Freeze Frame - California Pauses Shift from Natural Gas Amid ... - RBN Energy

Freeze Frame - California Pauses Shift from Natural Gas Amid Concerns About Power Shortages | RBN Energy

The U.S.’s effort to prioritize low-carbon energy entails some bumps and bruises along the way, an indication that the energy industry’s trilemma of availability, reliability and affordability can conflict with today’s economic realities and environmental priorities, even in a state like California with abundant financial and clean-energy resources and a commitment to decarbonization. In today’s RBN blog, we look at the state’s lofty goals to phase out fossil fuels, why it has been forced to put its transition away from natural gas and nuclear power on hold, and some of the biggest challenges ahead for the Golden State.

As we said in Can’t Help Falling in Love, the first blog in this series, the challenges of trying to shift away from oil and gas are being felt now in Hawaii, where a commitment to expanding energy production from renewable sources and tamping down the use of fossil fuels — while also keeping prices under control and reducing pollution — is turning out to be no easy feat. Today we turn our attention to California, the state with the most ambitious plans for moving away from fossil fuels and to an economy predominantly powered by renewables and zero-carbon power. (We last looked at the state’s efforts to manage the energy transition away from natural gas a few years ago in California Dreamin’.)

Let’s start with a 50,000-foot look at the state’s overall decarbonization goals before delving into some of the specific targets that have been put forward. The state’s strategy has three fundamental elements, according to Key Challenges for California’s Energy Future, published in June 2023 by the California Council on Science & Technology (CCST):

- Maximize efficiency and electrify energy use across sectors to the greatest extent possible.
- Provide affordable, accessible, and reliable carbon-free electricity for a highly electrified economy.
- Decarbonize activities that cannot be electrified by using clean fuels, efficiency, conservation, and better land-use planning and infrastructure.

With those basic guideposts established, let’s look at the state’s targets. California's renewable portfolio standard (RPS), enacted in 2002 and revised several times since then, required that 33% of electricity retail sales come from renewable resources by 2020. The RPS also requires that 60% of electricity sales come from renewables by 2030, with 100% coming from zero-carbon electricity by 2045. (In 2022, the state legislature set intermediate targets of 90% renewables and zero-carbon electricity by 2035 and 95% by the end of 2040.) The state also seeks to cut greenhouse gas (GHG) emissions to 40% below 1990 levels by 2030. It is one of about a dozen states that have established GHG and RPS commitments (green-shaded states with green squares in Figure 1 below).

Figure 1. GHG and Renewable Electricity Standards by State.

Source: National Regulatory Research Institute

The biggest challenge for California is likely to be how it handles its planned transition away from natural gas — the state’s climate and air quality laws essentially require the eventual elimination of natural gas consumption that does not include carbon capture and sequestration (CCS). That will be no easy feat, as California is the nation's second-largest natural gas consumer, behind only Texas. In addition, about 40% of the state’s electricity is generated from gas and about 60% of households rely on gas to heat their homes. (The potential impact of high prices on consumers is also a challenge; more on that in a bit.) This is all particularly problematic for a state that has been increasingly susceptible to droughts and wildfires over the last few years — droughts reduce the availability of hydroelectric power and wildfires threaten electricity infrastructure — driving up consumer demand for power and causing reliability issues with the power grid, with rolling blackouts becoming more common. The state already relies on power imports from other states for up to one-third of its electricity needs, more than any other state, so any threats to transmission could have a significant impact. These reliability concerns could become more acute in the next few years, with energy shortfalls of 10,000 MW possible by 2025, depending on increases in demand, how much new generation capacity is added, and weather conditions, according to a 2022 report by the California Energy Commission (CEC).

