California Decarbonization Dilemma

California Decarbonization Dilemma

May 28, 2024

by Jeff Bodington, with Bodington & Company in San Francisco

An analysis of California Energy Commission data for the most recent year available, 2022, shows that while the state had 85,000 megawatts of generating capacity, only 51,000 megawatts of that is capable of being managed to match electricity demand.

Most electric power generation in the state is from natural gas.  Moving to all renewables by 2045 as Governor Gavin Newsom has called for in his "clean energy transition plan" while maintaining at least 51,000 megawatts of "controllable" capacity would require tripling the capacity of wind and solar and adding five times more storage.

Is that possible?  And should we?

Data-Driven Answers

Hundreds of skilled people are working to answer those questions at the California Public Utilities Commission, California Energy Commission, California Independent System Operator, electric utilities, independent power producers, community choice aggregators, consulting firms and others.   

The analysts disagree, and uncertainty is huge.  The California Energy Commission, for example, published four forecasts of natural gas prices, and they differ by nearly 50%.  No one knows how much population will grow, electric vehicles will displace internal combustion, hydrogen will displace natural gas, batteries will improve, or the accuracy of dozens of other assumptions embedded in forecasts. 

However, elected officials and voters don’t really need to rely on dozens of assumptions about the future to make some big decisions. 

The following table shows current generating capacity as of the most recent year available, 2022, and what it would take to decarbonize fully.

Customers’ demands for power change second-to-second and substantially by time of day and season.  Wind and solar, and some other technologies, operate when the wind blows, the sun shines or other conditions allow that are not under an operator’s control.  Some technologies, including geothermal and nuclear, are under an operator’s control but, for engineering and thermodynamic reasons, operate all the time except for maintenance outages.  Natural-gas-fired generation and battery storage, and some other technologies to some extent, can be operated or “dispatched” within limits, to follow customers’ changing demands.  Times of highest customer demand are uncertain and, in particular, can occur on a hot afternoon when there is no wind and the sun is low.  

To meet that peak demand with diminished wind and solar, operators rely most on what they can control.  That controllable capacity in California Public Utilities Commission proceedings is defined as net qualifying capacity (NQ Capacity in the table), and on peak during 2022 for the types of generation in the table, it totaled approximately 51,000 megawatts.

Source: California Energy Commission data

The table shows that to have the same 51,000 megawatts of NQ Capacity and 200,000 gigawatt hours of energy output that the state had in 2022, it would need roughly to triple the capacity of wind and solar and build approximately five times more storage.  The energy from wind and solar must replace what was generated using natural gas, and the storage must replace the load-following dispatchable capacity enabled using natural gas.

Coming Rate Increases

A few key policy questions are in focus. 

Is tripling wind and solar possible?  Is a five-fold increase in storage possible? 

Are utilities and community choice aggregators prepared to offer power purchase agreements that support financing that development?  Are the potential participants, including the California Independent System Operator (CAISO) and permitting agencies, prepared to enable that development?  Is the real estate available?  Can the projects connect to an adequate and efficient grid?  Does the manufacturing and financing capacity exist to support, in particular, a five-fold increase in storage? 

What legislative and regulatory changes would be necessary to make such development feasible and perhaps likely?  What are the CO2 reduction, electric rate increase, climate and aggregate economic impacts due to such development?

The California Energy Commission’s 2023 Integrated Energy Policy Report provides partial answers to some of those questions. 

The level of early development activity is encouraging, but CAISO is overwhelmed with interconnection applications.  The existing transmission system cannot support them, supply chain constraints are already evident and land use permitting can take over a decade.

Material rate increases seem inevitable. 

Some developers appear to be gaming application procedures, and historical experience is that more half of projects that appear to be under development will never get built.  Many parties are working to solve those problems, but some of the questions, including the ultimate feasibility of such large-scale development, remain unanswered.   

Suppose that answers to the questions show that decarbonizing using wind, solar and storage is so speculative or so costly that alternatives ought to be considered.  Hydroelectric projects are so difficult to permit that most developers no longer have development staff.  Geothermal has potential, but wells are costly and risky to drill.  Biomass-fired generation also has potential, but it is costly and puts CO2 back into the atmosphere. 

New, underground, safe-design, small modular reactors (SMRs) are under development, and their sponsors are looking for test sites.  Pairing SMRs with storage could decarbonize the grid and dispatch to follow changing loads.  Carbon capture and sequestration, conservation and adaptation may also be part of the solution. 

The work of specifying scenarios that include those possibilities, even in the simple form of the table in this article, and identifying what seems to be most effective and economic, remains to be done.

We are entering a period of potentially sustained increases in electricity demand, driven by AI, data centers, re-shoring of manufacturing capacity and electrification of the transportation sector.  Population growth remains possible and could increase household and related demands.  Climate change could increase air conditioning demand.  The challenges are greater than suggested by the 2022 data in the table.