EEnergy Informer
January 2016
19The International Energy Newsletter
In this issue
EEnergy Informer
January 2016
Vol. 26, No. 1
 From City Of Light: Light At The End Of Tunnel ...................................................................................................................
1
 Fossil Fuel Divestments Begin To Bite .................................................................................................................................
8
 Coal’s Terminal Decline: Slow But Inevitable ......................................................................................................................
9 ISSN: 1084-0419
 Stranded Assets? Think Anglo American .............................................................................................................................
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 Electricity’s Future Is Peer-to-Peer On A Platform…… ........................................................................................................
15
 US Solar Had Another Record Year .....................................................................................................................................
17 Subscription options/prices
on last page
 Why Are Electric Cars Such A Hard Sell? .............................................................................................................................
19 Copyright © 2016. The
 What Went Wrong At NRG?................................................................................................................................................
22 content of this newsletter is
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 Home Energy Storage Taking Off, One Way Or Another .....................................................................................................
23
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 RWE Follows E.ON’s Script ..................................................................................................................................................
this publication may be
25
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 Texas Special: Free Electricity After 9 pm ...........................................................................................................................
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 US Nuclear Capacity: Holding Steady ..................................................................................................................................
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 California Consumers To CPUC: Don’t Mess With NEM ......................................................................................................
28
 Future of Utilities: Utilities of the Future .............................................................................................................................
32
From City Of Light: Light At The End Of Tunnel
“Compared to what it could have been a miracle; compared to what it should have been a disaster”
N
egotiations to address the threat of climate change that started in 1992 under an ambitious but
ambiguous mandate by the United Nations culminated in an historic agreement in Paris on 12
December 2015. For the climate skeptics, including many a Republicans in the US Congress, it
was much ado about nothing. For those concerned about the potentially catastrophic
consequences of a changing climate, it was a good start.
For many climate scientists, it was too little, too late. For a few island nations that may literally go under
water, or those exposed to massive flooding as a result of rising sea levels, it was a hopeful sign of the
global resolve to limit anthropogenic greenhouse gas emissions overtime, albeit too late to avert disaster
for some of the low-lying nations.
In declaring a unanimous vote from 195
nations gathered in Paris, Ban Ki-moon,
UN‘s Secretary General said,
―History will remember this
day,‖ adding, ―The Paris
agreement on climate change is a
monumental success for the
planet and its people.‖
Most important, he noted,
―Markets now have the clear
signal to unleash the full force of
January 2016
Source: The Wall Street Journal, 14 Dec 2015
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human ingenuity.‖ He praised the pact as ―ambitious, credible, flexible and durable.‖
President Obama, whose recent agreement with China was instrumental in success of the Paris accord,
praised the pact. The US was credited for supporting the accord‘s ―bottom-up‖ approach, which relies on
voluntary pledges to cut emissions. This means it is not a formal ―treaty,‖ hence does not require the
approval of a hostile Republican-dominated Congress.
The news, analysis, commentary and editorials associated with the Conference of Parties (COP) in Paris
have been ever so voluminous. The URL of full text of the accord is provided at the end of article; the key
outcome of the agreement was to:



Keep temperature increases ―well below‖ 2°C, calling for efforts to cap the increase at just
1.5°C over industrial levels – it is not clear how given the pledges made to date;
Set in place a mechanism to periodically report the progress against pledges beginning as
early as 2018 – it is not clear what will happen to nations that do not deliver; and
Seek a global peak in emissions as soon as possible, and to achieve a ―balance between
anthropogenic emissions by sources and removals by sinks of greenhouse gases‖ in the
second half of the century – again, without specifics on how.
David Robinson, who is with Oxford Climate Policy and president of DR Associates, attended COP21
and sent a dispatch from Paris (page 5) summarizing his take on what was accomplished and what it
may mean for the energy sector.
Most observers were elated that 195
countries, with vastly different agendas,
agreed to a historic deal that is far more
ambitious than anyone had thought
possible. Taken at face value it signals the
beginning of the end of the fossil fuel age.
Plenty of damage already done
To those who wonder why it took 20 prior
attempts to reach what was finally agreed
in Paris after over a year of preparations
and 2 weeks of intense negotiations, it must
be said that this most probably is the most
pressing and complex issue facing the
planet (box below). Since nobody owns the
planet‘s atmosphere, virtually all nations
had to agree to take part in one form or
another for a meaningful agreement to
emerge.
Source: World Resources Institute
Stern: Climate change “the greatest market failure the world has ever seen”
Economists often talk about market failure, when inappropriate pricing, or lack thereof, leads to undesirable
outcomes. The fact that the Earth’s atmosphere is free and has been used as a dumping ground to spew unlimited
amounts of greenhouse gases and other harmful pollutants for several centuries is a classic case in point. It can be
argued that if humans had established a proper price for carbon emissions since the dawn of the Industrial
Revolution, we wouldn’t be facing the climate crisis that we are facing today.
Speaking at an event at the Paris COP summit, Sir Nicolas Stern, now a professor at the London School of
Economics (LSE), said,
January 2016
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“The global electricity sector must reach zero emissions by 2050 to give the world a serious chance of
staying below a 2 degree global average temperature increase and avoiding dangerous climate change.”
“The next 20 years are of vital importance if we are to have any serious chance of holding to 2 degrees
and that’s what we’re implementing here.”
“To stay below 2 degrees you would probably have to have close to zero emissions from the electricity
sector by mid-century. To stay below 1.5 degrees, you would probably have to bring that forward 10 or 20
years.”
Stern, a former World Bank senior economist, produced a ground breaking report on the economics of climate
change for the British government in 2006, in which he famously described climate change as the “the greatest
market failure the world has ever seen.”
Aside from its impact on climate, air pollution associated with burning of fossil fuels kills 4,000 people a day in
China, far worse for India, which has 13 of the 20 most polluted cities in the world. 
The poor countries who are often the first to suffer from the consequences of a warming climate, are also
the least able to mitigate against it – making the issue of financial and technical assistance from the rich to
the poor so critical to any meaningful agreement.
As if these problems were not bad enough, there is little guarantee that signatories to Paris agreement can
or will be able to deliver what was promised over a long period of time, stretching to mid-century and
beyond.
In the case of the US, the challenge
surfaced even before negotiations started in
Paris (Box on page 4). Senator James
Inhofe, a Republican climate denier from
Oklahoma, for example, characterized the
Paris talks as ―full of hot air‖ and vowed to
block the White House from using
taxpayer funds to help carry out the accord
even before an agreement was reached.
Warning Obama of difficulties ahead,
Inhofe said,
―The news remains the same.
This agreement is no more binding
than any other ‗agreement‘ from
any Conference of the Parties over
Source: World Resources Institute
the last 21 years. Senate leadership
has already been outspoken in its
positions that the US is not legally bound to any agreement setting emissions targets or any
financial commitment to it without approval by Congress.‖
US Secretary of State John Kerry, an ardent supporter of the Paris accord disagreed, predicting that the
agreement would survive Republican opposition. Taking a stab at Republican climate deniers, he called
on Americans to elect as their next president a candidate who would support strong action on climate
change. Using undiplomatic language, he said,
―I regret to say, Sen. Inhofe is just wrong,‖ adding, ―I just personally do not believe that any
person who doesn‘t understand this science and isn‘t prepared to do for the next generations what
we did here today, and follow through on it, cannot and will not be elected president of the US.
It‘s that simple.‖
Regrettably, it is not that simple. It is called politics, and it is anything but simple.
January 2016
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Republican Congress humiliates Obama with symbolic vote, which the president promptly vetoes
On 17 November 2015, prior to the Paris Summit, the Republican controlled US Senate passed a pair of resolutions
that would overturn recent Environmental Protection Agency (EPA) rules to reduce US power plant emissions,
rules that form the core of the Obama administration’s Clean Power Plan (CPP) – a critical component of Obama’s
pledge in Paris.
The two resolutions were passed under a little-used provision known as the Congressional Review Act, which
allows Congress to overturn new regulations within 60 days of their publication in the Federal Register. The act
allows passage with a simple majority vote and bypasses usual Senate rules on filibusters.
Referring to CPP, Senate Majority Leader Mitch McConnell, a Republican from Kentucky, said:
“These regulations make it clearer than ever that the President and his Administration have gone too far,
and that Congress should act to stop this regulatory assault. Here’s what is lost in this Administration’s
crusade for ideological purity: the livelihoods of our coal miners and their families. Folks who haven’t
done anything to deserve a ‘war’ being declared upon them.”
