David vs. Goliath in the Energy Revolution

March 29, 2010 at 2:46 pm
Contributed by: Chris

For Green Chip Stocks last week, I detailed a few battles in the war breaking out between consumers who want renewable power and the fossil fuel industry.

David vs. Goliath in the Energy Revolution

The War for Renewables Has Begun

By Chris Nelder
Friday, March 26th, 2010

Anyone who thinks a peaceful transition from fossil fuels to distributed renewable energy is possible should think again.

In fact, the recent actions of the fossil fuel industry have the unmistakable flavor of war.

Its lords have clearly decided that they stand to lose far more in their existing businesses than they might gain from leading the clean energy revolution, at least in the short term. And in today’s business world, the short term is all that counts.

A comprehensive study on what’s really happening out there would fill a book. For this short column, I offer just a few current highlights.

The War for Renewables in California

I’ll begin right here at home, by updating the continuing drama around the Marin Energy Authority (MEA) I previewed in “The Renewable Power Rebellion.”

First, a bit of background.

After California deregulated its electricity markets in 1997, a flood of new competitors to the investor-owned utilities (IOUs) entered the market. Individual consumers could choose among several power providers, some of whom offered 100% renewable energy. But the power crisis of 2000-2001, precipitated by the despicable Enron and its comrades, ended that choice and forced consumers back into the arms of the IOUs.

In 2002, a different sort of consumer choice was enacted through AB 117, which allowed municipalities to form new entities called Community Choice Aggregations (CCAs). CCAs can buy power from other providers on behalf of the customers within their jurisdictions. Customers who do not want to join the CCAs may opt out.

CCAs effectively offer a new way that consumers can choose more renewable power than their utility can (or will) offer.

This year, MEA emerged as the first CCA in California, offering 25%* renewable power (as compared with PG&E’s 14%*) right out of the gate, with a consumer option to buy 100% renewable power for a modest 6% price premium. In time, MEA intends to offer 100% renewable power to all of its customers at competitive rates.

But the monopoly IOU, PG&E, is prosecuting an aggressive campaign to stop it in its tracks. I have begun an investigation into PG&E’s actions and as the Robert Hunter lyric goes, “If I told you all that went down, it would burn off both your ears.” Underhanded, dirty tricks are their norm, not the exception. Yet they are widely regarded (thanks in part to ample spending on public relations campaigns) as one of the greenest, most progressive utilities in the country.

PG&E originally lent its qualified support to CCAs when the legislation came out, but then adopted a neutral stance when the California Public Utilities Commission (CPUC) began its proceedings on the matter. Beyond the words, however, PG&E’s actions demonstrate that it clearly considers municipalization of power procurement a threat to its business.

Under a Byzantine arrangement of subsidiaries and relationships with other entities, the utility PG&E has devised various ways to work around the rules that pretended to protect the consumer after deregulation. For just one example, it now procures much of its power through swap agreements and opaque contracts with third parties so that the CPUC can no longer really examine their details. I’ve been told that I couldn’t find how much profit they make on generation if I wanted to, because nobody has all the information.

What is clear is that PG&E owns an effective monopoly on providing natural gas–both to customers directly, and to the gas-burning generators of its electricity. Its profit margin on the power itself is kept minimal under the law, but that’s allegedly about one-tenth of the profit it makes on transmission of the gas through its pipelines, and the transmission of power over its network.

That appears to be the real reason that PG&E has fought the MEA. If the latter were to succeed in fostering widespread deployment of distributed rooftop solar generation, it would cut PG&E’s revenues from both power transmission and natural gas supplied to centralized power plants. And if MEA were a stunning success, as Ohio’s CCA has been, it could lead to a proliferation of CCAs across the state.

After PG&E’s distortions and outright lies intended to whip up fear and confusion about MEA–under the guise of the “Common Sense Coalition” it funded–failed to stop it, the utility committed up to $35 million to put Proposition 16 on the ballot in June. It is the sole architect and sponsor of the initiative, which would embed in the state constitution a new requirement for “two-thirds of the voters in the territory being served and two-thirds of the voters in the territory to be served” to approve before any local government could proceed with power procurement, effectively closing the door on any further CCAs and preventing MEA from expanding its service area.

