(Fracking site close to Platteville, Colorado by Senator Mark Udall on Flickr)

With the introduction of the Halliburton Loophole in 2005 the Federal government largely abdicated its role in regulating the water quality impacts of oil and gas extraction. Local governments have been forced to step up, and communities in Colorado has been at the forefront of that effort. Routt County now requires stringent baseline water quality testing (PDF) before development can begin, and monthly re-testing during operations. The city of Longmont has banned all surface pits (PDF). The oil and gas industry is striking back against these efforts, with Colorado Senate Bill SB12-088 (PDF) which would preclude local governments from regulating oil and gas operations. If passed, this bill would slam the door on any potential regulation of fracking on our county open space lands.

A messy patchwork of different regulations in every little jurisdiction would be costly and legally dangerous for the oil and gas industry. The credible threat of such a patchwork is one of the few points of leverage we have, to get them to accept reasonable regulations at the state or national level.

If you’d like to retain the right to regulate — locally — the activities of these industries then please call and write the Senate Local Government Committee listed below. You may also attend and testify at the public hearing on the bill if you wish: Thursday, Feb. 16th at the Capitol Building, Senate Committee, Room 353, likely between 9:15 and 9:45am.

JOYCE FOSTER, Chair
Capitol Phone: 303-866-4875
E-Mail: joyce.foster.senate@state.co.us

JEANNE NICHOLSON, Vice Chair
Capitol Phone: 303-866-4873
E-Mail: jeanne.nicholson.senate@state.co.us

IRENE AGUILAR, MD
Capitol Phone: 303-866-4852
E-Mail: irene.aguilar.senate@state.co.us

Tim Neville
Capitol Phone: 303-866-4859
E-Mail: tim@nevilleforcolorado.com

ELLEN ROBERTS
Capitol Phone: 303-866-4884
E-Mail: ellen.roberts.senate@state.co.us

(h/t NRDC Switchboard and Colorado 350, also posted at The Boulder Blue Line)

However, the FHFA made this rule without engaging in any public process, and they were subsequently sued by the State of California and several cities and counties. The case has finally made it to the 9th Circuit Court of Appeals, and while they have yet to make a ruling, the Court has directed the FHFA to begin collecting public input on the proposed rules. The Natural Resources Defense Council (NRDC) has been involved in the suits and has had good ongoing coverage of the case:

• After the Earthquake and Before the Hurricane (8/29/2011)
• Be a part of PACEs revival (1/25/2012)
• PACE Lives! (1/26/2012)

The outcome of this case and the nature of the rules which are eventually adopted may have big effects on Boulder. Energy efficiency retrofits and local small scale renewable energy installation are high-quality local job producing industries. They allow our community to develop expertise that we can only hope will be in great demand in the near future. They’re absolutely vital to meeting our climate action plan goals. We have the financing mechanism in place to do this work; all we need is the go-ahead from the FHFA to get it underway. We should comment on these rules loud and clear.

The notice of the proposed rulemaking has been posted in the Federal Register, in all its gory detail. Details on how to submit comments can be found here. The easiest way is to e-mail Alfred M. Pollard, General Counsel: RegComments@fhfa.gov. You must include “RIN 2590-AA53″ in the subject line of the message. All comments must be received by March 26th, 2012.

Another resource to keep an eye on is PACE Now, a bi-partisan group advocating for PACE programs in congress. They’re developing talking points, and have been working to get legislation passed which would protect PACE programs introduced in congress (like H.R. 2599, the PACE Assessment Protection Act of 2011… which unfortunately didn’t get very far).

It’s not crazy to think that the FHFA or some other federal agency might have a useful role to play in the regulation of PACE programs. It’s important that the financing be set up to incentivize the most cost effective improvements first so as not to unduly burden future property owners, and to save as much energy as possible with a finite pool of funding (e.g. attic insulation and air sealing before solar panels…), but the outright ban is clearly far too broad.

Below is what I sent. Post what you send in the comments if you feel so inclined!

Property Assessed Clean Energy financing programs, as have been initiated by many states and local governments, are a potentially transformative financing mechanism, enabling property owners to make good long term investments in energy efficiency and behind-the-meter renewable energy production. They address a market failure, in that buyers often do not appropriately integrate a property’s energy costs into their price assessment. So long as the state and local PACE programs are performance based, and incentivise both efficiency and renewables, preferring those investments which have the greatest (positive) net present value, given the financing rate which is available to the government entity sponsoring the program, they do not pose a significant risk to mortgage holders, and should be allowed in FHFA held mortgages. Additionally, local energy efficiency and solar power installation provide high quality, skilled jobs which cannot be exported, stimulating the economies of the localities implementing the programs. These types of energy efficiency and local renewables programs can go a significant way toward reducing the energy intensivity of our existing building stock, and help insulate the US economy from fluctuations in fossil fueled energy prices.

FHFA’s previous ruling has directly affected my community, stalling out energy efficiency programs here in Boulder, CO. Rather than effectively banning these programs, I encourage the FHFA to work with the building retrofit industry and the state and local governments which have instituted these programs to develop guidelines which ensure the most cost effective use of PACE financing, including the use of before and after energy audits, and other energy efficiency retrofit best practices.

Cross-posted at The Boulder Blue Line.

Coal plants are being shut down because they are uneconomic. No matter how much climate activists might like to believe we are responsible for coal’s recent decline, it’s hard to deny that the finances are mostly what’s behind it.  Additionally, most of the coal fired power plants which are being shut down were already marginal, and aren’t actually being run at anywhere near their theoretical capacity factors of 80-90%.  Adding up the nameplate capacities of the shuttered facilities and claiming to have taken that much generation off the grid is thus at least a little bit disingenuous.  Matt Wassen from Appalachian Voices had several great graphics demonstrating this.  One looked at the dispatching order for a power plant in 2008 when gas was expensive vs. 2010 when gas was cheap.  In 2008 the ordering was very clear: the marginal operating costs were lowest for hydro, next lowest for nukes, then coal, and only at the end gas.  In 2010 on the other hand, gas and coal were completely interleaved.  Similarly, he found that many smaller coal fired power plants were apparently being used almost like peaker plants, with very low capacity factors, being cycled on and off frequently.  The EIA data only has monthly resolution, so it isn’t easy to see exactly what was going on, but especially given the inefficiency of cycling the plants, that seems like an amazing indicator of their lack of economic viability.

Coal plants have become uneconomic because the price of natural gas has crashed.  Over the course of the decade from 2000-2009 gas prices were wildly volatile, and much higher than they had been previously, with spikes to $15/mmBtu.  The expectation that this would continue provided an incentive for innovation, and thus was the so-called Shale Gas Miracle born, ushered in by advances in hydraulic fracturing and horizontal drilling technology.  As a result, gas is now going for as little as $3/mmBtu.  With cheap gas apparently plentiful (so long as we’re willing to frack our brains out), high efficiency, low capital cost natural gas plants are clearly the best economic choice for utilities, at least for the ones that have rational market incentives — the independent power producers (IPPs or “merchant” producers).  The regulated utilities on the other hand often have perverse incentives, which encourage them to spend as much as possible on up-front capital expenses, since that’s the only kind of investment they earn their guaranteed rate of return on.

The price of natural gas has crashed because the price of oil is high.   This meme came from the utility finance analysts, and I’m a little bit incredulous.  They claimed that the market is flooded with cheap natural gas because the gas is largely a byproduct of the production of much more valuable natural gas liquids.  Natural gas is methane (CH₄), but it’s often accompanied by other slightly larger hydrocarbons, like ethylene, propane, pentane, butane, etc. which are easy to liquify under modest pressure (unlike methane, which is only liquid at very low temperatures).  These other hydrocarbons are valuable industrial feedstocks, used to manufacture everything from plastics to pesticides.  Natural gas has long been a byproduct of oil production, and in much of the world it’s still flared (burned on site to no useful end) because the infrastructure to distribute it doesn’t exist.  The price of natural gas liquids is closely related to the price of oil, which remains high.  This is an interesting story if it’s true — that peaking oil production and/or dramatically increased demand for petroleum products from the newly developing nations of Asia is ultimately responsible for making coal fired electricity uneconomic.  I need to see this idea supported with more data before I really believe it.  I could see the causality being somewhat muddled at least, with the depressed price of natural gas incentivizing the fracking industry to preferentially produce reserves which have a high proportion of associated liquids.  In fact, Chesapeake Energy’s January 2012 investor presentation (PDF) indicates this is the case.

We can take advantage of the current fuel market to position our electrical grid for renewable integration.  If coal power plants are being taken offline, they’re most likely going to be replaced with something, and that something is almost certainly going to be gas.  However, there are several different kinds of gas.  There are cheap, inefficient, dispatchable peaker plants, designed to be used at very low capacity factors — just a few days out of the year, when demand is maxed out, usually due to hot weather and the associated air conditioning we’ve all gotten used to.  There are high efficiency combined cycle turbines which are not dispatchable.  For our purposes, neither of these are ideal.  The low efficiency peaker plants don’t buy a whole lot in the way of avoided emissions vs. coal, and the high efficiency combined cycle plants can’t be used to firm intermittent renewables.  Fortunately, high efficiency dispatchable combined cycle turbines have recently been developed by GE.  Unfortunately, they’re not going to be on the market until 2015.

If we want to position the grid for the smoothest possible transition to a high fraction of renewables, this is the kind of power plant we want to be building now.  We don’t have the clout to shut down coal plants on our own (without the natural gas markets helping us along…) but it seems a relatively minor shift to get utility commissions and IPPs to prioritize building this type of gas plant over others.  They make sense in a purely financial sense because of their high efficiency, and they give the grid the greatest possible flexibility going forward.  Ideally, if all the marginal coal plants that aren’t worth putting emissions controls on are replaced with a combination of high efficiency dispatchable gas and renewables, then when gas prices do eventually rebound, we may have some hope of upping renewable installations, instead of simply sliding back toward coal.  Given the trends of the last few years, I can only imagine that solar and wind will become even more price competitive.  Some recent studies suggest wholesale/utility scale PV module costs as low as $1/watt, with the full levelized installed costs being at or near grid parity if favorable financing terms are available.  There’s no reason to think this trend will reverse as technology improves and the industry continues to scale up.  Actively advocating for the construction of these renewables-compatible gas facilities instead of just focusing on shutting down all the coal plants also feels different in a PR sense — it’s a much more positive, constructive pitch, and it’s one which non-environmentalists can also be convinced of, given that it’s also the financially sound thing to do.

