Here's my worry, and the basis for my concern that the "kill all coal now" attitude may be counterproductive.

If they build the plant, then they have that generating asset.  It'll be expensive to build, and expensive to run, but it's there to provide power when its needed.  And maybe someday, they'll shut down an old coal plant

If, on the other hand, we stop all new coal construction and don't scale up R&E very quickly indeed, we will eventually hit a point where there just isn't enough generation capacity to go around.  The initial response will be to run the old plants at capacity (which creates more pollution) and use peaker plants as baseload (which is a bad idea).  But eventually things get tight enough, and people are desperate enough, they will build more plants.  And they will be the quickest, easiest, best-understood thing they can build, which probably means old-style coal.

Building IGCC now, while we're still living in times of relative abundance (of both capital and energy) is an investment towards a future that is likely to be rather bleak.  Not nearly as good an investment as renewables, efficiency and smart-grid tech, but quite possibly better than nothing.

Vastly better would be to open up electricity markets to truly competitive pressures - not the kind that masqueraded as competition in California, but the stuff that works, with no barriers to entry/exit and economic incentives to provide cheaper and more reliable sources.  If we did that, no one would build coal - but we also wouldn't be facing the faustian bargain you express, since there are SO many opportunities to build power that is cleaner and cheaper than our current fleet - but is hamstrung by an inability to get to market.  

The challenge that this raises is that it confronts a paradigm that is found almost uniquely in the electric sector (at least in this country).  Namely: we don't trust markets.  No reasonable person believes that the only way to ensure a supply of avocados in the supermarket is to appoint a 5 person Avocado Adequacy Board to oversee a monopoly supplier of semi-tropical produce production and distribution systems.  I'd even go so far as to assert that no reasonable person thinks that the creation of the AAB would benefit the supply, price or quality of our nations avocados.  And yet that is exactly what we  do with electricity.  Worse, we assume that the elimination of the AAB would compromise the supply, price or quality of our electricity - and this belief is perpetuated both by the regulated (who are loth to lose their protection from market pressures) and the regulators (who are loth to lose their jobs).  But if markets work in every other sector of the economy, one must ask the question as to why electricity is so unique.  And while we're at it, ask how it is that a system that provides guaranteed returns to really expensive, really socially disadvantageous power is worth keeping.

If they can reject it, Indiana may do so as well.

Now if you'll excuse me, I have a banjo to play...

I'm a big fan of market solutions, but I have a hard time seeing how your prescription is applicable here.  The barriers to entry for energy distribution/delivery are naturally high, because there is only so much distribution network that an area is willing to support or have built: most towns aren't interested in having two or three redundant sets of power lines running everywhere.  (There are also barriers on the generation side, but those are mostly capital-based, which is easier to overcome.)

The logic behind regulated utility markets is that a monopoly on distribution is inevitable to a certain degree, and energy is a basic requirement of modern life.  When you let a supplier set a market price for a necessity when they enjoy an effective monopoly, bad things happen.

Of course, the next logical (but poorly thought out) step is to do what California did: deregulate the generation side, but keep price regulations on the distribution side.  And we know how that turned out.

Given the logic that electricity is a necessity, and that delivering it is a public good, the whole  investor-owned utility model seems like a really peculiar mongrel that is inevitably going to take on the worst characteristics of a private company and of a government monopoly.  Municipal utility districts seem like a much better approach fundamentally: they (at least in theory) are directly answerable to their customers through political channels, and they have a mandate to provide for the public good, not for private profit.  Still, that doesn't get you away from the problem of onerous regulations which limit the ability of new players and new energy sources (like yours) to enter the market.

Ultimately I think that civic involvement, in the context of a MUD, has to be part of the answer.  Like so many things, we need to start taking responsibility on a community level for fulfilling our needs, rather than just trusting that some big, faceless bureaucracy and/or company will do it for us.

Bottom line is that I can see various ways that the current system is broken, and I can see how it might be improved, but I don't have a model for what a good solution would look like.  I'd be interested in hearing yours, if it addresses the problem of delivering a necessary commodity through channels that are inherently limited.

1. California's dereg had many problems, but it's worth noting that limiting competition to generation wasn't the biggest one.  Indeed, that's the way every deregualted state has done it (calling into question whether they really are deregulated).  Where CA was unique was in the combination of floating wholesale rates and retail price caps plus a willingness to bail out bankrupt utilities that really screwed up the system.  They also did not put into place any antitrust oversight, begatting Enron (although no other jurisdiction did either.)

