Energy Exchange: California

By EDF Blogs

By: Beia Spiller and Kristina Mohlin

Electricity markets around the world are transforming from a model where electricity flows one way (from electricity-generating power plants to the customer) to one where customers actively participate as providers of electric services. But to speed this transformation and maximize its environmental and cost benefits, we need to understand how customer actions affect the three distinct parts of our electric system: generation, transmission, and distribution.

Generation

Generators – or power plants – convert an energy source such as natural gas, coal, wind, or sunshine into electricity that flows across wires and into your building, allowing you to turn on lights and use appliances. Although the electricity is no different whether it is generated by solar or coal, the environmental and economic costs associated with different energy sources vary significantly.

Not all generators are created equal in terms of efficiency, pollution, and how much they cost to build and run. Some generators produce electricity very cheaply and with fewer carbon emissions, but are expensive to build and maintain. Other generators are more polluting than clean energy alternatives and cost more per unit (or kilowatt-hour) of electricity generated, but can be turned on when demand for electricity skyrockets (for example, during heat waves). As demand increases, a variety of generators are used to provide the needed electricity – relying first on the cheapest generators (such as wind and solar) in order to keep costs low, and only turning on expensive and inefficient “peaker” generators (such as natural gas-fired power plants) during periods of high demand.

Because higher demand for electricity from power plants drives up cost and pollution, reducing demand for power plant-generated electricity can reduce both the overall cost of the system and harmful environmental impacts.

Transforming the electric system to reduce costs and pollution
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Transmission

Electricity is transported from power plants to local communities via transmission lines. In addition to exporting energy from traditional power plants, transmission lines also allow communities to “import” clean and cheap energy from distant areas. But long transmission lines are expensive, and as more electricity flows through them, power is lost through heat, requiring greater amounts of electricity to be produced. Thus, different areas in the same state can face different prices for electricity depending on that area’s overall demand and distance from the generation sources.

Again, reducing demand and increasing local sources of generation helps control these transmission costs. The less electricity needed from large, distant power plants, the less electricity needs to be moved.

Distribution

Finally, local utility companies distribute electricity via the traditional electric wires we’re used to seeing on city streets. Some utility costs, such as billing and metering, are not affected by customers’ usage of electricity. However, very expensive grid infrastructure – including substations, transformers, wires and poles – is significantly affected by how much electricity customers demand.  Local utilities must also conduct costly maintenance and operations on this infrastructure to avoid blackouts and meet safety requirements. Importantly, as local demand peaks, the system needs to expand accordingly, causing distribution costs to increase even further. For example, New York City’s local utility (Consolidated Edison) foresees a billion-dollar investment in a new substation to accommodate increased demand in the Brooklyn-Queens area.

Reducing demand for utility-provided electricity helps each part of the system

Consider how residential rooftop solar affects the entire system. Each home equipped with solar panels requires less electricity from its local utility. Thanks to this reduction in demand and its related costs, the utility can use funding it would have needed for new transformers or substations to invest in improving energy efficiency or incentivizing more customers to generate their own electricity. Consolidated Edison is currently pursuing this type of effort in the Brooklyn-Queens area by identifying multiple alternatives to try to avoid the billion dollar substation investment. Other utilities are also experimenting with home energy batteries, which can store excess solar energy during daylight hours for use at night, further reducing each customer’s daily electricity use and impact on the distribution system. And because solar reduces demand for utility-provided electricity, less electricity has to be generated at power plants and transmitted from distant regions, reducing generation, transmission, and environmental costs. Many initiatives across the country are attempting to capture the opportunities offered by these technologies to change the fundamental way we interact with the electric grid.

Reducing the amount of electricity that needs to be generated by traditional power plants, transmitted long distances, and distributed locally, reduces the overall cost and environmental impact of our energy system.

For example, the Reforming the Energy Vision (REV) initiative in New York and the Public Utilities Commission-mandated Distribution Resource Plans in California require utilities to consider alternatives to traditional infrastructure investments to deal with peak demand. These initiatives encourage customers to install rooftop solar or adopt energy efficiency, storage, and demand response to reduce their use of grid-supplied electricity at peak times.

And, in Texas, the Distributed Resource Energy and Ancillaries Market Task Force (DREAM TF) is working to guarantee that customers who generate electricity are able to actively participate in the Texas electricity market. This will ensure distributed energy resources are paid appropriately for the benefits they provide to the system.

