Solar and Wind: Rent-Seeking at Ratepayer’s Expense

From LA River Series by John Kosta

From LA River Series by John Kosta
From LA River Series by John Kosta

I’ve outlined why rooftop solar is currently uneconomic in most parts of the country, and would never be competitive with utility-scale solar (large installations built and maintained by companies) without the political choice to subsidize it either directly (rebates, tax credits) or indirectly (tariff schemes that favor it by in effect paying solar owners retail price for wholesale power.)

TechCrunch in the 2-22-19 article by Mark Harris (@meharris) describes Solar City/Tesla’s “astroturfing” efforts. Astroturfing implies special interests funding a group that appears to be more broad-based while lobbying, so it doesn’t quite fit here — Tesla’s advocacy group purports to include other solar companies but (at least recently) doesn’t pretend to represent citizens or users in general, as in true astroturfing. But it does fail to disclose its primary sponsor.

Tesla has been masking its lobbying efforts on solar panels and battery storage through the Energy Freedom Coalition of America, a trade association that is little more than a front for the automaker and alternative energy company, public documents suggest.

SolarCity, which Tesla bought in 2016, began the practice of using the EFCA to promote its products and services without acknowledging it was the only significant member of the organization. EFCA was initially portrayed as a solar advocacy group with grassroots support.

When rule changes threatened payments to Arizonans with domestic solar panels in 2016, EFCA knew just what to do. It launched the Arizona Solar Pledge for citizens “to demonstrate their support for energy choice and add their names to the growing coalition determined to protect Arizona rooftop solar customers.”

Anyone signing the petition would “demonstrate to … the broader political community that the people of Arizona stand with rooftop solar and energy choice,” wrote an EFCA spokesperson at the time.

The economics of regulated power utilities are extremely complex. The utilities came to be regulated as natural monopolies by cities, states, then finally at the federal level during the Great Depression. This paper from the U of Texas Energy Institute explains how the current model was developed:

The dominant model for delivering electricity to consumers was, and remains, large-scale, central generation facilities, and transmission and distribution networks at regulated prices (rates) (see Figure 3, Model 1). The traditional utility business model formed within the interplay of technology, finance, and regulation. The business structure was created in the early 20th century as the industry pioneers like Samuel Insull realized that technology allowed for power plants to become larger (especially, using steam turbines) and to reach economies of scale that reduced the unit cost of power. Insull and other early electricity providers also realized that they could make money selling electricity to a more diverse set of customers throughout the day, rather than simply serving evening electricity demand (or “load”), which was the basis of the early electric systems. This realization led them to acquire more customers and to grow their service territories. These large power plants and networks necessitated financing mechanisms, via holding companies with multiple investors or later, access to low-cost financing via the debt markets. These progressively more advanced methods of equity and debt financing enabled new infrastructure (power plants, transmission and distribution lines) to be built and paid for over time, but without all the risk falling on a single company or investor. Regulation was considered necessary to allow electric companies to operate as monopolies to avoid waste of capital resources in duplicate infrastructure, create a regulatory compact that included an obligation to serve within the monopoly service area, stabilize the cost of capital by reducing risk, and provide affordable electricity service. To protect customers from monopolistic prices, electricity rates started to be regulated first by municipal, then by state governments. Federal regulation became relevant when grids grew larger across state borders, thus generating interstate commerce.

[Note, BTW, that Texas’ efforts at deregulation by allowing consumer choice of generating company while keeping the local grid a monopoly was much more successful than California’s, largely because Texas’s legislature was not *as* corrupted by special interests that inserted provisions in the law to favor their games.]

The regulated public utility model worked well enough for decades, but began to fray at the edges as some of its assumptions began to unravel:

— Power no longer needed to be generated near use. This is less true as less lossy high-voltage interconnects came to connect larger regions, which allowed power to be sourced from a larger area.

— Sources of power became less reliable as renewables were pushed into the mix, idling baseline capacity.

