Madison schools join the North Alabama Buildings Performance Challenge

MADISON, Ala. –  The Madison City Schools system is saving hundreds of thousands of dollars by being more conservative when it comes to energy use.

Now, they are going head to head with other businesses and organizations around Madison County to see just how much they can save on energy.

“It’s a voluntary effort where organizations and businesses from around north Alabama are committing to energy efficiency,” said Daniel Tait, CEO of Energy Alabama.

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Can electric cars save utilities

Can Electric Cars Save Utilities?

Over the past decade, we as a society have become much more energy efficient; we have energy efficient light bulbs, our appliances require less watts, and we can even install solar panels onto our homes to generate our own energy. Undoubtedly, these are great steps to take if we want to preserve natural resources and save some capital for other expenses like shopping or groceries. But is there a downside to someone?

As mentioned in a previous blog, the utility death spiral is a reality that could be all too imminent. Hawaii and some parts of Europe are already seeing the foreboding signs of a utility crisis. A result of declining prices and rising costs, utility companies are left desperate for new load growth. Utilities have been threatened by numerous factors like LED bulbs, on-site solar, and energy efficient appliances, which cause significant declines in utility sales. If revenue falls too quickly, then utilities become liable to start in free-fall, much like what happened in Germany where utilities lost half a trillion euros in their markets. Innovation and progressive change are good, but pace is pertinent in their execution. 

Another haunting reality for utilities is the void of commonly found, high-demand appliances in consumer facilities. Decades have passed since the refrigerator or heating and A/C units, all of which require considerable amounts of energy to operate, have been taken into our homes and commercial facilities. When these appliances were first introduced, utilities saw a major increase of demand. But that was long ago, and we have since become a much more energy efficient society, especially with largely encouraged renewable energy sectors.

However, quick innovation can involve shifts in losses and benefits from one industry to another. So if the electric car companies can take business away from the gigantic petroleum energy by releasing more electric cars (EV’s), then everybody wins. Well, everybody except the petroleum industry, but that’s another discussion.

Can a Shift to Electric Cars Save Utilities?

The answer to this question is a bit complicated. The Energy Information Administration (EIA) states that transportation energy is the second largest consumer of energy in the U.S, right behind electric power generation. However, a predictable 93% of that power comes from petroleum products. A recent post by the Edison Electric Institute (EEI) claims that EV’s could provide the load growth that utility companies so desperately need. EEI published a post on Transportation Electrification back in 2014. This post details how EV’s could benefit all parties involved, society included, if we moved from petroleum powered vehicles to battery powered ones.

Between 2007 and 2013, retail sales of electricity in the United States across all sectors dropped 2%. In addition, the American Society of Civil Engineers gave America’s energy infrastructure a D+ grade in their 2013 report card and estimated a 3.6 trillion dollar investment needed by 2020.

–Transportation Electrification, EEI

However, there are some foreseeable problems with a large scale shift to EV’s. One being that peak demand times could be significantly increased by people charging their EV’s. From what we notice today, EV owners typically charge their vehicles when they get home from work. Makes sense, right? You get home, plug in your car, and go inside to watch football and chill out for a while. The only issue with that is that utilities already see peak load times around these hours, so adding even more demand during these times could prove costly and difficult for utilities to handle. Some utilities, including Alabama Power, are hoping to fight this by offering qualifying EV owners rate incentives if they charge their vehicles in off-peak hours, which, if done correctly, could actually benefit grid stability and efficiency.

“Alabama Power offers an optional rate rider for customers with a Plug-in electric vehicle (PEV). The rate rider allows customers to charge their electric vehicle at a discounted rate during off-peak hours of 9 p.m. to 5 a.m. To qualify for eligibility, a customer must own a PEV that is manufactured primarily for use on public streets, roads, and highways. Electric scooters, electric bicycles, golf carts, and motorized electric wheelchairs are not included.”