Exports are a wildcard.  Currently, both coal and natural gas are almost entirely domestic commodities.  We don’t have liquified natural gas (LNG) export terminals, and we don’t have enough bulk carrier terminal capacity to make any difference with coal.  We do have large production capacity of both of these commodities though, and because the market is captive to the continent, their prices here are depressed relative to global markets.  European natural gas prices are something like four times as high as our domestic prices are.  Internationally traded bulk thermal coal is something like $125/ton, with the main exporters being Australia and Indonesia.  North American producers are thus understandably eager to get their products into those markets to fatten their margins and so there are big efforts afoot to build bulk terminals and liquefaction facilities on the west coast.  It remains to be seen whether they’ll be successful.  Ironically, as recently as 2008, before the gas price crash, companies like Sempra Energy were building billion dollar natural gas import terminals in Baja California and Louisiana (the liquefaction and gasification processes are different — import and export terminals are fundamentally different facilities).  Even if we go gangbusters on export facilities, they’ll only be able to move on the order of 10-20% of our current production for coal or natural gas.  At that level, I don’t really understand why the domestic market prices for the other 80-90% would be raised to international heights.  But maybe that’s really the way things work, with the marginal sale price setting the prices for the rest, even if the rest can’t actually be sold into the higher priced markets.  If this is true, then the creation of these export facilities would make both coal and natural gas less economical here, and potentially increase the cost of fossil fueled electrical generation significantly.

I have mixed feelings about that possibility.  On the one hand, the more expensive fossil fueled power is, the more attractive maximizing renewables is.  On the other hand, the creation of these facilities would discourage us from leaving these resources (especially the coal) in the ground, where it needs to be from the atmosphere’s point of view.  I also don’t fully understand why it would be the case that burning coal here at the international price is uneconomic, but doing so in China or Korea or Japan would make sense.  Are they just that much more energy efficient?  Or is the price elasticity of electricity that low?  Is China hiding the real cost of power from its consumers, for fear of inciting a popular revolt, should the expected 9% annual economic expansion fail to materialize?  Are they hoping that they can scale up their gas production, renewables and possibly nuclear power quickly enough that importing coal is just a temporary stopgap measure?

Fossil fuel subsidies are large, stable, and so deeply buried that they’re generally ignored.  Paul Freemont, the energy analyst from Jefferies, did a side-by-side comparison looking at what natural gas price equivalent would make investments in other sources of power attractive.  He did this “without subsidies”, meaning that the investment tax credit for solar and the production tax credit for wind were left out.  However, he explicitly included the favorable financing that the feds offer to nuclear (a clear subsidy).  He also included all the underlying subsidies that go into the market prices of gas and coal.  Unsurprisingly, on that uneven footing, in addition to their low capacity factors and the discounting of future fossil fuel costs (meaning that 10 years out, you’re essentially comparing solar/wind with no fuel costs to gas/coal with no fuel costs!) renewables did not fare well.

One fossil fuel subsidy in particular was interesting enough to warrant its own session, from Tom Sanzillo.  Virtually all coal in the western US is owned by the federal government.  The BLM auctions off the right to mine it in the form of leases.  Seems straightforward enough, right?  Transparent?  Competitive?  Wrong.  In the late 1970s and early 1980s, as the first nuclear power boom was imploding after Three Mile Island and escalating construction costs and increasing permitting delays, it looked like coal was going to make a comeback as an electrical generation fuel.  There was very little production outside of Appalachia, and so the Powder River Basin in Wyoming was finally considered on a large scale, despite its low heat content coal, and distance from any large population centers.  The process by which the “fair market value” of the coal was initially set was not subject to oversight by anyone really, and it ended up being undervalued.  Subsequent auctions have keyed their FMVs off of those initial prices, and the leasing tracts, instead of being designed to attract the largest possible pool of bidders by the BLM, have been designed by the existing leaseholders, as expansions of their existing mines.  They’re small enough that it’s not worth anybody else bidding on them — not worth the overhead of setting up a whole new mining operation — but very attractive if you happen to already have a huge mine going right next door.  The estimated financial impact of these misadventures is something like $30 billion, over several decades, and about 10 billion tons of coal, or about $3/ton.  Given that the mine-mouth price of PRB coal has been around $5/ton for much of that time, this ends up being a significant subsidy.  Then again, given that the cost of PRB coal once it’s delivered to a power station on the east coast is something like 75% transportation costs, maybe it’s not such a big deal.  The main voice pointing this fraud out for the last decade has been Mark Squillace at CU’s Natural Resources Law Center, who was also attending the NYU conference.  Especially in the face of potential export terminals on the west coast, it’s important that these auctions be run well, if they’re going to be run at all — asking the coal companies to pay the real value of the resource they’re extracting seems a pretty small ask.

Strict emissions controls have different effects on regulated and merchant power producers.  Merchant or independent power producers live in a much more natural market environment.  They get to keep the difference between what they can sell their power for on the wholesale market, and the cost of producing it.  Consequently, they hate the increased capital costs associated with complying with strict EPA emissions regulations.  The addition of those emissions controls makes many of their older, smaller plants uneconomic, and if push comes to shove, they will retire them rather than retrofit.  Of course, they’ll bitch and moan about it right up to the very end.  It was nice to hear the industry analysts call this behavior out as clearly disingenuous.  They had every expectation that the industry would comply, and do the rational economic thing, which is to shut the plants down, and that the sky would not in fact fall as a result.  Everyone has known for far too long that these regulations were in the pipeline, and has had plenty of time to prepare themselves.  They all predicted that it would not be disruptive, no matter how much caterwauling the utilities put out.

The regulated utilities on the other hand, especially those like Xcel, who have relatively overbuilt power systems at this point, love the new emissions requirements, because they allow — or really compel — new and significant capital expenses, which they get to earn a return on.  The trick, then, is to get your local public utility commission to understand that from the ratepayer’s point of view, installing emissions controls doesn’t make sense, especially on older, smaller plants.  The rule of thumb the analysts used was something like if the cost of retrofitting a plant was more than 8-11 times the annual profits generated by the plant (implying an expected 9-12% ROI), then it wasn’t worth doing, and the plant should be retired, and replaced with a high efficiency combined cycle gas turbine, or energy efficiency, or demand response, or renewables… take your pick.

Unfortunately, utility commissions just don’t want to hear it.  David Schlissel made an analogy between his 25 year old daughter and the average PUC early on the first day, and it stuck.  She was feeling ill, and he suggested that instead of going out on the town, she head to bed early.  She didn’t want to hear it, and stayed out until 3am anyway.  The point being, no matter how logical and well supported your arguments are in front of the utility commission, sometimes — perhaps often — they just refuse to absorb them.  If a utility suggests that a new gas plant will be uneconomic, based on the EIA’s projections of natural gas and coal prices, it apparently does little good to point out that the projected gas prices are far above the NYMEX futures contract prices (so the utility can easily hedge against them) and the EIA’s coal price projections have been laughably wrong for the last decade — no better than simply saying that the price will be the same as last year for the next ten years, even when it’s doubled or tripled in the last ten years.

This is an intolerable state of affairs.  If the PUCs can’t be held to account somehow, politically, or in the court of public opinion, for blatantly ignoring well supported logical arguments, then there’s not much hope for fixing the regulated utility markets.  I guess the only thing to do is make sure this stuff gets in the official record, so you can say “I told you so” later on and hopefully embarrass them into listening the next time around.  The pain here is that their stamp of approval ends up indemnifying the utility companies for any negative ratepayer consequences down the line.  When the write-downs eventually come, on coal plants that aren’t worth running, it somehow has to be unacceptable for those losses to be foisted off on ratepayers.  The utility stock and bondholders need to eat them.

Speak different languages to different audiences.  Both from listening to tales of grassroots organizers who successfully fought coal plants on the basis of their poor finances, and hearing from the financial industry people, it was clear that in many contexts bringing up the environmental issues with coal is simply not necessary, and depending on your audience, it may well hurt you.  Learning to parse and communicate the financial details opens up a whole new world of people that can be convinced coal is a bad idea (at least with current gas prices): fiscal conservatives.  The widely held belief that environmentally sound policy has to be expensive and/or bad for jobs simply isn’t true, but it’s such an ingrained meme that many people will reflexively assume that what you’re fighting for as an environmentalist is against their personal financial interests, even when it’s not.  If you have a strong case on purely financial grounds, then there’s little reason to stray into the environmental argument — those who agree with you will realize that you’re advocating for something which is environmentally sound.  Those who disagree with your green politics will still likely be responsive to the wasteful spending/rate hike story.

Almost immediately after we empowered Boulder to form a utility, a spate of articles appeared in the national press talking about the relative costs of coal and renewables, and the trends in those costs.  There was Krugman’s Here Comes Solar Energy Op-Ed in the NY Times, making the case that solar PV is already cheaper than coal-fired power once you remove all the subsidies we provide to both of them, and calling for the Feds to fix regulation to make that clear.  Boulder’s own RMI had a bit of commentary on Krugman’s opinion: it’d be nice if Federal regulations were saner, but even without that fix, it makes sense to build this stuff now, and will only make more sense as time goes on and the balance of system costs (which currently make up 50% or more of the cost of a PV installation) are reduced through best practices, standardization and mass production.

From the industry side, GE’s Jeff Immelt also said that federal regulation was a little beside the point now… and that even without government support GE was going all-in, expecting something like 200GW of solar to be built in China and India by the end of the decade.  That’d be a non-trivial amount of generation, on the order of 10 Three Gorges dams, or as much power as the entire US nuclear generation fleet.  Meanwhile NRG Energy, a nationwide and largely traditional fossil-fuel based independent power producer is planning to spend the overwhelming majority of its capital investment funds over the next few years on solar, mostly small utility projects (20-100MW) and distributed rooftop generation.

In the same vein, Xcel Energy’s recently filed 2011 Electric Resource Plan foresees essentially no new generation facilities being built until close to the end of the decade.  Some of this is attributable to the soft economy, but many people are saying it’s just as much a consequence of energy efficiency, demand side management, and increasing distributed (behind-the-meter) generation coming on line.  Unfortunately, Xcel added a gigawatt of coal generation to its grid last year, and this lack of demand for more energy means the company is now walking away from the transmission lines that would have enabled large-scale solar-thermal with storage in the San Luis Valley.  This means that the only way to shift Xcel’s power mix in the near future will be to accelerate the retirement of existing coal-fired generation, making room for more efficiency, wind, and solar.

The optimistic narrative that falls out of the articles above — that our energy systems are undergoing a transformation — seems plausible, and I hope that it’s true.  Certainly it’s the one that the Boulder Light and Power effort is going to be built around.  It’s comforting to see that we’re not alone on the world stage, and less daunting to imagine our job as facilitating an ongoing transformation, rather than starting one from scratch.

The Colorado Public Utilities Commission (CPUC) regulates Xcel Energy; they have final say over the rates that the company is allowed to charge, and which investments they make in our energy future.  In the past four years, the CPUC has approved 3 rate increases.  The commission also allowed Xcel to build the state’s largest coal-fired power plant — Comanche 3 — at a cost of nearly one billion dollars, waiving their own rule that such large projects be bid out competitively.  By doing so, they handed Xcel a windfall profit.  Now Xcel wants to double down its long-term bets on coal by spending nearly $400 million to refurbish the aging Pawnee and Hayden power plants, tying Colorado to this polluting and climate damaging fuel for decades to come, and making all of us pay for the privilege of burning it.

The CPUC is allowing Xcel Energy to make choices that are bad for our rates, good for their profits, and which degrade our environment both locally and globally.  Furthermore, the commission has — at Xcel’s request — begun barring citizen participation in their proceedings.  Decisions about our rates, fuel mix, and the huge capital expenditures made on our behalf thus stand to be approved without any direct public participation.  If we stick with Xcel, we will be stuck with this impenetrable regulatory system indefinitely.  In contrast, the governance of a local Boulder utility would be far more accountable, accessible, and transparent.  It would not involve constantly battling a well funded corporate adversary.  It would be able to reflect Boulder’s core values of sustainability and innovation — values unfortunately not universally shared by our fellow Coloradans.  We would also be able to effectively leverage our vibrant community of clean energy entrepreneurs.

