Why Would Consumers Want a Home Battery? Part I

by Bob Shively, Enerdynamics President and Lead Instructor

At a recent press conference in Los Angeles, Tesla CEO Edwin Musk gave a compelling presentation on how Tesla’s new Powerwall home battery system will revolutionize the electric industry.  And you too can own this system for only $3,000 (although installed it may total around $7,000).

Media reports abounded with some saying that Tesla is seeking to create the iPad or the Apple Watch of the battery industry. I don’t quite get the analogy. I’m pretty sure I could stare at a Powerwall battery system all day long and never see anything as compelling as an Internet cat video.

Dual Powerwall Battery

Dual Powerwall Battery

 

So looking through all the hype, why would someone want a home battery system mounted in the garage? To answer that question, let’s first discuss what a battery does.

Most of the electricity that we consume is generated at the time that we consume it. This is unlike other energy sources such as gasoline, fuel oil, natural gas, and coal, which are produced or mined and then sit in storage for a while until it’s needed.  Batteries and other storage systems such as pumped hydro allow us to generate electricity at one time and consume it at a later time.

 

electric system.typical vs battery

 

For the average electric consumer to benefit from a battery, there has to be some value associated with splitting the timing of generation and consumption.  Such value could be:

  • for reliability reasons if supply will be unavailable at a later time
  • for economic arbitrage because power may be more expensive at a later time
  • to avoid specific utility charges associated with using the electric grid
  • to make a roof-top solar system economical

So are any of these “value adds” actually compelling enough for one to buy and install a cool new battery system? This week we break down the first two – reliability and economic arbitrage. Next week we’ll conclude the discussion by examining avoidance of utility charges and using a battery system to enhance the economics of roof-top solar.

Using Batteries for Home Reliability

The most obvious reason to buy a home battery system is to mitigate the concern of power outages. Severe storms are often followed by stories of homeowners stunned by how much they depend on electricity (“Even my cell phone quits working when I can’t charge it!”) So is the Powerwall the answer? Not necessarily.

Kohler generator

Kohler 14 kW Standby Generator

The largest of the Powerwall home systems provides 10 kWh at full charge. This would take care of a home’s needs for about one day or maybe two or three days if the homeowners were very careful to only run critical loads. After that, power would be out just like the rest of the neighbors.

So if reliability is the concern, it’s probably better to go to Home Depot and spend money on a natural gas backup generator that will run as long as it is fueled.

Using Batteries for Price Arbitrage

So what about economic arbitrage?  As most in the industry (but not the general public) know, power tends to be more expensive to generate during peak times such as late afternoon and early evening in summer. Batteries seem to be the perfect answer – buy power during the cheap off-peak hours and use it during the expensive peak hours. Except, most residential customers in the U.S. are on a flat rate that costs the same no matter what time of day you consumer power.

While it costs the utility more to generate or buy power for consumers during the peak, it costs the consumer exactly the same unless the utility has residential time-of-use rates. And time-of-use rates are very rare in the U.S. So, until time-of-use rates become prevalent at the residential level, this value proposition for a battery system doesn’t work either.

So we haven’t made a strong case for installing a home battery system yet…in our next post we’ll continue exploring reasons consumers may (or think they may) need one.

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Why Auto Manufacturers Care About Getting Electric Vehicles to Market

by Bob Shively, Enerdynamics President and Lead Instructor

At the end 2013 there were approximately 70,000 electric vehicles in the U.S. and 104,000Parking Space only for electric vehicles plug-in hybrids. This is minuscule compared to more than 226 million registered vehicles in the U.S. Why, you may wonder, do car manufacturers even bother? A short answer: They have to.

In 1990 the State of California created a Zero Emissions Vehicle (ZEV) mandate. With ongoing modifications to the rules, nine other states have joined California including Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Vermont. The current rules will require approximate 15% of light-duty vehicles sold by 2025 to be either electric or fuel-cell powered. Together these states make up about a quarter of the U.S. car market. So to keep selling cars, manufacturers must find ways to get electric cars into the market.

Meanwhile, some interesting competitors are coming into the EV space. Tesla has been there for a while and continues to produce spectacularly engineered (but not profitable) EVs. And Smart, now a subsidiary of Mercedes-Benz, was founded by the inventor of the Swatch watch. More recently, technology heavyweights have weighed in:

  • Google has been working on the driverless car (which may or may not be electric).
  • The Wall Street Journal reported last week that Apple has secretly created a project dubbed Titan with several hundred employees working toward an Apple-branded EV.
  • The well-known iPhone manufacturer Foxconn recently announced its own intention to partner with Chinese internet investment company Tencent to develop a low-cost electric vehicle in China.