The resolutions passed 52-46, largely along party lines; the House of Representatives also passed the resolutions.
Not surprisingly, the US coal lobby, hailed the Congressional move. Mike Duncan, CEO of the American Coalition
for Clean Coal Electricity – an oxymoron in view of environmentalists – said:
“Leader McConnell and Senator *Shelley Moore+ Capito’s stout defense of the everyday Kentuckians,
West Virginians and those that depend on affordable and reliable energy nationwide cannot be lauded
enough. We look forward to similar House efforts to provide a unified voice in opposition of this illegal
rulemaking.”
In reality, the resolutions were purely symbolic since the climate skeptics in US Congress do not have enough votes
to overturn a presidential veto. The symbolic vote, however, was intended to humiliate the President and send a
message to other countries that Obama does not have the support of Congress in striking a climate deal. As
expected, on 18 Dec 2015, President Obama vetoed the resolutions. 
Then there is the sheer technical immensity of the challenge. According to climate scientists, to
accomplish what is needed, man-made
GHG emissions must be quickly and
radically reduced, eventually reaching
carbon neutrality – i.e., a level that is
in balance with the Earth‘s natural
ability to absorb the emissions. This,
depending on who you ask, must be
achieved by mid-century if not sooner.
Then there are issues of how much global
warming is acceptable or tolerable and by
when – given that so much GHGs has
already been spewed into the atmosphere
and the sheer momentum in the global
energy system.
In short, the use of fossil fuels, the stuff
that allows mature economies to enjoy
Source: World Resources Institute
current high standards of living, must
be restricted, and eventually replaced
by other means from other sources – presumably renewable and sustainable sources of energy. That
means replacing the entire global energy delivery infrastructure – an enormous investment making the
Marshall Plan to rebuild Europe after WW2 or the man‘s landing on the moon a picnic by comparison.
January 2016
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David Robinson’s Dispatch From Paris
The Paris Agreement represents a monumental and successful effort to avoid a complete breakdown of climate
change negotiations. At the same time, we cannot assume that nation states will necessarily comply with their
commitments, or deliver even more ambitious ones. In Paris we witnessed the growing significance of non-state
actors who will increasingly provide leadership on climate change. Few highlights:



A victory over process: The process of negotiations was so complex and the interests so diverse that
the prospects of achieving any meaningful consensus were low. In this sense, COP21 was a major
achievement with 185 countries accounting for over 95% of global GHG emissions submitting
Intended Nationally Determined Contributions (INDCs);
COP winners and losers: The happiest were the UN and the French hosts who above all were
desperate to avoid a repeat of what happened in Copenhagen in 2009. India and China fared OK
since they managed a degree of differentiation compared to the developed countries. US managed
to craft a language that avoids formal approval from the US Congress – a non-starter given the
current political climate. The biggest losers were those most vulnerable to the consequences of
climate change, notably the small island states; and
Not a victory over climate change: If met, the combined INDCs at best offer a 50% probability of an
increase of about 3ºC in the average world temperature this century; significantly above the agreed
limit of 2ºC that made the headlines. Far more will be needed to stay below the 2 degree rise.
Imagine a bank offering a mortgage without demanding a down payment, a 5-year waiver on interest
payments, very limited interest payments in years 5-15 followed by huge payments after that.
Furthermore, since the mitigation targets in the INDCs are not legally binding, this is akin to the bank
having no collateral. If a major emitter, say the US or China, were to fail to meet their commitments,
the whole agreement could unravel.
What can be said about the implications of COP21?



First, there is absolutely no assurance of victory over climate change. This may be the only good
news for the fossil fuel lobby, who will argue that the Paris Agreement is doomed to fail, pressing for
a continuation of the status quo;
Second, for more ambitious outcomes don’t look at governments who are signatories to the
Agreement but rather “sub-national” actors such as regions, states, provinces, cities and key players
in the private sector, many of whom are pressing for more efficient carbon prices; and
Third, the urgency to accelerate research and innovation to develop low-cost, low-carbon sources of
energy in sufficient quantities in the near to medium term. This is especially critical for the largest
developing economies, notably India and China, which will otherwise remain reliant on plentiful and
cheap fossil fuels, especially coal – a page from the coal lobby’s PR script.
Examples of non-national actors, who gained prominence in Paris, include:



ICLEI and C40 (http://c40.org/ending-climate-change-begins-in-the-city) representing hundreds of
cities around the world who made commitments to act even before agreement was reached;
Another significant development was Under2MOU – referring to a Memorandum of Understanding
(MOU) to keep temperatures below 2 degrees, signed by over 130 states, provinces and regions
around the world notably California, Quebec and Ontario, who together are creating an effective
North American carbon trading market (http://under2mou.org); and
Finally, a number of private companies and financial institutions pledging to reduce their carbon
footprint and/or “decarbonize” their investment portfolios. A number of millionaires and billionaire
including Bill Gates, Elon Musk, Michael Bloomberg and Jack Ma consider climate change not only a
major threat to humanity but an enormous business opportunity. 
The issue of who should pay to assist the poorer countries to convert to cleaner fuels – a chronic
showstopper at prior COP summits – is not entirely clear. During the negotiations, Ajay Mathur, an
Indian negotiator insisted,
January 2016
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―We want developed countries to provide resources that can help mobilize capital. The amounts
that have been pledged have not been enough.‖
Joking, or possibly showing his naiveté, he added,
―Finance is the easiest thing. All you have to do is write a check.‖
Republicans in the US Congress, however, do not see writing checks as easy as claimed. For some time,
the US federal government has been routinely running out of budget, with temporary infusions of cash to
keep it from shutting down.
Following the symbolic vote (box on page 4), Senate Republicans have vowed to block any US funding
for climate change, significantly weakening President Obama‘s options. John Barrasso, a republican
Senator from coal-producing state of Wyoming was quoted in Politico saying,
―We want to make sure that any of these countries that think they‘re going to have a check to
cash because of an agreement that the president may make in Paris – that they shouldn‘t cash the
check just yet.‖
Non-national players key to COP’s success
California State Senator Kevin de Leon, the architect of 50% renewable target, was
treated as celebrity in Paris and welcomed with the Energy Award of the Year, here
with newsletter’s editor at PANC’s San Francisco award luncheon in Dec 2015
The Paris gathering offered a
platform for an assortment of
politicians and heads of states to
make grand speeches (Box on page
7). Dilma Rousseff, the embattled
President of Brazil who is facing
potential impeachment proceedings
at home, for example, had an
opportunity to speak, as did former
US Vice President Al Gore (box
page 8).
Libya and Syria did not seem
overly concerned about climate
change – understandable given the
more pressing issues they face.
Saudi Arabia, the world‘s biggest
oil exporter, did not seem
enthusiastic about the eventual phase
out of fossil fuels, its main source of
revenues – also understandable for a country whose sole existence is defined by pumping vast quantities
of oil almost regardless of the level of demand, prices or emissions.
India, emerging as a major emitter of GHGs, had to be dragged along at times. China behaved much
better, showing that it is indeed emerging as a global powerhouse and needs to take its responsibilities
more seriously.
In case of China, it is not clear how or who will do the bookkeeping on emissions. Data coming out of
China is not always reliable. This makes it difficult to know if the country has delivered on its
commitments. The same problem afflicts a number of other developing economies where record keeping
is poor or non-existent.
January 2016
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Brown in Paris: California’s governor prods others to join the path to sustainability
California passed a law in 2006 to reduce its state-wide emissions to 1990 levels by 2020, and 85% below by 2050,
with intermediate milestones in between. It is the only state in the US with such an ambitious, binding and
unilateral law.
th
Even though California is the most populous state in the US and would be the world’s 8 largest economy if it were
a nation, the law is largely symbolic. It was, and is, intended to show California’s resolve, to demonstrate that it
can in fact be done without harming the state’s economy, and to encourage other states – perhaps a reluctant US
Congress – to follow suit.
California’s current Governor, Jerry Brown, misses no opportunity to persuade others to join the effort. Referring
to the Golden State’s climate commitments at the Paris summit, he said:
“We are building a global force and momentum to decarbonize our economy that will slowly but surely
erode the denial, skepticism and opposition.”
According to the governor’s office, other countries that have already joined the effort in one form or another
represent more than 614 million people and $18.6 trillion in GDP, equivalent to nearly a quarter of the global
economy.
