Archive for Distributed electricity

Small is Beautiful

My recent Forbes article Cheap Photovoltaics Are Eating Solar Thermal’s Lunch about how the rapidly falling price for photvoltaic (PV) modules is undermining the case for concentrated Solar Thermal Power (CSP) is just one instance in a larger trend: In the modern energy economy, modular technologies advance more rapidly than large scale technologies because it is easier to get experience with them in the field at reasonable cost.

PV started with sub-watt sized cells in solar powered calculators. Solar calculators may not seem to have much to do with today’s multiple hundreds of megawatt (MW) sized plants which can be a billion times larger than a solar calculator, but the manufacturing experience with those tiny cells allowed manufacturers to bring costs down to the point where kilowatt sized systems started to be used on off-grid homes, which in turn brought down the price enough to allow subsidies to make solar affordable for most homeowners, and 1-2 MW commercial plants, and now we’re seeing announcements of solar farms approaching a gigawatt.

CSP, on the other hand, only starts to make sense at around 100 MW, so building each new plant represents a much bigger financial commitment than even a million calculators. Looked at this way, PV’s potential eclipse of CSP perhaps should have not been all that surprising. But hindsight is 20-20.

This also has implications for the advance of other energy technologies. Look for the modular technologies to gain ground at the expense of the industrial scale technologies.

Modular technologies

  • PV
  • Wind
  • Gas Turbines
  • Land Fill Gas
  • Grid based battery storage
  • Energy Efficiency
  • Smart Grid / Demand Response
  • Fuel Cells

Industrial Scale Technologies

  • CSP
  • Coal
  • Nuclear
  • Ocean Thermal Energy Conversion (OTEC)
  • Geothermal Power (sometimes small scale, but limited places it can be built)
  • Compressed Air energy Storage
  • Pumped Hydro
  • Flow Batteries

That’s just a few energy technologies off the top of my head, and I’m not trying to say that modular technologies will always win out over industrial scale technologies. But I am saying that price per kWh is not everything… sometimes small scale leading high prices per unit of energy but low prices for individual systems can allow a rapid evolution to lower prices per kWh. We’ve certainly seen that in Solar.

What’s next? LEDs were also able to develop rapidly because they were useful in a large number of specialized niches, such as indicator lights on electronics) despite the high initial cost per lumen.


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Can the Poor Afford a Community Solar Garden Subscription?

Yesterday, I wrote about Community Solar Gardens (CSGs) and their uses from an investment perspective. One of the goals of CSG legislation is to allow people without access to large amounts of credit the opportunity to invest in solar. Yet there is a clause in the bill that places the size of the smallest allowable CSG subscription at 1kW. A typical home system is usually between 2kW and 10kW, so a 1kW system does not seem unreasonable if the intent is to simulate a home system. However, if the intent is to allow people of all economic means to participate, the 1kW minimum may be onerous.

According to Rick Coen, Director of Engineering at Colorado solar installer Bella Energy, a 1 kW solar garden subscription would probably cost about $2,500 after current Colorado incentives and federal tax credits. Colorado incentives have been dropping quickly recently, as have solar panel prices, so this cost could either rise or fall, depending on which falls faster. Nevertheless, $2,500 seems like more money than most typical low income earners are likely to have at one time, so the minimum subscription may present a barrier.

A bill that was designed to allow low income earners to participate would either remove the 1 kW minimum, or provide for some type of monthly payment plan.


The Community Solar Gardens bill (HB1342) does allow the developer of the CSG to provide financing to subscribers, but for someone with low income, such loans would likely need to be secured against the subscription itself in order to achieve a low interest rate. If the income from the subscription came close to covering the payments on the loan, a CSG developer could package together a CSG subscription and a loan so that a 1 kW subscription could be bought on a monthly payment plan.