These efforts in New York, California, and Texas are on the right track. Reducing the amount of electricity that needs to be generated by traditional power plants, transmitted long distances, and distributed locally, reduces the overall cost and environmental impact of our energy system. That’s not just clean, it’s smart.

This blog post is part one in a four-part series that takes a deep dive into economics of the electric system and the role pricing can play in accelerating the clean energy economy.

By EDF Blogs

By Tim O’Connor and Lauren Navarro

Ongoing fallout from the catastrophic failure at the Southern California Gas Company’s Aliso Canyon storage facility is exposing a critical weakness in the state’s energy system. Overdependence on natural gas – and on one provider of that gas – means we don’t have the flexibility we need to cope if things go wrong. And now that they have gone wrong, because of SoCalGas’ mismanagement of the Aliso Canyon storage facility, a group of state agencies says the region could be facing power shortages this summer as a result.

A new report released today by the California Energy Commission (CEC), California Public Utilities Commission (CPUC), California Independent System Operator (CAISO,) the Los Angeles Department of Water and Power (LADWP) and Southern California Gas (SoCalGas) describes the problem. While a separate report released by CEC, CPUC, CAISO and LADWP, begins to lay out the short-term response plan. (Some of the efforts already under way are documented here, here, and here).

To minimize these risks now and avoid them in the future, officials need to diversify California’s electricity portfolio and free up utility markets to deliver a better mix of assets – gas, renewables, distributed generation, and energy efficiency – to help keep supply and demand in balance on the grid, and make sure the system stays up and running. SoCalGas’s monopoly over energy supply in southern California must end.

A symptom of a larger problem

Sadly, this situation shouldn’t come as a surprise. We’ve come up against the limits of the gas supply system even before the Aliso disaster. The better news, such as it is, is that state officials have already put some good tools in place that will help the electricity grid operators keep the lights on during peak demand times this summer. But if the agencies today are right, it’s going to be a nail-biter.

Right now, Southern California depends on a single fuel, natural gas, for the bulk of the region’s electricity. And because utilities depend on quick-firing gas power plants to handle shifting loads, gas is even more essential when it comes to balancing peak demand. In fact, California has continued to approve more natural gas, locking in an even greater reliance, even though more diversified sources are available that are cheaper and less polluting.

Diversifying the energy mix for more resilience

The problem is, the utility market as its currently designed doesn’t make it easy for these other sources to compete, and the system doesn’t fully recognize – or reward – the value that diversified assets bring in terms of increased reliability. For example, fast-acting demand response – which incentivize customers to reduce their load at peak times – and electric energy storage don’t receive unbundled payments associated with the added resilience and other advantages they offer.

Maintaining a stable and reliable electricity system will require short-term actions by regulators and utilities, including:

• Deploying demand response, an energy conservation tool that empowers people to shift their energy use to times of day when there is less demand on the power grid or when renewable energy is more abundant. Demand response programs like California’s successful Flex Alert program should be maximized for increased grid reliability.

• Time-of-use electricity (TOU) pricing rewards people who shift some of their energy use to times of the day when renewable energy is plentiful and electricity is cheaper. Time-of-use rates better reflect the true cost of electricity, which fluctuates throughout the day, and empowers people to take control of their energy use and costs. The state is well on its way to automatically transition all residential customers to TOU in 2018. In the meantime, utilities need to better educate consumers so they take full advantage of the benefits.

• Energy Efficiency is one of the most cost-effective and fastest ways to reduce peak energy and gas use. Over the last two decades, Los Angeles has made huge strides, keeping energy demand relatively flat, despite adding over a million new residents. Last year, California committed to doubling savings from efficiency programs and upgrades as part of the SB 350, building on its successful history of promoting energy efficiency measures that have saved consumers billions of dollars and helped reduce electricity demand by more than 15,500 megawatts – equivalent to the output from more than 30 large power plants.

• More renewable energy like wind and solar power, as required by SB 350, will diversify California’s energy portfolio. Combined with tools to reduce peak energy demand, these abundant energy resources will build a cleaner, more resilient energy system.

• Developing a reliability “safety net” by connecting California’s electricity market with other western states allows the state to bring more reliability to the system with more wind and solar both at home and across the West.

Moving forward, however, these solutions alone aren’t nearly enough. Over the next few years, we need to create more competition among energy sources, and give consumers more and better access to energy choices. Measures like these will spur more alternatives that improve reliability, reduce pollution, and meet electricity demand at lower cost.

