The chief executive of the California power grid went to Washington D.C. on Wednesday to tell the national industrial media that the state would have enough power to meet this summer’s peak demands. This is good news in itself, especially for those of us who survived the great California electrical shortages of 2001, when the state apparently could not access enough power to meet a steadily growing wattage demand.
Since ongoing measures to increase the state’s energy supply have been largely out of the headlines in recent years, however, it is the long-term picture that looms most important for California. And as it turns out, the numbers are actually looking rather encouraging, although investment needs to continue indefinitely because demand is growing by about 1,000 megawatts per year.
“There is time to make the necessary expansion, but not a minute to waste,” Yakout Mansour, head of the California Independent System Operator, told The Examiner.
On one hand, California is now building more new generation plants and transmission lines than any other state in the U.S. Between the summers of 2005 and 2006, 1,900 megawatts of energy capacity will have been added to the system. But due to scheduled shutdowns of aging and polluting generation facilities, the actual net gain for this summer is only 400 megawatts, not quite enough to meet that annual 1,000-megawatt increase in demand.
This gap could be closing within the next decade because there are some $4 billion in major new projects now under preparation throughout the state. Three of Northern California’s most notorious transmission line bottlenecks, in Vacaville and Oakland, will be fixed by recently approved upgrades expected to save ratepayers $30 million per year.
Investment to keep up with California’s energy demands also brings direct benefits to ratepayers. Since last year, state utilities have nearly halved the $1 billion in costs associated with maintaining supply reliability. California’s average megawatt-hour in 1998 cost $75. That dropped to $45 last year, if the spike in natural gas costs is removed from the equation.
Mansour points out that California require a highly diverse energy system in order to safeguard against unpredictable changes. For example, out-of-state energy sources are generally cheaper, but they cannot be accessed without adequate transmission line capacity.
It is also necessary to retain sufficient local in-state generation capacity to avoid overdependence on market fluctuations. When natural gas prices were low, numerous gas generation plants were built. Now record-high natural gas prices are a drain on affordability and demonstrate why it is unwise to rely too much on any one source of energy.
Encouragingly, California seems to have learned the hard lessons of 2001, and such a shortfall is unlikely to sabotage the state’s economy again.