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A couple of years ago I chose to buy a Honda Civic hybrid automobile, despite calculations that showed I would lose money--if gasoline prices stayed at 2006 levels. I’m pretty smug these days. California is now pondering its electric energy choices. Will the state be equally smug a few years from now? I limited my options to cars that got great mileage. California’s electric energy options are limited, too. Hydroelectricity--If you ignore the impact on the critters that live in free-flowing rivers, hydro is a good choice. Periodic droughts cut into supplies, but, when available, hydro can be quickly ramped up and down to help meet changing conditions. Unfortunately, most of the good sites for dams have been utilized. Moreover, expected climate changes may reduce the amount and timing of hydro available. There is no expectation that California can increase its reliance on hydroelectricity significantly. Nuclear--The California nuclear industry has a checkered past. In addition to concerns about cost, the question of how and where to store spent fuel safely for centuries remains unanswered. California law prohibits construction of additional nuclear plants in the state until the waste storage problem is resolved. Given the uncertainty and long lead times required for construction, most analysts agree that the likelihood of increasing nuclear generation by 2020 is nil. Coal--Nearly all coal-fired electricity is generated out of state and imported over interstate transmission lines. Some is from plants owned by California utilities and some is provided under contract. Coal-fired power is relatively inexpensive, but unfortunately is a major source of carbon dioxide, the greenhouse gas most responsible for global warming. State legislation limits long term utility contracts with conventional coal-fired power plants in hopes of reducing greenhouse gas emissions. How this limitation will be implemented in practice remains to be seen. There is talk about “sequestering” carbon dioxide from coal-fired power plants to reduce emissions, but I don’t expect this technology to be developed and deployed in the 2020 timeframe. Coal-fired power will decrease if California is serious about reducing carbon emissions. Even if global warming reduction efforts wane, I don’t see the use of coal increasing any time soon. Natural Gas--Since generation from hydro and nuclear will remain more or less constant and coal isn’t yet clean, the remaining commercially available energy sources are natural gas and renewable sources of wind, solar, and geothermal. That’s all we have to work with. A miraculous new source of energy is as elusive as a car that runs on water. Left to their own devices, utilities would choose natural gas. Efficiencies have improved with the introduction of better equipment, and gas can be piped to sites suitable for generation. Unfortunately, the price of natural gas has been increasing rapidly, as the chart below shows. California is already dependent for 40 percent of its electricity and should be worried about the future price of gas. Investing in more gas-fired power is as foolish as buying a Hummer and hoping gasoline prices go down. The risk of dramatically higher future gas prices is real, having increased 300 percent in the last decade or so. It is folly to believe that gas prices will not continue to rise. (As I write this, gas is trading at $11.83/MMBtu, compared to $7.94 one year ago.) There were expectations that imported liquefied natural gas (LNG) would keep gas prices from climbing. Global competition for LNG has killed that fantasy. We’re stuck with the gas-fired generation we have, just as we are stuck with gasoline-fired automobiles. But increasing California’s dependence on natural gas is as goofy as buying a gasoline-guzzling car and expecting fuel to be cheap again. Renewables--The remaining electric energy options are solar, wind, and geothermal. California’s renewable energy resources are plentiful, and renewable electricity could be imported from neighboring states as well. Opponents claim that investment in renewables is not “cost effective.” They cite official theoretical gas price “forecasts” that predict natural gas prices will go down in the future, not up. Yeah, right. Hybrid automobiles weren’t cost effective a year or so ago, either--if fuel prices didn’t increase. The chart shows U.S. natural gas prices, adjusted for inflation, over the last decade. Every “official” forecast I’ve seen during this time has predicted that gas prices will decline. The forecasters must be slow learners, because they continue to predict gas will be cheaper in the future. How anyone can look at the recent empirical history and not expect gas prices to increase in the next decade is beyond me, especially with oil prices going berserk. But then I don’t understand Hummer buyers, either. California is pondering its limited electric energy options. Renewables or gas? Hybrid or Hummer? If anyone thinks energy will be cheap again, I know of several SUVs for sale here in Boonville.

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