I last wrote on this topic a couple of months ago, following a Denver Post article that started with a Judge’s decision that ratepayers should not be responsible for cost overruns associated with Xcel’s SmartGridCity program. The judge’s decision was not the final step in the matter. As a matter of course, the final step was the Colorado’s Public Utilities’ Commission decision whether to grant Xcel’s request to collect $16.6 million from Colorado ratepayers.
If this is the first time you’ve read about this, here is a short history. In 2008, Xcel proposed SmartGridCity, in which they would install approximately 50,000 smart meters in the city of Boulder by year’s end. It was one of the most ambitious smart grid projects announced at the time. Xcel’s proposal totaled $15 million in costs, which they themselves would completely bear. Seven partner companies were supposed to pay for the remainder of the $100 million project. A little something called the Great Recession got in the way, along with little transparency and project mismanagement on Xcel’s part. Today, 23,000 smart meters are installed – at a cost of $44.5 million, triple the original estimate for less than half the project deployment. The PUC previously approved Xcel’s request for $27.9 million, which is currently collected through customer rates, not from Xcel’s assets.
Thankfully, the PUC decided today to reject Xcel’s request with prejudice, which means Xcel cannot appeal the decision. I support this decision mainly because I do not think Xcel should saddle regional ratepayers with costs for benefits they cannot receive. That is a disgusting business practice and terrible precedent to set for future projects. In a similar vein, Xcel’s success in expanding a coal plant in Pueblo, CO seemed to many to be a grab at capital to pad profit. Ratepayers overwhelmingly rejected the plant’s expansion because it would generate more electricity than demanded by the population as well as its long life: Xcel stuck CO with this expanded plant for the next 50 years.
I have expressed my frustration with the PUC on occasion. I do not think they exert the appropriate level of oversight over Xcel when the energy utility asks for rate increases, especially given Xcel’s lack of correctly forecasting generation capacity or demand. This decision doesn’t atone for past decisions I didn’t agree with, but I am glad of this result.
I reiterate my general support for the smart grid. I think we will eventually witness a significant transformation of the US’s power sector, including its infrastructure. Smart grid technologies could usher in an era of increased efficiency. Energy consumers currently do not have much access to data on their usage. Many (not all) people could change their consumption habits if they had access to that data.
A quick description of the project: Xcel Energy planned to hook up residential, commercial, and industrial properties in Boulder, CO to new technologies so that the utility could more easily see which parts of the grid were performing well or poorly and so customers had real-time access to their energy usage. The latter feature was particularly intriguing to me since I’m a data junkie. I look at my solar PV system’s website constantly to see how much energy its generating. I would do backflips of joy if I had access to energy consumption by my appliances and outlets.
The initial cost of the project was reported to be $15 million, although Xcel said that collectively with its partners, $100 million might be spent to lay the infrastructure and get everything working. Xcel’s publicly stated plan was to install digital meters in 15,000 homes Aug. 1 2008 and approximately 50,000 meters by year’s end. Xcel targeted 1,850 installations of in-home energy devices. They told Boulder’s mayor that they would not seek payment for customers for their grand experiment. Their overall plan? To revolutionize how power was monitored and controlled by stakeholders. That’s about where the good news ends.
Due to the Great Recession as well as overall mismanagement, costs tripled: $44.5 million was the final price tag. Xcel had a good idea a few months after their original announcement that costs would approximately double, but did not inform either the Public Utilities Commission (PUC) or the public. As usually happens when a corporation has an epic fail, the customer was held financially responsible. Xcel filed rate increase requests with the PUC that increased over time as they sought more and more money from all its ratepayers. Customers throughout Xcel’s service region (not just Boulder customers) have already paid $27.9 million!
For what did ratepayers actually pay? Today, only 23,000 meters are hooked up. Customer’s with the meters can view 15-minute energy data, not up-to-the-minute data. Only 101 homes have in-home energy devices (5.5% of the original number). So fewer than half the original number of smart meters and 5% of in-home energy devices were installed. The service delivered does not match the service promised when the project was first proposed. For all this, Xcel wants 3X the money they initially requested.
Which brings us to the judge’s decision. In November 2008, Xcel filed a $15.3 million SmartGridCity (SGC) request with the PUC. In May 2009, they re-filed for $27.3 million with the PUC for SGC. In July 2009, they re-filed for $42 million. Xcel included $44.5 million in a 2010 general rate increase, which the city of Boulder and the Colorado Office of Consumer Counsel challenged. In January 2011, the PUC approved SGC and allowed Xcel to collect $27.9 million for the project (more than the 1st re-filing and almost 2X the original filing). In December 2011, Xcel filed to collect the remaining $16.6 million. Yesterday, the judge ruled that “The lack of information provided here regarding customer-facing benefits or justification of the cost overruns fails to meet the Company’s burden of proof.” The PUC will consider the judge’s ruling at a future meeting, which means that customers still might have to pay for this folly of an experiment.