— Widespread use of AC created an afternoon-early evening peak usage that taxed sources. Lacking short-term storage, peaker plants became more necessary.

Under the old model, utilities either generated most of the power used themselves or contracted with others to supply it. Sourcing was either internal or under long-term supply contract, which generally required a minimum take-or-pay to justify investment.

Politicians began to tinker with this model by favoring some sources over others, notably in recent years setting higher and higher targets for so-called renewables while shutting down nuclear plants and limiting hydro by requiring dams to manage water for downstream ecosystems. Grid management became more challenging, and only a small number of experts understand how to arrange supplies to match instantaneous demand.

The push for more renewables and less nuclear has gone beyond the point of diminishing returns, destabilizing the grid and increasing rates to all consumers and businesses. The situation in California is now worse than in any other state, after a disastrously mishandled “deregulation” effort bankrupted utilities and saddled the state with expensive power contracts for a decade. Beset from all sides by renewables mandates, restrictions on infrastructure spending, and requirements to trim brush for fire suppression while local NIMBYs protested tree trimming, utility managements grew less able to accomplish their core goals as a culture of complacency set in.

The recent disastrous fires and the natural gas incidents (San Bruno pipeline explosion, Aliso Canyon underground storage reservoir leak) devastated communities and cost $billions in damages. Yet the state’s utility regulators have no choice but to jack up rates further to recapitalize the bankrupt utilities. They are now wholly-owned creatures of the state, and no investors will step up to fund them without guarantees.

The PG&E bankruptcy is the first among many for this round. From the Chron 2-22-19 story by Taryn Luna, “California legislators want final say on utility bill increases following PG&E’s bankruptcy filing”:

California lawmakers would carve out a key role for themselves in the bankruptcy of Pacific Gas and Electric Co. under a proposal introduced Friday in the Legislature. The legislation marks the latest attempt by state officials to intervene in the reorganization of California’s largest utility, a process playing out in federal court that legislators fear could lead to higher bills for customers and leave wildfire victims uncompensated for losses.

The proposal would require the California Public Utilities Commission to seek approval from the Legislature for any increase in PG&E’s electricity rates. Customers took on the burden of billions of dollars in rate hikes after PG&E last filed for bankruptcy in 2001. “In effect, this requirement gives the Legislature a say in how the reorganization impacts PG&E customers — who otherwise would have no representation in any consideration of rate changes,” said Sen. Jerry Hill (D-San Mateo), who introduced the bill.

PG&E cited some $30 billion in legal liability when it filed for bankruptcy protection in late January. The filing came after state investigators found the company’s equipment sparked dozens of wildfires in recent years, in some cases because of negligence. Under Chapter 11 bankruptcy, the company will continue to operate as it develops a plan to pay off debts. The situation has frustrated California lawmakers, who spent months last year passing a bill to help offset PG&E’s legal liability for damages. Now legislators and ratepayer advocates are concerned that customers won’t have a voice in the bankruptcy case and may see electricity bills increase dramatically under the reorganization.

Hill’s office said the CPUC approved an 11 % return on equity for PG&E, secured through rate hikes, to improve the company’s credit rating more than a decade ago after the last bankruptcy. At the same time, the agency sanctioned nearly $8 billion in new financing that also fell on customers in addition to $4 billion approved before the filing. Mark Toney, executive director of the Utility Reform Network, said the rate hikes resulted in bill increases of about $1,500 per customer over the course of nearly a decade.

The moral of this disaster is that political micromanagement of utilities and energy policy has done very little to combat climate change (cheap natural gas from fracking, also opposed by renewables advocates, has done much more.) But it has made power more unreliable and expensive, hurting consumers and businesses, most notably the less wealthy inland regions requiring more AC and where manufacturing employment is fleeing California.