California’s Shift

EEI claims that a large scale electric transportation shift would benefit the electric vehicle industry, the consumer, the environment, and especially utilities who need to see a significant rise in load growth. As we know, electric vehicles have significantly lower carbon emissions that damage the atmosphere, save the consumer money on gas, and would cause a considerable rise in electric demand for utility companies.

California is already making notable efforts in regards to filling it’s streets with electric vehicles. The California Public Utilities Commission (CPUC) received several proposals from different companies who wish to accomplish different goals in expanding their fleets to exclusively EV’s and installing thousands of new EV charging stations. The proposals are filed under California’s Zero-Emission Vehicle Program that plans to propagate a utility infrastructure to support 1 million Ev’s by 2020. The state hit 250,000 in late 2016.

The proposals approximate to 1 billion dollars in funding. If granted, tens of thousands of charging stations would be installed in California airports, ports, warehouses, and residencies. The Pacific Gas and Electric Company (PG&E) is seeking $253 million for three efforts: “expanding electrification for fleets with medium- and heavy-duty vehicles, responding to consumer demand for fast-charging stations, and exploring new uses for vehicle electrification through five, one-year projects.”

Vehicle Electrification and Alabama

Alabama faces one big problem with the electrification of its transportation industry: charging. Alabama is all but void of any charging facilities that EV’s so desperately need. If utilities are truly depending on EV’s for the load growth that they need, then charging station projects would have to come soon.

Additionally, Alabama needs to take a hard look at its policy in the transportation policy to encourage growth in electric transportation. These changes could be everything from building codes at the local level that require installation of chargers for large destinations to the Alabama Department of Environmental Management (ADEM) using Volkswagen settlement money to build the infrastructure for heavy duty trucks.

As you can see from California’s example, where energy efficiency and renewables have stunted electric demand growth, utilities are making aggressive moves to electrify transportation. Regulators are working with electric utilities to build the shared infrastructure while keep the market open to private sector innovations. We hope Alabama will follow suit.

Probing Residential Demand Charges

What are Demand Charge Rates?

We have become very accustomed to the electric bill we receive every month. This bill has different charges like sanitation, tax, etc. But the largest charge is very likely to be the electric service charge. Put simply, this charge is what the utility company charges to meet your demand, or the amount of power your home consumes, during that monthly billing period. This is what is known as a standard consumption rate, which could be either fixed or variable. But you probably paid a fixed rate, which means that you pay the same rate for your energy regardless of how much or when you need it.

Related: Understanding Your Utility Bill

Fixed rates have been used for a very long time for residential consumers, and are probably the most common rate structure around. However, a different billing policy exists for commercial consumers, one called demand charge rates (DC’s). DC’s are a completely different charge that commercial and industrial sectors have to pay for, along with their consumption rates. A DC can be defined as an extra cost that a consumer has to pay for their maximum demand over a billing period, and can make up around 30% of a utility bill. So, imagine not only paying for the energy you use, but paying more the maximum used at any one time. Kinda lame, right?

Another way to think of this is like turning everything in your house on at the same time. That’s a lot of juice! And the utility will charge for this because they still have to supply you even when everyone is turning on everything at once.

(If you want to learn more about rate design, then check out our article on the ins and outs of rate design! )

Are Demand Charge Necessary?

Demand charges are designed to lower the cost of grid operation during peak hours of demand. DC’s supposedly help utility companies offset the cost of meeting high peaks of demand, which they have to do at all times, and that can be expensive. Utilities have to meet demand 24/7, and to do so they have to operate a lot of expensive equipment and generation plants.

Utilities argue that DC’s help cover the cost of maintenance and construction of wires, transformers, power plants, substation, etc. DC’s also encourage consumers to have a more consistent demand, with smaller demand peaks offset by spreading demand over a larger period of time.

However, charging the consumer more just because they have a peak demand during any given time is not always the best solution. For example, a business could reach its peak demand in system off-peak hours where the total demand on the grid is considerably less significant than system peak demand hours. This means that a business has to pay more for their energy although they are not costing the utility any more to meet their demand.

You can read our article on the Duck Curve if you want to learn more about demand, peak hour efficiency, and the costs of meeting demand during peak hours!

