It’s the Infrastructure, Stupid

California Elects Jerry Brown -- How Might He Impact California's Energy Policy?

This is just a recap of what we will be looking at in the year to come with a new Governor and also a quick look at what happens next... 

NEW GOVERNOR

On November 2, 2010, Californian’s elected Jerry Brown as the next Governor.  So, how will the election impact the energy sector?

Appointments and Energy Advisors

As soon as this coming week, we can expect Brown to announce a team that will lead his transition into office.  This team will help organize and recruit those that will lead the various agencies and departments – but principally – the initial transition team typically ends up as part of the Governor’s Cabinet or Governor’s Office initial key advisor staff.

Specific to Energy, candidate Brown said he would appoint an energy advisor – he called that a “renewable energy jobs czar” -- Whomever he selects, they will be a driver for energy policy in California.

Candidate Brown on Energy

Candidate Brown campaigned on the following plan for energy:

• Building 12,000 megawatts of Localized Electricity Generation
• Building 8,000 Megawatts of Large Scale Renewables and Necessary Transmission Lines
• Dealing with Peak Energy Needs and Develop energy Storage
• A Timeline to Make New Homes and Commercial Buildings Zero Net Energy
• Making Existing Buildings More Efficient
• Adopting Stronger Appliance Efficiency Standards
• Developing More Cogeneration Projects to increase combined heat and power production by 6,500 megawatts
• Add 500,000 new renewable energy jobs

Agencies

Governor Brown will be appointing to the energy and environmental agencies:

CPUC – Brown will have at least 3 appointments to replace Commissioners Bohn, Gruenich and Ryan

CEC – Brown will have at least 3 appointments to replace Commissioners Byron, Eggert, and Wisenmiller

Other Agencies – Brown will also have appointments to agency secretary roles at Cal EPA and Resources, Chair at CARB (the entire CARB Board serves at the Governor’s pleasure), CAISO (Chair Willrich’s term is up, Board member Tom Habashi, was not confirmed. Kristine Hafner also did not win support of the current administration, and Board member Laura Doll told media she would not seek reappointment -- so 4 appointments for Brown here).

NEW LEGISLATURE/CONSTITUTIONAL OFFICERS

While the California Legislature remains unchanged as far as balance goes (Democrats still in control of the Senate and Assembly), there are rumors that we will see a new president of the Senate.  We may also see a shuffling of committee chairs. 

Already (on 11/4), the Republicans have announced that the new minority leader will be Connie Conway (Assemblywoman from Visalia).  On Friday (11/5), the Democrats re-elected Perez as Speaker.

While it should not impact the policy of energy too much, it is interesting to note that all Constitutional officers are Democrats [NOTE: AS OF THIS DATE, THE AG RACE HAS NOT YET BEEN CALLED].

All of these changes could bring changes in the views on energy policy. 

Energy Legislative Committee Chairs Re-Elected Easily

Senator Alex Padilla (D-Pacoima), current chair of the Senate Energy Utilities & Commerce Committee, won 69 percent of the vote; Assemblymember Steven Bradford (D-Los Angeles), current chair of the Assembly Energy Committee, won 82 percent of the vote.

PROPOSITIONS

With regard to the propositions, the failure of Prop 23 means that AB 32 can move forward.  The passage of Prop 26 could mean that the legislature will have to approve by 2/3 vote how and if fees will be imposed to implement AB 32.  So this makes for an interesting situation. 

Legislation and RPS vs. RES

Depending on whom Brown selects as his energy advisor or advisors, these have the potential to greatly impact what we see in the form of the next RPS bill (Rumor: We will see a new RPS bill in January, this bill has the potential to look very similar to SB 722 – and Senator Simitian is expected to again carry the RPS bill – 3^rd time the charm?).  Labor played a key role in the discussions in the last 2 versions of this effort, so considering that labor and the unions influenced by labor gave Brown $25 million (IEs that paid for the Whitman attack ads), I assume they will again play a major role and this time with a much more sympathetic ear from the Administration.