Subsidies for rooftop solar and EVs in the $billions have mostly helped wealthy consumers buy shiny status goods. Loans and grants to big projects have similarly been wasted as politically-connected insiders take the money and run, leaving the white elephant plants behind in bankruptcy.

Every complex system set up to “manage” energy policy for some greater purpose than providing reliable power at the lowest cost will be gamed by the bootleggers who know how to get laws and regulations written to favor their looting. The proponents will exit with their ill-gotten gains leaving the rest of us to pay. Voters did this to themselves, it’s true, by favoring politicians who promised to Do Something about climate change. But the pain will be wasted if the lesson is not learned: don’t elect people and parties who offer more of the same quack medicine.


More on solar and Tesla topics:

PS: Rooftop Solar Mythology

The Story of Solar City’s Takeover.

Rooftop Solar: Trendy Boondoggle or The Future of Power?

Solar: Cost-Effectiveness by Regions, Climate and Latitude

Solar: Do Not Lease!

Solar PV on a Palm Sorings rooftop
Solar PV on a Palm Springs rooftop

To continue my delayed series on rooftop solar investment: pay attention to the horror stories coming to light on how rooftop solar *leases* can damage your home’s value or end up as a nightmare of higher costs and roof damage.

A few years ago, the general tone of advice articles gave equal weight to leasing vs. buying. The lure of “no-cost solar” attracted hundreds of thousands of cash-poor customers who wanted to cut their power bills without laying out cash. The salespeople at solar companies pushed leasing schemes which promised immediate savings but had contracts escalating lease payments regardless of power costs, and promises of guarantees and maintenance that it turns out were not going to be kept.

As a result, the public image of solar leases has soured and people trying to sell houses burdened by solar lease contracts are discovering it’s difficult or impossible to sell without buying out the lease first, a very costly proposition.

Bloomberg’s 2/14/2109 article, “What Happened When I Bought a House With Solar Panels:Third-party ownership and decades-long contracts can create real headaches,” by Esmé Deprez, recounts how one house couldn’t be sold until the lease was bought out and the panels removed:

Two days after walking through Jug’s ham shack, we made an offer. A week later, just before we entered escrow, we learned the solar array hadn’t belonged to Jug. It was, in the language of the industry, a third-party-owner, or TPO, system, belonging to Sunrun Inc., the largest provider of residential solar in the U.S. I started looking into the TPO model. It’s used less often than it once was, but it’s been important in making residential solar, once out of reach for most people, much more widespread. The reason is simple: Homeowners usually pay nothing upfront. A company like Sunrun puts solar panels on your roof, connects them to your home, and claims a tax benefit for owning the system. Going forward, you pay Sunrun to provide the bulk of your electricity needs instead of your utility….

I got ahold of a copy of Jug’s contract, and quickly saw how Sunrun could afford to extend such an offer. It lasted 20 years. The payments escalated annually by 2.9 percent—they’d be 72 percent higher by 2036. The tax credit was worth at least $5,000….

I asked Sunrun if it would take back the system to put it on someone else’s house. It wouldn’t. The only way to get out from under the obligation, as far as we could tell, was to prepay the balance on the remaining 18-plus years’ worth of payments and buy the hardware outright. The price: $27,300….

On consumer review sites and in local news reports, rueful customers warn others to stay away from TPO solar offered by Sunrun and other companies. State attorneys general and politicians have fielded complaints from people who say they were sold expensive systems they can’t afford after signing contracts they didn’t understand; or are paying more now on their electricity bills, not less as promised; or are having trouble selling their homes because potential buyers are turned off, just as I was….

As I write this I’m pregnant. The life Alex and I pictured the first time we walked through Jug’s house, now our house, is taking shape. And let me tell you about our electricity bill. Had we assumed Jug’s lease, we’d be paying $79 a month to Sunrun (the second escalator would have kicked in) plus at least $10 to SoCal Edison to stay on the grid, minus $7.50 for net metering. We’ve been in the house 10 months, and our average SoCal Edison bill is $30. Compared with becoming Sunrun customers, we’re saving $50 a month. We’re going to give some of that to help protect the environment.

