It’s the Infrastructure, Stupid

Lack of Transmission is a Barrier to Green Generation

While most of the California energy discussions this week have surrounded the Sunrise Powerlink, the California State Senate Energy, Utilities and Communications Committee held an informational hearing to this week to discuss where the in-state utilities are with regard to securing their mandated requirement to provide renewable electricity for their customers (the law requires the three California in-state utilities to secure a minimum of 20% of their entire electricity load from renewable energy sources by 2010).

In a nutshell, the utilities are struggling to get there – which has lead to arguments that the Renewable Portfolio Standard (RPS) mandate is broken. I’ll be blunt – I don’t think that the RPS is perfect, and yes it needs work – but it’s a step in the right direction if we are to get to a cleaner energy future.

Astonishingly – OK, not really – the myopic views of the legislative committee members (save one senator) – should tell all concerned that the legislature is in grave need of an education on how the RPS can work and what it’s going to cost. At one point, legislators actually agreed that new transmission development is critical to securing renewable generation that is in various stages of development.

Absent the new transmission, proposed projects would be unable to get the energy to where it would be consumed, financing will not materialize for these projects and the State’s goal of securing a greener future will not happen. Maybe the legislature has woken up to that reality. Steel in the ground (green generation) will cost us money. New transmission will cost us money. I only hope that when we debate this fact – we will remember to honestly weigh the cost against the benefits this brings.

It will take infrastructure of many kinds to get us to a greener future. I hope the blinders can come off and the cacophony of the opposition will subside long enough to honestly weigh what it will take to get us to the greener future everyone is asking for.

No Surprises on Sunrise: The Opposition is Still Emotional, but the Need for the Line is Real

I don't expect to see anything new this week as the hearings continue on the Sunrise Powerlink. None at all... I expect that the opposition will show up with their emotional arguments that are based mostly on emotion and very little on facts. I expect that the proponents will show up with sound and reasoned arguments. And while they may be vague on the exact route, the facts will be strong on the need to build this project.

In this blog, I have discussed my views on this project - do we need it? Most definitely. A growing part of the state should not have such a deficiency in transmission. Should all of the generation that the line is scheduled to potentially bring come from green resources? Ok, this point can be debated, but I say no. Why? Well, green is not totally dependable. You see ambient temperature drives wind, so when the days are hot - no wind. When the days are cloudy, no sun - ergo no solar energy.

On those days, you need to have dependable back-up generation that can start on a moments notice. This will be generation fueled by clean burning natural gas. SDG&E has been careful not to talk about this - I don't blame them. But I think they should. In so doing they could come clean with this issue and put it to rest. They might further state that they would secure that bit of generation (however much it is) through a competitive solicitation that will only consider state-of-the art generation - thus keeping the potential impact to the environment to a minimum. I am sure they will do just that at some point.

The realities are simple. The region is growing and a growing area has power needs that cannot be met by conservation alone - we the actual users have proven that we would rather not bake when the temperatures go up - and that we would rather not be inconvenienced by having to try to wake up to o laundry or any other energy intensive using task at 3 in the morning. No, we want our power when we want to use it and we don't want to hear excuses.

So, consider the following when you read the stories this week about the Sunrise Powerlink hearings: Want to be comfortable when it's hot? Want to do laundry and run the dishwasher and dryer or pool and spa whenever you want to? Stop complaining and support the Sunrise Powerlink. It's really that simple, the infrastructure is lacking, and we need to build it.

Support Your Local Powerline Project

There was an interesting piece by Duane Dichiara in the Flash Report yesterday (http://www.flashreport.org/blog.php?postID=2008022020060501) that spoke of the need for transmission in southern California. As I have commented in previous postings, I don’t see how we can achieve the GHG reduction goals that are mandated if we fail to secure the necessary transmission that the grid will need to allow for the delivery of the green energy.

So on one hand we have the environmentalist movement crying for more green and on the other, those same folks are fighting the very mechanisms that would allow for the delivery of what they are asking for!

Time for the NIMBYists to get in touch with reality – to Dichiara’s point about maybe they want to go back to the days of living by “candlelight” – candles emit carbon, so we can’t go there!