These concerns have led California to pause the transition away from natural gas — hence the “freeze frame” reference in today’s title — in a couple of significant ways:

- The State Water Resources Control Board (SWRCB) voted unanimously in August to extend the deadline for eliminating seawater cooling at four gas-fired power plants along the California coast. The board, which specifically cited concerns about the potential 10,000-MW shortfall by 2025, received input from an advisory committee that includes representatives from several regulatory bodies and grid operators. The state had previously planned to halt seawater cooling in 2020 (a policy adopted in 2010), but the board’s action extended the compliance deadline for the 1,491-MW Ormond Beach, 1,137-MW Alamitos, and 226-MW Huntington Beach power plants to 2026, while pushing the deadline at the 326-MW Scattergood plant to 2029.
- The California Public Utilities Commission (CPUC) on August 31 voted unanimously to approve an increase in the maximum natural gas storage capacity at SoCal Gas’s Aliso Canyon facility in Los Angeles County to 68.6 Bcf, from the previous cap of 41 Bcf, in an effort to alleviate price spikes and blackouts. The field has a maximum storage capacity of 86 Bcf — making it the largest in the entire U.S. West. However, it was the site of a massive four-month-long gas leak discovered in 2015. The incident resulted in the field being shut-in for nearly two years. When it was deemed safe for operation in July 2017, the CPUC put in place withdrawal protocols and ordered that the facility be treated as an “asset of last resort” for withdrawals. CPUC eased the withdrawal protocol in June 2018 and allowed the facility to increase the maximum allowable storage capacity to 34 Bcf, citing pipeline constraints for gas supply in Southern California. In 2021, that limit was increased to 41 Bcf. That year, Pacific Gas and Electric (PG&E) reclassified 51 Bcf of working gas capacity to base gas, further reducing access to storage gas in the state.

Those two decisions are reminiscent of efforts to extend the life of the 2,280-MW Diablo Canyon nuclear power plant past 2025, when it was previously scheduled to close as part of a 2016 agreement with environmental and labor groups. California Governor Gavin Newsom signed legislation in September 2022 to keep the plant running, and the U.S. Nuclear Regulatory Commission (NRC) ruled in March 2023 that the plant’s licenses will remain in effect provided that its owner, PG&E, submits a license renewal application by the end of this year. The operating licenses for the site’s two reactors expire in November 2024 and August 2025. PG&E has indicated that it wants to extend the life of both units for an additional 20 years, until 2044 and 2045, respectively. Diablo Canyon, located between Los Angeles and the Bay Area, generates about 9% of the state’s electricity and 17% of its zero-carbon energy. Nuclear power is also seen as an important element in providing zero-carbon, firm (non-intermittent) power to the grid. (More on that later.)

California’s move away from fossil fuels is further complicated by the size and scope of the upgrades that need to be made in the next several years, especially regarding the amount of generating capacity that needs to be added and the investment required to make it happen.

Let’s start with the bottom line: California is going to need a lot of power to meet the expected increase in demand. The California Air Resources Board (CARB) estimates that electricity demand could jump by 76% by 2045, compared with 2022 levels — but because the state is committed to moving away from fossil fuels, essentially all of that new demand is envisaged as being met by utility-scale wind and solar facilities. On the plus side, California has an established history of developing renewable energy — it’s the nation’s top producer of electricity from solar and geothermal resources, second in total generation from renewables, and fourth in conventional hydropower. The state already has 16,000 MW of utility-scale solar in operation but will likely need another 70,000 MW by 2045 to meet demand. (We should also note that the state’s plan includes provisions for a variety of generating methods, including rooftop solar, onshore and offshore wind, biomass, geothermal, and hydrogen fuel cells, in addition to large-scale battery storage.)

Figure 2. Expected Growth in California Utility-Scale Solar Generation. Source: CARB

All those new sources of power generation will also need to be connected to the power grid. The California Independent System Operator (CAISO) expects grid upgrades to cost $30.5 billion over the next 20 years. That would likely include development of a smarter power grid that better incorporates distributed generation resources like rooftop solar and vehicle-to-grid initiatives designed to utilize the bidirectional charging capabilities of electric vehicles (EVs).

A third issue is land use, especially in a state historically at the front of environmental concerns and cognizant of the impacts of development on agriculture and the environment. Utility-scale wind and solar facilities take up a lot of land. The CCSC’s report estimates that anywhere from 2,900 to 4,200 acres of land are needed for every 1 GW of solar generating capacity. If the state is going to add 70,000 MW of solar capacity over the next 20 years, that’s up to 294,000 acres, or more than 450 square miles. California’s a big place, but that’s still a lot of land.