We have vastly more access to our City Council and the commissioners they appoint than we will ever be able to get at state level.  Whatever decisions are made locally, we can be confident that our community will have a voice in the process and truly influence the outcome.  Vote Yes on 2B and 2C and give us the power to control our own energy future!

(this post is a slightly longer version of the Letter to the Editor that I wrote with Amy Guinan)

Friday September 9th PLAN Boulder County held the first of their City Council candidate fora at the Boulder Public Library. The room was packed, with people standing in the back, listening to Tim Plass, Daniel Ziskin, Jonathan Hondorf, Ken Wilson and Kevin Hotaling define their platforms. John Tayer acted as moderator.  Each candidate was first allowed to introduce themselves for 90 seconds.  This was followed by about an hour’s worth of pre-selected questions from PLAN Boulder, and the last half hour was dedicated to audience questions vetted by Alan Boles

Tim Plass currently serves on the planning board, and prior to that served on the landmarks board.  He said he’s running in part because both Susan Osborne and Crystal Gray are bowing out of the race.  He’s very excited about the Boulder Light and Power initiatives (2B/2C) and wants to be a part of it.  Loves Boulder, wants to help make sure we maintain our open space policies and keep the built environment high quality.  Wants to keep our local economy strong.

Daniel Ziskin described himself as a physicist and earth scientist, and related the story of his awakening as an environmentalist while mourning the loss of an urban woodland back east.

Jonathan Hondorf, a local developer, wants to focus on our energy, environment and economy.  He praised the city’s past bold policy actions, and urged us not to retreat into the status quo.

Ken Wilson the only incumbent candidate in the group, was elected to Council 4 years ago, and became deputy mayor 2 years ago, with support from Mayor Susan Osborne.  He said he feels like he’s only now really gotten up to speed with the many complex issues facing the city, and wants to stick around for another term to apply that understanding.  He’s previously served on the Water Resources Advisory Board, and has a technical background in electrical engineering and biology.  He said the city has some very aggressive goals — and that’s good.  He wants to keep it up.

Kevin Hotaling appeared to be the youngest member of the panel, by a solid 10-20 years.  He said he’s a web designer, and also works as a consultant to people all over the country producing biodiesel.  He said he values living a sustainable lifestyle, and is proud that the city makes this possible.  He believes that the city has seen a decode of controversies and divisive politics, driven by pandering to special interests, and that it’s time to bring people back together.

PLAN Boulder County Questions

Q: What should we do to reduce our greenhouse gas emissions?

Daniel Ziskin suggested that perhaps we could target our home energy efficiency audits by taking an aerial photograph of the city shortly after a new snowfall, to see which roofs the snow has melted off most quickly — those are the ones that need more attic insulation.  He said we should improve the efficiency of our neighborhoods.

Jonathan Hondorf said we need to reduce energy demand, and not just from residences, as commercial and industrial customers actually use 75% of the electricity in Boulder.  We need to work on transportation challenges, getting people out of single occupancy vehicles.  Need to create incentives for people to do the right (low carbon) thing in their transportation choices.

Ken Wilson recounted working on SmartRegs with the Rental Property Association, and helping make sure that it was a negotiation, instead of just something that got forced upon landlords.  Since commercial/industrial energy use is 3 times as great as residential, it will be even more important to get it right.  We’ve learned from the residential program and negotiation process, and can do it well.  Efficiency is the biggest target to aim for in energy.

Q: What do you think about the possibility of a commercial SmartRegs program?

Kevin Hotaling questioned whether these kinds of regulations really end up changing behavior, or are they just a source of yet more bureaucracy?  He doesn’t believe that they work in general.  Not in favor of a commercial SmartRegs program.

Tim Plass disagreed with Hotaling.  He said he believes that good regulation is possible, and supports SmartRegs.  He reiterated the fact that the commercial sector is the majority of our energy use, so it has to be tackled if we really want to reduce GHG emissions.  However, as with the residential, we have to find an ordinance that works.  Residential SmartRegs was a good learning experience.  We need to communicate well with businesses, and find money up front to help finance the investment in efficiency.  As with the residential program, there are lots of split incentives between landlords and tenants that need to be addressed for efficiency to be improved.

Daniel Ziskin recalled that when serving on the Environmental Advisory Board (prior to the SmartRegs program’s development) he put a property up for rent.  The safety inspection for the rental license was onerous, but there was nothing in the way of an energy efficiency inspection, which he found shocking.  He mentioned it to the board that it was a big missing piece in the rental process.  Ziskin stressed that he wasn’t taking credit for any of the ensuing hard work, just that he put the idea out there way back when.

Ken Wilson favored more voluntary measures, and mentioned a program called Ten For Change, in which businesses voluntarily sign up to reduce their energy usage by 10% over the course of a year.

Jonathan Hondorf felt that businesses are struggling right now, and shouldn’t be burdened with more requirements right now.  Given the right environment people will voluntarily come forward to do the right thing with respect to energy efficiency.

Q: What is your position on the Boulder Light and Power initiatives (2B/2C)?

Jonathan Hondorf was involved in the citizen’s modeling effort, looking at technical and financial feasibility.  Enthusiastically supportive of the ballot measures.  He emphasized the absolute need to get away from fossil fuels, and the scale of the global problems that result from GHG emissions.  However, he also stressed that whatever our solution is, it must also work for businesses, as they are the majority of our energy use.  He was confident that the ballot measures would pass, and that the city would move ahead.

Ken Wilson said he’d spent many years working at Bell Labs, and with other utilities and telecommunications companies over the years.  He does not believe that a Boulder municipal utility will work, expects Xcel to drag the process out, and make it as expensive as possible for the city.  Would rather spend all that time working on “real” renewable energy.  Stated that other municipal utilities aren’t doing the kinds of things that we want to do with ours.

Kevin Hotaling asked where are we going to get the most tangible results in the least amount of time, and suggested that the energy business environment is more complex than it seems.  He said he wad worked on a financial analysis with others at CU that showed it wouldn’t work, and expects the municipal utility to eventually declare bankruptcy if it is formed.

Tim Plass put himself out there as a strong supporter of 2B/2C.  Said he had been to many, many learning sessions, and believes that the extensive analysis done by the city shows that it’s feasible both technically and financially.  Moreover, voting yes in November gives us the full range of options to explore and improves our bargaining position with Xcel.

Daniel Zisken was also a strong proponent of municipalization, and agreed with Tim Plass.  He founded an organization called Ratepayers United of Colorado.  He has intervened at the Colorado Public Utilities Commission, and believes that  a swift transition to renewables is not only the right thing to do with respect to climate change, but that it is also in the best interest of the ratepayers.  Xcel has invested billions in coal plants, and is incapable as an institution of being supportive of wind and solar power at scale.

Kevin Hotaling responded directly to Ziskin‘s enthusiastic support by claiming that nobody had projected the revenues for the putative municipal utility, at which point Jonathan Hondorf broke in to give him a smackdown.  Hondorf claimed that as a member of the financial modeling team he could personally attest to the fact that they did project revenues, and the municipal utility comes out well both technically and financially.  He further noted that the vote in November isn’t an either/or decision — we’re not voting on whether to create a muni, we’re voting on whether we even want to seriously consider it as one of the options on the table.

Q: What are some examples of the best and worst new land developments in Boulder in recent years?   Describe why you think they are good/bad.

Ken Wilson identified Washington Village as an example of both the good and the bad.  The project was very controversial, and resulted in a lot of conflict in the neighborhood, lost time, and lost money for the developer.  He said people are uneasy with increases in density, and that we especially need to do a better job of integrating new and dense developments with alternative transportation infrastructure.  In the end though, he feels that Washington Village has worked out great.

Tim Plass felt that the Holiday Neighborhood on North Broadway has clearly worked.  It’s got some increased density, aligned with a transit corridor.  It’s animated NoBo, and made it into a destination.  He thought that the city did a good job of facilitating the process by buying up the old theater site.  Plass was not a fan of the Peloton.  Felt it was too monolithic, isolated.  Has also turned out not to be financially successful for the developer.  On Washington Village, he said that regardless of the ultimate outcome, the process was clearly a disaster — long, drawn out, and stressful for everyone involved.  He suggested that involving neighborhoods in the planning process from the beginning could avoid a lot of that kind of pain in the future.

Daniel Zisken focused on the 29th Street Mall.  He liked that it was a brownfield re-development, and that it’s easily accessed via the Hop.  He disliked the fact that it was all chain stores, surrounded by a “sea of asphalt”, and that the development as a whole seems very car oriented.  He said he believes that there are higher value uses for that land, and that he’s sad the city ceded so much power to the developers, and essentially let them build whatever they wanted.

Jonathan Hondorf agreed with Plass about NoBo and the Holiday Neighborhood being a good example of modestly higher density development that’s still livable and interesting.  He said he was concerned about the Transit Village Area Plan, and questioned whether density is necessarily the answer to our housing problems.  He suggested that increasing density was not going to be good for families that want to live in Boulder.  He wants to see any new density made accessible and convenient without relying on cars.  Said we have a lot of power via the ordinances that control our built environment, and held up SmartRegs as an example of regulation that’s working.

Q: What’s your take on the Area III Planning Reserve?

Kevin Hotaling suggested that it was inappropriate to pit historic preservation against development, and thought that by developing outlying areas, like the planing reserve, we might be able to relieve some of the pressure on our historic districts.  He said he believed we should allow small scale development on open space, and that we really don’t need to buy up every last acre of land in the county.

Daniel Ziskin thought that there’s been enough discussion of Area III for the time being.  Now is clearly not the time to develop it.  We should set it aside for another 5-10 years, and revisit the question then.  More importantly, he felt that we need to change the way that development is debated.  He would rather see people have to demonstrate the value of their planned development, instead of the city having to defend the value of the open space.

Ken Wilson said he’d support changing the development review process to include just the Planning Board and City Council (two body review), instead of involving the outlying communities and the county as well (four body review).  He questioned the need to get permission from other cities for our own planning decisions.  Wilson also mentioned concerns that we may lose Naropa University, if a suitable site for them to grow and consolidate their campus.

Jonathan Hondorf seemed confident that Area III will never be developed, as open space preservation is very entrenched at this point.  He supported the 4-body review process, saying that there’s an interaction between us and the other communities around us, and that our decisions do affect them.

Tim Plass said that nearby land is a very limited resource, and that he supports the 4-body review process.  He noted that green field development can never really be undone, so decisions need to be made very carefully.

Q: Boulder’s population today is about 100,000.  What’s the ideal number?

Tim Plass said it’s impossible to come up with an absolute number, and that at any population, the quality of life will depend strongly on the built environment.  At the same time, he said he doesn’t want Boulder to become a “big city”, and would rather we remain a town in character.  Additional population needs to be accommodated within our existing geographic boundaries by modestly increasing density, and building more small, efficient units.  He was not in favor of increasing the 55′ height limit.

