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CEC: California Needs Infrastructure Upgrades to Meet Demand

In a state increasingly dependent on energy imports, "it's the infrastructure, stupid," according to the California Energy Commission (CEC) Integrated Energy Policy Report, which was approved on Monday by the five-member commission. It will now go to the governor and state legislature as the state's key energy planning document, stressing that without critical upgrades state infrastructure may not be able to keep up with growing energy demand in the near future.

In a wide-ranging set of recommendations for electricity, natural gas and transportation fuels, the CEC's policy report contends that if the state follows its recommendations California will increase supplies, reduce demand, broaden its alternative energy sources and improve the state's delivery infrastructure. The CEC's final version of the report acknowledges that many of the recommendations were made in two earlier versions of the integrated plan in 2003 and 2004.

A joint state "Energy Action Plan" updated earlier in the year by the energy commission and the California Public Utilities Commission was cited for having articulated "a series of concrete actions" for meeting the state's future energy challenges. And the policy report reiterates that the state needs to get behind the action plan, attempting to attach a sense of urgency to the state's overall energy needs.

The latest integrated report finds causes for alarm in all three energy sectors -- electricity, natural gas and transportation fuels -- but it also cited progress made over the past two years. In short, it calls for stepped up production, demand-side management and infrastructure investment, particularly in the electric transmission grid.

"As the state's demand for electricity increases, California could face severe shortages in the next few years," the CEC's integrated report said. "Of particular concern are the potential impacts of higher-than-average summer temperatures, which can drastically increase the state's electricity demand, as well as shortages resulting from decreased hydroelectric generation in lower-than-average precipitation years."

Noting in another section that California still lacks a comprehensive and coherent transmission planning/permitting process, the integrated report recommends "a corridor planning process" that would identify transmission paths for transmission owners, establish priorities for the pathways, identify the major permitting issues, and gain fuller participation of stakeholders.

"California must urgently encourage major investments in new transmission infrastructure needed to access remotely located renewable resources in the Tehachapi and Imperial Valley areas," the integrated report said. "Without this investment it will be difficult for California to meet its statewide renewable portfolio standard (RPS) goals.

While emphasizing energy efficiency programming, the integrated report also stressed the development of more effective power procurement, advancement of combined-heat-power cogeneration installations, beefing up of natural gas storage, and increased attention to global climate change.

On the subject of gas infrastructure and liquefied natural gas (LNG), the report does not choose sides between onshore and offshore terminals, but it does hail the expected increase in LNG imports over the next ten years, assuming these large new supplies will help dampen current high wholesale natural gas prices.

"The cost of delivering natural gas to the West Coast through a LNG project is expected to be well below the market prices that California currently pays at its borders, and could have a dramatic effect on gas market prices in the state," the integrated report said, citing the example of if market prices dropped just 50 cents/MMBtu, Californians could save more than $1 billion annually on their natural gas bills.

Noting that the state's economy -- billed as the sixth largest in the world -- is dependent on "reliable, affordable, adequate and environmentally-sound" energy supplies, the integrated report concluded that the state's dependence on natural gas and petroleum fuels continues to become more acute, making the state increasingly vulnerable to supply disruptions and price spikes. "It is time for California to urgently address the many challenges facing the state's energy systems to safeguard its economy and its environment."

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