Tackling 2018

As I look forward to 2018, I see much work ahead for all of us involved in the California energy scene. Continued progress on renewable energy deployment, energy efficiency improvements, and vehicle and building electrification are all necessary to keep us on track toward meeting our goals for 2030 and beyond, and will require continued hard work by many. But there are additional challenges ahead that need to be addressed that will also take up a lot of space on the 2018 agenda – maintaining reliability as the system shifts toward greater reliance on intermittent renewables, ensuring affordability of energy for all Californians, and meeting the new challenge of rampant wildfires that has dominated the headlines recently.

Maintaining reliability while we integrate more and more renewables will not be an easy task. The California ISO faces evening “ramps” of 13,000 MW or more when the sun sets and both utility-scale and rooftop PV panels cease production but customer demand continues into the evening hours. If we truly want to decarbonize the grid, we will need to develop clean alternatives for meeting or minimizing that ramp, which is met primarily with natural gas generation today. Storage, demand response, and inter-regional energy trades are all part of the solution, but they provide only a small fraction of the needed MW today. Yet more and more existing gas units face financial distress and their ability to continue to cover the ramp is an ongoing question. Is California ready for the hard part of the job – developing the resources that will be needed to maintain reliable service when the sun sets?

Affordability is also an ongoing concern, as more and more Californians face the threat of utility shut-offs due to inability to pay their escalating bills. Even as wholesale prices decline due to the increased availability of zero marginal cost renewables, retail rates continue to trend higher due to needed investments in utility distribution systems to transform them into the smart grid of the future. And the periodic excess of renewable energy on spring afternoons will force the utilities to make increasing off-system sales of the surplus, often at prices lower than what they pay their suppliers. While the CARE and Energy Savings Assistance (ESA) programs provide critical support for the economically disadvantaged, they do not go far enough to help many of those in need.

I also anticipate that 2018 will see a major focus on the recent, hugely destructive wildfires that occurred in both northern and southern California. The costs of these tragedies may reach as much as $10 billion, and it is not clear who will pay. We are already hearing reports that private insurers are refusing to renew homeowners’ fire policies due to the costs and risks that continue to grow as the climate changes and drought remains a constant threat. Is this the beginning of the same phenomenon that we saw in the early 1990’s after the Northridge Earthquake, when private quake insurance dried up and the state was forced to create the California Earthquake Authority to fill the void?

Insurers and homeowners are increasingly looking to the utilities as “deep pockets,” who may be held liable under “inverse condemnation” for fire damage partially caused by their lines, even when the utility properly trimmed trees and conducted all necessary maintenance. Should the utility be held responsible when high winds break limbs off of trees that fly many yards into distribution lines, igniting a wildfire? The utilities themselves are finding it more and more difficult and expensive to obtain insurance, and the damages wrought by the recent fires far exceed their policy limits. It is one thing to say that the utility should pay when its own negligence causes a fire, but what if the utility did nothing wrong and a fire occurred anyway?

All of these are big issues that state policymakers will have to grapple with in 2018, even as they continue the push for more renewables, increased efficiency, and beneficial electrification.