California Energy Crisis Redux?
By Arnold Kling
Could California suffer another “energy crisis?” Lynne Kiesling writes,
California has a lower construction rate for proposed generation projects than other states that have implemented electricity restructuring…even in states that started with higher capacity relative to demand, such as Texas and New York, generation construction success rates are higher than California’s. Regulatory uncertainty in California has a variety of sources – the denouement of the 2000-2001 crisis and the shadow of expensive energy contracts to pay back, the introduction of legislative proposals to re-regulate the industry in California, the prolonged siting and permitting process that makes building baseload plants extremely difficult (leading to a shift toward construction of peaking plants), and the persistence of retail and wholesale price regulations that make it almost impossible to earn a return on your peaking plant investment.
Kiesling cites a report by the Bay Area Economic Foundation that forecasts renewed shortages within a few years.
For Discussion. California wants to have adequate energy without sufficient generating capacity and without using retail pricing to influence consumers to conserve when there is peak demand. How would you explain to politicians that something has to give?