Letters from the West

When batteries are included, electric utility customers can save money

Idaho Power CEO Darrel Anderson said at his annual meeting last week that the investor-owned utility would continue to reduce its carbon footprint.

But in response to questions from stockholders advocating renewable energy, the 55-year-old Anderson said he does not foresee a carbon-free Idaho Power in his lifetime. Since the utility that serves Southern Idaho and part of eastern Oregon just built the 391-megawatt Langley Gulch natural gas plant near New Plymouth, which has a life of at least 30 years, that’s a pretty safe prediction.

Still, changes in technology for the electric grid and generation industry are moving at a faster pace than at any time over the past century. So-called smart-grid technology, bringing information technology together with improvements in energy efficiency and programs that can manage electric demand, is reducing the need for building big power plants.

Utilities also are moving to setting prices at true cost, increasing the price during peak periods and reducing it during times of surplus. All kinds of technologies and opportunities to increase efficiency will pop up, such as making ice in times of low cost for commercial buildings and using it for air conditioning in peak periods.

Then there is the amazing drop in the cost and rise in the storage capacity of batteries. Tesla’s announcement earlier this month that it was putting its Powerpack utility-scale battery system on the market at $250 a kilowatt hour is rocking the utility industry.

Some utilities, including Idaho Power, have been watching and studying how new, more efficient batteries can help them. A utility in Texas, according to Forbes writer Jeffery McMahon, had been looking at the price of $350 a kilowatt hour and saw opportunities for saving customers money.

The main advantage is that good battery systems will resolve the biggest problem intermittent wind and solar generation plants present to reliability. A nuclear critic, as you would expect, said such batteries would make nuclear power and its 24-hour power obsolete, McMahon reported.

Let’s not get ahead of ourselves.

McMahon reports that the Texas study suggested that even at $350 a kilowatt hour, batteries would reduce the cost of electricity for consumers and utilities by reducing the need to buy power and run expensive peak plants during peak demand, the selling of battery capacity on the wholesale market, and the reduction of power outages.

And last, but not least, utilities won’t have to build new power plants as often.

Idaho Power currently has a surplus of power through 2025, which is why it wants to reduce the length of the contracts for solar power it must buy from private developers under federal law. Idaho Power says that it can’t close its Valmy coal plant in Nevada until the Boardman-to-Hemingway transmission line to eastern Oregon is built. A second transmission line east could bring even more power, giving the utility more than a decade to lay the groundwork for its transition.

Idaho Power has the chance to reshape its own grid to take advantage of improved battery storage. Anderson talked about the potential of batteries in our first meeting in 2014. But where and how this revolution will take place is driven by capital markets on Wall Street. It was Wall Street that told Idaho Power and other utilities that it would not finance new coal plants in 2006, essentially moving the industry to natural gas, which then dropped in price.

Even before President Barack Obama’s Environmental Protection Agency proposed new power plant rules to reduce carbon emissions, the coal industry had begun phasing out. New nuclear plants also are stalled because of the low price of natural gas. These carbon-free plants won’t catch up without a restrictive federal carbon rule or a carbon tax.

The capital marketplace will decide whether batteries are the best place to invest. Public utilities are inherently conservative — usually followers, not leaders. That’s because they get rewarded not by the market, but by state public utilities commissions that guarantee monopoly utilities a dependable profit. Utilities get paid for their investments once approved, even if the market changes.

But Idaho Power’s new CEO has shown an openness to work more collaboratively with customers and advocates of renewable energy and efficiency. With one of the lowest carbon electric grids in the nation, Anderson and the Idaho Public Utilities Commission have the opportunity to ride the energy revolution wave instead of allowing it to make Idaho Power an attractive takeover target by a bigger utility, such as PacifiCorp.