2. You're right about the "natural monopoly" arguments on the wires, but only to a limited degree.  Transmission is subject to limited market forces, so it's really only the low-voltage local stuff that's problematic.  But here's where it gets interesting: the same arguments have been made for lots of other industries and proven false.  I can now build a private cell tower and patch into the telephone network without being a regulated monopoly.  I can also tap into the natural gas distribution system.  These processes have a couple of lessons.  One, it's not as natural as the existing monopoly would lead you to believe.  Two, the ability to build your own distribution network is beneficial not because you will, but because you can threaten to.  In the current model, if I have excess power to sell, I get stuck with whatever price the distribution utility gives me.  No right to negotiate or complain, and no alternative path to market.  By contrast, the minute I can credibly threaten to build my own connection to the network, the utility has to treat me honestly.  This is exactly what folks have done on the natural gas system - then end result is that subject to market discipline, people get fair interconnection prices.  At the end of the day, I don't want to build a wire, and an honest grid manager knows that.  But I will if it's my only way to get a fair price.  

3. A big part of the problem with the wires debate is that it starts from the presumption that we have to have a for-profit enterprise in the mix.  This isn't true for most social goods.  (Can you imagine what our police force would look like if they had a profit incentive?)  Indeed, absent competition, profits are just a tax.  So the real question - and I think we're in agreement on this - is whether we let wires utilities be for-profit and subject to competition (wherein Adam Smith's invisible hand creates benefits through the competitive pursuit of profits) or non-for-profit civil servants (where the ballot box maintains discipline).  What we have right now is the worst of both worlds, but we don't have to stay this way.  One of the best ideas I've heard on this is from the Galvin Institute, who has essentially said (my words, not theirs) "distribution utilities do a great job at managing the grid, but they do a shitty job at encouraging efficient use of the grid".  Ergo, let them do what their good at.  If it's a natural monopoly, then give them the right to manage it and a way to be reimbursed.  But don't let them own the metering or billing function.  You would then get competitive aggregators who could come in and own your meter to bill you for all upstream services - including, but not limited to the distribution system - none of whom are subject to monopoly protection.  After all, it's cheap to replace a meter and get a new utility provider, as the telecom industry has shown all too well.

No, they should reject it on environmental grounds for its massive CO2 pollution, probably in the range of 5 million tons a year.

1. What you said is more or less what I meant: When I spoke of allowing competition only at the generation level, what I was really referring to was the fact that the wholesale price of electricity was deregulated while the retail price remained controlled.  They broke the price feedback loop.  Although I'm no friend of the utilities (particularly PG&E, or "Pigs, Goats, and Elephants" as a former colleague of mine put it), I'm not sure what they could have done to escape from this problem: they were caught at the center of the broken price feedback loop.

2 & 3.  It sounds like what you are describing is a system in which the distribution network is owned by a regulated party (ideally a MUD, but in the case of the gas and phone lines, typically a private company), while the upstream and downstream ends (generation, and end-user metering) are handled by a private company freely subject to competition.  This sounds like a good model.

Questions:
Are the upstream and downstream provider necessarily the same entity?

How is the good behavior (i.e. not favoring one aggregator over another) of the distribution network operator ensured?  The issues here seem very similar to those around "network neutrality" of the internet.

You imply that this model is already used for gas distribution?  Where?  Is this common?  Is this how it works in PG&E-land?

If this is successful in gas, why is it not applied to electricity?  Are there technical barriers, or just political ones?  I can see where the need to keep supply and demand balanced might create a technical barrier, or at least the illusion of a technical barrier: If there's a mismatch (especially oversupply) on the gas grid, this isn't a problem.  On the electric grid, it is.

My last question raises another one, though: If gas providers A & B are using the same gas distribution system to server their various customers (who may be neighbors to each other), and provider A screws up such that they don't buy enough gas to meet their customer's needs, how do you make sure this impacts them (and their customers) rather than sharing the pain throughout the grid?  The gas all goes through the same lines, so it seems any shortfall would hurt everyone equally, regardless of culpability.  Electricity of course would have the same problem.

It sounds like you're saying that it's legal to build a gas line to my neighbor across the street if I don't like the rates I'm getting from the utility.  But that seems unlikely, for reasons related to safety, the public right of way, and so forth.  Elsewhere in your post, you describe a system in which the gas network is apparently owned by a neutral third party, who is required to let you tap into it and make a deal directly with your customer to supply them with gas on your terms, using the pipeline as a neutral conveyance.

