NEVs blog

Large investor-owned utilities (IOUs) have been the vehicle of choice for the state to implement its wide ranging energy policies. In particular, the California Public Utilities Commission has implemented state renewable energy policy by requiring a series of competitive solicitations conducted by the IOUs. In total this has been a success in increasing renewable generation and in reducing its cost.

But now, major head winds are affecting the state’s policy options:

• The state has authorized Community Choice Aggregators (CCAs) which have been peeling off IOU bundled load leaving less utility load to absorb state mandated purchases. For instance, PG&E now estimates that Direct Access and CCAs will serve 55% of its load in 2020. With that amount of load departing, PG&E states they have sufficient renewable resources to meet all their current state-mandated requirements. The impacts of this huge structural change in the electric market are now just starting to unfold.
• PG&E’s bankruptcy has many indirect impacts. Owners of the 298 contracts/projects selling to PG&E as part of the State’s RPS program are now faced with assertions that many of these contracts are at “above market rates”. While the utility hasn’t concluded or recommended to the bankruptcy court that some of these contracts be invalidated, this is a serious concern for generators and state policy-makers.

This combination of major market restructuring, and the risk that contacts might be invalidated, is dramatically changing the dynamics for the state. While for generators it’s business as usual, expect for generator produced pre-bankruptcy and not yet paid for, these uncertainties are chilling.

Not only have yields declined on nominal US bonds but TIPs yields have hit all time record lows.  Five year TIPS now yields minus 0.84% (-0.84%) and the ten year TIPS yields zero.   That means the real rate of return on a 10 year AA+ rate security, with no inflation risk, is zero.  For taxable investors the real return is, of course, negative.

That said, the distortions continue to abound with the yield of AAA munis exceeding US Treasuries on all maturities up to 20 years.   When I compute the AAA / AA+ after tax yield curve munis come out ahead in all time buckets.

In my previous post I wrote that we will use EVs like we use cell phones.   After driving our cool EV in the day, we’ll plug it in at night and charge it up for the next day.   Put yourself in the EV seat and this seems a workable scenario.    I really don’t see how I would use public charging very much or, frankly, ever change out a battery.

Apparently other players are coming to the same conclusion.   On Feb 24, the WSJ reported that GE, Siemens, and Eaton all believe that EV owners will soon be buying chargers for their homes.    GE says it is planning to sell it’s home charger for about $1,000 which will help EV economics.  I my previous analyses I’ve assumed an installed cost of  $2,000 and I may now be able to lower this a bit.  With low cost nighttime electricity and higher gasoline costs EVs are looking a little better.

What isn’t looking better is public EV charging stations.  Apparently NRG Energy Inc. is planning to spend $10 million to install 100 chargers in Houston by 2011.  Let see, that’s $100,000 per charging station?   If they announce any more of these programs sell NRG Energy  [NRG].