LAMPAC Spring ConferencePhoenix, Arizona
May 9, 2017
Jonathan M. WeisgallVice President, Government Relations
• Energy trends
• Political landscape
• 2017 legislation?– American Health Care Act
– Comprehensive tax reform
– Infrastructure
• Impact of 2018 midterm elections
• “Let’s go off the grid”
Topics
2
Energy trends
3
Energy jobs 2016
4
U.S. Department of Energy “2017 U.S. Energy and Employment Report” (January 2017)
Generation additions and retirements
5
Wind and solar installations 2000-2016
6
Corporate renewable energy deals 2010-2016
7
Gas and coal plant capacity factors
8
Coal jobs are being replaced by machines
9
Future of nuclear – closed, closing, saved
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Future of nuclear – closed, closing, saved
11
Cumulative change in generation 2007-2016
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CO2 emissions by sector
13
Emissions reductions and Paris goal
14
Levelized cost of energy 2016 (unsubsidized)
15
Battery prices
16
Political landscape
17
2016 elections – the trifecta
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2016 electoral college results (270 required to win):
Trump Clinton
306 232
• Republicans control 68 of 99 state legislative
chambers
• Republicans control both chambers in 32 states;
Democrats control just 13
• 33 Republican governors; 16 Democratic (Alaska)
• 25 “trifecta” Republican states; 6 Democratic
• 12 fewer Democratic senators than there were when
Obama was sworn in; 63 fewer House members; 16
fewer Democratic governors
• Fewer Democratic state legislators today than there
have been at any time in last 100 years
Tough times for Democrats
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• Only certainty is no certainty
• Trump governing as he campaigned: unorthodox
• No honeymoon – but no marriage either; declared war
against the Washington establishment
• 556 positions require Senate confirmation; Trump has
nominated 41 (and says many are “not necessary”)– Demands loyalty; hand-on approach; prevented #2 at State
– Run government with traditional small team at White House?
• No ideology – and not a traditional Republican – Don’t’ change entitlements (Social Security, Medicare)
– Oppose free trade (Trans-Pacific Partnership; NAFTA)
– Raise deficit with infrastructure spending
– Many advisors (e.g. Gary Cohn) were Democrats until 1/20/17
Trump: What’s happening?
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• Shift power back to states; deference on environmental issues
(SIPs to FIPs 1988-2008: 5; Obama: 56)
• But different approach on markets – federal intervention?
– DOE study on whether markets are adequately compensating
baseload power and potentially threatening reliability
– We don’t have blackouts, we have supply, markets are economic,
no reliability issues. What’s the complaint? Security – really?
– Not in best interests of U.S. to have baseload (coal and nuclear)
shuttered; energy independence; drive increase in manufacturing
– Should organized markets give benefits to resources that aren’t
otherwise competitive?
– FERC concerns: If states want grid operators to reward the
environmental attributes of their own in-state generation, will that
end organized markets?
What’s happening? Energy trends?
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• Technology advances and scaling of production
have led to lower prices
• Customers have spoken; they want renewable
energy– 71 of the Fortune 100 companies have renewable energy
or GHG targets
– 87 major companies committed to 100% renewable
energy
– States adopting policies and regulations that help enable
corporations to procure renewable energy (green tariffs)
Markets and renewable energy – change?
22
• Aggressive state policies aren’t changing (RPS,
restrictions on carbon emissions)– Even cities pursuing renewable energy – Las Vegas, Salt
Lake, Portland
– But some pushback (Oklahoma wind)
• Federal tax credits (PTC/ITC) still in place
• Transformation happening – moving from a
mandate-driven push market to a customer-driven
pull market that is overtaking government policy as
the real driver?
Markets and renewable energy – change?
23
2017 legislation?
