(December 2009)
California has a population of some 38 million, which grew by over 25% through the 1980s and 12% through the 1990s. Its economy is larger than that of most nations, and includes a major high-technology sector. It produces 13% of US gross domestic product (GDP).
Electricity demand growth accelerated in the late 1990s, so that it substantially exceeded the state's 53,000 MWe generating capacity. At the same time, capacity actually fell 1.7% during the 1990s. This left California dependent on imports for 23% of its electricity (13% from US Southwest, 10% from Pacific Northwest); it relied on some 9000 MWe of out-of-state capacity. At the same time, growth in adjoining states limited the amount of surplus power available, as did the capacity of interstate (and north-south internal) transmission lines.
Electricity generated in-state and importeda
California Energy Commission (CEC) data for 2008 shows in-state generation of 208.5 billion kWh and net imports of 98 billion kWh to give total of 306.5 TWh, 14.44% of this nuclear, 18.21% coal, 45.74% natural gas, 11.0% large hydro and 10.61% other renewables.
The basic longer-term problem is that, apart from some impressive wind farms, hardly any generating capacity had been built in California in the 20 years to 2000 due to officially-indulged environmental activism, despite almost 2% annual growth in demand. Furthermore, some 80% of California's generating plants were older than 35 years (the two largest gas-fired plants were 45 years old), and less than 5000 MWe of new plant was due to come on line 2000-03. In the event some 3000 MWe of gas combined cycle plant came on line by the end of 2001 and a further 8400 MWe from then to the end of 2005.
From 2002 to 2006 'in-state' generation from coal dropped by 36% due the closure in 2005 of the Mohave plant (out of state but Californian-owned, hence deemed 'in-state'), and that from natural gas rose by 18% in line with a 26% increase in installed capacity (after dropping back to pre-2000 levels in 2002). Supply from hydro rose 59%, evidently due to seasonal factors, there being no increase in capacity.
The state has two nuclear power plants Diablo Canyon and San Onofre - with four PWR reactors totalling 4390 MWe capacity.
The 2000-01 crisis
Compounding the long-term problem, towards the end of 2000 the state had a lot of its generating capacity off-line, mostly catching up with maintenance deferred from peak summer load conditions. California thus faced severe power constraints and these continued through the winter into 2001.
Several plants, totalling 2700 MWe, had used up their annual pollution credits so could not restart without severe fines. In particular, three gas-fired plants (2000 MWe) were shut down after the south coast Air Quality Management District required them to install emission control equipment for NOx (oxides of nitrogen). As the crisis developed, the state's Independent System Operator (ISO), which operates most of the state's power grid, called them back into service, but they were required to obtain NOx emission credits to cover the short-term impact of this. The price of such credits soared.
Furthermore, a dry summer had reduced hydroelectric availability in the US Northwest. Interstate coal and nuclear plants helped, and local gas-fired plants met some of the shortfall, but demand forced gas prices to double. In 1999, gas provided 31% of the state's electricity, including imports (37% in 2000 and 40% in 2001).
As a result, wholesale electricity prices throughout the US West soared to unprecedented levels - briefly reaching US$ 750/MWh (75 c/kWh). In December 2000, it averaged $377/MWh and the weekly average ranged from $198 to $350/MWh in January 2001. (Prices in 1998-99 had been $24-28/MWh.) Electric utilities generally experienced a quadrupling of wholesale prices from generators but they had their own prices capped at 16 cents/kWh and consequently suffered about US$ 12 billion in losses over just six months. The state government stepped in to bail out the two largest utilities and re-regulate the system.
Three west coast aluminium smelters with long-term power supply contracts closed until 2002, and made more money selling their electricity entitlements than they could from aluminium, while employees were sent home on full pay. In one case, power bought for 2.25 c/kWh was being sold for 55 c/kWh.
