This article was co-authored with Matt Kasper.
Willie Soon, a prominent climate denier, received over $1.2 million from fossil fuel companies and foundations for research denying human-caused climate change according to documents released by the Climate Investigations Center and Greenpeace this weekend. The documents reveal that Soon described his work as “deliverables” for his funders when writing journal articles or testimony before the U.S. Congress, in a serious breach of ethics rules for academic researchers.
According to reports, Willie Soon has received funding from Southern Company, Charles G. Koch Charitable Foundation (run by the owners of Koch Industries), Exxon Mobil, the American Petroleum Institute, and DonorsTrust (an organization that serves as a conduit for money from the Koch’s and prominent conservative donors to organizations).
Southern Company has been funding Willie Soon, an astrophysicist and climate change denier at the Harvard-Smithsonian Center for Astrophysics through one of its subsidiaries called Southern Company Services. The utility company has been funding Willie Soon’s research since 2006 and reports from Inside Climate News show that Southern Company is listed as the funder in 11 papers in 9 academic journals written by Soon. In total, $409,000 has come from Southern Company Services over the past decade.
According to Inside Climate News, “the documents reveal that Soon and Harvard-Smithsonian gave the coal utility company the right to review his scientific papers and make suggestions before they were published. Soon and Harvard-Smithsonian also pledged not to disclose Southern’s role as a funder without permission.” Inside Climate News also explained, “Without exception, the papers question the extent, severity, cause or existence of man-made climate change.”
African energy ministers, utility companies, and private sector investors all gathered in Washington D.C. recently for the Powering Africa Summit at the St. Regis Hotel. The summit is designed to bring stakeholders together, including those leading the Obama administration’s Power Africa initiative, to discuss increasing access to electricity in Africa.
The summit was an opportunity for the Energy & Policy Institute to interview African energy and finance ministers, along with investors, about Peabody Energy’s “Advanced Energy for Life” campaign and the role they see coal playing in the electricity sector in Africa.
Not surprisingly, many people interviewed had never even heard of Peabody’s coal campaign. The ones that had heard of the campaign thought it was a ridiculous attempt to sell more coal. All but one person interviewed said that there was no role for Peabody’s coal in Africa and many advocated for renewable energy as the right path forward for the nations of Africa. The sole outlier interviewed that admitted he had investments in the “clean coal” sector.
Watch the video below:
Utility revenue decoupling is often seen as an enabling policy supporting “demand side management” (DSM) programs. DSM is a catch-all term for the things you can do behind the meter that reduce the amount of energy (kWh) a utility needs to produce or the amount of capacity (kW) it needs to have available. DSM includes investments improving the energy efficiency of buildings and their heating and cooling systems, lighting, and appliances. It can also include “demand response” (DR) which is a dispatchable decline in energy consumption — like the ability of a utility to ask every Walmart in New England to turn down their lights or air conditioning at the same time on a moment’s notice — in order to avoid needing to build seldom used peaking power plants.
For reasons that will be obvious if you’ve read our previous posts on revenue decoupling, getting utilities to invest in these kinds of measures can be challenging, so long as their revenues are directly tied to the amount of electricity they sell. Revenue decoupling can fix that problem. However, reducing customer demand for energy on a larger scale, especially during times of peak demand, can seriously detract from the utility’s ability to deploy capital (on which they earn a return) for the construction of additional generating capacity. That conflict of interests is harder to address.
But it’s worth working on, because as we’ll see below, DSM is cheap and very low risk — it’s great for rate payers, and it’s great for the economy as a whole. It can reduce our economic sensitivity to volatile fuel prices, and often shifts investment away from low-value environmentally damaging commodities like natural gas and coal, toward skilled labor and high performance building systems and industrial components.
The rest of this post is based on the testimony that Clean Energy Action prepared for Xcel Energy’s 14AL-0660E rate case proceeding, before revenue decoupling was split off. Much of it applies specifically to Xcel in Colorado. However, the overall issues addressed are applicable in many traditional regulated, vertically integrated monopoly utility settings.
The post Decoupling & Demand Side Management in Colorado by Zane Selvans appeared first on Clean Energy Action. Zane is the Director of Research and Policy at Clean Energy Action and a Senior Fellow at the Energy and Policy Institute.
Why can’t we scale up DSM?
