct cost of capital applied inside the rate structure.

- Inefficiencies

Solar with current technologies is very inefficient compared to a nuclear or coal based generation. The real cost per kWh for solar is anywhere from 10-15 times more costly to produce. However, due to investor demand that utilities include renewables in their rate structure, they have agreed to take on some of that infrastructure but must be able to pass those costs to the ratepayers. By law only certain costs can be passed on from these new sources. If by law they are mandated to take on these new sources, then it doesn't take a PhD to realize they wouldn't want anyone else doing it unless they had to carry some of the other related mandates.

As the cost of distributed power generation continues to drop, there will be more pressure on the utilities to accommodate. In an odd twist, it is the pressure to have the utilities embrace renewables that will help drive the costs down as demand will push the need for more efficient technology.

It has been tossed around that Wal-Mart could be most disruptive distributed power source in the nation. They have one of the largest amounts of raw square footage overall that faces the sun. But the capital costs of trying to take on a venture like that would be daunting. With many solar deployments seeing anywhere from 15-20 year paybacks, that is a difficult sell in a short-term oriented culture we live in today. Wal-Mart probably can't justify it in their price structure.

We looked at getting a renewable energy supplier here in Jacksonville for a major business park and the numbers actually worked. The payback was around 17 years. Why did it fail? The tenants refused to take on any additional costs in their CAM or psf lease to offset the reduced JEA bill. The park owner was not going to take on the financial risk alone and was concerned that while the psf cost was going to make him green, it would  also make him uncompetitive.

The owner actually went on a green initiative in the park and cut his JEA/Teco energy expense 15% instead. That reduction showed up in his bottom line within the year and his psf profit jumped.

We also looked at getting an outside supplier of energy and found that after transmission costs, we couldn't get a cheaper source than JEA.

While I don't like the lobbying and political obstructions that take place to promote distributed power, there are cost and regulatory implications that many people haven't understood or embraced.

[Dog Walker]

Does time of day matter?

Yes, During the middle of the day, say from 10AM to 4PM, the panels are generating about 4kw of power.  It's much less in the morning and late afternoon.  So if we schedule clothes washing, dish washing, electric water heating (in season), etc. during those times, we are using "our" power rather than JEA's to a greater extent.  

This is one reason our JEA bills run higher in the winter time than the summer time.  In the summer our greatest use of power is during the sunniest time of the day, but in the winter our greatest use of power for heat is at night when we aren't generating any of our own power.

[Dog Walker]

Solar with current technologies is very inefficient compared to a nuclear or coal based generation. The real cost per kWh for solar is anywhere from 10-15 times more costly to produce.

Sorry, over the lifetime of a nuclear power plant, solar is less costly.  It is still more costly on a $$ basis than coal as long as there is no penalty for releasing mercury and CO2 into the atmosphere.

Nuclear is the most costly of all methods of producing power with current technologies when you add in the capital costs.

[BridgeTroll]

I agree that there should be more effort at promotion of distributed power in the state of Florida.

There are several forces at work that do not promote this.

- Regional Planning

If a private entity decides to start setting up distributed power on their own w/o any input to the regional power grids who forecast power usage and sharing, it can cause some chaos as regulated power grids attempt to schedule their load factors around them.

- Bond Payments

Utilities are a very high capital intensive operation. In order to get the scale they needed to reduce the cost per kWh, they needed the ability to finance in large amounts.  To get cheap bonds, they have to have a regulated rate of return to make sure that the ratepayers are getting the correct cost of capital applied inside the rate structure.

- Inefficiencies

Solar with current technologies is very inefficient compared to a nuclear or coal based generation. The real cost per kWh for solar is anywhere from 10-15 times more costly to produce. However, due to investor demand that utilities include renewables in their rate structure, they have agreed to take on some of that infrastructure but must be able to pass those costs to the ratepayers. By law only certain costs can be passed on from these new sources. If by law they are mandated to take on these new sources, then it doesn't take a PhD to realize they wouldn't want anyone else doing it unless they had to carry some of the other related mandates.

As the cost of distributed power generation continues to drop, there will be more pressure on the utilities to accommodate. In an odd twist, it is the pressure to have the utilities embrace renewables that will help drive the costs down as demand will push the need for more efficient technology.

It has been tossed around that Wal-Mart could be most disruptive distributed power source in the nation. They have one of the largest amounts of raw square footage overall that faces the sun. But the capital costs of trying to take on a venture like that would be daunting. With many solar deployments seeing anywhere from 15-20 year paybacks, that is a difficult sell in a short-term oriented culture we live in today. Wal-Mart probably can't justify it in their price structure.

We looked at getting a renewable energy supplier here in Jacksonville for a major business park and the numbers actually worked. The payback was around 17 years. Why did it fail? The tenants refused to take on any additional costs in their CAM or psf lease to offset the reduced JEA bill. The park owner was not going to take on the financial risk alone and was concerned that while the psf cost was going to make him green, it would  also make him uncompetitive.