CONCLUSION

The most important message to take from this is the following: If you are working on projects in California, you really need to pay close and active attention to how the energy and renewable process develops under the new Governor and offer your opinions on a regular basis.

Sunrise Powerlink Gets Boost from CPUC President -- Approval is Next

SDG&E got a boost on its efforts to build the Sunrise Powerlink, a $1.9 billion power line proposed to connect San Diego and Imperial counties.

Michael Peevey, president of the California Public Utilities Commission, offered a third alternative for his four fellow commissioners to consider when they discuss the proposal on December 18, 2008.

President Peevey's proposal would allow SDG&E to build the Powerlink without any condition that the line be required to deliver green energy to San Diego.

The proposal points to a southern route that avoids Anza-Borrego Desert State Parkand communities such as Julian and Santa Ysabel.  Does he have the votes to get this done?  Sources say yes. 

I have said before, infrastructure is in short supply -- and our continued grwoth -- like it or not -- demands that we build the necessary infrastructure that we will need to keep the lights on.  And for those who say we don't need it -- not only do we need transmission, we need to add more generation inside of California too.  Failure to do these necessary upgrades and construction will cause us to fail on the effort (and now law and executive order) to get to a greener future.

CPUC's Trick or Treat on Sunrise

On all Hollows Eve, the CPUC offered a treat to SDG&E:  competing proposed decisions on thier proposed Sunrise Powerlink.  The trick:  the two proposed decisions either partly or fully oppose the project.

The first of the proposed decisions, authored by an administrative law judge, denies the application for the 150-mile Sunrise Powerlink altogether, saying the project could significantly raise electric rates and do extensive environmental damage if built, and “is not needed to meet California's current renewable (energy) requirements.”

The second proposed decision, written by Commissioner Grueneich, approves the project but denies SDG&E its preferred northern route.  Grueneich argues that Powerlink is needed to meet state goals in reducing greenhouse gases, but the utility should use a southern route through

San Diego

County

that avoids

Anza-Borrego

Desert

State Park

and all tribal lands.

The full commission is not expected to vote on the two proposed decisions until December 4 at the earliest.  The commission will hear comments from interested parties and oral arguments at a public hearing in

San Francisco

on November 7.

FERC Says SoCal in Danger of Blackouts

Southern California faces a greater threat of power outages this summer, according to a statement by FERC due to shrinking power reserves.

“This remains a concern despite implementation of demand response of more than 1,400 MW” projected by the state grid operator in late April, said Charles Whitmore, FERC’s senior market advisor.  FERC staff pointed to supply risks arising from decreased power imports to the state, as well as possible generation and transmission outages and summer temperatures on par with last summer’s heat waves.

CAISO, however, does not predict blackouts in Southern California this summer.  They quickly pointed to measures to curb peak demand and new generation coming online, adding that demand response programs have grown, but stressing that “Southern California’s load continues to grow--and most of the new generation that has come on line in the state since 2001 has been in Northern California.”  

FERC also noted that wholesale power prices are rising.  The continuing increase is attributed to higher natural gas prices because of increased demand from the fleet of new gas-fueled power plants, lower imports of liquefied natural gas and lower gas storage.

 

Interestingly, CEC also issued their summer assessment on the heals of this comment from FERC, and in thier assessment, they said that Southern California has a 3.8% chance of a staged emergency this summer, but that it still remains "below target reliability standards."

 

If nothing else, this should be read as a warning that our infrastructure to deal with our current and future energy demand is not in place.  Will we get lucky and squeeze through a hot summer without blackouts, or will we have finger pointing when the lights go out in the middle of July, August or September?

Governor Schwarzenegger Says CA Will Be First to Clean Energy Independence

While touting the potential of renewable power but remaining silent with regard to --the “hydrogen highway”--(I still believe someone talked him into touting this early in his governorship) Governor Schwarzenegger said California will be the first state in the nation to reach energy independence while fighting global warming.

In a speech last week on May 13 at a meeting sponsored by the University of California, Irvine, and the Milken Institute, he called on business leaders and scientists to protect the state’s economic and environmental future.

