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Inside episode 22 of Shift Key.
Have you looked at your power bill — like, really looked at it? If you’re anything like Rob, you pay whatever number appears at the bottom every month and drop it in the recycling. But how everyone’s power bill is calculated — in wonk terms, the “electricity rate design” — turns out to be surprisingly important and could be a big driver of decarbonization.
On this week’s episode of Shift Key, Rob and Jesse talk about why power bills matter, how Jesse would design electricity rates if he was king of the world, and how to fix rooftop solar in America. This is the finale of our recent series of episodes on rooftop solar and rate design. If you’d like to catch up, you can listen to our previous episodes featuring Sunrun CEO Mary Powell, the University of California, Berkeley’s Severin Borenstein, and Heatmap’s own Emily Pontecorvo.
Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
You can also add
the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Robinson Meyer: There’s other issues we could talk about electricity rate design, and I want to come back to them in a second. But let’s say you were made Grand Vizier of all public utility commissions across the country. How would you fix this? Like, what do we need to do?
Jesse Jenkins: I think there’s basically two options that we have, here — and this is, you know, a reflection of the fact that there is no one unified electricity market structure in the U.S. We have a bunch of different ways that we do things. And so I’ll just sketch two kind of classic examples of that. There are lots of little gradations in between.
One is a kind of traditional regulated market where you get your power from a regulated or publicly owned utility, like a municipal utility, or a rural utility district, or an investor-owned utility. It’s regulated by the state, and you buy power at whatever the regulated rate is. And so, if that’s the case, we need to get those rates right. And by that I mean: There are multiple things you’re paying for when you’re paying for your bill. You’re paying for the actual energy you’re consuming, and that is a kind of volumetric thing — you know, you should pay more the more you consume, all else equal.
But the interesting feature of electricity pricing is that it varies from hour to hour because of the fact that demand is changing all the time and renewable energy availability is changing all the time. And so the actual marginal cost of generating electricity depends on this intersection of how much you demand and what the available supply is. And if you have a lot of cheap renewables, for example, flooding the grid, that price could be very low. It could even be zero — when you’re curtailing solar or wind, you have excess free power, effectively. And at other times it can be very expensive when you’re running diesel generators or inefficient gas turbines to meet this sort of peak demand requirements. Electricity prices could be several hundred dollars a megawatt-hour.
And so we have a very wide range of pricing and we don’t communicate that at all to people today. And I think we have to restore that, in some way — to let people understand that if you consume more energy during the middle of the day when there’s lots of solar available, even if you don’t have solar on your roof, it’s coming from your neighbor or utility-scale solar farm far away, that’s the cheapest, best time to consume electricity. And if you’re consuming when fossil power plants are producing expensive power, you should think about how to reduce that consumption. So it’s really important that we get that kind of time dynamic rate right for the energy component.
Robinson Meyer: So you would expose people to prices. I mean, that’s kind of your basic answer is that you would expose people to these time-of-day prices even if — and I just want to be clear, here. You’re talking about folks who live in Washington, D.C., who live in New York, who live in Philadelphia, who live in San Francisco, who live in Atlanta …
Jesse Jenkins: All over. Yeah, everywhere.
This episode of Shift Key is sponsored by…
Watershed’s climate data engine helps companies measure and reduce their emissions, turning the data they already have into an audit-ready carbon footprint backed by the latest climate science. Get the sustainability data you need in weeks, not months. Learn more at watershed.com.
As a global leader in PV and ESS solutions, Sungrow invests heavily in research and development, constantly pushing the boundaries of solar and battery inverter technology. Discover why Sungrow is the essential component of the clean energy transition by visiting sungrowpower.com.
Music for Shift Key is by Adam Kromelow.
Rooftop solar is four times more expensive in America than it is in other countries. It’s also good for the climate. Should we even care about its high cost?
Yes, says Severin Borenstein, an economist and the director of the Energy Policy Institute at the University of California, Berkeley’s Haas School of Business. In a recent blog post, he argued that the high cost of rooftop solar will shift nearly $4 billion onto the bills of low- and middle-income Californians who don’t have rooftop solar. Similar forces could soon spread the cost-shift problem across the country.
On this week’s episode of Shift Key, Rob and Jesse talk with Borenstein about who pays for rooftop solar, why power bills are going up everywhere, and about whether the government should take over electric utilities. Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Severin Borenstein: Let me start by saying, there are two big problems with the way we do this. One is the equity issue, which I’m sure we’ll get back to, which is that it turns out this extra money, when you get it by charging people for kilowatt-hours, takes a disproportionate share of the income from low-income people.
The other is, when you set a price for electricity that is way above the actual cost of providing that electricity, it’s going to discourage people from electrifying things. Now, it’s also going to discourage people from just using more electricity, and people who love conservation say, well, we should have higher rates to encourage conservation. I think that’s misguided beyond some point, and we are way beyond that point in many areas.
But setting that aside for a moment, we need people to electrify. If we’re going to reduce greenhouse gases, the way we’re going to electrify [...] is by people switching to electric transportation instead of burning gasoline, and people switching to electrification for heating, hot-water heating, cooking, clothes drying, all the things where you have a choice of using natural gas. In both of those cases, if you overcharge for electricity, you are discouraging people from doing that sort of electrification.
I will give you the extreme example — again, in California. Right now, even with California’s well known very high gasoline prices, gasoline and electricity are about at parity. That is, you don’t save money fueling your car with electricity. If you compare a Prius to a Tesla Model 3, which are about the same interior size, you don’t save money when you switch to a Tesla Model 3, for fueling. That’s nuts. You should be saving three-quarters of the cost of fueling by switching to electricity.
Likewise, when we start talking about heat pumps, now, there’s one other aspect of this which is often not appreciated. Not only are we overcharging for electricity, we are undercharging for gasoline. So even with all the taxes — and I’ve done a bunch of work on this — if you look at the price of gasoline almost everywhere in the country ... Actually, if you believe the social cost of carbon is over $100 a ton, everywhere in the country, gasoline is underpriced. We’re not charging enough to reflect the full cost.
So it’s even worse than just the overpricing of electricity. We’re really putting our thumb on the scale in the wrong direction when it comes to getting people to electrify transportation. And it’s also true with natural gas, though to a lesser extent. If we’re going to consider the social cost of carbon over $100 a ton, natural gas is also underpriced pretty much everywhere in the country.
So we want people to adopt heat pumps. We want people to put in heat pump water heaters. But we’re really sending economic signals to tell them not to.
This episode of Shift Key is sponsored by…
Watershed’s climate data engine helps companies measure and reduce their emissions, turning the data they already have into an audit-ready carbon footprint backed by the latest climate science. Get the sustainability data you need in weeks, not months. Learn more at watershed.com.
As a global leader in PV and ESS solutions, Sungrow invests heavily in research and development, constantly pushing the boundaries of solar and battery inverter technology. Discover why Sungrow is the essential component of the clean energy transition by visiting sungrowpower.com.
Music for Shift Key is by Adam Kromelow.