The owner actually went on a green initiative in the park and cut his JEA/Teco energy expense 15% instead. That reduction showed up in his bottom line within the year and his psf profit jumped.

We also looked at getting an outside supplier of energy and found that after transmission costs, we couldn't get a cheaper source than JEA.

While I don't like the lobbying and political obstructions that take place to promote distributed power, there are cost and regulatory implications that many people haven't understood or embraced.

Your last sentence says it all.  You seem more familiar than most with this system.  May I ask your connection to the process?

[ChriswUfGator]

No quite accurate, Chris.  If I use my power instead of JEA's during the day I am avoiding the retail rate.  It's only my surplus generation that is credited at the wholesale rate.

However, I think it would make sense for JEA to look at the cost of their necessary expansion of capacity as this area grows and consumes more.  To me it would make more sense for them to pay me slightly above the retail rate for my power because THEY HAVE NO CAPITAL COSTS INVOLVED in gaining the additional capacity.  In effect us private power producers are putting up our own money, not JEA's money in order to increase their capacity.  They don't have to issue the bonds to build or expand a powerplant.

This is the rational behind the "feed-in-tariff" concept.  The utilities save the cost of raising capital since we are doing it for them.  They are paying us some of the money they would have had to pay to their bond holders.  The European utilities have found it to be a winning formula, but they don't have bond holders to keep happy and bond issuing agencies to pay fees to.

Is JEA in the utility business or in the bond issuing business?

I understand that's how it works, and it's unfair.

What I'm saying is that, at the end of the month when they tally up your bill and you have generated more than you have consumed, the only truly fair way to handle it is if JEA gave you a retail-rate credit for your generated power up to the exact amount you consumed, and then any excess generation over and above your consumption is then credited at the wholesale rate, and any consumption over what you generated is billed at the retail rate.

Under the current scheme, JEA collects almost everything generated by solar during the daytime when most people aren't home, paying only the wholesale rate, and then bills the same producer the full retail rate when they get home and use power during times their panels are inoperable. The only fair way to do this would be by first giving a retail-rate credit for the total generated against the total consumed, with any additional amount generated being credited at the wholesale rate and any additional amount consumed being billed at the retail rate, and including rate adjustments for peak/off peak times if necessary if JEA ever is forced to purchase power from outside its network to meet demand.

Otherwise, you wind up in the position you are in, where you are actually providing more power to JEA than you are consuming in a given billing period, and JEA still manages to bill you for the privilege. It doesn't matter what time of day it is, whatever amount you generate is power JEA doesn't have to produce at its plants, so it is unfair to treat you as an outside wholesale network while also billing you at the retail rate. That's just gaming the billing, and IMO is out-and-out theft.

[Dog Walker]

Got it!  Understand your point now and agree.  Best I can do is offset the retail rate charge as much as possible by using more of MY power rather than theirs.

JEA is buying some "green" power from bigger suppliers.  They have interest in a wind farm out west and they are buying about 95 megawatts from a company locally that is using methane gas generated by an old landfill to run generators.

I think that they should retrofit all of our sewage treatment plants to produce biogas (methane) to generate power too or at least feed it into the natural gas stream.  We are just throwing away a potential fuel source and charging us for doing so.

[ChriswUfGator]

Excellent idea about methane collection from sewer plants!

[dougskiles]

Several landfills in the SE are capturing methane and generating electricity.  Sustainable Energy Solutions is one such company:

http://www.sustainableenergysolutionsllc.com/learn

Landfill Gas Facts

Landfill gas (LFG) is a by-product of the decomposition of municipal solid waste (MSW):
•~50% methane (CH4)
•~50% carbon dioxide (CO2)
•<1% non-methane organic compounds (NMOCs)

Landfills were the second largest human-made source of methane in the US, accounting for 22.6% generated.


Why is methane a greenhouse gas?
•Methane absorbs terrestrial infrared radiation (heat) that would otherwise escape to space (GHG characteristic)

Methane as a GHG is over 21x more potent by weight than CO2.

For every 1 million tons of MSW:
•~0.8 megawatts (MW) of electricity
•~432,000 cubic feet per day of LFG

If uncontrolled, LFG contributes to smog and global warming, and may cause health and safety concerns.

Methane combustion produces only half the carbon dioxide emissions of coal, and two thirds less than oil, while creating virtually the same output of thermal energy. This potential output represents an enormous opportunity to improve air quality.

What’s Happening with LFG Today?

State of the National LFG Industry (April 2008). At least 450 operational projects in 43 states supplying:
•11 billion kilowatt hours of electricity and 77 billion cubic feet of LFG to direct-use applications annually. This is comparable to:

Estimated Annual Environmental Benefits
• Carbon sequestered annually by ~17,800,000 acres of pine or fir forests, or
• CO2 emissions from ~182,000,000 barrels of oil consumed, or
• Annual greenhouse gas emissions from ~14,300,000 passenger vehicles

Estimated Annual Energy Benefit
•Powering more than 870,000 homes

However, the EPA estimates that up to 550 landfills in the USA with a combined potential of over 1,290 Megawatts, or 250 billion cubic feet per year of LFG for direct use, do NOT have LFG collection systems currently in place but are capable of installing economically viable LFGTE projects.

