Salient White Elephant

June 21, 2009

Why Renewables Aren’t Cost Effective

The last electric bill I got charged me $65 for the luxury of being connected to the electricity grid, and $5.00 for the electricity I used. In other words, if I had conserved all of my electricity, using no electricity at all, then I would have saved only $5.oo! My bill would have been $65 instead of $70! Really makes you just want to go all out to conserve resources and reduce pollution, doesn’t it!?

The logic behind this rate structure is that the utility company must make electricity available to you whether you use it or not. They must guarantee that if you wake up at 3 o’clock in the morning and turn on every electrical gizmo in your house, then the electricity to power these devices will be available to you. That’s what I paid the $65 for. This $65 portion of my bill is appropriately called capacity charge. It varies based on how much capacity I require, as I will explain in a moment.

Two questions immediately come to mind:

  • Does this rate structure encourage waste. Answer: YES!
  • Does this rate structure reflect the utility company’s cost structure? In other words, are 65/70 = 93% of their costs really devoted to the provision of the service, with only 7% of their costs spent of making electricity? Well.. who knows… but does it sound believable to you?

How the Capacity Charge is Calculated

Now let me explain how the $65 is calculated. Basically, they keep a record of the amount of power you draw for 6 months. Then they look at the maximum amount of power you drew in any one minute for that 6 months, and your capacity charge is based on that amount. Let’s say for example that 3 1/2 months ago I turned everything in the house on at the same time and drew 10 kilowatts. And let’s say that this is the most power I drew at one time during the last 6 months. Then my capacity charge, $65, is based on that 10 kilowatts. Now suppose 2 1/2 months elapse, so that the moment when I drew 10 kilowatts is now more than 6 months ago. Now we look back over my history and find that the most power I drew at once during the last 6 months was only 5 kilowatts. Now my capacity payment drops to $65/2 = $32.50.

How to Beat the System

The manufacturers of small wind turbines designed for residential use are always complaining about this rate structure. Strange, huh? These small wind turbines go on dutifully pumping power backwards – into the grid rather than out of the gird – knowing that if there was so much wind as to make your net power consumption zero you would still only save $5!!! No wonder it takes so long for a small wind machine to pay for itself!

And yet the answer is obvious. Get a small wind machine, add a small battery, and use the wind turbine to keep the battery charged. Now design some electronics to detect peak power usage. Now if I wake up at 3 o’clock in the morning and turn everything on in the house, the wind turbine battery suddenly turns on to limit my peak consumption as much as possible. If the system is able to cut my peak consumption from 10 kilowatts to 5 kilowatts during the 5 minutes that I keep everything turned on at 3 am, then in that 5 minutes I just earned $35! Contrast this with the $5 I would have earned had my wind turbine worked hard every minute of the whole month, producing 100% of the electricity I used for that month!

Is a Wind Turbine Even Needed?

Obviously not. Just draw the electricity from an electrical outlet in your wall in order to charge the battery whenever you aren’t using much electricity for anything else. Now when you turn a lot of things on, the electronics that control the battery realize that you are approaching peak power consumption, and they kick the battery on so that it supplies part of the power you need, thereby limiting your peak consumption and its associated capacity charge.

If You’re an Environmentalist – Play It Smart

So if you don’t need a wind turbine, then what does all this have to do with wind energy? Well… if everybody had these battery systems in their homes to level out power consumption, we’d find out real quick whether $5 is really enough to cover the cost of electricity produced. My bet is that you’d see the rate structure change real quick. Once the rate depends more on the actual amount of energy the utility is required to produce, then it becomes more cost effective to install your own wind turbine and run the meter backwards.

Related Technologies

There’s a whole slew of technologies for conserving energy that become obvious when you look at the problem from the perspective of this post. For example, what about a clothes dryer that automatically shuts off anytime peak household consumption exceeds 5 kilowatts, and then turns back on anytime peak consumption dips back down below 5 kilowatts?

The Moral of the Story

The moral of the story is that environmentalism that is based on nothing but complaining is doomed to fail. What we need are jazzy inventors and entrepreneurs who are patient, calculating, and sufficiently intelligent to twist the arm of a greedy industrialist behind his back and inform him of changes to his job description. He needs to know that his duties no longer include destroying the planet and sending other people’s children overseas to die fighting over oil.

Remember – if twisted logic and pretzel laws work for those who oppose efficiency, then they will work for the proponents of sustainability as well.

A Product and Business Based on this Idea

You buy a product that includes electronics that monitor your electricity usage. A continuous record of electricity usage is kept. The system includes a battery that is just large enough to absorb the average amount of power you use in a day from the power grid. The electronics are designed so that the battery draws enough electricity for one day from the power grid between the hours of minimum demand. Let’s say the hours of minimum demand are from 11pm to 5 am. The battery draws enough power for one day’s worth of your electricity consumption, and it draws that power at a steady even rate from 11pm to 5am every evening. Anytime you use electricity in your house, it is drawn from the battery.

Now, to the power company, you are the ideal customer. You never draw anything but a small steady flow of power during the hours of minimum demand (when they’re trying to figure out how to get rid of their excess power anyway). If ever you use more than your average amount of power, the battery system is bypassed and you draw straight from the grid (increasing your electricity bill).

I think this is what they mean by the “smart grid”. (I keep seeing that term on the internet, but I haven’t had a chance to look it up in the dictionary yet.)

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