Jonathan Hondorf was also skeptical than anyone could really come up with the right number.  He agreed with Plass that we should keep our open space boundaries and height limit intact indefinitely, and allow those to define our urban form.  He didn’t want to risk making people feel like “rats in a maze”.  He suggested that increasing density does decrease the quality of life, and said we need to prioritize the creation of more affordable housing within our city, lest we become a kind of boutique community, inaccessible to mere mortals.

Daniel Ziskin said that rather than focusing on managing our population per se we should work on reducing the number of in/out commuting trips, as it’s not just the number of people, but what their daily activity pattern is that affects our quality of life.

Q: What do you think about the city’s recent affordable housing report?

Daniel Zisken felt that having a cap on equity in affordable housing was a boon to buyers, but that it doesn’t help people bootstrap themselves out of poverty — once you’ve bought into affordable housing, that’s pretty much where you’ll stay, as the value of your home cannot increase at the same rate as other properties in the city.  He felt that the allowable equity increase should be better indexed to the cost of living, and wondered whether it might not be possible for the city affordable housing program to somehow kick in money directly to subsidize the purchase of market price homes instead.

Ken Wilson said he thought the city was doing pretty well with its affordable housing goals, so far as they go, but that we were doing a poor job of creating “workforce housing” that can appeal to young families who currently get priced out of the local market, and end up exiled to Broomfield and the L-burbs.  We’ve got options for the top and the bottom of the income spectrum; now we need to work on filling in the middle.  At the same time, he noted that these cost of living issues are intimately tied up with people’s transportation decisions, and wondered if we might not be able to solve some of this problem by giving people cheaper, more convenient transit options.

Q: What’s the right balance between transportation and land use planning?

Kevin Hotaling said he felt that those with modest incomes were being hurt by our affordable housing policies, driving their costs of living up.  He suggested that we might consider some “tentpole density” scattered in limited areas around the city, to help create some housing supply and thus reduce prices.

Tim Plass said he thought we had a good affordable housing program, but that of course it could be made better, and more efficient.  He said we need to keep our inclusionary zoning (PDF) ordinance, but find a broader base of funding for the program as a whole.  He suggested that eventually, we would probably have to bring this back to the voters to decide where the money would come from, and how much there would be.

Jonathan Hondorf pointed out that as it is today, the creation of affordable housing units is dependent on new development for funding, and most developers choose to do cash-in-lieu (paying the city instead of making some of their units permanently affordable) and so the creation.  With slow or declining rates of development in town, we can’t be simultaneously anti-growth and supportive of affordable housing.  Hondorf also questioned the need to subsidize affordable housing in town for so-called middle income households earning $90-$100k/year.

Q: What should we do about the commute hour congestion on US-36?

Jonathan Hondorf pointed out that we’ve been talking about getting rail service between Denver and Boulder for close to 40 years, and we thought it was too expensive way back when at $45 million.  He said we need to build better regional transit service, and align RTDs financial incentives such that as the service is used more, they can respond by providing more and better service.  He decried the recent reductions in service as being counterproductive for the region.

Kevin Hotaling said that the creation of more density locally would alleviate many of these transportation problems.

Ken Wilson said he thinks that transit along the US-36 corridor is a huge issue.  It needs to work much better.  Density can incentivize transit use, but it doesn’t work well if people are still using their cars to get to transit.  He also mentioned the need to figure out how to make rail viable without making a mess of the county by developing all along the rail line.

Q: Should the city keep trying to shift people away from using cars?

Ken Wilson was enthusiastically in favor of continuing efforts to get people to bike, walk and use transit.  For many years he commuted by bus into downtown Denver.  He wondered if we might not be able to get better transit education into the BVSD.

Tim Plass emphasized the need to make it convenient not to drive, with great bike and pedestrian environments and connections.  He voiced his support for a community wide eco-pass program, and said that we really need to work on getting the commuter rail line built, that we’d regret not doing it later.

Daniel Ziskin didn’t want any coercive anti-car measures, and also emphasized making biking and walking and transit much easier to use.  He came out against the train, and suggested instead that we make the bus work better, as it’s so much cheaper.  In particular he was supportive of implementing the planned Bus Rapid Transit corridor along 36.

Q: Should the city ban plastic shopping bags, or require a fee to provide them?

Kevin Hotaling was strongly opposed to a ban on plastic bags, and said he didn’t think it would work.  He suggested that this type of regulation can only really work when the regulated entities are large and few, and that it would be a mess with the large number of retailers and consumers that would be affected.  He said that instead we should use voluntary measures, and stay away from heavy handed government.

Daniel Ziskin highlighted his activity with Better Bags Colorado, attempting to get a tax imposed on single use bags, but new tax can’t be imposed without appeal to the voters, because of TABOR.  He said that it’s clearly a blind spot, as someone somewhere is already paying for the bags — we just need to make that cost transparent to the consumer.

Jonathan Hondorf suggested looking at a deposit system, like the ones we’ve used successfully for glass bottles and cans to incentivize re-use and recycling.

Ken Wilson said he had hoped that we would get functional biodegradable bags by now, and that he was disappointed that it hadn’t happened.  He agreed that some kind of deposit system would be good, and that he’d really like to see us move away from using so much disposable plastic.  He said that “voluntary” programs just don’t work on issues like this — the default behaviors are just too strongly ingrained.

Tim Plass noted that lots of young people had been speaking to Council about the issue, and that we ought to do something, but it’s not clear what will really work.

Q: Who are your political heroes, and why?

Tim Plass: Locally, Susan Osborne (Boulder’s current mayor).  She’s great at bringing people together, and figuring out a solution that works.

Jonathan Hondorf: Senator Rollie Heath for taking the incredible position that we should raise taxes to fund education!

Ken Wilson: Also Senator Heath, for his ability to work both sides of the aisle.

Kevin Hotaling: Not really a politician, but Dr. Paul Farmer, a Harvard MD who has dedicated his life to public health in Haiti, now working in Rwanda.

Daniel Ziskin: This isn’t likely to be a popular response… but president Obama, for having the courage to take a leap of faith in the debate over extending the Bush tax cuts.  He wasn’t in favor of them, but attempted to bridge the gap with Republicans by supporting them.  Unfortunately, it didn’t work.

Questions from the audience

Q: Would you support discontinuing mandatory parking minimums?

Jonathan Hondorf said that if we’re going to change our transportation systems, we have to change our parking policies.  He was supportive of reducing parking requirements.

Ken Wilson was philosophically in agreement, but pointed out the need to deal with overflow and the potential effects on adjacent neighborhoods.  He pointed out that CU cut down on their parking, and saw a tremendous increase in bike usage by students, so maybe it can work elsewhere too.

Kevin Hotaling said that a big reason he moved to Boulder was so he could get rid of his car, but not everyone is willing to do that.  You can’t force people to do it.  On a related note, he suggested that we might consider integrating the fleet of city vehicles into a carshare program, as the city of Philadelphia has done.

Daniel Ziskin mentioned that he has served on the board of the local eGo Carshare, and worked with developers trying to get a few dedicated carshare parking spots on 28th, and Boulder One Plaza.

Q: What about creating more affordable rental properties?

Kevin Hotaling noted that even excluding the students the median age in Boulder is 35, an that most of that half of the city’s population rents.  He said that building rental properties doesn’t seem to be a possibility that’s open to developers, and we need more of it.  By preventing larger rental properties from being created, we restrict the rental market and drive prices up, hurting our younger residents.

Tim Plass said that a large portion of the affordable housing program is rental units, and that owning your own home really isn’t the right option for a lot of people.  Plass again pointed out that we need a better funding stream to support our affordable housing goals, especially on the rental side.

Daniel Ziskin pointed out that lots of homes have extra space already (finished basements, carriage houses, etc), and added that we should make it quick and easy to develop those spaces and rent them out legally.  This would both help the renter market, and give homeowners some needed revenues.

Q: The city is requesting $49 million in bonds to finance deferred maintenance.  Is this a good idea?  Shouldn’t we have just budgeted for it along the way?

Tim Plass responded that certainly it would have been better that way, but we are where we are today, and this infrastructure needs work.  He’s in favor of ballot measure 2A.

Q: Should we have additional restrictions on nighttime and off-trail access to our open space?

Daniel Ziskin said we were asking for trouble letting people wander around in the dark, that it was an issue of personal safety and that we would eventually get in trouble for it.  He also said he thought it was bad for wildlife.  He was also in favor of more restricted off-trail access.

Jonathan Hondorf noted that open space is also used by non-Boulderites.  He was in favor of allowing night time use, but restricting off-trail use.

Ken Wilson said that we’d built a good visitor plan, and that people hate it when you take away things they’ve gotten used to having.  Additional restrictions will upset a lot of people.  Lots of people like night time running and full moon climbs, especially in the summer.

Q: Should we allow short-term rentals for less than 30 days?  If so, should we tax them as we do hotels?

Ken Wilson: It’s unclear how we can enforce any rule we make here, but we’re definitely getting pushback from neighbors who are annoyed at the practice.

Kevin Hotaling: You can’t legislate this kind of thing.  How can you tell the difference as a city between a visiting friend, family, and new friend that you just happen to have met on the internet?

Daniel Ziskin: We have lodging taxes, and this sounds like informal, black market hotel rooms.  Would rather see it controlled by the city, and not done under the table.

Jonathan Hondorf: Lots of people are apparently doing this, and it needs to be regulated, but it’s not clear what the right way to move forward is.

Tim Plass: We’ve certainly got budget issues, and it would be great to get this as a revenue stream for the city, but the real problem here is the impact on the quality of life for neighbors.  That’s what we need to address.

Q: How can we create affordable “congregate care housing” within Boulder for older residents?

Tim Plass: There are a few sites around town that are potentially open for this kind of development, and as a congregate care facility — if that’s what they really are — they’d be allowed 3x the zoned density.

Q: If elected, how do you see Boulder in 30 years?

Jonathan Hondorf: Our open space, quality of life, and our research labs and university are all good.  I’d like to keep them and see more of the same.  The biggest changes we’ll see in that time span is hopefully in our energy and transportation systems.

Ken Wilson: The physical city will be similar, with 1% or less annual population growth.  We should be leaders in renewable energy and efficiency at both the state and national levels.

Kevin Hotaling: The rate of change today is huge and increasing.  There’s no way to know what the world will be like in 30 years.  Renewable energy and transportation will be utterly transformed in that timespan, so we need to maintain flexibility.

Tim Plass: The city will still be recognizable in 30 years, still compact, and surrounded by open space.  Every once in a while you’ll see an electric car on the road, but mostly it’ll be bikes and pedestrians and transit.  Hopefully we’ll have a diverse set of vibrant neighborhoods.  I’d like to see lots of clean energy, and distributed generation.  The people of Boulder 30 years from now should be more diverse, with a broader range of ages, races.

Daniel Ziskin: As a geophysicist, I believe that we are sliding down the tail of the end of the Oil Age.  We should be localizing our food supply and increasing our energy resilience.  We might see change come as a gradual increase in petroleum prices, or could be a series of shocks.  We need to prepare for this new world.