[JHAT76]

Chris

JEA is not really looking at it as a net out.  Essentially they are "contracting" with you under 2 separate legal tariffs.  In one case you are a retail customer, which means when they sell you power they get a set rate of return over there costs.  The other is the interconnection or generator tariff.  Basically if you are in their area and generating power they agree to pay you.  Usually it is the estimated cost of the power they turn down to take yours in minus a certain % factor. 

This does protect JEA somewhat.  If you look at DogWalker situation they are giving JEA power between 10 - 4.  For JEA this would on most days be considered "valley hours."  Essentially hours where demand is not at peak levels.  On some days, especially in the fall and spring JEA may be backing down coal units because there just isn't much customer demand and then DW comes in and gives them more.

DW is pulling power from JEA in peak hours. Peak demand hours are approx 6AM - 9 or 10 AM and 5PM or 6PM - 9 or 10PM in Winter and approx 4PM or 5PM - 10 PM in Summer as people turn on lights, crank up heat, businesses get going etc. 

No quite accurate, Chris.  If I use my power instead of JEA's during the day I am avoiding the retail rate.  It's only my surplus generation that is credited at the wholesale rate.

However, I think it would make sense for JEA to look at the cost of their necessary expansion of capacity as this area grows and consumes more.  To me it would make more sense for them to pay me slightly above the retail rate for my power because THEY HAVE NO CAPITAL COSTS INVOLVED in gaining the additional capacity.  In effect us private power producers are putting up our own money, not JEA's money in order to increase their capacity.  They don't have to issue the bonds to build or expand a powerplant.

This is the rational behind the "feed-in-tariff" concept.  The utilities save the cost of raising capital since we are doing it for them.  They are paying us some of the money they would have had to pay to their bond holders.  The European utilities have found it to be a winning formula, but they don't have bond holders to keep happy and bond issuing agencies to pay fees to.

Is JEA in the utility business or in the bond issuing business?

I understand that's how it works, and it's unfair.

What I'm saying is that, at the end of the month when they tally up your bill and you have generated more than you have consumed, the only truly fair way to handle it is if JEA gave you a retail-rate credit for your generated power up to the exact amount you consumed, and then any excess generation over and above your consumption is then credited at the wholesale rate, and any consumption over what you generated is billed at the retail rate.

Under the current scheme, JEA collects almost everything generated by solar during the daytime when most people aren't home, paying only the wholesale rate, and then bills the same producer the full retail rate when they get home and use power during times their panels are inoperable. The only fair way to do this would be by first giving a retail-rate credit for the total generated against the total consumed, with any additional amount generated being credited at the wholesale rate and any additional amount consumed being billed at the retail rate, and including rate adjustments for peak/off peak times if necessary if JEA ever is forced to purchase power from outside its network to meet demand.

Otherwise, you wind up in the position you are in, where you are actually providing more power to JEA than you are consuming in a given billing period, and JEA still manages to bill you for the privilege. It doesn't matter what time of day it is, whatever amount you generate is power JEA doesn't have to produce at its plants, so it is unfair to treat you as an outside wholesale network while also billing you at the retail rate. That's just gaming the billing, and IMO is out-and-out theft.

Chris

[ChriswUfGator]

I understand that.

And if JEA has to purchase power from outside their network during peak times, they should surcharge DogWalker for his peak usage like everyone else. But if JEA is normally able to meet all demand in-grid, then whatever dogwalker produces is power they don't have to produce at their plants. It doesn't cost JEA any more to produce a Kw/h at 5pm than it does at 11am, unless they have to buy from another provider. They just produce more of them, and also sell more of them. So if JEA is regularly supplied all in house, which I understand to be the case, then the time issue is completely moot. So IMHO, this setup is unfair and they should treat these solar installations as net in / net out during a billing period, with a surcharge for any peak times during which they had to buy from another provider.

[Lunican]

If everyone had solar panels on their homes and businesses, I wonder if JEA would be able effectively manage the demand changes due to the decreased sunlight in an afternoon thunderstorm. I would think a storm could roll in faster than they could bring additional generators online. Then 30 minutes later the panel are back to full power.

This is really just a theoretical question since almost no one has solar panels at this point.

[BridgeTroll]

If everyone had solar panels on their homes and businesses, I wonder if JEA would be able effectively manage the demand changes due to the decreased sunlight in an afternoon thunderstorm. I would think a storm could roll in faster than they could bring additional generators online. Then 30 minutes later the panel are back to full power.

This is really just a theoretical question since almost no one has solar panels at this point.

I think spuwho made that point earlier with the Walmart example.  If they were covered in panels they would cause havoc to the grid as they brought them online and took them off.  The utility would have to adjust on the fly... which is difficult to do with large turbines and facilities.