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.

Budget Trailer Bill Makes Energy Developement in California Even More Expensive

The California legislature voted late yesterday on a budget to finally fund all that has been in arrears for the past 95 plus days.  Yes, can you imagine being 95 days late on your mortgage?  Well, this has become the norm in California.  Legislators and the governor have a broken system that fails to enact on time budgets – apparently they have forgotten about the oath to abide by the powers of the State Constitution which requires that the Budget be enacted by June 15 of each year.   

I’ll let journalists deal with the vagaries of the process – they are much better at that than I am. 

In this arcane process however, there are what are called “trailer bills.”  These are tag-alongs to the main budget bill, but provide details of how our taxes are spent – and how they are shifted from program to program.  Yes, you thought that transportation funds from your DMV license fee went to roads, right?  Wrong.  Those funds, unless protected by statute, might go somewhere else.

A great example is the tobacco tax (I am not a smoker, so I shouldn’t care, but I do)…  Those funds are supposed to go to fund “stop smoking” programs for kids.  Where do they wind up?  Many places…

But I want to concentrate on something interesting with the 2010-11 Budget.  Do you remember how every legislator has been talking about job creation?  How we need to make California more “competitive?”

Well get this…   Among the many trailer bills being considered is AB 1615 which addresses many issues related to the energy and water infrastructure sectors.  Unfortunately, one particular section increases fees.  Please note that this is for all energy infrastructure projects:  generation (including renewable power) and transmission.

Like in all regulated industries, certifications and permits are required for all developments – this is a good thing, as we identify hurdles with environmental impacts and other factors like traffic issues that may need to be mitigated.

So, under California law, when seeking certification (energy infrastructure projects go through certification at the California Energy Commission), the fees will go from $100K per project (and $250 per gross MW capacity) for a maximum fee of (not to exceed) $350K per project with an annual permit of $15K -- the new fees will be $250K per project (and $500 per gross MW of capacity) for a maximum fee (not to exceed) $750K per project with an annual permit fee of $25K. 

From Assembly Bill 1615

   (12) Existing law requires a person to obtain certification from the State Energy Resources Conservation and Development Commission before commencing construction of a thermal powerplant or electric  transmission line and requires the person who submits an application for certification for a proposed generating facility to pay a fee of$100,000 plus $250 per megawatt of gross generating capacity of the proposed facility, the total fee not to exceed $350,000. A person who receives certification of a proposed generating facility is also required to pay an annual fee of $15,000. Existing law exempts from those fees a generating facility that uses a renewable resource as its primary fuel or power source. The fees are required to be deposited in the Energy Facility License and Compliance Fund in the State Treasury, for expenditure by the commission, upon appropriation by the Legislature, for processing applications for certification and for compliance monitoring.     This bill would increase the amount of the fee for an application for certification to $250,000 plus $500 per megawatt, would increase the limit of the total fee to $750,000, and would increase the annual fee to $25,000. The bill would repeal the exemption from the fee for a generating facility that uses a renewable resource and would require the commission to submit a report, by July 1, 2012, to the Legislature on the impact of these changes. 

Did Nevada, Arizona, Oregon, Washington, or New Mexico increase their fees?  Nope.  Given that California has never produced the power we need to keep our lights on (we go to market for 20-30% of our daily power needs to keep our lights on) – if I were a developer, would I build in California?  Nope.  I would build in other parts of the West and sell the power to California.  Oops!  We did that once in 2000-2001…  Power prices soared.  Yup, you and I – the ratepayers are left holding the bag. 

So in their effort to make things more competitive, the legislature just made things worse.   Great.

CATO Institute Calls President-Elect Obama's "Going Green" Plan a "wealth transfer"

The much respected CATO Institute has issued a report on the Obama energy plan to go green for the United States, and the report says the only "green" in the plan will be part of a wealth transfer.

As if that were not enough, the report also says that a federal renewable portfolio standard is unlikely to deliver much green power.  The paper dubbed President-elect Barack Obama’s plan to create a federal green power standard of 10 percent in 2012 and 25 percent in 2025 a “wealth transfer.”

Read the report:  "A Federal Renewable Electricity Requirement" www.cato.org

Obama-Nation: Historic Win -- Now What on Energy?

Historic.  That's the word that most of the pundits used to describe it.  While I have my reservations about some of the issues and how the President Elect may deal with them, I agree that we have an exciting situation in the United States.  Biut closer to my heart is energy.  And what can we expect from the president elect and the vice president elect?