In sunny Colorado, solar farms often have capacity factors as high as 20%. At that capacity factor, typical monthly production for a 1kW nameplate system would be 146 kWh, which is worth about $14.60 a month at typical Colorado residential rates of 10 cents per kWh. Using a mortgage calculator, I found that the income from the subscription would be enough to pay off a $1,400 ten-year loan at 5%, an $1,800 fifteen-year loan at 5%, or a $2,200 20 year loan at 5%. That means that with $300 down, a low income subscriber could pledge the income from the CSG subscription for 20 years, and would eventually be able to use the income from it after the loan was paid off 20 years later. Solar panels can last for well over 20 years, so the subscription could still be worth something at that time.

A more likely option would be for the subscriber to make the initial $300 down payment on the 20 year plan, followed by smaller amounts each month to accelerate the debt repayment, and end up owning the subscription outright sooner.

Despite the potentially daunting $2,500 initial cost of a 1kW subscription, it looks as if developer financing could bring this down to a manageable initial payment. All of this assumes that incentives for solar do not fall faster than the price of solar installations, and that currently low interest rates stay low. On the other hand, if electric rates rise, the income from a CSG subscription might be enough to cover the entire subscription.

Truly Affordable Solar

While financing can in principle allow the low income earners to purchase a Community Solar Garden subscription, it remains to be seen if there will be enough demand for an asset that has no tangible value for twenty years among people without much cash to spare. I doubt that the demand will be sufficient to entice a CSG developer to offer such a complex financing arrangement. A much simpler way to make CSG subscriptions affordable would be to allow subscriptions smaller than 1 kW.

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Community Solar Gardens

A new bill being considered in the Colorado legislature would create "Solar Gardens." Solar Gardens allow people to participate financially in owning part of a solar array even if they do not have a suitable site on their own property. My reading of the proposed legislation is that subscriptions in a Solar Garden would be financial securities, and fall under securities laws. That’s probably a good thing.

Solar for Everyone

Solar panels are elitist: They cost a lot of money, and only homeowners with good solar access can usefully install them. This means that renters and people who can’t come up with at least $5,000 to $10,000 worth of cash or credit can’t own them. That’s the problem Colorado House Bill 10-1342 (HB1342): Community Solar Gardens aims to correct.

HB1342 defines a Community Solar Garden(CSG) as "A solar electric generation facility with a nameplate rating of two megawatts or less… where the beneficial use of the electricity generated by the facility belongs to the subscribers to the community solar garden." A subscriber is a "retail customer of a qualifying retail utility who owns a subscription and who has identified one or more physical locations to which to which the subscription shall be attributed" withing the same county or municipality as the CSG. The bill allows subscribers to change the premises to which a subscription is attributed, and also to sell them to other qualifying subscribers, something which is necessary in case a subscriber were to move out of the county or the utility’s territory.

It’s a worthy idea, although local solar installers are concerned that the superior economics of large installations will eat into their market share, by easing the requirements in House Bill 10-1001 for customer-sited generation. People who own perfectly good sites for rooftop solar may instead choose to buy a CSG subscription because of the convenience and potentially lower price. I think fears that residential customers who are good candidates for rooftop solar might instead subscribe to CSGs are overblown. Although the economics may be better, buying solar in Colorado is not yet a great investment because of the cost an return involved. Instead, I believe people are investing in solar because it gives them satisfaction to think that they are using green energy, and because they want to show off their environmental bling to their neighbors. I know that some people are more interested in the bling aspects of solar panels than the economic aspects, because otherwise there would not be a market for fake panels in Japan, although I don’t know of anyone who knowingly bought fake solar panels in the US.

On the other hand, there is currently a multiplier in the bill which would allow 2 kW of CSG subscriptions to substitute for 3 kW of rooftop solar that I think needs to be fixed to avoid undermining the residential set-aside of Colorado’s renewable energy standard as envisioned in HB 1001.

Energy Sprawl

My greatest concern with the bill is not that it will cause a move towards large installations, but that it will lead to more ground-mounted installations taking up open space, contributing to Energy Sprawl. No matter what you think about the economics of photvoltaics, one advantage that they have over almost every other type of electricity generation (both fossil and renewable) is that they can be placed on otherwise unused rooftops and other structures, giving a use to otherwise wasted space. Only energy efficiency and conservation have less physical impact on the environment than rooftop solar. Some people have told me that their air conditioner ran less after they put solar on their roof.

