Smart Grid City Update

Well, unfortunately, Xcel and the PUC have really bungled the potentially exciting deployment of the Smart Grid City prototype in Boulder.

The whole business model for Smart Grid in Colorado is strange because it's a monopoly trying to save it's customers money.
The PUC tries to regulate against Xcel ripping off their customers, but they have almost no directive to promote investment now if it saves money in the future. Add to that some customer resistance to smart metering because it is viewed as an invasion of privacy, and you get a difficult if not impossible implementation.

Why do we care so much about the Smart Grid? Because if TRUE electrical costs could be accurately accounted for and allocated, a residential solar photovoltaic system can be shown to be a better investment than it currently is. We are firm believers in the theory that many small investments in renewables and efficiency can make faster and more nimble improvements in the US's overall energy problems. Big ideas and large projects take much longer to implement, because they are big. The large amount of capital required slows down the process too much, even if the ROI is significantly better than small projects.

If your home-based PV system gives you a return of 5%-15% on your money, millions of homeowners will quickly enter the green energy market as investors. Even if they have zero cash, they can partner with a 3rd party such as SunRun to get a system installed.

We have lots of politically conservative friends who even think PV is a good investment.

Although we were hoping that the Smart Grid could reduce PV system size, PV system cost has been dropping steadily, so this good news takes the sting out of Xcel's big fumble.

Connecting the Dots Between Google and the Smart Grid

How the Google Math Adds Up:

1. Google is rapidly becoming the nation's largest single consumer of electrical energy.

2. 2007: Google announces their goal of producing renewable (solar) electricity as cheap as coal. The goal: $ 0.025/kwh

3. Plentiful solar electricity is generated during the common peak demand periods, hot summer afternoons.

4. 2009: Google announces the PowerMeter to help implement the "smart grid" as they envision it. A properly implemented smart grid could increase the selling price of peak demand power to $ 0.25/kwh or more.

Therefore, #4 causes a 3x to 10x increase in the profits of #2, while #3 + #2 solves problem #1.

Obvious Need for Smart Metering

Some sort of weird incentive program has been approved by the PUC. From the Denver Post article:

"Under a new incentive plan approved by the commission, Xcel could recover from ratepayers all costs for programs that encourage customers to use energy more efficiently. Xcel also could receive bonuses if it meets certain targets." Is it just me, but isn't this some kind of circular logic? Here's another way to say it, and it's hard to believe the Post can write this with a straight face: "Xcel will recover from ratepayers all costs for programs that encourage ratepayers to use less." Auugghhh!

How about a rate-based incentive program? That's how the rest of our economy works. You are charged the cost of a service plus a profit. The amount of profit is determined by the market price.

Since Xcel is a monopoly, the market price is set by the PUC. Therefore the market price should be the cost plus the 10% profit that Xcel is allowed by law.

The problem is that the rate structure doesn't reflect actual costs.

The smart metering initiative will solve this problem, so incentive programs like this are unnecessary because normal economic laws of the marketplace will naturally encourage conservation and alternative energy.

Smart Metering Coming to Boulder

In previous posts, I have emphasized the need for "smart meters". In a move that was secret until today, Xcel Energy has announced plans for an even more ambitious program called the "smart grid".

They have chosen Boulder for the pilot program.