Steve Pomerance

This title is a combination of “creative destruction,” that which occurs when innovation destroys an economic system, and the thesis of “Disruptive Challenges,” a paper that discusses the impact of distributed renewable energy on the utility business model. This study was prepared for the Edison Electric Institute, an association of U.S. investor-owned electric companies, and is on their website. In recent years, utility regulators, public interest groups, and even utility companies themselves have asked whether the changes that are coming will disrupt their business and regulatory models in the way that that mini-mills changed the steel industry, or the internet and cell phones changed the Ma Bell telephone companies. If that happens, history may be repeated, with current players being replaced by newer, more nimble competitors and the whole economic structure reconfigured. On the supply side, photovoltaic cells, wind turbines, gas-powered micro-turbines and fuel cells like Bloo...

Xcel Energy, in what appears to be an attempt to gain a PR victory to try to stop Boulder from creating a municipal electric utility to escape from Xcel’s coal-intensive monopoly, asked the city to engage in yet another last-moment process. I fully expect Xcel to use this to try to kill the muni process so it can keep its Boulder customer base. The first four Xcel-City processes in the last five years produced little to nothing of value: The first was SmartGridCity, which Xcel promised to be the Holy Grail by helping integrate solar, wind, and demand management, providing real time billing and information, and costing the ratepayers nothing. SGC ended up producing little of customer value, and ratepayers are already on the hook for nearly $30 million of its costs. Then came the franchise negotiations, in which Xcel basically stonewalled the city. After the vote on the occupation tax that replaced the franchise came the city’s offer to Xcel to be its “laboratory” , where Xcel could ...

What got me thinking about this topic was the article in the Camera a few days ago announcing the upcoming debate on fracking between County Commissioner Elise Jones and Governor John Hickenlooper. To quote the Camera, “the goal of the 45-minute session is to provide a state-versus-local perspective on the effects of fracking, including public health concerns, the environmental impacts and local economic considerations.” To me, an equally important issue is the use of natural gas as the “transition fuel.” Hickenlooper speaks of it this way, but if he really grasped its significance, he’d be raising a whole host of other issues. Of primary importance is that methane (70-90 percent of natural gas) is a potent greenhouse gas that, per the EPA, has 25 times the global warming potential of CO2 over a 100-year period, with the effect concentrated in the first decades. Although burning methane may produce half as much CO2 per unit of electric energy produced as coal, any gas leaking from ...

Investor owned utilities, like Xcel, that own their own generation, transmission and distribution, make money by investing their equity capital and borrowed debt in hardware (power plants, transmission lines, etc.) and earning a regulated rate of return on these investments. This rate of return is determined by the Public Utilities Commission and is ultimately set by looking at other utilities in similar circumstances. This somewhat circular process, together with the ability of utilities to spend large sums on legal and accounting staff, has led to a double whammy of high returns on equity (over 10 percent/year) with very low risk, witness the PUC allowing Xcel to recover $29 million back on its SmartGridCity debacle. So these monopolies are completely unlike normal companies, which must perform competitively to make any money at all. That’s the regulatory “bargain” we all have had to live with. Because the return on equity is so certain, it becomes in effect a relatively fixed ob...

On Tuesday night the Boulder City Council discussed the report on the potential for Boulder to create its own municipal electric utility, like Longmont, Fort Collins and many other Colorado cities. The conclusion of the report was that a muni could deliver rates competitive with or below Xcel’s, a lot more renewable energy and much lower GHG emissions, and as good or better reliability, all on a solid financial basis, assuming that Boulder does not have to pay Xcel an exorbitant amount for “stranded costs.” The modeling results compared a number of different options. A critical aspect was to ensure that the Xcel “baseline” option, to which the muni options were compared, was conservative. So the Xcel option was given the benefit of the doubt on whether Xcel’s planned $3.5 billion capital investment program was fully incorporated into rate projections for Xcel, and whether coal costs will continue to rise faster than Xcel’s official estimates. The Low Cost and the Low Cost/No Coal...

