
Musk vs. Buffett: The Billionaire Battle to Own the Sun - prostoalex
http://www.bloomberg.com/features/2016-solar-power-buffett-vs-musk/
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Riod
The email to the governor is actually quite accurate.Big issue with renewables
is that their adoption on roofs puts a de facto tax on people who don't have
solar (eg apartment dwellers). Why? Because they use the grid as backup and
the grid requires significant maintenance. There's a cost to that.

As it stands everyone pays for a part of these costs through their power bill.
Take enough people away from paying into the grid and all of a sudden rates go
up for everyone or the utility takes a loss. You might be fine with the latter
but a lot of utilities are rate based. Meaning the government determines how
profitable they will be and rate increases need to be justified.

Will be very interesting to see how different states tackle this issue in the
years to come. The utilities don't like it because incentives for roof based
solar mean their rate base erosion gets accelerated.

It must be added that this article talks about distributed generation
(rooftop). Interesting that the incentives for rooftop development are more
than solar plant development even though utility scale solar is far cheaper
than rooftop and is sold at wholesale prices via PPAs with utilities. Makes
you question what exactly politicians are up to here.

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prostoalex
The opacity exists because the utilities bundled them that way. Energy
generation, energy sales and grid maintenance are three separate businesses,
but in many states at least two (if not all three) of those are bundled under
the same company.

The opacities create distrust - how do you know that an increased "grid
maintenance" fee is a true representation of that service, and not an attempt
by the utility to cover up losses in other areas?

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Riod
NV Energy is heavily regulated. A rate base utility is allowed to earn a
certain % profit each year. This is specified by the authorities. They then
work up the income statement to how much they can charge and justify that to
the government. Trust me when I say every line item is scrutinised. Don't envy
anyone on the utility's side. What's the opacity here?

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prostoalex
We can have a committee (of politicians who might or might not had accepted
political contributions campaigns from the energy sector) doing the regulation
and another committee (of appointees with various levels of connections to
energy sector) doing the scrutinization, or we can have those broken out as
two separate businesses arriving at their numbers independently.

Why can't consumers buy kWs from a variety of competing providers, and have
them delivered via grid owned and serviced by a third-party? If a major
utility decides they can outbid everyone else on grid maintenance contracts
due to their superior cost structure or some technological know-how, so be it.

Such tight vertical integration does not make sense if you extend the analogy
to other infrastructure projects. Grid operator is the toll road operator,
energy distributors are the UPSes, FedExes and other trucking companies paying
for access to that road, and energy generators are the Amazon.coms and Wal-
Marts pitching their kWs to final consumers.

The billing is done by three separate parties, and we don't have to establish
a supreme committee that decides whether Amazon charges us a fair price on
shipping costs and toll road surcharges.

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Riod
Economics dont always work to split the three because each business needs to
have sufficient competition for it to work. You can't exactly build 5+ grids
running parallel to each other. The generation part is already competitive
FYI. IPPs are a thing (as pointed out in the article). Deregulated markets
tend to have spikes or lots of space for IPPs to build and compete. Have you
ever looked at the financials of a utility and understood the different rate
regimes? Your suggestions come across as pretty naive tbh. Power generation,
distribution and retailing is not equivalent to setting up a Walmart. Texas
has a deregulated regime and regulators there are always looking into price
spikes because customers don't like their bill to change radically from month
to month. And their bills aren't exactly lower.

And customers can already buy electricity from different providers. One of
them is solar city (under a lease). Or resellers.

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prostoalex
Do you have a reading suggestion on understanding the economics of IPPs and
effects of regulation/deregulation? I am also curious about more in-depth
reading of Texas situation.

Understood that a natural monopoly exists precisely because we _don 't_ want
to run 5 competitive grids, but it also doesn't prevent a city (or county, or
township, or HOA) from owning their last-mile distribution network (and having
servicing/maintenance done by a contractor).

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Riod
Look up primers on us power generation, should be a section mentioning ercot
and highlighting its unique features. Agree that cities could own last mile
(preferable really). But, and this is a big but, they're not always well
equipped to do so. Mismanagement on their part could be even worse. Though
Canadian provinces seem to be pretty successful with their crown corporations
like Hydo One. But I understand those are separately managed utilities that
buy some power, make some power, and transmit power. Interestingly hydro one
ipo'd last year. Could look at their ipo filings to understand its history.