I could make a dozen analogies why I think this situation is so bad. Suffice to say corporate experiments should not be paid for by customers, especially when the corporation hasn’t acted in good faith. Moreover, I challenge anyone to find the local libertarians who take up space in the media railing against Xcel for this money grab. They’ll complain long and loud about the Transportation District and its decisions regarding expansion of light rail across the Denver metro area. Due to rising commodity prices and mismanagement, an entire line could be delayed until 2042 while every other line is built out by 2019 and some lines receive luxury stops because District personnel live by them. There is a big difference, however, in a public agency issuing transit projections based on revenue projections which turned out to be more optimistic because they didn’t forsee the Great Recession and a corporation hiding ballooning costs from a public regulatory agency. But while RTD is a governmental entity, Xcel is a corporate entity. In these so-called libertarains’ minds, government can do little good while corporations can do little harm. Hence, the only commentary on the topic was 3 paragraphs from Vincent Carroll back in August: “SmartGridCity delivered less consumer benefit than originally advertised. More to the point, however, it cost way more than Xcel estimated. Surely this sort of major miscalculation should cost Xcel more than a little bad publicity.” That’s the same Carroll who has had plenty to say about FasTracks and little of it useful for discussion.
The PUC needs to tell Xcel to eat the costs because Xcel severely mismanaged their project. Ratepayers already are responsible for twice the originally quoted amount. Xcel should revamp their smart grid strategy. The smart grid will be a valuable tool for higher energy awareness in the future. Other utilities are implementing smaller but more reasonable portions of their smart grids. A lesson a supervisor hammered into me years ago is apt: don’t go out and design the Cadillac version of something on your first try. With all the mistakes that will occur with a ground-breaking venture, design something basic but solid first, from which you can add bells and whistles later.
A new paper published in today’s Nature (subs. req’d) estimates costs to keep total man-made temperature rise below a set of thresholds (including 2°C). This paper joins a long list of previous estimates, all of which are highly dependent on sets of assumptions. The authors try to take uncertainties from four disciplines into account: geophysical, technological, social and political. They state that “Our information on temperature risk and mitigation costs provides crucial information for policy-making, because it clarifies the relative importance of mitigation costs, energy demand and the timing of global action in reducing the risk of exceeding a global temperature increase of 2°C, or other limits such as 3°C or 1.5°C, across a wide range of scenarios.” Given my recent push into the policy side of climate change, this paper provides a good example of something interesting and useful.
I will briefly state a central economic tenet: if you want to reduce how often an action takes place, the most direct way of doing so is to tax it. Thus, if we want to minimize CO2 emissions, we should tax carbon at the source. It is also obvious that the higher the cost of carbon, the lower carbon emissions will be within a set of real-world constraints. What then should a carbon price be today that would work to keep global temperature rise above pre-industrial values below 2°C? With a 50% probability, the authors estimate the 2012 price of carbon should be US$20 tCO2e−1 ($20 per ton of CO2-equivalent emission), as the following graph shows:
You should ask yourself a question at this point. If there was a 50% probability of arriving safely at a destination airport on an airplane, would you buy the ticket? If there was a 1-in-2 chance of me not surviving that trip, there is no way I would buy that ticket. But that’s me. But let’s try to stay away from dire sounding language when talking about climate policy. Yes, substantial changes would result from 2°C warming. But most people and ecosystems would survive intact. I mean only to illustrate what probability looks like for scenarios you or I might encounter.
What prices would generate higher probabilities? A price of more than US$40 tCO2e−1 would achieve the 2°C objective with a probability exceeding 66% – much better odds for something we might think is a worthy goal.
It makes sense too that the graph shows an 80% probability of achieving a 2.5°C objective with a 2012 carbon price of US$20 tCO2e−1 and a >90% probability of achieving a 3°C objective at the same price. We might not want to use 2.5°C or 3°C as our goal – that is our policy choice. But probabilities increase for higher temperatures as well as higher carbon prices. Our climate policies determine which of these two represents our actual goal.