Which is it?

In the context of an electric grid, I can see how the "neutral network" model would work well, except in the case of a shortfall (see previous post).  I'm having a much harder time imagining a situation in which it would be reasonable to allow someone to build their own actual pipe/wire, just because they don't like the terms that the grid operator is offering.  How do you prevent the proliferation of a vast number of micro-networks, none of which speak to each other sensibly?

I am not intimately familiar with the gas rules, but will tell you only that folks I know have used this threat to get competitive gas prices.  Rather than stick my foot in my mouth, I'll leave it at that.

But the larger point is that just because you have the right to build something doesn't mean that you don't still have to comply with local codes & safety standards.  (e.g., the opposite of regulation is not anarchy).  There is no reason why one should assume that any non-regulated builder of an electric distribution wire ought not comply with the same codes & standards - and indeed, go through the same local siting boards - as the regulated utility.  These rules are there to protect against precisely the concerns that you raise.  (It's also worth noting that Subtitle E of the House Energy Bill which I wrote about here, and is still very much a part of the conference energy bill would finally remove the legal ban on so-called "private wires").

So I don't think you really have any reason to believe that a removal of the utilities sanctified and explicit right to build wires has anything to do with the safety or sightliness of our grid. But it does suddenly give the guy (like me) who puts an on-site power plant in which can make more energy than the facility needs a route to market.

And here's where this all gets interesting.  If you get rid of the ban on non-utility wires, you almost certainly end up with fewer wires and a more reliable grid.  Why?  Because no unregulated actor is going to build a whole grid - they're just going to patch up their generator to some local facility.  That means that we shift generation closer to the wire and will tend to make it smaller, since there's no economic reason to build 500 MW power plants at the load.  This means more generators (= more nodes), which for system reasons gives you a more reliable grid.  Hisham Zerrifi of Carnegie Mellon did a PhD thesis on exactly this point (google him) and found that you only need a ~5% reserve margin in a grid with generation shifted towards the load to provide the same reliability as our current architecture gives you with a 20% reserve margin.  That translates into fewer generators and fewer upstream wires - and a grid less likely to black out.

This doesn't mean you don't still need a central grid manager - simply that you shouldn't give that grid manager a profit incentive unless you're willing to let them go bankrupt in the face of competition.

Will get to your earlier points later...

There's no reason why they would be.  The guy who builds upstream generation has a lot of capital and a pretty high tolerance for risk, since the upstream plant is inherently inefficient (see: our whole grid).  Thus, they require much higher returns and live & die by fuel price fluctations.  Calpine is a good example.  The downstream guy (like our company) is an industrial energy jock who chases efficiency and is very closely integrated into the energy supplies of their host.  If you look at the industry, it's really pretty rare to find both skill sets and risk tolerances in the same company.  A notable exception is Cinergy (now Duke), but even they spun out the downstream group in their Cinergy Solutions (now Duke Solutions) business, since it didn't fit very well with the big central bits.

You imply that this model is already used for gas distribution?  Where?  Is this common?  Is this how it works in PG&E-land?

See my earlier comment about my lack of familiarity with these rules.  My understanding is that it applies to the high-pressure transmission grid rather than the LDCs (a la PG&E), but I could be mistaken.

If this is successful in gas, why is it not applied to electricity?  Are there technical barriers, or just political ones?

Political, per my earlier comment.  Indeed, we build electricity distribution systems all the time that integrate seamlessly with the grid on the customer side of the meter.  In cities, they commonly have multiple points of connection to the grid and must therefore be designed very carefully to avoid getting crossed up between the two feeders. And some of these can be quite large (think about a steel mill, with many hundreds of MW being brought into the mill on multiple feeders and then distributed all over the mill, within which it is transformed, inverted, stepped up, phase shifted... and yet we don't disrupt the grid.  The idea that somehow all these skills are only applicable on the customer side of the meter is bogus - but the utilities are very skillful at presenting themselves as holding sacred knowledge that is unknown - and unknowable - outside of their monastery.  It is the rare utility commissioner that is able to see through those arguments, but that doesn't make them any more valid.

As an aside, multiple gas grid interconnections can also be dangerous, especially if they blend different gas fuel specs with different flame speeds, Btu contents, etc.  But like electricity, these issues are all solvable.

