To Keep Lights on in LA, State’s Aliso Canyon Action Plan Must Fix Energy Markets, Maximize Smart Energy Solutions

By Tim O’Connor and Lauren Navarro

Ongoing fallout from the catastrophic failure at the Southern California Gas Company’s Aliso Canyon storage facility is exposing a critical weakness in the state’s energy system. Overdependence on natural gas – and on one provider of that gas – means we don’t have the flexibility we need to cope if things go wrong. And now that they have gone wrong, because of SoCalGas’ mismanagement of the Aliso Canyon storage facility, a group of state agencies says the region could be facing power shortages this summer as a result.

A new report released today by the California Energy Commission (CEC), California Public Utilities Commission (CPUC), California Independent System Operator (CAISO,) the Los Angeles Department of Water and Power (LADWP) and Southern California Gas (SoCalGas) describes the problem. While a separate report released by CEC, CPUC, CAISO and LADWP, begins to lay out the short-term response plan. (Some of the efforts already under way are documented here, here, and here).

To minimize these risks now and avoid them in the future, officials need to diversify California’s electricity portfolio and free up utility markets to deliver a better mix of assets – gas, renewables, distributed generation, and energy efficiency – to help keep supply and demand in balance on the grid, and make sure the system stays up and running. SoCalGas’s monopoly over energy supply in southern California must end.

A symptom of a larger problem

Sadly, this situation shouldn’t come as a surprise. We’ve come up against the limits of the gas supply system even before the Aliso disaster. The better news, such as it is, is that state officials have already put some good tools in place that will help the electricity grid operators keep the lights on during peak demand times this summer. But if the agencies today are right, it’s going to be a nail-biter.

Right now, Southern California depends on a single fuel, natural gas, for the bulk of the region’s electricity. And because utilities depend on quick-firing gas power plants to handle shifting loads, gas is even more essential when it comes to balancing peak demand. In fact, California has continued to approve more natural gas, locking in an even greater reliance, even though more diversified sources are available that are cheaper and less polluting.

Diversifying the energy mix for more resilience

The problem is, the utility market as its currently designed doesn’t make it easy for these other sources to compete, and the system doesn’t fully recognize – or reward – the value that diversified assets bring in terms of increased reliability. For example, fast-acting demand response – which incentivize customers to reduce their load at peak times – and electric energy storage don’t receive unbundled payments associated with the added resilience and other advantages they offer.

Maintaining a stable and reliable electricity system will require short-term actions by regulators and utilities, including:

• Deploying demand response, an energy conservation tool that empowers people to shift their energy use to times of day when there is less demand on the power grid or when renewable energy is more abundant. Demand response programs like California’s successful Flex Alert program should be maximized for increased grid reliability.

• Time-of-use electricity (TOU) pricing rewards people who shift some of their energy use to times of the day when renewable energy is plentiful and electricity is cheaper. Time-of-use rates better reflect the true cost of electricity, which fluctuates throughout the day, and empowers people to take control of their energy use and costs. The state is well on its way to automatically transition all residential customers to TOU in 2018. In the meantime, utilities need to better educate consumers so they take full advantage of the benefits.

• Energy Efficiency is one of the most cost-effective and fastest ways to reduce peak energy and gas use. Over the last two decades, Los Angeles has made huge strides, keeping energy demand relatively flat, despite adding over a million new residents. Last year, California committed to doubling savings from efficiency programs and upgrades as part of the SB 350, building on its successful history of promoting energy efficiency measures that have saved consumers billions of dollars and helped reduce electricity demand by more than 15,500 megawatts – equivalent to the output from more than 30 large power plants.

• More renewable energy like wind and solar power, as required by SB 350, will diversify California’s energy portfolio. Combined with tools to reduce peak energy demand, these abundant energy resources will build a cleaner, more resilient energy system.

• Developing a reliability “safety net” by connecting California’s electricity market with other western states allows the state to bring more reliability to the system with more wind and solar both at home and across the West.

Moving forward, however, these solutions alone aren’t nearly enough. Over the next few years, we need to create more competition among energy sources, and give consumers more and better access to energy choices. Measures like these will spur more alternatives that improve reliability, reduce pollution, and meet electricity demand at lower cost.

The bottom line is, our best guard against the risk of dependence on natural gas, especially to meet peak electricity demand, is a diversified portfolio of energy options, and we shouldn’t sell ourselves short. The potential for clean energy solutions in California can transform the state’s power system, and we can, and should, leverage our abundant clean renewable resources to make reliability issues a thing of the past.