In typical fashion, PG&E has disguised the true objectives of Prop 16 under a high-minded appeal to protect the voters’ right to choose. Got that? A utility company is willing to spend $35 million in an altruistic effort to protect your rights as a voter! It’s an inversion of the truth that would make Orwell blush.

David vs. Goliath

Because municipalities are forbidden by law from such activism, the MEA can only defend itself through a small independent activist group funded by private donations. I don’t know the exact numbers, but it looks like the funding balance is roughly $35 million vs. $100,000, at best.

Here are the facts.

  • PG&E has failed to meet the state 20% renewable portfolio standard (RPS) target for 2010, and it is in no way prepared to meet the proposed 33% by 2020 standard.
  • It has failed to produce the efficiency gains that $450 million a year in state funding should have achieved, and has apparently used the money as a political slush fund while hiding where its alleged efficiency gains came from.
  • It has successfully lobbied to limit renewable generation by its customers under net metering to a small fraction (from 0.5% initially to 5% now) of peak demand loads, when it makes no sense from a public interest standpoint for there to be a cap at all.
  • It continues to parlay a few million dollars here and there in handouts for efficiency improvements in exchange for political favors, while vigorously lobbying for billions of dollars in new transmission lines, new natural gas power plants, and new nuclear plants…all while misrepresenting those projects as being much cleaner, and greener, than they actually are.

For example, when the CPUC asked PG&E and Southern California Edison to sign a pledge affirming their claim that a proposed multi-billion dollar new transmission line stretching from just below the Mexican border to San Diego would be used only to import renewable power, the utilities declined. Their true intent was to use the line to import power from new natural gas-fired plants in Mexico.

Indeed, PG&E is now one of the top lobbyists for nuclear power on Capitol Hill, seeking billions of dollars in loan guarantees for new nuclear plants, even as it tries to choke off the deployment of rooftop solar power.

The utility’s chutzpah is breathtaking, particularly considering that it has just received the largest rate hike in history, and has another $5 billion in rate hikes now pending before the CPUC. And that’s on top of the roughly $20 billion it received for the bankruptcy bailout in the wake of the Enron debacle, which we’re all still paying off on our monthly bills.

For its part, the CPUC fiddles around the edges of the utilities’ proposals in an attempt to create the illusion of guarding the public interest, while its president Michael Peevey (the former Vice President of Southern California Edison) rubber-stamps them.

The conflict of interest is painfully clear. A mass transition to distributed renewable power is the best hope for the future of local communities, but PG&E has nothing to gain from it and everything to lose. They will stand to profit handsomely from building billions of dollars’ worth of new gas- and nuke-based power infrastructure, but will lose when customers generate their own power and cut waste through higher efficiency.

Even in California, with its abundant sunshine and its high electricity prices, the push for renewables is a David vs. Goliath scenario…and CCAs are the stone.

The War for Solar in Hawaii

In a remarkably similar tale, a report from Hawaii last month detailed how the Hawaiian Electric Company (HECO) proposed a total ban on rooftop solar systems connected to its grid. The move was in response to the unveiling of an aggressive new feed-in tariff (FIT) program adopted by the state PUC.

HECO had originally supported the FIT, and committed to a broad agenda that would obtain 70% of the state’s power from clean energy by 2030. But when the program became real, it backpedaled with the usual whining and hand-wringing about maintaining grid stability, and proposed instead that it form a working group to study (read: delay) the issue further.

As my readers know, I believe that FITs are the most effective, tried-and-true policy approach around for encouraging distributed renewable power, and I have hailed Hawaii’s FIT as a promising step toward a national FIT model.