Lets review what they said during the campaign and you decide.  As for me -- I see HUGE hurdles, given the economy.  Many challanges remain in California and as to how we meld with the campaign promises and the realities that come -- well, lets wait and see...

What Does Barack Obama Say About Energy?

www.barackobama.com

ü      Reduce the Burden of Rising Gas Prices on Working Families

ü      Reduce Carbon Emissions 80 Percent by 2050

ü      Invest in a Clean Energy Future

ü      Support Next Generation Biofuels

ü      Set A

merica on Path to Oil Independence

ü      Improve Energy Efficiency 50 Percent by 2030

ü      Restore U.S. Leadership on Climate Change

Senator Joe Biden

The energy challenge take sacrifice and is a moral crusade. (Dec 2007)

FactCheck: Oil did not jump $18/bbl due to Iran Resolution. (Dec 2007)

Supports cap-and-trade for greenhouse gases. (Nov 2007)

Provide for emergency fuel assistance immediately. (Oct 2007)

Make every automobile sold be a flex-fuel automobile. (Apr 2007)

Voted YES on tax incentives for energy production and conservation. (Jun 2008)

Voted YES on addressing CO2 emissions without considering India & China. (May 2008)

Voted YES on removing oil & gas exploration subsidies. (Jun 2007)

Voted YES on factoring global warming into federal project planning. (May 2007)

Voted YES on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)

Voted YES on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)

Voted YES on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)

Voted YES on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)

Voted YES on Bush Administration Energy Policy. (Jul 2003)

Voted YES on targeting 100,000 hydrogen-powered vehicles by 2010. (Jun 2003)

Voted YES on removing consideration of drilling ANWR from budget bill. (Mar 2003)

Voted NO on drilling ANWR on national security grounds. (Apr 2002)

Voted NO on terminating CAFE standards within 15 months. (Mar 2002)

Voted NO on preserving budget for ANWR oil drilling. (Apr 2000)

Voted NO on ending discussion of CAFE fuel efficiency standards. (Sep 1999)

Voted NO on defunding renewable and solar energy. (Jun 1999)

Voted NO on approving a nuclear waste repository. (Apr 1997)

Voted NO on do not require ethanol in gasoline. (Aug 1994)

Keep efficient air conditioner rule to conserve energy. (Mar 2004)

Establish greenhouse gas tradeable allowances. (Feb 2005)

Sponsored bill raising CAFE by a 4% per year until 2018. (Jul 2006)

Rated 83% by the CAF, indicating support for energy independence. (Dec 2006)

Designate sensitive ANWR area as protected wilderness. (Nov 2007)

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.

So, What do Sarah and Joe Say About Energy?

While I will make no predictions on who ultimately wins the presidential election, I have been tracking where the candidates stand on energy matters.  Followin is where the vice presidential candidates stand on the matter.  And by the way, remember that the VP debate is tonight.  Here's what you can look out for on energy:

Governor Sarah Palin

Produce more of our own oil & gas, for national security. (Sep 2008)

Gas pipeline:history's largest private-sector infrastructure. (Sep 2008)

More pipelines; more nukes; more coal; more alternatives. (Sep 2008)

Claimed major triumph: $500 million subsidy for gas pipeline. (Aug 2008)

Global warming affects Alaska, but is not man-made. (Aug 2008)

Resource rebate: suspend AK 8-cent fuel tax for one year. (Aug 2008)

Gasline Inducement Act: 1,715-mile natural gas pipeline. (Aug 2008)

Commercialize Alaska's North Slope natural gas. (Aug 2008)

Appointed an Alaska oil and gas commissioner. (Aug 2008)

To win, GOP must push energy independence. (Aug 2008)

Agrees with Obama on more Alaska oil & gas production. (Aug 2008)

Windfall oil profits tax prevents investment. (Aug 2008)

Lift moratorium on offshore drilling. (Jul 2008)

Convinced McCain to drill offshore; not yet on drilling ANWR. (Jul 2008)

Exxon-Mobil should pay $507 million for Exxon Valdez spill. (Jul 2008)

Unlock ANWR; we're ready, willing and able to contribute. (Jun 2008)

Energy relief plan: $100 per person monthly, for oil & gas. (May 2008)

Bush is right: drill ANWR & develop our own supplies. (Apr 2008)

Fully fund for the Petroleum Systems Integrity Office. (Feb 2008)

$250M for proven alternative energy, including wind & hydro. (Jan 2008)

Gas pipelines are approved if they meet Alaska's needs. (Jan 2008)

National energy policy not an either/or proposition. (Nov 2007)

Fund cellulosic biofuel research in Farm Bill. (Oct 2007)

