Australia Suffers Net Metering, PV Challenges

By Karen Haywood Queen Smart Grid Today January 12, 2015


Energy pricing creates ‘death spiral’ as AC grows

The energy pricing structure in Australia is creating a world of energy “haves” and “have-nots” where homes with large air conditioning systems and/or solar panels are subsidized by those with neither, leaders of two industry groups told us recently.

“Many higher income families are putting more than their fair share of pressure on the grid by using large AC systems and creating extreme peaks,” Mark Paterson told us. He is grids and renewable energy integration leader at CSIRO’s (Australia’s National Science Agency) Energy Flagship.

“Meantime, many of these people also have installed a lot more PVs. So their electricity bills have been significantly reduced as they sell power back to the utilities. The rates do not actually reflect a home’s peak demand impact on the grid.”

3rd in a series on the challenges of renewables

Both tariff reform and, in time, something like the transactive energy approach under development in the US (SGT,2013-Nov-7) and the Netherlands (SGT, Dec-18) are needed to resolve this issue, the pair said.

For customers with large air conditioners, the cost of their network service exceeds what they pay by AU$683/year (US$585/year), Energy Networks Assn (ENA) CEO John Bradley told us. His organization represents Australia’s gas and power distribution firms.

For solar customers, the reduction in network charges exceeds the reduction in network costs by AU$29-117/year (US$24-95/year) depending on which direction the panels face, Bradley said, citing a report ENA published last month on a national approach to power network tariff reform.

Paterson was in the US last month to speak at the GridWise Architecture Council conference on transactive energy in Portland, Ore, and he called the growing problem “a social justice issue” in his country where, according to Oxfam, the richest 1% own the same amount of wealth as the bottom 60%.

In the last 15 years, Australia experienced a sharp rise in residential AC adoption. In 1999, about 35% of homes in the country had AC, according to figures ENA released in April. By 2010, that doubled to 70%.

When many residential customers install AC, this can drive the need for expanded distribution grid capacity that is under-used for most of the year, Paterson said. This drives up rates for all customers, he added.

About AU$11 billion (US$9 billion) in peak generating and other infrastructure has been built to meet this peak demand for AC and is used only 1% of the time – the equivalent of only four or five days a year. Meeting this demand at peak times costs AU$2,500/appliance (US$2,000/appliance), the ENA estimated.

“It’s a major factor in over 50% of every electric bill,” Paterson said. Network charges range from 25-58% of the bill, ENA said.

Paying for this infrastructure has sent power bills soaring – 8-20%/year – and created what Paterson called “a death spiral” as more PVs are added in response to higher power bills. Consumers now pay over AU33¢/KWH (US27¢/KWH), he added.

“There’s a lot of bill shock every year,” Patterson said. The Energy Users Assn of Australia in 2012 said energy prices in Australia were among the highest in the world. Those rising energy prices – combined with high buyback rates of over AU40¢/KWH (US33¢/KWH) for early adopters of PV-generated power – spurred fast growth in PV installation for those who could, Paterson said.

As all those AC units came online, peak demand grew dramatically, creating a low network capacity use – the ratio between peak demand and average demand. From 2001 to 2012, peak demand grew 20-37%, twice the rate of average energy demand during the same period, ENA said. In newer subdivisions, average energy use is just 21% of peak demand.

Meanwhile, solar panels in that time grew to over 1.3 million for about 9 million homes from almost none in 2007, according to 2014 figures from ENA and the Australian Institute of Family Studies. That growth was compared with 500,000 panels in the US for 120 million homes.

Initial Australian government incentives offering payments of over AU40¢/KWH (US33¢/KWH) for PV generation – an amount higher than customers were billed for energy use – helped drive that PV growth, Paterson said.

Participation in the PV programs typically exceeded what the original policymakers may have anticipated. In some states, that became a runaway train. Not everyone could catch the train,” he added.

“There are a lot of families living in apartments where it’s not simple or perhaps even possible to take advantage of PVs,” Paterson said. “Meantime, if you happen to be able to install solar, you can either be paying nothing for your electricity bill or you may actually be paid.