Personality-wise, it was mostly a re-match of the folks involved in the PLAN Boulder event from a couple of weeks ago with Bob Bellemare (Utilipoint) and David Miller (Boulder Smart Energy Coalition) speaking against the measures, and Ken Regelson (Renewables YES!) speaking in favor.  However, instead of Sam Weaver sitting next to Regelson, we had former Colorado state legislator Tom Plant, co-chair of the Boulder Clean Energy Business Coalition, and former head of the Governor’s Energy Office.  Also present was Jonathan Koehn, the City of Boulder’s Regional Sustainability Coordinator.  He was on hand to speak to matters of fact alone, as the City is required to recuse itself from advocating one way or the other on the ballot measures.

All in all, the “against” side seemed somewhat more polished, but essentially unchanged, and still very focused on fear, uncertainty and doubt.  I thought the “for” side focused less on the technical and quantitative aspects of the initiatives, and more on the benefits of moving our electrical generation much closer to home, both in an economic sense (keeping our energy dollars in our community, involving local businesses in the development an innovation) and in a regulatory sense (removing ourselves from the statewide public utility commission process, and making the relevant governing bodies much more accessible).  The “for” side also repeatedly pointed out that the purpose of the ballot initiatives in large part is to empower the city to remove much of the uncertainty surrounding the formation of a municipal utility.

What follows is my attempt to summarize the content of the debate.  Anything not in “quotes” is my attempt to paraphrase the speakers, based on my notes.  In the interest of full disclosure, while I am in favor of passing 2B and 2C, I am working as a volunteer only, and receiving no compensation.

The Backgrounder: Jonathan Koehn

Koehn introduced the debate with a little background, explaining that the expiration of our 20 year franchise agreement is why we’re talking about this today, but that the issue is more broadly relevant now because of the City’s aggressive commitment to its Climate Action Plan and rapid changes taking place in the energy industry.  He pointed out that whatever decision we make, it will be momentous, with consequences spanning decades and directing several billion dollars worth of investment in energy technologies and fuels.  He likened the scale of the decision to that of our open space purchases, geographic growth constraints, and the last 30 years of city investments in bike, pedestrian and mass transit infrastructure.  He noted that the City has done a lot of outreach and communication with citizens to try and figure out what our real energy priorities are, and beyond the obvious functional ones of reliability and reasonable costs, the ones that stood out were:

1. Hedging against the possibility of an uncertain energy future, with potentially volatile fossil fuel prices and supply issues.
2. Positioning Boulder as a center for innovation in the fields of renewable energy and energy efficiency (or as NY Times editorialist Thomas Friedman likes to say, ET).
3. Meeting our moral and ethical obligations to future generations with regards to our consumption of finite material resources, and the curation of our habitable atmosphere.

He made it clear that there are two basic structural options going forward, either we stay with Xcel, or we form a municipal utility.  Within each of those options of course there’s a lot of potential variability.  For example, with Xcel, there’s no reason we need to sign another franchise agreement.  Xcel simply passes the franchise fee directly through to us as ratepayers, so it amounts to nothing more than indirect taxation via corporation.  This is politically expedient in many communities, but Boulder has demonstrated that we are often willing and able to voluntarily tax ourselves to pay for the services and infrastructure we want from our local government, so it makes less sense here.  If we stick with Xcel, we’ll still have the ability to do energy efficiency and other demand side management programs, as well as anything else that takes place “behind the meter”.

Koehn also pointed out that within the municipal non-profit utility option, there are also many different ways to go about meeting our local goals, and made it very clear that while there haven’t been a huge number of municipal utilities formed recently, it’s by no means an unusual way to get your power in the US.  In Colorado alone, there are 29 other municipal electrical utilities, including Fort Collins, Loveland, Longmont, and that bastion of socialist fervor… Colorado Springs.  Nationwide, there are about 2,000 munis, serving about 14% of the US customer base.

As to why we ought to make the decision now, and not just sit on it another year, Koehn noted that multiple analyses by disinterested outside parties have already determined that the formation and operation of a municipal utility in Boulder is technically, legally, and at least potentially financially feasible.  The remaining unknowns, including the rates we’d have to pay on any bonds issued, the cost of any stranded Xcel assets, and the cost of separating our infrastructure from that of the investor owned utility can only be determined with a vote.  Then he outlined what the ballot initiatives actually say:

2B extends and increases the Utility Occupation Tax:

• to pay for technical and legal operations connected with the City’s exploration of forming a Boulder Light and Power utility.
• Tax lasts until the earlier of Dec 31st, 2017, or until the city decides one way or the other on creating a utility.
• Would raise ~$1.9M/yr (which is equivalent to about $0.90 on each monthly electric bill)

2C Gives the City the authority to create Boulder Light and Power:

• if we are able to acquire Xcel’s distribution infrastructure
• and initial rates will be lower than or equal to Xcel’s
• and the utility’s operations and debt service (with a 25% margin of safety) will be covered by projected revenues.
• and we are assured the same or better reliability, and can come up with a concrete plan to integrate more renewables, with less GHG emissions.
• Also gives the City the authority to issue bonds to pay for starting up the utility, and the creation of a citizen board which would oversee its operations.

After Koehn’s setup, each side got to make 15 minutes worth of introductory statements.

Against: David Miller and Bob Bellemare

First up was David Miller.  He said the sole purpose of the $12 million raised by the Utility Occupation Tax is to “fund the fight against Xcel”, and that 2C does not actually require any municipal utility created by the city to reduce GHG emissions or increase its renewables fraction.  (This is true, but the initiative does require a concrete “plan” to those ends.  There are no binding emissions/renewables targets partly because without doing the technical legwork which 2B would fund, we can’t know what the rate vs. emissions vs. renewables tradespace will look like.)  Miller claimed that the muni option is too slow and risky, and that “there are better quicker options” to get the clean energy that we want.  He didn’t elaborate on what those options might be.

He again pointed out that the cost of the whole utility start up is as of yet unknown, and will only be determined through lengthy negotiations and potentially litigation.  Nobody is disputing this; in fact one of the main purposes of the ballot initiatives is to give the City the ability to figure the costs out concretely.  He again made the point that after this vote, we won’t have direct say in whether the City decides to form a utility — City Council will have the authority to do so (within the bounds set out by the ballot language).  However, in a community as politically engaged at the local level as Boulder, it’s hard for me to imagine Coucil going ahead if it was clear that the move didn’t have popular support.  It seems like it would be politically… difficult, and as Bob Bellemare intimated in the first debate, we can always vote the bastards out if we don’t like what they’re doing.

The Xcel side seemed to be appealing repeatedly to our supposed distrust of government and bureaucracy.  Miller mentioned that our municipal utility would no longer be under the purview of the Colorado Public Utilities Commission, which is supposed to represent the interests of the public in the regulation of the utility monopolies.  This is true of course.  Instead, it would be governed (that is, regulated — not operated) by a locally appointed utility board, and the City Council.  To me, this sounds like a much much more accessible level of governmental control.  I’ve been to Council meetings.  I’ve talked to the mayor and council members and City staff about issues that concern me.  At the state level, that becomes a much more challenging proposition.  Regardless of whether you think creating a Boulder Light and Power utility makes financial or technical sense given our goals, it would clearly localize our decision making processes, and in this era of distant, dysfunctional, corporate influenced governance, that seems to me a good thing.

On the financial side, Miller also noted that Xcel’s rates are below the Colorado median, and that Boulder takes far more than its fair share of Xcel’s efficiency and renewables programs.  For every $1 we put in as ratepayers, our community has gotten back $4-5.  That’s definitely some kind of deal, but it strikes me as a kind of cheating.  Obviously it’s not a solution that can scale up to work at the state level, and it’s only made possible by other communities failing to embrace efficiency and renewables.  Miller also said that while all of Colorado’s municipal utilities are very reliable, they’re also by and large very dependent on coal, and that Boulder’s potential focus on a high renewables fraction might somehow make us less reliable.  If it’s a foreseeable failure of reliability, this scenario is expressly forbidden in the ballot language.  Even if it wasn’t, in the broader view of things, if we really do care as a species about stabilizing the Earth’s climate without reverting to a pre-industrial society, then somebody somewhere is going to have to figure out how to make renewable power also reliable power, and it’s not as if we’re going to cut ourselves off from the rest of the grid in five years and suddenly jump to 100% wind and solar in a leap of blind faith… silly YouTube videos notwithstanding.

Finally, Miller talked about GHG emissions and climate change directly.  He noted that the City is set to fail in its bid to meet our (voluntarily imposed) Kyoto GHG goals by 2012.  He said we need to focus on heating, efficiency, and transportation systems too.  All true, but unfortunately, every one of the major emissions sectors — transportation, heating, electrical generation, agriculture, etc — must be tackled aggressively if we are to make the 80-90% reductions in GHG emissions required to stabilize the atmosphere.  They are all necessary, and each one alone is insufficient, so we need to work on all of them now.  He suggested that Boulder as an entity is too small to make any difference in the larger scheme of things, and that we’d have more impact by continuing to influence Xcel more broadly in the context of Colorado.  How exactly this influence was to be exerted was left unsaid.

I thought this was a strange juxtaposition — first, that we are going to fail to meet our 2012 climate goals, and second, that we should just keep doing what we’ve been doing, and hope that it turns out better in the future than it has so far.

Bob Bellemare took a different tack in his half of the introductory statements.  First, he did his best to convince us of his credentials.  He’s a professional business appraiser.  He’s spent 25 years in the utility industry.  He’s managed a 14 gigawatt generation fleet.  Been involved in almost every similar potential municipalization case in the nation over the last decade.  I haven’t checked, but I presume these are true statements.  However, just because someone possesses a particular expertise doesn’t mean that they are wielding it on your behalf.  The appointment of many Goldman Sachs alumni to positions within the US financial regulatory bodies is a great example of this.  Certainly Hank Paulson (former Goldman CEO) understands the market as well as anyone, but that doesn’t mean you can expect him to do a good job of overseeing it in the public’s best interest as secretary of the Treasury.

So it is here.  I have no doubt that Bellemare understands what’s going on in this debate, but his interests are Xcel’s and not ours, and so his experience and expertise should, if anything, make us wary of what he has to say.  After extolling his own virtues, Bellemare went on to display lots of frightening financial numbers very quickly, without making much effort to explain what they meant.  The main takeaway point was that it could end up costing as much a $1.2 billion to get a municipal utility off the ground in Boulder.  Of course, we don’t get to see where Xcel’s numbers come from.  To use them, we must simply have faith that the company is, as its slogan states, Responsible by Nature™.  This is in stark contrast to the analysis by the City’s consultants and the citizen’s modeling effort put together by Renewables Yes, which both offer no end of gory detail about their assumptions, inputs and processes.

More than anything listening to Miller and Bellemare, I got the impression that they were doing a very good job of staying on message, with the same Fear, Uncertainty and Doubt approach that they’d taken in the PLAN Boulder debate (Miller has the role of Uncertainty, and Bellemare is in charge of both Fear and Doubt).  It was somewhat more polished, but none of the substance had changed.