In December I wrote about the Boulder City Council’s need to determine how they intend to fund the massive transportation needs that will be created by the 60,000 more jobs and thousands of new residents expected under “reasonable” build-out of the city. Last week I had the pleasure of participating in a PLAN-Boulder panel discussing the city’s proposed Transportation Maintenance Fee, a stopgap measure to make up for deficits in funding road maintenance and paying for increased transit. My fundamental issue with the TMF is that it provides no incentive for people to reduce their auto trips: The TMF charges properties based on statistical averages rather than charging real drivers for actual behavior. The city has expressly decided to avoid creating any incentive with this charge, even though they know that incentives work — in downtown Boulder parking is costly, so people have shifted away from single-occupant-vehicle use. I have been involved with local politics long enough to kno...

I just returned from a great trip to Ecuador. I have never been there before, although I’ve traveled elsewhere in South America, including multiple trips to Peru (starting with the Peace Corps) and to Argentinean and Chilean Patagonia. Ecuador is a wonderful place to visit. The people, scenery, and accommodations are terrific, and the country, at least from a traveler’s perspective, is well-managed and easy to deal with. And I have to say that the quality of the meat, seafood, eggs, vegetables, fruit and baked goods was superb — I looked forward to every meal. The big event of the trip was a climb of Cotopaxi, a 19,347-foot volcano. My wife and I, with the assistance of a guide (mandatory allegedly) started at 1 a.m., after a sleepless night in a crowded refuge at just under 16,000 feet. After six-plus hours of mostly headlamp climbing (which produces its own version of motion sickness) using crampons up a glacier and through an icefall, we popped out on the sunlight summit to supe...

Against my own better judgment, I have been closely following the fiscal cliff process in Washington. It appears that the wisdom of our Founding Fathers was insufficient to ensure that this collective group of elected officials would address a major crisis in any useful way. I’m starting to wonder if this isn’t the end of the great American experiment in democracy. We apparently have reached near total paralysis, where the big issues are ignored or dealt with in a cursory fashion. I don’t see how this country can operate with a debt load so big and growing so fast that much of the resources our children create will have to be dedicated to paying off this burden. Our tax code promotes rather than reduces income inequality, and our defense budget reportedly exceeds that of the next 17 nations combined. We are faced with a climate crisis that could submerge coastal cities, and cripple our agricultural productivity and water supplies, yet the best Congress can do is extend the tax cred...

To better understand how the city of Boulder should fund our transportation budget shortfall, it’s helpful to look at how we pay for water here in Colorado. Water systems are funded through tap fees paid by new development, and user fees (water rates) paid by all system users. Tap fees pay for water rights, reservoirs, treatment plants, etc. needed to serve new development to prevent lowering of the level of service (LOS). Water rates pay for the electricity, chemicals, personnel, etc. needed to deliver water. Water rates can also correct for the inevitable inaccuracies in tap fees, which are set based on expected use rather than actual consumption. We accept paying for our own water, and indirectly paying for the water that we use at restaurants, golf courses, etc., because we understand that these fees pay for the costs of a limited commodity in a reasonable and equitable way. We treat public transportation facilities in a completely different manner. Only about 20-25 percent of ...

An estimated 2.4 million pounds of CO2 are spewed into our planet’s atmosphere every  second , a billion tons more than last year. Worldwide emission levels are over 50 percent higher than in 1990, per the report from the Global Carbon Project. If we don’t do something radical very soon, we could be faced with runaway global warming, as methane, also a potent greenhouse gas (GHG) escapes from melting arctic permafrost. Even without that, global warming above tolerable levels and frequent extreme weather events could make the Dust Bowl of the ’30s and Hurricane Sandy into regularly occurring disasters. We need to commit to addressing this issue, which is far more important in the long run than the U.S. budget-and-debt crisis. Colorado’s current rules are far too weak. The “30 percent by 2020” renewable energy requirement is actually closer to 26 percent, because in-state renewables get a 1.25 multiplier. And the target for rural electric co-ops and municipal utilities is only ...