California lawmakers will soon decide on a bill that could either be a gift to the coal industry or a boon to solar power — depending on which environmental group you ask.
Assembly Bill 813 is a priority for Gov. Jerry Brown. The legislation would pave the way for a regional energy market involving as many as 14 western states, which would allow California to sell more solar power to its neighbors and import cheap renewable energy from other states, such as wind power from Wyoming. The Golden State would be required to give up political control of most of its power grid, which is currently overseen by a five-member board appointed by the governor and confirmed by the state Senate.
Several major environmental groups — including the Natural Resources Defense Council, the Environmental Defense Fund and the Union of Concerned Scientists — think that’s a good idea. They argue a regional market would create huge efficiencies and reduce the costs associated with California’s transition from fossil fuels to renewable energy.
But those groups have a surprising opponent: the Sierra Club.
The Sierra Club is America’s largest environmental group, and it has spent much of the last decade fighting to shut down existing coal plants and block new ones. The fight has given the group a unique perspective on coal. For Sierra Club leaders, any policy that could be abused by the coal industry and its allies in the Trump administration should be avoided at all costs — and they worry Assembly Bill 813 is such a policy. Their fears are shared by others, including publicly owned utilities and some ratepayer advocates.
Environmentalists who support AB 813 say the Sierra Club’s fears are unfounded. They also say California needs a regional energy market as soon as possible to solve a growing challenge: On many days, the state has more solar power than it can use.
That challenge stems from a mismatch between supply and demand; power companies can’t control when the sun shines, and they only have so much influence over when people and businesses use electricity. When there’s more supply than demand — typically during the middle of the day, when the sun is shining — some solar or wind farms will be forced to shut off or reduce their output, which is called “curtailment.”
The amount of energy lost to curtailment grew from 10,000 megawatt-hours in May 2014 to 72,000 megawatt-hours in May 2018, according to an analysis of state datafrom an advocacy group that favors a regional market. In the first seven months of 2018, the state grid operator curtailed 315,000 megawatt-hours of solar and wind power — enough clean electricity to power San Francisco for 20 days, the advocacy group said.
A regional market could lessen the need for California to shut off solar and wind farms, by making it easier for those facilities to sell electricity into other western states. A 2016 study by the California Independent System Operator, which runs most of the state’s power grid and supports a regional market, found California ratepayers could save $1.5 billion annually by 2030 if most of the western U.S. joined a regional market.
“It’s not the only thing we need to do, but it’s by far the biggest and cheapest part of the solution. We don’t have nearly enough (energy) storage to manage curtailment at this level,” said Ralph Cavanagh, co-director of the Natural Resources Defense Council’s energy program. “Throwing away clean energy makes no sense.”
Would a regional market benefit coal plants?
Sierra Club officials don’t think throwing away clean energy makes sense, either. But they say there are better ways for California to reduce curtailment, such as investing in energy efficiency or batteries. The group supports Senate Bill 700, which would extend a financial incentive program for homes and businesses to install energy storage devices.
The Sierra Club is also worried a regional energy market could backfire and benefit coal.
The California Independent System Operator originally proposed for California to launch a regional market by partnering with PacifiCorp, a six-state utility owned by legendary investor Warren Buffett. PacifiCorp has customers in Idaho, Oregon, Utah, Washington, Wyoming and part of Northern California. The company also owns six coal-fired power plants in Utah and Wyoming, and got 59 percent of its electricity from coal in 2017.
Environmentalists who supported a PacifiCorp partnership saw an opportunity for California to help put coal plants out of business, by flooding the new western energy market with cheap solar and wind. But the Sierra Club worried the regional market would give PacifiCorp a lifeline for its financially struggling coal plants, by making it easier for the company to sell coal-fired electricity California’s huge population centers.
California currently controls its own power grid. A multistate grid operator, though, would be overseen not by appointees of the California governor, but by an independent board, whose members would likely need to be approved by all participating states.
Sierra Club officials say such a board, if weighted toward coal-friendly states like Utah and Wyoming, could try to force California to buy coal power — possibly with help from the Trump administration. A multistate market would be overseen by the Federal Energy Regulatory Commission, or FERC, four of whose five members have been appointed by President Trump. The president has said he wants to revive the coal industry.
“If California regionalizes its grid, PacifiCorp could be a huge beneficiary of this process. They’re an incredibly dirty utility,” Sierra Club spokesperson Marta Stoepker said.
Could the Trump administration interfere?
In response to those concerns, advocates for a regional market have stopped promoting the idea of a partnership with PacifiCorp. Instead, they’ve talked about California joining forces with Oregon, Washington and possibly Nevada, where policymakers share at least some of the Golden State’s priorities of growing renewable energy and fighting climate change. California could complement its intermittent solar and wind farms with hydropower from the Pacific Northwest, while still exporting excess solar power to its neighbors. Once those states lay the groundwork for a regional market and show how it can benefit everyone, other states would gradually agree to join, the thinking goes.