Any law which makes solar more likely to be ground-mounted than rooftop is a step in the wrong direction. I think the bill should be amended to prohibit CSGs from being ground-mounted, effectively limiting them to large rooftops and other structures such as awnings for parking lots. This would also have the effect of doing something to limit the practical size of CSGs to available rooftops, which would probably make the solar installers a bit happier.

The Secondary Market for Community Solar Garden Subscriptions

Provisions for a secondary market for CSG subscriptions are included in the bill, since a subscriber moving out of the county in which their CSG is located will not be able to benefit from their subscription. The secondary market and and other security-like characteristics of subscriptions may make them a useful financial tool for small investors. Most importantly, a CSG subscription is (as intended) an excellent hedge against rising electricity prices.

The only real reason to hold a CSG subscription for the long term is as a hedge against rising electricity prices because, like all utility-subsidized solar installations in Colorado, the utility ends up owning the Renewable Energy Credits (RECs), which are defined as all the “environmental attributes of the electricity.” Although most people with solar panels don’t understand this, the fact that they cannot legally claim the RECs means that they are using electricity that is just as dirty as any other Coloradan, with the exception of direct purchasers of RECs or Carbon Offsets, such as Windsource or Colorado Carbon Fund subscribers.

Although the secondary market for CSG subscriptions is likely to be very illiquid, it will probably become a good direct indicator of local expectations for utility rates. CSGs will not be much use to speculators, however, because there are restrictions in the bill which limit the investment to only 120% of estimated electricity usage at the designated physical location of the subscription. Nevertheless, experienced local market professionals with an understanding of market psychology may be able to make small profits trading subscriptions, since the illiquid and unprofessional nature of the market will likely make prices extremely volatile and subject to strong behavioral biases. When electricity rates are rising, subscription prices will likely overshoot their true value as potential subscribers overestimate future increases, and prices will likely undershoot if falling natural gas prices lead to falling interest in CSG subscriptions.

Allowing investors into the subscription market would probably create a more liquid and stable market for subscriptions, but such an outcome is unlikely because of the general public distaste for speculators. It’s also impractical because of the fact that payments to subscribers are at the retail electricity rate, which is considerably higher than the owners of commercial solar farms are allowed, and hence are effectively subsidized by all utility customers, over and above the direct subsidies given to encourage solar in Colorado.

CSG subscriptions have other aspects that will be familiar to investors. The law allows for the CSG to finance the purchase of a subscription (buying on margin.) It also allows the payments for electricity production to either go to offset the subscriber’s electricity bill, or to go to the CSG sponsor. In the latter case, I could see a small subscriber buying a small subscription, and enrolling in the equivalent of a Dividend Reinvestment Plan (DRIP): rather than cash payments, the electricity generation would be used to increase the size of the CSG subscription over time, until the subscriber decided to start taking cash payments. A CSG with a large number of subscribers enrolled in DRIP-like plans might add a new solar module to the farm every month, in order to keep up with the growing subscriber base.

CSG subscriptions could become a valuable financial planning tool for retirees and others on fixed incomes. Because a CSG subscription rises in value with utility rates, an owner would be better able to budget for the utility bill, no matter how wildly electricity prices gyrate. As subscription prices fall with the falling cost of photovoltaics, I can see the purchase of a CSG subscription becoming standard financial advice for retirees.

CSG Subscriptions as Securities

Although professional investors and speculators will have at most a limited role in the trading of subscriptions, CSG subscriptions may legally be securities. The legal definition of a "Security" is an investment in an enterprise with the expectation of profit from the efforts of other people. If I’m right and the draft law is not changed, CSG subscriptions will fall under Colorado securities regulations. (Because CSG subscriptions cannot be sold outside the state, they are clearly matter for Colorado security regulators.)