Your last question

If I understand you right, you're really talking about the difference between a grid and a single provider.  But this isn't a bimodal choice.  If I can produce 50% of my load, I can still connect to the grid for any excess (which may be 100% of my load if my generator is down).  This may sound complicated, but it's no different from saying that you can walk into your house with all the lights on and quickly turn on your stereo, AC and electric dryer.  The grid is very capable of handling fluctuating loads, and from a grid management perspective, there is no differentiation between fluctuations caused by sudden increases in demand or sudden reductions in on-site generation.  Now shift your perspective and imagine that instead of relying on an on-site generator, I'm relying on my neighbor's on-site generator which may go up or down (or my neighbor may suddenly consume more of that generator output leaving less excess for me).  Functionally, this isn't any different from the other examples.  Their load fluctuates and they get the balance from the grid.  But the key is that you still have a grid backup.  The grid is a truly wonderful thing, aggregating both suppliers and consumers so that the instantaneous fluctuation of any individual on either side of that transaction doesn't harm any individual on the other side.  Presto, you get more reliable supply and demand, and we shouldn't think about taking that away - what we do need to take away is the theory that this benefit of aggregation is somehow inseparable from the idea of inefficient, central, monopoly owned power.   Jack Handley put it best when he said that he'd rather be rich than stupid.  Me too.

Imagine a world which is organized along the lines you describe: There are multiple generators, and there are multiple aggregator-suppliers who sign up individual customers, supply them with power and bill them for their consumption.  There is also a grid which is owned by a neutral third party -- say it's city-owned and operated for the public benefit.

Each of these aggregator-suppliers is responsible for making sure that their customers get a reliable supply of power.  To do this, they contract with generators to buy X MWh over a certain period of time.

Obviously, they have to overbuy somewhat, to provide insurance against unexpected demand.  But they don't want to overbuy too much, because that costs them money.  Let's say supplier A (one of several serving the same area) cuts it too fine and underestimates demand.  He buys too few MWh, or pays for too little hot spinning reserve, or whatever.

In a standard market situation, supplier A's customers would find themselves coming up short.  They'd be pissed, and A would either have to make nice with them or they'd take their business to someone more competent.

However, in this case, all the power is coming through a common grid.  Which means that if there is more demand than the grid can supply, everyone gets shafted at least a little bit.  Then everyone is pissed, and the feedback mechanism that would punish supplier A for their error doesn't function.

The obvious way around this would be for the grid operator to be responsible for making sure the resources existed to cover shortfalls.  But now you're back to having the distribution grid owner also selling power, with significant disconnects between their incentive structure and that of the other players.

How do we get around this?  Or am I misunderstanding your model from the word "go"?

You do not actually believe this, do you? Are you aware that electrical generating stations employ lead-acid backup batteries and resistive shunts to even-out the power? If you install a windmill on your property and tie it to the grid, where do you suppose the power goes when the wind happens to blow? Typically, it gets bled off by a resistive shunt -- i.e. the electrical utility, after being forced to buy it from you, disposes of your garbage-power for you.

You still have the grid as the "swing" supplier, and I'm not suggesting otherwise.  Indeed, the problem you describe is one faced by ISOs every day where they have to forecast tomorrow's demand and make sure that there is resource adequacy to provide - and then have the flexibility if someone comes up short.  The way that they have taken to addressing this is to have markets of various lengths (e.g., day-ahead and 15 minute markets) so that the big, baseload reliable guys can bid into the day ahead markets and the guys who come up really quickly bid instantaneously into the 15 minute markets.)  I'm grossly oversimplifying, but the concept is the important part.  Big, cheap to run, slow to start (think coal, nuke, hydro) bids day ahead and stays on.  Small, expensive to run, quick to start (think little gensets, small gas turbines) plays arbitrage in the instantaneous markets.

There's really no reason that we couldn't apply this same model in a market that excludes the ISO, except in a grid manager role.  (Remember that the grid doesn't "know" anything about your load - power simply flows to the lowest voltage, such that if your demand increases, voltage just across your buss falls in the same way that water pressure in a pipe falls if you start pumping out downstream - and more power flows to you.  To the extent that this is happening to a lot of downstream nodes at once, the voltage starts to sag on the larger system, and the grid manager says "aha - we need more juice" and another generator gets dialed in.  Much of this can be - and is - automated.)  So now stick yourself in the position of a customer who is pulling power from your neighbor and an on-site power plant in addition to the grid.  All are connected.  If you  are getting lots of juice from your neighbor and on-site generator, your local voltage rises and the grid power flows past you to the next dude on the street.  If your generator goes down and/or your neighbor's supply eases, local voltage sags and more power comes in from the grid.  But in all cases, you still have a grid there as a swing provider.

