A power system "needs" analysis for greater Los Angeles could cause a watershed shift in state energy policy that propels distributed generation and energy storage instead of new fossil fuel power plants. Alternatively, it could push state and local air quality officials to press for relaxations of federal and state clean air laws. The assessment comes against the backdrop of a shortage of emissions offset credits for new fossil-fueled power plants and likely closure of aging coastal plants under a state marine life protection policy in Southern California--home to 17 million people. It is part of the California Energy Commission's 2011 Integrated Energy Policy Report process in response to a law passed last year, AB 1318. Lawmakers ordered the needs assessment because of an air pollution offset shortage. The lack of credits has stymied construction of fossil-fueled power plants in the smoggy region for almost a decade. Developing the needs assessment is a complex process akin to solving a "Rubik's Cube," Bob Weisenmiller, California Energy Commission chair, said Feb. 15. Change one assumption and all of the other pieces of the puzzle change in relation to one another, noted commissioner Karen Douglas. Weisenmiller said the commission plans to use the report to align state energy policies with Governor Jerry Brown's priorities. Among those are creating energy storage facilities to back up renewable energy and relying more on distributed generation instead of large centralized power plants. "The governor is very serious about his priorities," said Weisenmiller. South Coast Air Quality Management District executive officer Barry Wallerstein said the study should definitively answer the question of whether the region requires more fossil-fueled plants or can meet its future power needs entirely with renewable energy. In the long-run, he maintained, the region has to virtually eliminate fossil fuel combustion to clean the air. Yet, Wallerstein suggested that without a clear showing that more fossil-powered plants aren't needed, his agency would seek changes to both the federal Clean Air Act and state law AB 288. Revisions would aim to minimize the need for air pollution offset credits and make it easier to create new credits. In smoggy areas, new power plant developers must offset their emissions under the federal Clean Air Act's new source review provisions either by reducing emissions at one of their other facilities or by buying credits on the open market from other companies that have cut pollution beyond what's required. The provisions are designed to stop economic growth from worsening air quality (see sidebar). Center for Energy Efficiency and Renewable Technologies executive director V. John White noted that two pumped storage facilities are being planned in the region, including one at Lake Elsinore and one at Eagle Mountain. These could minimize new fossil-fueled power plants used for ancillary services. White also suggested that greater cooperation between CASIO and the Los Angeles Department of Water & Power, which manages its own grid, could help. He suggested the muni and Southern California Edison could exchange power from existing resources to meet each other's needs, which might minimize the need for new fossil fuel capacity. In greater Los Angeles, credits are in short supply due to tight pollution requirements that make it hard to achieve excess emissions reductions. For instance, credits for fine particulate matter are in such short supply, said SCAQMD deputy executive officer Mohsen Nazemi, that their price has risen 4,806 percent over the past decade. CAISO external affairs manager Dennis Peters noted the grid operator's resource adequacy studies for the area have looked solely at the need for generation and not taken account of new transmission capacity and increasing reliance on demand response and energy efficiency. This leaves other agencies to determine "need." The Energy Commission is leading the assessment in cooperation with the California Public Utilities Commission, California Independent System Operator, and South Coast Air Quality Management District. Officials from each agency discussed how to go about the study at a meeting in the Los Angeles area on Feb. 15. The assessment, which was due under AB 1318 last summer, is running late due to the complexity of assessing the region's needs and a lack of information. Agency officials did not discuss when the needs assessment would be finished.