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“A growing fragility in the U.S. electricity system”

news-los-angeles-times-logoIn any large market, there are are trends that can be predicted and trends that cannot. For example, the loss of San Onofre (and some hydro plants) in California can be predicted to have an impact on the energy market, not least through an increase in carbon emissions. It would seem this is true, per this report from California ISO (the grid managers):

The generation gap caused by having less hydro-electric and nuclear generation was filled, in large part, by natural gas. Natural gas generators supplied about 40 percent of ISO energy in 2013, up from 39 percent in 2012 and 28 percent in 2011.

That’s not too bad – solar energy increased during the same period from 5 percent to 8 percent, so that helped stave off carbon emissions.

This is the unpredictable part, with no nuclear mention whatever and put as sunnily as possible:

While total wholesale electric costs increased by 31 percent in 2013, after controlling for the 30 percent in natural gas prices last year, costs rose by 5 percent, primarily because of implementing the state’s greenhouse gas emissions cap-and-trade program.

Another factor nudging prices higher in 2013 was a decrease in in-state hydroelectric generation, which was down about 40 percent in the fourth quarter from 2012.

In other words, everything would have been fine if we could just ignore natural gas - which provided most of the electricity. San Onofre was down during 2013, so it doesn’t really count in these calculations.

The Los Angeles Times does not directly address California ISO’s report, but treats the rising cost of electricity as a permanent condition:

A fifth of all power-generating capacity in a grid serving 60 million people went suddenly offline, as coal piles froze, sensitive electrical equipment went haywire and utility operators had trouble finding enough natural gas to keep power plants running. The wholesale price of electricity skyrocketed to nearly $2 per kilowatt hour, more than 40 times the normal rate. The price hikes cascaded quickly down to consumers. Robert Thompson, who lives in the suburbs of Allentown, Pa., got a $1,250 bill for January.

Now, we can milk the polar vortex as much as anyone – and have – but the Times explains why the vortex – a temporary condition –signaled the onset of a new reality:

But it exposed a more fundamental problem. There is a growing fragility in the U.S. electricity system, experts warn, the result of the shutdown of coal-fired plants, reductions in nuclear power, a shift to more expensive renewable energy and natural gas pipeline constraints. The result is likely to be future price shocks. And they may not be temporary.

It gets worse:

In California, residential electricity prices shot up 30% between 2006 and 2012, adjusted for inflation, according to Energy Department figures. Experts in the state's energy markets project the price could jump an additional 47% over the next 15 years.

Let’s back up a moment and note that nuclear energy performed like a champ during the vortex.  Unlike coal, uranium doesn’t chunk up in cold piles or get stranded in frozen pipes as does natural gas. If it’s at the reactors, it’s running the reactors until a spring or fall outage.

Wind also picked up some plaudits, especially in Texas, but let’s let AWEA tell that story.

There’s a bit of nuclear presence in the story:

The mandate is just one market force. California has all but phased out coal-generated electricity. The state lost the output of San Onofre's two nuclear reactors and is facing the shutdown of 19 gas-fired power plants along the coast because of new state-imposed ocean water rules by 2020.

"Our rates are increasing because of all of these changes that are occurring and will continue to occur as far out as we can see," said Phil Leiber, chief financial officer of the Los Angeles Department of Water and Power. "Renewable power has merit, but unfortunately it is more costly and is one of the drivers of our rates."

One story and a report – from a single state, albeit a large one – does not herald the coming of Mad Max-style dystopia. Here’s the thing: leaning on renewable energy and natural gas while discounting nuclear and hydro power is throwing California’s energy profile out of whack. I have more faith than writer Ralph Vatabedian in the capacity of energy mavens to correct course – they’d better, since that’s their jobs - but conflicting mandates likely make it harder than not for them to navigate to a solution.

The story ends this way:

"If power gets too expensive, there will be a revolt," Leupp [Alex Leupp, an executive with the Northern California Power Agency] said. "If the state pushes too fast on renewables before the technology is viable, it could set back the environmental goals we all believe in at the end of the day."

Or it may remind Mr. Leupp that nuclear energy is not only still around – not least at California’s Diablo Canyon facility – but can still do a lot for mitigating both carbon and cost issues. The whole article is worth a read, though you have to filter out some of the more panic-stricken overtones.

Nuclear energy feels like the solution to the California puzzle hiding in plain sight; I suspect others may come to that conclusion, too. Is nuclear energy a panacea? No, of course not, but it does answer to an exceptionally broad portfolio of energy issues.

Comments

Meredith Angwin said…
Great article.

One thing I didn't understand, though. Your example of soaring electricity prices was Allentown PA. I would have thought that Allentown would have maintained low prices.

There was a WSJ article today called Why Marcellus Shale Gas Doesn't Get to New England.In this article, the PA hub gas price was around $3.50 while the Boston price was around $24.00. So I wouldn't have expected soaring gas or electricity prices in Allentown.

As usual, the bottom line is...we need nuclear!
California law prohibits the construction of new commercial nuclear power plants within California until the California Energy Commission has determined that the federal government has identified and approved a demonstrated technology for:

1. The construction and operation of nuclear fuel rod reprocessing plants.

2. The permanent disposal of highlevel nuclear waste

Of course, the Federal government hasn't even been politically able to remove spent fuel from commercial nuclear reactors in the US. So it doesn't look like there's going to be any new nuclear power plants in California for a very long time.

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