Energy Rate Shock: How Much Will Regulatory Delays Cost Ratepayers?

Over the past two years, the cost of energy infrastructure construction has risen dramatically. Several factors should be considered when looking at the root causes, but paramount in this phenomenon is the rising costs of fuel, steel, cement and regulatory delays.

Why have the costs skyrocketed? Well, as one of my friends put it, “Enter the Dragon.” China has engaged an amazingly robust period of energy infrastructure development, thus gobbling up materials on a dramatic scale. So much so, that the typical materials used for the industry are increasingly on aggressive delivery schedules headed for mainland China. With no regulatory controls in place (in China), construction and development of energy infrastructure is on a pace that is perhaps only comparable to what the United States experienced during the industrial revolution.

When I asked folks currently engaged in energy infrastructure development in California about their surging costs, what became patently clear was the fact that we too are competing in world market for these resources. The difference here is that we have to abide by significant regulatory control, thus putting this capital intensive development industry at a disadvantage when we compare to the rest of the world. Cambridge Energy Research Associates (CERA) has recently developed some modeling that shows the dramatic increase in costs to develop this infrastructure in the United States. Conclusions by their reports should worry al consumers. Other reports that are getting little attention also peg the run up in material costs (just since the energy crisis of 2000-2001) anywhere from 33 to 130 percent (depending on the technology). That will translate into a significant impact to all ratepayers.

Is there anything that we can do to curb this eventual shock to energy consumers? While we have a moral imperative to do what we can to protect the environment, it should be equally important to protect energy consumers from the coming rate shock as much as possible and not create unnecessary regulatory burdens that compound costs. A regulatory process that moves at glacial speed is dangerous on many fronts – and the bottom line is that the ratepayer will always bear the cost of those delays.

Will California Meet It's GHG Goals? CPUC and CEC Offer Recommendations to CARB

Last week, the California Public Utilities Commission's (CPUC) President Michael Peevey issued a proposed decision concerning implementation of California's greenhouse gas emissions legislation, AB 32. The decision recommends a cap and trade program for the electricity sector in California that would impose regulations on owners and operators of generation in California and out-of-state generators delivering electricity to the California electrical grid.

Under AB 32, the California Air Resources Board (CARB) is primarily responsible for adopting the regulations required to reduce California's greenhouse gas emissions to 1990 levels by 2020. The CPUC and the Energy Commission also play a role in implementing AB 32, however, and initiated a joint proceeding to produce recommendations to CARB on how to regulate the electricity and natural gas sectors in California. Once the CPUC and the Energy Commission adopt those recommendations, they will be passed on to CARB for incorporation into CARB's scoping plan. Although all three agencies are working together, and any recommendations provided by the CPUC and Energy Commission will be given careful consideration, CARB is not obligated to follow such recommendations.

President Peevey's proposed decision first recommends that the CPUC and Energy Commission continue to implement energy efficiency improvements and efforts to increase the percentage of renewable generation in California. Currently in California, investor-owned utilities are required to obtain 20 percent of their electricity from renewable sources by 2010. Publicly owned utilities are required to adopt a plan for increasing renewable generation in their portfolios, but are not required to meet any specific standards. The proposed decision recommends that the 20 percent requirement for investor-owned utilities be increased, although it leaves for future proceedings what the increase should be. The proposed decision also recommends that publicly-owned utilities be required to obtain at least 20 percent of their electricity from renewable sources by a date certain.

The proposed decision makes recommendations concerning the allocation of greenhouse gas emissions allowances under the cap and trade program. It recommends that at least some allowances be auctioned rather than allocated administratively, and that at least some of the proceeds from the auction of allowances be used to benefit electricity customers by minimizing the cost of greenhouse gas emissions reductions to consumers.

The CPUC and the Energy Commission will receive comments on the proposed decision and will then vote on it. If approved, the decision will be forwarded to CARB, which will make the final decision on how to implement AB 32.

The proposed decision leaves many open questions on implementation – and fails to cover considerations on transmission – specifically, how the lack of new transmission may impact the State’s ability to achieve not only GHG reduction goals, but also how investor-owned utilities will secure the 20 percent electricity requirement from renewable sources by 2010.

