|
The Great California Energy Opportunity by Joel Levin Electricity is our largest source of pollution. That means that fixing the electrical system can also be a big step towards reducing pollution. The good news is that the electricity industry is our country's single largest source of pollution-linked to global warming, acid rain, smog, and mercury contamination. How can this be good news? Because electricity is an industry with vast potential for cleaning up. And the current brouhaha is making people pay attention, and creating the opportunity for constructive change. To understand what has been happening in our state over the past year, though, one must understand some significant oddities about the economics of electricity. A strange product Electricity is different from most other products. Electricity cannot be stored. It must be used at the exact moment when it is produced. The production and usage of electricity must be constantly balanced. At every moment hundreds of generating plants are pumping electricity into the grid. At the same time thousands of users are pulling electricity off of the grid. If these are not always in perfect balance, the system can be damaged or spontaneous uncontrolled blackouts may result. The tricky work of keeping this balance is the job of the California Independent System Operator (ISO). The short-term supply for electricity is strictly limited-but demand swings widely over the course of a day, a week, and a year. Demand is lowest at the middle of the night, but peaks in the mid-afternoon. Demand is higher on weekdays than weekends because of commercial and industrial use. In California peak demand is highest during the hot summer months, when heavy use of air conditioners can increase the overall load on the grid by as much as one-third. Once all power plants and transmission lines are running at capacity, however, there is simply no more power to be had at any price. Unlike other products, we can't just pile some electricity onto a truck and bring it in from out of state. The wholesale price of electricity changes hourly, but the price consumers pay doesn't reflect those changes, so they can't react to them. If the price of gasoline at the pump jumped by a dollar per gallon, people would respond immediately by driving less. But when the price of electricity spikes, no one even knows (at least not right away) because consumers pay a price established by the state Public Utilities Commission (PUC) that is supposed to reflect the average price over time. This price is also affected by a host of political factors and bears little relation to the actual cost. The result of this strange situation is that the market for electricity is more volatile than that for almost any other product. During one hour, usage may be well below the system capacity, and prices may be quite low. In the next hour, as temperatures rise and air conditioners click on, demand may approach supply capacity, and prices may jump substantially. If at that same time a generating plant has a mechanical problem and goes off-line, prices may jump tenfold or more as the ISO frantically seeks additional electricity to avoid blackouts. (Energy suppliers may illegally be making this situation worse by deliberately taking plants off-line or constraining the flow of natural gas into the state, to make prices jump when supplies are at their tightest. Investigators have not yet determined conclusively that this is the case, but suspicions run high.) Some consequences Now that we have a better understanding of why the electricity market is such an odd duck, what conclusions can we draw? From the perspective of consumers it is important to have an ample supply of electricity so that supplies do not get too tight. When supplies get tight, electricity generators can manipulate prices to make huge profits. When capacity exceeds usage, prices will be reasonable. It does not take much of a shortage to cause electricity prices to go wildly out of control. When electricity prices were spiking and blackouts were rolling last summer, the grid was short by only a relatively small amount of electricity. In such periods a small amount of conservation can have a big impact-despite Vice President Cheney's comment that "Conservation may be a sign of personal virtue, but it is not a sufficient basis for a sound, comprehensive energy policy." We do not have a shortage of electricity at 4 am. During off-hours there is more than adequate electricity in California. Electricity is in short supply only during periods of peak demand. If we could reduce peak demand, shortages would be a lot less of a problem. For example, if prices were set higher during peak hours, as in many European countries, people would shift their usage of electricity to off-peak periods. Such pricing might be made mandatory for large business users, who are most able to shift their load, and optional for residential consumers. Shortages due to peak use are bad for the environment. When supplies get tight, "peaker" plants and back-up generators come on-line. Typically these are old plants that are too dirty or inefficient to run all the time. Many of them burn diesel, which is much more polluting than the natural gas that fuels most power plants in California. Reducing peak use would also reduce the number of new plants that must be built. Conversely, while we can meet most of our energy needs by increasing efficiency and by generation from clean, renewable sources, we must also look at responsible additions to our fossil-fuel-fired capacity-at least in the near term. Modern gas-fired plants are dramatically cleaner and more efficient than those built a few years ago, not to mention their smog-belching cousins, coal and diesel. In some cases, building new plants can allow older, dirtier plants to be shut down. The Sierra Club looks carefully at such proposals, to make sure that they really do reduce pollution and that they are sited in appropriate locations. As the Yodeler goes to press the San Francisco Group is evaluating a proposal by Mirant to build a larger power plant on the site of the existing Potrero Hill plant, and the Energy Committee has received word of two new plants being considered in eastern Alameda County. What You Can Do So what are the solutions? Based on the above principles, here are some concrete steps towards building our long-term energy security without hurting the environment. Improve the efficiency of electric appliances Increasing energy efficiency should be our first line