The lease model has several forms, with acronyms like TPO (Third Party Owner) and PPA (Power Purchase Agreement) thrown around. The gist of all of them is that your solar panels are purchased on behalf of investors who fund the purchase and installation (and sales commission) and immediately take the government tax credits for themselves, while the homeowner is stuck with a bill for the lease that escalates with time and a continuing obligation to pay the utility for any extra power used over what is generated by the panels. This model works reasonably well where utilities have net metering rules allowing the grid to be used in effect as a long-term battery for solar power, but many utilities have lobbied their regulators to remove this arrangement since the increasing use of solar makes managing other power sources harder and can raise prices for all customers as low-cost baseline generation is forced offline in periods of high solar generation.

As the story recounts, solar became a high-pressure-sales con job, with Solar City (now Tesla), Sunrun, and other large rooftop solar providers finding profits in installations that were not in the interest of homeowners, in this case on a shady roof and costing the homeowner more than he paid for power previously. And the thousands of horror stories about broken systems that weren’t repaired as promised, roof leaks caused by installers and never repaired by unresponsive solar companies, and refusals to temporarily remove panels for roof repairs make assuming a leased system as part of a home purchase an extremely unwise decision.

If solar makes sense for you, go with a local company with references. In the Coachella Valley, we have two large and reliable solar providers, Renova and Hot Purple Energy, plus several smaller companies that have good reputations. If you can’t afford to pay cash, look into financing with a separate loan or home equity loan.

Previously:

Rooftop Solar: Trendy Boondoggle or The Future of Power?
Solar: Cost-Effectiveness by Regions, Climate and Latitude
Solar: Approaches for Modest Living
PS: Rooftop Solar Mythology
Elon Musk, Tesla, and the Solar Roof Tile Fraud
Elon Musk, Tesla, and the Solar Roof Tile Fraud: Update

Tesla Elon Musk Threads: Shanghai Gigafactory #3

Shanghai Gigafactory #3

1/ He’s doing it again, in China! First crowd pictures I’ve seen, gives you an idea of how much was invested in the groundbreaking. Pattern: use Tesla’s image to descend on unsophisticated polity, offer local pols trade of PR for PR.

2/ Gigafactory 1: Reno, NV, USA. Gather subsidies and tax concessions, mostly successful because partner Panasonic lets $tsla pretend it’s all Tesla’s achievement. Over $1 billion in subsidies and tax abatements predicted by 2030.

3/ Gigafactory 2: Buffalo, NY, USA. Mostly failed, so only local news covers it – Tesla hype partners silent. Employment goals quietly reduced so they could be met, solar panels produced now sold to non-Tesla/Solar City companies, solar roof tiles in limited production…

4/ ..for Potemkin solar roof tile installations. No volume installs because can’t be done profitably. Even if it were possible, it would take years and $billions to get there, so it’s all being sent to the memory hole where other Elon failed promises go.

5/ Scandal followed, pols convicted in bribery schemes related to the Cuomo’s NY agency: “Alain E. Kaloyeros.. was convicted on Thursday in a bid-rigging scheme that steered $100s of millions… to favored companies in Buffalo” bloomberg.com/news/features/…

6/ Musk has NEVER visited the plant. The $billions spent on it served their purpose: several hype cycles and the Solar City bailout that let him soak Tesla investors to save himself and cousins huge losses when Solar City was near failure.

7/ Gigafactory 3: Shanghai! Shrouded in secrecy on details, groundbreaking timed to assist current pump needs. Local pols may indeed be pushing banks to loan money for building (easily repurposed or de facto expropriated). The capital required to tool up is much larger.

