Keeping the Lights on Keeping the Lights on in Californiain California
Part 1: Energy Update Study OverviewPart 1: Energy Update Study Overview
Part 2: Energy Consensus Discussion Part 2: Energy Consensus Discussion
January 19, 2006 & Unit MeetingsJanuary 19, 2006 & Unit Meetings
Energy Update Study GuideEnergy Update Study Guide
Available on the League’s Available on the League’s website at:website at:
http://ca.lwv.org/lwvc/edfund/citizened/natres/http://ca.lwv.org/lwvc/edfund/citizened/natres/energy/index.htmlenergy/index.html
Tonight’s AgendaTonight’s Agenda IntroductionIntroduction PresentationPresentation Discussion QuestionsDiscussion Questions
Current Energy PositionCurrent Energy Position
Adopted in 1978; updated in 1980Adopted in 1978; updated in 1980 Support state energy policy that promotes Support state energy policy that promotes
conservationconservation Foster renewable energy sources (tax Foster renewable energy sources (tax
incentives and loan guarantees)incentives and loan guarantees) Consider energy-development impacts on Consider energy-development impacts on
public health/safety/environmentpublic health/safety/environment Decrease reliance on oil and natural gasDecrease reliance on oil and natural gas
Current Position Current Position Does Not Address…Does Not Address…
Consumer rights/protectionConsumer rights/protection Role of market forcesRole of market forces Energy industry structureEnergy industry structure Integrated energy planningIntegrated energy planning Direct access/customer choiceDirect access/customer choice Role of state agencies/one energy agencyRole of state agencies/one energy agency
California’s Demand for California’s Demand for Electricity and Natural GasElectricity and Natural Gas
Annual Electricity ConsumptionAnnual Electricity Consumption
200,000
220,000
240,000
260,000
280,000
300,000
320,000
340,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Year
GW
h Historic
Projected
Peak Electricity DemandPeak Electricity Demand
40,000
45,000
50,000
55,000
60,000
65,000
70,000
75,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Year
MW Historic
Projected
Natural Gas DemandNatural Gas Demand
0
1000
2000
3000
4000
5000
6000
7000
8000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Year
Mil
lio
n C
ub
ic F
eet
per
Day
Power Generation
Industrial Demand
Commercial Demand
Residential Demand
State PopulationState Population
27,000
29,000
31,000
33,000
35,000
37,000
39,000
41,000
43,000
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Th
ou
san
ds
Year
Po
pu
lati
on
Historic
Projected
Utility Programs’ Utility Programs’ Energy-Efficiency Savings Energy-Efficiency Savings
0
500
1000
1500
2000
2500
3000
2000 2001 2002 2003 2004 2005 2006 2007 2008
Year
An
nu
al N
et S
avin
gs
(GW
h/y
r)
PG&E
SCE
SDG&E
California’s Electricity California’s Electricity SystemSystem
Electricity supply is not Electricity supply is not a natural resource. a natural resource.
The “Big Machine”The “Big Machine”
California uses a diverse mix California uses a diverse mix of fuels for electricity generation.of fuels for electricity generation.
Natural gas: 34%Natural gas: 34% Nuclear: 13%Nuclear: 13% Hydro: 11 %Hydro: 11 % Coal 10%*Coal 10%* Other renewables: 10%Other renewables: 10%
* Out-of-state coal plants owned/controlled by * Out-of-state coal plants owned/controlled by California utilities are counted as in-state California utilities are counted as in-state power.power.
California imports 22% of its California imports 22% of its electricity supply.electricity supply.
Transmission lines enable California Transmission lines enable California to import and move electricity to import and move electricity
around the state.around the state.
California’s Electricity California’s Electricity Market and Regulatory Market and Regulatory
StructuresStructures
In the Old Days…In the Old Days…
Vertically integrated electric utilitiesVertically integrated electric utilities GenerationGeneration TransmissionTransmission DistributionDistribution
Monopolies with their own service territoriesMonopolies with their own service territories Investor owned or publicly ownedInvestor owned or publicly owned
Competition only between IOUs and public Competition only between IOUs and public power.power.
In the old days…In the old days… IOUs earned their rate of return from IOUs earned their rate of return from
infrastructure investments: an incentive to infrastructure investments: an incentive to overbuild. overbuild.
The regulatory process for approving “rate The regulatory process for approving “rate base” additions was always controversial. base” additions was always controversial.
The solution? “Let the market decide” when to The solution? “Let the market decide” when to build new generation and take the financial build new generation and take the financial risks.risks.