The bottom line is, our best guard against the risk of dependence on natural gas, especially to meet peak electricity demand, is a diversified portfolio of energy options, and we shouldn’t sell ourselves short. The potential for clean energy solutions in California can transform the state’s power system, and we can, and should, leverage our abundant clean renewable resources to make reliability issues a thing of the past.

By Jayant Kairam

Economic inequality has become one of the dominant political narratives of the day. It occupies discussions on both sides of the aisle, and is shaping elections from city halls to the White House. There’s a good reason for this: the continuing trends of flattening incomes, concentrated wealth, and deepening poverty are historic.

One place this reality is really hitting home for millions of Americans is on their monthly energy bill. For nearly one in three American families, paying a monthly energy bill is a challenge.

The energy burden, as the Department of Energy defines it, is the ratio of energy costs (which includes heating, cooling, appliances, and lighting from electricity, gas, and fuel sources) to household income. Nearly 40 percent of low-income households use electricity to heat their homes (the majority in the South and West), and are suffering a more severe energy burden because of factors like wage stagnation and the quality of housing at lower economic levels.  In 2014, researchers looking at the “energy affordability gap” for low income households (the difference between actual energy bills and what is considered affordable) tabulated it at almost $45 billion nationally. That is an increase of 16 percent from 2011, with nearly 60 percent of the growth accounted for by states in the mid-South, South, and east of the Mississippi. For any of those families, even a 10 percent growth in electricity costs can be destabilizing. Monthly electric bills become another factor forcing households to choose between groceries, childcare, and medical bills.

To make inroads in closing the energy affordability gap and reducing energy burdens for the most vulnerable, Environmental Defense Fund believes we need a combination of greater and scalable clean energy investment in low- and moderate-income communities, and a focus on empowering the many faces that are energy-burdened. The multi-billion dollar affordability gap certainly poses a variety of financial risks, but it’s also rife with opportunity.

It still takes a village: Start with partnerships at home and scale from there

Sparking investment, innovation, and access to clean energy solutions in low- and moderate-income markets requires sustained engagement and strong enabling policy rooted in cross-sectoral partnerships. For example, in Los Angeles we are partnering with local labor, economic justice, and environmental justice organizations to educate communities about what renewable power can do for quality of life and community health. These partnerships, as my colleague Jorge Madrid has pointed out, can nurture place-based investments like shared solar and other distributed energy programs that use the power of collective purchasing, pay-as-you go subscriptions, and other innovative models to create access to clean power. They show in tangible ways the job-creating and social  benefits of clean energy. Moreover, if these clean energy demonstrations are coupled with the guiding principles laid out in the just released “Low-Income Solar Policy Guide,” – which outlines a variety of tested, local interventions ranging from financing tools,  direct incentives, and technical assistance, to net metering compensation bill credits that can make clean energy affordable – they can address the question of financial risk and be scaled to transformative levels.

Transforming an Energy Burden into an Energy Opportunity
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Empowering customers translates into encouraging various efficiency, payment, data-access, and awareness strategies that help people simply use less. To get there, we must also recognize that there is a learning curve for many people in understanding the advantages offered by the smart grid. It also means encouraging innovative, partnership-based energy efficiency and other energy-use reduction programs – as my colleague Marilynn Marsh-Robinson has written about – that are within reach and accessible for all. A new report from the American Council for an Energy-Efficient Economy (ACEEE) suggests that low-income households pay nearly 25 percent more on energy per square foot compared to the general population because they often use older appliances, electric space and water heaters, and don’t have programmable thermostats. Pairing energy efficiency with on-bill solutions (which allow people to repay clean energy loans through their utility bills) ensures renters and homeowners can get upgrades without traditionally high upfront costs.

Essential, federal energy-assistance programs like LIHEAP and WAP are also helping to close the energy affordability gap. Combined, they accounted for approximately $4 billion in fiscal year 2015. These programs prioritize bill assistance and efficiency for the most vulnerable, but have also witnessed an increased demand in recent years. Various state and utility-efficiency and bill-assistance programs, as well as the U.S. Department of Agriculture’s Rural Utility Service, also help fill the need. And some utilities are certainly recognizing just how vast and heterogeneous their at-risk customer base is. Yet, while there are a variety of federal, state, and local efforts aimed at closing the affordability gap, more needs to be done.

How to ensure real, lasting change

Clean energy is a potent tool in fighting inequality and making sure all families are able to participate in the clean energy future. These are families that live in towering high-rises in the Northeast, the shotgun houses of the Southeast, the colonias of the Rio Grande Valley in Texas, and the manufactured homes of California’s Central Valley.