Submitted legislation to build natural AGIA gas pipeline. (Mar 2007)

Stranded Gas Development Act no longer applies. (Nov 2006)

Get ANWR open. (Nov 2006)

Chaired the Alaska Oil and Gas Conservation Commission. (Nov 2006)

Pursue gasline plan that is best for ALL Alaskans. (Nov 2006)

Met with producers and employee groups for pipeline deal. (Oct 2006)

Firm start date as part of gasline incentive offer. (Oct 2006)

Opposes natural gas reserves tax--it's not earned income yet. (Oct 2006)

Analyze potential costs associated with climate change. (Oct 2006)

Senator Joe Biden

The energy challenge take sacrifice and is a moral crusade. (Dec 2007)

FactCheck: Oil did not jump $18/bbl due to Iran Resolution. (Dec 2007)

Supports cap-and-trade for greenhouse gases. (Nov 2007)

Provide for emergency fuel assistance immediately. (Oct 2007)

Make every automobile sold be a flex-fuel automobile. (Apr 2007)

Voted YES on tax incentives for energy production and conservation. (Jun 2008)

Voted YES on addressing CO2 emissions without considering India & China. (May 2008)

Voted YES on removing oil & gas exploration subsidies. (Jun 2007)

Voted YES on factoring global warming into federal project planning. (May 2007)

Voted YES on disallowing an oil leasing program in Alaska's ANWR. (Nov 2005)

Voted YES on $3.1B for emergency oil assistance for hurricane-hit areas. (Oct 2005)

Voted YES on reducing oil usage by 40% by 2025 (instead of 5%). (Jun 2005)

Voted YES on banning drilling in the Arctic National Wildlife Refuge. (Mar 2005)

Voted YES on Bush Administration Energy Policy. (Jul 2003)

Voted YES on targeting 100,000 hydrogen-powered vehicles by 2010. (Jun 2003)

Voted YES on removing consideration of drilling ANWR from budget bill. (Mar 2003)

Voted NO on drilling ANWR on national security grounds. (Apr 2002)

Voted NO on terminating CAFE standards within 15 months. (Mar 2002)

Voted NO on preserving budget for ANWR oil drilling. (Apr 2000)

Voted NO on ending discussion of CAFE fuel efficiency standards. (Sep 1999)

Voted NO on defunding renewable and solar energy. (Jun 1999)

Voted NO on approving a nuclear waste repository. (Apr 1997)

Voted NO on do not require ethanol in gasoline. (Aug 1994)

Keep efficient air conditioner rule to conserve energy. (Mar 2004)

Establish greenhouse gas tradeable allowances. (Feb 2005)

Sponsored bill raising CAFE by a 4% per year until 2018. (Jul 2006)

Rated 83% by the CAF, indicating support for energy independence. (Dec 2006)

Designate sensitive ANWR area as protected wilderness. (Nov 2007)

I will give the edge to the Right Honorable Governor Palin on this issue.  What do you think?

McCain vs. Obama on Energy – Who Wins this Battle?

So, we have heard a lot from both of the presidential campaigns on energy this week, but have either of the candidates delivered knockout punches on the issue?  In my opinion, neither candidate has done that – but for now I would score the fight in favor of McCain, only because he is not loading up his plan with more spending.  Take a look for yourself, and make your decision.

 

What Does John McCain Say About Energy?

www.johnmccain.com

ü      Expanding Domestic Oil And Natural Gas Exploration And Production

ü      Taking Action Now To Break Our Dependency On Foreign Oil By Reforming Our Transportation Sector

ü      Investing In Clean, Alternative Sources Of Energy

ü      Protecting Our Environment And Addressing Climate Change: A Sound Energy Strategy Must Include A Solid Environmental Foundation

ü      Promoting Energy Efficiency

ü      Addressing Speculative Pricing Of Oil

ü      Does Not Support A Windfall Profits Tax

 

What Does Barack Obama Say About Energy?

www.barackobama.com

ü      Reduce the Burden of Rising Gas Prices on Working Families

ü      Reduce Carbon Emissions 80 Percent by 2050

ü      Invest in a Clean Energy Future

ü      Support Next Generation Biofuels

ü      Set America on Path to Oil Independence

ü      Improve Energy Efficiency 50 Percent by 2030

ü      Restore U.S. Leadership on Climate Change

Here We Go Again, A Stressed Out Grid

For the past three summers, we have had the same story.  Early in the year, the government agencies will state: "not to worry, the grid looks fine for this summer and it appears we will have plenty of energy to keep the lights on."  But as we have experienced in the past two consecutive summers, this one is no different.