For small CSGs set up by community organizations, this is unlikely to have a tremendous impact, because securities laws include a number of exemptions for sales to a small number of related individuals. (Note that this is not intended as legal advice! I am not qualified to give legal advice, and even a small CSG should need to consult with someone familiar with the relevant laws.) For large CSGs with many subscribers, securities law may actually require the delivery of a prospectus and fall under a variety of other rules about communications that apply to the CSG developer and its representatives. In general, this is probably a good thing, since it provides a strong legal framework under which regulators will be able to sanction unscrupulous CSR developers who might be tempted to cold-call unsophisticated utility customers and over-promise the benefits of a small subscription in a Solar Garden.


The intent of Community Solar Gardens is a good one, because it allows many more people the opportunity to hedge their electricity price risk. The people in most need of such a price hedge, those living on small fixed incomes, generally do not have both the home ownership and credit that installing a solar system requires. So I’m glad to see Colorado pioneering this concept, and it will be very interesting to see how CSGs and the market for their subscriptions evolve when the final bill passes. With luck, and a few people emailing Claire Levy, the bill’s sponsor, that final bill will have been amended to exclude ground-mounted Community Solar Gardens, and help preserve Colorado open space.

I also hope that some among the majority of my readers who are not in Colorado will suggest your own legislators consider local variations of this idea.

Tom Konrad PhD CFA

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Colorado House Bill 10-1001 Passes Senate: Will Raise Renewable Energy Standard to 30% by 2020

This article was written before the HB10-1001 passed the Senate on March 5, and so focuses on the arguments for and against. Read on, and you’ll see why I think the passage was a good idea. I’m publishing now without updating what follows because it looks like I’ll be the first to break the news. Please bear with any typos, my proofreader has not had a chance to see this yet. The full text of the bill is here. All that is needed to pass this bill into law is for the House to approve minor amendments made in the Senate, and Governor Ritter’s signature. Neither is expected to be a barrier to adoption.

Tom Kornad, Ph.D.

Colorado has a good chance of increasing the requirement for electricity from renewable sources for the second time since I’ve been blogging here. When I moved to Colorado in 2005, the state had recently passed the first renewable energy standard (Amendment 37 or A37) to be directly approved by voters in the United States. A37 required that the state’s investor owned utilities (Currently Xcel Energy (XEL) and Black Hills (BKH) to produce 15% of their electricity from renewable sources, with a small set-aside for solar and residential solar by 2020, 15 years in the future at that time.

The reason A37 was voter-approved was not because the state was trying to capture some "first" but because of steadfast opposition in the Colorado Legislature from many of the state’s leading politicians. As of April 2009, Xcel was getting, 10% of its electricity from non-hydro renewable generation (mostly wind), and the cost of that achievement has been a surcharge (called the RESA or Renewable Electricity Standard Adjustment) on our electric bills of 0.6% until after the first doubling of the RPS, and stayed at 1.4% for at least a year after the first doubling. The the current House Bill 10-1001 (HB1001) raises the standard to 30% without raising the statutory cap on the RESA, although the full 2% will most likely to be needed. Yes, our transition to clean energy costs money, but it is altogether lower than the costs caused by constant fluctuations in natural gas and coal prices.

Andrew Winston, in the Plenary address at this year’s Sustainable Opportunities Summit the next day described the debate currently going on on in Washington DC as surreal. He likened Climate Change to a bunch of people in a house where one room is on fire. The current discussion at the international level he thought was analogous to debating about who started the fire and who should put it out. The debate in Washington, DC, he likened to debating if the room is actually on fire.

The debate in Colorado is often similarly surreal. The opposition to the bill, which came more from committee member Lundberg rather than the people who testified, centered on cost. Keep in mind that the cost is capped at 2% of electric bills… if the target cannot be met within this cost, the target will not be met. More intelligent (if not completely accurate) opposition came from the Oil and Gas industry. Officially, they were neutral on the bill, but opposed it on the ground that wind in Colorado has not reduced pollution in Colorado, because wind variability has forced existing coal plants to ramp up and down faster than they were designed to do. This makes them run less efficiently, and emit just as many pollutants such as SOx, NOx, and particulates, even though they are producing less power. Further, there are plans to close most of these coal plants by 2017.

