100 hear utility outline its plans

Texas Heat Pump Electrification replaces natural gas furnaces with electric heating across ERCOT, cutting carbon emissions, lowering utility bills, shifting summer peaks to winter, and aligning higher loads with strong seasonal wind power generation.

Key Points

Statewide shift from gas furnaces to heat pumps in Texas, reducing emissions and bills while moving grid peak to winter.

✅ Up to $452 annual utility savings per household

✅ CO2 cuts up to 13.8 million metric tons in scenarios

✅ Winter peak rises, summer peak falls; wind aligns with load

What would happen if you converted all the single-family homes in Texas from natural gas to electric heating?

According to a paper from Pecan Street, an Austin-based energy research organization, the transition would reduce climate-warming pollution, save Texas households up to $452 annually on their utility bills, and flip the state from a summer-peaking to a winter-peaking system. And that winter peak would be “nothing the grid couldn’t evolve to handle,” according to co-author Joshua Rhodes, a view echoed by analyses outlining Texas grid reliability improvements statewide today.

The report stems from the reality that buildings must be part of any comprehensive climate action plan.

“If we do want to decarbonize, eventually we do have to move into that space. It may not be the lowest-hanging fruit, but eventually we will have to get there,” said Rhodes.

Rhodes is a founding partner of the consultancy IdeaSmiths and an analyst at Vibrant Clean Energy. Pecan Street commissioned the study, which is distilled from a larger original analysis by IdeaSmiths, at the request of the nonprofit Environmental Defense Fund.

In an interview, Rhodes said, “The goal and motivation were to put bounding on some of the claims that have been made about electrification: that if we electrify a lot of different end uses or sectors of the economy...power demand of the grid would double.”

Rhodes and co-author Philip R. White used an analysis tool from the National Renewable Energy Laboratory called ResStock to determine the impact of replacing natural-gas furnaces with electric heat pumps in homes across the ERCOT service territory, which encompasses 90 percent of Texas’ electricity load.

Rhodes and White ran 80,000 simulations in order to determine how heat pumps would perform in Texas homes and how the pumps would impact the ERCOT grid.

The researchers modeled the use of “standard efficiency” (ducted, SEER 14, 8.2 HSPF air-source heat pump) and “superior efficiency” (ductless, SEER 29.3, 14 HSPF mini-split heat pump) heat pump models against two weather data sets — a typical meteorological year, and 2011, which had extreme weather in both the winter and summer and highlighted blackout risks during severe heat for many regions.

Emissions were calculated using Texas’ power sector data from 2017. For energy cost calculations, IdeaSmiths used 10.93 cents per kilowatt-hour for electricity and 8.4 cents per therm for natural gas.

Nothing the grid can't handle
Rhodes and White modeled six scenarios. All the scenarios resulted in annual household utility bill savings — including the two in which annual electricity demand increased — ranging from $57.82 for the standard efficiency heat pump and typical meteorological year to $451.90 for the high-efficiency heat pump and 2011 extreme weather year.

“For the average home, it was cheaper to switch. It made economic sense today to switch to a relatively high-efficiency heat pump,” said Rhodes. “Electricity bills would go up, but gas bills can go down.”

All the scenarios found carbon savings too, with CO2 reductions ranging from 2.6 million metric tons with a standard efficiency heat pump and typical meteorological year to 13.8 million metric tons with the high-efficiency heat pump in 2011-year weather.

Peak electricity demand in Texas would shift from summer to winter. Because heat pumps provide both high-efficiency space heating and cooling, in the scenario with “superior efficiency” heat pumps, the summer peak drops by nearly 24 percent to 54 gigawatts compared to ERCOT’s 71-gigawatt 2016 summer peak, even as recurring strains on the Texas power grid during extreme conditions persist.

The winter peak would increase compared to ERCOT’s 66-gigawatt 2018 winter peak, up by 22.73 percent to 81 gigawatts with standard efficiency heat pumps and up by 10.6 percent to 73 gigawatts with high-efficiency heat pumps.

“The grid could evolve to handle this. This is not a wholesale rethinking of how the grid would have to operate,” said Rhodes.

He added, “There would be some operational changes if we went to a winter-peaking grid. There would be implications for when power plants and transmission lines schedule their downtime for maintenance. But this is not beyond the realm of reality.”