of defense. In recent years, researchers have made significant gains in the efficiency of household appliances. For example, a refrigerator manufactured today uses only a quarter the electricity of one built in 1973. Federal efficiency standards for a wide range of products have been critical to this process. Rebates for new efficient appliances have been a cornerstone of state conservation efforts. But plugging in a new appliance, no matter how efficient, uses electricity. It's the permanent unplugging of an old appliance that saves energy. Programs that promote the sale of efficient appliances must include incentives to capture the old replaced units so that they don't simply return to service elsewhere. Fortunately, California has recently increased funding for old-appliance retirement programs, but much more needs to be done. Experts at Lawrence Berkeley National Laboratory have suggested that the overall efficiency of appliances can still be improved by as much as one third. This gradual, cumulative process provides savings over a period of years as technology improves, becomes integrated in new appliances, and is adopted by consumers as old appliances wear out. With incentives for early appliance retirement, the system benefits immediately, and we don't have to wait for the appliances to wear out. Unfortunately the Bush administration is trying to roll back standards for new central air conditioners and heat pumps. The Sierra Club is defending this standard that would improve the energy efficiency of these devices by 30%. All new equipment sold in the U.S. would need to comply by January 2006. Rolling back this standard would lead to increased national energy consumption, higher utility bills for millions of households, and more pollution from power plants. Write to Sens. Dianne Feinstein and Barbara Boxer at: your representative at: and the president at: Urge them to support tough efficiency standards for air conditioners and other appliances. Invest in renewable energy California already produces about 12% of its electricity from renewable sources such as wind, solar, geothermal, biomass, and landfill gas-more than any other state. As demand for electricity continues to grow, new power generation should come mostly from renewable sources. The state legislature is currently considering SB 532 (Sher). This bill would establish a "Renewables Portfolio Standard" that would require utilities to get a gradually increasing percentage of their electricity from renewable sources. The current proposal calls for 20% renewable capacity by 2010. Such a requirement would be a tremendous boost to renewable energy sources. The bill has a real chance of passing this year. Write your assemblymember at: If you are not sure who your assemblymember is, an easy way to find out is at: www.assembly.ca.gov Many cities and counties are installing solar panels on the roofs of city buildings. Cities with municipal utility districts are considering expanding their renewable generation portfolio. Urge your city to be a part of the solution, not the problem. San Francisco has four ballot measures on this November's ballot on energy. Conserve electricity in your home and at work, especially during peak hours The California Legislature has already allocated $800 million to fund energy-efficiency programs this year. While this is an excellent step, the Sierra Club is working to ensure that this money is spent wisely. Currently the vast majority of public ratepayer and tax money for conservation is controlled by the utilities, with excessive overhead and a poor record of performance. After all, they are in the business of selling energy, not helping their customers avoid buying it. The Sierra Club believes that public funds for energy conservation should be controlled by public entities with no conflicts of interest. The Sierra Club is also helping to save energy through our Energy Efficiency Pledge Campaign. Nearly 15,000 Sierra Club members have already signed and returned the pledge to cut household energy consumption by 20% this summer. The pledge cards, addressed to Governor Davis, urge him to make energy efficiency his top priority and to resist efforts to roll back air-pollution standards for power plants and dirty back-up generators. To make it easier for Californians to conserve, the Club has also released "A Family Guide to Saving Energy and Money", with tips and information about saving energy in your home. To take the Energy Efficiency Pledge, call (510)622-0290 Request a copy of the "Family Guide to Saving Energy and Money" or call (510)622-0290. Install solar panels at home The "Emerging Renewables Buydown Program" of the California Energy Commission now offers a rebate of $4.50 per watt for installation of photovoltaic panels. This typically covers nearly half of the total cost. The program is available for residences, businesses, and municipalities. Many lenders will allow the cost of solar panels to be rolled into an existing home mortgage. Depending on your mortgage rate and the price that you pay for electricity, the savings in your monthly electricity bill may actually be greater than the addition to your monthly mortgage payment-with little or no up-front expenditure. This program is an incredible deal; now may be the time for you to install solar panels on your home (or business)! See more information or call (800)555-7794, ext. 3 (from inside California). If you are preparing to buy a new home, ask your builder about solar homes. Many homes are now being built with solar features. This is even less costly than installing solar panels on an existing roof. Plug into Sierra Club's Clean Energy Campaign Join the Energy Action Network to receive updates and learn about opportunities to have your voice heard on local, state, and national energy issues. We're working for clean energy solutions such as energy efficiency and renewable technologies and against the polluters who are using California's energy debacle as an excuse to pursue dirty energy schemes. To plug in, contact Eric Wesselman, the Club's regional energy representative, at: eric.wesselman@sierraclub.org or (510)622-0290, ext. 240. To join the Bay Chapter's Energy Committee, contact Helen Burke at (510)527-0176 or: helenburke@prodigy.com The author, Joel Levin, is an MBA candidate at the Haas School of Business at the University of California, Berkeley, focusing on energy issues. He is also secretary of the San Francisco Bay Chapter's Energy Committee. Back to California Energy Main Up to Top |
