A Free-Market Energy Blog

California Energy Update: Part III

By -- December 17, 2013
  • California Valley Solar Ranch Mothballed Morro Bay Gas-Fired Power Plant
  • California Shifting Power Rate Increases from One Set of Customers to Another
  • California Cap and Trade Accused of Double Counting Emissions
  • Will Warren Buffet’s Hydro Prevent CA Electricity Crisis? Part 1;
  • Will Warren Buffet’s Hydro Prevent CA Electricity Crisis? Part 2
  • Will California’s Small is Beautiful Sink Water (and Energy) Plan?

Morro Bay Power Plant Mothballed by California Valley Solar Ranch – Trading Fish Larvae Kills for Bird and Insect Kills

“Another giant Dinosaur has gone extinct.
An ugly power plant that looks like one, I think.
For 58 years, it has been unnecessary.
Sucking all the fish out of my Estuary.
It took a bank of people who were not afraid to fight.
We punched it in the nose and sent it off into the night.
The final straw was when a pod of Dolphins strayed in.
Got stuck and would up leaving without two of their kin.
Now we can protect our State Marine Reserve.
And have the kind of estuary we deserve.”

– Joey Racano, Morro Bay homeowner and activist, the San Luis Obispo Tribune News, November 8, 2013. [For the readers of MasterResource, Jerry Graf presented an excellent cash-flow analysis of the California Valley Solar Ranch located in inland San Luis Obispo County.]

What is not well known is that the California Valley Solar Ranch is designed to serve customers in the coastal City of Morro Bay where Texas’s Dynegy-owned gas-fired power plant is to be decommissioned by California’s ban on power plants using ocean water for cooling steam turbines. The ban on using “once-through cooling” water is to prevent harm to millions of fish larvae sucked into the 3/8th inch wide water inlet tubes to the plant.

The above clichés in the form of a poem is by a local activist who fought to remove the Morro Bay Power Plant. The activist’s claim that two dolphins were stranded in the power plant’s intake tubes could not be verified in any news report or government document found online.

Little did the above-cited activist realize that his wish might come true in a different way than he expects. The City of Morro Bay plans to acquire the former power plant site for redevelopment. California put a halt to redevelopment in 2011because it was robbing public schools of property taxes.

Thus, the City has plans to partner with Starwood Energy Group to develop the site with an ugly solar or wind power plant that would be mostly immune from environmental lawsuits over killing sea birds or millions of insects, unlike the mothballed natural gas power plant. And ironically, replacing the now-inoperable Morro Bay Power Plant with the California Valley Solar Ranch merely traded harming fish larvae for harming thousands of desert tortoise eggs and millions of flying insects that desert birds and lizards subsist on.

Piecing the two halves of this story together indicates the duplicity and folly of renewable energy and environmental regulation in California.

Read more here.

California Shifting Power Rate Increases from One Set of Customers to Another

As indicated in the above capsule story, California government policy is good at shifting energy and environmental problems around rather than solving them. Another way that California government tries to correct the unequal impacts of its energy and environmental policies is to shift electric power rates from one set of customers to another.

After the famous California Energy Crisis of 2001, California shifted the burden of paying down the $42 billion debt amassed from the crisis onto higher-use ratepayers (e.g., commercial and industrial users). Now that the debt has been paid off, policy makers have decided to reduce power rates for the highest users and raise rates for the lowest users. State Assembly Bill 327 – the Ratepayer Equity Act – is the vehicle for doing so.

California has a tiered electricity rate billing structure where those who use the most pay higher rates and those who use the least pay less.

California is also trying to shift its emerging “Duck Chart” problem of super-peak power rates during 3 hours at sunset in the Spring and the Fall seasons. Shifting from green solar power during the day to conventional gas-fired power at night presents a huge “ramping” problem that will cause power rates to spike during sunset hours. To once again shift this problem elsewhere, California is trying to arrange a bail out of cheap Federal hydropower during the “Ducky” hours from 3:30 to 6:30 pm. (read more on this in post below).

Another example of cost shifting is California’s solar rooftop initiative that has just come to an end. Rooftop solar systems will shift over $1 billion in power bills onto other customers. Assembly Bill 327 authorizes charging rooftop solar customer a $10 surcharge per month to recover some of this subsidy.

Assembly Bill 327 also delays time-of-use billing through smart meters until 2018. Any rate reduction for high use customers would be lost when time-of-use billing kicks in.

The favorite tool in California policy makers took kit is the cost shifting hammer. But, as the saying goes, if all you have is a hammer everything becomes a nail (or is it fail?). 

Read more here.

California Cap and Trade Accused of Double-Counting Emissions

Bloomberg Energy Finance has accused the California Air Resources Board (CARB) of double counting emissions on which its Cap and Trade auction permit allowance are based. Selling too many pollution allowances is causing illiquidity and unsalability of allowances in the trading markets. CARB denies the charge but several other trading and consultant firms have corroborated Bloomberg’s accusations.