And because Texas’ wind power generation is higher in winter, a winter peak would better match the expected higher load from all-electric heating to the availability of zero-carbon electricity.

A conservative estimate
The study presented what are likely conservative estimates of the potential for heat pumps to reduce carbon pollution and lower peak electricity demand, especially when paired with efficiency and demand response strategies that can flatten demand.

Electric heat pumps will become cleaner as more zero-carbon wind and solar power are added to the ERCOT grid, as utilities such as Tucson Electric Power phase out coal. By the end of 2018, 30 percent of the energy used on the ERCOT grid was from carbon-free sources.

According to the U.S. Energy Information Administration, three in five Texas households already use electricity as their primary source of heat, much of it electric-resistance heating. Rhodes and White did not model the energy use and peak demand impacts of replacing that electric-resistance heating with much more energy efficient heat pumps.

“Most of the electric-resistance heating in Texas is located in the very far south, where they don’t have much heating at all,” Rhodes said. “You would see savings in terms of the bills there because these heat pumps definitely operate more efficiently than electric-resistance heating for most of the time.”

Rhodes and White also highlighted areas for future research. For one, their study did not factor in the upfront cost to homeowners of installing heat pumps.

“More study is needed,” they write in the Pecan Street paper, “to determine the feasibility of various ‘replacement’ scenarios and how and to what degree the upgrade costs would be shared by others.”

Research from the Rocky Mountain Institute has found that electrification of both space and water heating is cheaper for homeowners over the life of the appliances in most new construction, when transitioning from propane or heating oil, when a gas furnace and air conditioner are replaced at the same time, and when rooftop solar is coupled with electrification, aligning with broader utility trends toward electrification.

More work is also needed to assess the best way to jump-start the market for high-efficiency all-electric heating. Rhodes believes getting installers on board is key.

“Whenever a homeowner’s making a decision, if their system goes out, they lean heavily on what the HVAC company suggests or tells them because the average homeowner doesn’t know much about their systems,” he said.

More work is also needed to assess the best way to jump-start the market for high-efficiency all-electric heating, and how utility strategies such as smart home network programs affect adoption too. Rhodes believes getting installers on board is key.

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Ontario Hydro Crisis highlights soaring electricity rates, costly subsidies, nuclear refurbishments, and stalled renewables in Ontario. Policy missteps, weak planning, and rising natural gas emissions burden ratepayers while energy efficiency and storage remain underused.

Key Points

High power costs and subsidies from policy errors, nuclear refurbishments, stalled efficiency and renewables in Ontario.

✅ $5.6B yearly subsidy masks electricity rates and deficits

✅ Nuclear refurbishments embed rising costs for decades

✅ Efficiency, storage, and DERs stalled amid weak planning

By Mark Winfield

While the troubled Site C and Muskrat Falls hydroelectric dam projects in B.C. and Newfoundland and Labrador have drawn a great deal of national attention over the past few months, Ontario has quietly been having a hydro crisis of its own.

One of the central promises in the 2018 platform of the Ontario Progressive Conservative party was to “clean up the hydro mess,” and then-PC leader Doug Ford vowed to fire Hydro One's leadership as part of that effort. There certainly is a mess, with the costs of subsidies taken from general provincial revenues to artificially lower hydro rates nearing $7 billion annually. That is a level approaching the province’s total pre-COVID-19 annual deficit. After only two years, that will also exceed total expected cost overruns of the Site C and Muskrat Falls projects, currently estimated at $12 billion ($6 billion each).

There is no doubt that Doug Ford’s government inherited a significant mess around the province’s electricity system from the previous Liberal governments of former premiers Dalton McGuinty and Kathleen Wynne. But the Ford government has also demonstrated a remarkable capacity for undoing the things its predecessors had managed to get right while doubling down on their mistakes.

The Liberals did have some significant achievements. Most notably: coal-fired electricity generation, which constituted 25 per cent of the province’s electricity supply in the early 2000s, was phased out in 2014. The phaseout dramatically improved air quality in the province. There was also a significant growth in renewable energy production. From  virtually zero in 2003, the province installed 4,500 MW of wind-powered generation, and 450 MW of solar photovoltaic by 2018, a total capacity more than double that of the Sir Adam Beck Generating Stations at Niagara Falls.

