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PA IN THE MEDIA

How to keep the lights on in California

Mark Repsher, energy markets expert at PA Consulting, discusses California’s power grid and the need for better coordination between power markets.

Click here to read the full Wall Street Journal article

As California keeps facing electricity shortages, the discussion around its grid often veers to extremes.

On the one hand, some see it as a sign that the state has moved away too quickly from natural gas and nuclear power, which can run on command. Others see the heat waves and the tragic wildfires as further evidence that the state should move even faster toward a carbon-neutral future based on intermittent renewables. That misses some nuances.

In particular, California’s high reliance on electricity imports has received attention and criticism. But the state has consistently imported roughly 30% of its total power needs from outside markets, even in previous years when renewables accounted for a smaller share of its overall mix, according to data from the California Energy Commission. This makes sense from a locational standpoint: California is densely populated and has high power demand, while neighboring Arizona, Nevada and Utah have swaths of unpopulated land suited for generation.

Should California then have shut down less natural gas and nuclear power? That is definitely part of the issue, and future shutdowns might need to slow. However, there were legitimate reasons for some closures, too. For example, the Diablo Canyon nuclear-power plant, a hot topic of previous debates, is scheduled to shut by 2025 because of its proximity to seismic fault lines. Given all the other natural disasters California is dealing with now, it seems wise to avert such unnecessary risks. And compared with other markets, California’s natural gas-fired power plants are neither too old nor too young: Its combined-cycle power plants are just a year older than the 14-year average across different power markets, according to S&P Global Market Intelligence.

Battery storage is certainly part of the solution, though the 500 megawatts of operational storage in California is a drop in the ocean compared with the 15,000 megawatts that the grid operator says it might need to reach its goal of eliminating carbon emissions from power generation by 2045. State regulators have approved roughly 1,000 megawatts of new storage.

What then? Part of the answer has to be in the market design. California is generally able to manage heat waves through imports. In a year such as 2017, in which demand also hit record levels, the state still could get by because the heat wave was more localized. This time around, the heat affected surrounding states too, reducing the amount of power California could import.

But at least some of the shortage is addressable through market rules.

There also needs to be better coordination between power markets, especially as California’s neighbors also are shifting away from fossil fuels. Regional heat waves could leave more than just California strained in future years. Mark points out that California might be better off coordinating with other regions weeks or months ahead of time, rather than in real time as it stands now.

The market also could come up with better ways to incentivize big electricity customers to curb usage, which could be more cost effective than building brand new gas-fired power plants. The Texas power market, which has relied on wind for 23% of its electricity this year, averted rolling blackouts in 2014 because of its demand-response program, which pays large commercial and industrial customers for lowering usage during peak hours.

There is no silver bullet for California’s power woes—a solution has to be as multifaceted as the problem itself.

 

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