The authors’ also state the following: “Yet, despite all of the uncertainty in the geophysical, social and technological aspects, our analysis indicates that the dominant factor affecting the likelihood and costs of achieving the 2°C objective is politics. Only for low-energy-demand pathways can global mitigation action be delayed until 2020 and the 2°C objective still be achieved with a probability exceeding 66% (or delayed until 2030 with a 50% probability).”
Does anyone seriously believe that we can keep energy demand at turn-of-the-21st-century levels? Developing nations want the same access to energy that developed nations have enjoyed for decades. Demand will continue to rise throughout the 21st century. Absent radical technological innovation (and continued political inaction), I find a 2°C target is already out of reach. If carbon prices aren’t enacted in the next few years, it won’t matter very much what the price of carbon is afterwards, with respect to a 2°C target – the target will simply be unachievable. Other targets will have to come into view. Left unsaid in this discussion is whether a temperature value should even be our target. There are other values that likely make more sense to more people in the world and should therefore be the central focus instead.
The state of Colorado wants to do everything it can to facilitate fossil fuel development, even if that means putting drilling rigs in the middle of housing areas. The city of Longmont doesn’t think drilling should take place amidst residential areas, but the Colorado Oil and Gas Conservation Commission doesn’t care about local controls – they’re pro-drilling no matter the consequences. So the Boulder County DA is suing Longmont to invalidate the city’s common sense regulations.
The fine folks at JP Morgan Chase continued to make unchecked bets (the same kind that A.I.G. made and got burned) and lost big: $2 Billion in the last 6 weeks. A few of those folks have since lost their jobs. But not the man who lobbied the hardest against regulations that would prevent Chase from making those bets – no, he still has his job. The shareholders are doing what they’re supposed to be doing: asking tough questions. Will Dimon keep his job? Sure – crony capitalism rewards failures at the top.
What I want to know is where are the massive rallies by the Tea Party calling for Dimon to be fired and regulations to be imposed on gamblers masquerading as bankers?
The answer is easy: there aren’t any and there won’t be any. The Tea Party was co-opted by the same folks who perpetrated the worst activities that led up to the Great Recession and our continued economic malaise. No substantive changes were made in the way Chase or other banks do business – save the tens of Trillions of dollars they got for free from the Federal Reserve.
The co-opting included distracting the populists in the Tea Party with the supposedly scarier threat of a Black Man in the White House.
Meanwhile, speculators were allowed to run up the cost of oil and gasoline, which acts as a choke collar on the American economy, and other right-wing economic theories were imposed across Europe, which has led to what is likely to be another recession:
The combination of high oil/gas prices, US corporations sitting on Trillions of dollars in cash (not hiring), and European economic weakness will not help the US economy. Will our “recovery” be over soon; will we follow Europe into weaker and weaker economic conditions? Don’t ask the Tea Party, they don’t truly care.
Consumers bought a record 52,000 gas-electric hybrids and all-electric cars in March, up from 34,000 during the same month last year.
The two categories combined made up 3.64 percent of total U.S. sales, their highest monthly market share ever, according to Ward’s AutoInfoBank. The previous high was 3.56 percent in July 2009, when the Cash for Clunkers program encouraged people to trade in old gas guzzlers for more fuel-efficient cars.
While obviously not dominating the vehicle market, vehicles that use considerably less gas than most vehicles are selling better than ever. There will be ups and downs on monthly and yearly basis in the future, of course. I hope the day isn’t too far off when electrics and hybrids make up 50% of the market. And to the free-market worshippers: this is how markets should work. New technologies should receive a little assistance to spur market penetration.
The transportation sector constitutes a significant portion of our greenhouse gas pollution. Plus it makes good economic sense to spend money on your own car instead of shoveling it over to the most profitable corporations history has ever known. An important next step is when we deploy charging stations across urban areas. There isn’t a good reason to pay $15,000 per battery pack. Then, distributed renewable energy generation will wrap up my vision of the future. There is, after all, no need to pour dirty fossil fuels into our transportation devices.
Put another way – why should employers get to decide what insured Americans get access to? The Teabaggers didn’t think that the government should have that ability (not that the recent health insurance legislation ever proposed doing so), so why should it be okay for employers to restrict access, as Republican politicians are advocating?
All that said, this whole thing wouldn’t even be an issue if universal health care was enacted instead of forcing millions of Americans into the for-profit insurance industry.
I’ve read numerous articles in the first week of the new year describing the “disappointing” sales numbers of hybrid and electric vehicles in the U.S. in 2011. It somehow makes sense to declare a subsector industry dead after sales came in under expectations. Interestingly, the same hybrid/electric naysayers didn’t have the same opinion when internal combustion car sales tanked a few years back.