He urged energy and other industry leaders to think about the long-term benefits of investing in renewable resources. The Governor touted AB 32, the Million Solar Roofs initiative, his executive order to create a low carbon fuels standard, and the state’s green building initiative.

Sounds great... But message to the Governor and his staff: PLEASE, take a moment to reach out to your own Administration -- particularly your appointees at the various energy agencies and environmental agencies. The only way that the energy industry will realize all the goals established to date, is if the industry is afforded a market with market signals and rules that will allow all of that to happen. Hate to say, this, but so far, so bad...

From regressive policy initiatives at the SWRCB to protracted permitting at the CEC and CPUC... in some cases, the process has turned from stumbling blocks to snares. Trust me, if these were to see improvements, the industry would respond and the infrastructure to deliver that green independent future would be closer to reality. And sooner than we all might otherwise expect. To do nothing, will mean that we will get nothing. Markets and industry need meaningful signals -- we don't have them today. We need tose market signals so that the infrastructure can secure the financing to get this stuff built.

As the Dust Settles in Borrego Springs… What Now for the Sunrise Powerlink?

The CPUC held two back-to-back public participation hearings in Borrego Springs on Monday (5/12). The most notable difference from all of the previous hearings held thus far was that almost all of the commissioners were in attendance. CPUC President Peevey and Commissioners Bohn, Simon and Grueneich were present for over eight hours of public comment on the project.

What did we see or learn from the testimony? Nothing new, in fact, it was very similar to the five previous hearings that were held in the last few months in various San Diego communities. If I closed my eyes and listened – the song remains the same.

What we did see – were numbers. The opposition really did show up and this time they brought a few folks that are no strangers to spotlights. And if I have learned nothing else about Mike Aguirre, he never met a camera he didn’t want to jump in front of, and now as City Attorney, the next word you can always expect is “lawsuit.” He may have a case, but having watched him on energy matters (ever since the energy crisis of 2000-2001) before, this is likely to be more spotlight than action.

I was a bit surprised by Supervisor Diane Jacob, she raised points about the firefighting hazards that she had not raised before – or maybe I had just missed that before. Senator Christine Kehoe (also Chair of the Energy Committee) did not attend, but did have a representative read a letter into the record. Other than making it clear that she opposes any route through the State Park, she stressed that distributed generation is being overlooked as part of the solution to San Diego's energy needs.

What does all this mean? I think that the opposition scored one for their side – and the CPUC will now have to sharpen the pencil to draft an alternate proposed decision that outlines a clear path to construction for this project if it is going to get built. I still believe it will get built, and I further believe that the Commission will find a way to secure the right formula to getting this project approved. The big question now is what will the route be and when will the line be energized? Every year of delay, will mean one more year of tighter energy reserve margins for the region. And while no one wants to hear the word “blackout” – the CAISO will tell you that delays may really pinch system reliability.

Schwarzenegger Administration Holds Meeting on RPS/Senate Asks About Costs

The Administration is growing more concerned over the high probability of missing the Renewable Portfolio Standard mandate of utilities securing 20% renewable generation by 2010.

Though unpublicized, the Administration met last week with several stakeholder groups to discuss what might be done. I am told that the Governor had several pointed questions and that the staff did as well. How might we get to 20% renewables, and why will we miss the mark?

It is highly likely that we will see an Executive Order that will address how to get to the 20% -- and beyond -- the 33% that is being kicked around.

Why is this important now? Because of the initiative that has qualified for the ballot that would take us to 50% renewables by 2020. Is it doable? Sure, if we eliminate all of the barriers to building the infrastructure that would be needed. Will we do that? Even if it were done through regulation, the legal side will always slow the process down.

We need the infrastructure to get us to that green future – and to echo what the Governor said in his speech at Yale last month: "There's no two ways about it. Neither business nor environmentalists nor Republicans nor Democrats can be set in their ways. I suggest to them: Relax, exhale, just exhale and relax and let things move forward.”

In a hearing yesterday, the Senate Energy Committee had sharp questions about costs for the President of the CPUC, Michael Peevey: "How much is all of this, GHG reduction, RPS and other mandates going to cost?"

Great question!!! But we have no answers because we have not really looked at it...