Prior to COP21 summit in Paris, Brown and US Ambassador to France, Jane Hartley, welcomed 15 new signatories
to the Under 2 MOU climate agreement – referring to a Memorandum of Understanding (MOU) to keep global
temperatures from rising more than 2 degrees C. With the latest signatories—which include South Australia, the
first Australian state to sign on, and Rhode Island, the 9th American state to sign—80 jurisdictions representing 22
countries on 6 continents have thus far endorsed the MOU.
It is not entirely clear how effective or binding the MOU is, but as far as Governor Brown is concerned, it is the sort
of bottom-up, voluntary, unilateral effort that needs to take place to make a global impact in time.
Governor Brown, like President Obama, has long given up on any support from the Republican dominated US
Congress, especially given the current political campaigns leading to US presidential elections in 2016. 
What does COP21 mean once the dust settles after the holidays? Only time will tell.
As this editor sees it, regardless of what happens at the governmental or political levels, the issue of
climate change has now been
elevated to a new level of
China & US: Main culprits
significance and urgency at the
China and US account for roughly 40% of global emissions; recently each announced
intended nationally determined contributions (INDCs) to mitigate their respective
corporate board rooms. Fossil
greenhouse gas (GHG) emissions
fuel companies are not only
acutely aware of the longerterm challenges ahead, but are
beginning to change course,
albeit slowly and grudgingly.
The same applies to energy
intensive industries.
More important are pressures
exerted on the financial,
insurance and investment
communities to consider
carbon as an added risk that
must be an integral part of the
calculus of longer-term
January 2016
Source: EIA, International Energy Statistics
http://www.eia.gov/todayinenergy/detail.cfm?id=23812.
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Al Gore: Another sub-prime investment debacle?
Former US Vice President Al Gore also had to be heard at the
Paris summit. In characteristic style, he warned that trillions of
dollars of investments in oil, coal and gas risked becoming
stranded assets similar to the infamous ‘subprime’ investment
scam which led to the global financial crisis in 2008. He said,
“The evidence for climate change was just as clear as
it is for gravity and the increasing incidence of climatic
disasters had made the television news like a nature
hike through the Book of Revelations.”
Referring to a Goldman Sachs report released the prior week,
global investment in solar PV and onshore wind for the coming
5 years was predicted to exceed investment in the gas boom
during the last 5 years to 2015. Gore highlighted the speed of
the renewables expansion by comparing previous forecasts
with actual installations.
Forecasts in 2002 for an installation of 30 GW of wind power by
2010 were exceeded by a factor of 12. Forecasts for 1 GW of
solar power by 2010 was exceeded by a factor of 17 and then
last year by a factor 48. 
investment strategy. This, as further
described in the following article, may be
the most important outcome of the Paris
summit.
Many economists have long argued that
if the main culprit is carbon, a carbon
tax is the most efficient and effective
way to curb its emissions. Instead, the
Paris accord puts in place a rather
cumbersome set of mechanisms for
governments to record and report their
emissions over time against pledges
made. And the target of 2 or 1.5 degree
limit in global temperature rise is rather
arbitrary – and most likely unrealistic.
But as everyone knows, perfect is the
mortal enemy of good enough. As
Guardian‘s George Monbiot elegantly
put it, compared to what it could have
been, the Paris accord is a miracle;
compared to what it should have been,
it‘s a disaster.
Slowly but surely, however, fossil fuels have to begin to fess up for the carbon content of their energy,
starting with coal as described in article on page 9.
To those who say UN‘s efforts to curb GHG emissions have been fruitless or worse, this editor‘s view is
that it does not much matter. The train is already leaving the station – with or without the Paris
Agreement. 
Washingtonpost.com
Fossil Fuel Divestments Begin To Bite
Paris accord may be the beginning of the end for fossil fuels, starting with coal
E
ven before the ink had dried on the Paris agreement, the environmental activists were celebrating
record fossil fuel divestment milestones. By one account, over 500 institutions with over $3.4
trillion of assets have already pledged to divest their funds of fossil fuels – whatever that means –
according to Bill McKibben’s organization, 350.org – referring to 350 parts per million of GHGs
in the atmosphere – and Divest-Invest, another environmental advocacy group.
Bill McKibben, Pascal Canfin, managers of Rockefeller Brothers Fund, Carbon Tracker, and other
like-minded environmental activists were celebrating – while many scientist were disappointed that the
agreement in Paris did not go nearly far enough.
While $3.4 trillion is a negligible sum relative to the total global fossil fuel assets, it has grown
substantially over a relatively short period of time. In September 2014, 181 institutions representing $50
billion in assets had made a divestment commitment. By September 2015, the number had jumped to 400
January 2016
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institutions representing $2.6 trillion.
One can only guess how much by end of
2016.
Coal’s terminal decline to be followed by other fossil fuels?
Year-on-year change in global coal consumption on first half of 2015, Mtce
It must be noted that some of the
commitments are only partial
divestments, hence the $3.4 trillion
represents the total amount of assets
represented by pledging institutions, not
the amount of money divested of fossil
fuels – which is difficult to track due to
restrictions on disclosures as well as lack
of a clear definition of what it ultimately
means to divest of fossil fuels.
Source: Coal’s terminal decline, Greenpeace, Nov 2015
Nevertheless, by all accounts, the Paris
Climate Summit may be seen as the
proverbial writing on the wall, gradually shifting capital away from fossil fuels and towards clean and
renewable energy resources. At the same time, Bill Gates and a group of like-minded investors
announced the launch of a multi-billion dollar private sector coalition to accelerate clean energy
innovation.
The institutions that have joined the fossil fuel divestment campaign hope that their actions, symbolic as
they may be, can push governments to follow suit by shifting public finance from fossil fuels including
ending fossil fuel subsidies. 
Coal’s Terminal Decline: Slow But Inevitable
Paris accord puts increased pressure on carbon-heavy coal
E
ven before the Paris accord, global coal consumption appeared to be heading for gradual decline.
By all indications, coal‘s fortunes have deteriorated significantly. Few countries, including poor
and developing ones, it would seem, would wish to invest in a dirty fuel that has to be phased out
sooner, or later – only if they could afford a cleaner alternative.
Greenpeace, in a
November 2015
report, titled
Coal’s Terminal
Decline,
chronicles how
coal has fallen out
of favor despite
the fact that it is
plentiful and
cheap – that is if
one ignores its
significant
environmental
externalities and
carbon costs.
China also shunning coal
Source: Coal’s terminal decline, Greenpeace, Nov 2015
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Greenpeace claims that global coal consumption has fallen 2.3% – possibly as much as 4.6% within JanSept 2015, the largest ever fall in demand. While bad news for coal miners, it is the best news the
environmental community has had in decades.
The report chronicles coal‘s decline in key global markets. In the US, over 200 coal-fired plants have
been retired or are scheduled for retirement and coal mines have been shut down as a result of a powerful
grassroots movement, unfavorable economics and increased environmental regulation. Coal‘s share of US
electricity generation will fall to 36% this year from 50% a decade ago, and US coal production has fallen
to the lowest level in 3 decades. As a result, dozens of US coal mining companies have gone into
bankruptcy, including once major producers such as Alpha Natural Resources, James River Coal and
Patriot Coal Corporation.
In Europe, the UK has taken the lead by committing to phasing out coal-fired power plants within the
next 10-15 years. Since 2013, 17 UK coal-fired power plants with 5,400 MW of capacity have closed as
coal use fell by more than 10% in the first half of 2015. A further 12 units with a total capacity of 6,400
MW have been earmarked for closure in 2016. Almost half of UK‘s coal-fired capacity at the beginning
of 2013 will be closed by 2016.
Germany experienced a 0.9% decline in thermal fuel generation in the year to date, despite a 2.6%
increase in electricity consumption – a bit of a rebound from the rapid decline in 2014. The rapid increase
in renewables – a 29% year-on –year rise excluding large hydro production – is eating into coal and gas‘
market share.
China: Moving away from coal, slowly but surely
In the European Union as a whole,
coal consumption has been falling
since mid-2012, after a short-lived rebound following the 2009 economic
shock. This year‘s consumption shows
no sign of rebounding after a record
fall in 2014. The decline of coal is
being accelerated by the runaway
success of the renewables sector in
Europe, according to the report.
In other countries, energy efficiency
investments have led to the lowering of
overall demand for coal-powered
electricity. In Japan, for example,
electricity demand is down 2.5% yearon-year in 2015, leading to a 5.2% fall
in thermal electricity.
These 4 markets - the US, the EU,
China and Japan - make up almost
three quarters of global coal demand.
So even though coal use is still
growing in one key market - India,
where coal use still grew but at a
significantly lower rate - this is
nowhere enough to offset the falls
elsewhere. Even this growth could be
threatened by India‘s ambitious
renewable energy plans – to build 100
January 2016
Source: Coal’s terminal decline, Greenpeace, Nov 2015
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GW of solar and wind.