Residential Integration

DC’s have been around for decades in the industrial and commercial worlds respectively, until recently.  The Arizona Public Service (APS) attempted to integrate their residential customers into their Demand Charge policies back in 2016, but was met with frustration and from residential costumers. APS and and regulators were swarmed with public backlash in the form of upset calls and even protest.

The problem with integrating DC’s into residential districts lies in that individual residential homes, even in their peak demand, do not often put adequate stress on the grid to justify charging more. This stress point usually occurs only a few times per year. Furthermore, residential consumers are not used to being charged this way and frankly many do not understand what the charge is much less how to manage it. Simply put, it requires action by the consumer to manage.

Residential demands and peaks are also very similar. For the most part, we all wake up, shower, and use appliances before we leave for work/school, and we turn on the air conditioner when we return. Commercial and industrial facilities, however, tend to have much more sporadic and instantaneous peaks and demands throughout their billing cycles, especially those facilities operate on a 24 hour basis. Not to mention that these facilities require much larger amounts of power than any given residential home.

APS also made errors in giving proper effort to outreach to consumers of what DC’s really are. It takes a long time, sometime years, to adequately inform every consumer of policy changes. Some people don’t watch TV or have a smartphone, and some do not even have an adequate mailing address. So conducting proper outreach is difficult, but absolutely required.

It is doubtful that APS will be the only utility to attempt to push DC’s on their residential consumers.

A Better Alternative

A third rate design currently exists in the world of energy, one that we believe to be a healthier, more efficient one. This rate is called Time of Use (TOU). This system is more complicated than the standard consumption rate, so let’s break it down.

Related: 6 Reasons Time of Use Rates Are the Best Option

TOU rate policies work by monitoring energy use during peak demand hours. Peak hours vary slightly from grid to grid, but utilities generally see a big ramp in demand in the morning hours (approximately 6AM-9AM) followed by another ramp that evening (approximately 6PM-10PM).  Consumers under TOU rates would be charged more for using energy during these hours. But, unlike demand charges, time of use rates only apply if you use energy during hours where the grid is at its most stressed, and not just whenever your home meets its own peak demand. Consumers under TOU’s are generally charged less per kWh in the off-peak hours than consumers who are billed through the standard fixed rates. TOU’s give business and homeowners alike the capability to save money by reducing stress on the system by lowering their demand peaks, which in turn saves money for the utilities, as well. 

But we like TOU’s for a number of reasons. One being that it gives you the ability and encouragement to work around times of peak demand, and you can even save money by doing so. And who doesn’t like saving money? But it does take some amount of work on the consumer’s part to do. If you usually wash clothes in a dryer and washer or keep the A/C or heat on during peak hours, then try and move those times of usage to non-peak hours.

Furthermore, you can install automatic timers on your water heater and other equipment to only make it run during off peak hours. (Trust us, you’ll still have plenty of hot water). Also, and we love this one, you could install solar panels into your home to lower your demand even more! This would be especially helpful if the the highest charges are during the day with the sun is plentiful. TOUs and committing to these changes could save you hundreds of dollars per year on your electric bills. It’s also worth mentioning that a true TOU system would leave out any unwarranted and extraneous fees. You pay for the energy you consume, when you consume it, period.

TOU’s can not only help you save money, but they also provide real help to the grid. If implemented properly, TOU’s will reflect times when the grid is at it’s highest demand. These times are much more costly for utilities to meet as they have to operate a plethora of expensive equipment to do so. Operation of less expensive equipment = money saved for utilities and you.

Our own Tennessee Valley Authority is proposing TOU’s for utility companies such as Huntsville Utilities, but it’s unknown if they have plans to move TOU’s to their other consumers.

Energy Alabama Signs On to Comments Opposing TVA’s NEPA Rule Changes

Energy Alabama, and a host of energy and conservation groups, signed on to comments prepared by the Southern Environmental Law Center opposing changes to TVA’s implementing regulations for the National Environmental Policy Act (“NEPA”).