There are several barriers to Xcel profitably and cost-effectively scaling up their current DSM programs. Removing these impediments is necessary if DSM is to realize its full potential for reducing GHG emissions from Colorado’s electricity sector. Revenue decoupling can address some, but not all of them.
- There are the lost revenues from energy saved, which impacts the utility’s fixed cost recovery. If the incentive payment that they earn by meeting DSM targets is too small to compensate for those lost revenues, then the net financial impact of investing in DSM is still negative — i.e. the utility will see investing in DSM as a losing proposition. Xcel currently gets a “disincentive offset” to make up for lost revenues, but they say that this doesn’t entirely offset their lost revenues.
- Even if the performance incentive is big enough to make DSM an attractive investment, the PUC currently caps the incentive at $30M per year (including the $5M “disincentive offset”), meaning that even if there’s a larger pool of cost-effective energy efficiency measures to invest in, the utility has no reason to go above and beyond and save more energy once they’ve maxed out the incentive.
- If this cap were removed, the utility would still have a finite approved DSM budget. With an unlimited performance incentive and a finite DSM budget, the utility would have an incentive to buy as much efficiency as possible, within their approved budget, which would encourage cost-effectiveness, but wouldn’t necessarily mean all the available cost-effective DSM was being acquired.
- Given that the utility has an annual obligation under the current DSM legislation to save a particular amount of energy (400 GWh), they have an incentive to “bank” some opportunities, and save them for later, lest they make it more difficult for themselves to satisfy their regulatory mandate in later years by buying all the easy stuff up front.
- It is of course the possible that beyond a certain point there simply aren’t any more scalable, cost-effective efficiency investments to be made.
- Finally and most seriously, declining electricity demand would pose a threat to the “used and useful” status of existing generation assets and to the utility’s future capital investment program, which is how they make basically all of their money right now.
Revenue decoupling can play an important role in overcoming some, but not all, of these limitations. With decoupling in place, we’d expect that the utility would be willing and able to earn the entire $30M performance incentive (which they have yet to do in any year) so long as it didn’t make regulatory compliance in future years more challenging by prematurely exhausting some of the easy DSM opportunities.
What are we doing now?
Here’s the description of Xcel’s current Electric Financial Incentive from their 2013 CO DSM Annual Status Report:
The Commission approved the financial incentive mechanism — which includes a “Disincentive Offset” and “Performance Incentive” — applicable for 2013 electric DSM programs in Proceeding No.10A-554EG (Decision C11-0442). A Disincentive Offset of $3.2 million (grossed up for income taxes) is awarded when Public Service achieves 80% of the annual energy savings goal. The Disincentive Offset increases to $5.0 million when Public Service achieves 100% of the annual energy savings goal. The Performance Incentive is 1% of net economic benefits when the Company achieves 80% of the annual energy savings goal, and escalates to 2% at 85 % of the energy savings goal, 3% at 90% of the energy savings goal, 4 % at 95% of the energy savings goal, and[the performance incentive] is 5% [of the net economic benefit] at 100% of the energy savings goal. The Performance Incentive share of net economic benefits continues in a pattern where each 5% increase in energy savings achievement above 100% achievement of the annual energy savings goal results in a 1% addition to the Company’s share of net economic benefits, up to a maximum of 15% at 150% of goal.The combination of the pre-tax Disincentive Offset and the Performance Incentive may not exceed $30 million. That total financial incentive is recovered in the year following the 2013 performance year.
Admittedly, it’s about as clear as mud, but let’s try and pick it apart.
There are two different achievements being tracked:
- the amount of energy saved (as a percentage of a goal set by the PUC), and
- the net economic benefit that results from saving that energy.
There are also two different rewards being calculated:
- the “Disincentive Offset” which has a well defined dollar value, based on how much energy has been saved (relative to the PUC’s goal) and
- the “Performance Incentive” which is calculated as a percentage of the net economic benefits — and that percentage increases as the amount of energy saved increases (again, relative to the PUC’s goal).
The structure of these incentives is problematic in a couple of ways. They don’t encourage the utility to be cost effective and they don’t fully scale with the amount of energy saved.
The Disincentive Offset is a crude way of compensating the utility for lost revenues due to lower energy sales, but it only applies to the base savings target — once the utility has surpassed their regulatory mandate, it drops away, forcing the Performance Incentive to take over and do both the job of protecting the utility from lost revenues, and providing them with a financial incentive to keep saving energy beyond their mandate.