But it is not just the developed economies who are shunning coal in droves. Even China, still considered a
developing economy, appears to have had enough as suggested by what is illustrated on graph on bottom
of page 9, left.
Greenpeace believes that the recent trends in China are only the beginning of a longer-term trend. China,
by all indications, is gradually diversifying its electricity generation away from coal (graphs on page 10).
In Europe, coal has been in slow decline for some time (graph on bottom of page 9, right). With the Paris
accord, the trend will only accelerate.
In a major speech setting out the future direction of the UK‘s energy policy in mid-November 2015,
Energy and Climate Change Secretary Amber Rudd announced plans to restrict the use of the
country‘s coal-fired power stations by 2023 and close all by 2025. She said,
―Frankly, it cannot be satisfactory for an advanced economy like the UK to be relying on
polluting, carbon intensive 50-year-old coal-fired power stations,‖ adding, ―We need to build a
new energy infrastructure, fit for the 21st century.‖
Rudd said that even with huge growth in renewables, 30% of the UK‘s electricity still comes from coal –
a higher proportion in 2014 than in 1999.
―One of the greatest and most cost-effective contributions we can make to emission reductions in
electricity is by replacing coal-fired power stations with gas.‖ Adding, ―In the next 10 years, it‘s
imperative that we get new gas-fired power stations built.‖
The UK currently imports about half of its gas needs, but some estimates suggest that imports could
increase to 75% by 2030. Rudd‘s plan, however, is to encourage investment in shale gas exploration so
that new sources of ―homeEU: Walking away from coal
grown supply‖ are added in
the future.
Shortly after the
announcement that the UK
is planning to phase out its
coal-fired plants by 2025,
Alberta‘s Premier Rachel
Notley announced on 22
Nov 2015 a Climate
Leadership Plan to
accelerate the transition
from coal to renewable
electricity sources, put a
price on carbon
emissions, and set
emissions limits on the
Alberta oil sands.
Source: Coal’s terminal decline, Greenpeace, Nov 2015
―This is the day we step up at long last to one of the world‘s biggest problems—the pollution that
is causing climate change. This is the day we stop denying there is an issue. And this is the day
we do our part,‖ Notley said.
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Alberta‘s coal phase out is based on strategy proposed by the Climate Change Advisory Panel, led
by Dr. Andrew Leach, which has set 3 main objectives: maintaining grid‘s reliability, providing
reasonable price stability for consumers, and ensuring that capital is not unnecessarily stranded –
very sensible.
The plan calls for coal to be phased out by 2030, with renewable energy and natural gas generation taking
its place. Two-thirds of coal-generated electricity is to be replaced by renewable sources—primarily wind
power—with natural gas providing baseload power. As envisioned, renewable energy sources would
provide up to 30% of Alberta‘s electricity by 2030.
Coal’s decline will accelerate nearly everywhere, according to Greenpeace
India, South Africa,
Russia, Korea,
Australia – coal-reliant
countries – have made
pledges in Paris that
should lead to further
drops in demand for coal
over time. Overall,
Greenpeace projects a
2.3 to 4.6% global drop
in demand in 2015 – that
is before the Paris
summit.
Naturally, such
developments leave the
World Coal Association
(WCA) – the industry‘s
global lobby group – in
an unenviable position,
only made worse by the
Paris agreement. The
WCA and other coal
Source: Coal’s terminal decline, Greenpeace, Nov 2015
lobbies around the world
now face the impossible
challenge of persuading governments to continue burning coal while addressing global warming.
For some time, the global coal industry has touted Carbon Capture and Storage (CCS) as the silver
bullet that would make coal acceptable. But CCS technology has not delivered to date, certainly not on a
commercial scale that would make a difference. In 2014, the WCA was quick to celebrate when the $1
billion Boundary Dam CCS plant in Canada was commissioned, but was silent when it was
subsequently revealed that the plant was hopelessly unreliable.
The only other major CCS coal power station is the Kemper in the US which, at $6.4 billion, has cost
triple its original estimate and may yet bankrupt its sponsor – another story the coal lobby would rather
not talk about.
With the commercial viability of CCS in doubt, the coal lobby now talks about ‗ high efficiency’ coal
plants. It is not a message that has been getting much traction. That explains why the WCA has gone
through 6 successive CEOs since 2010; its 7th CEO is probably not having much fun these days
either.
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Stranded Assets? Think AngloAmerican
The plight of once mighty global powerhouse shows the challenges ahead
F
or some time, environmental activists have been warning the fossil fuel industry about the risk of
stranded assets should governments decide on gradual phasing out of fossil fuels and/or imposing
a price on carbon emissions. It was a scary but distant scenario. The Paris accord has made that
future more of a reality, and certainly
closer than many had expected.
Fossil fuels: Beware of the danger zone
In a report released in Nov 2015 to
coincide with the COP21 in Paris,
Carbon Tracker claimed that the
―low carbon express is coming,‖
warning the fossil fuel industry to get
out of the way. The report portrays a
danger zone, the amount of carbon
that can be emitted before exceeding
the 450 parts per million
concentration in the atmosphere,
which is tied to the 2 degree
temperature rise, now codified in
Paris.
According to Carbon Tracker, no new
coal mines will be needed; natural gas
will play a role as a bridge fuel while
Source: The $2 trillion stranded asset danger zone, Carbon Tracker, Nov 2015
oil will face a ―cultural shock‖
entering an ex-growth period as
demand for the stuff eventually declines with the gradual conversion of transportation sector to cleaner
fuels.
Coal not needed
Denmark, for example, is on track to
phase out fossil fuels from its entire
economy by 2050. Norway, which is
nearly 100 hydro-based in its electric
sector, is trying to convert its transport
sector towards cleaner fuels, mostly
electric, with generous incentives.
Reportedly one in 5 new cars sold in
Norway today are electric, the highest in
the world.
Natural gas will also be un-needed,
according to Carbon Tracker‘s analysis,
as illustrated in graph on page 14.
Source: The $2 trillion stranded asset danger zone, Carbon Tracker, Nov 2015
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The same fate eventually applies to oil,
leaving a lot of companies owning lots of
carbon-rich resources as stranded assets,
fuels that will become un-burnable due
to the carbon budget established by the
Paris accord.
13
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Who is likely to be stuck with a lot of the
stuff? You guessed it: many of today‘s
giant oil and gas companies, some
private, others state-owned. By Carbon
Tracker‘s reckoning, Mexico‘s Pemex
will be on top, followed by Shell,
ExxonMobil, Rosneft and Chevron
(table below).
Natural gas: Also not needed
The pain will be widely spread among
the major global fossil producing
economies. It is not a pretty picture.
Unreal? Fantastic? Perhaps. But there is
evidence of pain already afflicting a
number of major coal and mining giants.
Some oil companies are also suffering,
not yet due to carbon restrictions but
unprecedented low oil prices.
In December 2015, AngloAmerican, a
major mining company, spooked not
Source: The $2 trillion stranded asset danger zone, Carbon Tracker, Nov 2015
only its own employees but its peers by
announcing a grim financial picture of
depressed commodity prices with little expectation of a turnaround.
Who will be stuck with stranded assets?
Ranking of companies by unneeded capex under 450 Scenario 2015–25
($bn)
The company said it was restructuring,
downsizing, and selling assets in a
depressed market, including South
African and Australian coal mines. The
company‘s stock plunged to a 5-year low,
its market capitalization is down 35% for
the month, 90% in 5 years.
Glencore, the No. 1 mining conglomerate
in the world, has also experienced an 85%
decline in market capitalization since
2010. Peabody Energy, another big coal
company has shed 98% of its market value
in 5 years.
Source: The $2 trillion stranded asset danger zone, Carbon Tracker, Nov
2015
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Other global coal titans, including Rio
Tinto, Vale, Whitehaven are facing
similar challenges: low demand for coal
and depressed prices amidst a global
supply glut and falling demand for
commodities. Falling demand in China is
mostly blamed for much of the pain. The
Paris agreement to reduce carbon
emissions will make life even more
painful in the years to come. 
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Electricity’s Future Is Peer-to-Peer And On A Platform
Consumers will have more options to trade electricity using open platforms: think eBay
P
eople have been trading with one another since the dawn of civilization, possibly earlier. One
person‘s extra stuff is another person‘s necessity, hence the need to trade, making both better off.
Traditionally, the exchange took place in a market place or public forum, where goods could be
physically examined and exchanged. Modern day flea markets are still popular the world over.