Double counting is prone to occur in a natural gas-to-electricity production chain where the same fuel is counted twice. Of course, natural gas is the major competitor to green power. Cap and Trade is supposed to work in the long-term by withdrawing permits, thus forcing industries to either buy increasingly higher-priced permits or reduce pollution. What CARB has done so far instead is to flood the market with permits and collect $396 million in permit fees while failing to reduce an iota of emissions. BCG Environmental Brokerage has raised the issue of whether this double counting might be considered fraud. Gov. Jerry Brown has diverted Cap and Trade revenues into the state General Fund in violation of the law that created the Cap and Trade program by calling it a “loan.”

Read more here.

Will Warren Buffett’s Hydro Prevent CA Energy Crisis? Part 1

California is in the process of creating what it euphemistically calls an “energy imbalance market” to cut off an emerging daily three-hour energy pricing crisis. The crisis is portrayed as a technical problem of how to ramp up the grid fast enough during sunset hours when solar power is facing out. Energy imbalance is the difference between live demand and prearranged, scheduled resources.

To curtail a 3-hour per day “rate shock,” the California Independent System Operator (ISO) is negotiating with the Warren Buffett-owned Pacifi-Corp and Federal hydropower administrations to buy cheap hydropower instead of higher-priced conventional natural gas-fired or coal-fired power from out-of-state providers during superpeak hours during sunset each day.

California already runs an imbalancing market within its borders each day. This new imbalancing market would include members of the Western Interconnection Coordinating Council. What California is after, however, is cheap hydropower from the Bonneville Power Administration, the Western Area Power Administration (Lake Mead, Parker Dam), and Buffett’s scattered hydropower dams in the western U.S. including Lewis River (Washington), North Umpqua River (Oregon), Klamath River (Oregon), and Bear River (Idaho). What California is up to is a “cost shifting” scheme to buy cheap hydropower to bail out the rate shock it has created during three-hours each day as part of its transition to an energy portfolio of 51% green power.

Read more here.

Will Warren Buffett’s Hydro Prevent CA Electricity Crisis? Part 2

Argonne Labs has pointed out several problems with California’s proposed regional electricity rebalancing market:

* It is speculative to assume the Western U.S. grid would commit 100% of its hydropower to California with a “market price risk” of reserving power each day for a time window of 3:30 to 6:30 pm when California may not need it.
* There are limitations on hydropower due to environmental lawsuits to protect fish.
* The only studies of an “imbalancing market” conducted by the U.S. Dept. of Energy are “benefit-studies”, not “cost-benefit studies.” So the true costs of such a market have not been disclosed.
* Independent studies done by the American Public Power Association indicate costs are greater than benefits.
* If the Bonneville Power Administration and Western Area Power Administration do not join California’s imbalancing market the cost savings would be miniscule or negative.
* The western grid is likely to be congested when California needs power at 5-minutes notice to bail itself out from higher power prices created by its shift to green power.
* California’s imbalancing market is a cost-shifting scheme that mainly benefits its three largest regulated electric utilities: So Cal Edison, Pacific Gas & Electric and San Diego Gas & Electric.

California’s green-power mandate already needs a partial bailout of cheap federal hydropower to plug a three-hour daily rate shock crisis. The bigger question is what would California do if the imbalancing market doesn’t work as Argonne Labs suggests?

Read more here.

Will Gov. Brown’s ‘Small is Beautiful’ Ideology Sink Water and Energy Plans?

California’s “One-Million Roofs” residential solar program ended in 2012. Now a study by UCLA’s Center of the Environment and Sustainability appears to be a marketing device for solar rooftop installations on commercial and industrial buildings in Southern California. It is being touted that just 5% of Southern California’s buildings could produce one-half of the electricity needed statewide (for 6 hours per day?).

Solar marketeers are trying to appeal to the California public’s hatred of big utilities, big banks, or big anything. Now even conservative Republicans in Arizona have bought into the “small equals beautiful” movement. The Sierra Club in California is trying to co-opt the Tea Party with the appeal of this smaller energy utopia ideology. These tactics mimic marketing strategies to portray green power as patriotic, Biblical, and as American as apple pie and mom.

Ironically, this small is beautiful movement might also sink California Gov. Brown’s huge $53 billion water plan. Front organizations have emerged representing small farmers, small towns, small fishermen, and protectors of small water basins to sink the governor’s Water Plan. These opposition groups are front organizations for big real estate, tourism, recreational, commercial fishing, and environmental organizations that want to cut off water to farmers and cities cold turkey!

There is no ‘small is beautiful’ when it comes to California’s water wars. The same could be said for its energy wars.

Read more here.

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