The oil and gas argument about a lack of reduction in pollution from coal plants is more serious than the cost argument, but still does not stand up to scrutiny. First of all, they are focusing on conventional pollutants, not Greenhouse Gasses, which are what we are most concerned about. More importantly, there are already a couple of factors in place which will help to mitigate the problems which cause the quick ramping to diminish. I just recently wrote about better predictive software which allows utilities to predict wind production much more effectively. What forces Xcel to ramp their coal plants quickly is not that wind power is variable so much as the fact that the utility gets surprised by quick changes in wind output. When a utility knows that wind ouput is going to rise by 100MW an hour ahead, they can start lowering the output from their coal plants slowly in the time, and replacing that power with power from natural gas, which can ramp up and down much more quickly.

Second, as we get more renewable electrity on the system, we will also have more diverse electrity sources on the system. Right now, most of the wind farms in Colorado are located in the Northeast of the state. This clustering is because that corner of Colorado not only has a good wind resource, and also has available existing transmission lines to bring the wind power to the load centers in Denver and the Front Range. That means that wind power production in Colorado is mostly a function of the wind in Northeast Colorado. The lesson here is not that we should not add more renewable electricity to the grid, but that as we add non-wind renewables, and wind in other parts of the state. Adding large wind farms in other parts of the state requires new transmission. The main barrier against new transmission is not cost, but the difficulty of permitting and the time it takes to build. But Colorado is working to overcome this barrier by looking ahead and and planning the transmission we need for wind and other renewable resources ahead of time. I wrote about a report that came out of this process and the cost of transmission a couple months ago, and some new projects are alredy well into the planning stages.

Other renewables are not at all correlated to the existing wind power in the Northeast of the state. Solar power is also variable, but it forms a natural complement to wind, because wind in Colorado tends to peak at night in the winter, while sun is most abundant during the day in the summer. Other renewables such as cofiring biomass, such as a recent project from Colorado Springs Utilities, are baseload power, and small hydropower has some variablity depending on stream flows, but it is completely uncorrelated with wind.

Just like in a stock market portfolio, a diversified portfolio of energy sources leads to a less variable and more stable grid. Diversified energy sources not only means power from a variety of sources, but also geographic divesity. HB1001 has a 1.5% set aside for Distributed Generation (DG), which means (in the context of this bill) renewable generation that does not require new electricity distribution facilities. By definition, DG will not be big wind in the Northeast corner of the state. Much of it will be solar, bit it also opens the field to small scale biomass, hydropower in water municipal water and sewage systems, and biogas electricity from anaerobic digestion. There was some opposition to this set-aside from interests that worry that building any renewable generation other than big wind would cost too much, but this set aside is an investment in diversification. Yes, many of these diverse resources cost more now than large wind turbines, but they are an investment today in establishing new industries and technologies which can then get to a scale where they can contribute to a diverse and more robust electric grid.

If the financial crisis taught us anything, it should have taught us that a single-minded focus on short term return and projections from complex models, leads to fragile financial systems. A single-minded focus on electricity generation that has the lowest cost similarly leads to a fragile electric grid. Utility least cost planning is driven by cost models for the price of each form of generation, and models for the prices of the fuels which go into them. We need to acknowledge that our models have been flawed in the past, and will continue to be flawed in the future. Predictions of fossil fuel prices are more often wrong than right, and even the projections of the cost to build generation are often wrong as well.

Since we know that the cost models are wrong, but we don’t know how they are wrong, it makes sense to make sure that we invest in electric resources that may not appear to be lowest cost when we run them through those models, but which add diversification and resilience to our electric grid in preparation for the day when the models fail. That day does not have to be a catastrophe like the financial crisis, but a crisis is more likely if we put all our faith in least cost modeling and don’t want to pay an extra 2% for renewable energy insurance.