With the rise of electronic platforms such as eBay, Airbnb and alike, there is no longer a need for a
physical markets to exchange the goods. And companies that offer these platforms are in a position to
learn a lot about what customers are buying, how much they are paying for it, while collecting other
useful information. Amazon, for example, offers merchandise based on customers‘ historical buying
habits – vastly improving its marketing success by being selective about what it offers.
There is no fundamental obstacle why the same cannot be done with electrons – provided somebody
offers a suitable platform for trade, and using the existing wires that already connects the trading parties.
In fact, it can be argued that this should be easier since virtually everyone is already hard-wired to a
common distribution network, which means that the physical transaction, delivery of electrons, can take
place easily and instantly once trade takes place on the platform.
Future is peer-to-peer if someone offers a suitable platform for trading
Customers can trace who is supplying them in real time, and from what resources
Source: Open Utility
Of course, few technical and regulatory issues must first be resolved, and then bingo: the dawn of peerto-peer electricity trading among consumers using a common platform. Three developments make this
concept timely and attractive:



First, it is getting cheaper, faster and easier to set up electronic platforms, which in turn
allows vast numbers of customers to trade in variety of ways;
Second, the rapid take up of distributed generation and storage is leading to the bifurcation
of customers into haves and have nots – meaning that excess distributed generation on one
customer‘s roof could be feeding the battery or electric vehicle in the neighbor‘s garage; and
Third, the expected proliferation of more complex tariffs – including time of use (TOU) –
along with home energy management (HEM) and other automated systems that can be preprogrammed to function on their own or possibly managed by an intelligent agent on behalf
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of the customers. In places such as California, virtually all customers now have smart meters
– real-time monitoring of consumption data has already been cracked.
The rapid rise of solar rooftop PVs, the most common form of distributed generation, has resulted in fears
about loss of revenues to incumbent utilities while shifting the costs of maintaining the distribution
network to non-solar customers, topics extensively covered in this newsletter.
Many jurisdictions have reduced how much consumers get paid for the excess generation they feed into
the grid from the solar PVs:





In Australia, for example, virtually all states have phased out their once lucrative feed-intariffs (FiTs), now mostly paying the equivalent of wholesale price of electricity for any
excess generation;
In New Zealand, where retailing is competitive, retailers are free to decide how much they
pay for any excess generation fed into the network, some paying virtually none, which
explains why there are a mere 3,000 solar customers in the country;
In sunny Portugal, there are limits to how much solar PV customers can install on their roofs
before extra requirements kick in – virtually limiting most customers to 1.5 kV systems and
encouraging customers to focus mainly on self-generation;
In equally sunny Spain, a virtual sun-tax applies to solar customers that feed excess
generation into the network, discouraging such investments and frustrating would be solar
customers;
In the US, the debate has shifted to imposing and/or raising fixed components to residential
tariffs, forcing solar customers to pay more in fixed charges to partially compensate for the
loss of volumetric sales (article on page 28).
These restrictions frequently frustrate solar customers. One way to fight back is to store the extra
generation on site for use when the sun is not shining – making electric vehicles (EVs) and storage more
attractive. Another way to fight back may be to trade the extra juice with a neighbor or neighbors whose
load profile is negatively correlated. This may be among the reasons peer-to-peer trading may take off,
especially if net energy metering (NEM) laws are repealed or limits are placed on export of excess solar
generation – as seems inevitable.
In their book Transactive Energy, Edward Cazalet and Steve Barrager broadly discuss how peer-topeer transactions can take place, as reported in the Dec 2014 issue of this newsletter. More recently, a
number of entrepreneurs and startups are beginning to create platforms for aggregating or balancing
loads, for demand response (DR) programs and for allowing trading among parties in a variety of ways.
It is fair to say that these efforts are in their infancy – or put another way – expect a lot more in not too
distant future.
An example of what is likely to come may be Open Utility, a UK-based startup offering a peer-to-peer
electricity platform.
As vaguely described on their website, perhaps intentionally – who wants to train a competitor by spelling
out the good ideas – Open Utility has formed a partnership with Good Energy, a UK electricity retailer,
offering customers the option to select among a number of competing renewable generators. Using a
website, called Piclo, customers can select from among the participating generators in order of
preference. The customer can subsequently monitor to see which generator is meeting the load at a given
time (visual on page 15). Likewise, the generators can monitor which customers are using how much and
from whom, and tailor their offerings in subsequent periods accordingly. Generators can, for example,
offer discounts to certain customers for certain periods depending on supply, demand and prevailing
prices. Clever.
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Customer power
An example of customer’s daily load profile and generation mix
Source: Open Utility
Customers typically select generators in such a way to match their load profiles (visual above). This
minimizes reliance on Good Energy, the retailer, who has to make up any discrepancies by buying the
shortfall or selling the surplus electricity in real time.
Customers can monitor who and from where their power is coming from. Generators sign a fixed power
purchase agreement (PPA) with Good Energy for balancing service, and gain experience by collecting
data on customers and their purchasing and bidding behavior.
Among the lessons learned is that most customers prefer to buy from local renewable generators – which
may add value to the local distribution network as customers rely on locally produced renewable energy.
There may be additional financial incentives for both generators and consumers to participate in such
open trading platforms. Open Utility says it has 100,000 customers who see sufficient value in the offered
service.
According to the company‘s CEO, James Johnston, the platform has the potential to grow into a vibrant,
open marketplace where buyers and sellers meet and trade – like the eBay, or Airbnb for electricity. How
interesting. 
Open Utility
US Solar Had Another Record Year
If current trends continue, solar will dwarf all new forms of generation, eventually
ver 3 GW of solar capacity was installed in the US in the 3rd quarter of 2015, much of it utilityscale solar PVs, according to GTM Research. Not impressed? That is the equivalent of adding 3
nuclear reactors in a quarter in the US alone – and everyone knows how long it takes to build 3
GW of nuclear capacity, and how much it costs, a virtual fortune. By the end of 2016,
cumulative PV installations in the US will nearly double to 41 GW. Not impressed? As a point of
reference, total installed nuclear capacity in the US is around 100 GW, a number that has barely increased
in decades (article on page 28).
O
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Utility-scale PV installations made up 42% of
the US total followed by 41% in residential
sector. The latter, according to GTM, hit
another new quarterly record growing at 69%
year-over year.
Put them or the roof, where ever you can
With falling costs and improved performance,
solar PVs are now routinely included in design
of many commercial buildings, warehouses,
schools, parking garages and alike (photo on
right). In the last 4 years, solar power
generation surged 183% among America's top
companies, according to the Solar Energy
Industries Association (SEIA), a pro-solar
trade group.
With 142 MW of installed solar PVs at 348
locations, Wal-Mart, the world‘s largest
retailer, has been on top of the rankings for 4 consecutive years followed by Apple, Macy's, Walgreens,
Target and IKEA. Combined, America's top corporate solar users have installed 1,686 systems totaling
907 MW of capacity – nearly as much as a 1 GW nuclear reactor.
The Energy
Information
Administration
(EIA) reports on solar
installations on a
state-by-state level in
its Electric Power
Monthly. EIA
Administrator Adam
Sieminski stated the
obvious when he said,
"Generation from
roof-top PV systems
has become an
increasingly
important part of total
solar generation in the
US.‖
US solar PV growing at a rapid clip
EIA estimates total US solar generation was 351 MWhrs in September 2015; 33% from small-scale solar
PVs, 67% from utility-scale. Overall US solar generation accounted for roughly 1% of the total
generation in September 2015 – a small number but one that has been growing at a rapid pace.
Almost 40% of the distributed PV capacity in the US is located in California, with the next 9 states
accounting for another 44% (graph on page 19). California‘s leadership in distributed solar capacity is
driven by a combination of factors, including high retail electricity prices, a large population, high solar
insolation, and generous net energy metering (NEM) incentives that offers a credit for all excess
generation at full retail tariff – a popular scheme as described in article on page 28.
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Other top solar states share
some but not all of these
factors. New Jersey,
Massachusetts, and New
York are among the top
distributed solar states
because of significant state
solar PV policies and
incentives despite having
average to below-average
solar resources. Other
states, like Arizona, have
incentive programs and
strong solar resources. Hawaii, despite having a small population, has strong solar resources and high
electricity prices, which make rooftop solar PV systems economically attractive. 
Why Are Electric Cars Such A Hard Sell?
