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Electricity Deregulation and the California Energy Crisis. Electricity and energy What happened in California? Utility deregulation in NE and Maine Future trends, including renewables The big picture. What is electricity?. - PowerPoint PPT Presentation
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Electricity Deregulation and the California Energy Crisis
• Electricity and energy
• What happened in California?
• Utility deregulation in NE and Maine
• Future trends, including renewables
• The big picture
What is electricity?
• Electricity is a naturally occurring physical force created by the interaction of negatively and positively charged particles.
– Benjamin Franklin, 1752 (electricity transmitted from lightning to iron spike to key)
– Michael Faraday, 1831 (generated electricity by rotating magnets around a coil of wires)
– Thomas Edison, 1882 (world’s first electricity-generating plant, NY)
CALIFORNIA DEREGULATIONThen Now
• Utilities owned generating plants, prices regulated
• Utilities owned transmission lines
• Utilities own distribution systems to homes and businesses
• Plants sold to private companies. Prices set at auction by CA Power Exchange.
• Transmission lines, grids in Independent System Operator (np)
• Utilities still own distribution systems
California Energy CrisisWholesale Electricity Costs
• 1999 $7.4 billion
• 2000 $27 billion
• 2001(6mo) >$20 billion
– CA now has long-term contracts (peak purchase)
Who are the Players?
• Energy producers (natural gas, nuclear, coal, other)
• Marketers/Traders (buy-sell energy and/or buy-sell electricity)
• Power Plants (Utilities and others)
• Transmission(Utilities, ISOs, RTOs)
• Distribution (Utilities to users)
• Regulators (State and Federal)
Who to blame?
• Generating capacity tight; few non-utility owners; few new plants
• Long–term contracts not allowed; spot purchases required• Demand increased 25%; supply increased 6% in 10 yrs• Transmission lines/infrastructure constraints• Natural gas prices much higher than normal• California electricity rates frozen (at utilities’ request);
couldn’t pass price increases on to consumers• Generators and fuel suppliers were reluctant to sell to
bankrupt utilities• Poor sight by FERC, state regulators
New England Utilities
• Nine plants built since 1998. 30 plants under construction.
• Demand at a steady pace.
• Increased dependence on natural gas.
• Utilities use long term contracts (20% spot)
• NE imports from other states (Canada, also)
New Approach to Deregulation
• Electricity is a special commodity
• Better wholesale market design (less spot market use)
• Create real-time pricing for consumers
• Provide transparency, efficiency, choice
• Add co-generating capacity/rethink size
• Think distributed generation/”off grid”
• Improve transmission infrastructure
• Use gas storage to moderate volatility
• Re-evaluate regulatory system
• Use life-cycle analyses• Anticipate surprises
New Utility Generating Unitsby year of entry into service
1,000
750
500
250
01994 1995 1996 1997 1998 1999 2000
1,250
1993
100
75
50
25
0
125Number ofnew units
Maximumnew size, MW
Sources: US Energy Information Administration; Rocky Mountain Institute
Power Shopping
A variety of distributed-generation technologies are available or under development. Costs of producing power can vary widely, depending on location, size, use and fuel prices, but here are estimates:
Technology Description Cost*
Photovoltaics (solar panels) Converts sun lights into electricity 22-40 cents Wind turbines Wind blades power electricity-producing turbines 4-28 cents Diesel generators Similar to truck engines, also run on natural gas 7-12 cents Microturbine Scaled-down jet engines that run on natural gas,
methane or waste gases 7-10 centsFuel cells Chemical reaction produces electricity and water No commercial production
* Per kilowatt-hour, without subsidies. For comparison, the average U.S. retail electricity price earlier this year 6.9 cents per kwh.Source: Department of Energy; National Renewable Energy Laboratory; American Wind Energy Association; manufacturers
From WSJ, Sept 17, 2001 Think Small by Robert Gavin
Marketing Renewables• Life cycle analysis/resource equity
– Goal of true cost of all energy sources
– Level playing field
• Co-generation– How/should/could renewables integrate with fossil fuels
– Production, storage, utilization issues
– Scale issues (distributed energy)
• Energy price and supply– Conservation, efficiency, volatility, reliability, technology
– BP(solar), Shell(hydrogen, geothermal), Texaco(fuel cells)
– Choice, diversity
Food for Thought• 40% of world not on grid (>2 billion people)
• Increased energy demand in China (5-8%/yr)
• 20,000 gas wells drilled in US last 12 mos; deliverability increased by 4%
• What happens when the world economy recovers?Demand>supply