Contractually - and in a world unfettered by stupid regulation - there's no reason you couldn't contract for all these pieces separately.  You pay one guy for baseload, 24/7 power at a price that's low, but which you guarantee to take even if you don't need it.  (For example, if you had an average 10 MW load that cycles from 5 - 12 MW on a daily basis, this would be the guy you lock in 5 MW from.) Then you buy another block from another dude for your shoulder loads that's a bit more expensive but gives you a bit more flexibility.  And you leave the last bit to be purchased off the grid as a swing supplier. That's probably pretty expensive - in part to ensure that the grid stays there - but you manage your other contracts so that you don't need it very often.  Whether you do that or leave it to your aggregator is a personal choice - but this is essentially how we buy everything else, from telephone service (fixed monthly charge for my land line, variable fee for my cell) to vegetables.

The bottom line though is that through a combination of maintaining a grid connection and giving a market the ability to arise and create contract structures that give customers what they want (cheap, reliable energy) instead of what commissioners think they want, there's no reason you need end up with a shortage.

And if I haven't made sense, drink a beer - I'm sure it'll start gelling.

I don't suggest the grid is perfect - but it is a truly wonderful invention that allows you to instantaneously get energy in just about any quantity you need at the flick of a switch.  While we can all contemplate better things, we shouldn't lose sight of how much better this is than life before the grid, when getting more power meant going out and firing up another generator (and hoping it had been maintained in the interim to start up, and would synch up with your other power supply so that you didn't get massive frequency and voltage disruptions.)  Or, to go back a bit farther, to a time when getting more power meant buying another mule.  By comparison with any non-grid source of power, it is a remarkable achievement, and one upon which a modern economy depends.

I would still be concerned that the grid operator would be placed in an untenable position, having either too much control (the current situation)or not enough control to do their job well.  It seems that the challenge of grid balancing would be even greater under a system in which they are merely the swing supplier, because now they have to coordinate with what a bunch of other players are doing.  Not saying it couldn't be done, merely that it would make a hard problem even harder.  Of course, if there was a reasonable level of intelligence embedded in the grid, that would help alot.

I think Nucbuddy's point is that this amazing level of service has been bought at the price of enormous waste.  Which is potentially a valid point, although the degree of that waste is hard to establish.  Of course, being part-troll, he also had to take it as an opportunity to slam renewables. Somehow the energy fluctuations from renewables is fundamentally harder to manage than the fluctuation created by user loads going on- and off-line.... But I digress.

Before, you said it was aggregation that gave the grid its advantage. I pointed out that you neglected to mention the lead-acid batteries and the resistive shunts that make the grid function smoothly so that when you flip a lightswitch on, you have instant power, and when you flip a lightswitch off, nothing blows up or catches on fire. If you want that level of modulation-ability, aggregation won't cut it.

You are still neglecting to mention the lead-acid batteries and the resistive shunts that make the grid function so smoothly.

...And it isn't energy we can modulate instantly from the grid, it is power.

Sean Casten wrote: we shouldn't lose sight of how much better this is than life before the grid, when getting more power meant going out and firing up another generator

Before the grid, instant power modulation meant relying on lead-acid batteries and resistive shunts -- the same as today.

That would be an absurd point to make, and it was not my intent to make it.

GreenEngineer wrote: Somehow the energy fluctuations from [windmills] is fundamentally harder to manage than the fluctuation created by user loads going on- and off-line

Yes, windmill fluctuations are harder to manage. Windmills within a given area, relative to each other, go on and off not randomly, but in sync.

GreenEngineer wrote: Nucbuddy's [...] Of course, being part-troll

grist.org/about/terms

Prohibited Conduct

6. By accessing our website or any chat room, online discussion forum, or other service provided through our website, you agree to abide by the following standards of conduct. You agree that you will not, and will not authorize or facilitate any attempt by another person to, use our website or any related chat room or online discussion forum to:

a. Transmit any Content that is unlawful, harmful, threatening, abusive, harassing, defamatory, vulgar, offensive, obscene, pornographic, lewd, lascivious, or otherwise objectionable, as determined by Grist.

b. Use a name or language that Grist, in its sole discretion, deems offensive.

c. Post defamatory statements.

d. Post hateful or racially or ethnically objectionable Content.
[...]
g. Harass, threaten, or intentionally embarrass or cause distress to another person or entity.