Great post, Grandma, thank you. For the benefit of an under-educated civil engineer, could you expand on what efficiency payments are? To whom are said payments made? Who makes them? Does your promised follow-up post address these questions. I am a firm believer in Jevon's Paradox (it is wholly a confusion of ideas to suppose that the economical use of fuels is equivalent to a diminished consumption. The very contrary is the truth.) so am somewhat surprised that anyone would want to give credit for efficiency.
A suggestion for a future post, or series of posts: a primer on rates, done by tracing a kilowatt-hour of energy used by my computer (or home appliance of your choice), from the home to the source of generation, and what agencies/utilities/organizations have a voice in that routing process. I live in Nebraska; our power is legislatively mandated to be via a public corporation. How does the Southwest Power Pool, our RTO (i think) control the flow of power, and what portion of our rates are parsed to SPP for their involvement. Does the RTO set capacity rates; accredited rates?
I've read your book, "Shorting the Grid," but wonder if it's time I re-read and treat the reading more as a text than as casual read.
I thought of having a picture of Jevons instead of the picture of the FERC building, but since I don’t mention him in this post, I thought better of it….
I won’t be able to answer all your questions in the next post. But I hope to answer some of them.
1. First of all, no one controls the flow of electricity on the grid. God, or whoever it was who wrote the laws of physics, decided to write those laws so that electricity flows through multiple paths, essentially every interconnected wire on the grid. What the Southwest Power Pool (SPP), and other system operators do is treat the entire system under their control like a giant pool of water, and their job is to balance the amount of water (electricity) being injected into the pool with the amount of water (electricity) flowing out of the pool and into our electric devices, including your TV and lights in Nebraska. It is more complicated than that (as is everything), but this is essentially what happens. That is why the electric systems operated by a single operator are called "Balancing Authority Areas" and system operators like SPP are called "Balancing Authority Operators."
2.Rates in SPP, and other RTOs, are set through a two-part process. First, SPP conducts wholesale auctions in real time in which all generators in the SPP region must participate in order to sell electricity, and all retail providers, including NPPD, must purchase the electricity needed to serve their retail customers. The retail providers then resell that electricity at rates set by their retail regulator or, for public corporations like NPPD, whoever oversees the rates of the retail providers. That rate includes the wholesale price paid in the SPP auctions plus a mark-up to include the costs incurred by the retail provider to deliver the electricity to its customers (the cost of local distribution wires, administrative costs, etc) plus a profit for those retail providers that are for-profit companies.
3. Four RTOs also conduct wholesale auctions for capacity, but SPP does not. Rather, retail providers in SPP purchase capacity in bilateral transactions, or provide it to themselves with the generation that they own, and recover those costs in their retail rates, subject to review by their retail rate regulator.
If you find these explanation helpful, check out my free Substack, "Explaining the Grid"
Years and years ago PG&E did a pilot program with a subdivision that installed radio switches on air conditioners, and then cycled them to reduce demand. Worked for a while, then started to become less and less effective. A quick check found that most of the switches had been bypassed and PG&E was paying for nothing. The program was quietly shut down…sounds kinda like the PJM experience, but way smaller.
I don't want to be too wonky here, but you seem to be confusing two terms: efficiency; and demand response. Demand response is what you described PG&E was trying to do--reduce the use of electricity when demand is high. Efficiency is when you use electricity more efficiently, for example by buying a more efficient refrigerator or install insulation. In explaining this I don't mean to justify either one being included in RTO rates. It seems to me that in both cases your compensation is reduced rates because you used less electricity (assuming that you actually do turn off your air conditioner when it gets hot). No one has given me $60,000 because I decided not to buy a new Mercedes.
But...in my opinion...Efficiency has taken the place of patriotism in the saying "Patriotism is the last refuge of a scoundrel." Samuel Johnson said that originally, but he was careful to distinguish between scoundrel-patriotism and true-patriotism.
We need to do something like that for Efficiency. We need a new Samuel Johnson.
EE is just something that Utilities monetize. Rich people can take advantage of it. Poor people get it free or are heavily subsidized through socialized rates and the middle class gets to pay for it all via EE being socialized through rates. It is just redistribution of middle class income to others.
This was how it worked on the distribution side. At least where I worked. It always drove me nuts how things were socialized in rates. The “societal benefits charge” embedded in rates was largely redistribution of income from rate payers to the “income eligible.” It was the main mechanism of how the home energy assistance program (HEAP) was funded among other things.
I'm in favor of HEAP, because without it people might freeze to death in Vermont. On the other hand, I also understand the man who told me that "he hadn't realized he could be taxed through his utility bill, and there's not a thing he can do about it."
