CCA’s, Coal and Nukes

by John on August 3, 2008

It’s really great to see that Marin is working to develop what is called Community Choice Aggregation so that the County can buy electrical power for its residents from renewable sources.   Essentially, we would all band together and purchase from a “green” source and have it delivered over PG&E lines. In this way, the County hopes that our electricity would be 100% carbon free. However, PG&E, who are not going to give up their customer base without a fight, points out that renewable energy is in short supply, and the County will be competing with utilities and other CCA’s to purchase green power.  You might think that anything that increases the demand for green power is good…. A classic case for “think globally, act locally”

However, if we don’t want to see a whole spate of nukes and coal-fired generating plants in our future, we need to change how we finance the construction of power plants and distribute the electricity they generate.  Let’s look at financing first.  Power plants represent huge investments, and are funded by bond issues and loans that are paid back over decades.  What pays back the bondholders is the income for the plant, and the banks and bonding companies require a long-term power purchase contract before they will underwrite a project, so they’re going to underwrite the project that gives them the most chance of getting paid back.  Underwriters don’t love coal and nukes, they just want to get paid.

Thanks to deregulation and Enron,  the laws tend to favor large, cheap, polluting power plants or subsidized nukes. Deregulation of the electric power grid, like all other governments scandals, is an incredibly complex issue; eloquently described in “Free Lunch”, by Pulitzer winning journalist David Johnston.  In the chapter, “Paying Twice” he explains how the auctions for electrical power are rigged to produce the highest price to the generators.  He shows that, in 2007, the 26 states that adopted Enron style deregulation paid an estimated 48 billion dollars more than the states that didn’t deregulate.  That’s 138 million dollar per day hidden “tax” that goes straight to the generators.  The ‘Enron’ laws are still on the books.

More importantly, deregulation  has created instability and power failures in the grid.  In an article in an American Institute of Physics journal entitled, “Whats wrong with the electric grid?”,, author Eric Lerner points out that the engineers in charge of grid reliability told the government regulators such as the Federal Energy Regulatory Commission that deregulation was going to cause massive problems. His article looks at grid failures and emergency power plotted before and after deregulation came into effect.  When the Enron induced power trading laws came into effect in 2000, emergency transmission loading relief (TLR) incidents and out of limits power variance increased by several hundred percent, almost overnight.  What makes this so important for Marin is that this grid instability limits the amount of renewables that can be fed into the grid, and increases their price.  Estimates are that the US grid is limited to about 20% distributed renewable energy in its current deregulated, unstable condition.

Contrast this with Germany, which mandate that the utilities maintain a high degree of grid stability and buy renewable power from anyone who produces it at a price that reflects the true cost, i.e. what power from coal would cost if you mandated no greenhouse gasses and air pollution.  Many countries are adopting Germany’s buy-in tariff approach, which guarantees 20 years of income so it’s easy to finance renewable energy.  While the utilities and power plant operators at first complained about the high cost of the buy-in tariff, they’re now investing in solar plants themselves.  One German company that I sometimes talk to is installing 40 megawatts (mW) of solar power on a disused airfield, and Spain, who recently adopted the German system is installing solar plants in 100 mW increments.

The results so far?  Germany is producing 15% of its power from modern renewables, and increasing that at a rate that will, according to Herman Scheer, the German Member of Parliament who fathered the buy-in tariff concept, reach 100% renewable by 2030.  As Scheer points out, the guaranteed price for renewables makes them easy to finance and has lead to a booming new industry, now earning major export dollars for the German economy while creating over 100,000 high tech jobs.  To make Marin’s CCA work as well as possible, it is essential that local government ask state and federal officials when the “Enron” rules that destabilize the grid will be repealed, and when will the government adopt a German style buy-in tariff.  It would also be a really good question to ask our presidential candidates, because if they don’t come up with the right answer very soon, I see lots of coal and nukes in our future.

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