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President Trump’s policy priorities
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Strengthen trade agreements
Reform US tax system
Secure the border
Repeal and replace Obamacare
Overhaul financial regulations / Dodd-Frank
Environmental De-Regulation
Rebuild infrastructure
Drain the swamp
• Republicans are planning to use budget reconciliation to pass
both Obamacare repeal and comprehensive tax reform
• Regular legislative process benefits• Legislation can be enacted permanently
• No artificial restrictions on which measures can be included
• Regular legislative process limitation: 60 votes needed at every
step in the Senate
• Budget reconciliation benefits• Requires only 51 votes in Senate; no filibuster allowed
• Expedited process (time limits for amendments and debate)
• Budget reconciliation limitations• Legislation that increases deficit must sunset after 10 years or be
subject to other measures to avoid long-term deficit effect
• Used only for measures that have a fiscal effect on the federal budget
Budget reconciliation
26
Affordable Care Act –
Repeal and Replace
27
• May 4, 2017: 217-213 House vote for American
Health Care Act
• Need to show Republicans can govern and
meet promise after inability to pass bill in late
March
• Affordable Care Act: 0 Republican votes
• American Health Care Act: 0 Democratic votes;
20 Republican “no” votes
• “Let the Senate fix it”
• Senate showdown more difficult
Repeal and replace Obamacare
28
Comprehensive tax reform
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Start with 6/24/2016 House “blueprint”
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• Reduce top U.S. corporate income tax rate from 35%
to 20% (Trump proposal down to 15%)
• 100% depreciation: full expensing of both tangible and
intangible property
• Eliminate deductibility of net interest (huge for energy)
• Border tax adjustment – no deduction or depreciation
for cost of imported goods and services; no tax on
receipts from exported goods and services
• Major reform of international taxation and focus on
repatriation of foreign earnings
• Retain mortgage interest and charitable deduction
• Congress has already repealed the PTCo Scheduled to sunset 1/1 2020 under legislation passed in December 2015
o 2015 deal was in return for lifting oil export ban; no reason to re-litigate
• Jobso >100,000 wind industry jobs
o Veterans: National workforce: 7% veterans. Wind industry: 11.5%.
o Wind turbine technician is fastest growing job in U.S.; will double over next
decade
• U.S. infrastructureo Over 1,000 U.S. businesses in the wind industry; have invested over $100 billion
since 2008
o More than 500 U.S. factories build wind turbines and parts
o 20 years ago: 90% of components were imported. Today: about 60% produced
domestically
• Property taxes – billions of dollars
• Climate change or making America great again?
Preserve/protect PTC/ITC
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Infrastructure
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• Trump on campaign trail: $1 trillion for infrastructure – Possible bipartisan deal? Everyone loves infrastructure, but no
agreement on how to get there
– Ds: direct spend; don’t ease permitting/environmental rules
– Rs: exact opposite
– Pay for it; must be revenue-neutral (cuts elsewhere?)
– Public-private partnerships? Tax incentives? Tolls?
– Trump budget inconsistent? Cut mass transit/trains
• 2009 stimulus bill; “shovel-ready;” two GOP votes
• Include transmission? Yes
• Stand-alone infrastructure bill or part of tax bill?
How to do it?
33
• 3/14/17: Senate Energy/Natural Resources Committee
• “New transmission infrastructure is required to access
vast American renewable energy resources and
deliver this clean energy to customers”
• 10-year process to get Gateway West record of
decision; a 3-5 year project shouldn’t take 10 years of
federal regulatory review
• Suggestions for permitting reforms – Lead agency as a single point of accountability
– Clear and permanent deadlines for agencies to act
– Grandfather prior agency actions to avoid unnecessary
reviews every time a government policy changes
Berkshire Hathaway Energy testimony
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Will 2018 midterm
elections pressure the
Democrats to cooperate?
35
Key Senate races in 2018
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R-Incumbent –Trump won
D-Incumbent –Trump /
Romney won
D-Incumbent –Trump won
D-Incumbent –Clinton won
R-Incumbent –Clinton won
No election
Sen. Claire McCaskill (D-MO)
Sen. Debbie Stabenow (D-MI)
Sen. Joe Donnelly(D-IN)
Sen. Bill Nelson (D-FL)
Sen. Jon Tester (D-MT)
Sen. Heidi Heitkamp(D-ND)
Sen. Sherrod Brown (D-OH)
Sen. Bob Casey, Jr. (D-PA)
Sen. Joe Manchin(D-WV)
Sen. Tammy Baldwin(D-WI)
Sen. Dean Heller (R-NV)
Midterm election trends
37
Voter turnout in midterm elections
38
“Fifty or sixty million American homeowners will
essentially be able to generate all their energy using
solar; they will be able to store what they don’t use at
the moment of generation for the rest of the day and
night. For just $18.30 per month they will store
enough energy to essentially get off the grid.”– Tony Seba, author of Clean Disruption
“What has popularly become known in the
industry as the utilities’ death spiral is
extremely unlikely to occur.”– Jean-Marc Ollagnier, Group Chief Executive, Accenture
Let’s Go Off-Grid …
Is That Really Feasible?
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• Not a pro-solar versus anti-solar discussion
• Customers want solar power, and energy companies are going
to give it to them
• Real issue: What’s the most cost-effective way to provide that
solar power to our customers?