Supporters of AB 813 also say California is already subject to federal regulation. But in an effort to sway skeptics, the bill’s author, Assemblymember Chris Holden, recently added provisions that supporters say would protect against interference by FERC.
“If you’re worried about FERC, we need AB 813 because none of these protections are currently in law,” Cavanagh said.
Critics aren’t convinced.
The bill’s opponents include Matthew Freedman, an attorney with The Utility Reform Network, an influential ratepayer advocacy group. Freedman said the formation of a regional market would invite scrutiny from the Trump administration. He pointed to a Politico report that Trump is planning to appoint Energy Department official Bernard McNamee to replace an outgoing FERC commissioner. McNamee was involved with last year’s rollout of an Energy Department’s plan to bail out coal and nuclear power plants.
FERC rejected the bailout plan in a unanimous vote. But two of the five commissioners, Neil Chatterjee and Kevin McIntyre, have expressed tentative support for the concept of rescuing coal plants. If McNamee joins them, Freedman said in an email, FERC “will be even more pro-coal than before and less concerned about meddling in wholesale markets.”
Critics also say regional-market advocates have underestimated the cost of new power lines that would be needed to bring electricity to California from other western states. Publicly owned utilities are especially concerned. They’re worried their customers will be forced to help pay for expensive transmission lines that don’t benefit them directly.
Sierra Club officials, meanwhile, are still worried about PacifiCorp. They point out there’s nothing in AB 813 that would prevent the Buffett-owned utility from joining a regional energy market once California allows its grid operator to expand to other states.
Stoepker, the Sierra Club spokesperson, pointed to an ongoing battle in Oregon and Washington as evidence that California can’t trust PacifiCorp. Last month the company got a temporary restraining order to block the Washington Utilities and Transportation Commission from publicly releasing some of the results of a PacifiCorp study on the economic viability of its coal plants. The Sierra Club had sought the information’s release.
Californians “should have all the information before entering into this very expensive long-term partnership” with PacifiCorp, Stoepker said.
“Their lack of transparency — that shows how much respect they have for their customers,” she said.
PacifiCorp spokesperson Bob Gravely said in an email that the company is “protecting market sensitive power cost information, and would do the same for any power plant regardless of resource type.” He also noted that the Oregon Public Utility Commission, which ordered the study in the first place, supports keeping the information confidential.
PacifiCorp has not taken a position on AB 813 — and it’s not clear the company would be allowed to join a regional market, even if it wanted to. PacifiCorp would only be able to join with approval from officials in all the states where it serves customers, and those officials may not approve if the governance structure gives too much weight to California. AB 813 doesn’t resolve what the governance structure would look like.
“If the governance issue is worked out, PacifiCorp would also still need to determine that there would be net benefits for customers before taking further steps,” Gravely said.
Whether or not PacifiCorp joins forces with California, it’s making big investments in wind. The company plans to add 1,150 megawatts of wind power by 2020, which will increase the amount of wind power on its grid by more than 60 percent, Gravely said. The company expects the share of its electricity mix coming from coal to drop to about 40 percent in 2018, as coal power is displaced by natural gas and renewable energy.
‘A small step in the right direction’
Supporters of AB 813 are convinced a regional market would benefit all participants.
A more limited electricity-sharing program called the Western Energy Imbalance Market, which began in 2014 and is led by California, has already reduced planet-warming emissions and led to more than $400 million in electricity savings for ratepayers in Arizona, California, Idaho, Nevada, Oregon, Utah, Washington, Wyoming and British Columbia, according to recent data from the California Independent System Operator.
Cavanagh, of the Natural Resources Defense Council, said the electricity-sharing program “shows the promise of grid integration.”
“It’s a small step in the right direction. The data on cost and pollution savings are very heartening,” Cavanagh said. “But to us, they represent how much of an opportunity we’re missing by not going all the way to integration.”
With the legislative session ending August 31, the fate of AB 813 will be determined in the next two weeks. The bill survived a near-death experience Thursday in the Senate Appropriations Committee, which referred it to the Rules Committee without a vote.
The argument among environmentalists may have little impact on the bill’s fate. The legislation’s most politically powerful opponents are labor unions, which say a regional market could lead to energy jobs being created in other states that would otherwise be created in California. The list of groups opposing AB 813 includes the State Association of Electrical Workers, the State Pipe Trades Council and the State Building and Construction Trades Council. Barry Broad, a lobbyist for the powerful Teamsters union, told lawmakers at a hearing Monday that the Teamsters are opposed to the bill.
It’s yet to be seen whether Gov. Brown can strike a deal with organized labor, possibly involving other energy bills, that would clear the way for AB 813’s passage.