| Updated:
August 2007
Original market commentary by Dr. Robert Michaels, professor
of economics, CalState, Fullerton, and senior columnist, The Desk
Unreal Renewables, Unfuzzy Transmission
Mind if I honk my own horn just this once? Once upon a time most
of us thought that the National Interest Electric Transmission Corridor
provisions of the 2005 Energy Policy Act had so many wild-card rationales
for FERC’s backstop authority that they would suffice to get
some new transmission built. I noted that there was still a Congress,
which would soon realize its error and try to kill the corridor
provisions or blockade individual projects. It almost happened last
month, when the House voted 257-174 to defeat an energy appropriations
amendment that would have defunded DOE’s corridor programs.
The authors said they would bring it up again elsewhere. The last
time states rights looked this weird was before the Civil War. Co-author
Maurice Hinchey, D-NY, said that up ‘til now the states had
“done just fine” in siting, and it would be a crime
to allow these “powerful energy companies, i.e., local utilities,
to simply come into town, i.e., their assigned territories, seize
private property” (with compensation) and make a bundle. The
possibility that some utilities can do better by not building them
apparently never crossed his mind.
Which takes us to sunny, transmission-dependent San Diego. Sometime
back I also noted that nowadays you can rationalize almost anything
by saying it helps renewables, using Sempra’s San Diego Gas
& Electric as my example. Against resistance from property-conscious
locals and the California PUC, SDG&E has been pushing to build
a 150-mile line called Sunrise Powerlink. The company claims that
absent the line, it will be unable to meet its 20 percent state
renewables quota by a 2010 deadline.
An assortment of critics has slammed the renewables rationale from
an assortment of angles. Some think that existing lines will suffice
to access the renewables. Others claim that the owners of two local
gas units want to re-power them, but SDG&E is only interested
in imports, not for renewables but because Sempra needs Sunrise
for its own production and trading. As currently routed, the line
will help forge a link between its Baja California facilities (soon
to include an LNG terminal) and the main California/Arizona grid
to the north and east. Unfortunately, the northern part of the line
would go through the environmentally sensitive Anza-Borrego Desert
State Park, which critics say is not necessary to reach the renewables.
Of course if enough renewables materialize in the right places,
it will be hard to refuse SDG&E. Last year they materialized,
sort of. They came from the same supplier that neighboring Southern
California Edison will use to meet its renewables requirement. Remember
Stirling Energy Systems (PowerMoves, 10/13/06 column), developers
of a “Stirling Engine” solar concentrator whose current
beta incarnation can produce 150 kilowatts? SCE contracted to build
850 megawatts of them in a footprint of several square miles that
has yet to get any permits. Last year SDG&E signed with Stirling
for up to 900 MW of the same, fortuitously to be located near the
new line. The company’s VP handling Sunrise claimed to know
nothing about Stirling’s financial condition, which foes are
hinting is precarious. SDG&E was also not requiring a pilot
project, which in any case can’t be done without land use
permits.
Meanwhile SDG&E keeps recalculating the savings that its ratepayers
will net from the line. Its original $443 million dropped to $85
million in mid-January, hit $220 million a week later and dropped
to $129 million a few days ago. The PUC is understandably miffed
over changes like these, including Assigned Commissioner Diane Grueneich,
the most enthusiastic environmentalist on a pathologically enthusiastic
commission. She is delaying the draft environmental impact report
for several months, which SDG&E says will put its renewables
quota out of reach.
And now back to Washington, where last month the Senate passed an
additional rationale for FERC’s backstop transmission authority.
It amended its energy bill to ask that DOE study and possibly designate
“green energy” corridors suitable for renewables, whether
congested or not. It’s hard to imagine the House and White
House not going along with something so warm and fuzzy, and SDG&E’s
project is an ideal test because it is in a region DOE has already
identified as critical. Can’t you already envision the rulemaking
where they set guidelines for distinguishing real from unreal renewables?
All quotes are from various issues of Electric Transmission Week
and the San Diego Union-Tribune. In fairness to SDG&E, their
side of the story can be found at http://www.sdge.com/sunrisepowerlink/info/Myth_v_Fact.pdf.
Bob Michaels is a professor of economics at California State University,
Fullerton, and an independent energy sector adviser. Michaels has
worked with some of the country’s leading energy companies.
The views expressed in this column are only coincidentally the professional
opinions of the author, his affiliations or his clients. Contact
Michaels at rmichaels@fullerton.edu.
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