Just like the grid that delivers electricity, making clean energy accessible for everyone facilitates high-impact, multi-dimensional partnerships that transmit power across the spheres of community development, public health, education, and other sectors where the impacts of economic inequality are reverberating.

Holistic, inclusive solutions are hard, but for energy-burdened communities, they are what is absolutely needed. These cross-sectoral, co-benefit solutions are exactly what leads to real change. It’s also how you can turn a burden into an opportunity.

Photo credit: Chloe Looker

By EDF Blogs

Each month, the Energy Exchange rounds up a list of top clean energy conferences around the country. Our list includes conferences at which experts from the EDF Clean Energy Program will be speaking, plus additional events that we think our readers may benefit from marking on their calendars.

Top clean energy conferences featuring EDF experts in March:

March 9: Clean Power Plan or What Next? Symposium & Workshop (Houston, TX)

Speaker: John Hall, Texas State Director, Clean Energy

• Join a group of high level executives for a discussion on the issues arising from the U.S. Environmental Protection Agency’s proposed Clean Power Plan and its regional impact.

March 16-17: California’s Distributed Energy Future 2016  (San Francisco, CA)

Speaker: Jamie Fine, Senior Economist, U.S. Climate and Energy

• As distributed energy gains steam in California, state regulators, policymakers, utilities, and distributed energy resource providers are shaping the rules, regulations, and markets that will ensure the transition is speedy and smooth. Greentech Media is partnering with More Than Smart to host actionable conversations on the future of electricity in an innovative state.

March 16: 2016 Building Energy Summit® (Washington, DC)

Speaker: Ellen Bell, Manager, Midwest Clean Energy

• Building owners, energy experts, and technology pioneers will come together at the Ronald Reagan Building in Washington, DC to address the business and social drivers for more energy efficient buildings. Ellen will participate in a discussion on how to analyze portfolio data for energy saving opportunities, how to prioritize initiatives based on payback, and how to align your efforts with a corporate environmental policy.

  Other top clean energy conferences across the U.S. in March:

  March 14: The Wall Street Green Trading Summit (New York, NY)

  • Launched in 2002 by Peter Fusaro, the founder and chairman of Global Change Associates Inc., the Wall Street Green Summit covers the emergence of the "Impact Economy," where main street investors team up with corporations, entrepreneurs, and government to solve environmental and social problems while generating financial returns. The 2016 Wall Street Green Summit XV is the “one-stop shop” to come up to speed on the latest developments in green finance.

  The Top 6 clean energy conferences of March 2016
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  March 15-17: 4th Microgrid & Distributed Energy Development (Philadelphia, PA)

  • Learn what communities throughout the country can achieve in addressing climate change and scalable alternative energy and efficiency strategies at the Philadelphia Navy Yard Microgrid, which is one of the region’s greatest economic development successes as a national example of a modern, progressive and sustainable urban campus. The country’s first self-contained navy installation is home to more than 150 businesses and three navy activities, and more than 12,000 employees. This electric grid is one of the largest non-military unregulated grids in the eastern United States. The Navy Yard’s senior energy team will guide a pre-conference behind-the-scenes tour on March 15.

  March 29-31: Energy Thought Summit (Austin, TX)

  • Born in Austin, Texas, Energy Thought Summit events aim to bring the world’s thought leaders together to debate the state and future of energy, with smart dialogue and an engaging setting, on- and offline.

  Photo source: Flickr/National Retail Federation

By EDF Blogs

By: Mark Brownstein & Tim O'Connor

The nearly four-month disaster at the Aliso Canyon storage facility owned by Southern California Gas Company has spurred widespread calls to close the sprawling underground reservoir, and cast intense scrutiny on the 13 other similar facilities around California. But others, including Governor Jerry Brown and key state agencies, say the facilities may be needed to keep the electric grid running reliably.

Ironically, one reason for dependence on this fossil fuel is California’s renewable energy boom.

As things currently stand, there aren’t enough responsive resources on the grid to simultaneously manage the large daily swings in consumer electricity demand typical in California and swings in renewable energy output due to variations in time of day and weather.

A more robust grid in combination with innovative energy storage and energy management technology will eventually reduce these swings, but may take decades to fully deploy.  Until then, fast-acting gas-fired generation is necessary for balancing system operations. This has become a rallying cry for SoCalGas and the rest of California’s oil and gas industry in the wake of Aliso Canyon.

