By Timothy O'Connor, Los Angeles Ratepayer Advocate
Something important happened last week for electric ratepayers of LADWP - about 100 miles north of downtown Los Angeles, the official opening of the Eland Solar‑plus‑Storage facility brought online a major energy generator with zero carbon emissions at bargain basement prices. Prices for the facility are so low, and the energy production generation is so high, that it beats out some natural gas power plants while contributing 7% of LADWP's energy mix.
While Eland can and should be seen as a crown jewel in the region's progress toward 100% renewable energy by 2035, it should also serve as an even stronger reminder that progress to affordably meet regional energy goals will take a mix of smart near-term investments, stable long-term vision and ambition, and significant ratepayer protections.
Eland clearly demonstrates the changing dynamics of clean energy investments
While the Eland project is a significant milestone, and has some unique characteristics that led to its success, its opening last week powerfully demonstrates how the pace of change in our energy system can impact the region’s larger energy needs and accelerate progress towards decarbonization.
Just 10 years ago – iPhones still had a home button and major solar facilities paired with storage batteries like the Tesla-megapack were seen as a futuristic, hard to scale, expensive to operate, and unreliable at meeting evening demand. Now, just a few iPhone models later, utility scale solar-plus-storage facilities like Eland are clean, affordable and reliable – providing lower cost energy than previously thought possible. In fact, battery storage for energy in California has increased more than 30x since 2018 while the price of batteries like those at Eland has dropped almost 90%.
With this pace of change, Eland shows that the one constant in the energy system is change. And with the advent of new physical and digital technology, whether it be from batteries, advanced computing, or futuristic generation technology like nuclear fusion that is drawing billions in private investment, today’s energy planners will have an increasingly difficult time predicting long term decarbonization costs with accuracy.
LADWP must focus on making near term investments while also planning for an energy system in constant change
Both the State of California and the City of Los Angeles have ambitious policy goals to transform the energy system to meet climate change goals. Supported by extensive energy modelling, analysis shows that while energy system decarbonization is possible, it relies on a range of strategies working together like increased electricity use in transport and buildings, extensive grid upgrades, lots of new renewable energy generation and storage, and deployment of technology to encourage more nimble energy demand.
What these models and lived experiences also show is that many investments are needed right now, and can start delivering benefits, preparing the system for the future, and enhancing reliability today. Further, when looking forward 5, 10, 15 years into the future – it is clear that while cost curves and technology maturity are changing, expensive grid upgrades and new energy generation investments are needed to make decarbonization a reality.
Winning on decarbonization requires that ratepayers also win (or at least don't lose)
When projects like Eland come online, ratepayers win because they get access to clean, relatively inexpensive, and reliable energy that leverages massive private investment. However, not all energy system investments will benefit ratepayers as quickly or clearly. Further, when looking at investment solely in the short term, some can look more like things that increase ratepayers costs rather than delivering ratepayer benefits.
For example, with investments like transmission and distribution line upgrades - benefits happen in more diverse, and more murky ways because they unlock future energy deliveries while keeping the lights on. Additionally, investments in things like smart meters embedded with advanced analytics may increase near-term costs, but over time can facilitate massive savings through smarter energy use in homes and businesses, theft reduction, and efficiencies in meter reading and outage management. Further, broadscale electrification efforts can require upfront incentive dollars and create new requirements for people to navigate, but over time can help spread electricity costs over a larger customer base - creating downward pressure on rates.
With these and many more examples, one thing it is clear: figuring out how to sequence, pay for, and distribute costs and benefits must be done carefully to ensure ratepayers win – or at least don’t lose. If they aren’t, ratepayers may be stuck with a bill they didn’t ask for, can’t afford, and don’t benefit from.
LADWP must take a principled approach to decarbonization in Los Angeles to safeguard ratepayers
According to LADWP, major investments are needed across the Los Angeles energy system, and costs are certain to follow. The utility has already forecasted over $6 billion in energy expenditures over the next 3 years to maintain and modernize the grid on top of regular operations and maintenance costs –meeting present day needs while preparing for the future. As it marches forward, and to safeguard the interests of ratepayers, at least 5 core principles should be followed:
Ambitious clean energy goals (like California's statewide SB 100 and LA city's LA100) are needed to ensure predictability in the market, stimulate private investment, and maintain a North Star to orient utility and private sector progress. That doesn't equate to decarbonizing at all costs - but rather in sequenced, controlled ways and with adequate protections to ensure investments align with the utility mission of providing customers and communities with safe, reliable, and cost-effective service in a customer-focused and environmentally responsible manner.
Given that long term system costs are going to be changing, portfolios of grid and infrastructure investments like those laid out in LADWP's Strategic Long Term Resource Plan (SLTRP), Long-term Transmission Roadmap, and Power Infrastructure Plan need to be evaluated for costs and benefits in both the long term and short term. As a result, investment plans, affordability and benefits should be considered over traditional investment cycles of 3-5 years while also considered in the context of meeting long term needs.
Private capital must be leveraged where possible to drive large-scale projects without overburdening ratepayer capital budgets. Securing low-cost, long-term contracts that offer price stability and climate benefit together are important opportunities to do this.
Formal electric ratemaking actions must happen, and soon, and those actions should follow established pathways and principles that ensure customer bills accurately reflect the cost of service, provide flexibility for ratepayers to control their bills, ensure the city can manage its utility-related finances, and generate new opportunities to raise proceeds to cover needed grid upgrades.
- Investments must be made to support grid improvements for the near – mid- and long-term to support a stable, clean and future proofed power system. This means LADWP needs to be adopting emerging technologies as they mature while also capturing the cost declines over time.
What’s next for ratepayers
Eland’s success is a signal of momentum and constant change as well as yet another illustration of how important it is make sure energy system planning and long term goals are aligned. Why? When it comes to clean energy – the result can be affordable, reliable, and scalable—all while serving the public interest.
Over the next few years LAWDP will need to figure out how to design its energy rates and investments to support major upgrades while supporting ratepayer needs. As the Ratepayer Advocate for Los Angeles, we will work to make sure the utility engages stakeholders and follows a principled path going forward. At the same time, ratepayers themselves will need a seat at the table to make their voices and issues known. Please reach out if you want to learn more.