In Favor: Tom Plant and Ken Regelson

The pro-municipalization side brought a fresh face to the table with Tom Plant, in lieu of Sam Weaver.  The addition of his political experience definitely changed the character of the team, providing a nice counterpoint to Regelson’s more technical approach.  I suspect this combination will appeal to a broader audience than the purely quantitative duo.

Plant listed the main goals of the Boulder Light and Power initiative as localization, decarbonization, democratization, and decentralization, and framed the issue as being about finding the best way to address those goals, either with our own utility, or in partnership with Xcel.  We’ve been working within the framework provided by Xcel for years, but in Plant’s opinion have not been able to find an acceptable way forward.  He was adamant that passing 2B and 2C does not commit us to forming a utility, and emphasized that passing these measures do not take any options off the table.  Rather, he sees them as simply giving the City the ability to even seriously consider the municipal utility option.  He sees localizing our power systems as a way to keep more of our energy dollars within the community, and anticipates a lot of participation from local renewable energy companies in the creation of a system that works, positioning them well to help other communities in similar endeavors.

He sketched three scenarios for our energy going forward.  We might decide to simply buy our power from 3rd parties through wholesale contracts, and focus our efforts locally on demand side management, energy efficiency, and distributed generation, or we could go ahead and do a lot of our own generation, or we might end up being able to negotiate an acceptable deal with Xcel, and he pointed out that passing 2B and 2C would actually put us in a much stronger negotiating position with the utility, if that’s what we decided to do.  He lamented the fact that Thomas Edison would still recognize and understand the structure of our grid today, despite all of the technological change that’s taken place in the last century, and questioned whether we really want that to be the case for our grandchildren, which is the future he sees resulting from continuing to rely on centralized fossil fuel based generation.

Regelson began by describing Xcel’s plan as “Coal to 2069″, referring to the anticipated retirement date of Comanche 3, their most recently completed, billion dollar, 750MW power plant.  In contrast, he summarized the results of the Renewables Yes citizen’s modeling effort as: 40% renewables and a 2/3 reduction in carbon emissions, while maintaining rate parity with Xcel, and he was keen to point out that all the data and modeling behind those numbers are publicly available, unlike Xcel’s estimates.

He explained wind curtailment costs — because wind is variable, and coal plants can’t be turned on and off quickly, sometimes Xcel ends up dumping wind power, when it would exceed the grid’s demand.  In 2007 these costs were only about $120k, but as more wind has been integrated into the grid, they’ve exploded, nearing $4M in 2010.  The problem will only get worse as more renewables are added — baseload coal and variable renewable power just can’t play well together.  Just switching from coal to gas cuts our GHG emissions roughly in half, but more importantly, it allows us to integrate more renewables into the mix, as gas plants can be turned on and off quickly, allowing the grid to absorb whatever wind and solar there is available, and using the fossil fuels only as backup “firming” power.

Like Plant, Regelson emphasized the fact that we simply cannot get accurate estimates of a municipal utility’s startup costs without passing measures like 2B/2C, and enabling serious negotiation from the City’s side.  He asserted that even if the startup costs were as much as $810M, we could still do a 50% reduction in carbon emissions while maintaining rate parity, and that a 68% reduction would be similarly possible, so long as startup costs were below $560M.

Questions and Answers

Written questions were then posed to the panelists by the moderator.  Each side had 3 minutes to respond, and could split that time as they saw fit between the two members.

Q: What is your organization’s position on climate change and the Climate Action Plan?

David Miller admitted that climate change is a very serious problem, and the coal is a huge contributor, but emphasized the need to look at other carbon sources as well.  He also touted Xcel’s wind farm proposal (despite the large curtailment costs that would have resulted from it).  He urged us to continue working with “the greater community” in Colorado, as he believes that any actions taken by Boulder independently will prove insignificant in the grand scheme of things.

Bob Bellemare remained strategically silent, letting Miller have all 3 minutes.

Tom Plant described stabilizing the climate as one of the greatest challenges of our time, and disagreed that Boulder’s local actions are immaterial.  Demonstrating that these changes are both possible, and economically feasible will set an important example and precedent, and embolden others to do the same.  He agreed that we’re not going to come anywhere close to meeting our 2012 Kyoto goals, and attributed a lot of that failure to our inability to separate ourselves from coal fired power.

Ken Regelson said that carbon is a huge deal, and that he’s dedicated his life to mitigating climate change, both professionally and as a volunteer advocate.  He noted that while we’ve done better as a community with renewables and efficiency measures than most other cities served by investor owned utilities, we’re not doing as well as Sacramento, CA or Austin, TX with their municipal utilities.  He called into question the practicality of Xcel’s wind deal, because of the large curtailment costs that would result.

Q: What about stranded asset, separation, and “going concern” costs?

Ken Regelson: Big range in cost estimates here from $0 (city) to $huge (Xcel).  Only rural electrical co-ops are explicitly given value as “going concerns” in the law.  Xcel will have to sue to set such a precedent for an investor owned utility.  Seems like it will be a difficult case to make.  According to consultants hired by the City, separation of our infrastructure from Xcel’s will be a piece of cake, due to the near continuous greenbelt we’ve surrounded ourselves with.  Their informed cost estimate was $7.5M total.  The city doubled that to $15 in their financial modeling, which is still a far cry from the $100M number Xcel is throwing around.

Bob Bellemare: Spent most of his 3 minute response talking about his credentials as a business appraiser, power engineer, and expert witness and asserting his status as an authority on the subject in a very serious voice, before describing Boulder’s city boundaries as “swiss cheese”, and asserting that it would be very expensive to separate.

Tom Plant: You’ve heard two sides with wildly differing numbers.  The only way to actually get a final estimate is to pass 2B/2C and put together a detailed separation proposal.

Q: If we separate, where will our power come from?

David Miller: We have no idea.

Bob Bellemare: You won’t know until 6 months before your utility begins operations.  The ballot language doesn’t say anything about this.  Wholesale power could be 65% of your operating costs.  You might lose what wind power you’ve got now.

Tom Plant: as a wholesale power utility, we will have the power to go to the market and shop around, to competitively bid our supply contracts.  Xcel customers will be locked in to carbon because of the way it generates its profits, and the large investments it has made, and is redoubling, in coal.  What if we actually end up pricing carbon effectively?

Ken Regelson: initially we will probably bid power production out to many independent suppliers.  There are lots of companies interested in this kind of contract.  Tiny Marin got 12 qualified responses to their request for proposals, and we have a much higher profile than they did.  Southwest generation has 1GW of natural gas in Denver (we only need at most 285MW) and they’ve got a contract with Xcel that expires in 2012, which Xcel has decided not to renew.  They’re already interested, and are members of the Boulder Clean Energy Business Coalition (which Tom is representing).

Jon Koehn: point of information.  The City looked at many different plausible scenarios with different renewable energy portfolios.  We currently have a request for information (PDF) out on the street asking for proposals, due back on Sept. 16th.  We’ve already gotten 9 responses.  Don’t know yet if they are real credible offers, but keep an eye out on the city website for more information as it comes in.

Q: What is the biggest misconception the public has about your organization’s position?

Tom Plant: Well… we’re only now taking a position, so people can’t be confused yet!  We’re in favor of 2B/2C because we want to take an innovating position in the market.  The real decision is not being made in November.  We are not committing one way or the other now, we’re just talking about whether to give the City the power it needs to fully explore all the options, despite what Xcel says about this being some kind of point of no return.

Ken Regelson: Polling has shown there’s a lot of support for the municipal option.  There’s a misconception that what we’re talking about doing here is somehow strange or unique.  It’s not; there are lots of other municipal utilities out there.

David Miller: I don’t think there are any misconceptions about us out there.  The notion that we’re not committing ourselves is incorrect.  We won’t be able to stop once we’ve started.  We’re already spending money, and it’ll be nearly $2M/yr going forward.  We don’t have the time to figure this out and work through the process, which could take many years.  There’s a misconception that a municipal utility is some kind of proxy for clean, green energy, which just isn’t true.  At some point, we have to make a resource choice and finally pay for it.  2C doesn’t say anything about our future resource mix.

Bob Bellemare: Condemnation is a difficult process.  It’s very divisive for the community, and creates bad blood with the utility.  You’re committing with this ballot measure, and you have no guarantees as to what you’ll get in your energy mix going forward.  The city plans not to do any debt service on its bonds for the first 1.5 years of operations, so of course you’ll have lower rates then.

Q: Is the City of Boulder qualified to run a utility?

Bob Bellemare: Clearly today you don’t have the staff, nobody with those skills on hand, but you’ll still be making these decisions, about assets with 20-50 year lifetimes.  Of course cities can run utilities, but there will be growing pains, and the first few years will be a mess.  Where will you get the linemen?  It costs a lot of money to build competency.

David Miller: City doesn’t have it, obviously.  We’re going to have to learn and/or build it.

Tom Plant: We already run several utilities (water, sewer, roads, etc.)  We’re surrounded by cities that run their own utilities (Ft. Collins, Colorado Springs, Longmont, etc.).  A municipal utility can engage with the local community in a much broader way, and we have lots of really high quality local resources

Ken Regelson: From a technical standpoint, for the first 5 years it will certainly make sense to outsource this expertise, to bid it out competitively, and learn from the experiences of the experts we hire.  Investor owned utilities have much higher overhead.  Consultants, highly paid executives, lawyers, etc.  In fact I recognize quite a few Xcel staff in the room right now on company time!  The city is extremely fiscally conservative.  We have a AAA bond rating, which we’re not going to jeopardize.  Financially we can do this, and we can buy the technical expertise while we build our own core competency.

Q (from Tom Plant to Xcel) if 2B/2C doesn’t pass, we’re left with Xcel (with or without a franchise).  Why would it be in the City’s best interest to limit our options today by not considering Municipalizing?

David Miller: It’s in the City’s interest to take advantage of the existing Xcel programs.  It doesn’t benefit us to be reclusive on this issue.  We can’t choose a daunting, expensive, time consuming process and expect others to follow in our footsteps.  Let’s just keep doing what we’ve been doing.

Bob Bellemare: if you vote no, you don’t lose the option to do this again in the future.  You have such a good relationship with Xcel today, why sour it?  If you municipalize, you’ll no longer be part of the discussion at the Public Utilities Commission.  Currently you get 5x as much money in solar and 4x as much money in energy efficiency as you put in to those programs as a community.  How can you hope to do better than that?

Ken Regelson, rebutting Bellemare: Jefferson County, WA voted to condemn, and within 4 months they had a settlement with their utility.  It was an easy process.  A lot of this talk about “souring” a relationship is just posturing.  Corporations (and nations) have no friends or enemies, just interests.

Q (from David Miller to Plant/Regelson) We’ve had significant benefits with the current arrangement with Xcel.  What’s really the benefit of this separation, and all the overhead it brings?

Tom Plant: We’ve collaborated with Xcel for 12 years, and I’m proud of the work we’ve done in Colorado.  I don’t hate Xcel, I congratulate them for making changes to their fuel mix (from 90% to 60% coal).  Their actions have benefited communities that left to their own devices would have done nothing whatsoever to mitigate climate change.  However, Boulder is not one of those communities.  Allowing Boulder to separate will let us similarly pull Colorado forward, both materially and by example.  Today Xcel is holding us back.

