A hybrid energy industry with less reliance on natural gas and more reliance on renewables, demand response and retail price signals is the overall thrust of recommendations in the current draft of an integrated energy resource plan released last Wednesday by the California Energy Commission’s staff. The final report is due to the state legislature and governor by Nov. 1.

Viewed as one of the principal implementing tools for the state’s “energy action plan” crafted earlier this year, the commission’s draft blueprint links both stationary and transportation energy strategy for the state and attempts to avoid a recurrence of the 2000-2001 crisis that could re-visit the state by 2007 unless the it “takes action now,” the 40-page draft policy report said.

The report attempts to lay out the major issues in electricity demand, supply and transmission and natural gas’ increasingly critical role, so legislation can be drafted in the next two years to address a combination of infrastructure, processing and technological challenges facing the nation’s most populous state. The draft summarizes the state’s current energy situation as “tenuous.” It says that without action California will face a future of “growing demand, supply disruptions and high/volatile energy prices.”

“The state needs a clear and focused integrated planning process to procure, implement and monitor electricity resources,” the draft report stated. “Unless the state repairs its fragmented and ineffective transmission planning and permitting processes, California will not reap the benefits of the policies proposed in this report.”

Among its recommended actions for the governor and the state lawmakers are:

While electricity reserves look adequate for the next three years at least, the energy commission “has local reliability concerns” for load centers such as San Diego and San Francisco, and its resource planning now under way at the three major investor owned utilities — Pacific Gas and Electric Co., Southern California Edison Co. and San Diego Gas and Electric Co. — needs to consider several critical variables: (a) rising dependence on gas-fired generation, (b) cyclical economic activity that has a major impact on the volatility of electricity demand, (c) long-term contracts tied to older generation that hinders more efficient new plants coming on line, and (d) renewables that have an impact on keeping older, efficient plants operating and slowing the growth of new more efficient gas-fired plants.

Despite growing concern among policymakers about the state’s greater dependence on natural gas, the report sees that dependence increasing and noted that pipeline capacity should be adequate for the next 10 years in Southern California and through 2006 in northern California.

As the nation’s second largest natural gas-consuming state, California can expect liquefied natural gas (LNG) to be a factor, most likely coming from North Baja, but the role of California-produced supplies from the state’s older oil/gas fields is “limited,” although the energy commission noted the state needs to “encourage enhanced production of in-state natural gas consistent with environmental protection requirements,” according to the staff report draft.

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