At the same time, public concerns over rising hydro rates flowing from a major reconstruction of the province’s electricity system from 2003 onwards became a central political issue in the province. But rather than reconsider the role of the key drivers of the continuing rate increases – namely the massively expensive and risky refurbishments of the Darlington and Bruce nuclear facilities, the Liberals adopted a financially ruinous Fair Hydro Plan. The central feature of the 2017 plan was a short-term 25 per cent reduction in hydro rates, financed by removing the provincial portion of the HST from hydro bills, and by extending the amortization period for capital projects within the system. The total cost of the plan in terms of lost revenues and financing costs has been estimated in excess of $40 billion over 29 years, with the burden largely falling on future ratepayers and taxpayers.

Decision-making around the electricity system became deeply politicized, and a secret cabinet forecast of soaring prices intensified public debate across Ontario. Legislation adopted by the Wynne government in 2016 eliminated the requirement for the development of system plans to be subject to any form of meaningful regulatory oversight or review. Instead, the system was guided through directives from the provincial cabinet. Major investments like the Darlington and Bruce refurbishments proceeded without meaningful, public, external reviews of their feasibility, costs or alternatives.

The Ford government proceeded to add more layers to these troubles. The province’s relatively comprehensive framework for energy efficiency was effectively dismantled in March, 2019, with little meaningful replacement. That was despite strong evidence that energy efficiency offered the most cost-effective strategy for reducing greenhouse gas emissions and electricity costs.

The Ford government basically retained the Fair Hydro Plan and promised further rate reductions, later tabling legislation to lower electricity rates as well. To its credit, the government did take steps to clarify real costs of the plan. Last year, these were revealed to amount to a de facto $5.6 billion-per-year subsidy coming from general revenues, and rising. That constituted the major portion of the province’s $7.4 billion pre-COVID-19 deficit. The financial hole was deepened further through November’s financial statement, with the addition of a further $1.3 billion subsidy to commercial and industrial consumers. The numbers can only get worse as the costs of the Darlington and Bruce refurbishments become embedded more fully into electricity rates.

The government also quietly dispensed with the last public vestige of an energy planning framework, relieving itself of the requirement to produce a Long-Term Energy Plan every three years. The next plan would normally have been due next month, in February.

Even the gains from the 2014 phaseout of coal-fired electricity are at risk. Major increases are projected in emissions of greenhouse gases, smog-causing nitrogen oxides and particulate matter from natural gas-fired power plants as the plants are run to cover electricity needs during the Bruce and Darlington refurbishments over the next decade. These developments could erode as much as 40 per cent of the improvements in air quality and greenhouse gas emission gained through the coal phaseout.

The province’s activities around renewable energy, energy storage and distributed energy resources are at a standstill, with exception of a few experimental “sandbox” projects, while other jurisdictions face profound electricity-sector change and adapt. Globally, these technologies are seen as the leading edge of energy-system development and decarbonization. Ontario seems to have chosen to make itself an energy innovation wasteland instead.

The overall result is a system with little or no space for innovation that is embedding ever-higher costs while trying to disguise those costs at enormous expense to the provincial treasury and still failing to provide effective relief to low-income electricity consumers.

The decline in electricity demand associated with the COVID-19 pandemic, along with the introduction of a temporary recovery rate for electricity, gives the province an opportunity to step back and consider its next steps with the electricity system. A phaseout of the Fair Hydro Plan electricity-rate reduction and its replacement with a more cost-effective strategy of targeted relief aimed at those most heavily burdened by rising hydro rates, particularly rural and low-income consumers, as reconnection efforts for nonpayment have underscored the hardship faced by many households, would be a good place to start.

Next, the province needs to conduct a comprehensive, public review of electricity options available to it, including additional renewables – the costs of which have fallen dramatically over the past decade – distributed energy resources, hydro imports from Quebec and energy efficiency before proceeding with further nuclear refurbishments.

In the longer term, a transparent, evidence-based process for electricity system planning needs to be established – one that is subject to substantive public and regulatory oversight and review. Finally, the province needs to establish a new organization to be called Energy Efficiency Ontario to revive its efforts around energy efficiency, developing a comprehensive energy-efficiency strategy for the province, covering electricity and natural gas use, and addressing the needs of marginalized communities.

Without these kinds of steps, the province seems destined to continue to lurch from contradictory decision after contradictory decision as the economic and environmental costs of the system’s existing trajectory continue to rise.

Mark Winfield is a professor of environmental studies at York University and co-chair of the university’s Sustainable Energy Initiative.

