DISCOVERY AND EVOLUTION
Looking back through the short history of man's use of and eventually dependence upon electricity illustrates the nature and complexity of this evolution, how it's organized and how it's financed. In California as in the US, mature, centralized electrical energy grid infrastructures exist. Transitioning to clean, climate friendly and smarter electricity systems means bringing innovative, capital intensive, and increasingly decentralized power sector infrastructure on stream.
GETTING TO THE 20TH CENTURY MODEL
Late in the 19th century, electricity spread in systems as small as a single building, a city block, or a small area of a city. Plants were small and authority to deliver in a specific area was granted by local governments to numerous overlapping providers. The concept was that competition was the best way to achieve the lowest prices. As larger generators led to larger service areas, it was discovered that duplicating sometimes dozens of servers in the same area led to higher costs. The question became how to keep prices low without the negative impact of monopolies. The conclusion at that time was to allow these large entities to have a monopoly in a given area, but with government oversight and control of pricing. Large Trusts, consolidating a number of smaller businesses to establish a monopoly, were common at the turn of the century so this didn't seem unusual. (See Electrical World, June 1, 1974).
The evolution into larger capacity generation made some big progress during that same period. Pioneers like Nikola Tesla and George Westinghouse played key roles in making possible the first large-scale harnessing of Niagara Falls with the first hydroelectric plant in the United States in 1886. http://www.code-electrical.com/historyofelectricity.html. Westinghouse financed the project in the simplest but seldom available way, using his own money. The Niagara plant began construction before there was an adequate method of handling large power transmission and distribution. However, even as the hydraulic tunnel was under construction, Tesla was developing the polyphase apparatus that allowed only one kind of current to be generated, transmitted to the place of use then transformed into the desired forms. The Niagara system of current for all purposes from large generators led to similar power systems in New York City for a number of uses, many in mass transportation. Thus began the growth of the large generator that grew to serving whole states or even larger regions.http://www.teslasociety.com/adams.
INVESTOR OWNED MONOPOLIES AND PUBLICLY OWNED FACILITIES.
While demand increased rapidly, the large generation facilities with electricity generated and delivered through a complex network of transmission lines began to serve more of the U. S. As described above, unnecessary duplication of expensive delivery and distribution networks was prevented by monopolies being granted for a particular community or region to the investor owned utilities ("IOU's") making it possible for the behemoths to deliver electricity a a lower cost. Low cost production and delivery did not lead to lower prices for the consumer. Even with the creation of Public Utility Commissions to regulate prices, the IOU's investors expect a return on their investment and this additional cost is passed on to the customer. Even with prices being higher than other organizational formats such as municipal utilities, the IOU has survived due to the ability of the IOU's to protect their market even in the face of more democratic, cleaner, and eventually less expensive models.
Publicly Owned Utilities ("POU's") came into being almost simultaneously with the growth of IOU's. These are local institutions working to serve local needs. They allow homes and businesses to be served by electricity provided by a not-for-profit, locally owned utility. Boards of Directors are commonly elected by the voters within the area served by the POU, essentially making the stockholders the voters who have the expectation of lower prices to consumers rather than shareholder profit. Ownership of the cost of production, or at least some of the costs of transmission and distribution, means the community has more control, so all the benefits produced by public power—including affordable energy costs, better service, and a focus on local goals—stay in the community. As both began to proliferate, a tension developed between profit motive and public service. See more at whypublicpower.org
GERMANY’S GREEN REVOLUTION
While the spread of electricity first followed the model of the monopoly with large generation capacity serving thousands, the trend today is taking us in the direction of a more democratic model involving much smaller, even one house size generators that can serve the individual or neighborhoods through trading and sharing at the local level. The "German Revolution" illustrates how well this can work. The share of electricity produced from renewable energy in Germany has increased from 6.3% of the national total in 2000 to about 30% in the first half of 2014. The German transition started when both solar and wind electricity were relatively expensive by current standards. Government incentives like those in the past that had allow oil and coal to prosper were made available to these new local methods of generation and transmission. These incentives leveled the playing field and costs to the consumer became competitive with established sources. By 2011, more than half of the investments in German renewables had been made by small investors. The German energy transition has been and is being driven by citizens and communities. Germans want clean energy, and a lot of them want to pay for and produce it themselves.
FINANCING MOVING FROM WALL STREET TO MAIN STREET
Financing mechanisms for decentralized energy supply emerged alongside traditional methods of local infrastructure finance, notably in the context of decentralized solar and wind energy deployment. They include, for example,
- vendor financing of distributed energy generation systems,
- long term power sales agreements with energy consumers,
- local bank financing of rooftop solar electricity systems owned by local energy users,
- loans from government sponsored finance authorities like the California Infrastructure and Economic Development Bank,
- loans for energy upgrades that are retired via surcharges on utility and local property tax bills,
- tax-exempt revenue bonds issued by cooperatives,
- developers of local renewable electricity projects leveraging revenues from a municipal utility,
- CCA fee-in tariffs that are widely employed in Europe and now being introduced into the US,
- institutional and business owners of industrial, commercial, university and residential micro-grids,
- local investors in distributed generation systems that leverage revenues from generator leasing or power sales to local businesses, community groups, and individual energy users,
- community scale solar generation financed by "crowd funding" aggregators, and
- green venture capital funds investing in community scale shared solar projects.