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“Heretic” Battles Straw Man

Energy Self-Reliant States [pdf], a flawed study on local Renewable Energy availability from the Institute for Local Self-Reliance (ISLR) found that 18 of the 50 states could not meet their electricity needs with local renewables.   In fact, no state can meet its electricity demand through local renewables without expensive electricity storage.  On a national basis, such storage would cost an estimated $13 Trillion, or over 65 times the cost of the transmission investments they oppose.

by Tom Konrad, Ph.D.

Straw Man: "Transmission is Only for Utility Scale Renewables"

Image: GE Smart Grid Scarecrow (video)

One of the study authors, John Farrell, has been promoting the study as a "Heresy on Transmission."  Rather than a heretic attacking misguided establishment shibboleths, this flawed study attacks a simplistic misunderstanding of why we need transmission.  Farrell and his co-author David Morris are either intentionally promoting this misunderstanding as a straw man, or if they simply fail to grasp the reasons behind long distance transmission’s necessity.

Their straw man is the false choice between states relying on local renewables such as PV on rooftops which supposedly would require only "minimal transmission upgrades" and far-off wind farms requiring expensive long distance transmission.  They say, for example,

[I]f Ohio’s electricity came from North Dakota wind farms — 1,000 miles away — the cost of constructing new transmission lines to carry all that power and the electricity losses during transmission could result in an electricity cost to the consumer that is about the same, or higher, than local generation with minimal transmission upgrades.

This ignores most of the benefits which would flow from new transmission lines connecting North Dakota and Ohio.  A 1,150 mile transmission line from Bismark to Cincinnati would also connect Fargo, Minneapolis, Eau Claire, Madison, Chicago, and Indianapolis running along Interstate Highway corridors (Google maps.)  It also ignores the study’s own finding that Ohio would only be able to generate 29% of the electricity it needs with local renewables. 

Incidentally, their national map shows Ohio being able to generate 33% of its electricity from local renewables, but adding up their own numbers for the renewables they identify gives 29%.  I looked closely at their numbers for only six states, so there may be other arithmetic errors as well.

The states along this hypothetical route are North Dakota, Minnesota, Wisconsin, Illinois, Indiana, and Ohio.  The study found that these states can generate the following percentages of local demand with in-state renewables:

State %Wind % Solar % Small hydro % CHP Total
North Dakota 14,000% 19% 1% 4% 14,024%
Minnesota 1,311% 24% 1% 4% 1,340%
Wisconsin 120% 22% 1% 5% 150%
Illinois 57% 17% 2% 4% 80%
Indiana 83% 18% 1% 3.6% 106%
Ohio 3% 20% 1% 5% 29%

If each of these states attempted to meet their local electricity needs with the renewables in the study, Ohio and Indiana would still need to import some electricity from other states.  Although Ohio would not need to import power from as far away as North Dakota, they would have to tap into Minnesota’s wind resources if demand were to be satisfied along this corridor.  An attempt to meet that demand with the nearest resources might look like this:

State %Wind % Solar % Small hydro % CHP Total
North Dakota 300% 2% 2% 304%
Minnesota 150% 10% 1% 2%   163%
Wisconsin 120% 22% 1% 5%   148%
Illinois 57% 17% 2% 4%  80%
Indiana 83% 18% 1% 3%   105%
Ohio 3% 20% 1% 5%  29%

You’ll note that the total above exceeds 600% because the states with renewable energy surpluses have much lower local demand.  The magnitudes of this demand are my best guess.  Keep in mind that I did not choose this corridor to make my example work; the suggestion came directly from the transmission example in the study.

The Consequences of Timing

By the study’s own methodology, both Ohio and Illinois need interstate transmission, because they cannot generate all their renewable electricity locally.  Yet, as I will demonstrate, even though North Dakota and Minnesota would be generating electricity for export, they will often need to import renewable electricity as well.  