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Bitcoin Energy Debate examines electricity usage, mining costs, environmental impact, and blockchain efficiency, weighing renewable power, carbon footprint, scalability, and transaction throughput to clarify stakeholder claims from Tesla, Square, academics, and policymakers.

Key Points

Debate on Bitcoin mining's power use, environmental impact, efficiency, and scalability versus alternative blockchains.

✅ Compares energy intensity with transaction throughput and system outputs.

✅ Weighs renewables, stranded power, and carbon footprint in mining.

✅ Assesses PoS blockchains, stablecoins, and scalability tradeoffs.

There is a great debate underway about the electricity required to process Bitcoin transactions. The debate is significant, the stakes are high, the views are diverse, and there are smart people on both sides. Bitcoin generates a lot of emotion, thereby producing too much heat and not enough light. In this post, I explain the importance of identifying the key issues in the debate, and of understanding the nature and extent of disagreement about how much electrical energy Bitcoin consumes.

Consider the background against which the debate is taking place. Because of its unstable price, Bitcoin cannot serve as a global mainstream medium of exchange. The instability is apparent. On January 1, 2021, Bitcoin’s dollar price was just over $29,000. Its price rose above $63,000 in mid-April, and then fell below $35,000, where it has traded recently. Now the financial media is asking whether we are about to experience another “cyber winter” as the prices of cryptocurrencies continue their dramatic declines.

Central banks warns of bubble on bitcoins as it skyrockets
As bitcoins skyrocket to more than $12 000 for one BTC, many central banks as ECB or US Federal ... [+] NURPHOTO VIA GETTY IMAGES
Bitcoin is a high sentiment beta asset, and unless that changes, Bitcoin cannot serve as a global mainstream medium of exchange. Being a high sentiment beta asset means that Bitcoin’s market price is driven much more by investor psychology than by underlying fundamentals.

As a general matter, high sentiment beta assets are difficult to value and difficult to arbitrage. Bitcoin qualifies in this regard. As a general matter, there is great disagreement among investors about the fair values of high sentiment beta assets. Bitcoin qualifies in this regard.

One major disagreement about Bitcoin involves the very high demand for electrical power associated with Bitcoin transaction processing, an issue that came to light several years ago. In recent months, the issue has surfaced again, in a drama featuring disagreement between two prominent industry leaders, Elon Musk (from Tesla and SpaceX) and Jack Dorsey (from Square).

On one side of the argument, Musk contends that Bitcoin’s great need for electrical power is detrimental to the environment, especially amid disruptions in U.S. coal and nuclear power that increase supply strain.  On the other side, Dorsey argues that Bitcoin’s electricity profile is a benefit to the environment, in part because it provides a reliable customer base for clean electric power. This might make sense, in the absence of other motives for generating clean power; however, it seems to me that there has been a surge in investment in alternative technologies for producing electricity that has nothing to do with cryptocurrency. So I am not sure that the argument is especially strong, but will leave it there. In any event, this is a demand side argument.

A supply side argument favoring Bitcoin is that the processing of Bitcoin transactions, known as “Bitcoin mining,” already uses clean electrical power, power which has already been produced, as in hydroelectric plants at night, but not otherwise consumed in an era of flat electricity demand across mature markets.

Both Musk and Dorsey are serious Bitcoin investors. Earlier this year, Tesla purchased $1.5 billion of Bitcoin, agreed to accept Bitcoin as payment for automobile sales, and then reversed itself. This reversal appears to have pricked an expanding Bitcoin bubble. Square is a digital transaction processing firm, and Bitcoin is part of its long-term strategy.

Consider two big questions at the heart of the digital revolution in finance. First, to what degree will blockchain replace conventional transaction technologies? Second, to what degree will competing blockchain based digital assets, which are more efficient than Bitcoin, overcome Bitcoin’s first mover advantage as the first cryptocurrency?

To gain some insight about possible answers to these questions, and the nature of the issues related to the disagreement between Dorsey and Musk, I emailed a series of academics and/or authors who have expertise in blockchain technology.

David Yermack, a financial economist at New York University, has written and lectured extensively on blockchains. In 2019, Yermack wrote the following: “While Bitcoin and successor cryptocurrencies have grown remarkably, data indicates that many of their users have not tried to participate in the mainstream financial system. Instead they have deliberately avoided it in order to transact in black markets for drugs and other contraband … or evade capital controls in countries such as China.” In this regard, cyber-criminals demanding ransom for locking up their targets information systems often require payment in Bitcoin. Recent examples of cyber-criminal activity are not difficult to find, such as incidents involving Kaseya and Colonial Pipeline.