If the U.S. had any sense or vision at all, it would make Hawaii a proving ground for distributed renewable power. Being isolated, it is utterly dependent on imported fossil fuels, which provide 96% of its energy. Consequently, it pays the highest electricity rates in the nation.

Hawaii also has abundant sunshine and enormous marine energy potential. With the impetus of the FIT, it could show the rest of the country exactly how much of America’s fossil fuel habit could be cured through renewables.

At this point I don’t know exactly what’s behind HECO’s ban, but it doesn’t take much imagination to guess. Scratch a hoary utility, and you’ll quickly find its fossil fuel bedfellows.

The War On Greenhouse Gases

Another fight is now unfolding in California, as the so-called “California Jobs Initiative”–an entity backed by oil and gas companies–has raised nearly $1 million to put an initiative on the state ballot for November that would suspend the state’s tough new emissions law, AB 32.

According to SolveClimate blogger Leslie Berliant, the group has issued a stream of factually incorrect, fearmongering claims about the jobs that will be lost in the state as AB 32 is enforced, while funding studies that cast doubt on the number of green jobs that would be created under it.

If the initiative passed, it would stop the state’s planned cap-and-trade program until California has four consecutive quarters of unemployment below 5.5%…something that has only happened twice, in 2000 and 2006, and seems highly unlikely to happen again any time soon (if ever).

The War for Wind

Meanwhile, Danish journalists confirmed this week that the Institute for Energy Research (IER), an American think tank with close ties to the coal and oil industries, had commissioned and paid for a report released last year by a Danish think tank that made numerous false and disparaging claims about Denmark’s wind industry.

The study concluded that coal is cheaper than wind, conveniently ignoring the true costs of coal while assiduously counting all the costs of wind, and then some.

According to a post at Desmogblog, IER’s CEO Robert Bradley was formerly the Director of Public Relations Policy at Enron, where he wrote speeches for “Kenny Boy” Lay. IER’s connections extend to notorious fossil fuel companies and front groups including Koch Industries, the Competitive Enterprise Institute, TASSC, the Cato Institute, and the Heritage Foundation, yet they shamelessly accuse the Obama administration of being too cozy with wind energy lobbyists.

Pick a Side

It’s becoming abundantly clear that if communities want to have a resilient, secure, local renewable supply, they’re going to have to fight for it–and fight hard.

The businesses that control the power sector now are not going to just give up their grip on it, nor are they going to lead the transition to renewables. They’re going to oppose it at every turn with delay tactics, dirty tricks, outright lies, and anything else that will give them an edge. And they have far deeper ties to policymakers, and far deeper pockets with which to wage the war, than anybody in the renewables business. By a wide, wide margin.

What’s good for them is not good for communities, and vice versa. There will be no bridging of that gap. Nor would it be rational to expect investor-owned companies to act against their own self-interests for the benefit of the public.

The residents of Marin County are already being asked to choose a side in the war for the future of energy. Soon the rest of the country will be asked too. Do you have the will to form a stone like MEA? And if you do, do you have the will to throw it?

I say: ¡Viva la Revolución!

I’ll close with a few more lines from the song I quoted above:

Since it cost a lot to win
and even more to lose
You and me bound to spend some time
wondering what to choose

Goes to show you don’t ever know
Watch each card you play
and play it slow
Wait until your deal come around
Don’t you let that deal go down.

— Robert Hunter, “Deal”

Until next time,


Thanks to Barbara George of Women’s Energy Matters, Paul Fenn of Local Power,  Alexander Bischoff of open4energy, and Charles McGlashan of Marin Energy Authority for their contributions to this article.

Corrected from original

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  1. Dear chris,

    Why doesn’t PG&E’s hydroelectric power count as green and renewable? I understand their mix is 50% hydro. Don’t you think nuclear energy may be the way to go despite the long term waste management problems since it has a low carbon emission rate?

    Comment by Beverly Mayeri — March 30, 2010 @ 10:42 am

  2. Beverly: I use PG&E’s own definition of renewables, which is a separate category from hydropower. See their 2008 power supply mix here.

