California Steams Toward Statism and Energy Doomsday
Founder and CEO of the Institute for Energy Research
Principal, MasterResource: A Free-Market Energy Blog….
[Editor’s Note: California is making all the same mistakes as Europe by relying upon statism as an energy policy and, as a result, is headed straight for energy doomsday!]
A major theme of political economy is: one government intervention or program leads to another and yet another. In “green electricity” California, supply-side distortions have required demand-side management (DSM) within the central planning exercise of Integrated Resource Planning. That began in the 1980s; today, there is centralized wholesale power grid planning. And supply side mismanagement means demand-side programs and exhortation to use less energy in the peak-demand hours.
It is back to Amory Lovins’s soft energy path within his “whole-systems planning,” whereby a “negawatt” (usage forgone) is as important as a kilowatt (see the conclusion below).
Colorado recently had an “electricity lockdown” to meet peak demand–an invasion into the home. California, Texas, and other wounded grids might be next.
For California, the Emergency Load Reduction Program (ELRP) is the major program at present (expect revision/enlargement to come). It is described by the CPUC below:
In 2021, the CPUC created an innovative program, the Emergency Load Reduction Program (ELRP), to pilot a new Demand Response approach to help avoid rotating outages during peak summer electricity usage periods from May thru October. The ELRP started in 2021 with commercial customer participation. In December 2021, the CPUC expanded the program to include residential customers for Summer 2022 and beyond.
- [T]he Emergency Load Reduction Program (ELRP) is a 5-year pilot program designed to pay electricity consumers for reducing energy consumption or increasing electricity supply during periods of electrical grid emergencies. The purpose of the ELRP pilot is to offer a new tool for the electric grid operators and utilities for reducing energy consumption during a grid emergency to reduce the risk of electricity outages when the available energy supply is not sufficient to satisfy the anticipated electricity demand.
- The ELRP is managed by the State’s three large investor-owned utilities (IOUs) – Pacific Gas & Electric, San Diego Gas & Electric, and Southern California Edison.
- The ELRP Program is called upon only as a last resort during an emergency grid situation issued by the California Independent System Operator (CAISO).
- The ELRP pays customers who voluntarily reduce electricity demand during a grid emergency.
- The State’s three IOUs handle customer enrollment, event communication, and per event compensation.
- The ELRP started in Summer 2021 with nearly 200 megawatts (MW) of enrolled non-residential customer participation. The program was called on four times in the early summer 2021, and customers received payments of approximately $1 million for voluntary reductions in demand achieved through the ELRP.
- In December 2021, the CPUC expanded the ELRP for Summers 2022 and beyond to include participation by residential customers. Nearly half of California consumers will be automatically enrolled in the residential program, and the CPUC ordered the IOUs to do special outreach to low-income customers ….
Suppliers paying customers not to use electricity is not a market innovation. It is a perversity of government intervention.
Market providers have handled the demand peak with:
- Enough dispatchable (reliable) power to meet the peak.
- A rate design under which peak users (those with potentially high demand, but infrequently required) paid a demand charge (as opposed to a variable volumetric rate for each kWh used). This arrangement of two-part rates, which is now a century old in the industry, compensates the provider for having extra infrastructure standing by, ready to meet the special needs of the peak user.
- Foregoing those customers who generate losses for the supplier or require cross-subsidies from other grid users.
Note the program-upon-program in California today. In addition to the legislature, there are these government energy-related agencies: California Public Utilities Commission, California Independent System Operator, and South Coast Air Quality Management District. And multiple programs to help lower-income ratepayers who cannot otherwise afford “green” energy: California Alternate Rates for Energy (CARE); Energy Savings Assistance (ESA); Family Electric Rate Assistance (FERA); Disadvantaged Communities program.
Where will it all end?
Reposted, with permission, from Master Resource.
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