Wrong pricing hurts

QUOTABLE: This is increasingly presenting a social inequity challenge. Australian households with large AC and PVs are placing an inordinate burden on that common shared infrastructure that they’re not paying for due to Australia’s volumetric rate structures. This is understandable, however, because our rates do not signal how customer choices impact the grid or the community as a whole. – Mark Paterson, grids and renewable energy integration leader at CSIRO’s (Australia’s National Science Agency) Energy Flagship

For example, a typical PV customer in New South Wales provides a benefit to the grid of about AU$10/month (US$8/month) but receives benefits estimated at AU$69/month ($56/month), Bradley said.

Those payment rates for new PV connections are much lower now, around AU8¢/KWH (US7¢/KWH) in most states, Paterson said, but solar customers who installed solar early on have been grandfathered in under old rates until they expire as late as 2028 in some states, according to ENA.

Advances in Fraud Analytics Promise to Stop Crooks, Not You

By Karen Haywood Queen Published May 13, 2015

Fighting credit card fraud is a balancing act. On one hand, if you’re in Houston but your card account is buying expensive jewelry in Paris, you want that transaction stopped — now! On the other hand, if your first trip to the Bahamas includes renting a boat, you don’t want your day ruined by an overprotective computer program blocking the charge as suspicious.

New anti-fraud analytics and mobile phone geolocation tracking offer hope for both problems. Used on their own or together, these technologies can help your credit card issuer stop a fraudster early in that international spending spree, while also reducing “false positives” — those times when a legitimate purchase is flagged as fraudulent.

New analytics lessen anti-fraud failure
Consumers using this technology “now have peace of mind,” says Loc Nguyen, chief marketing officer for Feedzai Inc., a San Mateo, California, company that provides this technology to credit card issuers. “Knowing their bank is watching gives consumers satisfaction that their money is being protected.”

A lot is at stake. Currently up to 80 percent of transactions that are declined when consumers are traveling abroad actually are legitimate, says MasterCard spokesman Bernhard Mors. Issuers spend hundreds of millions of dollars annually to manage customer service calls related to pre-travel requests and to research declined transactions, according to estimates from Visa.

Visa, MasterCard, Feedzai and FICO all have new solutions designed to lower those costs and make fraud detection more accurate. So when that fraudster in Paris tries to use your card, the authorization is more likely to be declined, or you’re more likely to get a text or call alerting you to possible fraudulent activity.

And when you try to rent that boat in the Bahamas, these tools mean the credit card is much more likely to be honored.

Better analytics
FICO is one of the oldest and biggest players in anti-fraud analytics. Its Falcon Fraud Manager technology is 20 years old and is used by 9,000 banks worldwide covering two-thirds of payment cards, says Scott Zoldi, FICO’s vice president of analytic science.

In recent years, FICO has rolled out an updated version called Falcon 6 that is able to immediately learn when fraudsters change their methods, Zoldi says. More than two-thirds of the financial institutions using Falcon are either already using Falcon 6 or moving to it, he says.

“Fraudsters are continually adjusting their tactics and it’s a never-ending battle,” Zoldi says. “That is why in Falcon 6, the adaptive and self-learning models and capabilities are so important … the model can continually refine itself based on the motives and calculated movements of the fraudsters.”

The new technology also keeps track of your behavior and can quickly determine if an attempted transaction is part of your normal patterns. “When I go and take money out of an ATM, I don’t go to a random ATM — I have favorites,” Zoldi says. “If Falcon saw me taking a large dollar withdrawal from an ATM I haven’t been to before, that’s riskier.”

If we saw a score of 85, we consider that very risky. But when we see a location match, we’re able to say that decreases the risk.
— Eden Smith  Visa

Although reducing fraud is important to card companies, reducing false positives may be even more important from a customer service point of view. A 2014 scientific national poll by found that among frequent card users, 42 percent said having a legitimate transaction blocked made them feel annoyed, embarrassed or angry — conditions that would cause customers to turn away from their cards. In a 2012 study by Finsphere, a Bellevue, Washington, company that provides mobile identity-authentication services, 54 percent of those surveyed said they would be less likely to use a credit card in the future if it had been declined and 48 percent said they’d consider changing cards. “We are committed to reducing fraud,” says MasterCard’s Mors. “But we also want to drive a better consumer experience.”

