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Electricity Deregulation and the California Energy Crisis. Electricity and energy What happened in California? Utility deregulation in NE and Maine Future trends, including renewables The big picture. What is electricity?.

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Electricity deregulation and the california energy crisis
Electricity Deregulation and the California Energy Crisis

  • Electricity and energy

  • What happened in California?

  • Utility deregulation in NE and Maine

  • Future trends, including renewables

  • The big picture


What is electricity
What is electricity?

  • Electricity is a naturally occurring physical force created by the interaction of negatively and positively charged particles.

    • Benjamin Franklin, 1752 (electricity transmitted from lightning to iron spike to key)

    • Michael Faraday, 1831 (generated electricity by rotating magnets around a coil of wires)

    • Thomas Edison, 1882 (world’s first electricity-generating plant, NY)


Electricity flow 1999 quadrillion btu
Electricity Flow, 1999 (Quadrillion Btu)







Why deregulate

Why Deregulate?

ANSWER: Inefficient market

(move from monopoly to market and choice)


California deregulation then now

Utilities owned generating plants, prices regulated

Utilities owned transmission lines

Utilities own distribution systems to homes and businesses

Plants sold to private companies. Prices set at auction by CA Power Exchange.

Transmission lines, grids in Independent System Operator (np)

Utilities still own distribution systems

CALIFORNIA DEREGULATIONThen Now


California energy crisis wholesale electricity costs
California Energy CrisisWholesale Electricity Costs

  • 1999 $7.4 billion

  • 2000 $27 billion

  • 2001(6mo) >$20 billion

    • CA now has long-term contracts (peak purchase)


Who are the players
Who are the Players?

  • Energy producers (natural gas, nuclear, coal, other)

  • Marketers/Traders (buy-sell energy and/or buy-sell electricity)

  • Power Plants (Utilities and others)

  • Transmission(Utilities, ISOs, RTOs)

  • Distribution (Utilities to users)

  • Regulators (State and Federal)


Who to blame
Who to blame?

  • Generating capacity tight; few non-utility owners; few new plants

  • Long–term contracts not allowed; spot purchases required

  • Demand increased 25%; supply increased 6% in 10 yrs

  • Transmission lines/infrastructure constraints

  • Natural gas prices much higher than normal

  • California electricity rates frozen (at utilities’ request); couldn’t pass price increases on to consumers

  • Generators and fuel suppliers were reluctant to sell to bankrupt utilities

  • Poor sight by FERC, state regulators



New england utilities
New England Utilities

  • Nine plants built since 1998. 30 plants under construction.

  • Demand at a steady pace.

  • Increased dependence on natural gas.

  • Utilities use long term contracts (20% spot)

  • NE imports from other states (Canada, also)


New approach to deregulation

Electricity is a special commodity

Better wholesale market design (less spot market use)

Create real-time pricing for consumers

Provide transparency, efficiency, choice

Add co-generating capacity/rethink size

Think distributed generation/”off grid”

Improve transmission infrastructure

Use gas storage to moderate volatility

Re-evaluate regulatory system

Use life-cycle analyses

Anticipate surprises

New Approach to Deregulation


New utility generating units by year of entry into service
New Utility Generating Unitsby year of entry into service

125

1,250

Number of

new units

100

1,000

75

750

50

500

25

250

Maximum

new size, MW

0

0

1994

1995

1996

1997

1998

1999

2000

1993

Sources: US Energy Information Administration; Rocky Mountain Institute



Electricity deregulation and the california energy crisis

Power Shopping

A variety of distributed-generation technologies are available or under development.

Costs of producing power can vary widely, depending on location, size, use and fuel prices,

but here are estimates:

TechnologyDescriptionCost*

Photovoltaics (solar panels) Converts sun lights into electricity 22-40 cents

Wind turbines Wind blades power electricity-producing turbines 4-28 cents

Diesel generators Similar to truck engines, also run on natural gas 7-12 cents

Microturbine Scaled-down jet engines that run on natural gas,

methane or waste gases 7-10 cents

Fuel cells Chemical reaction produces electricity and water No commercial production

* Per kilowatt-hour, without subsidies. For comparison, the average U.S. retail electricity price

earlier this year 6.9 cents per kwh.

Source: Department of Energy; National Renewable Energy Laboratory;

American Wind Energy Association; manufacturers

From WSJ, Sept 17, 2001 Think Small by Robert Gavin


Marketing renewables
Marketing Renewables

  • Life cycle analysis/resource equity

    • Goal of true cost of all energy sources

    • Level playing field

  • Co-generation

    • How/should/could renewables integrate with fossil fuels

    • Production, storage, utilization issues

    • Scale issues (distributed energy)

  • Energy price and supply

    • Conservation, efficiency, volatility, reliability, technology

    • BP(solar), Shell(hydrogen, geothermal), Texaco(fuel cells)

    • Choice, diversity


  • Food for thought
    Food for Thought

    • 40% of world not on grid (>2 billion people)

    • Increased energy demand in China (5-8%/yr)

    • 20,000 gas wells drilled in US last 12 mos; deliverability increased by 4%

    • What happens when the world economy recovers? Demand>supply


    World consumption of end use fuels

    5,808

    Mtoe

    9,117

    Mtoe*

    World Consumption of End-Use Fuels, %

    1997

    11

    Coal

    8

    2020

    Forecast

    1

    Renewables

    2

    4

    Heat

    3

    Electricity

    20

    17

    Gas

    18

    18

    49

    Oil

    49

    * Million tonnes of oil equivalent

    Source: International Energy Agency