Electric Market Structure TodayElectric Market Structure Today
California Independent System Operator Other California
Control Areas (LADWP, SMUD, IID)
IOUsSome
Municipal Utilities
ESPs
Customers of these municipal utility-run
control areas
Direct Access Customers
IOU Customers
Federal and Municipal
Utility-Owned Generation
IOU-Retained Generation
In-state,Merchant-
owned Generation,
including QFs
Out-of-State Generation
Municipal Utility Customers
CA’s Electricity Regulatory StructureCA’s Electricity Regulatory Structure
Electricity Oversight
Board
Energy Commission
Public Utilities Commission
Independent System
Operator
Governor and LegislatureFederal Energy
Regulatory Commission
Energy Service
Providers
Investor-owned Utilities
City Councils or
Boards of Directors
Community-Choice
Aggregators
Publicly Owned Utilities
Wholesale Generators
Electric System Electric System Adequacy and ReliabilityAdequacy and Reliability
Growth in peak demand drives…Growth in peak demand drives…
Electricity supply Electricity supply contractingcontracting
Infrastructure Infrastructure investmentsinvestments Power plantsPower plants Transmission and Transmission and
distribution linesdistribution lines Natural gas Natural gas
pipelines and other pipelines and other facilitiesfacilities
0
500
1000
1500
2000
2500
3000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
(Multi-day, Daily Load Profiles)
Electricity System Electricity System Reliability needs: Reliability needs: ►►Supply AdequacySupply Adequacy►►Infrastructure Infrastructure Adequacy Adequacy ►►Regional Coordination/ Regional Coordination/ Communication Communication
Without one of these …Without one of these …
Outages occur whenever Outages occur whenever demand exceeds supply.demand exceeds supply.
Generator outages Generator outages Transmission line outagesTransmission line outages Other component outagesOther component outages
Risk of outages is highest during California’s Risk of outages is highest during California’s summer season. summer season.
Strategies to Prevent Strategies to Prevent System Overloads/OutagesSystem Overloads/Outages
Extra generation is lined up in advance to Extra generation is lined up in advance to replace the largest generator outage.replace the largest generator outage.
Alternative transmission lines are Alternative transmission lines are identified in advance to carry the biggest identified in advance to carry the biggest import in the event of a line loss.import in the event of a line loss.
Demand-side managementDemand-side management
Blackouts are caused by Blackouts are caused by cascading overloads.cascading overloads.
Reliability standards seek to prevent outages. Reliability standards seek to prevent outages.
California must meet the same North American Electric Reliability Council standards as the other states and provinces in the Western Interconnection.
Electricity imports & exports flow Electricity imports & exports flow between control areas.between control areas.
Control areas within Control areas within California must meet California must meet West-wide reliability West-wide reliability standards standards
34 control areas in the West:34 control areas in the West: Operate transmission Operate transmission
systems systems Balance supply/demand Balance supply/demand
with “real time” power with “real time” power purchases.purchases.
Consumer “demand response” Consumer “demand response” would enhance system reliability too.would enhance system reliability too.
California’s California’s Natural Gas SystemNatural Gas System
California Natural Gas FactsCalifornia Natural Gas Facts
California consumes 2% of the world’s California consumes 2% of the world’s natural gas production.natural gas production.
Average daily demand: 6 billion cubic Average daily demand: 6 billion cubic feet feet (10 Bcf per day in winter)(10 Bcf per day in winter)
One-third of electricity in California is One-third of electricity in California is generated from natural gas.generated from natural gas.
California California imports 85% imports 85% of its natural of its natural gas supply.gas supply.
Interstate Interstate pipelines pipelines enable enable California California to to competecompete for the for the lowest-cost lowest-cost supplies.supplies.
U.S. Gas Production TrendsU.S. Gas Production Trends(increased drilling, flat production)(increased drilling, flat production)
0
5,000
10,000
15,000
20,000
25,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Gas
Pro
du
ctio
n (
Bcf
) an
d W
ells
Dri
lled
Dry Natural Gas Wells Drilled Dry Natural Gas Production (Bcf)
Why the interest lately Why the interest lately in liquefied natural gas?in liquefied natural gas?
Canadian and Lower 48 states’ gas production Canadian and Lower 48 states’ gas production is not keeping pace with demand. is not keeping pace with demand.
Wellhead prices are rising.Wellhead prices are rising. Market prices are high and volatile.Market prices are high and volatile. LNG links U.S. consumers to transoceanic gas LNG links U.S. consumers to transoceanic gas
supplies from many countries.supplies from many countries.
LNG is natural gas in liquid form.LNG is natural gas in liquid form.
Cryogenic liquid Cryogenic liquid
(-260(-260ooF)F) 1/600th volume 1/600th volume
of natural gas of natural gas Can not ignite or Can not ignite or
explodeexplode
A West Coast LNG import terminal A West Coast LNG import terminal would enable California to access would enable California to access
Pacific Rim supplies.Pacific Rim supplies.
