It’s the Infrastructure, Stupid

25 California Legislators Fighting Against Renewables and New Transmission

Twenty-five legislators have signed and sent a letter to the California Public Utilities Commission (CPUC) in opposition to the proposed San Diego Gas & Electric Sunrise Powerlink. In a meeting with CPUC President Michael Peevey this week, the Commissioner disclosed that the opposition was specific to the proposed route of the intended line.

It is astounding that the legislators would fail to see the collateral impact of such a shortsighted position. Two quick points: If their effort succeeds, the opposition will almost certainly guarantee that the line will not be energized in time to meet some of the critical milestones on the need for new transmission to serve renewable generation into the San Diego area; and if the legislators’ effort succeeds in delaying this project – even in part – the legislators will have effectively succeeded in keeping the state from achieving the renewable portfolio standard of 20 percent renewable generation by 2010 – a mandate that the legislature itself imposed!

I wonder if these legislators realize that they are shooting their own mandate to achieve 20% renewable generation in the head? At the end of the day, it is always going to be a question of infrastructure. Legislators need to wake up to that fact.

Renewable Power for Sale – But Who’s Buying?

Suppose you were an owner of renewable power in California and you posted a “for sale” sign on your front door. Whom do you suppose would show up as an interested buyer? A) A California utility (PG&E, SDG&E or Southern California Edison)? B) A bank (Morgan Stanley, Bank of America, Citi, Wells Fargo)? C) Venture capital (there are lots of hedge funds and private equity out there – too many to name even a few)? D) Foreign companies?

The answer is all of the above. But perhaps most interesting is the fact that there have recently been strong interest and indeed significant investment by British, Spanish, German and Irish companies to name a few. Of particular interest here is the fact that it may well be this foreign influx of capital that actually winds up owning the green generation that we are so thirsty for.

As battered as the dollar has been, and with the strength of the Euro, this is a good thing on many levels. Good for us, and great for trade – actually could help the world economy to see this kind of diversification.

But of course, none of this is without danger, so we should all be concerned – at least tacitly. Fluctuations of markets create strange instabilities in the way money circulates and you might well wind up with a number of companies that find themselves so frustrated with the realities of regulatory hurdles that we love to create in the States that some of these guys will throw their arms up and give up. Then what?

Well, then we are back to square one. In the meantime, let’s watch the foreign interests come in and kick the tires. Weakened balance sheets will provide for some attractive potential buys – particularly in the renewable sector – solar or wind anyone? As a believer in free markets and international trade, I hope they find success.

Regulatory Malaise in California is Alive and Well

The California State Water Resources Control Board is scheduled to issue a scoping document today on a proposed regulation to restrict the use of ocean water for cooling power plants. On its face it is not something most people would ever really care about until you hear the emotional side of the argument: the use of ocean water for cooling power plants harms the ecology of the oceans, so we should stop this and figure out an alternative – like renewable energy. This is the environmentalist’s argument.

Like many emotional arguments, the claims are not supported by science. No surprise here, right? Well, try this on for size: 40% of the in state California generation comes from facilities which use ocean water for cooling and have been doing so since the 1940’s. Doesn’t that mean that the cumulative impact to the oceans has been severe? Consider that what we are talking about is a technical issue surrounding what is called “entrainment and impingement of marine life.” In English, the water that is sucked in by the facilities, also suck in plankton and ocean-going micro-organisms. These are in turn measured on an annual basis and thus the impact that a power facility is having can be determined.

At most power plants, the impacts are insignificant – especially when you consider the mitigation that is required to operate these facilities. Let me give you an idea of what we are talking about. At one facility, the total entrainment and impingement is about 700 pounds of fish and fish larvae on an annualized basis. Sounds like a lot, doesn’t it? Ever been to an aquarium – San Francisco, Monterey or Sea World? Any idea how much those aquariums “entrain and impinge?” Try this on for size: one adult harbor seal eats over 9500 pounds of fish per year. I am sure Shamu is putting a significant amount away too!

Don’t get me wrong, I am not for vanquishing the oceans of habitat or fish. But come on! Why does the state insist on creating more havoc where none needs to be created? The most irrational aspect of this charge to create a new regulation is that there is no one asking for this. There are no requirements on the books to impose something like this. Moreover, the charge by staff on this front ignores the collateral impacts that this will bring.

