Sep
19
2017

Anticipating Energy Issues in Tax Reform

As Carly Simon sang decades ago, “anticipation, anticipation, it’s makin’ me late, it’s keepin’ me waitin’.”  “Anticipation” could be the theme song of the week here in Washington, D.C., where several thousand people are getting ready (again) for release of the Republican tax reform plan.

Rumors are circulating that “everything is on the table,” meaning every interest group is gearing up to protect current provisions that lower their constituents’ tax bills and therefore cost the Treasury money.

Even amid all the anticipation, long-time tax-watchers know disappointment could be next week’s story line. Still, something seems to be coming together, and so it’s timely to review a few of the known knowns and ask questions. What’s the timeline? Who are “the deciders?” What provisions could impact energy policy and consumers? 

Speaker Ryan said earlier this month that the tax reform plan would debut the week of September 25. “Plan” likely means a document outlining areas of agreement between the Trump administration and congressional leadership. It’s unclear how much can be gleaned from the plan, though, as Speaker Ryan also said that Ways & Means and Finance need to figure out the details and draft legislative language. Late October is the current best guess for when the tax committees might take up legislation.   

However, between now and late October (only 6 weeks!) lie a boatload of challenges. Aside from the really thorny tasks of maintaining consensus, and reflecting that in legislation which amends thousands of pages of the Internal Revenue Code, Congress must also pass a budget resolution in order to sidestep Senate rules that normally require 60 votes to move forward. 

Who’s likely to be in the room when decisions are made? The “Big Six” for tax reform are:

  • House Speaker Paul Ryan
  • House Ways & Means Chairman Kevin Brady
  • Senate Majority Leader Mitch McConnell
  • Senate Finance Chairman Orrin Hatch
  • National Economic Council Chair Gary Cohn
  • Treasury Secretary Steve Mnuchin.

However, many other members of Congress (just about all of the other 531) will want to weigh in and are already doing so on social media, in public forums and behind closed doors. Some key bills have already been introduced as part of lawmakers’ campaigns to get important ideas into the overall reform package.

One bill that seems to have momentum and could bring benefits to energy consumers is bipartisan and bicameral – an increasingly rare combination. The “Carbon Capture Utilization and Storage Act” seeks to increase an existing tax credit for carbon capture and storage projects that could eventually help keep clean coal in the generation mix.  According to a recent summary of the Senate version, the bill is necessary because the existing “45Q” credits, at “$10 per ton for Enhanced Oil Recovery (EOR) and $20 per ton for geologic storage continue to be insufficient to stimulate any real financing of CO2 capture or utilization projects.”

Renewable energy technologies, perennial applicants for tax benefits, are expected to push benefits for small wind, geothermal heat pumps, fuel cells, and Combined-Heat-and-Power. We may also see a renewed effort to extend timelines and increase flexibility for the nuclear Production Tax Credit, an integral building block in making sure conventional plants (such as Vogtle) and next-generation installations (Small Modular arrays) come to market and add diversity to our generation mix.

Another likely entrant into the tax reform fray – a renewed push for a carbon tax; while congressional support is thin, new D.C.-based, well-funded coalitions have emerged to boost the concept. At PACE, we view a carbon tax as saddling the American economy and its consumers with higher costs, while doing very little to address global carbon emissions.

As Congress and the White House circle around tax reform, PACE will keep an eye on the debate, especially as it relates to energy, and update you if anticipation becomes real action.

Sep
14
2017

Smart Cities: What's in a Name?

After Harvey and Irma, some cities and towns may need to rebuild parts of their infrastructure. To do that, they can partially rely on disaster relief public assistance from the federal government, but also will need their own funds and sweat equity. Local government personnel, elected officials, and concerned citizens may discuss the “Smart City” concept as they formulate plans to move forward with recovery.

The word “Smart” clearly speaks to consumers, since it’s attached to a wide range of products and services. (It already has a longer shelf life than that relic of 1990s marketing, the “e- prefix”). No city is lining up to get grants or recognition for being a Dumb City, although I believe many people weary of being hyper-connected would move to one tomorrow. So, what is a Smart City and what questions should energy consumers ask if (when) the term comes to their neighborhood?

The ever-helpful internet serves up dozens of definitions. My amalgamation of these: A Smart City uses existing and new technologies, along with a robust interactive planning effort among its departments and stakeholders, to make every aspect of its operations more efficient and effective for citizens and businesses. The Smart City relies universally on big data and real-time responses. High-speed, broadly available telecommunications are critical. The Smart Grid, seen as the responsibility of the local utility provider, is also integral.

The Smart Cities movement emerged over a decade ago, boosted by a partnership between the Clinton Foundation and Cisco, which developed a suite of technologies to help cities become more sustainable. Not surprisingly, other technology companies, such as Google and IBM, were also generating new applications and testing them all over the world. The ensuing years have seen a veritable explosion of conferences, frameworks, working groups and panel presentations. Last year, the U.S. Department of Transportation’s “Smart City Challenge” was featured prominently at SXSW, a sure sign of the concept’s trendiness.

Energy companies, long-standing partners with their local communities, are full participants in the Smart City conversation. In March, the Edison Foundation highlighted the achievements of several cities and their utility counterparts, including Columbus, Kansas City, and San Diego. They also flagged the unavoidable fact that electricity provides the lifeblood for many of the exciting technologies (EVs, public charging stations, data centers, connected information kiosks, to name a few) needed. Smart meters, which provide real-time data about outages and energy usage, are rapidly replacing “dumb” meters thanks to efforts by the entire electric utility sector, with estimates now of over 70 million installed in the U.S.