Your history, habits go into a score
With a detailed history of your personal behavior, card issuers are better able to pinpoint activity that may be uncommon for others but isn’t for you — and thereby reduce false positives. “For example, if customer ‘Joe’ tends to frequently make a large number of large payments associated with online gambling, that is normal for ‘Joe’ but perhaps not for other customers,” explains Zoldi.

All of this information feeds into a numerical score. FICO’s Falcon systems rate credit risk from 1 to 999, with a score of 1 having the lowest probability for fraud and a score of 999 having a high probability, Zoldi says. The model also identifies the ratio of fraud to false positives at each score. For example, at a score of 960, for every three transactions, two are legitimate and one is a fraud, he says.

Banks target different strategies at the higher score ranges based on their fraud experience, Zoldi says. One bank may decline every transaction with a score of 980 and higher while another bank may decline purchases at 990 and higher, he says. Also, certain banks write rules to work at lower score thresholds for more risky international destinations, particularly high dollar transactions in risky merchant category codes.

Besides location, risk factors might include a fast pattern of purchases, especially of electronics and jewelry, Zoldi says.

The time it takes to rank those risks is now measured in milliseconds or less, drastically shortening those awkward moments waiting for a verdict from the cashier or card reader. “When you’re at a terminal and swipe the card, you don’t want to wait a long time,” Zoldi says. “You want it to go rapidly.”

Geolocation tracking
In addition to advanced analytics, some of the new programs also rely on location tracking through your mobile phone. MasterCard, for instance, is working with Tampa, Florida-based technology provider Syniverse on a program that focuses on international transactions and will be available to consumers this summer.

Once you register for the service with your card issuer, a transaction can be matched to your location, which is revealed by data from your mobile network, says MasterCard’s Mors. Because all device types connect to the mobile network, this system is effective using both smartphones and phones that don’t have GPS.

We’re now in the era of the ‘always connected Internet of things’ where this digital exhaust can be captured and recycled to keep our money safe.
— Loc Nguyen Feedzai

Visa’s Mobile Location Confirmation program, which it developed with Finsphere, is due to be in the hands of consumers by the summer travel season and also focuses on international transactions, says Eden Smith, senior product analyst at Visa. To use it, you must download an app to your smartphone and agree to allow the company to use your location for fraud prevention purposes, according to Visa.

Mobile location can be determined using the mobile network, Wi-Fi or GPS. This is especially important for international travelers who may prefer not to use expensive data roaming services. Visa’s location analysis is ongoing so there is no need to wait for your location to be pinpointed after attempting to use the credit card. If your device is in the same location as the attempted transaction, the credit card issuer can more confidently confirm the transaction.

The Visa system scores risk from 1 to 99. “If we saw a score of 85, we consider that very risky,” Smith says. “But when we see a location match, we’re able to say that decreases the risk. Now we can approve the transaction because it’s not as risky as it seemed before.”

While it’s still early days, vendors say initial results look promising. In one pilot program, Finsphere reduced by 55 percent the number of times that legitimate transactions were either declined or required what it calls “intrusive customer contact,” according to a company news release. FICO says both generations of Falcon technology reduce fraud losses up to 50 percent. Falcon 6 also results in 25 percent fewer false positives, the company says.

Technology, attitudes enable results
The reason these programs are gaining traction now is because several factors have changed: computers are faster, smartphone adoption has increased and consumers are more open to being tracked.

Only in the last few years have location-based anti-fraud systems been capable of crunching data fast enough to quickly detect fraud, Feedzai’s Nguyen says. “Even three years ago, fraud systems weren’t able to do this in real time,” he says. “People moving around produce massive real-time data streams that come in too fast for legacy anti-fraud systems to process. We’re now in the era of the ‘always connected Internet of things’ where this digital exhaust can be captured and recycled to keep our money safe.”

Another change making the technology more marketable is the increasing consumer use of smartphones. Two-thirds of consumers now own smartphones, compared to 35 percent in 2011, according to a 2015 survey by the Pew Research Center.

And, as credit card fraud has increased, cardholders have become more open to having their credit card issuer know their location in exchange for improved security, Nguyen says. Nearly one-third of Americans (31 percent) are willing to have a financial institution access their mobile phone data in exchange for protecting their personal financial information from being stolen, according to a March online poll conducted by Harris Poll on behalf of Feedzai.