CPUC Opinion on GHG Regulation On Its Way

The CPUC will soon issue their recommendations to the California Air Resources Board (CARB).

Perhaps, a harbinger of things to come from the CPUC, at a hearing this week (2/6), CARB hinted that point of regulation will come from the source (generators) and that auctions, rather than allocations will be the name of the game.

Why should we care? This means nothing to me! Well, here’s where you should care: CARB outlined five “policy scenarios” they plan to analyze with economic models to determine the impact of California’s attempt to reduce GHG emissions through AB 32 – on energy prices; economic output; jobs; and other key aspects of the state’s economy. They said that more options might be subsequently analyzed.

What else could be analyzed, you ask? Well, try this one on. At present, the talk is to regulate only the large users, the problem for the large users is that they are only a fraction of the problem. Who is the larger problem? You and me and our cars. So if the State decides to tax the output of GHG – get your wallet ready, as you may be paying even more to drive!

Smarter would be to create an infrastructure that reduces GHG’s an provides us with clean power, right?! Maybe we should rethink our views on transmission and embrace it.

What Are the Top Presidential Candidates Saying About Energy?

If you are still working on your presidential ballot and want to consider what the candidates are saying about energy -- I looked at the top condidates for the both the Republican and Democratic parties and following are what they see as the top energy priorities:

REPUBLICANS

John McCain

• Supports mandatory cap-and-trade measures (which would cap greenhouse gas emissions and let companies trade emissions allowances)
• Supports increasing fuel-efficiency standards
• Supports nuclear power
• Opposes opening Arctic National Wildlife Refuge to oil and gas exploration

Mitt Romney

• Believes carbon emission reductions must be enacted globally
• Supports making energy independence a top administration priority
• Supports increasing federal spending on energy-related research
• Supports accelerating construction of nuclear power plants
• Supports increasing domestic production, including opening Arctic National Wildlife Refuge to oil and gas development

DEMOCRATS

Barack Obama

• Supports market-based cap-and-trade system to reduce carbon emissions 80% below 1990 levels by 2050
• Supports investing $150 billion over 10 years in "clean" energy sources
• Supports requiring that 25% of electricity be generated by renewable energy sources by 2025
• Supports doubling fuel-efficiency standards by 2026

Hillary Rodham Clinton

• Supports cap-and-trade program to reduce greenhouse gas emissions 80% below 1990 levels by 2050
• Supports 10-year, $150-billion energy package, including $50-billion Strategic Energy Fund to develop alternative energy sources
• Supports increasing fuel-efficiency standards to 55 mpg by 2030
• Supports a transition to renewable-energy sources, with a goal of generating 25% of electricity by 2025

Not surprising, both parties are in favor of a GHG cap -- and equally not surprising -- both parties will support new technologies and "greener" energy.  The question none of them tackle is how that new generation will reach the consumer?  I suppose it will be a challange that the eventual winner will have to help solve.  In the meantime "green" is great, but making green available at your light-switch will be a matter solved only by new transmission.  Hopefully our candidates will soon understand that. 

20% Clean Energy by 2010 -- Can We Get There?

As I discussed in an earlier post, the idea of a Renewable Portfolio Standard (RPS) was a good one -- but getting to the 20% renewable energy target (that is 20% of the State's electricity consumption is to come from renewable sources like wind, solar or geothermal) by 2010 is proving to be a tough challenge.  In a meeting with top California government officials this week, those gathered learned that among the top concerns on the energy front this coming year will be trying to secure the 2010 goal.

But how will we get there if the renewable resources are found far from the centers of consumption?  That's easy, we'll build transmission, right?  Well, there is opposition to new transmission.  Interestingly, much of that opposition often comes from the same folks who advocated for the renewable, affordable energy in the first place.  Yes, the same folks who fight the projects that could get them what they asked for in the first instance may be the folks who actually keep the state from reaching the 20% renewable goals that they themselves fought for! 

Back to 20 % RPS.  Can we get there by 2010?  Perhaps in some parts of the state we will -- but in others we might fall short.  Not because we ignored the mandate, but because a handful of people armed with emotional arguments failed to see the folly of their arguments.  So, if we are to make it -- the voices of reason (in the government ranks) will have to speak up to get us back on track.