California's Electricity

(updated July 2012)

• California has a large and growing population and a flourishing economy, with a major high-technology sector. 
• Electricity demand has been rising steadily for many years, but to 2001 no major new plant had been built for about 15 years. 
• In 2000-01 there was an acute electricity supply crisis, triggered by several factors. 
• To meet electricity demand and carbon emission goals a large nuclear component will be necessary by 2050. 

California has a population of some 38 million, which grew by over 25% through the 1980s and 12% through the 1990s. It is expected to reach 55 million by 2050.  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).

 The state has a goal of reducing its CO2 emissions by 80% of 1990 levels by 2050, as required by its Global Warming Solutions Act of 2006 and a 2005 executive order. The means going from 470 Mt CO2e in 2005 to 85 Mt CO2/yr, with most of those coming from the energy sector.  The short-term goal is to reach 1990 levels by 2020.

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 imported^a 

 

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. Early in 2012 the Independent Systerm Operator forecast peak demand on 46,350 MWe in 2012.

The state played a significant role in the early development of US nuclear power. Today it has two nuclear power plants: Diablo Canyon and San Onofre - with four PWR reactors totalling 4390 MWe capacity. These are designed to survive large earthquakes.
 

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.

In July 2011 a study from the California Council on Science and Technology (CCST) called for an almost tenfold increase in the state’s nuclear energy capacity by 2050. The report, California’s Energy Future ‐ Powering California with Nuclear Energy, includes a “Realistic Model” scenario that assumes that the state's energy demand in 2050 will be 510 TWh/yr. It also assumes that nuclear electricity will be used as the base-load power source, nuclear plants will have a 90% capacity factor, and nuclear power will provide two‐thirds of the state’s electricity, the rest coming from renewables as required by the Global Warming Solutions Act of 2006. This scenario requires about 44 GWe of nuclear capacity. “California needs to reduce its greenhouse gas emissions to 80% below 1990 levels by 2050, while accommodating projected growth in its economy and population,” which "will likely require a doubling of electricity production with nearly zero emissions. “There are no technical barriers to large‐scale deployment of nuclear power in California. There are, however, legislative barriers and public acceptance barriers that have to be overcome to implement a scenario that includes a large number of new nuclear reactors.” The report concludes that 6-8 c/KWh is "the best estimate today" on nuclear power costs. "Reactors can be cooled with reclaimed water or with forced air, though air cooling is less efficient and would increase nuclear electricity prices by 5% to 10%."

This nuclear energy report was produced as follow-up to a wider CCST report, California’s Energy Future: The View to 2050 (May 2011). This found that: "Nuclear power provides reliable base-load power with very low emissions and can offset variability issues incurred by renewables, but faces obstacles with current public policy and public opinion. By law, new nuclear power in California is currently predicated on a solution for nuclear waste." However, "If electric generation is predominantly intermittent renewable power, using natural gas to firm the power would likely result in greenhouse gas emissions that would alone exceed the 2050 target for the entire economy." The CCST prepared its reports for the California Energy Commission.
 

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)

California Council on Science and Technology, 2011, California’s Energy Future ‐ Powering California with Nuclear Energy.
California Council on Science and Technology, 2011, California’s Energy Future: The View to 2050.
 

Related information pages

Nuclear Power in the USA