Using the Correlation Maximization tool on Energy Timing (note: Energy Timing has been taken down, see comment here.), I generated the best portfolio of North Dakota wind and solar farms to meet the needs of Square Butte Electric Coop, an electric utility in Grand Forks, ND.  The results are shown below:

Composition of Optimal Portfolio of North Dakota Renewable Energy:  ND Optimal Portfolio

  Site Name Type Optimal Weight Capacity Factor
1) Olga 5, ND Wind 63% 21%
2) Pickert, ND Wind 19% 38%
3) Valley City, ND Wind 18% 22%


Normalized Diurnal ND wind and demand.png

This combination of three wind farms represents the best fit between electric output from existing wind farms and solar sites in Energy Timing’s database, and local demand.  Even though this is the best fit, the correlation between supply and demand is only 13.2%.  Solar sites do not appear in the optimal portfolio because they do not lead to a better fit.

As you can see from the bottom graph, wind output is strongest in the morning, when demand is relatively low, and falls off in the afternoon, as demand rises.  Hence, unless North Dakota builds far more wind farms than it needs to supply local demand (an expensive proposition which could only be justified by electricity exports), they would not have enough electrify in the afternoon and early evening, when the wind typically dies down.  This would be the situation on a typical day.  On any given day, wind power is even more variable than it is on average, leading to large and frequent swings from oversupply to undersupply.

Composition of Optimal Portfolio of Minnesota Renewable Energy:  MN Optimal Portfolio

  Site Name Type Optimal Weight Capacity Factor
1) International Falls, MN Solar 37% 17%
2) Minneapolis, MN Solar 34% 20%
3) Rochester, MN Solar 23% 19%
4) Duluth, MN Solar 6% 18%


Normalized Diurnal MN Solar and demand

In the case of Minnesota electrical demand, solar sites turn out to be a better fit than wind sites.  In reality, if Minnesota were to attempt to meet local demand with renewable energy, a mix of wind and solar sites would be used, since wind is so much less expensive than solar.  But since solar sites are the best fit for local demand, a mix of wind and solar would produce a worse match than the 24.5% correlation we see in the scenario above.

Benefits of Transmission

We can now see how both Minnesota and North Dakota would benefit with a high capacity transmission connection between the states.  In the early morning, before the sun rises, Minnesota will not be producing any domestic renewables, so it makes sense to import electricity from North Dakota, where production is far in excess of demand all morning.  Minnesota will in turn be able to supply excess solar power to North Dakota in the afternoon before the sun gets low and cuts solar output.  

In short, even though both Minnesota and North Dakota can easily produce enough local renewable electricity for their needs, the timing of that electricity causes problems of both oversupply and unmet demand.  If we build transmission connecting states regions, these problems are reduced, and less storage is needed to make up the difference.

As we increase the interregional connections, we will be able to bring in power from farther afield that better meets demand.  For instance, both these states don’t have enough local renewables in the evening, even when combined.  The worst period is just around dusk, from about 5pm to 8pm Central time, before the wind begins to pick up at night in North Dakota.  But in the sunny Mojave Desert of southern California, the sun is still up (it’s two hours earlier, Pacific Time), and large Concentrating Solar Power (CSP) plants can use relatively cheap thermal storage to continue producing power for hours after sunset.

We can also see that both North Dakota and Minnesota typically have spare production capacity in the summer months, so they could export electricity back to the Southwest during these months, when Southwest electricity demand peaks due to air conditioning loads.

As we increase the length of regional transmission networks, each state along the path gains, both as an electricity exporter and as an importer depending on the season and weather conditions.  Ohio does not need to pay for giant transmission lines from North Dakota to import which "could result in an electricity cost to the consumer that is about the same, or higher, than local generation."  North Dakota, Minnesota, Wisconsin, Illinois, and Indiana would also benefit from such a line, and all could be asked to contribute.