Energy Alabama is extremely concerned that TVA’s proposed changes undermine transparency, stifle public involvement in TVA’s decisions, and bestow upon TVA almost boundless discretion to decide whether and how it must review the effects of its activities on the people and environment throughout its seven-state service territory, which includes nearly all of Tennessee, and portions of Alabama, Georgia, Kentucky, Mississippi, North Carolina, and Virginia.

To view the full comments, please visit:

What is a Value-of-Solar Tariff?

A value-of-solar tariff, or VOST, is a rate design policy that gives customers with solar panels credit for the electricity they generate at a specific price. The credit is then applied to the customer’s utility bill. A VOST usually clarifies how much energy is sold from the customer to utility company and from the utility company to customer; it also determines at what rate the energy is valued. Value-of-solar tariffs are generally viewed as unfair and for two main reasons: the value of the tariff is lower than market rate in most areas and the benefits of VOSTs aren’t broadly advertised. But VOSTs don’t HAVE to be unfair.

As of right now, there aren’t many markets that have fair compensation for solar in the form of VOSTs. The two main places that are under the current implementation of value-of-solar tariffs, Minnesota and Austin, Texas, purchase all of their energy at the utility’s retail rate and pay out a separate VOS rate in dollars per kilowatt hour. In Minnesota, the VOST rate is about $0.145 per kilowatt-hour which is above the residential retail electricity rate of $0.115 per kilowatt-hour. This rate means that for every kilowatt-hour a solar user produces, the user doesn’t have to pay for a kilowatt-hour and they save a little on the electricity they don’t produce but still use. Why would a state or utility pay higher than retail? Because through a VOST process, IF the total value of solar energy is taken into account, there may be cases where it is in fact worth more than retail.  This type of VOST is very customer friendly to encourage the residents of Minnesota to begin producing solar energy themselves; unfortunately, outside of Austin, Texas, the same cannot be said for other states. One of the reasons for less than market rate compensation is the cost of providing the VOST in the first place or other services that utilities must provide for you to sell to them.

What is the unseen value of a VOST?

An end financial value of a VOST is made up of many subparts. For example, some value components include: avoided cost (money saved by the utility from not having to buy additional fuel for the power plant), environmental (the value of reducing harm to the environment and its subsequent cleanup), and transmission system impact (less strain on power lines due to generation being located closer to where it is being used), among others.

For a user to successfully produce and sell back solar energy to a utility company, they have to use the grid. Even if a customer produces the same amount of energy as they use, there are still costs to selling the energy back and for energy used from the grid when solar is not producing. When paying out for solar, utilities have to consider the cost of business (grid maintenance, labor, parts, etc.), which takes a portion out of the amount the customer receives. The need utilities to receive compensation for their services in a VOST to maintain the grid cannot be overlooked.

The second reason value-of-solar tariffs can get a bad reputation is customer lack of knowledge about its benefits. Utilities can better understand customer load, timing, and volume because a VOST separates electricity generated by the consumer from electricity consumed. This is valuable information that utilities can use to better predict when peak times might occur and how much electricity they’re actually using. However, customers may not understand all the variables that make up a VOST or why they are there.

Another reason is how customers receive compensation based on utility-specific benefits and costs of their electricity generation, instead of fixed retail rates that may span many regions. Customers are able to select what VOST is most beneficial to them depending on their energy production and use, as opposed to going with the rate of their region no matter the circumstances.

Value-of-solar tariffs are one of several viable options for solar users to sell back their solar energy, and there are both good (Minnesota and Austin, Texas) and bad (almost everywhere else) ways of providing it to customers. One important aspect that cannot be overlooked is how a VOST is beneficial to the energy system (e.g. the grid) as a whole. With a true integrated value, a VOST can provide the grid with much needed support and gives utilities valuable information; but as it becomes more widespread, concrete worth needs to be given to the value provided from things like environmental and avoided energy costs. VOST has a bright future if implemented correctly, and as more states follow Minnesota’s example, solar will continue to grow more valuable.