Declaring Emergencies in California: The Realities of ISO Operation
of sufficiency of market rules as demonstrated throughout this article, the total available dependable capacity in California is simply well below its current demand. Therefore, lack of generation supply would have led to rotating blackouts regardless of deregulation. However, it should be noted that if deregulation had not taken place and the utilities had kept the ownership and operation of their California generating plants, the current financial crisis in California's electric energy industry may have been different.
Historically, California has heavily relied on importing electricity from the Pacific Northwest and Southwest. This discouraged building generation to keep up with the growing economy and has gambled on out-of-state purchases of electricity to supply the growing population. This is a key contributing factor to the current energy crisis. The lack of supply within California, recognizing that the existing generation fleet in California is old and plagued with environmental restriction, high growth in the Northwest and Southwest and below-normal water conditions combined with the unworkable market design, have collectively led to current energy crisis.
The Supply & Demand Issue: Adequacy of Supply and Load Growth
Statistics show that the actual capacity (i.e. supply) in the West is less than 2 percent over the demand. This is extremely inadequate by any US standards, especially since the system operators are required to maintain 7 percent of supply on standby as operating reserve. In addition, supplies are not available 100 percent of the time and their availability is subject to many factors: planned maintenance, forced outages, water availability, gas supply, environmental restriction, etc. The fact is that the entire western power grid is deficient in generation capacity and the aforementioned inadequacies further deteriorate the supply picture to unacceptable levels.
(Figure 1 shows the extent to which supply has kept up with demand. It should be noted that California actually lost supply due to early retirement of some plants.)
Moreover, the average demand growth in the West, including California, has been between 2 percent and 3 percent per year for the last 10 years. This translates to about 1,000 MW per year for California alone (enough electricity for one million households). In the last 10 years, California required 10,000 MW of growth in peak demand. During the same time frame, added generation capacity is nowhere near the required 10,000 MW. In California alone, 2279 MWs of new generating capacity has become operational as of September of 2001. The neighboring Western states are in about the same condition as California and are all building new generating plants frantically.
Figures 1 and 2 show the load growth in the last three years and that the fact baseline demand has also gone up, (i.e., the number of days that demand exceeded 35,000 MW has gone up from 51 days in 1998 to 84 days in 2000). This creates not only a capacity problem but also a MWh energy problem.
Not Fit For Print: The Newspapers Get Installed Capacity Wrong
A number of newspaper articles have asserted that there has been enough installed capacity to meet the need, but somehow it is being