The shortfall in generating capacity is widely seen as being due to years of weak government appeasing extreme environmentalism. Defending proposals for new plant against advocates of renewables and demand management as being the total answer to provision of power, means that it takes up to seven years in California to turn a proposal into a functioning power station, compared with three years in Texas. This is despite price levels which would enable an operator in Northern California to pay off a new gas-fired power station (@ $600/kW) in a year.
The supply crisis, with rolling blackouts, ran from mid 2000 to late February 2001. It forced renewed interest in building substantial coal and nuclear baseload capacity. Support for building new nuclear power plants in USA generally jumped as a result of the Californian crisis. In the west of the country, opinion that "we should definitely build more nuclear energy plants in the future" rose from 33 to 52%, nationwide it rose from 42 to 51%, compared with October 1999. More than two-thirds said that nuclear energy should play an important role in meeting future US energy needs.
In the event, demand reductions and load shifting through mid 2001 meant that summer blackouts were averted. Gas-fired capacity was much more fully utilised than before or after 2000-01.
Deregulation
Much newspaper coverage of the Californian crisis has pointed to deregulation as a factor, if not a cause.
Before 'deregulation', electric utilities, which have a legal obligation to serve their customers' demands, could build plants regardless of the expense and recover costs from customers. In 1996, utilities owned 81% of the total generating capacity and the average retail price was 9.5 cents/kWh, the tenth highest in the USA. This arrangement locked in certain inefficiencies, and when deregulation loomed it raised the question of how utilities would recover their 'stranded costs', mostly the capital component which could not be amortised with expected lower electricity prices. Elaborate mechanisms were put into place to cover these, but there were conditions imposed to ensure that utilities did not exploit the situation.
Under the Electric Utility Industry Restructuring Act in 1996 the Californian government put into place a deregulation scheme sought to bring competition into generation - attracting needed investment, while leaving transmission and distribution as regulated monopolies. This required the major utilities to divest at least half their major generation assets, so that their ownership fell to 46% of the total capacity.
The scheme also prevented them from entering long-term hedging contracts that would limit the risk of large price movements, forced them to buy electricity at market rates from a centralised pool, and on top of all this committed the two main utilities to retailing the electricity at fixed 1996 prices until March 2002 regardless of the cost of wholesale purchase. The price cap provision incorporates a transition charge which is the mechanism for utilities to recover stranded costs.
Thus there was not so much deregulation as a much less effective form of regulation. The need for long-term contracts enabling generators to build and maintain adequate capacity was emphasised, as was the need for adequate reserves which consumers had to be prepared to pay for maintaining.
New nuclear capacity
A 1976 state law prohibits construction of new nuclear power plants in California until a means of disposal of high-level nuclear waste is approved. A bill to repeal this moratorium was voted down in April 2007, but may be reintroduced. Meanwhile the California Energy Commission is reviewing the prospects of new nuclear capacity in the state and a group has sought the involvement of UniStar Nuclear (a joint venture of Constellation Energy and Areva Inc) to investigate building one or two of Areva's 1600 MWe EPR power reactor units at Fresno.
In September 2007, the California Republican party voted unanimously to work to remove the prohibition on new nuclear power plant construction. However, to date no progress has been made with regard to ending the moratorium on new nuclear build.
In July 2008, public opinion was found to have moved positively towards building new nuclear power plants: 50% in favour, 41% against (N=809), compared with 1990: 38% in favour, 56% against.
Further Information
Notes
a. Up to 2006, the in-state generation figures included coal-fired plants owned by California utilities located out-of-state. Source: Energy Information Administration and California Energy Commission (CEC). [Back]
General sources
US DOE Energy Information Administration website (www.eia.doe.gov)California Energy Commission (CEC) website (www.energy.ca.gov)Nuclear Energy Insight, Nuclear Energy Institute (January 2001)S. Watson, Industry Link, British Nuclear Industry Forum (March-April 2002)Nucleonics Week, Platts (5 July 2007)
Related information pages
Nuclear Power in the USA