More demand or less supply?

Fri May 18 15:12:03 UTC 2001

> From: rs at seastrom.com (Robert E. Seastrom)
> Date: 18 May 2001 10:11:44 -0400
> Sender: owner-nanog at merit.edu
> 
> 
> 
> Sean Donelan <sean at donelan.com> writes:
> 
> > Why is 2 to 3 times more capacity offline this year compared with previous
> > years?  I don't know.  It appears the "supply" shortage is not due to
> > increased demand, or even the lack of new power plant capacity; but due
> > to the shutdown of existing capacity by generation companies at a higher
> > rate than normal.
> 
> My understanding is that there is a seasonal "online / maint" cycle
> for the generation plants, and that many of them were not taken
> offline for normal PM several months ago because of energy usage
> _then_...  my unsubstantiated guess would be that just like letting
> your car go 30,000 miles between a pair of oil changes,
> procrastination of the maint cycle eventually comes home to roost and
> that's what we're seeing now.

As with everything in the California energy situation, it's more
complex than it seems.

1. There was likely substantial manipulation of the natural gas market
   last winter. (Both the courts and congress are looking at this and
   there is a "smoking gun" that indicates that the controlling natural
   gas distributor was holding back on delivery to force prices up.)

2. The amount many small generators were paid for power was
   contractually fixed so that when gas prices sky-rocketed, the
   generators could not afford to sell power to the ISO. This was made
   far worse when PG&E and So. Cal. Edison got into trouble and
   stopped paying ANYTHING which forced more small generators to shut
   down.

3. The state is now claiming evidence that, when the tight electrical
   market appeared, large generators took plants off-line for
   unscheduled and unneeded maintenance, forcing the crisis and
   shooting prices on the spot market to obscene levels. Power that
   Reliant was selling previously for was suddenly selling for over
   $1500 and California paid rather than have black-outs.

   In retrospect, this was probably a bad choice, but the state was
   very determined to avoid blackouts. As a result we still had
   blackouts (albeit fewer) and the state has spent over $6 billion
   which has drained the treasury and will soon result in the sale of
   bonds to keep the state solvent.

Add to this a long scheduled shutdown of half of the largest power
plant in the state (Diablo Canyon) for refueling, and you have a LOT
of generating capacity off-line.

I have avoided pointing fingers except where formal, public
allegations of specific wrong-doing have been made. I have also
skipped the Cal-ISO structure which invites price manipulation and the
politics of power which promised windfall profits for PG&E and Edison
but, instead, led to massive losses and, for Pacific Gas and Electric,
to bankruptcy. I have not mentioned Texas/Washington (D.C.) politics or
Washington/Oregon rainfall (or the lack thereof) which has resulted in
a huge decline in available hydro-electric power.

There is plenty of blame for most of those involved and it looks
likely to get a lot worse before it gets better. We have a new, large
emergency generator to be installed shortly. :-(

But the lights are still on and I'll be using Arizona power to keep
cool for a few days.

R. Kevin Oberman, Network Engineer
Energy Sciences Network (ESnet)
Ernest O. Lawrence Berkeley National Laboratory (Berkeley Lab)
E-mail: oberman at es.net			Phone: +1 510 486-8634