CPUC Singing the Right Tune on SONGS, But Southern California Still Needs to Harmonize to Achieve a Clean Energy Future

rp_Navarro_Lauren-228x300.jpgLast week, the California Public Utility Commission (CPUC) finalized an important decision for Southern California’s energy supply following the closure of the San Onofre Nuclear Generating Station (SONGS). The plan emphasizes increased reliance on clean energy in this part of the state – an important step towards a fully realized low-carbon future.

The decision authorized San Diego Gas and Electric and Southern California Edison to procure at least 550 megawatts (MW) of ‘preferred resources,’ which include renewable energy, demand response (a tool that’s used by utilities to reward people who use less electricity during times of “critical,” peak electricity demand), energy efficiency, at least 50 MW of energy storage, and up to 1,000 MW of these resources altogether.

That’s a major step forward, as utilities across the country traditionally rely on large fossil fuel plants to meet regional demand.

However, the CPUC also authorized the procurement of 1,000 MW of power from natural gas generation, demonstrating that Southern California still has a ways to go to reach its clean energy potential.

In the proposed decision last week, the CPUC recognized the need for a diverse and flexible portfolio of energy tools and resources. By emphasizing the potential of demand-side energy resources to meet Southern California’s reliability needs, the CPUC has essentially launched a new era in the state’s transition to a cleaner, more resilient energy future.

The CPUC should be commended for including ‘preferred resources’ (such as renewable power and energy efficiency) in its decision, and for recognizing the important role demand response resources can play to meet California’s energy needs following the loss of SONGS. Going forward, the CPUC and the utilities should go one step further by seeking to expand and maximize the role of demand response policies – which rely on people, not power plants, to meet electrical demand – including voluntary time-of-use (TOU) pricing in securing the state’s energy future.

Time of use rates, for example, put power in the hands of the customers to determine whether power plants are needed by pricing electricity based on the time of day it is used.  By linking awareness of the cost of energy with smart displays and thermostats, these rates can make a big difference in the need for power plants – and lower your bills, one power plant at a time.  As EDF described in our comments on the proposed decision, if 20 percent of Southern California Edison’s ratepayers adopted voluntary TOU, peak demand would fall by almost 630 megawatts (“MW”), about a third of SONGS capacity.

In fact, if half of Southern California Edison’s residential ratepayers adopted a voluntary TOU electricity pricing structure, this could replace two-thirds of the SONGS’ lost capacity, saving $357 million per year. By including increasing demand response resources, such as TOU, in the CPUC’s long-term plans, the state can avoid being locked into environmentally risky – and expensive – fossil fuels.

By replacing a chunk of capacity from SONGS with renewable energy, energy storage, demand response, and other smart energy resources, the CPUC highlights an important priority for the state in the coming decades. This should be the beginning, not the end, of Southern California’s push to adopt preferred resources and diversify its energy mix in order to usher in a clean, sustainable, and healthy future.

This commentary originally appeared on our California Dream 2.0 blog.

This entry was posted in California, Clean Energy, Demand Response, Electricity Pricing, Energy Efficiency, Smart Grid. Bookmark the permalink. Both comments and trackbacks are currently closed.

5 Comments

  1. Matthew Dixon
    Posted March 19, 2014 at 6:26 pm | Permalink

    After reading the CPUC final decision I'm even more concerned about the reliability of our grid. First, they make the assumption that 29-39% of our 2022 needs will be met by as-of-yet unknown energy solutions such as backyard solar or SCE/SDG&E projects that have yet to even be filed, let alone make it through the arduous approval process. The CPUC counted the power reduction of the Mesa Loop-In project in their calculation, despite even SCE admitting that their Mesa Loop-In project could only be completed by 2020 with unparalleled cooperation from regulation and public agencies – which, if we're honest with ourselves, is something unheard of in California where you can't build a birdhouse without having some environmental or local agency filing a dispute. I think 10% would be a more realistic figure and yet the CPUC is basing their overly-optimistic decision on this value.

    Secondly, due to the current nature of power being a traded commodity and therefore in pursuit of maximum profits, the existing plants are being run harder than any plants in history. Yet no one in the energy business seems to acknowledge the long-term effects this will have. I suspect that a lot of lobbying is occurring to keep the billions of dollars flowing as long as possible. I compare it to buying a new car: If I buy any car today, I can pretty much assume that I'll be able to drive that car for a good 100k to 150k miles with just regular maintenance. If however, I only drive it on surface streets and I floor the accelerator between every light, I'd be lucky to get half that mileage before starting to have significant mechanical issues. That is exactly how the investment banks that own the dispatch rights to most of the plants in the US are operating. Floor it when prices are high, and shut as many off as the ISO will allow when prices are low. Under these run profiles, to expect the nominal 30 year life expectancy that turbine manufacturers are still advertising and energy planners are basing their predictions on is folly. 5 years ago if I had told the CPUC that SONGS would no longer be viable, they would have dismissed me as a raving lunatic. What other surprises will we have in another 5, 10, even 20+ years when the new generation that they are cancelling would still be viable?