• Private (rooftop) solar not the same as going off the grid; private
solar customers still need the grid 23.99 hours a day
• Grid support necessary to start large equipment (such as air
conditioners
• Going completely off the grid requires a prohibitively expensive
energy storage system
• Local utilities are here for the long term and are providing
renewable energy for customers in more cost-effective ways
Let’s Look at the Facts
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Private Solar Generators Need the
Power Grid 23.99 Hours a Day
41
0.00
0.50
1.00
1.50
2.00
2.50
Kil
ow
att
/Us
ag
e
Customer Power Demand
Energy Company-Provided Power Grid Services
23.99 hours/day energy company provides all power grid services
Energy Company-Provided Power
10 hours/day energy company provides 100% of power needed
Private Generation System-Provided Power
6.5 hours/day private generation system provides 100% of power needed
Private Generation
Energy Company and Private Generation System-Provided Power
7.5 hours/day both energy company and private generation system provides power
100%Energy Company-
Provided Power
Private generation peak 12-2 PM Customer power
demand peak 6-8 PM
Private generation customer
uses power grid to
export excess power
4am 8am 12pm 4pm 8pm 12am
100%Energy Company-
Provided Power
En
erg
yD
eli
ve
ryC
ha
rge
The Power Grid Provides the
Support to Start Up Large Appliances
• Even when the private solar system is producing more power
than the home needs, the homeowner is still not self-sufficient
• The power grid provides in-rush current – the necessary support
for starting large household appliances (compressor for A/C)
Source: The Integrated Grid report published by EPRI, 201442
13.5 kWh Tesla Powerwall 2
Technology
Wall or floor-mounted,
rechargeable lithium ion
battery with liquid thermal
control
Model13.5 kWh
For daily cycle applications
Weight 264.4 lbs
Dimensions
Height: 44”
Width: 29”
Depth: 5.5”
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5
10
15
20
25
30
1/1 1/31 3/1 3/31 4/30 5/30 6/29 7/29 8/28 9/27 10/27 11/26 12/26
kW
h
Average Daily Residential Demand PV System 10-Day Rolling Average Generation
Supply-Demand Imbalances Require
Excess Battery Storage To Go Off the Grid
4.1 kWdc Solar PV Daily Generation – Santa Maria, CA
Battery system must store excess
energy to cover the demand for
the balance of the year
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0
100
200
300
400
500
600
700
800
January February March April May June July August September October November December
Battery Storage Requirements
to Never Rely on the Grid
4.1 kWdc Solar PV Monthly Generation Average Residential Off-Grid Battery System Requirements
• The battery system must store 38 days of average use by August, annually, in order to provide
the necessary energy throughout the balance of the year due to the variability of private solar
Private Solar Generation vs. Battery System Requirements in Santa Maria, CA
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Battery drains
to one day’s
average
energy use
kW
h
Battery
system is at
full capacity
Not as Easy as It Sounds …
True Cost of Going Off the Grid in Iowa
46
Annual Energy Usage
(residential) 11,026 kWh Varies between 19-46 kWh/day during the year
Private Solar Supply1
8 kWdc private solar system needed
525 sq. feet rooftop space needed for panels
Average Private Solar Cost2 $25,680 installed
Battery System Requirement1,650 kWh battery system (55 days of storage) –
would require a large 1,200 sq. foot garage
Number of Powerwalls3 123 Powerwalls
Installed Battery System Cost4 $861,000
Total Cost To Go Off The Grid $886,680
Payback5 577 years; after 30% investment tax credit
1 Assumes optimal conditions: rooftop faces due south, panels have a 20-degree tilt and no shading2
Uses average cost of $3.21/watt; source: SEIA 3
One Tesla Powerwall is 13.5 kWh; need 1,650 kWh, or 123 Powerwalls4
Uses average cost of $7,000 for each Powerwall battery; includes Powerwall, inverter and installation5
Assumes no system maintenance or performance degradation; calculated using $0.0975/kWh retail rate
Not as Easy as It Sounds …True Cost of
Going Off the Grid in Santa Maria, CA
Annual Energy Usage
(residential) 6,811 kWh Varies between 15-23 kWh/day during the year
Private Solar Supply1
4.1 kWdc private solar system needed
400 sq. feet rooftop space needed for panels
Average Private Solar Cost2 $13,160 installed
Battery System Requirement712 kWh battery system (38 days of storage) –
would require a 500 sq. foot area
Number of Powerwalls3 52 Powerwall 2 Units
Installed Battery System Cost4 $371,000
Total Cost To Go Off The Grid $384,160
Payback5 232 years; after 30% investment tax credit
1 Assumes optimal conditions: rooftop faces due south, panels have a 20-degree tilt and no shading2
Uses average cost of $3.21/watt; source: SEIA 3
One Tesla Powerwall is 13.5 kWh; need 712 kWh, or 53 Powerwall 2 Units4
Uses average cost of $7,000 for each Powerwall battery; includes Powerwall, inverter and installation5
Assumes no system maintenance or performance degradation; calculated using $0.1699/kWh retail rate47