For starters, this summer's fire season started a bit earlier than normal.  At one point in the last couple of weeks we were up to 1700 fires burning across California.  One national television network called their headline "California On Fire" -- indeed.  While we can be thankful for the brave men and women that have battled back these fires and have knocked the numbner down to around 500 fires currently burning, the problem is that 3 of those fires are currently threatening transmission lines in northern and central California.

Now add heat to the equation.  California this week is experiencing our second heatwave of the summer.  Stronger than the last one earlier in the year, the California Independent System Operator (CAISO)is predicting that consumtion may near the records we saw in 2006 (heaviest consumption of electricity is predicted for Wednesday and Thursday, given the anticipated high temperatures in major parts of the state).  The only potential good news is that the heatwave will likely be concentrated to California and not affect the rest of the West -- if it does, we are in trouble.

What happens if the heatwave does hit other Western states?  Well, that means that the power they would normally ship to California will likely be consumed at home, so the power for the region will be constrained and in short supply.  Ugly, right?

One more thing... The aging infrastructure.  Will our older power plants hold up to a third summer in a row of heatwaves, fires and transmission issues?  I know that the good folks that work at those places will do what they did the last two summers in a row and work their hardest to make sure that the facilities run and produce power.  But will the aging steel cooperate?

Once again, 2008 is what I call a "Summer of Hope."  Hope the fires don't disrupt transmission, hope the heatwaves don't engulf the whole west and that they don't last too long, and hope that the againg infrastructure holds up.  Wouldn't it be nice to say, "good thing we are building the necessary infrastructure to deal with this problem?"

Well, I "hope" that legislators and the regulators are paying attention. 

Do We Really Want to Stop Global Warming?

There were a couple of stories yesterday about cities having small carbon footprints…  The San Diego Union Tribune carried one and so did The San Jose Mercury News – both good stories, but how do these cities fair when we keep hearing that the state will not achieve it’s 20% renewables target by 2010 (as is mandated under current law)?

 

Let’s assume that we could not only meet that target, but better yet, we exceeded that target…  How would these cities then be impacted (on a global scale) by events such as the eruption of the Chaiten volcano in Chile last month that spewed lava and blasted ash more than 12 miles (20 kilometers) into the sky or the devastating earthquake that rocked China this month?

Seems to me, that we will really need to step up efforts around the globe if we really hope to impact global warming…  But back to my question, and closer to home (at least as far as generation is concerned), how will we accomplish this without the infrastructure to allow us to deliver the low emission generation? 

California really needs to re-evaluate our views on this matter and allow for creative thinking.  Do we really want to have a lasting impact on global warming?  I mean in the positive sense…  Since the answer is a resounding "yes," I would submit that we had better allow for the infrastructure to be developed, including transmission, solar, wind, hydro, natural gas (we need the gas generation to run when the wind is not blowing) and yes, even rethink nuclear generation.  Admittedly, nuclear is not in the cards anytime soon, but we need to begin that dialogue today.  How can it be that France and Japan are doing so well with nuclear and we can barely even say the word? 

Last month I wrote about the comments that Governor Schwarzenegger made at the Yale Climate Change Conference .  He’s right – we all need to take a deep breath and get out of the way and allow the infrastructure that is needed to be built to actually be built.  Otherwise we should be honest and admit that we really don’t want anything to change.  The more we stand in the way of the infrastructure development that is needed, the harder it will be to turn global warming around.

Arizona Critical of SCE Devers Transmission Line in Letter to FERC

The Arizona Corporation Commission (ACC) has responded to the Federal Energy Regulatory Commission (FERC) concerning Southern California Edison’s (SCE) appeal on the proposed Devers-Palo Verde No. 2 transmission line.

The ACC defended its June 2007 decision to deny an application for the 230-mile, 500 kV line that would run from the Palo Verde hub area in Arizona to the Devers substation in Southern California.

In their letter to FERC, the ACC complained about higher levels of nitrogen oxide pollution from Arizona power plants and loss of water used in generating power that will be sold to SCE. The project also “raised concern about its negative impact on the environment, particularly in and around the Kofa National Wildlife Refuge.” The ACC went on to say that SCE has other options to satisfy its needs, which include building new power plants and using renewable energy.

SCE has appealed the Arizona denial to FERC because the DPV2 line falls within the U.S. Department of Energy’s Southwest Area National Interest Electric Corridor, as authorized under the Energy Policy Act of 2005. This is a very interesting test to the Federal Corridors portion of the act – and will prove interesting as the Sunrise Powerlink continues its path to construction.