In exchange for protecting their personal financial information from being stolen, 29 percent of adults said they would allow a financial institution access to their online activity; 23 percent would allow access to their social network accounts and 23 percent would allow access to mobile phone, online activity and social network accounts, according to poll results.

“Five years ago, the attitude was ‘I don’t want anyone to know where I am,'” says Nguyen. “Now, for security purposes, consumers are more willing to make that barter.”

But Visa’s Smith stresses that consumers will still have a lot of control over their information. They first need to opt in to Visa’s Mobile Location Confirmation program, and then they still have options to limit tracking. “They can opt out any time,” she says. “Consumers can say ‘I would like to opt in to this, but for fraud purposes only — not for marketing.'”

New systems work both behind the scenes and with consumer-facing apps to better determine whether it’s a fraudster or you trying to make a transaction.
FICO’s Falcon 6
Capable of learning from legitimate cardholder behavior and from fraud attempts so it can more quickly identify new types of fraud. Uses merchant location and distance from consumer’s home in its fraud detection model but does not use mobile device analytics, yet. Future versions will incorporate mobile device location. Analyzes both domestic and international transactions.
This fraud-detection engine is used by banks, which may incorporate it into their banking apps. Can analyze tens of thousands of transactions per second in real time, track online and in-store consumer behavior and learn from that behavior. Analyzes both domestic and international transactions.
Visa’s Mobile Location Confirmation/Finsphere
Works through mobile banking apps offered by participating financial institutions, and focuses solely on international transactions. Once a cardholder opts in, their location can be determined using their mobile phone network, Wi-Fi or GPS. Those options are especially important for international travelers who may prefer to use Wi-Fi rather than GPS, which relies on expensive data roaming services.
Works even on mobile phones with no Internet access. No app required. Users register with their card issuer for the service, then travel with their mobile device. Location is tracked through the mobile service provider. Focuses solely on international transactions.

HECO Faces Big Challenges After Solar PV Explosion

By Karen Haywood Queen

Published January 27, 2015 Smart Grid Today 

Solar business slows dramatically behind inspection queue

With 12% of customers using PV, new rules were needed


As Hawaii’s electric utilities address reliability issues stemming from an explosion in home PV systems, there are solar-integration lessons to be learned for grids in the rest of the US, EPRI senior project engineer Ben York told us recently. He spoke to us from Honolulu where he is involved in research on PVs and other renewables.

QUOTABLE: The biggest takeaway is, we’re starting to see the need for standards and equipment that goes beyond what we’ve traditionally thought about for PV generation. Hawaii is very dynamic and rapidly changing in this particular field. – EPRI senior project engineer Ben York

Hawaii had 850 home solar systems connected to the grid in 2008, Darren Pai, a spokesperson for Hawaiian Electric Co (HECO), told us recently. By the end of last year the number had surged to 51,000, he added.

That’s 12% or about one in eight of HECO’s 450,000 customers – far more than any other utility in the nation, Pai said. Compare that with an average of one system per-240 homes on the mainland, York said.

GROWING PAINS: Part 7 in a series on the challenges of renewables

“It’s been an incredibly rapid pace,” Pai said.

The huge growth in PV generation, with power flowing back onto the grid and potential fluctuations when clouds block the sun, can strain a system designed for a one-way, constant flow from the point of generation to the end-use customer, York noted. The danger is that power flow will veer from required parameters for voltage, posing risks to utility infrastructure, customer equipment and utility employees working in the field, he added.

“Now you have power generators, ‘prosumers,’ on a system that’s designed to be one-way,” York told us last week. “That changes how the system works. If you get a lot of generation concentrated in one area, it’s so far from how the system is designed, it may pose a reliability problem.”

HECO was not prepared for the explosive home-solar growth, leaders of Hawaii’s solar firms told us.

“This whole solar PV thing started to blow up in 2008,” Gary Ralston, founder of Hawaii Island Solar – on the island of Oahu – and a board member of the Hawaii Solar Energy Assn (HSEA), told us this month. “By 2011, it was just going gangbusters.