    • Posted March 20, 2014 at 6:29 pm | Permalink

      EDF shares your concern that California is overusing dirty, inefficient, and expensive power generation. California currently has excess generation resources that are more than double federal standards for reserve capacity. Plenty of available capacity is one of the reason why the lights have remained on, and the grid has been reliable, even with the unplanned closure of SONGS. Experience, optimism, and necessity have led EDF to strongly support CPUC plans for meeting energy needs in California first with "preferred resources" – energy efficiency, demand response, and clean sources of generation.

      Experience: our utilities are well on the way to meeting their obligation to use clean renewable energy for at least one-third of all electricity supply by 2020, and rooftop solar is being installed with private investment dollars at unprecedented rates.

      Optimism: wind and solar are increasingly cost competitive and, when combined with storage technologies and "demand response" practices, can be a vital part of a reliable, resilient, clean energy system in California.

      Necessity: if unneeded natural gas generation plants are built, energy users will see higher prices to pay utilities (and their shareholders) for infrequently used assets that also create a generation oversupply problem that both undercuts the value for clean resources and makes it harder (and more expensive) for California to stay within the established limits on greenhouse gas pollution.

      • Matthew Dixon
        Posted March 21, 2014 at 12:05 am | Permalink

        Much of our "excessive generation" is via old and inefficient plants that are having difficulty meeting minimum reliability goals, despite extremely infrequent run times. Their inefficiency is the only thing keeping them in business since they're only called upon to run when demand is so high that it's worth the expense to run these old plants. So while on paper you might see that a generator is capable of producing 1000 megawatts, frequent equipment problems often mean that generator will only make a fraction of that when called upon during an emergency – if any at all.

        In most cases, excessive natural gas generation capability is not passed onto the consumer. Natural gas plants are operated by an independent company, or generator operator. A second company, most typically a JP Morgon-type investment firm, owns the rights to the power that plant can produce. They pay the facility operator a monthy fee for being 'available to run', and a bit more per megawatt if the plant is actually running. Whether the energy trader chooses to run the plant or not is based solely on the price of power vs. the price of gas, however the ISO can also force them to have their plants run in order to provide reserve capacity or grid reliability. The power produced is then distributed by the transmission company, which is the entity that charges the customer.

        So in this way, having excessive generation not only increases grid reliability, but actually provides LOWER energy prices. Additional maintenance costs of having more plants are paid by the generator owner, while they in turn are paid by the bank trying to make money when prices are high. The basic law of supply and demand applies. When demand is high and supply is low, energy prices go up and more megawatts are pumped into the grid so the banks can capitalize on these profits. This then causes an excess in supply and the prices come back down. Decreasing the available supply of anything will never lower the cost.

  2. I know better
    Posted March 26, 2014 at 3:33 pm | Permalink

    Lets face it some of the company's in the Los Angeles Basin claim 97-100% availability on the generators that sit idle for most of the year in the basin. It's a joke on the public and the rate payer. I worked for a corporation based in USA that has made money in the IPP market and only run max 15% capacity a few days a year. SCE should build more peakers that SCE has control of.

    • Matthew Dixon
      Posted March 30, 2014 at 4:13 am | Permalink

      This is it in a nutshell. 97% availability isn't terribly hard to meet if you're only running 20-30 days out of the year – and even then usually at reduced load due to the inefficiency of older plants (every megawatt produced costs more to make). California is coasting by on the false assumption of excess generation capabilities. I spent about 20 minutes reorganizing the 2013 ca.gov spreadsheet on all power generation in the state: 48.17% of our current "capacity" is from non-solar/wind/hydro plants that are over 55 years old. That means that if all of these plants that are operating 25+ years after their designed retirement date were to shut down today, we'd be ~6,000 megawatts short of the 15-year AVERAGE peak summer load, and ~10,750 megawatts under our highest ever recorded peak which occurred in 2006. This means we have to rely on out-of-state production just to keep our lights on all summer, which if the winter of 2000-2001 taught us anything, is an extremely bad idea. I fully expect that within 10 years it will be unusual for a California home or business to make it a full week without losing power for at least several hours.

      The cheapest and most natural solution is to approve new natural gas generation, especially at the older plant sites, but require a per-megawatt battery storage quota at each new plant. By doing this, the generator makes money from the new natural gas plant, in addition to a bit extra for the battery capability. In exchange, the personel needed to operate and maintain a gas plant are more than capable of taking care of the batteries and the existing infrastructure (power/gas lines), is salvaged – thus saving the rate payer from having to pay for new lines to be run to a new plant location. In the next several decades as new renewable generation enters the grid the gas plants will naturally run less due to being unable to compete with the cheaper power that renewables provide. This solution then, will increase capacity, reliability, and much-needed battery storage, while gently phasing out fossil plants rather than trying to discourage their use via higher environmental standards which only result in decreased reliability and higher rates for customers.

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