Is California Firing on Too Many Cylinders?

Electricity CurrentsA survey of current industry news and developments

Is California Firing on Too Many Cylinders?

May 2013, Vol. 26, Issue 4 1040-6190/$–see front matter 1

Is California’s multiple self-imposed energy and

environmental policies pushing the state towards another

crisis? That’s the view lately of critics of the state’s

ambitious policies. Others insist that the state is on the

correct path and that the alarmist rhetoric gets in the way

of addressing the adjustments that need to be made.

Two targets, both set for 2020, stand out among

many. The first, the state’s climate bill, passed in 2006,

requires statewide greenhouse gas emissions to be

reduced to the 1990 level by 2020. It is the only binding

unilateral climate bill in effect anywhere in the U.S. –

and among the most ambitious globally. The other is a

requirement to supply fully one-third of all retail

electricity sales in California from new renewable

resources, also by 2020. The key word is new, which

means that existing renewable resources do not count

towards the goal.

In Electricity Currents This Month:

Is California Firing on Too Many

Cylinders? . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Eyeing Building Sector, Obama Vows: Let’s

Cut Energy Waste in Half . . . . . . . . . . . . . . . 1

Running on Cheap Natural Gas: Trains,

Ships, Trucks, Power Plants . . . . . . . . . . . . . 4

Europe Charts More Flexible, Real-Time –

and Complex – Grid . . . . . . . . . . . . . . . . . . . 4

Electricity Currents is compiled from the

monthly newsletter EEnergy Informer pub-

lished by Fereidoon P. Sioshansi, President

of Menlo Energy Economics, a consultancy

based in San Francisco. He can be reached

at [email protected].

Eyeing Building Sector, Obama Vows:Let’s Cut Energy Waste in Half

In his State of the Union address to the

Congress in mid-February 2013, President

Obama set a new goal for America. He said,

‘‘Let’s cut in half the energy wasted by our

homes and businesses over the next 20

years.’’ The President did not dwell on how

the goal can be achieved or who will be in

charge – he simply stated a vision and set a

target – and that is a good start.

Not surprisingly, Steven Nadel, executive

director of the American Council for an

Energy Efficient Economy (ACEEE), said the

president’s call to cut energy waste in half

was ‘‘heartening,’’ adding, ‘‘By supporting

Continued on page 5

mailto:[email protected]

in part due to new stresses, demands, and service

quality standards that we have come to expect

from the electricity grid. It drives the interest in

the Smart Grid, smart meters, dynamic pricing,

demand response, and so on.

Moreover, the growing interest in integrating

vast amounts of intermittent renewable generation

– among other things – is stressing the grid to

perform functions that it was not originally

designed to do. Finally, the information revolution,

which is gradually pervading the power sector,

promises to offer new and ingenious ways to

change the ways we manage energy generation,

transmission and consumption.

In January 2013 the European Electricity Grid

Initiative (EEGI) released a report that outlines

what will be required of the grid of the future, and

what it will take to develop such a grid.

Ironically, the report’s very first reference is to a

paper published in 1978 by MIT’s Fred Schweppe,

who many regard as a pioneer in the burgeoning

field of electricity market design.

The physical fundamentals of power flow – from

central generating plants to major load centers

through a complex transmission and distribution

network – has not changed. But everything around

and about the network, including the direction of

the power flows, has. This, in short, requires new

thinking on how the pieces fit together so that the

whole system will work efficiently and reliably.

The report highlights four key changes that

must be considered in designing how the grids of

the future will need to operate to cope with the

additional complexities and demands placed on

them:

� From ‘‘supply-follows-load’’ to ‘‘load-follows-sup-

ply,’’ which encompasses the growing interest in

customer demand participation (DSP), demand

response, dynamic pricing, and a host of other efforts

designed to adjust or manage demand to match what

will increasingly be intermittent, unpredictable, and

non-dispatchable supply;

� Increased real-time balancing, which refers to the

trend towards more intermittent renewable as well

as distributed generation;

� Introduction of aggregators, which refers to the

emerging role of intermediaries who can contribute

to the preceding two requirements; and

� Multi-layer control structure, which is referred

to as ‘‘systems of systems.’’

As EU-wide roadmaps go, the report is written

at a high level of abstraction, yet its underlying

message, that the time has arrived for fundamental

rethinking about the grid of the future, is spot on.

Many of the issues highlighted by EEGI are the

same as the debate about the changing role of the

grid in California confronting a growing proportion

of renewable and distributed generation, described

earlier in Electricity Currents this month.

The same challenges will be facing grid operators

in Germany, California or many other regions who

are intent to transition to a low carbon energy mix

with a significant renewable component. One of the

main take away points is to increasingly focus on

managing and shaping demand, rather than

adjusting supply. With so much generation coming

from non-dispatchable resources including

distributed generation that is a sensible way to go. &

http://dx.doi.org/10.1016/j.tej.2013.04.014

These two targets, plus a number of other

mandates, have put California’s energy sector,

particularly the electricity generation sector, into

overdrive. Electricity retailers, who have to meet

the 33 percent new renewable target, have been

signing long-term contracts with renewable

developers, who have been working overtime to

deliver.

