While California’s response to global climate change is a major focus, energy policymaking in the state centers on efficiency and demand response, according to the latest update of the California Energy Commission’s (CEC) 2007 Integrated Energy Policy Report (IEPR).

The report recommends natural gas and electricity infrastructure additions, along with improved, advanced technology-based programs to reduce energy use and greenhouse gas emissions.

Part of the infrastructure effort should center on repowering and replacing old gas-fired generation plants with state-of-the-art, more efficient facilities. The report stressed that California’s electric distribution systems still “mainly use designs, technologies and strategies that were designed to meet the needs of the mid-20th century customers, and about 90% of the state’s outages are caused by distribution problems.”

California’s latest IEPR version has gone to the governor and state legislature for use in 2008 energy initiatives. The report encourages and expects widespread collaboration among federal, state and local government agencies “to address critical energy infrastructure and related environmental challenges.”

Overall electricity use in the state is now projected to grow faster on a peak-demand than an overall basis (1.35% for peak-demand vs. 1.25% overall each year). “The increase in peak demand is the result of a population that is moving inland to hotter areas of the state, prompting higher demand for electricity for air conditioning,” the IEPR said.

This population shift will move up to 40% of the state’s population (20 million people) inland by 2040, compared to the 30% of the population residing in these areas now. The shift to hotter, drier areas not only drives up overall energy demand, it changes “patterns of energy use,” the CEC report said. This makes the need for upgraded infrastructure crucial, but even more important makes demand response and energy efficiency increasingly important, the report said.

Adopting more statewide energy-saving targets and pulling in the public-sector utilities, along with new state legislation to require energy audits and cost-effective efficiency improvements when buildings are sold, are some of the recommendations in the report. “Net-zero” for newly constructed buildings should be a goal by 2020 in the state whereby a combination of more stringent efficiency standards and on-site generation renders the new structures as independent of the grid. This would apply to residences in 2020 and by 2030 to new commercial buildings.

For natural gas, the CEC report assumes the eventual use of liquefied natural gas (LNG) imports, but additional LNG supplies beyond the Sempra Energy North Baja facility on the West Coast may be delayed. In the interim, the IEPR recommends measures to extend the value of existing supplies through more research and development and energy efficiency measures, along with expanded displacement of gas with renewable energy sources for generating electricity.

In addition, the CEC report recommends that the California Public Utilities Commission develop an appropriate “feed-in” tariff for bringing more pipeline quality biogas into the state’s natural gas distribution system.

Ultimately, the CEC said it recommends two actions by the state and its utilities:

The report clearly puts the CEC on record as supporting improved use of the state’s electricity infrastructure and recommends broad collaborative efforts among the state energy agencies, utilities and other stakeholders to plan and implement steps to achieve that goal. Some of the effort involves the development of more sophisticated electric generation portfolio management tools.

Specifically, the IEPR recommends that private-sector utilities “procure enough capacity from long-term [power supply] contracts to allow for the orderly retirement or repowering of aging plants by 2012.” And it specifically calls for requiring Southern California Edison Co. to develop contingency plans for replacement generation in case its share of supplies from the troubled Palo Verde nuclear plant in Arizona should be “shut down for an extended period of time.”

The mandate for Edison is recommended as part of the utility’s ongoing long-term procurement planning process.

“California’s commitment to distributed renewable energy, combined heat and power and demand response programs requires a change in the design of the state’s distribution systems to accommodate the integration of new resources,” the CEC report said.

Ideally, the report envisions the state moving to a more sophisticated smart grid that provides rapid, two-way real-time communications between power providers and users.

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