Because car dealers don’t like to sell EVs, Teslas exempted
W
alking in downtown Palo Alto, the home of Tesla, you see so many you think they must be
giving them away. And there is so much wealth in certain super zip codes – extra affluent
communities – that the price does not much matter. Outside the super zip codes and
California, however, the number of electric vehicles (EVs), Tesla or otherwise, falls off
precipitously.
As reported in a 24 November 2015
article in New York Times, there are a
mere 330,000 EVs currently in use in the
US, roughly half are in California.
Seven years ago, President Obama
called for 1 million EVs on the US roads
by end of 2015. California Gov. Jerry
Brown has set a target of 1 million plugin vehicles in California by 2020 and 1.5
million by 2025.
So why are there so few of them – the NY
Times asked? The answer, surprise, may
be that the car dealers – the sleazy guys
(most are still guys, and nearly all are
sleazy if not worse) who interface with
Source: www.tesla.com
customers in the US would rather sell you
other cars, say SUVs with much higher
profit margins. According to NY Times, ―They (car dealers) are showing little enthusiasm for putting
consumers into electric cars.‖ Full stop.
―Some buyers even tell stories of dealers talking them into gas cars and of ill-informed
salespeople uncertain how far the (electric) cars can go on a charge or pushing oil changes that
the cars do not need. And industry officials themselves acknowledge a hesitancy to sell cars that
may not suit drivers‘ needs.‖
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Speaking to a gathering of car dealers, Forrest McConnell, the former chairman of National
Automobile Dealers Association, a US trade group, said, ―… tougher fuel-economy regulations could
mean pushing cars on consumers that were about as enticing as broccoli, when they really wanted ‗lowcalorie doughnuts‘ like fuel-efficient gas cars.‖
According to a survey, he said, only 14% of US car buyers cited fuel efficiency as the most important
factor in buying a car,
adding, ―That was a nice
Millions of EVs will be needed to meet California’s climate target
way of saying 86% of them
California Greenhouse Gas Emissions Reduction Goals
didn‘t think so.‖ The
percentage is probably even
lower now that gasoline
prices have fallen to
historical lows, currently
below $2 per gallon.
McConnell may be correct.
In most parts of the US,
EVs are a hard sell. High
prices, range anxiety, lack
of charging infrastructure
and absence of incentives
are among the reasons.
Mary Nichols, the chair of
California Air Resources
Board (CARB), the state
agency responsible for
Source: California’s golden energy efficiency opportunity: Ramping up success to save billions and
meet climate goals, Natural Resources Defense Council, Aug 2015
implementing California‘s
climate bill – which
requires state-wide
greenhouse gas emissions to fall to 1990 levels by 2020 – disagrees. She says consumers, at least in
California, ―don‘t think of zero emissions cars as broccoli.‖
She told NY Times, that consumers wanted these (electric) cars and that they had been dissuaded in part
by unenthusiastic dealers and ―horror story‖ sales experiences. California, she pointed out, already has
150,000 electric cars – roughly half of the total in the US – adding that the number needs to grow tenfold
in the next decade if the state is to meet its environmental goals. Without the EVs ―simply put, we can‘t
make it,‖ she added.
How is California going to meet its ambitious targets? For one thing, the state may need as many as one
million EV charging stations to meet its goal of having a million plug-in vehicles on the road by 2020,
according to recent analysis by the California Energy Commission (CEC) released in Dec 2015.
According to Leslie Baroody, CEC‘s EV program manager, the state currently has 7,642 public chargers,
plus 722 public fast charging stations – clearly inadequate to meet the target.
To increase the numbers, recently the California Public Utilities Commission (CPUC) reversed policy
by allowing – encouraging may be a better word – the state‘s 3 investor-owned utilities to begin
investing in EV charging infrastructure as previously reported in this newsletter. Prior to the policy
reversal, the IOUs were virtually banned from such investments.
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It is easy to see why. Many consumer advocates are not convinced that IOUs should invest in EV
charging infrastructure using the traditional regulatory approach by adding such investments in their ratebase and collecting a virtually risk-free allowed rate of return on it, as with all their other assets.
The critics ask: Why should all consumers pay for an infrastructure that only a small portion of
consumers will benefit from, namely those with EVs – especially given that these customers tend to be
more affluent, say the Tesla owners.
The CPUC grappled with the issue for a while, waiting for the free ―market‖ to invest. But it soon became
apparent that the free market would not deliver sufficiently in time for California to meet its targets – at
least that is this editor‘s take on what transpired at CPUC. With the reversal, the 3 IOUs were more than
happy to invest – and invest they apparently will.
With their revenues falling due to the rapid rise of self-generation and energy efficiency, the IOUs see
electric transportation and investments in charging stations as their savior. It is one of few remaining
areas they can invest and earn a guaranteed rate of return.
Will Tesla’s giga factory produce enough batteries to go around?
Tesla Gigafactory under construction, by Bob Tregilus (CC BY-NC-SA 4.0)
A study by National Renewable Energy Laboratory (NREL) suggests that EVs may require 2,800
MWh of extra juice by 2020, 4,000 MWh by 2025 and perhaps as much as 10,000 MWh in 2030 – the
actual number depends on assumptions about the growth of EVs over time and other factors. Numbers
like these are music to the ears of electric utility executives.
In the last few months, the 3 IOUs have announced increased investments in electric charging stations,
public, private, fast, slow, you name it. As reported in 11 Dec 2015 issue of California Currents:



Southern California Edison Company’s (SCE) plans to initially spend $22 million to install
1,500 chargers, followed by another $333 million for up to 28,500 stations between 2016 and
2020, according to Dean Taylor, SCE‘s principal advisor on EVs;
Pacific Gas & Electric Company (PG&E) plans to install 25,000 chargers and 100 fast
chargers, according to Jana Corey, PG&E‘s electrification and alternative fuels director; and
San Diego Gas & Electric Company (SDG&E) plans to install 550 charging stations in
multi-family communities and another 5,500 in work places.
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It is a classic chicken-and-egg problem. Consumers will not buy EVs unless there is a sufficient charging
station network. Nobody – free market or the IOUs – will invest in EV charging infrastructure unless
there are a sufficient number of EVs already on the road.
In case of California, the regulators and policy makers at the CEC, CPUC and CARB must have come to
the conclusion that the only way to meet Gov. Jerry Brown‘s target of 1 million plug-in vehicles by 2020
and 1.5 million by 2025, the IOUs should be given a relatively free reign to invest in a vast charging
network.
In defense of their investment strategies, the IOUs point out that:


They do not intend to monopolize and/or saturate the market – claiming that there is plenty of
room for others if they choose to invest; and
In trying to balance the needs of EVs owners – who tend to be more affluent than the average
customer – against the needs of the state to meet its ambitious climate goals, the former takes
precedence – this editor‘s words, not necessarily theirs.
Clearly in this case, someone had to decide which comes first, the chicken or the egg. And investing in
charging stations came first. And this being California, car buyers may actually like broccoli. Tesla
certainly cannot keep up with the demand. 
24 Nov – NY Times
What Went Wrong At NRG?
When there is bad news, there is no news
W
hen the news is good, the CEOs like to brag a lot and the PR department spins out stories
feeding the press. But when the news is not so good everyone goes silent. No news, no
information, calls are not returned, no interviews granted, nothing. That is happening with
NRG, once frequently in the news, with its outspoken CEO David Crane regularly speaking
at conferences, bragging about his grand vision to turn NRG into a new breed of utility company, saving
it from the brinks of bankruptcy, transforming it from the country‘s biggest independent power
producer (IPP) into something entirely different and vastly more excising.
In December 2015, it was announced that Crane would vacate his seat as NRG‘s President and CEO, a
post he has had since 2003. It was reported that he was resigning, under pressure from investors. The
company‘s declining stock price was blamed, as well as shareholder concerns that the merchant power
producer had invested recklessly and far too much in distributed energy, and it had little to show for the
effort to diversify away from its core business.
Strange, since Crane was touting his decision to move the company away from being a mere IPP into
something better as the best thing since sliced bread.
―During more than 12 years at the helm of NRG, Mr. Crane led the company from emergence from
bankruptcy to its current position as leader in the wholesale and retail energy markets,‖ said NRG Board
Chairman Howard Cosgrove in a brief and enigmatic statement on 8 December 2015, adding, ―The
Board thanks Mr. Crane for his leadership that helped transform NRG into the company it is today.‖ He
was replaced by Mauricio Gutierrez, an executive vice president and CFO since 2010.