By championing the status quo, these companies are ignoring actions that can be taken right now to reduce natural gas dependence by making the state’s gas and electricity markets more efficient and competitive. There’s no excuse for holding back reforms that can begin the transition away from co-dependence.

The Codependence of Gas and Renewables

The marriage of gas and renewables in the electricity market springs from inherent variability in wind and solar power flows. The more of these resources there are on the system, the more utilities depend on the quick on-off response of natural gas-fired power plants to balance the load – particularly in surge periods such like early summer evenings when solar output falls rapidly but cooling demand from air conditioning remains high.

Officials are acutely aware of the relationship (after all, nobody wants a blackout on their watch). In his January 6 Emergency Declaration, Gov. Brown directed a half-dozen state agencies overseeing the Aliso response to “take all actions necessary to ensure the continued reliability of natural gas and electricity supplies in the coming months during the moratorium on gas injections into the Aliso Canyon Storage Facility.”

In response, the California Energy Commission (CEC), California Public Utilities Commission (CPUC), and the California Independent System Operator (Cal-ISO ) expressed serious concern about closing the facility, because existing gas pipelines aren’t big enough to feed all power plants in the Los Angeles basin, and that those plants depend on gas from Aliso Canyon to meet “rapid changes in electricity demand that occur every day.”

Utilities See Renewables as Opportunity for Gas

This codependence creates a number of perverse incentives. First, it effectively gives utilities like SoCal Gas a virtually endless justification for sites like Aliso Canyon – and their three other fields in Southern California. What’s more, SoCalGas and other companies have actively latched on to renewables as a new growth opportunity – supporting solar and wind as they hold monopoly power over the regional pipeline and gas storage market.

In their most recent bi-annual report to CPUC, SoCal Gas and the state’s other gas utilities stated as clearly as can be said that “the intermittent nature of renewable generation is likely to cause the electric system to rely more heavily on natural gas-fired generation” and with “higher daily fluctuations of gas usage in the future … [the] gas system will need to be able to accommodate such operations.”

With rising penetration of intermittent renewables in California through the state’s recently mandated 50% renewable portfolio standard, as long as competing solutions are locked out of the market – as they are today – gas utilities will remain in the catbird’s seat.

Opening Up a Cleaner, More Dynamic Electric Grid

Reducing reliance on big natural gas storage facilities like Aliso Canyon – and on huge bulk supplies of natural gas in general – requires smarter solutions for reliably managing the swings that come with renewables. In November, our colleague Gavin Purchas wrote about time-of-use pricing, and linking the California wholesale electric market to its neighbors to the north as ways to enhance stability. Similarly, Larissa Koehler wrote about growing availability of utility-scale battery storage in the California energy system.

While new technologies and smarter rate structures for customers can deliver big returns, fundamental change materializes when energy markets where the big bets get made are actually transformed. Fostering real competition between natural gas and emerging clean energy resources here would allow battery storage, demand response and other technologies and energy management solutions to play on equal footing, spur innovation and capital investment, and take a bigger share of the market now wholly owned by storage and combustion of natural gas.

First and foremost, the job of creating open, competitive markets falls to the state and local regulators who decide the rules of the game. Entities like the Cal-ISO that develop rules for “fast-ramping” resources to support renewable integration; and the Los Angeles Department of Water and Power that develops long term Integrated Resources Plans. The Federal Energy Regulatory Commission, which oversees wholesale gas and electric markets, also has a role to play, as described recently by EDF’s Jonathan Peress.

Smarter, More Efficient Markets

Creating accurate and efficient price signals for the services that gas provides in both the gas and electric markets can determine the optimal mix of resources, while better meeting the goal of reducing dangerous climate and air pollution, and the risk of another Aliso Canyon disaster.

How California handles this challenge will have broad implications for other states as rapid renewable energy growth continues. Standards that allow more kinds of companies to get paid for providing services that keep the electric grid stable and balanced are a huge opportunity. Reducing the need for gas combustion and gas storage by allowing new alternatives to compete is part of the solution. In a future blog post, we will provide additional specifics on how such competition can be fostered.

Image Source: Flickr user Travis

By Ronny Sandoval

The GridWise Alliance, a leading business forum for the development of a smart, clean, modern electric grid, just released its 3rd Annual Grid Modernization Index – a ranking of states’ progress towards a more sustainable energy system. The Index goes beyond tracking investments that modernize the electric system; it explores the policies these investments can support, such as increasing efficiency and reducing emissions. The report also delves into the valuable services customers can expect from smart technology investments in the grid.

