Jerry Brown and Warren Buffett want to rewire the West
THEIR PLAN COULD SAVE CONSUMERS BILLIONS OF DOLLARS AND SLASH CLIMATE POLLUTION. BUT CRITICS ARE WORRIED IT WOULD DO THE OPPOSITE.
Stephen Berberich can see the future. He has to.
On a Friday morning in December, Berberich sat in a conference room in Folsom, outside Sacramento, in front of a picture window offering a bird’s-eye look at the high-tech control center for California’s electric grid. Down below, staffers scheduled transactions between power plants and utilities, watched for outages and monitored the careful balance between supply and demand.
As president of the California Independent System Operator, it’s Berberich’s job to know how much electricity the state is going to need at any given moment and to make sure just the right amount of energy is flowing through the power lines. But in this moment, he was thinking past the end of the day, to a not-so-distant future where there’s far more solar and wind power flooding the grid.
“One of the hallmarks, without question, is that you have more generation at times of the year than you need,” Berberich said, referring to the fact that sunlight and wind can’t be ramped up or down to match demand, like traditional power plants can. Increasingly, the California grid operator — CAISO for short — is forced to pay solar plants to stop generating when there isn’t enough demand. “You see it in Europe, you see it in Germany, we see it. And turning off renewable energy, in my mind, is a tragedy.”
Gov. Jerry Brown and investor Warren Buffett, the world’s second-wealthiest person, think they have a partial solution to that problem: Find California a bigger grid.
If that happens, advocates say, California solar farms could operate more hours by selling excess energy to other states, rather than having to shut down when supply exceeds in-state demand. California could also tap wind power from places with especially strong gusts, like New Mexico and Wyoming. Some out-of-state wind farms already plan to sell electricity to California, including the massive Chokecherry and Sierra Madre project in Wyoming. But institutional and financial barriers make those kinds of projects the exception, not the rule, grid experts say.
A more integrated western grid would also bring financial benefits, according to supporters of CAISO expansion. If the grid operator expands to include utilities across the West, they say, California homes and businesses could save billions of dollars on their electricity bills, in part because it would be cheaper for the Golden State to meet its ambitious renewable energy goals.
“The elevator pitch is: It’s good for customers and it’s good for the environment,” Berberich said.
Here’s the catch: A lot of people don’t think so.
In California, the grid expansion plan has divided environmentalists. While some green groups support the proposal, the Sierra Club is worried it could have unintended consequences, like giving coal-friendly Utah and Wyoming the power to force dirty electricity into California, undermining the state’s environmental policies and leading to increased climate pollution across the West. Decision-makers in Utah and Wyoming have the opposite fear: They don’t want to be subjected to climate policies they see as unnecessary and potentially damaging to their fossil fuel industries.
Those concerns are only the beginning. Some critics say California should focus on building renewable energy facilities within its borders, rather than sending high-quality jobs out of state. Others see grid expansion as a money-making venture for Buffett’s PacifiCorp utility, which might be able to get California to pay for a massive, lucrative transmission project called Energy Gateway.
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Donald Trump’s election has thrown another wrench in the works for supporters of CAISO expansion. Critics say Trump’s administration could interfere with the grid expansion plan, giving Utah and Wyoming greater authority to dictate energy policy across the six-state grid. More broadly, Trump’s presidency is expected to increase tensions between deep-red states like Utah and Wyoming, where politicians could be emboldened in their efforts to support fossil fuels, and dark-blue states like California, where lawmakers have pledged to double down on their progressive agenda.
For months, representatives from the six states have been negotiating an expansion agreement, which would need to be approved by the California Legislature and by public utilities commissions in the other five states. California lawmakers are expected to take up the proposal this year — if Brown thinks it still has a chance.
Sharing the sun and the wind
The continental United States is divided into three main electric grids: the Eastern Interconnection, the Western Interconnection and independent-minded Texas, which runs its own grid. While much of the East is covered by five large “regional transmission organizations,” which span multiple states, the West is divided into 35 “balancing authorities” — independent grid operators that are responsible for balancing supply and demand on their own systems, with limited help from the surrounding systems. CAISO is by far the largest balancing authority in the West.