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Power to be free
In the last several years, having resurrected NRG from bankruptcy,
Crane became obsessed with customer empowerment, climate
change and distributed energy, vowing to create the Apple or
Google of the energy industry, to challenge front runner SolarCity
in rooftop solar leasing business, to get into electric vehicle
leasing and EV charging business, energy storage business,
energy efficiency, ESCO, demand response (DR), home energy
management and other services – basically everything and
anything other than being an IPP.
Crane invested heavily in distributed energy through NRG Home Solar, NRG EVgo, and NRG Renew,
made several acquisitions in the solar sector and set a goal to triple its solar business by the end of 2015,
rivaling SolarCity.
He famously called traditional electric utility executives as Neanderthals, something that did not endear
him to his peers.
In an op-ed published in 2014 he wrote;
―There is no energy company that the consumer can partner with to combat global warming
without compromising the prosperous ‗plugged-in‘ modern lifestyle that we all aspire to — not
just for those of us who are so blessed to live a prosperous life in the US, but for the billions of
people who live in the developing world and aspire to what we already have.‖
He admitted,
―NRG is not that energy company either, but we are doing everything in our power to head in that
direction, as fast as we can.‖
NRG‘s shareholders apparently did not share his vision.
Crane was not able to deliver on his rooftop solar installation targets, admitting that it cost far more in
marketing and customer acquisition than he had assumed. Likewise, his efforts in utility-scale solar were
not nearly as successful as planned, ditto for commercial and community solar businesses.
In short, he fell short of the ambitious targets he had set to achieve. Not surprisingly, NRG‘s stock fell by
more than 30% while NRG Yield fell even more. Under pressure in September 2015 Crane announced
that the company would be ―resetting‖ itself by separating its clean energy initiatives from its traditional
IPP business but it was a classic case of too little, too late. Talking to the Wall Street Journal after the
story of his departure broke out, he said,
―There was a mismatch between what investors wanted us to do with our cash — which was give
it back — and what we wanted to do, which was put it in growth businesses.‖
With his departure, analysts and everyone else – including many who enthusiastically shared his vision –
have come up with different eulogies of Crane‘s demise, what exactly happened and why.
According to one, NRG‘s business strategy under Crane was in fact to have none. Simply invest in
everything and anything – hoping that some would ultimately stick or pan out. While that may be unkind
and unnecessarily harsh, it is true that Crane spread himself and his company thin by getting into too
many ventures at the same time. In the end, it was probably more than anyone could have delivered.
Investors, after all, are not known for their patience. 
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Home Energy Storage Taking Off, One Way Or Another
Utilities around the world are looking into home energy storage business; few can articulate how
W
ith the rapid uptake of customer self-generation and few options to increase revenues, utilities
around the world are looking at new business strategies. One obvious one is to get into
distributed storage offering customers the means to store energy, say the excess generation
from their solar PVs, for use at other times. Companies as far away as New Zealand and
Australia are seriously looking into such ventures, some with exclusive agreements with Tesla, which is
about to produce vast numbers of batteries suitable for home use (photo on page 21).
But how exactly can one structure the storage business model so that it does not eat into existing revenues
or cannibalize existing customers? The answer depends on what type of utility you are, regulated or
unregulated, privately-owned, municipal, investor-owned, and whether your are a stand-alone entity,
vertically integrated, or a variation thereof. Most important, of course, is what does the prevailing
regulations allow you to do – or even more important – specifically prevents you from doing.
Batteries in high demand
In early December 2015, Green Mountain Power (GMP),
a smallish utility in Vermont, announced what may be the
first coherent strategy in the US to offer home energy
storage.
Partnering with Tesla, GMP said it will offer customers the
option to purchase outright or lease with no upfront
investment Tesla‘s much touted Powerwall battery packs
(photo on left).
What‘s in it for customers? Obviously the ability to store
any excess energy, say from rooftop solar PVs, empowering
customers to become more energy independent – if that is
important to them – while offering higher service reliability,
say when distribution lines go down during storms, a major
issue in many rural communities.
What‘s in it for GMP? Ability to reduce peak demand on
the local distribution network, especially as more
consumers become prosumers, and install self-generation
and/or acquire EVs. Properly done, home storage systems can result in cost savings to all customers, not
just those with storage.
Source: The Wall Street Journal 2 May 2015
As explained in its regulatory filing with the Vermont Public Service Board, GMP plans to offer 3
options to interested customers:



Customers can lease and share access to the Powerwall battery, in which case they will pay
about $37.50 a month with no upfront cost;
Customers can buy the Powerwall for about $6,500 and share access to its use, in which case
they will get a monthly bill credit of $31.76 – GMP figures that is the value of the battery in
lowering average customer‘s peak energy costs; or
Customers can buy the Powerwall outright from GMP – which has an exclusive sales
agreement with Tesla – with no shared access for about $6,500 and no bill credit.
It is too early to tell if the regulator will approve the proposed scheme, how many customers may be
interested if offered the plans, and which option will turn out to be the most popular with the customers
and profitable for GMP.
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RWE Follows E.ON’s Script
German generating companies are scrambling to remain viable in a hostile business environment
I
n early December 2015, RWE, Germany‘s largest power generator, announced that it was following
in the footsteps of its competitor E.ON by splitting the company to focus on renewable energy, grid
operations and retailing, which it says is the future for utility companies – at least in the German
context.
RWE, based in Essen, which historically produced more than 40% of its power from hard coal and lignite
power plants, said the new subsidiary will be listed in the stock market by late 2016. Currently only 8%
RWE‘s 49 GW of installed capacity is renewable.
Bright future for a resurrected RWE?
RWE’s website (below) has been revamped to emphasize renewables, customers and the grid
Source: Page from RWE website
Three years ago, RWE found itself saddled with €33 billion ($36.3) of debt stemming from an ill-timed
massive expansion of its thermal power fleet just as falling demand and a flood of renewables were
depressing wholesale prices in the German market. The government‘s abrupt decision to phase out all
nuclear plants by 2022 added to RWE‘s woes – the perfect storm. According to its CEO, Peter Terium,
―All of this created a great deal of uncertainty, not only for us but for the entire industry,‖ adding,
―In the face of the scale of the problems, many chose to bury their heads in the sand and hope for
better times to come.‖
―Our top priority has been to make the company fit for the future. RWE was in danger of
suffocating under the weight of costs and debt. We had to regain stability and credibility by
making savings and reducing debt.‖
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The new firm will be an integrated energy company with a strong focus on wind power while operating a
vast distribution network serving some 23 million customers in 12 European countries. The restructuring,
Terium says, is in response to ―the transformation of the European energy landscape.‖
Texas Special: Free Electricity After 9 pm
Marketing gurus have come up with wasteful schemes to attract customers
A
s the preceding article describes, the rapid growth of renewables in many markets, Germany
included, is depressing wholesale prices, making life distinctly unprofitable for thermal
generators. But that is not the end of it. With so much renewable generation, there are an
increasing number of hours when the renewable supply meets, or in fact exceeds, demand. When
that happens, prices collapse or go negative – in essence the grid operator will pay customers or
neighboring networks to use the excess power. This phenomenon, called over-generation, is now
commonly experienced in networks around the world, from South Australia, to Denmark, to California
and Texas.
In Texas, which has roughly 14 GW of installed wind capacity (map below), prices go negative so often
that some electricity retailers are offering free electricity to customers during periods of excess
generation. According to an article in New York Times (8 Nov 2015), one retailer, TXU Energy is
offering free electricity between 9 pm and 6 am, when demand on the network falls off just as wind
generation picks up. According to NYT article,
―TXU‘s free overnight plan, which is coupled with slightly higher daytime rates, is one of dozens
that have been offered by more than 50 retail electricity companies in Texas over the last three
years with a simple goal: for customers to turn down the dials when wholesale prices are highest
and turn them back up when prices are lowest.‖
Texas has more wind
power than any other
state, accounting for
roughly 10% percent
of the state‘s
generation. Moreover,
the Texas grid, the
Electric Reliability
Council of Texas or
ERCOT, is virtually
isolated from the rest
of the country, hence
the nightly abundance
of wind cannot be
transmitted to
neighboring states, as
is routinely done in,
say, Denmark.
Texas: Blessed with lots of wind
Since retailoring is
competitive in Texas,
retailers such as TXU
can do more or less as
Source: 2014 Wind Technologies Report, DOE, Aug 2015
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they please. And if free electricity between 9 pm and 6 am appeals to a segment of customers, why not
offer it?
Commenting on the TXU‘s unorthodox scheme, Scott Burns, senior director for innovation at Reliant
Energy, another Texas retailer, said, ―You can be green and make green,‖ referring to greenbacks.