Clearly change is happening. And EVs are of interest to the electric industry not just as new load but also because the battery technology required for vehicles has great potential to provide short-term electricity storage on the grid whether or not the batteries are in a car. When Tesla announced its recent huge battery manufacturing facility in Nevada some speculated that batteries won’t just be used by Tesla for its cars but also by Solar City, a company part owned by Tesla founder Elon Musk. And indeed, Solar City just announced a GridLogic service where the company will build electric microgrids for cities, campuses, and military bases.

Utilities are also trying to get into the game. Pacific Gas and Electric recently filed with the California Public Utilities Commission a proposal to provide rebates to owners of EVs. These rebates would be funded by carbon emission credits created under the California program restricting greenhouse gas emissions.

It is hard to predict where this is all headed. Maybe the future lies in a model like MyEnergiLifestyleTM, which is a collaboration among Ford, Georgia Tech, and various consumer product companies including Whirlpool, Sunpower, Eaton, Infineon, and KB home. The MyEnergiLifestyleTM service integrates solar power, an EV, flexible loads, and an intelligent control system to minimize energy costs while maintaining full customer comfort. If and when such integrated systems become widespread, we may indeed have an energy revolution. And then no matter where oil prices lie, there will be strong incentive to buy an electric vehicle.

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Will the U.S. Shale Gas Supply Peak Sooner Than Predicted?

by Bob Shively, Enerdynamics President and Lead Instructor

Less than 10 years ago, the industry consensus was that natural gas was becoming scarceiStock_000023298502_Medium in the United States. Based on this belief, gas and oil majors spent billions building liquefied natural gas (LNG) facilities to import gas supplies into the U.S. Now, they are spending hundreds of millions more to convert these facilities into export terminals to ship LNG from the U.S. to Asia and Europe. Consumers are enjoying the benefit of low-cost natural gas, and large industries such as chemical plants are building new facilities guided by the assumption that cheap gas supplies will last for many years.

There is good evidence to suggest that the U.S. is in a fortunate spot with many years of supply available. However, after a recent series of studies, Canadian geoscientist David Hughes suggests that our expectations of long-term plentiful supply are based on inaccurate interpretations of gas drilling and production data.

To develop his own forecast, Hughes performs an assessment of actual well production data from the major shale fields, and then “determines future production profiles given assumed rates of drilling, average well quality by area, well- and field-decline rates, and the estimated number of drilling locations.”[1] According to the analysis, maintaining our existing shale gas production, let alone increasing it significantly, will be difficult.

The issue is that the output from shale gas wells declines rapidly after initial production.  For instance, output from a well drilled in the Barnett shale basin will decline by 75% in just three years[2]. Thus the only way to keep production up is to keep drilling more and more wells. And unfortunately the more you drill, the more you end up going into areas with less attractive geology meaning higher costs and lower output.

It may seem Hughes is another anti-fossil fuel naysayer. However, soon after Hughes released his analysis of the EIA’s estimate of shale oil available in California’s Monterey basin, the EIA reduced its estimate of available supply in the basin by a stunning 95 percent. Still, Hughes’ forecast for cumulative production from 2014 to 2050 for the top seven shale gas plays is 230 Tcf while the EIA’s forecast is 377.

Hughes suggests that the flush of shale gas is likely to peak by 2020, then decline. If true, the bust will hit right after many capital projects — the funding for which was based on long-term robust gas supply — are completed. This would sadly repeat the history of the many LNG import projects built in the 2000s.


Footnotes: 

[1] Drilling Deeper, p. 161, available at http://shalebubble.org/drilling-deeper/

[2] Ibid, p. 175

 

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How Energy Efficiency Programs and Policies Are Driving Low Load Growth

by Bob Shively, Enerdynamics President and Lead Instructor

The U.S. gross domestic product (GDP) has increased 9% since 2008, yet electricity use has not increased at all. In our last blog post, we looked at factors that are contributing to the nation’s stagnant electric load.

The primary factor is strongly increasing energy efficiency. The Bloomberg New Energy Finance Sustainable Energy in America 2015 Factbook reports that in the last decade states have dramatically increased policies that support energy efficiency such as energy efficiency resource standards (EERS) and revenue decoupling that removes incentives for utilities to sell more power.