Supporters of growing CAISO’s footprint see obvious economic benefits in a more integrated western grid, even without the potential to boost renewable energy. Those benefits, they say, include lower institutional barriers to energy flowing across state lines, less need for redundant backup power plants and fewer charges for sending electricity across another balancing authority’s wires.
“By having a larger and better coordinated grid, you can reduce costs (to electricity consumers) and make it more reliable and resilient,” Jan Smutny-Jones, CEO of the Independent Energy Producers Association and former chair of CAISO’s board of governors, said during an interview at his Sacramento office, down the street from the State Capitol, in December.
For Brown, the main reason California needs a bigger grid is the fight against climate change.
It’s not hard to figure out what he’s thinking: If you look at the National Renewable Energy Laboratory’s map of U.S. wind speeds, you’ll see that the largest concentrations of top-tier winds in the West are in Wyoming and New Mexico. The winds in those states also tend to blow more consistently than winds in California, meaning projects can operate for more hours each day.
Stronger, more consistent winds mean cheaper electricity. California has several world-class wind hot spots of its own, including the San Gorgonio Pass in the Palm Springs area and the Altamont Pass east of the Bay Area. But apart from the Tehachapi Pass in Kern County, the best sports have been mostly developed for years. And development in the Tehachapis and other windy areas has been limited by stringent land-use rules designed to protect birds, including an Obama-administration plan that critics say effectively closes off most of the California desert to new wind projects.
Wyoming wind could also help prevent blackouts as California adds more and more intermittent renewable energy to its grid, experts say.
Fossil fuels can reliably generate electricity around the clock. But wind is inherently variable, and sunlight is difficult to predict. Unexpected cloud cover, for instance, can cripple a solar farm. The greater the geographic diversity of the solar panels and wind turbines on the grid — some in California, some in other states — the less likely it is they’ll all stop generating electricity at once.
Wyoming wind could be especially helpful to California, since it blows during convenient hours. A 2015 study from the University of Wyoming’s Wind Energy Research Center, funded by the Wyoming Infrastructure Authority, found the two states’ winds are “complementary”: California winds blow the strongest at night, while Wyoming winds peak in the afternoon and stay strong through the early evening. That’s when electricity generation from California’s many solar plants drops off as the sun begins to set. It’s also when electricity demand ramps up, as people get home from work.
“When the sun goes down in the Mojave Desert, the wind in Wyoming is probably ripping,” said Doug Larson, former executive director of the Western Interstate Energy Board and now a consultant for the Energy Foundation, a nonprofit that has provided funding to groups supporting CAISO expansion.
Grid expansion could also create a new market for California solar farms.
Already, there are times when CAISO must turn away as much as 3,000 megawatts of solar because the electricity flooding the grid during the middle of the day exceeds demand, Berberich said. That would be equivalent to shutting down five and a half solar plants as big as Desert Sunlight in Riverside County, which was the world’s largest solar farm when it opened in 2015. If California could more easily sell excess solar electricity across state lines, solar plants could run more often, reducing climate pollution and improving the economics of building solar farms in California.
“The future of the Western grid is to integrate more,” said Robert Godby, director of the Center for Energy Economics and Public Policy at the University of Wyoming. “It makes sense for companies, because now they can access generation more cheaply than developing it themselves. It makes sense from an environmental perspective, because you can incentivize cleaner generation. And it makes sense from an operational perspective, because a grid is more stable when it’s larger.”
Baby steps toward a regional grid
California utilities are required by law to get 50 percent of their electricity from renewable sources by 2030, part of the state’s aggressive plan to slash planet-warming carbon emissions 40 percent below 1990 levels by that year. Last year, 27 percent of the Golden State’s electricity came from renewables, according to preliminary estimates from the California Energy Commission.
So far, California has added clean energy to the grid without significant impacts to electricity rates. But some experts worry that getting to 50 percent — and eventually 100 percent — will cause energy prices to rise dramatically.
New solar farms are cheaper than new natural gas plants across much of the state, and solar prices continue to fall. But because sunlight is intermittent, costly gas-fired “peaker” plants are often needed to accompany solar facilities. Natural gas accounted for 44 percent of California’s total electricity mix in 2015, up from 35 percent in 2000.
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California’s average retail electricity rate is about 15 cents per kilowatt-hour, according to the Energy Information Administration — already one of the highest rates in the nation.
