GAO: Military Could Ease Western Power Constraints

The Department of Defense (DOD) could potentially reduce demand on the western power grid by generating 90 MW of electricity and implementing conservation initiatives, although the use of DOD assets raises environmental and mission concerns, the General Accounting Office (GAO) recently told Congress. The GAO also said that although significant private back-up generation capacity exists in California its potential use is limited due to business and environmental risks.

About two dozen congressmen, most of whom represent California districts, asked the GAO to describe the condition of California's electricity market, including changes in demand, supply and prices. The agency specifically was asked to determine the extent to which the DOD can help add to western electricity supplies this summer and discuss available private backup generation resources and any benefits and problems associated with their deployment.

According to the GAO's analysis, summarized in a late June letter to Congress, the military services own an estimated 300 MW of electricity generation capacity. The services have 30 power plants in the western states capable of generating 109 MW and 158 mobile generators throughout the United States capable of generating an additional 189 MW. However, according to DOD officials, roughly two-thirds of the department's generating capacity cannot be used to assist the western system because it is being utilized to provide backup, for training purposes or undergoing maintenance. Therefore, approximately one-third of the DOD's generating capacity -- 16 MW from power plants and 74 MW from mobile generators -- could potentially be used to reduce demand on the western system.

While estimated costs to deploy and operate DOD's mobile generators are high, the California Independent System Operator (Cal-ISO) anticipates that wholesale summer prices may be higher. DOD estimates that costs to transport, set up and operate generators would range from $350 to $1,000/MWh of power produced, assuming that the generators would operate 20 days per month for four hours per day, over a period from one to four months. The GAO projects these costs could be lower, ranging from $200 to $500/MWh of power produced, in the event that the generators operated 30 days per month for eight hours per day over the same period. Even if actual costs of operation reached the highest level estimated, however, the cost of using DOD's generators could still be below the market price for electricity. Cal-ISO anticipates that wholesale 2001 summer prices may frequently exceed $1,000/MWh.

At the same time, the GAO acknowledged that deployment of military generators raises environmental and mission concerns. DOD mobile generators have pollutant emission rates two to eight times the maximum allowed in California. Also, DOD officials have expressed concern that increased use of these generators would impair military readiness by restricting the availability of generating assets and increasing maintenance requirements. In addition, logistical issues further complicate the decision of whether to deploy DOD assets. Among other things, questions remain as to who would direct the use of DOD generators and assume the risk.

DOD officials have said that they can best contribute to easing California's electricity crisis by reducing demand in California during peak consumption periods. The DOD in May of this year announced a plan targeting a 10% reduction in its peak electricity demand in California in 2001, with the total estimated reduction equal to about 42 MW. However, the DOD plan commingles conservation initiatives with generation. Specifically, the 10% target reflects plans to reduce peak demand by 6% through conservation and 4% through generation and the purchase of power. The DOD's plan also contains few details on how such initiatives would be implemented or funded.

Turning to privately-owned backup generation in California, the GAO said that backup systems have an estimated generating capacity of 3,500 MW to 5,000 MW of electricity, but the potential for the state to benefit from this capacity is limited. Existing incentives to increase the use of back generation may be insufficient. Businesses using backup generators that do not have the capacity to fully power business operations would probably require a greater incentive to switch to backup generators and risk temporarily disrupting their business. Also, most privately-owned backup generators are located in heavily populated urban areas, such as the California southern coast and the San Francisco Bay area. Because of regulatory restrictions and emissions rates that are four to five times those of other plants, extensive use of private backup generation could result in violations of federal, state and local regulations and air quality standards.

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