8/ By starting construction of *something* the timeline for reckoning is advanced a year. By the time a shell is up and running, Tesla may have found the capital to equip it, in some unlikely scenario where there’s huge demand in China…

9/ China’s market as we speak is slowing. Expensive products are failing to sell. Small, affordable EVs with 100-km range are what China needs in volume, and Chinese companies will supply them. Foreign status brands are out of style.

10/ $tsla has never shown the ability to mass-produce cars *in lower price tiers* in volume. Musk tried and failed with the Mod3 in the US. His bet on all-automated lines was disastrous and wasted $100s of millions.

11/ The extend-and-pretend, hype-and-raise cycles worked before. Can he do it again and make it through another year? Maybe. The damage done grows each cycle. The runway is ending ahead, as lawsuits and investigations quietly churn away. /end


More on solar and Tesla topics:

PS: Rooftop Solar Mythology

The Story of Solar City’s Takeover.

Rooftop Solar: Trendy Boondoggle or The Future of Power?

Solar: Cost-Effectiveness by Regions, Climate and Latitude

Tesla Elon Musk Threads: The Boring Co Demo

The Boring Co Tunnel, Hawthorne CA

Shortly after the Boring Co demo, the WSJ story leaking the apparent misappropriation of resources from SpaceX for Boring Co use came out. Layoffs at SpaceX and Tesla followed. Much appeared to have happened behind the scenes, and is still being played out.

1/ Boring Co Demo: from a desire to have his own tunnel to avoid the 405 to half-baked concept to lame-ass execution, but as usual he has to keep up the hype. As with $tsla, he bamboozles local pols to give him permission and they get PR while he uses them to draw investment.

2/ If he wanted elevated Hyperloop lines crisscrossing LA, it might make more sense than the overly-costly subway system LA is building. But the cost of subways is not in tunnel drilling, but in cities like LA and NYC, the cost of *lawyers*.

3/ The 10x world cost of big infrastructure in coastal US cities is not due to construction expense. See:
The Most Expensive Mile of Subway Track on Earth
How excessive staffing, little competition, generous contracts and archaic rules dramatically inflate capital costs for transit in New York.

for a view of one project. The lawyers, the studies, the delays, the contracting rules are what lead to much less new infrastructure than needed.

4/ Because Musk is operating in fantasy mode, he pens agreements with pols for supposed projects without ever getting to the point where environmental studies and lawsuits would be attracted. Fantasy projects have fantasy costs: mostly renderings and tweets. The product is PR.

5/ And PR lets him sell dreams and burn investment money. Until the bottom falls out, he lives a billionaire’s life wasting other people’s money. Like other bubbles he’s inflated, the Boring Co’s product doesn’t solve any problems or save the planet.

6/ One reason lower-density cities should halt investment in mass transit now is the very likely prospect of *non*-autonomous, cooperative networked vehicles: every vehicle knows where every other vehicle is, and can travel in close packs at high speed on highways safely.

7/ Vehicles under swarm software control coordinate passage through intersections at speed, with no need for stoplights. Highway and road capacities double and no new highways are needed for decades. The fleets of robot cars for hire reduce the need for private cars and parking.

8/ This happens around 2040-60, and the transition period is the hardest. $tsla is nowhere near the leaders in thinking about this. Boring Co tunnels are quickly outdated and even more obviously a folly. Others have pointed out how minimal their capacity would be vs. cost.

9/ The battery swap fraud, the solar roof tiles fraud, the vapor ware vehicles, neural net chips, Autopilot: Potemkin products for a ZIRP era when money-losing concept companies can keep growing on hype and lax securities regulators. Boring Co is just the most ridiculous.

10/ He’s dug his holes so deep he can’t stop. Digging is his life. Just one more funding round, just one more press release, just one more rendering the gullible will accept: the narcissist near the end will do anything to avoid facing failure. /end


More on solar and Tesla topics:

PS: Rooftop Solar Mythology

The Story of Solar City’s Takeover.

Rooftop Solar: Trendy Boondoggle or The Future of Power?