Proposed Proposed Terminals Terminals
Electricity & Natural Gas Electricity & Natural Gas AffordabilityAffordability
Electric Bill Cost ComponentsElectric Bill Cost Components Generation Generation (the largest cost component)(the largest cost component) Transmission and distributionTransmission and distribution Energy Commission surcharge Energy Commission surcharge Nuclear power plant decommissioningNuclear power plant decommissioning ““Deregulation”-inspired expensesDeregulation”-inspired expenses
Public goods charges Public goods charges (renewable energy, R&D, energy (renewable energy, R&D, energy efficiency, low-income)efficiency, low-income)
Competitive transition charge Competitive transition charge Rate-reduction bond chargeRate-reduction bond charge DWR bond chargeDWR bond charge
Electricity RatesElectricity Rates Rate classes vary.Rate classes vary.
Residential, commercial, industrial, agricultural, Residential, commercial, industrial, agricultural, street lighting, etc.street lighting, etc.
Rate structures vary by customer class. Rate structures vary by customer class. Energy charge (cents per kilowatt-hour)Energy charge (cents per kilowatt-hour) Demand charge (dollars per kilowatt)Demand charge (dollars per kilowatt) Time of useTime of use InterruptibleInterruptible
All rates should give “feedback,” stimulating All rates should give “feedback,” stimulating conservation behavior, when needed.conservation behavior, when needed.
Residential electric rates Residential electric rates are lousy price signalsare lousy price signals
because…because… May be subsidizedMay be subsidized Generation costs vary hourly and by Generation costs vary hourly and by
location, but rates are just averages of location, but rates are just averages of these costs.these costs.
In the future, even residential rates may In the future, even residential rates may vary hourly and by location.vary hourly and by location.
Natural GasNatural GasCost ComparisonCost Comparison
(2002 versus 2005)(2002 versus 2005)
2002 Natural Gas Price Components2002 Natural Gas Price Components(in U.S. Dollars per 10 therms,)(in U.S. Dollars per 10 therms,)
WellheadPrice
Begin InterstatePipeline
End Interstate Pipeline
CA Border
$1.91
$0.12
$2.03
$1.08
$3.11
$2.42$0.43
$5.53$3.54
Utility distribution charges
$3.36
$0.25
Gathering/ conditioning
charge
Transportation charge
Electric Generators Industry
Core Customers
2005 Natural Gas Price Components 2005 Natural Gas Price Components (in U.S. Dollars per 10 therms, PG&E only)(in U.S. Dollars per 10 therms, PG&E only)
WellheadPrice
Begin InterstatePipeline
End Interstate Pipeline
CA Border
$11.48
$0.12
$11.60
$.40
$12
$4.08$0.40
$16.08$12.40
Utility distribution charges
$12.37
$0.37
Gathering/ conditioning
charge
Transportation charge
Electric Generators Industry
Core Customers
Environmental ImpactsEnvironmental Impactsof California’s Energy Use of California’s Energy Use
and Infrastructureand Infrastructure
Water-Energy RelationshipsWater-Energy Relationships
Clean water needs Clean water needs a lot of energy:a lot of energy: DeliveryDelivery TreatmentTreatment HeatingHeating
Water consumes Water consumes 20 percent of 20 percent of California’s annual California’s annual electricity electricity production. production.
Water-Energy RelationshipsWater-Energy Relationships
Water is used to generate electricity.Water is used to generate electricity. Water may be used to cool thermal power Water may be used to cool thermal power
plants.plants. Saving water saves energy and vice versa.Saving water saves energy and vice versa. Desalination would increase water supply, Desalination would increase water supply,
but is energy intensive.but is energy intensive. Water and energy are interrelated, but Water and energy are interrelated, but
planning is not integrated.planning is not integrated.
Global Climate ChangeGlobal Climate Change
Warming trend for past 50 yearsWarming trend for past 50 years Greenhouse gas produced primarily from Greenhouse gas produced primarily from
fossil-fuel burning (cars, power plants)fossil-fuel burning (cars, power plants) Potential effects:Potential effects:
More rain, less snowMore rain, less snow More hot daysMore hot days Rising sea levelRising sea level Worse air qualityWorse air quality Higher fire dangerHigher fire danger
State’s Response to Global Climate ChangeState’s Response to Global Climate Change
Fossil-fueled power-supply bids increased by Fossil-fueled power-supply bids increased by CPUC’s “greenhouse gas adder” CPUC’s “greenhouse gas adder” $8 to $25 per ton of carbon emitted $8 to $25 per ton of carbon emitted
June 1, 2005 Governor’s Executive OrderJune 1, 2005 Governor’s Executive Order 2010 GHG level to be at 2000 level.2010 GHG level to be at 2000 level. 2020 GHG level to be at 1990 level.2020 GHG level to be at 1990 level. 2050 GHG level to be 80% below 1990 level.2050 GHG level to be 80% below 1990 level.
Discussion QuestionsDiscussion Questions1.1. How much reliability are you How much reliability are you
willing to pay for?willing to pay for?2.2. Given our large % of electricity Given our large % of electricity
generated by natural gas and generated by natural gas and the recent rise in natural gas the recent rise in natural gas prices…prices…What should we doWhat should we do??