Keeping California's Lights On

Infocast's Western Power Supply Forum II was attended by about 100 executives and techies representing western utilities, consultancies, and research firms like EPRI and Lawrence Berkeley Lab. Topics included power supply adequacy in the Western US, and solutions ranging from new transmission, new generation, and demand response/energy efficiency.

The theme of the conference? The west is short on power infrastructure. With record heat and demand on the California system this past summer, we were lucky that there was enough hydro and other generation available to keep the lights on. However, if we see another low hydro year (a draught) in the Northwest in combination with hot weather, we could experience rolling outages again. New environmental initiatives make it increasingly difficult to build new large scale generation certainly in California, and throughout the West.

As has been the case for years, electric transmission is particularly constrained. Even if there are tens of developers building windfarms in Wyoming, they can't get the power to where it needs to go. While a lot is being done, and a lot more is being discussed, it is unclear to me how all this infrastructure will be implemented without significant increase in rates over the next decade.

Most notably, demand in the Arizona/New Mexico region is growing rapidly, and the folks at Arizona Public Service are scrambling for more capacity. Although the region has its own coal supply, the Utility is finding it more cost effective to rely on coal-fired power plants in Wyoming, and transport the power over new transmission lines that cross all of eastern Colorado to deliver power to the growing Southwestern cities including Phoenix.

AZPS is preparing to invest $3 billion in new transmission assets to meet these needs.

San Diego Gas & Electric invested tons of cash in the new Sunrise Powerlink. This line will deliver power from the Imperial Desert of Southeastern California west to San Diego. Something like $40 million was spent on working with intervenors alone. The other $1 billion + will be spent on the line itself.

So what's next? I think rates will ultimately go up to cover the cost of these infrastructure improvements. I think independent transmission developers like Trans-Elec are in an excellent position to provide this infrastructure. In the meantime, distributed generation including Solar will become more cost effective by comparison to increasing electric cost. Not to mention, solar is imperative both to meet environmental standards, and simply to meet the regions demand for energy. However, with the cost of silicon, solar will continue to be in the early adoption stage for a while.

Demand side measures like energy efficiency and demand response (time of use pricing) will also take an increasing role. Like $3 gasoline, 0.70/kWh critical peak electric rates will get consumers to consider how much energy they are actually using, and they'll turn some lights off.