The result has been a more than three-fold increase in utility spending on energy efficiency programs with over $5.8 billion spent in 2013. If public and private energy savings performance contracts are added in, the spending on efficiency was close to $14 billion in 2013.

In addition, the Obama Administration has created significant new efficiency standards for federal government buildings, and the defense department has pushed efficiency spending on military facilities. We are beginning to see significant growth of distributed generation such as solar photovoltaics and a new wave of combined heat-and-power projects that reduce net loads seen by the utility.

Industrial electric use in the last five years has declined by 3% while the U.S. Industrial Production Index has increased by 2.5%. This suggests that industrial growth does not drive electric load growth as significantly as it once did. And unless it is blocked by the courts, the EPA’s Clean Power Plan will further push states to use energy efficiency as the least-cost way to reduce greenhouse gas emissions.

When looking at factors that could drive load growth such as increased EV use, growth in electric appliances, larger square footage of buildings, and climate change it is hard to imagine such factors will overcome the strong push for energy efficiency and growth of distributed generation. Indeed, when the Energy Information Administration set out its forecasts in the Annual Energy Overview 2014, it felt compelled to provide a low growth scenario that showed no load growth through 2040.

The old utility business model of expanding profits through capital spending while keeping rates low appears to be under increasing pressure. Utilities must collaborate with their regulators to find business models that work in a world of low or non-existent load growth.  Maybe loads will grow again and the work won’t be needed. But being unprepared for a zero-growth future could be an industry-wide disaster.

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Energy Efficiency Among Factors Contributing to the Nation’s Stagnant Electric Load

by Bob Shively, Enerdynamics President and Lead Instructor

The electric utility business model historically has been tied to electric load growth. As flat electric growthloads grow, utilities invest in new facilities to serve the new loads. As long as load growth can be served at a reasonable cost, rates remain stable while utility profits grow. 

But, as we pointed out in a recent blog post here on Energy Currents, the U.S. gross domestic product (GDP) has increased 9% since 2008, yet electricity use has not increased at all.

Here you can see the change in U.S. electric usage each year since 1950: 

Historically, electric use rose almost every year except for the first year in a recession. But for the latest economic downturn beginning in 2008, things look different. We have seen multiple years of reduced usage even though the economy has slowly recovered. So what is causing such stagnation and what might a lack of recent load growth mean for the future of the utility as we know it?

 Some key factors that can drive load growth up include:

  • growth in electric appliances and EVs
  • increase in square footage of homes and businesses
  • growth in industrial output
  • hotter summers and colder winters

And some factors that drive it down are:

  • increasing efficiency of homes
  • increasing efficiency of business/manufacturing
  • shift from manufacturing to knowledge business
  • growth in distributed generation behind the meter
  • cooler summers and warmer winters

Looking at these factors, it appears likely that zero load growth may be a lasting situation. The primary factor is strongly increasing energy efficiency. Next week’s post will continue this discussion by looking at how energy efficiency programs and policies are driving low load growth and what a no-load growth future may mean for the utility industry.

 

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Infographic Shows U.S. Natural Gas Flow from Source to Sector

Ever wonder where the country’s natural gas comes from and where it ends up? This infographic, based on the most recent (2013) data from the Energy Information Administration, provides a visual perspective of U.S. natural gas flow beginning with the source (green icons on the left) and traveling through to the end-use sectors (blue icons on the right).

Enerdynamics invites you to share or reuse this infographic in your own training or company materials so long as you keep the Enerdynamics logo as part of the image and please credit the source as enerdynamics.com.

 Click here to download.

U.S. Natural Gas Flow

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A Dickensian Winter in the Natural Gas Industry

by Christina Nagy-McKenna, Enerdynamics Instructor

Winter 2014-2015 is shaping up to be a study of opposites that is almost fitting of Charles Dickens’ Tale of Two CitiesCars covered with snow

In the East we’ve seen:

  • record cold temperatures
  • the second greatest snowfall on record in Boston (and winter is not over, so the record may yet be broken)
  • cumulative heating degree days from January 1 to February 20 that are 11% above normal
  • 5% more gas pulled from storage than the five-year average in the East region
  • average natural gas prices that are over $10/MMBtu since the new year

In the West, it’s a much different scene with:

  • record warm temperatures
  • a third year of drought and the first rain-less January in the history of San Francisco
  • cumulative heating degree days since January 1 that are 25% below normal
  • 7% less natural gas pulled from storage than the five-year average in the West region
  • average prices since the new year at delivery points in the West that are at or below the average Henry Hub price of $2.88/MMBtu

regional gas prices Oct 2014-Feb 2015

Yet, even with a large price disparity between East and West, there is good news to be found in the data for East Coast natural gas consumers. Compared to 2013-2014 — the treacherous winter of the Polar Vortex — natural gas prices are lower than a year ago as can be seen in the following chart.