“What happens when our retail rates go to 50 cents, to 60 cents, to 70 cents?” Berberich asked. “Is there a potential that we would actually have a backlash against our environmental agenda? I would submit, very possible.”
California has already taken baby steps toward integrating the western grid, which state officials say have already led to cost savings and reduced climate pollution.
In 2014, CAISO launched an “energy imbalance market.” The program allows out-of-state utilities to participate in California’s real-time market, where utilities can buy electricity in five- or 15-minute increments to fill in last-minute gaps between supply and demand. So far seven utilities, serving 7.2 million customers across eight western states, have joined or are in the process of joining.
California has hailed the imbalance market as a success. CAISO’s most recent quarterly report shows the program saved its participants $142.62 million over its first two-plus years of operation, with the benefits growing as more utilities joined. (California has accrued nearly 30 percent of those savings; about 55 percent have gone to Buffett’s PacifiCorp.) By allowing solar farms to operate more than they otherwise would have, the program has averted nearly 144,000 metric tons of carbon dioxide emissions, CAISO says — equivalent to taking 30,000 cars off the road for a year.
PacifiCorp was the first utility to sign up. (The utility operates as Rocky Mountain Power in Idaho, Utah and Wyoming, and as Pacific Power in California, Oregon and Washington.)
PacifiCorp has since been joined in the imbalance market by NV Energy (also owned by Buffett), Arizona Public Service and Puget Sound Energy. Idaho Power, Portland General Electric and Seattle City Light have agreed to join, and the Sacramento Municipal Utility District is moving in that direction. Mexico’s grid operator, the Comisión Federal de Electricidad, is exploring whether its Baja California Norte region should join, too.
“It’s one of these things that’s a no-brainer, the efficiency and economic balance that you get,” said Don Furman, a former PacifiCorp executive who now advocates for CAISO expansion through a coalition of environmental groups and energy companies called Fix the Grid West. “Once PacifiCorp broke the ice and got it going, people are lining up to join it.”
California could reap even greater benefits by fully incorporating other utilities, as is currently proposed with PacifiCorp, grid experts say. Under Brown and Buffett’s plan, PacifiCorp would give the California grid operator full control of its wires and become a participant in the market CAISO oversees, just like Southern California Edison, Pacific Gas & Electric and San Diego Gas & Electric.
That means PacifiCorp would be able to participate in CAISO’s day-ahead energy market, where the vast majority of electricity is moved, rather than just the real-time market. The same would be true for any other utility that later joins CAISO.
As part of the day-ahead market, CAISO decides every morning which power plants will and won’t be turned on the next day, based on factors like expected demand, operating cost and environmental impacts. While there’s room for adjustments during the day — that’s where the real-time market comes into play — many fossil fuel plants need to be committed in advance.
Right now, those day-ahead commitments are made independently in each of the 35 western balancing authorities. Every day, utilities across the West are firing up climate-polluting coal or natural gas plants even when cheaper, cleaner resources might be available elsewhere in the region, like excess solar generation in California or untapped wind in Wyoming.
“There are real benefits here,” said Carl Zichella, director of western transmission for the Natural Resources Defense Council, one of the country’s largest and most influential environmental groups. “Regardless of where you sit on the scale of ‘I’m a coal state,’ or ‘not a coal state,’ you have the ability to get reduced-cost energy.”
Red states and blue states
CAISO and PacifiCorp announced they would explore the utility joining the California system in April 2015, a few months after the imbalance market got started. Later that year, California lawmakers passed SB 350, which raised the state’s renewable energy mandate to 50 percent. The bill also required CAISO to study the economic and environmental impacts of expanding across the West.
The grid operator released that study, conducted by private-sector consultants, in July. The findings were striking: By 2020, California ratepayers would save $55 million per year, just by virtue of PacifiCorp joining CAISO. If most of the other western balancing authorities were to follow PacifiCorp’s lead, the California ratepayer benefits could grow to $1.5 billion per year by 2030.
To the consternation of some environmentalists, the study’s authors also found that PacifiCorp joining CAISO would lead to a 0.2 percent increase in western carbon dioxide emissions by 2020, because of a greater ability for coal plants to sell electricity into the California market. But they also found that a wider CAISO expansion, encompassing most of the western balancing authorities, would lead to a 3-4 percent decrease in regional carbon dioxide emissions by 2030, compared to continuing current practices.