David Yermack continues: “However, the potential benefits of blockchain for improving data security and solving moral hazard problems throughout the financial system have become widely apparent as cryptocurrencies have grown.” In his recent correspondence with me, he argues that the electrical power issue associated with Bitcoin “mining,” is relatively minor because Bitcoin miners are incentivized to seek out cheap electric power, and patterns shifted as COVID-19 changed U.S. electricity consumption across sectors.

Thomas Philippon, also a financial economist at NYU, has done important work characterizing the impact of technology on the resource requirements of the financial sector. He has argued that historically, the financial sector has comprised about 6-to-7% of the economy on average, with variability over time. Unit costs, as a percentage of assets, have consistently been about 2%, even with technological advances. In respect to Bitcoin, he writes in his correspondence with me that Bitcoin is too energy inefficient to generate net positive social benefits, and that energy crisis pressures on U.S. electricity and fuels complicate the picture, but acknowledges that over time positive benefits might be possible.

Emin Gün Sirer is a computer scientist at Cornell University, whose venture AVA Labs has been developing alternative blockchain technology for the financial sector. In his correspondence with me, he writes that he rejects the argument that Bitcoin will spur investment in renewable energy relative to other stimuli. He also questions the social value of maintaining a fairly centralized ledger largely created by miners that had been in China and are now migrating to other locations such as El Salvador.

Bob Seeman is an engineer, lawyer, and businessman, who has written a book entitled Bitcoin: The Mother of All Scams. In his correspondence with me, he writes that his professional experience with Bitcoin led him to conclude that Bitcoin is nothing more than unlicensed gambling, a point he makes in his book.

David Gautschi is an academic at Fordham University with expertise in global energy. I asked him about studies that compare Bitcoin’s use of energy with that of the U.S. financial sector. In correspondence with me, he cautioned that the issues are complex, and noted that online technology generally consumes a lot of power, with electricity demand during COVID-19 highlighting shifting load profiles.

My question to David Gautschi was prompted by a study undertaken by the cryptocurrency firm Galaxy Digital. This study found that the financial sector together with the gold industry consumes twice as much electrical power as Bitcoin transaction processing. The claim by Galaxy is that Bitcoin’s electrical power needs are “at least two times lower than the total energy consumed by the banking system as well as the gold industry on an annual basis.”

Galaxy’s analysis is detailed and bottom up based. In order to assess the plausibility of its claims, I did a rough top down analysis whose results were roughly consistent with the claims in the Galaxy study. For sake of disclosure, I placed the heuristic calculations I ran in a footnote.1 If we accept the Galaxy numbers, there remains the question of understanding the outputs produced by the electrical consumption associated with both Bitcoin mining and U.S. banks’ production of financial services. I did not see that the Galaxy study addresses the output issue, and it is important.

Consider some quick statistics which relate to the issue of outputs. The total market for global financial services was about $20 trillion in 2020. The number of Bitcoin transactions processed per day was about 330,000 in December 2020, and about 400,000 in January 2021. The corresponding number for Bitcoin’s digital rival Ethereum during this time was about 1.1 million transactions per day. In contrast, the global number of credit card transactions per day in 2018 was about 1 billion.2

Bitcoin Value Falls
LONDON, ENGLAND - NOVEMBER 20: A visual representation of the cryptocurrencies Bitcoin and Ethereum ... [+] GETTY IMAGES
These numbers tell us that Bitcoin transactions comprise a small share, on the order of 0.04%, of global transactions, but use something like a third of the electricity needed for these transactions. That said, the associated costs of processing Bitcoin transactions relate to tying blocks of transactions together in a blockchain, not to the number of transactions. Nevertheless, even if the financial sector does indeed consume twice as much electrical power as Bitcoin, the disparity between Bitcoin and traditional financial technology is striking, and the experience of Texas grid reliability underscores system constraints when it comes to output relative to input.  This, I suggest, weakens the argument that Bitcoin’s electricity demand profile is inconsequential because Bitcoin mining uses slack electricity.