QUOTABLE: I don’t think Hawaiian Electric had any idea that all these people would be buying PV systems. So they, I’m sure, were caught by surprise. They had to put some kind of brakes on it before things got out of hand. – Gary Ralston, founder of Hawaii Island Solar and a board member of the Hawaii Solar Energy Assn

HECO in September 2013 began enforcing a provision in its PUC-approved tariff requiring that customers seeking to install solar systems on circuits with high amounts of solar follow a technical interconnection review process, Pai said. That process was meant to ensure new solar systems would not impact safety and reliability for those customers and their neighbors, he added.

QUOTABLE: Collectively, thousands of PV systems installed on our island grids can impact the overall system reliability. On Oahu, for example, PV systems cumulatively exceed 280 MWs, exceeding the size of the largest central station generator on the island. Especially on small, stand-alone island grids like ours with high concentrations of PV, voltage spikes can damage utility equipment, damage customers’ appliances or even cause outages. – Darren Pai, a spokesperson for Hawaiian Electric

Solar firms were not prepared for the change that effectively brought new solar installations to a halt in September 2013 in areas that already had a lot of home PV. “They had said for a while that change was going to come but they didn’t say when or what,” Christian Adams, president and partner at Bonterra Solar in Honolulu and VP of HSEA, told us recently.

When the utility sent a letter stating the new rules, “it was a shock to the whole industry.”

The slowdown that followed left about 2,500 solar customers waiting for months for the go-ahead to connect rooftop PV to the grid. Some of those customers had already purchased a PV system.

HECO completed a series of the interconnection studies, Pai said. Most of those pending customers should be hooked up by April with another 200 connected by the end of 2015, he said.

Solar firms, meanwhile, took it on the chin.

Hawaiian Island Solar went from 20-25 salespeople and the same number of service technicians to four in sales and five service techs, Ralston told us.

QUOTABLE: A lot of us had to lay off a lot of people. We still have a stack of people that were sold PV system that are waiting. Some of these people have waited so long that they have changed their minds or something might have happened in their family – somebody lost their job or got divorced – so not all of those jobs will be going through. It’s been pretty devastating. – Ralston

Hawaiian Island Solar was not hit as hard as others because the firm is diversified – offering hot water systems, split PV-assisted AC that is not connected to the grid and solar PV pumps not connected to the grid. That gear does not need utility approval, Ralston said.

Bonterra’s 2014 business was down 50% compared with 2012, Adams told us.

Renegade systems seen

Some customers connected their home solar without permits. Late last year, HECO began notifying what it called “prematurely connected customers” – those who connected without a permit – to deactivate their PV systems while the utility reviewed their application, Pai said.

“To ensure safe, reliable service for all customers and protect our crews working in the field, it’s important that we know where and how many PV systems are interconnected to neighborhood circuits,” he added.

While the robust feeder lines near substations can more easily handle PV generation, smaller feeder lines serving more remote customers may not be strong enough for demands placed on them, York said.

The required upgrades so feeders can handle the demand vary from circuit to circuit, Pai said. If the upgrade has system-wide benefits, the cost may be passed on to all customers, he added.

Customers contribute

In other cases, under a regulatory “cost causation” principle, customers are responsible for upgrades that specifically benefit them, he added.

Typical equipment needed for the upgrade includes upgraded service transformers, grounding transformers, load tap changer controllers at substations and power lines, Pai said.

HECO recently approved about 1,000 applications for customers who agreed to share in the cost of upgrading certain control systems in neighborhood substations, he said, noting that the cost was less than $100/customer in most cases. For these customers, HECO upgraded load tap changer controllers that help regulate the flow of power the utility’s substations.

More PV on the way

HECO has continued to approve PV interconnections each month, Pai said, noting about 11,000 applications were approved last year.

Once the issue is resolved, HECO expects faster growth. The firm has submitted plans to its PUC committing to increase renewable energy to at least 65% of all generation by 2030 – far above the current clean-energy mandate of 40%, Pai said. That includes tripling distributed, largely rooftop solar, he added.

With those plans in mind, HECO is conducting additional studies to determine whether other safety or reliability issues will arise as the utility pushes to even higher levels of PV on circuits, Pai said. “We really believe there is an opportunity to use more technology to improve the integration of not just PV but all renewable resources,” he added.

More standards needed?