Grid modernization isn’t simply about replacing aging infrastructure – it’s about managing energy in new ways, namely through sensors and digital communication. Greater visibility and control as a result of these investments can create a dynamic electric system that is more efficient, better manages costs, improves customer service, and protects our limited resources.

In addition to possibly giving your home state something to brag about, the results of this Index offer plenty of useful information on how states have modernized the grid and charted their own course toward making smarter energy choices.

States are leading the charge

California, Illinois, and Texas rank first, second, and third in the new Index. They continue to lead the pack, as in previous years.

Feeling Gridlocked? New Report Grades State Power Systems and Inspires Modernization
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California has long been recognized as a pioneer in driving efficient and clean investments in the electric system, but ambitious time-of-use rate designs – which reward people who shift some of their electricity use to times of the day when renewable energy is plentiful and electricity is cheaper – have contributed to California’s continued leadership. New requirements that demand response – a voluntary conservation tool that relies on people and technology, not power plants to manage peak energy demand – be considered as a potential tool in meeting future system needs also contributed to California’s top ranking this year. Environmental Defense Fund (EDF) has advocated for these and other sustainable policies in the state for some time.

In Illinois, where EDF is also very active, utilities have agreed to report on environmental performance metrics, conducted studies showing voltage optimization is a great investment, and invested billions of dollars in smart meters that underpin smarter energy choices. Leading utility ComEd also recently embraced the Open Data Access Framework, an industry-recognized model framework that EDF helped create and made possible by Illinois’ investment in smart meters. Open Data Access is designed to help utilities unlock smart grid benefits by granting people easy access to energy data.

Texas, another one of EDF’s priority states, rounds out the top three leaders in this year’s Grid Modernization Index. The state’s policies in encouraging retail competition have facilitated the creation of products and services with a unique customer focus. Texas’s exploration into making the best use of distributed energy resources (like rooftop solar and energy storage) and providing value to the system further demonstrates its leadership in modernizing the electric grid. And, with three new grants from the Department of Energy’s SunShot Initiative, Texas may be well on its way to reclaim the number one spot in grid modernization.

Key takeaways

Aside from details about what is happening in leading states, the Index also offers some interesting key takeaways. We recommend you review them all, but three stand out:

1. There is a significant gap between the front runners and laggards. However, the findings are not just about shining a light on the leaders. If your state is behind in modernizing its grid, it can consider the approach of other states and focus on realizing the benefits that matter most first.
2. Demand response is a key ingredient for highly ranked states. This is not surprising, considering demand response is a proven clean energy tool for managing peak demand, lowering electricity bills, and reducing harmful pollution.
3. A modern grid can facilitate a number of your state’s energy, economic, and environmental priorities. However, collaboration among all stakeholders is essential to ensure the transition to a more modern energy system is sustainable.

What’s next for your state?

EDF is a member of the GridWise Alliance and is very proud of our involvement in bringing an environmental perspective to the project team and contributing as a strategic advisor on this report. The Index shows that the policies EDF promotes have impact – especially in some of the higher-ranking states. We envision that utilities and regulators will continue to be guided by the smart, clean energy strategies captured in this document. Regardless of ranking, all states can use the Index to make more informed decisions in creating a modern and more sustainable energy system.

By Scott Anderson

Southern California is now in month three of one of the country’s worst environmental disasters. In October 2015, a natural gas storage well operated by SoCal Gas sprung a massive leak hundreds of feet underground, releasing nearly 1,400 tons of gas into the air each day at its peak. Thousands of local residents impacted by noxious fumes and oily mist have been evacuated from the communities around the Aliso Canyon storage field. Because the leak is so large and technically complex, SoCal Gas has been working for months to fix it – so far without success.

In January, California Governor Jerry Brown declared a State of Emergency because of the ongoing leak. In addition to addressing the immediate disaster at Aliso Canyon, Gov. Brown ordered emergency regulations for the state’s natural gas storage industry and has directed several state agencies and commissions to prepare and submit reports and propose how to prevent similar leaks at similar sites across the state.

This month, the Department of Conservation's Division of Oil, Gas, and Geothermal Resources (DOGGR) released its draft emergency regulations, and EDF suggested important clarifications to make the rules more workable. We also provided a long list of issues not covered by the emergency rule that nevertheless must be addressed going forward (you can read our comments here). The draft is a good start, and though there is a lot more work ahead, the signs are that DOGGR is taking the right approach and heading in the right direction.