The resulting frenzy has made California’s

generation mix, traditionally clean and green by

Is California Firing on Too Many Cylinders?

Continued from page 1



national and international standards, even cleaner

and greener. California’s generation mix for

November 2012, a light month with mild weather,

shows that more than one-third was generated

from carbon-free resources; that is, nuclear and

renewables, including existing hydro. The balance

was supplied from relatively clean-burning natural

gas plants. Petroleum and coal accounted for a

mere 0.6 percent of the mix. California has no coal-

fired plants and is essentially phasing out all long-

term contracts to import coal-generated power

from out of state. Hence this portion is heading to

virtual zero.

In late February 2013, the grid operator,

California Independent System Operator (CAISO),

organized a strategy summit with the energy

regulator, California Public Utilities Commission

(CPUC), the state’s major utilities, private

generators, and other stakeholders to discuss

challenges facing the network as everyone is

rushing to meet the 2020 renewable targets, now

only seven years away, while reducing emissions

to comply with the climate bill.

Surprisingly, the focus of discussion was not

whether the 33 percent renewable target could be

met but rather if it would make the grid unreliable

or overstressed. Few doubt that California will be

able to meet the target per se. In fact, the

consensus of those attending the energy summit

was that California may actually overshoot the

goal. Referring to the 2020 deadline, Robert

Weisenmiller, chairman of the California Energy

Commission (CEC), the agency in charge of energy

policy and planning, offered, ‘‘I think we’re going

to end up closer to 40%.’’

The overwhelming issue was, having installed so

much intermittent renewable generation, would the

grid operator be able to maintain system reliability?

Steve Berberich, CEO of CAISO, pointed out that

California has succeeded in procuring a lot of new

renewable resources and brining it quickly on line.

So the problem is not having enough renewable

generation, but having the wrong kind of

generation, namely too much intermittent capacity.

He said, ‘‘The problem is we have a system now

that needs flexibility, not capacity.’’

Partly because of the massive investment in

renewables, and partly because of the state’s

sluggish economy, California now has an excess of

capacity, as much as 44 percent excess capacity

anticipated for 2014. CAISO projects the surplus to

fall to 20 percent by 2022, a rather generous margin

compared to regions suffering from slim reserve

margins, such as Texas.

The CPUC President, Michael Peevey,

acknowledged that ‘‘action (to address the issues)

is clearly needed,’’ but he said he wasn’t sure

whether the market needs ‘‘small adjustments or a

major overhaul.’’

In an article in February in The Wall Street

Journal, longtime energy reporter Rebecca Smith

referred to the California electricity crisis of 2000–

01 and asked if the state was heading towards

another man-made crisis ‘‘brought on by its

growing reliance on wind and solar power.’’ That,

and other alarmist articles like it, exaggerates the

challenges facing the grid operator in California,

and many others facing equally fast-rising

renewable generation in other parts of the world,

notably Germany.

The following day, Arno Harris wrote a rebuttal

to the WSJ article, which appeared in his Clean

Energy Future Blog. By examining California’s load

and resources for Feb. 27, 2013, Harris points out

that California’s load peaked at around 29.5 GW –

February being an off-peak month – with CAISO

having 32–38 GW of generation capacity at its

disposal at different times during the 24-hour

period.

During that period, renewable resources

contributed under 3.5 GW, including some

geothermal and hydro, the latter being perfectly

dispatchable. That reduces the ‘‘intermittent’’

supply to about 2.3 GW or less than 10 percent of

peak daytime load and less than 8 percent of the

maximum load. Clearly, California is not ‘‘overly

reliant’’ on wind and solar – certainly for a typical

day in February – and this is clearly not a situation

that can be characterized as being ‘‘out of control.’’

Harris compares California to Germany, which

has a much higher penetration of solar and wind

relative to load, where the grid operator has been

6 1040-6190/$–see front matter The Electricity Journal

able to maintain control even in particularly sunny

or windy months when the intermittent renewable

contribution was 40 percent of the total.

How does Germany make its system work under

such circumstances? By combining intermittent and

dispatchable resources in a way that reflects their

features and strengths. Harris observes that

technical capabilities exist to enable California to

absorb a lot more renewables without threatening

grid reliability.

Harris, like others, points out that the real

problem lies in the way California regulates its

power industry, as described in a recent report from

the Little Hoover Commission, which worried that

‘‘no single state entity is in charge of integrating

initiatives and addressing gaps, decision making is

slow . . . and — most importantly — there is no

consolidated roadmap and decision-making

schedule.’’ In California, the CPUC oversees

procurement and the CAISO oversees reliability.

While they are increasingly trying to coordinate,

there is no systematic technical or economic

optimization in place to balance cost, reliability, and

growth. Complying with California’s landmark

carbon regulation (AB32) will require the state to

reach 80 percent renewables by 2050, the same

target as in Germany.

Harris concludes, ‘‘No one’s saying it will be

easy, but it is important enough that we shouldn’t

just throw up our hands.’’ Surely a matter this

important can be solved with a little ingenuity, grit,

and determination. &


The following day, Arno Harris wrote a rebuttal to the Wall Street Journal article.



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Is California Firing on Too Many Cylinders?