Extra electricity, but no price relief
Fueled by a dated system that does not always respond to market incentives or pressure, costs and surpluses of energy have both grown in California, raising pointed questions about what residents should expect from rates and regulations alike.
“California has a big — and growing — glut of power,” as the Los Angeles Times announced in a detailed report. “The state’s power plants are on track to be able to produce at least 21 percent more electricity than it needs by 2020, based on official estimates. And that doesn’t even count the soaring production of electricity by rooftop solar panels that has added to the surplus.”
“To cover the expense of new plants whose power isn’t needed […] Californians are paying a higher premium to switch on lights or turn on electric stoves. In recent years, the gap between what Californians pay versus the rest of the country has nearly doubled to about 50 percent.”
The disparity has drawn steady fire from free market analysts. “In an open marketplace, gluts of products or services lead firms to slash their prices dramatically. If, say, car manufacturers produce too many vehicles, they will provide rebates or be stuck with lots full of unsold inventory,” Reason recently observed. “With California’s regulated utility system, by contrast, gluts in electricity actually raise prices for consumers because of the way utilities are paid for their investments. They need only get the approval from the Public Utilities Commission to build new plants and pass on costs to ratepayers.”
The gap between power and cost has grown to nationwide highs. November 2016 data from the U.S. Energy Information Administration, “showed California households paying 17.97 cents per kilowatt hour for electricity, or 40.9 percent more than the national average of 12.75 cents,” CNBC reported. “New England states also have high electricity costs. But out West, only Alaska and Hawaii have higher average electricity costs.”
Although controversy has swirled around the prospect of regulators approving new plants amid an energy glut, “experts say growing interest in energy storage — including battery energy storage technology — could have an additional impact on the electricity market in the nation’s most populous state,” CNBC continued. Michael Ferguson, U.S. energy infrastructure group director at S&P Global Ratings, told the network that new battery technology would help by storing surplus energy without having to produce more of it.
In fact, Edison and Tesla recently cut the ribbon on just such a storage system, moving from concept to execution in what utilities officials characterized as unprecedented time. “The facility at the utility’s Mira Loma substation in Ontario contains nearly 400 Tesla PowerPack units on a 1.5-acre site, which can store enough energy to power 2,500 homes for a day or 15,000 homes for four hours,” the Los Angeles Times reported. “The utility will use the collection of lithium-ion batteries, which look like big white refrigerators, to gather electricity at night and other off-peak hours so that the electrons can be injected back into the grid when power use jumps.
“Tesla and Edison sealed the deal on the project in September as part of a state-mandated effort to compensate for the hobbled Aliso Canyon natural gas storage facility. They fired up the batteries in December.”
Unless the utilities rejigger rates and storage, they could find pressure mounting to scale back their plans for a big outlay for electric transportation investment. “Southern California Edison would spend $19.45 million on six ‘priority review’ pilots and $553.8 million on a five-year charging infrastructure buildout,” according to the plan, UtilityDive noted. “San Diego Gas and Electric wants $18.19 million for six priority review pilots and $225.9 million for residential charging. And Pacific Gas and Electric has proposed $20 million for priority reviews and $233.2 million for two five-year charger buildouts. In all, it comes to $1.07 billion for a wide-ranging list of programs from heavy-duty transport electrification to incentives for Uber and Lyft drivers.”
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