The Disincentive Offset also depends only on the fact that a certain amount of energy was saved, not how cost effectively it was saved. DSM program costs are passed through to ratepayers directly, so the utility has no incentive to care about being cost effective until, at the very least, they’ve done enough DSM that they start earning the Performance Incentive.
Because the Performance Incentive is a percentage of the net economic benefits, in theory it does encourage the utility to do cost effective things first — since that would result in more economic benefits, which they get a cut of. But if the lost revenues from reduced sales aren’t being fully covered by the disincentive offset, it may still be a losing proposition (for Xcel!) to be aggressive on investing in efficiency.
The result is that the utility begrudgingly complies with the regulatory mandate, and meets their energy savings targets, without really going above and beyond to aggressively pursue the performance incentive, never getting close to hitting the incentive cap, and complaining constantly, while trying to get out of the obligation in future years.
Floridians for Solar Choice Launches Ballot Initiative: Americans for Prosperity Stays Silent on the Issue
Floridians for Solar Choice, a recently formed alliance of conservatives, libertarians, and environmentalists, launched a ballot initiative earlier this month that would allow voters in the 2016 election to vote on whether or not property owners who generate solar electricity can sell the power directly to other ratepayers.
The coalition is made up of Conservatives for Energy Freedom, the Florida Retail Federation, the Christian Coalition, the Florida Alliance for Renewable Energy, and the Florida Solar Energy Industries Association. The Republican Liberty Caucus of Florida and the Libertarian Party of Florida are also supportive of the ballot initiative.
This collection of parties, while disagreeing on most political issues, all agree on wanting to open up the electricity market so solar energy can compete with the major utilities in the state, including Duke Energy and Florida Power & Light.
Tom Perfetti, chairman of Floridians for Solar Choice, told The Daily Fray he has been seeking support across the entire political spectrum in order to change Florida’s energy policy and “open it up to an all-of-the-above free market policy.”
At the press conference announcing the ballot initiative earlier this month, Alex Snitker, the Libertarian Party of Florida Vice President, said,
“Who is the opposition? The opposition is the people that are profiting off of the current monopoly they have right now… One of the things libertarians complain about a lot of times is government-sponsored monopolies. I can’t think of a better example then what we currently have in Florida right now.”
One organization missing from this coalition, and whose sole mission is to take action “every day on behalf of the free market movement”, is Americans for Prosperity (AFP). AFP is the grassroots organization funded by the billionaire fossil-fuel industrialists Charles and David Koch. The Koch brother's operation, including AFP, intends to spend $889 million in the run-up to the 2016 elections.
At a press conference hosted by AFP at the National Press Club in Washington D.C. on January 15, Brent Gardner, AFP’s Vice President of Governmental Affairs, said he couldn’t offer comments regarding the solar initiative in Florida because he was unfamiliar with the details. Instead, he said to direct questions to the AFP chapter in Florida.
David McCurdy, President & CEO of the American Gas Association, said last week that he prefers state lawmakers and regulators submit their state implementation plans (SIP) to the EPA, rather than completely refuse to comply with the regulations. If states refuse, the EPA would be forced to impose a federal implementation plan (FIP).
The American Gas Association is a trade association representing natural gas supply companies. McCurdy was speaking at the 11th Annual State of the Energy Industry Forum sponsored by the United States Energy Association on Wednesday. He was asked about the Clean Power Plan during the question and answer portion of his presentation.
If the Clean Power Plan is upheld in court, McCurdy said he wants utility companies and the natural gas industry to provide input to state lawmakers and regulators when writing the plans. This is in contrast to what other fossil fuel companies and front groups, such as the American Legislative Exchange Council (ALEC) have been urging.
ALEC has finalized two model bills to block states from cooperating with the EPA.
Aliya Haq at the Natural Resources Defense Council writes,
The first ALEC bill aims to effectively repeal a state’s authority to work with EPA in implementing the Clean Air Act. It requires the state agency to obtain unnecessary legislative approval on its carbon pollution plan… The second model bill attacking EPA’s Clean Power Plan forces states to drag their feet, prohibiting state agencies from submitting a carbon-reduction plan to EPA until all legal challenges are resolved. This is a formula for indefinite delay, since any frivolous lawsuit could hold up the plan.
As Haq explains, the plan will backfire on these lawmakers because the EPA is obligated by law to issue a federal plan for any state that fails to submit a SIP.