As Smart City efforts grow, energy consumers and stakeholders should be aware of the tendency some organizations have shown to infuse Smart City dialogue with talking points about renewable energy and climate change. As plans develop for rebuilding after Harvey and Irma, we are likely to see some take advantage of the disasters to tie Smart City programs to 100 Percent Renewable Energy goals. As PACE noted earlier this summer, in reviewing an academic debate, 100 percent renewable energy programs aren’t feasible from either a technological or economics perspective. In PACE’s view, focusing on unrealistic goals diverts from conversations needed now in order to move forward on achievable results for consumers.

If a Smart City discussion is ongoing or begins in your area, some useful questions might include:

  • If the community gets a Smart City grant, can it sustain the program after the money and interested funder are gone?
  • Will the community see a broad and equitable build-out of broadband services?
  • Can average citizens easily participate in conversations about the Smart City?
  • What’s the cost per consumer of a Smart City initiative, and how does that compare to alternative plans?
  • Are third-parties, such as technology vendors, gaining unnecessary access to consumer data, especially concerning energy usage?
  • Are Smart City drivers, including funding, tied to 100 percent Renewable Energy initiatives?

Smart City conversations are often grounded in good common sense. There’s nothing wrong with applying a catchy label to routine planning, brainstorming and partnerships. Local officials and expert staff should be recognized for thinking ahead and congratulated for attracting much-needed private investment from mega-companies such as Google.

The proliferation of discussions and programs around Smart Cities points to the complexity of the subject and need to get it right. A smart way forward is to recognize, as many communities have, that when it comes to technology and consumers, one size doesn’t and shouldn’t fit all.

Sep
11
2017

What’s in Store for Storage?

The Salvation Army asks people who want to help those directly affected by Hurricane Irma to visit helpsalvationarmy.org, call 1-800-SAL-ARMY or text “Storm” to 51555.

During the recent spate of hurricanes, I’ve talked with friends and relations across the Southeast to see how they’ve prepared, weathered the storm, or in some cases, worked with line crews to assist restoration efforts. In several conversations, we discussed (again) whether a home generator is worth the investment. So, when the Smart Electric Power Alliance (SEPA) released its new energy storage market snapshot last week, I was doubly motivated to read it and learn more about how utilities and individuals can join the energy storage revolution.

 According to SEPA, “storage is a rapidly evolving segment of the energy sector” and “batteries of all sizes are positioned to play a significant role in grid operations in the near future.” Other stakeholders seem to agree. Kevin McIntyre, nominee for Federal Energy Regulatory Commission (FERC) Chairman, was questioned by members of the Senate Energy and Natural Resources Committee during his confirmation hearing last week. He was asked what role energy storage should play in the electricity markets and how FERC should properly compensate storage for the benefits it provides to the grid. (FERC has an open rulemaking asking how to remove barriers so that storage can more fully take part in the organized markets.)

Undoubtedly, energy storage will be part of the utility of the future, but when and how much? Is storage truly just around the corner, or are we just taking the first steps of a long journey?

 SEPA’s report defined storage as “batteries, flow batteries, kinetic energy storage (such as flywheels), supercapacitors, and compressed air energy storage.” Survey respondents include utilities that represent “slightly more than 75 million customer accounts out of the 130 million in the U.S.” SEPA offers the following topline data in the report’s executive summary: 

·      Total installed energy storage nationwide is now 622 MW / 661 MWh across 2,399 systems.

·      California led the way with new installations in 2016 (120.5 MW / 176.6 MWh), but the Midwest held its own with Indiana adding 22 MW / 20.8 MWh), and Ohio bringing on 16.1 MW / 6.2 MWh.

·      31 utility respondents deployed their first energy storage project in 2016. Conversely, of the 155 utility respondents, 44 did not have any interconnected energy storage systems at the end of 2016.

·      Residential deployments accounted for 4.5 MW / 7.5 MWh, while non-residential accounted for 54 MW / 68 MWh.

·      Utility-supply storage assets grew to a cumulative 514 MW / 509MWh due to 29 new installations.

After digesting these numbers, and realizing that 622 MW is about the size of a small power plant, I checked my memory of the overall scale of the nation’s electric power market. In its August 2017 “Electric Power Monthly,” the Energy Information Administration (EIA) reported that the country’s total net generation for June 2017 was 355,774 thousand MWh, or 355,774,000 MWh.

SEPA’s report does an admirable job of making the existing 622 MW of storage capacity come to life, highlighting several utility pilot projects across the country. Reading over these, it’s easy to see that utilities, states and consumers are trying a lot of new things and that everyone has a great deal to learn about details such as cost, technology, siting, battery lifespan and disposal, to name a few.

Consumers also need time to understand how storage fits into their homes and businesses.  Always a willing guinea pig, I did some online browsing for storage solutions. At the Tesla Power Wall site, I entered my home’s size statistics and some modest goals (one day of backup power for my home, powering lights, outlets and the fridge) for performance of a battery wall. I was quoted $5,500 for one 14kWh Powerwall battery, $700 for supporting hardware, and provided an estimate of $800 to $2,000 for installation that does not include possibly needed electrical upgrades. I’m pretty sure if I go back to my friends and relations affected by Harvey and Irma, the survey will say that the average family would apply $7000+ to many other priorities. 

Purely by the numbers, while storage may be rapidly evolving as technologies shift and storage pilot projects deliver new information, installed storage capacity is still an incredibly tiny piece of our overall electricity system. Storage won’t and shouldn’t scale all the way up until utilities, customers, and storage provider partners have time to sort out essential questions. It may be premature to set sweeping rules for organized markets when some states haven’t even brought a single storage facility online. 

PACE will return to this important subject in order to highlight these questions in detail, as we did in an August blog on the supply of Rare Earth Elements, an essential component for renewable energy and many storage applications. Share your storage ideas and questions with us at energyfairness.org, on Twitter, or Facebook.