Reliant is also exploring schemes to increase night and weekend electricity use.
NYT article quotes Jim Burke, TXU‘s chief executive stating,
―The American consumer wants choice,‖ adding, ―Consumer choice, with its impacts and
benefits, will drive the future of the power industry.‖ But he quickly adds a note of caution: ―I
think the pace at which it evolves is the unknown.‖
Everyone acknowledges that in Texas‘ overly competitive retail market (map below), the range of plans
and prices offered are part of the marketing ploy to attract and retain customers. ―We‘re all trying to
grow, and it‘s a very competitive market,‖ said Manu Asthana, president of the residential division of
Direct Energy, another Texas retailer, according to NYT article.
The free electricity scheme, and others where average rates are lower once you usage goes over a certain
minimum number of kWhrs a month – typically over 1,000 – have come under attack from
environmentalist and some consumer advocates as wasteful. The NYT article mentions a few examples,
―Briana Lamb, an elementary school teacher, waits until her watch strikes 9 pm to run her
washing machine and dishwasher. It costs her nothing until 6 am. Kayleen Willard, a
cosmetologist, unplugs appliances when she goes to work in the morning. By 9 pm, she has them
plugged back in. And Sherri Burks, business manager of a local law firm, keeps a yellow sticker
on her townhouse‘s thermostat, a note to guests that says: ―After 9 pm I don‘t care what you do.
You can party after 9.‖
Many believe that the
problem of over-generation
can be better managed by
resorting to time of use
tariffs (TOU). But not
enough consumers are
currently on such tariffs to
make a difference. In Texas,
which has over 6 million
residential customers, less
than 300,000 are on TOU
rates, according to ERCOT.
For now, however, the
―free‖ electricity after 9 pm
seems to appeal to certain
customers, as reported by
NYT article,
Electricity retailing highly competitive in Texas
Percentage of total load supplied from an alternative supplier
Source: Annual baseline assessment of choice in Canada & the US (ABACCUS), DEFG, July 2015
―Ms. Burks, the law firm business manager, ….. is not motivated by environmental concerns. ‗I
never thought about it,‘ she said. In fact, she leaves lights on and even the television on when she
leaves the room.
‗I‘m really wasteful now,‘ she said. ‗The first thing I tell my guests is my electricity is free after
9.‘ ‖
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Hopefully marketing gurus in Texas can come up with better ways to manage the excess wind generation,
such as charging up electric batteries or storing it for later use in a hot water tank.
US Nuclear Capacity: Holding Steady
Best case scenario: No decline
W
ith the recent announcements to shut down several nuclear reactors prior to the expiration of
their operating licenses, the number of operating reactors in the US has fallen from a high of
104 to around 99, or so. The question is how will the numbers stack up over the coming years
– will US‘ installed nuclear capacity shrink, remain flat or grow? As a point of reference, US
solar installed capacity is expected to top 41 GW by the end of 2016, from virtually nil in 2000. Solar
plants, of course, do not generate power 24/7 as nuclear plants do.
Only time will tell, but according to the latest analysis by the Energy Information Administration
(EIA), despite the scheduled closure of more than 2,000 MW of nuclear generating capacity by 2019,
more than 5,000 MW of new capacity are expected to come on line between 2016 and 2020, fingers
crossed. In that case, total installed US capacity should remain more or less at its current level through
2020, around 100 GW, give or take a little.
As illustrated in the
accompanying graph, US
installed nuclear capacity
grew rapidly in the 1970s
and 1980s, but has all but
stalled since 1990s, hovering
around 100 GW mark. While
that is more than any other
country in the world, there
are little prospects for a
resurgence of growth, with
the exception of a new
reactor coming on line
recently with 4 others
currently under construction.
Don’t expect a rebound of installed US nuclear capacity
Source: Energy Information Administration, Monthly Energy Review
The only good news for US nuclear fleet is that the existing reactors have been working at higher capacity
factors – which means that atom continues to supply roughly 20% of US electricity generation, a ratio it
has managed to maintain for quite a few years now.
California Consumers To CPUC: Don’ Mess With NEM
Reducing or removing generous solar subsidies is not going to be easy or popular
T
he battle over the fate of net energy metering (NEM) laws, now in place in 44 states, like the
battle over introducing higher fixed monthly fees, described in the Dec 2015 issue of this
newsletter, is heating up. The regulators find themselves in the uncomfortable position of having
to make decisions that are needed to keep the network operators whole without upsetting too
many customers, who can turn out as vocal voters in large numbers.
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A case in point was an announcement by the California Public Utilities Commission (CPUC) that it was
considering changes in the state‘s generous NEM laws. Within days, they were deluged with over
130,000 signatures and heaps of letters and petitions that warned the Commission not to mess with the
existing NEM laws. It was the largest number of public comments ever received by the CPUC on any
issue.
Among those
pleading the
regulators not to
mess with the
existing laws was
Dan Jacobson,
program director
with Environment
California
Research & Policy
Center, who –
referring to
truckloads of letters
and petitions
delivered to CPUC
– said,
NEM: Get credit for what you export to the grid
"Once again,
Californians all
Source: Database of State Incentives for Renewables & Efficiency (DSIRE)
across the state are
making clear that
access to clean solar energy is a top priority," adding, "Eliminating the primary policy that has
made California the #1 solar state in the country would fly in the face of public opinion, our
newly minted 50% renewables law, and California's ability to be a strong leader at the United
Nations climate change summit in Paris (in Dec 2015) …."
The outpouring of sentiment in support of the existing NEM law was in response to proposals by the
state's 3 investor-owned utilities, Pacific Gas and Electric Company (PG&E), Southern California
Edison Company (SCE) and San Diego Gas and Electric Company (SDG&E) to eliminate net
metering and/or add new fixed fees that would, in the view of solar proponents, effectively make rooftop
solar PVs non-competitive.
The popularity of solar PVs in California, and elsewhere, is hard to dispute – except for its adverse cost
impact on the silent majority, the non-solar customers. A recent statewide poll of 1,000 California
registered voters' concluded that:




90% favor rooftop solar as a way to generate electricity;
88% feel that more should be done to encourage rooftop solar;
82% see rooftop solar as an important way to reduce the threat of climate change; and
74% see it as a way to reduce the need to build more power plants.
Acknowledging the popularity of solar PVs, the IOUs note that existing NEM laws are not only
unsustainable in the long-run but decidedly unfair. SDG&E, for example, points out that currently a
typical non-solar customer – comprising nearly 95% of SDG&E's customers – pays an extra $100 per
year to support the solar customers. If the existing NEM laws and prevailing tiered tariffs continue, the
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same non-solar customer has to pay an extra $360 on their utility bill annually by 2025, according to
SDG&E‘s estimates.
The IOUs are unanimous on two points:


First, they say non-solar customers should not be burdened with additional costs to subsidize
the solar customers – who tend to be more affluent; and
Second, a way must be found to ensure that solar customers pay for their fair use of the grid –
which zero net energy (ZNE) customers currently avoid.
By some estimates, distributed generation, predominantly from rooftop solar PVs, may reach 12 GW in
California by 2020 if the prevailing tariffs and NEM laws are unchanged.
It is in this context that the
regulators must intervene,
making unpopular but
necessary decisions that
balance the interests of
solar vs. non-solar
customers while providing
the revenues necessary to
keep the distribution
network reliable and in
good working order.
Will fixed charges fix the utility revenue erosion problem?
In mid December 2015,
the CPUC issued a
proposed ruling that
essentially leaves the
Source: Advanced Energy Economy, June 2015
existing NEM laws intact
while incrementally
increasing some fixed charges. The proposal is scheduled for a formal hearing and decision in late
January – with important implications for regulators in other states facing similar decisions (map above).
On that note, the following remarks from the inaugural address of Travis Kavualla, a commissioner from
Montana, and the newly appointed president of the National Association of Regulatory Utility
Commissioners (NARUC), the club of state-level US utility regulators, delivered in late Nov 2015
resonates:
―Some say that rising retail prices from monopoly providers, combined with data driven tools
that unlock consumer behavior to interact directly with the market, and the falling cost of
transformative technologies, will turn the sector on its head. Others argue that the physical
properties of electricity mean that a natural monopoly is largely inevitable, and that the
economics of central-station power are likely to be more favorable than any distributed
alternative.‖
Adding,
―It should be a hallmark of our (regulators) restraint that we not presume to decide this future—it
is a future that should be decided by the fundamentals that drive resource cost, and of the choice
that resides with each consumer.‖
January 2016
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EEnergy Informer is an independent
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