Assume that it were feasible to retrofit the existing fleet of facilities that rely on this technology. Here is what will result: more pollutants (carbon and carbon equivalents – about 2 million metric tons across California); greater consumption of natural gas (because of efficiency losses by moving to an air-cooled process); aggravated risk to reliability (because some of these facilities will not be able to retrofit – size and fiscal limitations at the sites will make the retrofit infeasible from an engineering point) and – ready for this – at a time when we are trying to improve access to renewable energy, this regulation will hurt the state’s ability to integrate renewables. The operational characteristics of these ocean water cooled facilities allow for the ramping ability that provides the necessary back-up to renewable generation which is intermittent.

The bottom line here is that the State Water Resources Control Board is urging a new regulation that will only harm the environment and cost all ratepayer classes millions of dollars when it is all said and done. Thanks for nothing.

Is Conservation Failing? America’s Energy Consumption is on the Way Up – Way Up

In case you were wondering, the tally is now in. American’s are power gluttons. Total U.S. energy consumption is projected to grow about 31% between 2005 and 2030, according to the Department of Energy’s (DOE) long term outlook delivered to a federal Senate Environment & Natural Resources Committee hearing last week.

The report also predicts that greenhouse gas emissions will rise from 6,000 million metric tons in 2005 to almost 8,000 million metric tons in 2030. DOE also expects the price of oil to decrease from today’s high. But how much? It will likely not fall below $60, so get used to paying for your gas guzzler. Oh, I am not pointing fingers – I am right there with you. It’s a lifestyle, choice, right? Some of us choose to drive bigger cars. Do I feel guilty? Not really. But I did decide to put my money where my driving preferences are and bought off-sets. Take a look at www.drivinggreen.com. For under $100.00 per year, both of my cars are now carbon neutral. I feel greener already.

Back to conservation. Is it working? The report to the federal government indicates that it is not working as well as we expected it to work. What is unclear, is how well it works from region to region. In California the conservation numbers are not as high as we would like them to be. I expect that this is where the legislature will want to do more. I just hope that they remember the premise of first "doing no harm."

CAISO: 131 Renewable Projects Waiting for Transmission

The California Independent System Operator (CAISO) told the legislature this week that there are 131 projects waiting for interconnection transmission studies – these are renewable projects totaling over 40,000 megawatts (MWs) worth of generation (1 MW can power 700 homes). Of these, wind and solar command the lion’s share: over 16,000 MWs of proposed wind projects and over 23,000 MWs of proposed solar projects, the balance are geothermal and biomass.

At two separate hearings (in the Assembly and in the Senate), the CAISO repeated this figure. While I will be the first to admit that not every one of these projects will actually be built, if we fail to build transmission infrastructure in this State – none of it will be built and we will not realize any of the potential benefits of this green generation.

The CAISO further stressed that more needs to be done to streamline the process. To this end, the California Public Utilities Commission this week approved by a vote of 5-0, a new proceeding on renewable transmission. This will serve as a forum for discussing the California Renewable Energy Transmission Initiative (CRETI) recommendations and addressing other issues related to improving transmission access for renewable generators. Lets hope this helps educate regulators, legislators and the public about the realities of getting to a cleaner energy future. CAISO's bottom line: we need new transmission.

Will Oil Hit $130 Per Barrel? CalPERS is Hoping it Does

Crude oil may reach a record $130 a barrel this year because pension funds are investing more in commodities, according to comments recently made by BlueGold Capital Management LLP, a hedge fund.

The outlook for oil over the next five years is also “bullish” as producers find it hard to replenish reserves, and demand outpaces supply. The major oil companies around the world have tapped the lower hanging fruit and are now finding it tougher to replace their findings, thus are drilling for harder-to-reach deposits while energy demand and crude prices surge to records. With commodities prices surging to all-time highs, the California Public Employees’ Retirement System (CalPERS), the largest U.S. pension fund, said it plans to boost investments.

CalPERS, which has about $240 billion in assets, agreed at its most recent board meeting to hold between 0.5 percent and 3 percent of its assets in commodities and last year put $450 million into commodities - its first such investment.