A big question is how much electrical power Bitcoin mining would require, if Bitcoin were to capture a major share of the transactions involved in world commerce. Certainly much more than it does today; but how much more?

Given that Bitcoin is a high sentiment beta asset, there will be a lot of disagreement about the answers to these two questions. Eventually we might get answers.

At the same time, a high sentiment beta asset is ill suited to being a medium of exchange and a store of value. This is why stablecoins have emerged, such as Diem, Tether, USD Coin, and Dai. Increased use of these stable alternatives might prevent Bitcoin from ever achieving a major share of the transactions involved in world commerce.

We shall see what the future brings. Certainly El Salvador’s recent decision to make Bitcoin its legal tender, and to become a leader in Bitcoin mining, is something to watch carefully. Just keep in mind that there is significant downside to experiencing foreign exchange rate volatility. This is why global financial institutions such as the World Bank and IMF do not support El Salvador’s decision; and as I keep saying, Bitcoin is a very high sentiment beta asset.

In the past I suggested that Bitcoin bubble would burst when Bitcoin investors conclude that its associated processing is too energy inefficient. Of course, many Bitcoin investors are passionate devotees, who are vulnerable to the psychological bias known as motivated reasoning. Motivated reasoning-based sentiment, featuring denial,3 can keep a bubble from bursting, or generate a series of bubbles, a pattern we can see from Bitcoin’s history.

I find the argument that Bitcoin is necessary to provide the right incentives for the development of clean alternatives for generating electricity to be interesting, but less than compelling. Are there no other incentives, such as evolving utility trends, or more efficient blockchain technologies? Bitcoin does have a first mover advantage relative to other cryptocurrencies. I just think we need to be concerned about getting locked into an technologically inferior solution because of switching costs.

There is an argument to made that decisions, such as how to use electric power, are made in markets with self-interested agents properly evaluating the tradeoffs. That said, think about why most of the world adopted the Windows operating system in the 1980s over the superior Mac operating system offered by Apple. Yes, we left it to markets to determine the outcome. People did make choices; and it took years for Windows to catch up with the Mac’s operating system.

My experience as a behavioral economist has taught me that the world is far from perfect, to expect to be surprised, and to expect people to make mistakes. We shall see what happens with Bitcoin going forward.

As things stand now, Bitcoin is well suited as an asset for fulfilling some people’s urge to engage in high stakes gambling. Indeed, many people have a strong need to engage in gambling. Last year, per capita expenditure on lottery tickets in Massachusetts was the highest in the U.S. at over $930.

High sentiment beta assets offer lottery-like payoffs. While Bitcoin certainly does a good job of that, it cannot simultaneously serve as an effective medium of exchange and reliable store of value, even setting aside the issue at the heart of the electricity debate.

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Alberta Electricity Rate Cap stays despite carbon tax repeal, keeping the Regulated Rate Option at 6.8 cents/kWh. Levy funds cover market gaps as the UCP reviews NDP policies to maintain affordable utility bills.

Key Points

Program capping RRO power at 6.8 cents/kWh, using levy funds to offset market prices while the UCP reviews policy.

✅ RRO cap fixed at 6.8 cents/kWh for eligible customers

✅ Levy funds pay generators when market prices exceed the cap

✅ UCP reviewing NDP policies to ensure affordable rates

Alberta's carbon tax has been cancelled, but a consumer price cap on electricity — which the levy pays for — is staying in place for now.

June electricity rates are due out on Monday, about four days after the new UCP government did away with the carbon charge on natural gas and vehicle fuel.

Part of the levy's revenue was earmarked by the previous NDP government to keep power prices at or below 6.8 cents per kilowatt hour under new electricity rules set by the province.

"The Regulated Rate Option cap of 6.8 cents/kWh was implemented by the previous government and currently remains in effect. We are reviewing all policies put in place by the former government and will make decisions that ensure more affordable electricity rates for job-creators and Albertans," said a spokesperson for Alberta's energy ministry in an emailed statement.

Albertans with regulated rate contracts and all City of Medicine Hat utility customers only pay that amount or less, though some Alberta ratepayers have faced deferral-related arrears.

If the actual market price rises above that, the difference is paid to generators directly from levy funds, a buffer that matters as experts warn prices are set to soar later this year.

The government has paid more than $55 million to utilities over the past year ending in March 2019, due to that electricity price cap being in place.

Alberta Energy says the price gap program will continue, at least for the time being, amid electricity policy changes being considered.

