November 1, 2008

California’s GHG plan gives power heaviest load

Steven F. Greenwald and Jeffrey P. Gray

Electricity is part of the solution

Against this backdrop is the realization that the power sector, including new fossil-fueled generation, likely holds the key to the success of AB 32. At a recent industry conference, Yakout Mansour, president and CEO of the California Independent System Operator, expressed the view that California would need all exiting fossil-fueled generation to support the addition of new intermittent renewable resources that are necessary to meet the state’s emission reduction goals. Given the age of the generation fleet and the fact that older plants were not designed to operate as "firming" resources for renewable generation, it is likely that new fossil-fueled generation will also be needed.

The efforts of other sectors to reduce their GHG emissions will put an additional strain on the state’s generation capacity. These sectors are expected to increasingly substitute electricity for GHG-emitting fuels, such as natural gas and petroleum. For instance, plug-in hybrids are being touted as an emissions-reduction solution in the transportation industry. The success of this technology, however, rests in large part on the ability of car owners to charge their automobiles overnight. Given the intermittency of wind generation, the inability of solar to generate at night, and the cost of currently available energy storage options, the success of a plug-in hybrid program will likely rest on sufficient fossil-fueled generation remaining available during off-peak periods.

The application of AB 32 across the economy creates a challenge for regulators: Regulators are seeking significant emissions reductions from the electricity sector at the same time as other industry sectors will be using more electricity to reduce their own carbon footprints.