PROFILES INNOVATION

May 24, 2016
Profiles in Innovation
Exhibit 23: Line losses have averaged close to 10%
historically and 8%-9% in recent years
Line losses as % of total US generation
GWhs
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
14.0%
12.0%
10.4% 10.7%
10.0%
9.7%
10.0%
9.5% 9.4% 8.9%
9.0% 8.9% 9.0% 8.6% 8.7% 8.4% 8.0% 8.0%
6.0%
4.0%
2.0%
0.0%
Exhibit 24: Outages have been on the rise over the past
decade-plus, as the grid has continued to age
Electric disturbance events, 2000-2015
350
300
250
200
150
100
50
0
Line losses (GWhs)
% of total generation
Source: EIA, Goldman Sachs Global Investment Research.
Source: DOE.
What is the current way of doing business?
The electric power grid pairs centralized production with distributed consumption.
Since the advent of alternating current (AC) transformers in the late 1800’s, the electrical
grid has been dominated by centralized power generation and long-distance transmission
infrastructure. Some key features of the electrical grid and power markets in the US
include:
Over 3,000 utilities exist across the US
5,800 major power plants supply electricity to the grid
Over 450,000 miles of high voltage transmission lines deliver power to homes and
businesses
Distributed resources, particularly rooftop solar, effectively sell excess power back to
the grid under net metering. For energy producers that are not utilities – predominantly
rooftop solar customers – the form of remuneration for power sent back to the grid is
subject to net metering. This is a billing mechanism, used in more than 40 states, that
credits customers for electricity provided to the grid from approved renewable energy
generation systems. Under net metering, credits are generated at the prevailing retail utility
grid rate in most cases and enable consumers to lower their traditional electricity bill;
however, no direct revenue is generated. Net metering has faced significant utility
pushback in a number of states where rooftop solar has gained traction (e.g., Hawaii,
Arizona, Nevada). We believe that pressures to lower the rate at which net metered power
is credited will continue to increase over time.
Goldman Sachs Global Investment Research 26