    There is really no way to increase supply from large hydropower – those are legacy assets.

    I have a long list of reasons why I do not believe that new nuclear plants are practical in California, and waste is at the bottom of that list. Financing, insurance, accurately counted construction and maintenance costs, permitting and siting are the more important issues. I have not written on that subject yet because it’s a complex, difficult, and technical topic, but I do intend to at some point.

    Comment by Chris — March 30, 2010 @ 10:55 am

  3. Chris,
    The definition of “renewable” is not established by PG&E; it is set up under state law. Sometimes, however, PG&E tries to misrepresent its renewables by using various definition, sometimes even one that is similar to what Beverly suggest. None of these alternative definitions conform to the law. The state’s definition of renewables is not unique; in fact it is similar to what most other states in the US and countries around the world use. It is interesting that advocates find that calling power sources by the names “nuclear” or “hydro” is not enough, and that they covet to add the titles of “green” and “renewable”.

    Also, some of PG&E’s hydropower is already counted toward their renewable portfolio; state law allows hydropower facilities under 30 megawatts to “count” as renewable. It also allows efficiency upgrades of small hydro facilities to count as renewable, even if this pushes them over the 30 megawatt limit. Small hydro accounts for 20% of PG&E’s renewable energy, according to the charts you link to.

    As for nuclear, the reason it is not called renewable is because it is not in fact renewable, at least not for the current reactors in the US which generally have a “once-through” fuel cycle. Uranium is a mined product, just like coal, petroleum and natural gas. While we will never “run out” of uranium per se, we will sooner or later run out of easily and cheaply mined uranium, for exactly the same reason we will run out of cheap and easy fossil fuel. Uranium reactor waste can be “recycled”, but only at a steep price and with a large escalation of security and safety vulnerabilities.

    Great article; thanks for writing this. I do have some additional comments on the comparison between PG&E and MEA. It looks like you corrected one of them–the fact that MEA is offering 25% renewables out of the gate and not just 20%. Unfortunately the 20% figure went out the gate in some email distributions that I saw. Also, PG&E’s renewables is down between 13% and 14%, not 15%. So, combining these corrections: MEA will double the amount of renewables compared to PG&E, not just add 1/3 as originally implied. Another important point is that MEA and San Francisco have both voluntarily set CCA targets of 51% renewables, far higher than required by the state; while PG&E has consistently offered reasons for delaying implementation of even the minimum legally required amount of renewables.

    It would be great if you would allow a version, with these few corrections, to be freely distributed.

    Comment by Robert — April 1, 2010 @ 6:18 pm

  4. Thanks for your feedback and additional information, Robert.

    I regret the 20% error that went out originally and corrected it the following day. I have verified the 15% figure on PG&E’s web site and linked it to the source.

    All of my articles may be freely distributed.


    Comment by Chris — April 1, 2010 @ 6:34 pm

  5. My gut tells me that change won’t come from the major population centers where the major power companies have a grip on policy and politicians. Instead it will come from new communities, some of which may be self-formed, and even self-contained. And many of these like-minded citizens will have met, and got in touch with each other, on the Internet.

    Just to give an example: Detroit. If people wanted to change the dynamics of power generation and distribution, wouldn’t it make most sense to start in a place which is already in the pits, and where it wouldn’t make economic and political sense for the power companies to spend big political bucks on a political fight since they aren’t making much money (in Detroit) anyway? I’d say so.

    Such a strategy would simply be a modern version of Mao’s strategy of using the villages to surround the cities. Just as with the Internet, I suspect that change will come from the edges, not the power centers of today. And that’s because the power centers of today know that they won’t be the power centers of tomorrow.

    Comment by Paul Denlinger — April 4, 2010 @ 6:01 am

  6. […]  http://www.getreallist.com/david-vs-goliath-in-the-energy-revolution.html […]

    Pingback by Facts from Marin Clean Energy – March 2010 « Sustainable Mill Valley — April 6, 2010 @ 11:19 am

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