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SpotlightBoulder to Xcel: Thanks for the smart grid, now get lost!
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Nov 3, 2011
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Quick Take: In what has to be a painful slap to Xcel Energy, the citizens of Boulder have voted to create their own municipal utility. They even agreed to increase taxes on themselves to pay for the costs. I know that things didn't go smoothly with Xcel's SmartGridCity project. But the utility did work very hard to create the nation's first full-scale, soup-to-nuts smart grid project in Boulder. Far from being grateful, the city now wants to take over the assets and run it on their own. It's a complicated story without any simple explanations, but it still feels a bit harsh looking at it from the outside. I hope those of you with inside information will use the comment form to tell us the Rest of the Story. - By Jesse Berst
By Doug Peeples
SGN News Editor
By the slimmest of margins, Boulder, Colorado voters on Tuesday told city officials (and Xcel Energy) that they support a municipal electricity of their own. But moving ahead with the project is subject to a number of conditions and issues that could take years to sort out – so a break up with Xcel is anything but final.
And Xcel, the company responsible for the SmartGridCity demonstration project – the source of Boulder's long-simmering controversy – isn't sitting on the sidelines wringing its hands. Officials said after the votes were tallied that it doesn't want to continue investing in programs or resources if the city isn't going to remain a customer.
The city has a lot to think about right now. First, the ballot measure voters approved permits a local utility only if it can provide rates and services comparable to Xcel's. Second, according to a Wall Street Journal news article, the transition could be scuttled if, among other things, the costs of Xcel's infrastructure assets are too high.
Boulder officials have said they would stop if costs were unacceptably high – and the two sides are nowhere near close on cost estimates for the transition. City officials have estimated they could start up their own utility for under $230 million. Xcel says more like $1 billion or higher. Either way, a cost figure is likely to be hammered out in court.
"Although we are disappointed in the outcome, we know this is just the first step in a long process," Ben Fowke, Xcel chairman and CEO was quoted as saying in the WSJ article. He added that the city had underestimated its costs and doubted the city could match Xcel's rates.
City officials have acknowledged the narrow vote and that many questions and issues will need to be addressed and resolved – and that they need to be handled extremely carefully and thoughtfully.
For the record, Boulder's city council has not yet taken a vote on creating a municipal utility.
Jesse Berst is the founder and chief analyst of Smart Grid News.com. He consults to smart grid companies seeking market entry advice and M&A advisory. A frequent keynoter at industry events in the US and abroad, he also serves on the Advisory Council of Pacific Northwest National Laboratory's Energy & Environment directorate.
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| Unfortunate Sequence of Events |
| Jesse Yes it does seem harsh from the outside looking in. But fundamentally we have a divorce in the works here where one side is citing irreconcilable differences. Like any failed relationships there is blame on both sides, often if both sides could come to terms with that reality, things could be reconciled. Here we had an ambitious project, intended to be cutting edge, risky. By design that is what a demonstration project is really about. Things will not go according to plan, mistakes will be made and that is how we learn and refine. This happens every day in the competitive marketplace and is understood by company angers and their creditors, that they are taking risks together. In the controlled environment of regulated utilities we do not have an environment that is supportive of innovation and risk. Quite the opposite. Investments are always expected to be "used and useful" and "prudent" or they are not eligible for cost recovery. Honestly Smart Grid City is the most high profile case, but every single smart grid project has success and failure on a daily and weekly basis. We are on the front end of the curve so technology and business processes are being tried for the first time, not to mention the human adaptation to change. I gather that Excel's error was the dramatic cost overruns, and a failure to manage expectations and keep lines of communication open. The City of Boulder conversely had unrealistic expectations and clearly did not understand the notion of trial and error. As for the chance that there will be a municipal utility formed. The City may want to be careful what they wish for in that regard. Assuming the operational responsibility and financial risk is a very big deal and ultimately it will be a reach for them to yield demonstrable benefit in the form of say lower rates, system reliability, or a higher performing smart grid as compared to Xcel. Ideally the two sides can get back together, take an inventory of the lessons learned, re-establish roles and responsibilities, and go forward from here. I strongly believe such a mediation is vitally important for the industry as a whole and an effort well worth the time. |
| David O'Brien - 11/04/2011 - 07:23 |
| Boulder - World's first Smart Grid City |
| Boulder was an amazing experiment. Xcel's vision in trying to create the world's first Smart Grid City was way ahead of its time. Yes, indeed, there were a lot of cost overruns - but hte key is the lessons learnt that everyone is taking away with them. For the first time, in a real live experiment, we learnt what worked (Distribution automation) and what did not (Broadband over Power line) in terms of ease of implementation, costs and so on. I hope people will not put down the experiment - We all (in fact the entire industry) learnt a lot from it. |
| Subramanian Vadari - 11/04/2011 - 07:47 |
| smart or smart micro |
