Energy Czar Makes Resource Adequacy a Priority

The governor?s new energy czar, Joe Desmond, has resource adequacy at the top of his ?to do? list. It?s clear he has his work cut out for him after hearing him tick off all the things that need to be done to even get to number one: ensuring there is enough excess electric capacity lying around to avoid blackouts. The other priority on his list, creating a direct-access market for noncore customers, he says is dependent upon attaining resource adequacy. Desmond, who has a remarkable breadth of knowledge about current technical details in energy policy, started his job at the beginning of the month. Officially, the job description is to make sure there?s consistent policy between the myriad energy agencies, including the California Independent System Operator, the Federal Energy Regulatory Commission, and the state Legislature. In order to reach 15 percent extra power to meet resource-adequacy requirements, Desmond said, there first needs to be an accounting system to gauge what can meet the state?s deliverability demands. California isn?t an island in the quest for adequacy, and Desmond wants the state viewed in the context of the Western region. That, however, adds to the accounting complexities to avoid imports used for adequacy needs being counted twice. Also in the queue ahead of Desmond?s adequacy goal are ?appropriate price signals? to lure reserve power. ?I view resource adequacy as a ?public good.? No matter who?s served, there needs to be a payments pool? to ensure that the megawatts are available, he said. Desmond added that adequacy covers investor-owned utility customers as well as munis and noncore direct-access clients. He realized that the administration?s push to reach resource adequacy two years earlier than the goal set by the California Public Utilities Commission could result in some players exploiting the opportunity to exert market power. Referring to the administration?s belief that there remains a place in California for competitive markets, Desmond said that resource adequacy has to be achieved before there can be competitive markets. He avoided the question of whether reregulation is a policy choice. Once there are enough megawatts to ensure adequate reserves, the administration?s embrace of direct access to nonutility providers for noncore customers can proceed, according to Desmond. His ground rules are no new stranded assets and no cost shifting between customer classes. Next on his list is procurement?new power plants. Desmond had no specifics, saying only that the administration doesn?t ?presuppose? utility generation or third-party producers. He wants a risk-averse portfolio, like a personal stock portfolio. The state should be ?careful to avoid the extremes? of the spot market or long-term contracts, he said. Transmission is another part of the equation, although Desmond wouldn?t say whether the administration is leaning toward handing the California Energy Commission the ability to site new transmission. ?The governor is in the process of reviewing? the CEC?s proposal. He added that the CPUC also said it would streamline the siting process?to avoid playing favorites at this point. ?It?s more important? that decisions be made on pending proposals for big transmission projects than which jurisdiction they fall under, he said. In between alerts emanating from Desmond?s PDA reminding him of his next appointment (he says he sleeps with the phone/calendar/minicomputer device), he couldn?t say enough about the administration?s commitment to renewables. However, when pressed, he said that liquefied natural gas and coal are also on the state?s plate. He looks at supplies from a portfolio approach. The hurdle for renewables is to ?firm up? their reliability, said Desmond: in other words, changing grid requirements to be able to schedule intermittent, but economic, resources such as wind power to serve demand. ?California and its growing economy has to meet its needs,? Desmond said as the PDA called attention to his next eight minutes of scheduling. In addition to renewables and conservation, Desmond mentioned clean coal technology, such as gasification for combined-cycle turbines and carbon sequestration to offset fossil pollution. Regarding LNG, Desmond played coy. ?All I can tell you is that we?re looking at it.? Desmond says that what has been viewed as the administration?s energy policy?an April letter to the California Public Utilities Commission outlining Governor Arnold Schwarzenegger?s points of interest?is not the end of the administration?s energy policy. There is more to come, he promised.

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Energy Czar Makes Resource Adequacy a Priority

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