State's natural gas reliance a risk, report says

source: Paul Rogers Mercury News 2002.7.17

When it comes to electricity, California has put all its eggs in one basket -- natural gas -- and could pay a big
price for it, according to a new report released Tuesday.

The state, in its pursuit of cleaner power, has switched nearly exclusively to natural gas for power plants over
the last 20 years, putting it at risk of ``volatile and rising gas prices and recurring supply problems,'' according
to RAND, the non-partisan research organization in Santa Monica.

Currently, natural gas accounts for 45 percent of California's electricity generation. Coal and nuclear power
make up another third. Dams and alternative energy contribute most of the rest.

Depending on the economy and other factors, RAND, which wrote the report[pdf] for the Energy Foundation, a
non-profit organization in San Francisco, projects that California's natural gas consumption will increase 18
percent to 50 percent by 2010, mostly due to power plants.

Natural gas has significant benefits, including low smog levels. But RAND researchers are concerned that unless
more pipeline capacity is built, there could be bottlenecks.

``California has a real vulnerability to price shocks and power outages for consumers because of its increasing
dependence on natural gas and inadequate infrastructure to move it,'' said RAND's Mark Bernstein, director of
the research project.

The state shouldn't abandon natural gas, he said. Instead, state officials should reduce red tape in permitting
new pipelines and should expand incentives for electricity conservation, along with boosting renewable energy.

As of now, California produces 15 percent of the natural gas it uses, with the rest imported from Canada, the
Rocky Mountains and New Mexico. Those supplies have a projected life of 30 to 75 years.

Since last year, California has been building generating plants at a record pace. By the end of this month, the
state will have brought 17 large projects online since May 2001, producing 4,623 megawatts of electricity,
enough for 3.4 million homes. All are natural gas-fired.

During that same time, just 240 megawatts of renewable power, mostly biomass energy from burning forest
debris and landfill methane, have come on line. Another 1,200 megawatts of permanent efficiency have been
secured since last summer through such programs as installing more energy-efficient traffic lights, ``cool
roofs,'' and new farm pumps, said Claudia Chandler, a spokeswoman for the California Energy Commission.

``We concur with the report,'' said Chandler. ``You've got to have several approaches. Our No. 1 thrust is
energy efficiency. That's the cheapest megawatt you are ever going to have.''

Part of the hesitation over renewable energy is its cost. According to the Energy Commission, the wholesale
cost of power from natural gas is 3-5 cents a kilowatt-hour. By comparison, wind power costs 4-6 cents;
biomass is 6-12 cents; and solar can top 20 cents.

``With the possible exception of wind, most of the other alternatives are so expensive that they are not close to
competitive,'' said Severin Borenstein, director of the University of California-Berkeley's Energy Institute.

Some new projects are afoot. Natural gas pipeline capacity increased 13 percent since last year in California.
And in Alaska, plans are under way for a massive $20 billion pipeline that could bring huge stores of natural gas
to the lower 48 states.

``Until the pipelines are improved, California needs to hedge to reduce its risk,'' said RAND's Bernstein.

Contact Paul Rogers at progers@sjmercury.com or (408) 920-5045