Costing Storage vs. Transmission

The study’s authors also invoke electricity storage to "solve" the problem of timing, saying

Some renewable fuels, like sunlight and wind, are variable.  Thus, the estimates, especially for wind, assume a significant level of storage or on-demand distributed generation.

Unfortunately, they make no attempt to account for the price tag of such storage.  They state only, 

This report does not examine storage and its implications, but in our analysis of variable renewable energy potential, we assume that sufficient storage is available.

"On-demand distributed generation" could come from natural gas or biomass.  Renewable generation relies on the availability of the natural resource, few of which can be stored.  Even incremental hydropower is typically not on-demand, because it is usually the result of adding generation to existing dams and comes with obligations to maintain flow rates.

Biomass based power is typically baseload, not on-demand.  Furthermore, the study authors explicitly rule out the large scale use of biomass for electricity because they expect the amount of biomass-based electricity to be "modest."  Even if large scale, on-demand distributed biomass based generation were available, it would only be available in those states with a large biomass resources.  See the map below.

Natural gas is an incomplete response to climate change in that it is a fossil fuel, may not even be available in the necessary quantities, and must be imported by the vast majority of states.  What is the point in pushing for reliance on locally generated renewable electricity if it only increases our dependence on imported natural gas which may not be available and produces greenhouse gas emissions? 

Given the not only daily, but seasonal mismatches between local electricity production and demand, states which are locally self-sufficient in electricity would have to invest in a month or more worth of storage.  While electric vehicles may be able to provide some daily or hourly storage, they will not be available for seasonal electricity storage, since the vehicle owners will need to drive them, and so cannot keep them fully charged for months or even days on end.

The cheapest large scale electricity storage solutions, (Pumped Hydropower, Compressed Air Energy Storage, and Molten Salt Thermal Storage) typically cost $10 to $50 per kWh of storage.  Unfortunately, all three of these options are limited in where they can be located, so restricting transmission will also restrict the use of these cheaper forms of storage.  The cheapest battery and flow battery storage technologies cost about $100 to $150 per kWh.  To be generous, I will assume that all states can build as much electricity storage as they want at $50 per kWh, or $50,000 per MWh.  I will also assume that geothermal, hydropower, combined heat and power, and efficiency gains will mean that solar and wind will need to supply only 50% of our current electricity usage. 

According to the Energy Information Administration, total electricity production in 2007 was 4,156,745 thousand MWh.  An average monthly production was thus 346,395,000 MWh, and the cost of a month’s worth of national electricity storage to meet half of a month’s demand would be $8,665 Billion under the assumptions above.  In contrast, the ILSR study states that "FERC, Congress, and environmental groups… rush to accelerate the construction of a new $100-$200 Billion interregional transmission network."  

If such a network cost $200 Billion, and reduced the need for storage by only 10%, then it would have paid for itself more than eight times.  Given less conservative (and I think more realistic) assumptions of reducing the need for storage by 50%, and a per MWh cost of storage of $75,000, a regional transmission network would pay for itself in reduced storage needs by 65 to 1.


To me, 65-to-one, or a savings of approximately $13 Trillion, seems worth the price of stringing wires.  For comparison, $700 Billion has been spent on the war in Iraq since 2001.  In other words, the ILSR study is suggesting that we pay for eighteen wars in Iraq in order to avoid building an interregional transmission network, costing about as much as we spent in Iraq in 2008. 

In fact, the price for local self-reliance on renewable energy would likely be higher.  Thirteen trillion dollars does not include the cost savings that the report’s authors tried to address: Transmission allows us to exploit less expensive renewable generation.    Furthermore, the variability of both wind and solar generation can be vastly reduced by combining the output of dispersed wind and solar farms.  Less variability reduced the need for costly spinning reserves to stabilize the grid if wind power suddenly drops or a cloud passes above a solar farm.

Not all self-styled heretics are fighting a just cause against an oppressive consensus.  To the extent that a consensus exists in favor of an improved national transmission grid, it is based on sound science and economics.  It is unfortunate that so many environmentalists are seduced by the mirage of renewable energy self-reliance.

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