With crude oil trading above $100 a barrel, competition among producers to find untapped reserves has caused a worldwide shortage of rigs and crews.

Investors who are flocking to oil may be exacerbating the U.S. dollar’s plunge and pushing oil prices to new highs, according to the president of Cambridge Energy Research Associates (CERA). According to CERA, oil is now acting as a giant hedge fund against a weakening dollar.

The dollar touched a record low of $1.5395 per Euro last week as crude oil futures traded in New York surged to a historic close of $105.47. Add to this the worst U.S. housing market in more than a quarter of a century, fueled by $146 billion in losses by Wall Street banks, and a weakening economy and you produce the flight to oil which has been holding its value better than the greenback.

So, while CalPERS has talked about going green (as in being environmentally conscious) – the only real bets they are counting on are making more green (as in dollars backed by oil).

Governor Schwarzenegger Endorses Sunrise Powerlink

According to the www.SupportSunrise.com, Governor Arnold Schwarzenegger has given SDG&E’s proposed Sunrise Powerlink a huge boost by announcing his support for the project.

In a letter to the California Public Utilities Commission (CPUC), Governor Schwarzenegger said the Sunrise Powerlink would “deliver additional electricity to the area, while connecting San Diego to the vast supplies of green power in the Imperial Valley region needed to meet California’s aggressive renewable energy requirements.”

Bravo, Governor! It is good to see that reasonable minds can see the writing on the wall – the project will benefit all Californian’s and especially the region. With this line, renewable power will be tapped and hopefully SDG&E will also secure the local generation that will secure their ability to back-up the green generation when it becomes necessary.

As I look ahead to the eventual vote on this project, the crystal ball is now less cloudy. I think that the reasonable minds will prevail at the CPUC and an approval on this project is certain to occur before the end of the year. So, if you are in favor of running your AC when the temperature climbs above the century mark and live in San Diego County – you too should applaud the Governor’s action to support the line.

Worries About Meeting 20% Renewables by 2010 Reach Highest Levels

The legislature this week held a hearing on the probability of meeting the 20% renewable energy mandate by 2010. The mood from staff and from the legislators on the committee could be characterized as “aggravated.” Well, that level of discomfort with the possibility of utilities not being able to meet the 2010 deadline on the Renewable Portfolio Standard (RPS) – which by the way, is the law – has reached the highest levels in the State. Yes, Governor Schwarzenegger is concerned also.

So what to do? Well, in the meantime, expect more hearings from the legislative energy committees and maybe even from the legislative environmental committees – assuming they are awake to the facts. Two hearings are scheduled for next week (Assembly Utilities and Commerce on Monday and Senate Energy on Tuesday) to discuss among other things, RPS and the Renewable Energy Transmission Initiative. This is an initiative to build transmission that would access renewable generation.

But will more hearings solve anything? What else could be done? There is a rumor that we may see a Governor’s Executive Order that would propose to identify and eliminate barriers to getting transmission built. Finally, an education on why we need the resources and infrastructure. Now that might help.

Want a Greener, Cleaner Future? You’ll Have to Pay for It

A recognized world leader on finance and economics, Credit Suisse (http://www.credit-suisse.com/ib/en/research/index.html), earlier this year put together a report called "The Inconvenient Math: Implications of Costed Carbon" – it is a very interesting report that highlights the expected costs of living in a carbon constrained world – that is, a world with laws to enforce the reduction of greenhouse gases. At an energy conference in Newport Beach last week, Credit Suisse made a presentation on their report to a number of energy firms – for some, the news was not so good while for the rest of us, we recognized that Americans will at some point wake up to the realities of a greener future – and that is a future of greenbacks leaving your pocket.

The numbers are nothing short of shocking. Credit Suisse predicts that to reduce carbon output by 40% it will cost the world over $600 billion – yup, with a “B!” Oh, and that includes renewables, natural gas powered generation, transmission and new nuclear facilities. Failure to build that infrastructure will make the greener, cleaner future a non-reality. So, let’s get it straight – you need infrastructure, and be ready to pay for it. Failure to do so will cost us the greener, cleaner future we all want.