Above all else, DOGGR’s rules, both emergency and permanent, should satisfy one critical concept: well integrity. Well integrity is all about keeping wells from leaking – a complex endeavor requiring oversight (with vigorous enforcement) of design, construction, operation, testing, routine maintenance, repair, and decommissioning of wells.

The Aliso Canyon disaster has shined a light on an aging infrastructure where well integrity appears to have suffered from decades of neglect and thus poses significant environmental and public safety risks.

The draft emergency regulations are an important first step. California regulators know and EDF agrees that it is unrealistic to think that any emergency regulations will immediately resolve an issue this complex. This will be – and must be – the beginning of a long, continual effort to upgrade gas storage regulations, especially those relating to well integrity. This is true not just in California but across the country.

Thankfully, leaks of the size and duration of SS25 at Aliso Canyon are rare. Extreme leaks are dramatic and hard to miss. But even a methane leak this huge is small compared to the cumulative amount of methane pollution coming from every stage of the country’s oil and gas supply chain, from wellheads to the local utility lines under city streets. EPA estimates that each year, 7 million metric tons of methane escapes from the supply chain – about 80 times the amount that has been emitted from Aliso Canyon to date.

Preventing methane leaks from oil and gas wells is only part of the solution to the methane emissions problem – but it is an important one. If a well is built or maintained badly, it will leak.

EDF looks forward to working closely with other California stakeholders and with public officials to resolve well integrity issues and all other aspects of the methane emissions challenge. Our oil and gas staff have been working on well integrity issues for years, especially in states that have experienced tremendous growth in oil and gas production from shale formations. Texas, Ohio, and other states have favorably taken our environmentally-focused proposals into account in recent policy updates, leading to better overall outcomes. In these efforts, well integrity issues like cementing practices and pressure management were addressed. Passed in 2013, “Rule 13” marked Texas’ most significant overhaul in decades of well construction rules (including gas storage wells). According to the Texas Railroad Commission, the rule has reduced the number of blowouts across the state by nearly half.

This demonstrates that good well integrity rules can make a difference in safety and environmental performance. Well integrity includes key principles like multiple barriers of protection, appropriate safety equipment, frequent testing and maintenance, and monitoring of well conditions that might indicate potential leaks to the environment. After major gas storage disasters in Kansas and Texas, both states upgraded their gas storage regulations. California, too, will need to address these and other important technical issues as it upgrades its rules.

Given the State of Emergency in California, it is understandable that resolving the immediate crisis has taken center stage. But the solutions required to prevent another Aliso Canyon and the millions of tons of methane emissions from smaller, less dramatic leaks will not be implemented with one rule.

DOGGR must remain committed to ensuring that the state’s oil and gas laws reflect this idea of continual improvement. It’s the only way to ensure that policies meant to protect public health and safety keep pace with a rapidly changing industry. This means updating not only the policies that pertain to gas storage facilities, but also oil and gas production wells, underground injection wells for wastewater, wastewater storage facilities and other aspects of oil and gas development.

EDF works with states across the country to help implement the most forward-thinking ideas into their policies to safeguard against incidents like the Aliso Canyon gas leak, and we’re committed to working with DOGGR and other agencies, as well. Because the best way to fix a gas leak is to prevent it from happening in the first place.

By Jamie Fine

California’s big three utilities – San Diego Gas & Electric (SDG&E), Pacific Gas & Electric (PG&E), and Southern California Edison (SCE) – serve approximately 80 percent of the state's residential customers, which is why their recent move to update the state’s antiquated electricity pricing could be a game-changer for helping the state achieve its climate and clean energy goals.

In late December, while most people were on holiday, the utilities submitted plans to the California Public Utilities Commission (CPUC) to assess electricity prices that vary with the season and time of day. These plans detail the next two years of piloting time-of-use (TOU) pricing for most residential customers, and will help California reduce pollution and increase renewable energy production.

TOU electricity rates reward customers who shift energy use to times of the day when clean energy – like wind and solar – is plentiful, and electricity is cheaper. Already in use by commercial and industrial customers, starting in 2019, California households served by the big 3 utilities will also be able to benefit from TOU pricing. By shifting their energy use to times of the day when electricity is cleaner and cheaper, customers will be empowered to lower their monthly electricity bills and use more of California’s abundant, renewable energy resources.