In the future, more standards and equipment may be needed. New standards could cover interconnection and equipment such as IEEE 1547 for connecting DR, and interconnection rules that are maintained by individual states or utilities, York said. Additional equipment might include smart inverters and other smart grid communications technologies, he added.

How Investors Can Make The Most of Low Oil Prices

Published April 14, 2015 E*Trade

By Karen Haywood Queen

As the price of oil hovers around $50 a barrel, its lowest point in six years, some experts argue that now is a good time to invest in oil-related stocks and funds. But Mike Loewengart, director of investment strategy at E*TRADE Capital Management, LLC, says investors shouldn’t see the relatively low price as a green light to rush into oil investments.

That’s not to say that oil can’t generate a healthy return. In fact, if you had invested $1,000 in an investment tracking the S&P 500 Equal Weight Energy Index on Jan. 1, 2009, when oil was about $35 per barrel, your money would have more than doubled by now — even with the recent drop in prices, Loewengart says.

But the potential for growth comes with the potential for loss, says Loewengart, who has additional advice for those interested in testing the market, perhaps for the first time.

Expect Price Swings

If you invest in oil, expect wide swings in price. For example, in recent months, different experts have predicted that oil may hit $20 a barrel and $200 a barrel.

“Expect volatility,” Loewengart says. “See past what might happen in the short term and focus on the longer term.”

Seek Diversity

Consider your background, skill sets and how much time and effort you’re willing to put into following your investments, Loewengart says. If you’re not willing to put the time into researching individual stocks or other investments, then broad-based energy related investments are better choices, he says.

For a more conservative move into oil-related investments — and remember “conservative” is relative in this sector — consider investing in the largest players, Loewengart says.

“These relatively stable, diversified production companies didn’t rise as much as the riskier players,” he says. “But they also have fallen only about 10 percent from the peak. They’re more diversified so their price movements are less correlated to the price of oil than the smaller players.”

Options for Dividends

These bigger, diversified companies also are a good option for investors looking for dividends. No matter where the price of oil goes, these companies are likely to maintain regular payouts, Loewengart says.

Another option for those seeking dividends is investing in master limited partnerships (MLP) — in firms that transport and store oil and natural gas. An MLP is a type of limited partnership that is publicly traded. MLPs offer the tax benefits of a limited partnership combined with the liquidity of publicly traded securities.

“MLPs are required to pay out most of their earnings to shareholders,” he says. “Because of that, they produce a very healthy yield. Last year, they were very popular as people searched for yield investments.”

But MLPs are not low risk, he cautions. Prices have dropped about 15 percent from the mid-2014 high, he says. If oil prices continue to drop, producers may demand lower rates for transport, which could impact these energy sector MLPs, he says.
Riskier Investments

Slightly less conservative are investments in smaller companies that that are either directly or indirectly involved with exploration and production, he says. Because these businesses are more narrowly focused, their securities are more closely correlated with the price of oil, offering larger risk-reward opportunities, he says.

“Small cap players rose almost 400 percent from 20091,” Loewengart says. “Conversely, they have fallen the most. Because they are so closely tied to the price of the commodity, there would be a fair amount of speculation with investing in those companies.”

Moving up the risk ladder, oil-related bonds offer income — along with risk, he says.

“If the price of oil continues to fall, these companies will go out of business,” he says. “In these cases, a bond holder will get nothing or very little.”

When to Hire a Manager

Bond investments in the oil sector are more challenging for individual investors, he says. “These fixed-income markets are pretty opaque,” Loewengart says. “They’re not as transparent as equity markets. They trade differently. A lot of individual investors are not comfortable buying these securities.”

An active manager, however, can “shorten your portfolio, move investments to other sectors and help navigate a changing interest-rate environment. An active manager can add considerable value,” he says.

A Risky Bet

The riskiest oil-related investment of all is betting on the price of oil itself, Loewengart says.

“We would be very hesitant to suggest to a smaller retail investor to make a dedicated bet on oil futures,” he says. “There have been many professionals who have been simply caught off guard by the relatively swift decline of oil in the past few years.”

Investing in the oil sector can generate a good return for your portfolio. A variety of investment products offer many options for investors, Loewengart says, with different levels of yield, diversity, risk and reward. But you should take a long-term view and consider engaging an active manager.