I expect that a possible Executive Order on RPS will ignore the cost question, but maybe someone in the legislature will ask for an informational hearing to discuss the numbers that are out there already (EPRI calls it somewhere between $100 billion to $500 billion between 2020 and 2050 -- the smaller number to reduce GHGs by 25% and the larger number to reduce GHGs by 80%).

As I have stated before, going green is going to cost a lot of green... the better questions is who will pay for it? Will it be all ratepayer classes, or will we single out a few groups? The popular theme will be to make the wealthy pay for it... but how do we define that? Oh, get ready for that fun discussion that we will need to have at some point -- assuming we really do want to go green.

Happy Earth Day! Now, How Will We Get to the Green Future?

OK, first let me hug the planet with my public service announcement for EARTH DAY 2008 -- so lets start with my basic message: do the right thing.

And now, my commercial:

Did you know that electric demand for lighting could be cut in half if every household replaced its five most commonly used incandescent light bulbs with compact fluorescent bulbs? Earth Day 2008 is a great chance to start thinking about small, everyday decisions that can have a big impact on the environment. For example, turn your lights off when they are not in use and replace incandescent light bulbs with newer, efficient models.

While Earth Day comes just once a year, protecting and preserving our environment for future generations is something to think about every day.

There, I feel greener already.

But how will we really get there? Last week I attended a meeting of the California Foundation for the Environment and the Economy. The conference concentrated on the role that natural gas will play in getting us to a green future -- basically how natural gas could be the bridge to that new green future -- the transition form carbon to clean.

Natural gas is an excellent clean fuel source that can allow us to bridge to green -- a blue bridge to a green future.

New state-of-the-art clean-burning natural gas facilities are going to be needed in order to really afford us the ability to sustain and support a transition to green. In the last year, over 7500 MWs of new coal generation facilities have been cancelled. But what will replace them as the consumption continues to grow?

My suggestion: conservation, efficiency, new renewables, new transmission and new gas fired generation. Again, we need it all. And lots of it. Even if we are even moderately successful in curbing our apetite for more energy, we will need to need to secure the new infrastructure that will replace the current aging system -- something I will go into on another post.

So, do your part -- and Happy Earth Day!

SUNRISE POWERLINKLIVE BLOG UPDATE 5: HEARINGS CONTINUE IN SF THIS WEEK...

Same witness, new person asking questions... this time Imperial Irrigation District (IID) representative. Basic questions are seeking clarification on the palcement of the potential transmission towers -- will they interfere with irrigation operations to farmland?

Witness response is that while there is the potential for that to occur, the placement will be such that you would not incur problems with the current irrigation process.

Another break -- but not clear how much more the proceeding is likely to get through. At this pace, not much more.

I have a feeling that the ALJ will conclude this soon and start up again in the morning....

SUNRISE POWERLINKLIVE BLOG UPDATE 4: HEARINGS CONTINUE IN SF THIS WEEK...

With the hearing resuming after the lunch break, and about 45 minutes into the new round, the ALJ has asked an important question: can traditional or cultural land be developed? (I am praphrasing here)...

The answer was yes, if specific mitigation can be identified. The ALJ did not let go of the issue very swiftly, which makes me wonder if he has a disposition to a desired or expected answer... this is important as it might be a telling view of the ALJ's thinking.

Next witness -- finally got to witness #2 for the day... the questioning now comes from the farming interests. What kind of towers would be built, where would these be laced -- with respect to the potential for the farm land to still be farmable?

The witness is stating that he believes that SDG&E would work to mitigate the impacts to farmland and the ability to continue to farm... with safeguards (possibly mitigation measures).

I have a feeling that the landowners are looking for committments from SDG&E that the concerns (through agreements) of the landowners be negotiated. Not sure that the contractual side of the discussion will have much success given this forum -- not to mention that the witness is highly unlikely to be able to bind SDG&E to any agreement through his testimony... (this is an SDG&E witness, but I think he's a consultant)...

It's 2pm and UCANs Michael Shames just walked into the room... I think he's scheduled to be part of the testimony tomorrow with Bill Powers...