Solar: Cost-Effectiveness by Regions, Climate and Latitude

Tesla Elon Musk Threads: The Cult of Elon

Elon Musk - Solar Roof Tiles Demo

The original goal of this blog was to explore all aspects of making a larger house “green” or sustainable. I have spent more time lately debunking the mountain of lies promoted by Elon Musk in both solar and EV aspects of Tesla’s operations. Rather than convert those researches into posts, I’ll just copy those threads here for future readers.

1/ The cult of Elon is a subdivision of the ecowarrior movement that is pushing to eliminate all fossil fuels (and nukes) by 2030. That would mean keeping poor people poor while the connected grow fat on subsidies for their $tsla EVs and Powerwalls.


2/ Where the Progressive-Greens are influential (California, Germany) the cost of energy has doubled (or more) from what a free market mix would have provided, reliable paid-for nuclear is being shut down, and the costliest forms installed earlier are decaying.


3/ Wind turbines are especially costly, mechanical collectors of a low-density source which can never compete on cost with other forms. Already windmill farms installed early in the movement are largely abandoned. Photovoltaic is already maxed out in California at 10%.


4/ Patrick Moore (@ecosensenow) as founder of Greenpeace has come around to regret the cultural Leviathan he helped create. Political energy planning, like industrial policies everywhere they’re tried, is captured by special interests and corruptly siphons off wealth.

5/ After Solyndra and the litany of multibillion $ losses on grants, loans, and subsidies to political supporters of government, it’s clear this is a losing strategy. But pols want to double down, because hoodwinking the voters keeps the gravy train going.


6/ I’m all for a sustainable future. What’s not sustainable is borrowing $trillions to make bad investments that have small or negative return to society. And expensive EVs as status objects for the wealthy should no longer be subsidized.


7/ People who believe oil companies and ICE cars are highly subsidized are responding to decades of propaganda by true believers as well as proponents of political control of *every decision in life.* This is the “Bootleggers and Baptists” coalition.


8/ Direct political control of investment automatically creates corruption. For every example of a bankrupt private company that made a mistake and had to be liquidated, there is a government agency that lives on forever despite its failure.


9/ Without an honest accounting of good produced vs social and financial cost of regulation and control, voters can never see the but-for world where a better policy was followed. In this case, the cost of additional CO2 to future humanity is only vaguely known.


10/ Relentless global warming (now “climate change”) propaganda was justified as necessary to alarm voters enough to create support for costly actions. We now know the rate of change is something like a third of the crude alarmist model predictions.


11/ Slower change can’t justify keeping millions in poverty to save the planet – it points toward cheaper mitigation of effects. Economists correctly argued for small but increasing carbon taxes as the least costly means of repressing CO2 production.


12/ But (a la @instapundit) an efficient, neutral tax returned to the people offered insufficient opportunity for graft. Instead we have two generations of children out of public schools who have been indoctrinated in quasi-religious claptrap about recycling and alt-energy.


13/ An offshoot of the “populist” rejection of globalist control of governments in the EU and Anglosphere should be a rejection of controlled energy markets. Middle-class voters see who has the shiny solar panels and EVs, and who pays through the nose in rates for basic needs.


14/ Solar will often make sense as costs drop. New battery tech will change the economics of solar and allow it to take a larger share without distorting grid economics. But $tsla is a parasite which would not exist without $billions in subsidies and set-asides.


15/ $tsla occupied the US ZEV niche created by gov’t, but is unlikely to survive Musk’s mistakes of the past (which left it with heavy debt and legal liabilities.) Better managers can take it forward but only after restructuring.


Exemplar boondoggle: California’s high speed rail project. Floated on lies and maintained by the one-party state.



More on solar and Tesla topics:

PS: Rooftop Solar Mythology

The Story of Solar City’s Takeover.

Rooftop Solar: Trendy Boondoggle or The Future of Power?

Solar: Cost-Effectiveness by Regions, Climate and Latitude