Shorting the Grid is a very interesting book and Meredith does a good job of explaining how the grid works. I particularly like her term "the Angelic Miracle" to describe how the grid matches the output of generation plants with increases and decreases in electricity consumption, for example when you turn your lights on and when you turn your lights off. Meredith also does a good job explaining certain of the grid's vulnerabilities. But I think that her attacks on Regional Transmission Organizations (RTOs) are misplaced. RTOs are not perfect, and could be improved, but by and large allow for the pooling of resources to provide efficient grid operations. In my Substack "Explaining the Grid," I have added three posts providing defenses of various aspects of RTOs that Shorting the Grid criticizes. My substack also explains (free of charge) other aspects of grid operations. I try to provide easily understood non-technical explanations, and also to avoid taking sides on climate change or to make general criticisms of industry participants or political positions. Hopefully my explanations will help people understand the validity of such criticisms made by others. I only started my Substack a few months ago so there are not a huge number of posts, but have ideas for several more on various subjects
Ahhhh, thank you Meredith! The energy efficiency payment never made any sense to me. That makes sense. If you follow RTO Insider, you have no doubt seen the plethora of articles claiming that Virtual Power Plants are the way forward. I am working on a piece explaining Demand Response and it's new kissing cousin, Virtual Power Plants. Unfortunately the old guy got sick, so I have been set back a bit I will get it done soon.
Virtual Power Plant is a sort of squishy term. It can be a fancier name for demand response, or it can be a mixture of small generators, or a mixture of demand response and small generators and whatever. I found this post helpful, though mostly helpful in reassuring me that nobody knows for sure what a VPP is.
I wonder if anyone in FERC has an overall sense of the health of the grid and how to make it stronger. I am thinking of gas as well as electric. Energy is the base layer of all economic activity.
30 years ago I worked for an energy efficiency contractor. We had utility contracts to lower demand and energy use. After the energy savings investments were made the stringent 10 year measurement and verification requirements many times wiped out profit. The tools are much better now but M&V is necessary to ensure the ratepayers aren’t fleeced
Great post, Grandma, thank you. For the benefit of an under-educated civil engineer, could you expand on what efficiency payments are? To whom are said payments made? Who makes them? Does your promised follow-up post address these questions. I am a firm believer in Jevon's Paradox (it is wholly a confusion of ideas to suppose that the economical use of fuels is equivalent to a diminished consumption. The very contrary is the truth.) so am somewhat surprised that anyone would want to give credit for efficiency.
A suggestion for a future post, or series of posts: a primer on rates, done by tracing a kilowatt-hour of energy used by my computer (or home appliance of your choice), from the home to the source of generation, and what agencies/utilities/organizations have a voice in that routing process. I live in Nebraska; our power is legislatively mandated to be via a public corporation. How does the Southwest Power Pool, our RTO (i think) control the flow of power, and what portion of our rates are parsed to SPP for their involvement. Does the RTO set capacity rates; accredited rates?
I've read your book, "Shorting the Grid," but wonder if it's time I re-read and treat the reading more as a text than as casual read.
I thought of having a picture of Jevons instead of the picture of the FERC building, but since I don’t mention him in this post, I thought better of it….
I won’t be able to answer all your questions in the next post. But I hope to answer some of them.
Lots of good ideas in your comment!
A few answers to your questions.
1. First of all, no one controls the flow of electricity on the grid. God, or whoever it was who wrote the laws of physics, decided to write those laws so that electricity flows through multiple paths, essentially every interconnected wire on the grid. What the Southwest Power Pool (SPP), and other system operators do is treat the entire system under their control like a giant pool of water, and their job is to balance the amount of water (electricity) being injected into the pool with the amount of water (electricity) flowing out of the pool and into our electric devices, including your TV and lights in Nebraska. It is more complicated than that (as is everything), but this is essentially what happens. That is why the electric systems operated by a single operator are called "Balancing Authority Areas" and system operators like SPP are called "Balancing Authority Operators."
2.Rates in SPP, and other RTOs, are set through a two-part process. First, SPP conducts wholesale auctions in real time in which all generators in the SPP region must participate in order to sell electricity, and all retail providers, including NPPD, must purchase the electricity needed to serve their retail customers. The retail providers then resell that electricity at rates set by their retail regulator or, for public corporations like NPPD, whoever oversees the rates of the retail providers. That rate includes the wholesale price paid in the SPP auctions plus a mark-up to include the costs incurred by the retail provider to deliver the electricity to its customers (the cost of local distribution wires, administrative costs, etc) plus a profit for those retail providers that are for-profit companies.
3. Four RTOs also conduct wholesale auctions for capacity, but SPP does not. Rather, retail providers in SPP purchase capacity in bilateral transactions, or provide it to themselves with the generation that they own, and recover those costs in their retail rates, subject to review by their retail rate regulator.
If you find these explanation helpful, check out my free Substack, "Explaining the Grid"
Years and years ago PG&E did a pilot program with a subdivision that installed radio switches on air conditioners, and then cycled them to reduce demand. Worked for a while, then started to become less and less effective. A quick check found that most of the switches had been bypassed and PG&E was paying for nothing. The program was quietly shut down…sounds kinda like the PJM experience, but way smaller.