California’s plans revolve around bringing massive amounts of renewable power online in the coming years, but the intermittent nature of those sources remains a problem. Energy storage, demand response, and grid regionalization should be able to alleviate some — but not all — of the challenges associated with intermittent renewable resources. A diverse portfolio that also includes clean, firm power — be it geothermal, nuclear, clean hydrogen, or natural gas with CCS — would be essential in addressing seasonal fluctuations and extreme weather events. (Most of that demand is currently met by about 80 natural gas peaker plants spread across the state. Most of those plants feature combustion turbines designed to ramp up quickly to meet peak demand.)

All this also has to be put into the context of what California consumers have been dealing with in recent years, especially as it pertains to gas and electricity prices. California ranked #4 in residential electricity prices as of May 2023, according to Energy Information Administration (EIA) data, with residential, commercial and industrial gas prices exceeding the national average by 85%, 78% and 133%, respectively. This despite the fact that California’s large proportion of renewable generation sources are relatively low cost once installed. That’s because, due to the intermittent nature of wind and solar, more reliable generation facilities, namely natural gas units, are needed to fill the gaps.

California’s residential natural gas prices were more in the middle of the pack, at #31 among the states, but have occasionally spiked. The increased market share of renewables, along with limited gas storage injection/withdrawal capacity, extreme weather, and worsening transportation constraints have brought on gas and electricity shortages and increased price volatility, largely due to market demand outrunning natural gas pipeline capacity. (California imports about 90% of its natural gas from other U.S. states and Canada.) In July 2018, natural gas prices at the SoCal Citygate index rose to a record daily average high of $39.24/MMBtu — at the time, the highest price recorded since Natural Gas Intelligence (NGI) began tracking that index (see Electrical Storm). Since then, it has far surpassed that — during the Deep Freeze of February 2021 it hit $144/MMBtu, and most recently, in late December 2022 it spiked to as high as $48.74/MMBtu when many of the pipelines serving California were undergoing unplanned maintenance, a topic we covered in Wild, Wild West.

California has long been a U.S. leader in the transition away from fossil fuels, often setting the tone for discussions in other states with strong environmental priorities. But its size and economic might doesn’t make it immune to the difficulties inherent in the effort to transition its energy infrastructure. In upcoming blogs, we’ll be looking at how a few other states are balancing the energy needs of today with the clean-energy plans of tomorrow.

“Freeze Frame” was written by Seth Justman and Peter Wolf and appears as the first song on side one of The J. Geils Band's 10th studio album of the same name. Released as the second single from the album in January 1982, it went to #4 on the Billboard Hot 100 Singles chart. The single's B-side, “Flamethrower,” started picking up airplay in urban contemporary markets at the same time, particularly in the Detroit area. It reached #12 on the Billboard Hot Dance Play Singles chart. “Freeze Frame” was certified Gold by the Recording Industry Association of America (RIAA). Personnel on the record were: Peter Wolf (lead vocals), Seth Justman (keyboards, backing vocals), Stephen Bladd (drums), J. Geils (guitar), Magic Dick (harmonica, sax, trumpet), Danny Klein (bass), and Randy Brecker, Tom Malone, Lou Marini, George Young, Ronnie Cuber, and Alan Rubin (horns).

The album, Freeze Frame, was recorded in 1980-81 at Long View Farm in North Brookfield, MA, with Seth Justman producing. Released in October 1981, the LP went to #1 on the Billboard Top 200 Albums chart and has been certified Platinum by the RIAA. It would be the last album for lead vocalist/frontman Peter Wolf, who left the band in 1983. According to Wolf, “They wanted to continue in a pop-techno way, and it wasn't my thing.” Three singles were released from the album.

The J. Geils Band was an American rock band formed in 1967 in Worcester, MA, with Peter Wolf, J. Geils, Seth Justman, Magic Dick, Danny Klein, and Stephen Bladd. They released 11 studio albums, three live albums, nine compilation albums, and 30 singles. After Peter Wolf left the band in 1983, they carried on with keyboardist Seth Justman on lead vocals. The band released one album with that lineup in 1984 and disbanded in 1985. They did a few reunion shows and tours until 2015. J. Geils died in 2017. Magic Dick still records and tours in an acoustic duo with guitarist Shun Ng. Seth Justman is still occasionally involved in record production, and Peter Wolf still records and tours as a solo artist.