Here is the latest article, written from the Detroit Auto Show. It brings together a couple of salient facts which aren’t explored in any depth.
Hybrid sales waned as gasoline prices ebbed in 2011, declining to 2.2 percent of the market from 2.4 percent a year earlier, according to the research firm LMC Automotive. Meanwhile, sales of the Nissan Leaf electric car and the Chevrolet Volt plug-in each fell short of expectations.
Analysts do not expect the segment to grow significantly this year: the combination of gas prices below $4 a gallon and higher upfront costs for the cars is not attracting consumers.
I understand the higher upfront costs, especially in the continued economic malaise that most Americans are experiencing. The $4 per gallon of gas is an interesting factoid to throw in there though, don’t you think? After all, we’ve only visually seen $4 gas once so far. Gas prices in 2011 came close to $4, but the magic `4` never appeared on signs.
Which brings me to the following: demand in 2011, especially the 2nd half of 2011, was multiple percentage points below demand in 2010. Yet gas prices rose to close to $4 anyway. It’s all supply and demand, you might say, especially demand in other countries which would lead to higher fundamental prices. Well, oil prices shot up in Feb-Apr from $84 to almost $114 per gallon, then fell back below $80 by Sep (when gas prices were highest, despite slack demand in the U.S.). Oil is trading at more than $100 per gallon again now, yet gas prices continue to decline.
No, there are more variables than simply supply and demand at play. $4 gas represents an important psychological barrier for traders just as it does for gasoline consumers. There is incredible pressure to keep prices from rising above that threshold because too few people can think critically: when prices pass the threshold, one trader panics, then most everybody else panics. Consumers are just as irrational, however. More than anything, they sense that $4 gas represents some kind of significant threshold, even though too few consumers can analyze at which threshold gas represents a significant point at which their household budget is adversely affected. Moreover, consumers have an irrational desire to recoup additional costs of a hybrid/electric vehicle inside of 1 year. Where are their similar demands for products they’ve been buying their entire lives? It really doesn’t exist.
In 2000, Toyota sold 5,600 Prii in the U.S. (the 1st year available). In 2011, Nissan sold 9,700 Leafs in the U.S. (the 1st year available), or 73% more units than the Prius. 75% more sales of just 1 new hybrid/electric is a very significant number. Imagine if there were 73% more sales of a new kind of cell phone than a different cell phone 10 years after the first was introduced. That would be touted as a wild success story. The poor treatment of the hybrid/electric vehicle segment is pitiful. Is there a long path toward 1.5 million electric vehicles on the road by 2015? Yes, there is. But you might want to share with the rest of the car industry that having aggressive 2015 goals is a really bad idea. I doubt you’ll receive much of an audience.
The price per barrel of oil is back up near $100 as of the end of last week and through today’s trading. According to the free-marketeers, that must mean gasoline demand has been through the roof. Oops, not so much: demand is down -4.3% YoY, at 8671 M gallons vs. 9056 M a year ago, as noted at The Bonddad Blog.
Clearly, something other than just demand is and has been at work. Oil trading is as much gambling as the stock market is. All the volatility that consumers are affected by arises primarily from large amounts of bets placed on anticipated prices.
Why is this important? As NDD notes, “This [oil's price] is back above the recession-trigger level calculated by analyst Steve Kopits. Gas at the pump declined $.03 to $3.42 a gallon. Measured this way, we probably are still about $.15 above the 2008 recession trigger level.” Those bets have real-world implications. Recessions are easier to trigger when oil and gas prices remain high.
Three years after needing a (taxpayer funded) federal bailout (of billions of dollars) to survive, Citigroup reported its seventh-straight quarterly profit, with a 74 percent rise in the third quarter despite dismal results of its investment bank.
Remember, instead of consumer advocates or labor (you know, people who actually voted for him), Team Obama has people from Citi and other super-banks advising him on economics. Does anybody seriously think that’s accidental? No, it’s exactly what Obama wants. Think that through carefully as you hear his campaign ramp up attacks on Romney for being too connected to Wall Street. Rolling up his sleeves and giving speeches around the country is meant to obscure that hypocrisy. Tell me again exactly how Romney would be worse if you’ve lost your home and/or job in the past 5 years while Citi got bailed out with your tax money and is now posting record profits. Tell me how Romney would be worse when real incomes have fallen for the first time since WWII with a “Democratic” President pushing conservative economic policies as hard as his Con predecessor. Because on too many issues, I’m not seeing enough of a difference.