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Duration Portfolio Energy Storage aligns layered peak demand with right-sized batteries, enabling peak shaving, gas peaker replacement, and solar-plus-storage synergy while improving grid flexibility, reliability, and T&D deferral through two- to four-hour battery durations.

Key Points

An approach that layers battery durations to match peaks, cut costs, replace peakers, and boost grid reliability.

✅ Layers 2- to 4-hour batteries by peak duration

✅ Enables solar-plus-storage and peak shaving

✅ Cuts T&D upgrades, emissions, and fuel costs

The debate over energy storage replacing gas-fired peakers has raged for years, but a new approach that shifts the terms of the argument could lead to an acceleration of storage deployments.

Rather than looking at peak demand as a single mountainous peak, some analysts now advocate a layered approach that allows energy storage to better match peak needs and complement ongoing efforts to improve solar and wind power across the grid.

"You don’t have to have batteries that run to infinity."

Some developers of solar-plus-storage projects, bolstered by cheap batteries, say they can already compete head-to-head with gas-fired peakers. "I can beat a gas peaker anywhere in the country today with a solar-plus-storage power plant," Tom Buttgenbach, president and CEO of developer 8minutenergy Renewables, recently told S&P Global.

Customers are very busy these days and rebate programs need to fit the speed of their life. Participation should be quick, easy, and accessible anywhere.

Others disagree. Storage is not disruptive for generation, but will be disruptive for transmission and distribution, Kris Zadlo, executive vice president and chief development officer at Invenergy, told the audience at a Bloomberg New Energy Finance conference last spring. Invenergy, like many renewable power developers, develops generation, energy storage and transmission projects.

But there is another path that avoids the pitfalls of positions on either end of the all-or-none approach. "Do the analysis of the need itself," Ray Hohenstein, market applications director at Fluence, told Utility Dive. If the need is only two hours in duration, it may be best served by a two-hour battery. "You don’t have to have batteries that run to infinity."

Storage vs. fossil fuel peakers

Energy storage has several benefits over traditional fossil fuel peaking plants, Hohenstein said. It is instantaneous, it has no emissions and requires no fuel, and has limited infrastructure needs. It can also help the grid absorb higher levels of renewable generation by soaking up excess output, such as solar power at noon, and many planned storage additions will be paired with solar in the next few years. But the one thing energy storage cannot do, he said, is provide limitless energy.

So, instead of looking at replacing an individual peaker, Hohenstein advocated a "duration portfolio" approach that uses energy storage to shave peak load.

If the need is for 150 MW of resources that will never need to run for more than two hours at a time, then a battery is "quite cheap," significantly less than a four or eight-hour battery, said Hohenstein. "If you fill up your peak by duration layer, it could be more cost effective."

NREL research driver

Fluence’s approach is informed by research by Paul Denholm and Robert Margolis at the National Renewable Energy Laboratory (NREL), released last spring.

The NREL researchers looked at the California market where they said 11 GW of fossil fuel capacity is expected to be retired by 2029 because of new once-through-cooling requirements that are taking effect. A lot of that capacity is peaking capacity and, according to NREL’s analysis, a large fraction could be replaced with four-hour energy storage, assuming continued storage cost reductions and growth in solar installations.

The key in NREL’s research was the level of solar power penetration. There is a "synergistic" relationship between solar penetration and storage deployment, the researchers wrote, and other studies suggest wind and solar could meet 80% of U.S. demand as these trends continue.

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CPUC Exit Fee Increase for CCAs adjusts the PCIA, affecting utilities, San Diego ratepayers, renewable energy procurement, customer equity, and cost allocation, while providing regulatory certainty for Community Choice Aggregation programs and clean energy goals.

Key Points

A CPUC-approved change raising PCIA exit fees paid by CCAs to utilities, balancing cost shifts and customer equity.

✅ PCIA rises from about 2.5c to roughly 4.25c per kWh in San Diego

✅ Aims to reduce cost shifts and protect non-CCA customers

✅ Offers regulatory certainty for CCA launches and clean energy goals

The California Public Utilities Commission approved an increase on the exit fees charged to customers who take part in Community Choice Aggregation -- government-run alternatives to traditional utilities like San Diego Gas & Electric.

After reviewing two competing exit fee proposals, all five commissioners voted Thursday in favor of an adjustment that many CCA advocates predicted could hamper the growth of the community choice movement.

