Glendale Water & Power has proposed building a large new gas plant in Glendale to replace the aging Grayson facility. They claim it is the best option to provide cheap, reliable electricity to Glendale. But in the current regulatory and market environment, a new gas plant makes little sense. No wonder Los Angeles has put a moratorium on them.
The Grayson facility is aging and expensive to operate. A new source of power needs to be found. There’s no debate on this.
But the $340-million plant GWP has in mind goes way beyond our city’s current and projected energy needs. The new Grayson plant would have a capacity of 250 megawatts, enough to meet 80% of projected 2030 demand. Yet we are already getting a third of our energy from renewables, and current state law mandates that we get 50% of our electricity from renewables by 2030. GWP admits it will have to sell the excess power. But will they be able to find buyers? California already has a massive oversupply of power, which is forcing utilities to close plants early. Something is wrong with this picture.
But size is only part of the problem. It is doubtful that the proposal makes financial sense for other reasons.
One has to do with California’s new cap and trade program. Cap and trade forces utilities, refiners and others to buy permits for each ton of carbon they emit. While no one knows exactly what the permits will cost over time, economists most familiar with the program project a range of $25 to $85 per ton in 2030 with a probability-weighted price for 2030 at $55. In contrast, GWP’s model uses a price of about $30 in 2030. Every extra dollar GWP has to pay for carbon weakens the financial argument for gas over renewables.
Another stems from legislation in Sacramento that will mandate 100% zero carbon electricity by 2045. If this passes, as is expected, anything GWP builds today will have to be mothballed in 25 years. And when that happens, rate payers will be on the hook for the unamortized costs. Shouldn’t we instead spend this money on systems to move us faster toward a clean energy future?
While state policy has been evolving, energy and storage markets have been undergoing a massive transformation. Prices for wind and solar have fallen to a fraction of what they were just a few years ago and in many parts of the country are already cheaper than coal and gas. The challenge with wind and solar is that they are intermittent, but that’s where the storage revolution comes in. In the last few years, battery technologies have come of age and prices for these systems are also falling fast. Just this year, Tesla and Southern California Edison (SCE) installed the world’s largest battery facility at Mira Loma. At 20 megawatts, this facility can store enough energy to power 2,500 homes for a day. SCE will use it to store cheap solar power during the day and deliver it to consumers when the sun goes down at night. Glendale could do the same.
We know the climate crisis is upon us — just look at the annual temperature records and melting polar ice. At the Paris summit in 2015, world leaders agreed that we must completely decarbonize by mid-century to avoid catastrophic consequences, and most are stepping up to do their part. As our leaders in Washington obfuscate and deny, the onus on us here in Glendale is to insist that any future power projects support the Paris Agreement. Building an expensive, oversized gas plant does not.
Daniel Brotman is an adjunct professor of economics at Glendale College