Business Columns & Blogs

Self-reliance creates new world for everyone buying electricity

Tucked in the news release announcing the sale of Simpson Lumber Co.’s Tacoma Kraft Mill to RockTenn was a sentence that, when combined with other developments, has a lot to say not so much about this particular facility or the pulp and paper industry but where the electricity you use is going to come from — and how much you might pay for it.

“The Tacoma Kraft Mill operates a 55-megawatt green biomass fuel cogeneration facility that was completed in 2009 and sells electricity under a long-term contract,” the release says.

That a paper mill has its own electricity-generating capacity isn’t by itself the noteworthy aspect. In the Northwest the forest products industry has long used scraps and waste material to fuel industrial boilers to produce steam and electricity. There’s been a revival of interest in such facilities in recent years, with biomass — trimmings, thinnings and cleared deadwood from the region’s forests — providing the feedstock.

The significance of those facilities can be better understood when taken in context with a second item, a recent Wall Street Journal story about German companies “going off the grid.” A sixth — 17 percent — of German companies now generate their own electricity, the WSJ reports. A prime motivation is a 22 percent tax to fund renewable energy. Disconnecting from the grid not only relieves those companies from the tax, the story adds, but also makes them eligible for subsidies for conservation and “green” resources.

How does that contrast to what’s going on in the U.S.? The Energy Information Administration reported that in 2011, onsite industrial generating capacity amounted to 3 percent of the U.S. total.

Well fine, you say, but what’s that to me?

To answer that, we need to draw in one more piece of reading, a recent report from the Rocky Mountain Institute, a Colorado energy-and-environmental organization, and other participants.

The report says the utility industry faces “appreciable customer defection from the electric grid in major markets by 2025, without incurring higher costs or lower reliability,” according to the press release. “As the hybrid combination of solar photovoltaic and battery storage become cost competitive with retail grid electricity rates, migration of customers away from the grid could happen well within the 30-year planned economic life of typical utility investments such as central thermal generation plants and transmission infrastructure.”

Most of us have grown up with the assumption that electricity comes out of the wall socket of our homes, and gets there from a generator located somewhere else and run on falling water, coal, gas, nuclear energy or, more recently, wind. People have dabbled in going off-grid, but technological innovation is moving the idea of cutting the plug from the distant future to the near present. Solar, and the slump in panel prices, is just one component of the trend. Small wind turbines, home fuel cells and basement gas-fired generating units are coming. When battery and energy-storage devices hit that golden intersection between declining price and size and increasing capacity, that will really accelerate the defection of homes and businesses.

“Even before total grid defection becomes a reality, utilities will see further revenue decline since solar-plus-battery systems sized to meet most of a customer’s load will become cost effective sooner,” the report notes.

That’s a problem for the utilities that are still paying for the existing generating plants, the wires, poles, meters, repair trucks they bought to keep the grid running. Having fewer customers to pay rates means less rate revenue.

Compounding the problem for utilities is that programs designed to boost the percentage of green resources in their generating portfolios are increasing the cost of electricity to customers, thus narrowing the price gap between staying on or leaving the grid. That’s one reason why some utilities in Washington have been pushing for rewrites of Initiative 937, especially if they’re being pushed to add more expensive resources (than hydro or gas) they don’t need.

To see how this plays out, we’ll hop back to Germany where, according to the WSJ, the government wants coal and nukes out of its portfolio, to be replaced by “green” renewables. With rising rates driving customers off the grid, the government is considering the imposition of part of the renewables tax on those companies that are generating their own electricity.

That’s the sort of policy fight you can expect here as more companies, which in some cases (like Simpson) have a ready fuel source or the capital or both, do the calculations and decide it’s time to go grid-free. They’ll be followed by residential customers who do the same calculations and reach the same conclusion. Meanwhile, those who remain connected to the grid because they can’t afford to disconnect will be stuck with the bill for the existing system — unless they can persuade lawmakers and regulators to saddle the defectors with the cost.

The concept of self-sufficiency in everyday living has fallen out of favor, often with good reason — who has the time, land or ability to produce their own food? Not since the days of pioneers chopping wood and making their own candles has being energy self-sufficient been either realistic or attractive. Now it is — or soon will be. There’s big money at stake — more so for those who don’t leave than those who do. If you could tap the heat this fight is likely to produce as an electricity generating source, you probably wouldn’t have to go looking for lumps of coal, a waterfall, a stiff breeze, pockets of gas or a solar panel to keep the lights on.

Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at