Many factors have been cited as contributors to the current Californian energy crisis: botched deregulation, skyrocketing natural gas prices forcing up wholesale electricity prices, consequent financial malaise in the investor-owned utilities, insufficient availability of hydro imports due to low rainfall, exceptional levels of winter forced outages at existing plants because they had to run so hard over the summer to meet high demand. The list goes on.

Some see deregulation as the villain, while others, eg, economists and free marketeers, believe the problems have arisen because deregulation has not gone far enough and the wonder of market forces is not being fully experienced down at the customer level.

Economists at EPRI, which is in California, so presumably they should know what they are talking about, have put the blame on design defects in the market. The fatal flaw is the combination of "flexible wholesale prices, fixed retail prices, and prohibition of long-term contracting." They believe that the answer is to introduce market-based real-time electricity pricing. "The energy market in California has been restructured, but so far, the only efficiency gains that we have seen have been on the supply side," according to EPRI’s Ahmad Faruqui. "The demand side of the market is not functioning well because customers are not seeing real-time price signals. With real-time pricing options and their supporting technologies in play, we would get the full benefits of deregulation." Proponents of real time pricing point to the experience of Georgia Power Company, which is said to operate the largest real-time pricing (RTP) programme in the world. On high price days Georgia Power has achieved load reductions of up to 750 MWe "with the help of its more than 1600 RTP customers." Nevertheless, the root cause of California’s current ills is quite simply the failure to get enough new generating capacity into operation in time to meet the needs of a booming economy, with expected peak load running at around 48 000 MWe.

That such turmoil should occur in winter rather than summer, when demand peaks, is certainly unexpected, and can be explained by an unfortunate combination of factors coming unexpectedly together – as is often the case when things go badly awry.

But the underlying issue is unacceptably low reserve margins. The Independent System Operator had recognised this and is in the process of seeking to place contracts for about 1400 MWe of "summer reliability generation" spread over a number of projects of 50 MWe or less, which can be called upon in the period June to October to avoid black outs. Understandably, the ISO’s attention was focused on this coming summer, when it, like everyone else, assumed the next big crunch would come.

One possible benefit of the current mayhem is that it may help encourage efforts to streamline California’s complex permitting processes and might even lessen the rampant NIMBYism that has plagued recent power plant initiatives. A remarkable recent example was opposition to the proposed 680 MWe Metcalf Energy Center by none other than Cisco Systems, architect of the internet, which is thought to be one of the key drivers of burgeoning electricity demand.

The permitting and construction record in California for large plants (ie 50 MWe or more) over the past decade has certainly been less than impressive, with a feeble 952 MWe entering operation in the 1990s.

However since March 1998, when the electricity industry was restructured, the picture has changed markedly. The California Energy Commission reports that since then it has approved nine major power plant projects, totalling 6278 MWe. Seven, 4352 MWe in total, are currently under construction, with 2412 MWe expected on line by the end of 2001. A further 14 projects, amounting to 6734 MWe, are currently being considered for licensing by the Commission.

So some of the new capacity that California needs is at least in the pipeline. This is more than can be said for many regions of the world where blackouts are routine (see Indian grid failure story on p 5), to say nothing of the estimated 1.6 billion people worldwide who still do not have access to commercial energy supplies.