A study released Wednesday by Santa Monica, CA-based Rand Science and Technology raised a caution flag for California becoming overly reliant on natural gas-fired electric generation, which it said could add to the risk of more volatile and rising gas prices. Assuming under current plans that the state’s natural gas use could double by 2010, the report advocates a “balanced portfolio” approach to the state’s future energy planning that will minimize risks of supply/price volatility.

Offering itself as a planning tool, the Rand study, “Implications and Policy Options of California’s Reliance on Natural Gas,” describes likely problems from the increased gas reliance and explores “potential options for addressing and preventing problems in natural gas management in California.” The report carries a strong skepticism about the state’s infrastructure being able to meet the projected growth in gas demand, including “a growing summer peak” for power generation.

The report appears to be closely aligned with the proposed mission of the state’s year-old power authority to create more integrated resource planning that relies more heavily on energy efficiency, renewable resources and distributed generation to reduce the reliance on central, baseload (most gas-fired) generation plants. It estimates that a plan to lessen gas dependence could carve up to 1-3 Bcf/d out of the state’s future projected demand growth by 2010.

“Efficiency programs can achieve quick results — especially if they include direct equipment replacement programs rather than waiting for equipment to be replaced at the usual turnover rates,” the study concluded. “Combined-Heat-and-Power (CHP) distributed generation and many renewable technologies can be deployed in two to three years. In the long run, for California to successfully hedge against future price and supply volatility, it should engage in a regional planning process to address the region’s energy problems.”

Increasing competition is likely from neighboring western states from interstate supplies flowing into the state, and the current pipeline expansions envisioned will “only marginally meet requirements of anticipated demand growth throughout the West.” It noted a “good chance that the existing and currently anticipated infrastructure will be inadequate” to meet increased demand.

Among the options open to the state, Rand said there are both supply-side and demand-side steps that can be taken “to reduce the risk of gas price increases and volatility as well as gas supply problems.” The options include:

“Under a scenario with increased renewables, combined-heat-and-power and more aggressive energy efficiency, the required receipt capacity could be reduced to 1-3 Bcf/d by 2010,” the report concluded.

The Rand study is on the think tank’s web site (www.rand.org), and is co-authored by Mark A. Berstein, Paul D. Holtberg and David Ortiz.

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