But minutes after the vote was announced, one of the leading voices in favor of the city San Diego establishing its own CCA said the decision was good news because it provides some regulatory certainty.

"For us in San Diego, it's a green light to move forward with community choice," said Nicole Capretz, executive director of the Climate Action Campaign. "For us, it's let's go, let's launch and let's give families a choice. We no longer have to wait."

Under the CCA model, utilities still maintain transmission and distribution lines (poles and wires, etc.) and handle customer billing. But officials in a given local government entity make the final decisions about what kind of power sources are purchased.

Once a CCA is formed, its customers must pay an exit fee -- called a Power Charge Indifference Adjustment -- to the legacy utility serving that particular region. The fee is included in customers' monthly bills.

The fee is required to offset the costs of the investments utilities made over the years for things like natural gas power plants, renewable energy facilities and other infrastructure.

Utilities argue if the exit fee is set too low, it does not fairly compensate them for their investments; if it's too high, CCAs complain it reduces the financial incentive for their potential customers.

The Public Utilities Commission chose to adopt a proposal that some said was more favorable to utilities, leading to complaints from CCA boosters.

"We see this will really throw sand in the gears in our ability to do things that can move us toward (climate change) goals," Jim Parks, staff member of Valley Clean Energy, a CCA based in Davis, said before the vote.

Commissioner Carla Peterman, who authored the proposal that passed, said she supports CCAs but stressed the commission has a "legal obligation" to make sure increased costs are not shouldered by "customers who do not, or cannot, join a CCA. Today's proposal ensures a more level playing field between customers."

As for what the vote means for the exit fee in San Diego, Peterman's office earlier in the week estimated the charge would rise from 2.5 cents a kilowatt-hour to about 4.25 cents.

The Clear the Air Coaltion, a San Diego County group critical of CCAs, said the newly established exit fee -- which goes into effect starting next year -- is "a step in the direction."

But the group, which includes the San Diego Regional Chamber of Commerce, the San Diego County Taxpayers Association and lobbyists for Sempra Energy (the parent company of SDG&E), repeated concerns it has brought up before.

"If the city of San Diego decides to get into the energy business this decision means ratepayers in National City, Chula Vista, Carlsbad, Imperial Beach, La Mesa, El Cajon and all other neighboring communities would see higher energy bills, and San Diego taxpayers would be faced with mounting debt," coalition spokesman Tony Manolatos said in an email.

CCA supporters say community choice is critical in ensuring San Diego meets the pledge made by Mayor Kevin Faulconer to adopt the city's Climate Action Plan, mandating 100 percent of the city's electricity needs must come from renewable sources by 2035.

Now attention turns to Faulconer, who promised to make a decision on bringing a CCA proposal to the San Diego City Council only after the utilities commission made its decision.

A Faulconer spokesman said Thursday afternoon that the vote "provides the clarity we've been waiting for to move forward" but did not offer a specific time table.

"We're on schedule to reach Mayor Faulconer's goal of choosing a pathway that achieves our renewable energy goals while also protecting ratepayers, and the mayor looks forward to making his recommendation in the next few weeks," said Craig Gustafson, a Faulconer spokesman, in an email.

A feasibility study released last year predicted a CCA in San Diego has the potential to deliver cheaper rates over time than SDG&E's current service, while providing as much as 50 percent renewable energy by 2023 and 80 percent by 2027.

"The city has already figured out we are still capable of launching a program, having competitive, affordable rates and finally offering families a choice as to who their energy provider is," said Capretz, who helped draft an initial blueprint of the climate plan as a city staffer.

SDG&E has come to the city with a counterproposal that offers 100 percent renewables by 2035.

Thus far, the utility has produced a rough outline for a "tariff" program that would charge ratepayers the cost of delivering more clean sources of energy over time.

Some council members have expressed frustration more specifics have not been sketched out.

SDG&E officials said they will take the new exit fee into account as they go forward with their counterproposal to the city council.

Speaking in general about the utility commission's decision, SDG&E spokeswoman Helen Gao called it "a victory for our customers, as it minimizes the cost shifts that they have been burdened with under the existing fee formula.

"As commissioners noted in rendering their decision, reforming the (exit fee) addresses a customer-to-customer equity issue and has nothing to do with increasing profits for investor-owned utilities," Gao said in an email.

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