Meanwhile, the utilities will have the next three years to fine tune their TOU strategy by analyzing these pilots, with the goal of achieving customer understanding and satisfaction through outreach, education, and new technology.

These plans are a great start, but there is still an opportunity to refine them. Doing so will ensure Californians are well-positioned to successfully transition to TOU pricing in 2019.

What the plans get right

Each utility will evaluate three different electricity rate designs across a broad sampling of customers, setting the stage for scientifically rigorous pilots.

• The first rate, roughly speaking, is most similar to the TOU rates currently offered by the big three utilities.
• The second rate’s peak, or highest, price window is shorter and rewards customers who increase their energy use when solar power is plentiful (usually between 11 AM and 3 PM).
• The third rate is intended to provide the sharpest incentive for customers to use electricity from clean, renewable sources. This rate has the highest peak price, but customers benefit the most with this option from shifting or lowering energy use – by using strategies and enabling technologies such as home batteries, energy efficiency, and smart thermostats.
• Finally, each utility proposes to test how customers interact with technologies. SCE and SDG&E will examine how customers use smart thermostats and PG&E will test a smart phone app.

3 Ways to Improve California’s Time-Of-Use Electricity Pilots
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SDG&E's third rate has many attributes Environmental Defense Fund (EDF) endorses, including hourly price changes to reflect the near-real-time cost of electricity. Furthermore, this rate will provide a bill credit when electricity from solar plants, for example, is so plentiful that the cost of electricity goes down. The bill credit is yet another way to incentivize people to use electricity when there is ample clean energy available, making it easier for the state to rely more and more on these renewable sources. EDF submitted letters to the CPUC encouraging PG&E and SCE to adopt a third rate in their pilots reflecting what SDG&E is piloting because we believe it best matches the type of pricing system California needs to green the electric grid.

The evaluation plans laid out by SDG&E and SCE clearly list what objectives will be met in the next two years of pilots, and what will be done in the 2018 pilot when utilities can explore a process for automatically transitioning customers to TOU pricing. Their plans correctly emphasize studying how customers change their energy use when switched to TOU pricing and how these changes translate into utility bill changes and satisfaction. However, EDF sees additional opportunities for the utilities to make these plans stronger and more ambitious.

How the plans can be stronger

The state’s TOU objectives include offering Californian’s a broad menu of quality options. Here are three ways the pilots can better achieve this goal:

• Testing clear customer options. Not all of the electricity rates proposed by SCE and PG&E provide significant electricity price differences between times of day. The pilots should look at a greater diversity of TOU rates, as different combinations will work better for different people. If all of the rates offered are too similar, people won’t be able to distinguish between them. This confusion will likely result in customers not shifting their energy use to align with times when renewable energy is available – one of the main benefits of TOU electricity pricing.
• Inspiring use of new technologies. The pilots should determine how to inspire people to adopt technologies that can shift electricity use automatically when the electric grid is stressed, or turn on routinely during times when clean energy is abundant. By studying this focus group, the utilities could gain insights into how they might motivate others to adopt similar tools. SCE and PG&E could be more ambitious in this moment of testing. Comparatively, SDG&E has the right ambition and focus in their third pilot rate, but proposes a $40 per month fixed charge that may undercut the financial benefits customers can receive with TOU electricity pricing. EDF recommends SDG&E test a demand charge, which instead of adding a fixed amount to the utility bill each month, adds a fee based on the customer’s peak electricity use. While the demand charge may seem at first to have the same effect as a fixed charge, it can be avoided. Practices and technologies, such as automated demand response that, for example, dims lights and slows fans in coordination rather than incur peak demand charges, can make this option more beneficial to customers.
• Taking advantage of technology. PG&E’s plan in particular misses another critical opening to unlock the full potential of technologies like smart thermostats and home batteries. Instead of testing how people buy and use technologies and, in turn, how this impacts their utility bills and satisfaction when paired with TOU electricity pricing, PG&E is choosing to focus only on qualitative aspects of smart thermostat use. Furthermore, all three utilities could synch their technology treatments with concurrent efforts at the CPUC such as the Distribution Resources Plan proceeding and Vehicle Grid Integration

Setting the stage for success

As I’ve written elsewhere, TOU electricity rates provide numerous benefits, one of which is putting all of our clean energy to use.

EDF and others are working to ensure the TOU pilots are designed to provide utilities and Californians with the information necessary for the program’s eventual success. Namely, to establish the electricity rates we need to help California build a clean, affordable, and reliable energy system.

This post originally appeared on our California Dream 2.0 blog.