It’s the Infrastructure, Stupid

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.

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.

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.

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

CAISO CEO Says Grid Needs 6 New Major Transmission Lines in Addition to Sunrise Powerlink and Tehachepi Transmission Line

Yakout Mansour, CAISO CEO, delivered keynote addresses this past week at the California Manufacturers and Technology Association’s Annual Energy Conference and at the California Council for the Environmental and Economic Balance conference.  In his nearly identical remarks at both conferences (Wednesday and Thursday, respectively), Mr. Mansour made some interesting pronouncements.  Following are the highlights:

 

·       California’s Transmission and Generation Siting process must be streamlined as it poses incredible challenges (particularly to goals for renewable portfolio standard— RPS, generation integration and greenhouse gas reduction – as well as providing necessary generation for California’s continued energy consumption growth)

·       Current

California

nameplate capacity is critical in meeting the 20% RPS under current law, achieving 33% RPS will be even more difficult

·         Current CAISO interconnection cue is 110K MWs – of this 70K MWs are renewable-this is generation proposals that are under consideration and must be studied by the CAISO to determine how and where they would connect to the grid

·         CAISO expects that 85% of this generation will not be built

·        CAISO study concludes that in addition to the Tehachepi and

Sunrise

transmission lines, 6 additional major transmission lines will be needed to help CA meet RPS, GHG and growth requirements.

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. 

A New Renewable Plan for California?

There is a rumor that the Schwarzenegger Administration is in the process of preparing an executive order and legislative package to expand the Renewable Portfolio Standard (RPS -- this is the requirment that in state utilities procure a specific amount of generation from renewable sources) from 20% to 33% by 2020.  There may be three options to get to 33%: 1) a legal mandate, 2) a goal set in law (thorough legislation) or 3) set by the Air Resources Board in the AB 32 Scoping Plan.  There will be three elements in implementing this policy.  There will be an executive order (EO) with two primary elements on transmission and siting.  There will be a third element which will be a legislative package of bills.

The devil is always in the details, but if the move to 33% will truly streamline the siting process, which is the only reason to do this, then I would say that this is not only necessary, but it would become the only way that the state might actually achieve this goal.  Of course, no investment will be attracted if contracts are not offered to attract that business.  I do hope everyone is mindful of that. 

While I understand tha this is still under development, sources close to the proces indicated that this has moved from a conceptual draft and is closer to being official in the coming weeks.  Stay tuned!

  

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.