| All the elements of smart grid can help enable smart micro grids. Smart micro grids can contain their own generation and storage. In a city like Boulder, micro grids connected could enable redundancy, load balancing for sustainable renewables, and dependable backup for outages possibly creating 6 Sigma supply. Also any energy dollar not exported out of the economy acts as a economic development dollar with the same multiplier. This economic benefit is compounded with the investment in locally owned infrastructure.The question is what model of smart grid fits best in the future development of the area. |
| Craig Collier - 11/04/2011 - 08:04 |
| Judgement |
| A classic example of the executive squad buying the buzz words. Some things should not be attempted by some people. Excel didn't learn the lesson they should have from the abject failure that resulted from their trying to lead the nuclear industry a few decades back. (Not that I've ever seen a municipalization cure ANYTHING, except maybe the citizenry's irrational belief in government - not likely in the People's Republic of Boulder.) |
| Dave Gilmer - 11/04/2011 - 08:52 |
| More About Renewables than Smart Grid City |
| Your 'Quick Take' comment implies that this vote was a referendum on the Smart Grid City project. Rather, the vote was more about balancing Boulder's ability to achieve aggressive renewable energy goals against the costs and risks of municipalizing. Boulder's clean energy future was the sticking point in negotiations that led to this ballot measure and ultimately this vote, not Boulder's smart grid history. |
| Brad Rogers - 11/04/2011 - 10:46 |
| Boulder has nothing against Smart Grid City |
| The author of this story has it wrong. As a long-term Boulder resident, I can vouch that we have nothing against Xcel for their problems with Smart Grid City. In fact, some would say that SGC was offered to Boulder as a bribe to try to dissuade the City from moving forward with its already clear intent to pursue municipalization. Boulder's been moving toward a municipal utility for years before SGC was envisioned due to a number of reasons, including Xcel's decision to proceed with Comanche Peak 3 coal plant; its on-and-off again support for distributed solar; a belief (right or wrong) that Xcel's profits from Boulder sales would be better invested if they remained in Boulder; and a desire (by some) that Xcel would create a undergrounding program for distribution system wires similar to Ft. Collins, where folks can pay extra to underground the wires (and benefit via reliability and aesthetics). Boulder also remembers that Xcel aggressively opposed Amendment 37, the bipartisan referendum that established Colorado's RPS in 2004. Lastly, Boulder is taking its Kyoto Goals seriously; Xcel doesn't believe or support these goals to the extent that Boulder's elected officials do. So please, don't mislead folks that it was Boulder's problem with SGC that led to last Tuesday's vote. The rest of Xcel's customers might have a problem, because they're all paying for it (at least until a judge rules that Boulder has to pay for all of it as part of a stranded asset ruling), but Boulder's desire to seriously consider a municipal utilities pre-dates SGC by years, if not decades. And that, in fact, is one of the arguments Boulder is going to take to try to reduce stranded asset assessments: Boulder's been working toward a municipal utilities for many years, and Xcel should have anticipated this. It's a stretch of an argument, to say the least, and it'll be interesting to see how this all pans out. Many (including myself) expect that in the end, Xcel and Boulder will come to a mutually agreeable resolution for Boulder to achieve most of its goals without becoming establishing a municipal utility, but that will take two parties to want to make an agreement, something that didn't happen before the election was committed to last summer. |
| Nick Lenssen - 11/04/2011 - 11:25 |
| Eyewitness to the crash |
| I live in Boulder, Colorado, I was an early supporter of our Smart Grid experiment, and let me say right up front that I'm glad we tried, proud to be a part of it, and even willing to pay my share. But I believe the Smart Grid experiment was the proximate cause of why the citizens began pushing for municipalization, and why the City of Boulder, originally dragged kicking and screaming into the discussion, became a reluctant advocate. Many saw the vote as a nice democratic way to make the whole issue disappear, but it didn't turn out that way. The process demonstrated that it doesn’t do any good to have a Smart Meter attached to a Dumb Utility, and that a PUC in the hip pocket of that Dumb Utility isn’t exactly an advocate of the Public part of their name either. One our PUC’s remarkably tone-deaf moves was to revoke the standing of a longtime, diligent and generally respected citizen’s advocate right before the election, which probably cost them a thousand votes all by itself. Municipalization is a way to kill both of those Angry Birds with one stone. Not that the City is without fault in this debacle, for they were certainly guilty of drinking Excel Energy’s Kool-aid and overselling the project side-by-side with them. Nobody I know was surprised when it went over budget. I think most of us expected it would, but when the downward feature creep consistently took out user features and only preserved utility features, we all began to smell a rat. Today, I have PV on my roof and a Smart Meter on my house. If there is a Smart Grid anyplace in town, I wouldn’t know, except to look at my utility bill. I think the whole process exposed something fundamentally wrong with Smart Grid as currently conceived, and the vote to pursue municipalization was simply the citizens’ reaction to that visceral realization. It very well may not be the answer to the real problem. I’ve worked in alternative energy for over 35 years, and I’ve followed the cost curves of renewables, distributed generation, and “behind the meter” innovations every step of the way. The utilities’ world is about to turn upside down. Today they look like Ma Bell right before the breakup: giant monopolies, with monopoly DNA, sitting on huge piles of “irreplaceable” infrastructure that’s just about to start becoming economically obsolete faster than any accountant can write down the Balance Sheets. In that context, Smart Meters look like strings of garlic, tied around the wire bundles, in t |
| Ski Milburn - 11/04/2011 - 13:36 |
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