Ken Regelson: Xcel has come a long way for an investor owned utility, however, we want to see much, much more, and you simply cannot get there while relying on baseload coal.  Shifting to renewables will bend our rate curves down.  Renewables get cheaper with time, unlike fossil fuels.  At the state/CPUC level you can’t get your voice heard as a community of 100,000.  It’s much easier to participate directly at the city level.  I’ve worked with the PUC as an expert witness, I know what the process down there is like.

Closing Remarks:

Tom Plant: The other side says we shouldn’t do this because it’s hard.  They say Xcel is good enough, that we’re better off working through the PUC and the Colorado legislature.  Having served in the legislature for eight years, and worked with the PUC as the head of the Governor’s Energy Office, I can tell you firsthand that the process down there is arduous.  However, we do have good communication with our city government.  Our local democracy works!  Our local Green Building, SmartRegs, and Carbon Tax regulations have all been developed in close cooperation with the BGBG.  We have lots of great local expertise in these areas, and creating a local utility will allow us to leverage that expertise in the field of renewable generation, and set an example for the rest of the nation, and the world.  I’m doing this as a volunteer because I want to see us take advantage of this great opportunity.

Ken Regelson:  WE CAN DO IT.  40% renewables, 67% reduction in CO2, and rate parity.  We want to be able to tell our children and grandchildren that we did what needed to be done in 2011!

David Miller: Let’s work on this NOW!  Let’s keep doing what we’ve been doing!  We don’t have to wait for it to come to us.  Wish as we might for clean energy, 2B/2C doesn’t guarantee it.

Bob Bellemare: Is this really the best way to meet your goals?  What else could you do with that $12M over 6 years instead?  Is this the best possible use of $300M in Boulder?  Will you really make up what you lose in economies of scale with Xcel?  Will you have enough money to replace our solar rebates and other programs?

Jonathan Koehn: Continue following this issue online.  All the city consultant reports are online.  Check out our Know Your Power Community Guide v2.0.  Get informed before you decide!

Ringmaster John Tayer (center) introduces the municipalization contenders.  From left to right: Bellemare and Miller (against), Weaver and Regelson (for).

Plan Boulder County put on a well structured, and well attended debate of the utility municipalization question Monday night.  The forum pitted Ken Regelson and Sam Weaver from Renewables YES! against David Miller, representing the Boulder Smart Energy Coalition (which recently sent out a glossy Fear, Uncertainty and Doubt leaflet to many Boulder residents) and Bob Bellemare of UtiliPoint International — a consultant hired by Xcel Energy.

First each side got to make a 10 minute introductory statement or presentation, followed by a series of pre-submitted questions, posed by the moderator.  Finally, written questions from the audience were vetted by someone from Plan Boulder and passed on.

Ken and Sam’s intro attempted to get across the basic results of the citizens modeling effort their organization has put together.  Among them:

1. We can achieve rate parity with Xcel while reducing CO2 emissions by 67%, using natural gas and a 40% renewables mix, if we assume startup costs of $250M to $400M.
2. Coal and renewables simply can’t play well together on the same grid.  The renewables get curtailed because coal fired power takes a long time to turn on and off.
3. Xcel’s business model, based on large existing investments in coal, can at most accommodate a 15% reduction in CO2 emissions.

David Miller was supportive of meeting our Climate Action Plan goals, but seemed unsure whether going after the emissions due to power generation was the best strategy, suggesting we might instead focus on demand side management, energy efficiency, and the use of RECs.  As with the flyer circulated by his organization, most of the points he made focused on cultivating uncertainty.  He was apparently choosing to ignore, or unwilling to accept the conclusions of the City’s consultants and the citizen modeling effort.  Two points he made which I thought did warrant real concern:

1. About 75% of Boulder’s energy consumption is commercial/industrial, and that constituency isn’t directly represented in the voting public.
2. It is important that we not let the municipal utility’s revenues get entangled with the City’s general funding, as it sets up all kinds of poor incentives for the organization, and leads to an opaque city revenue scheme.

All in all Miller seemed earnest, but less informed than he ought to have been.  Maybe that’s not his fault — based on the Plan Boulder flyer, it looks like Craig Eicher, Xcel’s community affairs manager for Boulder, was supposed to be sitting in his seat.

Bob Bellemare on the other hand seemed like a more practiced, more active disinformer, mostly trying to seed doubt in the minds of listeners.  Among his recurring points:

1. Hardly anybody ever succeeds in this process.  Maybe one city every decade nationwide.
2. Once you vote in November to begin, it will be very difficult to actually stop the process, regardless of what “off ramps” you’ve supposedly put in place.  The only way it ever seems to happen is by voting in a new city council.
3. Your cost estimates are wildly wrong.  It will be much more expensive, and take much longer than you think.  You will probably lose money.
4. There’s no reason to think that your local monopoly (the municipal utility) will be any less monopolistic than Xcel.

The point about stopping the process often requiring the voting in of a new council seemed like a thinly veiled political threat.

Often the debate became one side asserting some number, and the other simply claiming it was wrong.  Stranded costs, separation costs, fuel costs, interest rates, etc.  At some point Bellemare claimed that Xcel was going to be shutting down half its coal plants, which got shocked and appalled looks from both Ken and Sam.  Half?  Really?  Their counter claim was that generation was dropping from 2400MW to 2000MW of coal (a 1/6 reduction, not 1/2).  When quantitative issues become he-said, she-said, all you can do is get someone to go look at the calculations or data.  In this sense, I think the proponents of municipalization have a big advantage.  Their models are all public.  They’re willing to have you examine their assumptions and check their work.  Xcel on the other hand has been very cagy with their data, and are unwilling to give detailed background on where their estimates are coming from (it took months just to get the city’s power consumption profile… and only happened after we’d gotten similar data from Ft. Collins).  All you get the end result and a “Trust Us…” which unsurprisingly makes municipalization look like a lousy deal.

Some of the audience questions were actually quite good.  Somebody requested that each debater disclose how much they were being paid (if anything) to participate, and by whom.  Weaver and Regelson (and the Plan Boulder moderator) are volunteering their time without pay.  Miller received a few hundred dollars from the Boulder Smart Energy Coalition.  Bellemare is a paid consultant working for Xcel and “[his] financial arrangements are not a matter of public information.”

At some point near the end of the debate, it became clear that the proponents of municipalization were winning pretty unambiguously in terms of both information and eloquence, and they became a bit more aggressive.  Miller claimed that obviously our rates would have to go up in a less carbon intensive scenario, as renewables are simply more expensive — just look at all the renewables assessments on our bills.  Weaver took almost violent objection to this point, noting that wind is already the same price as coal, we just can’t take advantage of it with the coal fired grid we’ve got today because of the baseload/curtailment issue.  He further noted that while solar is more expensive today, it’s dropped 40-50% in cost over the last 5 years to around $5.15 per installed watt, and if/when it gets to $2.75, it will be cheaper than grid power.  At which point, he envisions an explosion of distributed generation, “behind the meter” i.e. outside of Xcel’s control, which he believes will prove disruptive to Xcel’s business model.  It came off as being somewhere between a warning and a threat.

The final question, which came directly from the moderator, was on the larger consequences of the decisions being made, both for other communities watching the process, and for the future Boulder 10, 20 or even 50 years on.  The proponents of municipalization clearly felt that we are attempting to set an example for others, of creating a scalable, replicable, financially and climatically responsible power system.  One which a few decades hence they also expect Boulder ratepayers to be thankful for, due to much lower exposure to high and volatile fossil fuel prices.

Miller held out hope that we would find a “third way” to achieve our goals, also setting an example for other communities, though he didn’t lay out in any detail what such a third way would look like, and how it could work from within the confines of the Xcel energy system.

Bellemare felt that regardless of the outcome of the election it would have little effect more broadly.  Every franchise agreement is different, state regulations are different, what you learn in one place doesn’t really transfer well to others.  (Nobody’s watching.  What you’re doing doesn’t really matter.)  Should the ballot measure succeed, he expected 5 years of wrangling to get the utility set up, and another 5 years before we really figured out how to run it.  Twenty or fifty years on?  Well, who knows…  If the ballot measure fails, he expects Xcel and Boulder to keep on working together as they have for years, continuing to build one of the nation’s best energy efficiency programs.

This inspired a pretty loud response from Ken… who noted that yes, we do have one of the best efficiency and renewables programs in the nation for an investor owned utility, but several municipal utilities do far better, Austin, TX and Sacramento, CA were mentioned as examples.

Based on their overall performance, it seemed pretty clear to me that the proponents of municipalization can win if they’re given a fair forum.  It’s less clear to me how they will fare in the decidedly unfair landscape of full page newspaper ads, push polling, semi-anonymous glossy mailers, radio sound bites and yard signs.  In those fora, money talks much louder than good information, and Xcel has a lot more money at their disposal than we do.  We need to change that.

Last night I went to a presentation by the Renewables Yes technical and financial modeling team.  They’ve put up a bunch of information about their modeling efforts on the web site.  I’ve organized nine short videos of a previous iteration of the presentation into a single 90 minute playlist here if you want to see it yourself.  It’s definitely worth watching if you use electricity in Boulder!  This post is my attempt to digest and rephrase their conclusions.

A tiny bit of background first.  Last year our 20 year contract with Xcel energy (an investor owned utility… or IOU) ran out, and we voted not to renew their franchise for another 20 years.  We now have 5 years to figure out what we’d like to do instead.  There were a lot of good reasons to take a look at alternatives to another 20 year contract.  Xcel’s rates have increased rapidly in the past few years.  They are heavily committed to coal generation, which precludes integrating renewables into the grid and emits the most CO2 of any other power source.  Many people also feel that 20 years is just too long of a commitment given how rapidly the energy landscape is evolving.  We would lose a great deal of future flexibility if we signed another 20 year franchise similar to the previous one.

Renewables Yes is an explicitly political non-profit citizens organization, which worked on the ballot measure last fall.  After 2B passed, an all volunteer team started modeling the technical feasibility of building a coal-free grid for Boulder, that would allow the integration of large amounts of renewable power over time.  They’ve also been looking at the finances.  Fellow Caltech alum Sam Weaver from Cool Energy (which works on high efficiency, low cost, low temperature Stirling engines) headed the technical team, with most of the modeling being done by Tom Asprey.  Frank Selto, a professor at CU’s Leeds School of Business, did the financial modeling.

The Problems With Coal

There are a lot of problems with coal.  Both mining and burning coal are polluting in the traditional sense.  The majority of the mercury found at dangerous levels in big, tasty fish comes from coal fired power plants.  Mountaintop removal mines in Appalachia are watershed disasters.  It’s also the most carbon intensive of fuels, putting out about 1000 kg of CO2 per megawatt-hour (MWh) of power produced.  In the longer term, it’s also a limited resource.  It will some day run out.  However, there are also a couple of more subtle problems with coal fired power plants, which interact in such a way as to make a low-carbon grid an unthinkable business proposition for Xcel.

