July 5, 2009

Playing chicken with reality

State's Renewable-Energy Focus Risks Power Shortages

California officials are beginning to worry that the state's focus on transitioning to renewable-energy sources could lead to power shortages in the near term.

The state has been so keen to develop renewables that relatively few conventional power generators, such as gas-fired plants, have been built lately. That risks a possible energy shortfall in certain places if the economy rebounds any time soon.
California's utilities are barreling ahead to try to meet a state mandate to garner 33% of their power from renewable sources by 2020, and some officials are concerned the effort might push up electricity prices and crimp supplies.

The state auditor warned this week that the electricity sector poses a "high risk" to the state economy. A staff report from the state energy commission also warns that California could find itself uncomfortably tight on power by 2011 if problems continue to pile up.

Utilities complain that the ambitious renewable-energy mandates, combined with tougher environmental regulations on conventional plants, are compromising their ability to deliver adequate power. "Conflicting state policies are a problem," said Stuart Hemphill, senior vice president of procurement at Southern California Edison, a unit of Edison International of Rosemead, Calif.

The stresses being felt in California could be a harbinger of problems to come in other states. The federal Waxman-Markey climate-change bill, passed by the House of Representatives on June 26, would require states to obtain about 15% of their electricity from renewable sources by 2020. Currently, about 4% of U.S. electricity comes from renewables, excluding hydropower.

California's 33% renewable-energy target is so ambitious that it is likely to miss the goal by five years or more, energy officials now concur.

State energy agencies recently concluded it could cost $114 billion or more to meet the 33% mandate, more than double what it might have cost to achieve an earlier 20% requirement. Consumers will bear those costs, one way or another.

Agencies also identified problems with constructing sufficient transmission capacity to move renewable-based energy to cities.

Southern California Edison, which buys more renewable electricity than any other U.S. utility, has conducted seven solicitations for renewable-energy supplies since 2002 and inked 48 renewable energy contracts. Yet it is still only halfway toward its procurement goal. In 2008, 16% of its electricity was renewable in origin, but more than 60% of that came from geothermal plants -- most of them built long before the current push for green power.

At the same time, new regulations are putting existing power plants under pressure. Last week, the state Water Resources Control Board issued a proposed policy that would clamp down on power plants that use something called "once-through cooling," which sucks water out of the ocean and rivers and discharges massive amounts of warmed water, harming some aquatic life.

The policy would end the practice at 19 plants that produce as much as 15% of the state's electricity. That has the California Energy Commission worried electricity shortages might arise if older, marginal plants are shut down before there is replacement power is available.

Building conventional power units is notoriously tough in Southern California because of air-quality problems and difficulty getting air-emissions credits, which are essentially rights to spew specified amounts of pollutants.

Early this year, the local air agency, the South Coast Air Quality Management District, imposed a moratorium on issuing air credits from its "bank" that affected 10 power plants that were under development.

"It's too early to tell how the pieces will fit together, but all the agencies and utilities are talking," said Edison's Mr. Hemphill. "Something has to be worked out."

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