By Brit Naas and Amy Cooke
What if we could break free from the massive transmission lines and power plants and the utility-scale wind farms that are hundreds of miles away? It’s not impossible. From cryptocurrency to ride and home sharing companies, decentralized and sharing economy platforms are altering sectors in a way that was unfathomable twenty years ago.
We at the Independence Institute believe the power industry is about to see a similar renaissance, as companies like LO3 Energy work to make residential microgrids a reality – where neighbor-to-neighbor transactions occur with regularity.
As with any change – whether cultural or economic – movement away from the status quo usually doesn’t happen overnight. This is especially true for the power industry. For nearly a century, private, for-profit regulated monopolies have dominated the electricity sector, reaping in billions of dollars for their shareholders courtesy of captive ratepayers.
Theoretically, Colorado’s Public Utilities Commission and our state legislature serve as watchdogs over these for-profit monopolies. Publicly traded monopoly corporations are guaranteed a profit for their “just and reasonable” rates to provide service to ratepayers, who have no choice in their electricity providers. Monthly utility bills, sometimes larded up with additional fees for unnecessary corporate expansion, have become more of a wealth transfer system between captive customers and corporations’ shareholders.
Obviously, monopoly utilities do not yield this privileged position voluntarily. From Tri-State Generation and Transmission to Xcel Energy, they are notorious for their efforts to resist change that could lower or even eliminate their guaranteed profit margins.
Delta-Montrose, a rural electric cooperative that services Montrose, Delta, and Gunnison counties, is currently trying to withdraw from Tri-State because its members want the freedom to determine the type of sources that generate their electricity. It had hoped the process would have been nonconfrontational and fair for both parties, but Tri-State is resisting and has asserted that the co-op cannot withdraw. Not only is Tri-State’s position most likely illegal, it is also subversive to Delta-Montrose’s members’ autonomy and self-determination.
Xcel, Colorado’s largest electric utility, is the glaring case study of how our centralized electricity generation and distribution business model is a disservice to customers and a financial windfall to the monopoly.
It has been wildly successful at lining its shareholder’s pockets by appealing to the renewables-at-any-cost crowd. Self-described environmentalists such as the Sierra Club, Western Resource Advocates, and Conservation Colorado have formed an unholy alliance with Xcel.
These special interest groups with their own deep pockets and a myopic view of utility-scale wind and solar have aided and abetted Xcel’s unjust enrichment at the expense of innovation, free markets, the environment, and most importantly – those of us paying the bills, otherwise known as ratepayers.
Protected by an army of lobbyists, government officials, and entrenched interest groups, any hint of reform with the potential to threaten Xcel’s stranglehold on its 1.4 million captive ratepayers is met with open hostility and blatant lies. Despite the plethora of money-saving pledges, have your rates gone down? Furthermore, Xcel has used the “unholy alliance” to strengthen its financial and monopoly position.
Depending on need and political will, Xcel has used its position either to circumvent the Public Utilities Commission by going directly to the state legislature, or to circumvent the state legislature by going directly to the Public Utilities Commission.
It’s a clever strategy but not fool-proof for Xcel and its sycophants. Not all legislators are enamored with Xcel’s lying and bullying to protect its financial gravy train. In the 2018 session, a bipartisan group of legislators led by Senator Steve Fenberg (D-Boulder) showed a willingness to chip away at the monopoly’s stranglehold as one of the first states to pass a “right to store” bill (SB18-009). With Governor John Hickenlooper’s signature, Xcel residential customers now have an option to store their own electricity free from the monopoly’s interference.
This brings us back to the idea of 1500 feet of freedom. We urge those same courageous lawmakers to craft and pass legislation that will allow individuals to buy or sell power produced and/or stored within 1500 feet of them without regulatory and monopoly interference.
Let’s say a business owns a mini solar garden or a natural gas generator, but it doesn’t need all of the power it can produce. That business could contract with a neighboring business to sell its excess power. Assuming they comply with all local building codes, the contract is between the two businesses free from PUC or Xcel interference. This would also work for neighbors. One neighbor may invest in solar panels while the next-door neighbor invests in battery storage. They decide to share the power and capital costs. All of this happens without regulatory or utility meddling.
We believe a commercial or residential customer should be able to use the electricity they’re producing and storing as they see fit. This could mean using it themselves or selling it to those within 1500 feet of them.
As evidenced by an experiment conducted by the Brooklyn Microgrid in 2016, we have the technological ability to trade electricity via a peer-to-peer model. Three years ago, two participants in the Brooklyn Microgrid completed the project’s first peer-to-peer, or in this case, neighbor-to-neighbor transaction. One had solar panels that produced excess energy, the other wanted to purchase that excess energy. There was no middleman, just two neighbors who agreed upon a price and completed the deal.
According to the Brooklyn Microgrid’s website, this first transaction was a “sandbox experiment.” However, this year, the Brooklyn Microgrid is going live, and both the sellers and buyers are going to experience energy choice.
The technology is there, and 1500 feet of freedom puts innovation over regulation. It could reduce the need for behemoth-sized power plants and the hundreds of miles of transmission lines that go along with them. It could put money in individuals’ pockets rather than just corporate executives and shareholders. And it would put individuals in charge of power production and usage.
Now is the time to unshackle ratepayers from the confines of a centralized grid and monopoly utility and propel the power industry into the twenty-first century.