How odd! People don't like their air conditioners turned off when the weather is extra hot. Who could have guessed it?
I don't want to be too wonky here, but you seem to be confusing two terms: efficiency; and demand response. Demand response is what you described PG&E was trying to do--reduce the use of electricity when demand is high. Efficiency is when you use electricity more efficiently, for example by buying a more efficient refrigerator or install insulation. In explaining this I don't mean to justify either one being included in RTO rates. It seems to me that in both cases your compensation is reduced rates because you used less electricity (assuming that you actually do turn off your air conditioner when it gets hot). No one has given me $60,000 because I decided not to buy a new Mercedes.
Efficiency, my experience with it suggests, is more expensive and less reliable than wind.
Okay. I'm going to get in trouble here.
But...in my opinion...Efficiency has taken the place of patriotism in the saying "Patriotism is the last refuge of a scoundrel." Samuel Johnson said that originally, but he was careful to distinguish between scoundrel-patriotism and true-patriotism.
We need to do something like that for Efficiency. We need a new Samuel Johnson.
EE is just something that Utilities monetize. Rich people can take advantage of it. Poor people get it free or are heavily subsidized through socialized rates and the middle class gets to pay for it all via EE being socialized through rates. It is just redistribution of middle class income to others.
I'm not quite that cynical yet. But as I dig into capacity payments for EE, I'm getting there.
This was how it worked on the distribution side. At least where I worked. It always drove me nuts how things were socialized in rates. The “societal benefits charge” embedded in rates was largely redistribution of income from rate payers to the “income eligible.” It was the main mechanism of how the home energy assistance program (HEAP) was funded among other things.
I'm in favor of HEAP, because without it people might freeze to death in Vermont. On the other hand, I also understand the man who told me that "he hadn't realized he could be taxed through his utility bill, and there's not a thing he can do about it."
Such valuable information!
Shorting the Grid is a very interesting book and Meredith does a good job of explaining how the grid works. I particularly like her term "the Angelic Miracle" to describe how the grid matches the output of generation plants with increases and decreases in electricity consumption, for example when you turn your lights on and when you turn your lights off. Meredith also does a good job explaining certain of the grid's vulnerabilities. But I think that her attacks on Regional Transmission Organizations (RTOs) are misplaced. RTOs are not perfect, and could be improved, but by and large allow for the pooling of resources to provide efficient grid operations. In my Substack "Explaining the Grid," I have added three posts providing defenses of various aspects of RTOs that Shorting the Grid criticizes. My substack also explains (free of charge) other aspects of grid operations. I try to provide easily understood non-technical explanations, and also to avoid taking sides on climate change or to make general criticisms of industry participants or political positions. Hopefully my explanations will help people understand the validity of such criticisms made by others. I only started my Substack a few months ago so there are not a huge number of posts, but have ideas for several more on various subjects
Ahhhh, thank you Meredith! The energy efficiency payment never made any sense to me. That makes sense. If you follow RTO Insider, you have no doubt seen the plethora of articles claiming that Virtual Power Plants are the way forward. I am working on a piece explaining Demand Response and it's new kissing cousin, Virtual Power Plants. Unfortunately the old guy got sick, so I have been set back a bit I will get it done soon.
Virtual Power Plant is a sort of squishy term. It can be a fancier name for demand response, or it can be a mixture of small generators, or a mixture of demand response and small generators and whatever. I found this post helpful, though mostly helpful in reassuring me that nobody knows for sure what a VPP is.
https://www.greentechmedia.com/articles/read/so-what-exactly-are-virtual-power-plants
Best wishes for a speedy recovery for the Old Guy.
Meredith
Indeed, I planned on covering all the interpretations in my piece. I think this article covers the squishy pretty well.
https://www.utilitydive.com/news/virtual-power-plants-vpp-der-distributed-energy-resources-der/715364/
I wonder if anyone in FERC has an overall sense of the health of the grid and how to make it stronger. I am thinking of gas as well as electric. Energy is the base layer of all economic activity.
30 years ago I worked for an energy efficiency contractor. We had utility contracts to lower demand and energy use. After the energy savings investments were made the stringent 10 year measurement and verification requirements many times wiped out profit. The tools are much better now but M&V is necessary to ensure the ratepayers aren’t fleeced
Here are more concerns about how to connect green “stuff” (in this case wind) to the grid and still have the economics work. https://www.bloomberg.com/news/articles/2024-09-03/sydney-mpox-surge-offers-cautionary-tale-countering-emerging-viral-threat
Hi. This is about monkeypox, not wind ???
Sorry https://www.reuters.com/business/energy/vattenfall-halts-swedish-offshore-wind-project-over-grid-concerns-2024-09-02/
Thank you. I linked to this one on the social media site formerly known as Twitter.