The first is that it takes a long time — a day or two — to turn a coal plant on or off.  You can’t just flip a switch.  You also can’t throttle them back without seriously impacting their fuel efficiency.  Both wind and solar power — today’s most cost effective renewable options — are intrinsically variable on the timescale of minutes to hours.  This means it’s very difficult to build a stable power supply that uses both coal and renewables effectively.  You make a commitment to having a certain amount of coal power running in the background at all times (baseload) and if your renewable sources generate more power than is needed beyond that baseload, you have to “curtail” them — you have to throw away that free, clean energy.  Wind and solar power are also forecastable, which mitigates their variability somewhat.  The Research Applications Lab at UCAR works with utilities to improve their wind power generation forecasts, so that they can better predict how much fossil fueled power to idle.  Better forecasting can only get you so far though, because you still can’t respond to rapid changes in available renewable power fluxes with coal, even if you know they’re coming.

The other subtle problem with coal has to do with how the utility’s acceptable profits are calculated.  Xcel has a state-sanctioned monopoly, and so their profits are regulated.  The formula that’s used to determine how much they can charge the rate payers includes a certain profit margin beyond whatever their capital expenses are.  Coal plants are very capital intensive — they cost a lot to build up front.  Because Xcel is entitled to a set percentage of profit beyond that expense, they have an incentive to spend as much as possible building plants, as it maximizes the dollar value of the profits they’re allowed to collect.  For example, if they’re entitled to a 7% profit, and they spend $100M on a new coal plant, they get to recover $107M from the ratepayers ($7M in profit).  If the same amount of natural gas fired generation only costs $50M to build, then they only get to collect $53.5M from ratepayers (for a $3.5M profit).  It’s obvious which of the two is the better business decision.  They’re also entitled to recover operational costs, such as the cost of the fuels that they burn, but they don’t earn a profit on them, so they’re in a sense fuel agnostic.

This arrangement creates a large financial incentive for Xcel to systematically underestimate the future cost of coal in its financial planning, because it allows them to justify building expensive coal plants.  If they turn out to be wrong about the future price of coal, they simply pass that cost on to us, shrug their shoulders and say “Whodathunkit?”.  And they’ll probably be in good company — historically nobody (including the US Energy Information Administration) has done a good job of predicting future fuel prices.  Given how abysmally everyone fails at this game, it’s amazing to me that anyone keeps playing.  In the meantime, they get to charge us “cost-plus” on the expensive power plants.

Taken together, these realities make it very unlikely that Xcel will get behind a transition to clean energy in a significant way unless we can price CO2 emissions or re-write the public utilities regulations, de-coupling the utility’s profits from the amount of power they sell, and creating the right incentives for efficiency and low emissions.

A Baseline Scenario

The initial citizen modeling effort isn’t meant to be a detailed grid design.  It’s not meant to be highly optimized picture of just how good things could get.  It’s a very conservative sketch of the kinds of systems we might consider if we did want to create a municipal utility.  How much of what resources would we have to use to meet our demand?  How much would it cost?  How would it affect our emissions profile?

The very basest of the baseline scenarios is to simply use the renewable power we’ve already got installed — about 10 MW of rooftop solar and 12 MW of hydro — and get the rest of our power (~180MW) from natural gas.  This would immediately reduce our CO2 emissions by 50%, and our power would cost the same or less than it does now.  Switching to an all gas fired grid would be very reliable, and have low up front costs.  Efficient gas turbines are cheap; the fuel makes up the overwhelming majority of the cost of ownership.  With local small and medium scale gas generation, we’d also have the option of doing a lot of co-generation of useful heat along with the electricity.  This can be used for district heating, cooling and industrial processes, and can push the overall thermal efficiency of the plant as high as 90%, vs. 55-60% for electricity-only generation, in which all that potentially useful heat is just thrown away.

More importantly, natural gas plays nice with renewables.  It’s dispatchable, unlike coal.  Which means you can essentially flip a switch to turn gas turbines on and off in a matter of minutes, and so use them as very effective backup power to firm up an intermittent renewable power supply.  Natural gas certainly isn’t a panacea.  It’s still a limited resource; it has serious pollution issues of its own (if you haven’t already, definitely check out Joshua Fox’s film Gasland, about hydraulic fracking); it’s too carbon intensive to avoid climate change; it will certainly have some price volatility.  Nevertheless, it’s a big improvement over coal because it’s a much smaller up front commitment, and it will allow us to integrate a much higher proportion of renewable energy into our grid, until we can get scalable, low cost energy storage figured out.

Adding Renewables

We can get at least a 50% CO2 reduction for free by switching to gas, if we assume that natural gas prices stay where they are today, around $5/MMBTU.  This is roughly the average price of gas over the last decade, but the price has spiked occasionally to around $10.  What if that became the new normal?  In that case, it becomes cheaper to integrate some renewable power into our grid.  And unlike on the current coal fired grid, this would actually be a practical option.  We can hedge against high gas prices with renewables, but we can’t use them to hedge against the possibility of high coal prices, because coal and renewables aren’t really grid compatible.  In the model runs that the tech team did, the most cost effective non-coal option in case of a doubling of natural gas prices is 70% gas, and 30% renewables, and it led to about a 30% increase in the cost of power production ($0.114/kWh vs. $0.084/kWh).  It also resulted in a 64% reduction in our CO2 emissions versus today.  For a very modest additional increase (up to $0.117/kWh), renewables can come up to 39% of the mix, and our overall CO2 reduction is 68%.  Because we can effectively integrate gas and renewables, there’s an upper  bound to how much high gas prices can affect us.  Should gas prices become very high, we would want to integrate more renewables.  With doubled gas prices, at 61% renewables (and an 80% reduction in CO2 emissions) we’d be at around $0.142/kWh.

We’re going to be exposed to future fuel price volatility one way or another.  If we stick with Xcel, it’ll be coal prices which seem low today, but are difficult to hedge against.  If we strike out on our own, it’ll be gas prices, which are about the same cost as coal today, and are easier to hedge with renewables.  Obviously $0.142/kWh is a lot more than our power costs today, but one has to imagine that if gas prices have doubled, coal prices are also likely to be changing.  In that kind of uncertain energy future, having a grid with a very predictable long term cost of energy would become attractive to businesses, which will often pay a hedging premium to lock in a predictable price they can plan their operations around.

If gas prices don’t rise and stay high, then we’d be getting that 68% reduction in CO2 and a lot of future flexibility for just an extra penny per kWh.  The average household in Boulder uses about 650 kWh/month, which would mean the cost of a serious start on mitigating climate change would be all of $78/household each year.  This is the equivalent to a CO2 price of less than $20/ton of emissions avoided, which seems like an awfully good deal to me.  And again, this is all assuming that wind and solar continue to cost as much as they do now, and does not take into account any energy efficiency measures, or economies of scale in renewable generation.  There’s every reason to believe that the actual costs will be lower.

An Island Model of Conservatism

By design the model scenarios considered were very conservative.  One conservatism that was integrated was the assumption that the Boulder grid would be an island — that we would not be connected to the rest of the regional electrical system.  This isn’t a design decision; nobody is suggesting that we actually disconnect.  Keeping your power reliable in a disconnected system means having relatively large reserves you can lean on in case something goes wrong.  It also means that whatever solution you come up with is scalable and can stand on its own.  You could build a very robust interconnected grid out of a system of many potentially self-sufficient islands, or you can reduce the required reserves (and the system costs) by sharing resources across different jurisdictions.

Renewable power which is only functional if it’s connected to coal plants isn’t renewable at all, as a system.  This is in essence what Xcel was suggesting with its wind farm proposal (which has just been nixed by the city).  They were offering to hook up 200MW of new wind generation, and to assign the renewable energy certificates from it to Boulder.  This would mean that renewable energy would ultimately be above and beyond the statutorily required renewable energy portfolio standard.  The problem with this arrangement is, it can’t scale up.  You can’t just keep adding (and utilizing) intermittent power on a coal baseload grid.  So we might get clean energy, but if others want to do the same, eventually curtailment costs become large.  Within the proposal Xcel made, it was clear that we would be the ones on the hook for those costs, as well as the cost of constructing the wind farm in the first place.

The inability of coal plants to decrease power production dynamically means that on a coal grid as you add more and more renewable generation, the marginal reduction in emissions becomes smaller and smaller, and the cost of those additional clean megawatts becomes more and more expensive.  Coal simply can’t play much of a role in any system that is trying to do what the atmosphere requires, which is achieve at least an 80% reduction in our greenhouse gas emissions.

The Known Unknowns

As far as I can tell, most of the risks involved are legal and political.  Fuel costs are uncertain, but that’s true regardless of whether we stay with Xcel or not.  It’s just a choice between whether we want to be exposed to the price of coal and stuck with it, or the price of gas and able to replace a lot of it with renewables, placing a firm upper bound on our potential energy costs.

Politically, on the city’s side it would be tempting to use the municipal utility as a cash cow to pad the general fund.  This is a bad idea, especially this early in the process.  If people want city services (and I think we do) then we have to pay for them, and that means taxes of one kind or another.  We just have to get comfortable with that.  It’s okay to tax, especially if the tax is transparent and localized.  Wrapping taxes for unrelated things up inside your utility bill obscures both the cost of energy and the costs of whatever it is those taxes are paying for.  It also makes it more difficult to do straightforward comparisons — to show that you are in fact succeeding (or failing) in a cost context.

We don’t know how much it’s worth to Xcel to prevent us from municipalizing.  It might be worth more to them to stop us, than it is for us to go through with it in a purely financial sense.  They may want to prevent us from setting a good example.  They may want to try and make a bad example of us to scare others off.  It would be nice to get some kind of upper bound on how long they can make it take in court, and how much they can squeeze out of us for their potentially stranded assets.  The city says there will be no stranded assets.  Xcel says it could be as much as $600M.  Those startup costs will have significant ongoing consequences (but keep in mind that the annual revenues for the city utility would be about $100M… which makes a startup cost of $300M seem less insurmountably huge.)

This risk — that Xcel is willing to spend more than we are — will first appear in the form of ads.  Propaganda.  Campaign messaging.  We’ve already had some push-polling from Xcel (which they deny of course), suggesting that the poor and the elderly might get their power cut off, or that businesses might flee Boulder if we raise the cost of power (commercial users do consume 80% of our power).  We have to get our messaging down.  The vast majority of voters aren’t going to watch a 90 minute presentation or flip through 100 slides.  This has to be sound-bite and poster compatible.  Much though we might like folks to make their decision on the basis of a deep and subtle understanding of the issues, in the end we are mostly emotional beings, and we have to frame the truth in a way that makes it accessible to people who aren’t going to go on digging.  Xcel will not play nice, or clean.  We shouldn’t expect to have that luxury either.

There’s a line near the end of the excellent animated short Wake Up, Freak Out! that is particularly apropos here:

It is now very clear that in order to actually win the fight against climate change, making big changes to the way we each live our own lives is not going to be enough; we’re also going to have to actively confront powerful vested interests who will stop at nothing to prevent the changes we need from taking place. We have to be more than just consumers.

Other cities will be watching us, especially early on in this process.  Let’s make it easy to see what’s happening, and set a good example that others can follow.  Ultimately this isn’t just about us having our own source of ethical, reliable, cost-effective power.  It’s also about showing others how they can get there too.