Lynne Kiesling

No, it’s not 2001 again (thank goodness). But the Pacific Northwest has had a very dry winter, with almost no snowpack to speak of and little rain, so the reservoirs that power the hydroelectric plants that provide California with a good chunk of its power are going to be hard pressed to do so. Tuesday’s Daniel Weintraub column in the Sacramento Bee (registration required) describes the concern; he also accurately hits on the approach that would give the most bang for the buck:

Another possible solution – charging customers based on the actual cost of the electricity they use – would help by ending the inefficient practice of letting people and businesses who use power when it is most in demand pay the same as those who shift their use to times when the resource is in relative abundance. But that change would require the installation of modern “smart meters” and a new, dynamic rate structure that politicians and regulators have been slow to embrace.

I love that he used the word “dynamic” to describe the retail choice rate structure, and that he highlights the contrast with static, status-quo-focused politicians and regulators who think they are protecting consumers by keeping them in the 20th century and relying on information from meters that are vintage 1920s technology. Anyway…

Other stories providing information on the state of power supplies for this summer are in the LA Times (registration required) and the San Diego Union-Tribune (registration required).

These articles were prompted by the 2005 Summer Assessment Report that the California ISO issued last week. The punchline:

The ISO anticipates that the ISO Control Area and the northern (NP26) sub-region should have adequate resources available to meet a “1-in-2” forecasted 2005 peak demand under a Base Outlook of resource availability (most likely conditions), barring significant transmission or generation outages, natural disasters, or local and/or national catastrophes. However, the ISO Control Area could be approximately 804 MW deficient for a “1-in-10” peak load, or similarily deficient under adverse availability of system resources. For the southern (SP26) sub-region, extremely narrow transmission and resource margins (409 MW) are expected under “1-in-2” non-coincident peak loads and a Base Outlook of resources. As such, the SP26 sub-region has very little tolerance to accommodate any adverse resource variations from the Base Outlook, (i.e. the additional loss of a generating unit, or reduction of imports into the SP26 sub-region.) Furthermore, an SP26 shortfall of up to 1,725 MW is expected for the Base Outlook of resources during a “1-in-10” non-coincident peak load condition.

In English: the southern zone of the state is unlikely to have enough generation available to maintain both service and reserves if the universe deviates much from the benchmark case that they have analyzed. So there’s very little fault tolerance in southern California’s electricity situation for this summer.

What I don’t know is the extent to which they have built in demand response in their base case or scenarios. The summer assessment does say that

Renewed and aggressive conservation efforts will be critical for California to avoid potential resource shortages. Since summer 2004, the Investor Owned Utilities (IOUs), California Public Utility Commission (CPUC), California Energy Commission (CEC), California’s Governor’s Office, the ISO, and other agencies have been working diligently to gain the support and participation of California businesses and citizens to increase energy efficiency and participation in demand response programs in preparation for the upcoming summer season.

It then goes on to say that they expect 950MW of load to participate in demand response programs this summer, and 1,610MW of interruptible load contracts to be in place. It may not sound like a whole lot, but the important thing about system balancing and the economics of demand response is that it is very nonlinear; a small reduction at just the right time can have very large value, both for keeping up reliability and for keeping wholesale prices from spiking. But I don’t know how big this demand response expectation is relative to prior years.


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