Ave wholesale nat gas prices 2014 v 2015

Partial credit for this development belongs to the advanced winter planning done by electricity generators. In New England, where half of all power plants are fueled with natural gas, the devastating cold last year sometimes left generators with no fuel. This year power plant owners locked in natural gas and oil contracts early. ISO New England even provided an end-of-season cash-out opportunity to generators that meet its early reliability goals.

Credit also goes to the lack of extreme demand in the West and higher-than-expected natural gas storage inventories after they were greatly depleted last year. Residential gas customers benefited directly as well. Eversource Energy, a distribution utility with service territories in Connecticut, Massachusetts, and New Hampshire, has proposed cutting customer bills in Massachusetts by approximately $20 a month in March and April to better reflect the actual prices it will pay for natural gas. National Grid, the distribution utility that serves Boston and Northeastern Massachusetts, already cut rates in January and February, which saved customers an average of $20 a month.

Still, it doesn’t sit well with many people in Massachusetts that their neighbors in New York pay less for natural gas. The cost of heating a home or a business and the cost to generate electricity is higher in New England because the region lacks the capacity to deliver adequate natural gas supplies.

However, if this is indeed the case, why is a proposed new pipeline project from Kinder Morgan’s Tennessee Gas Pipeline, which would bring up to 2.2 Bcf/d of natural gas to Massachusetts, so controversial? Despite the high prices and supply constraints, customers do not want the environmental impact or the cost of building a new pipeline.  Kinder Morgan hopes to soon receive permission from the FERC to move forward with the pipeline with a goal of being operational by the end of 2018.  However, many landowners along the 180-mile route oppose the project and have publicly spoken out against it.  It seems 2015 will be a contentious year for both sides as this proposed project moves through the FERC certification process.

pipeline map NE     Source: Kindermorgan.com

Whether the Kinder Morgan pipeline project goes forward or whether another large project or series of smaller pipeline projects take its place, New England will need to add natural gas pipeline capacity to keep up with new demand and to make adjustments as it retires old nuclear and fossil fuel electricity plants and puts gas-fired plants in their place.

It is unlikely that the region can maintain its ambitious plan to retire older power plants and replace them with more environmentally benign gas-fired plants through increased energy efficiency alone. New York will need to add capacity as well if it wants a chance at lowering its average natural gas price to a range similar to that in the Midwest and Western states. In the meantime, we will ride out the remainder of Winter 2014-2015 and hope that next year the weather will not be so drastic on either coast.

Dickens never wrote “it was an average time,” but after two extraordinary winters, that may be exactly what the gas industry needs.


Footnotes and references

U.S. Energy Information Administration, “Natural Gas Weekly Update,”  February 25, 2015.

DiSavino, Scott, “As New England Freezes, Natural Gas Stays Cheap,” Reuters, March 1, 2015.

Kinder Morgan Web Site, “Tennessee Gas Pipeline Northeast Energy Direct (NED) Project,” March 3, 2015.

“Kinder Morgan Pipeline Best Energy Supply Proposal for Mass,” Lowellsun.com Opinion, February 17, 2015.

U.S. Energy Information Administration, “Natural Gas Weekly Update,”  February 18, 2015.

Newsham, Jack, “Baker Calls for Input on Paying for Gas Pipeline through Electricity Bills,” Boston Globe, February 25, 2015.

Newsham, Jack, “Everysource Aims to Cut Its Price for Natural Gas,” Boston Globe, February 23, 2015.

Serreze, Mary, “Kinder Morgan Natural Gas Pipeline Friends, Foes Gear Up for Battle in 2015; Events Planned,”  Masslive.com, January 19, 2015.

Zeller, Tom Jr., “Natural Gas Pipeline Plan Creates Rift in Massachusetts,” New York Times, July 10, 2014.

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