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Yes, California Utilities Need Smart Metering Reform
The question was asked whether California utilities need smart metering reform, such as that which is currently under consideration by the state government. To have financial viability, the answer is yes. (This has nothing to do with whether the utilities should survive, just whether they need the change to survive.)
The situation of Pacific Gas & Electric is a good example of the case. PG&E's stock price has dropped dramatically since 2017. As noted in macrotrends.net/stocks/charts/PCG/pacific-gas-electric/stock-price-history, PG&E's stock price has dropped from $71.56 in 2017 to $12.17 today (1/24/2022), and shows every sign of continuing to drop. The accompanying macrotrends.net/stocks/charts/PCG/pacific-gas-electric/financial-statements information shows that PG&E lost billions of dollars in 2018 and 2019, which can be explained by the problems with wildfires, but also lost over $1 billion in 2020. The most recent available net income statement, at macrotrends.net/stocks/charts/PCG/pacific-gas-electric/net-income, shows losses in at least the hundreds of millions continuing into 2021.
PG&E and the other California utilities face big financial challenges, with no margin for error. The changes being considered by the California Public Utilities Commission, as described in latimes.com/environment/newsletter/2021-12-16/california-plan-to-cut-solar-incentives-boiling-point, notes that current rooftop solar suppliers to the grid are being paid market rates. The solar providers basically eliminate profit for the utilities in daylight hours. For early evening and early morning, California is largely relying on natural gas and imports. This can be seen by looking at http://www.caiso.com/todaysoutlook/pages/supply.aspx. But California has committed to 100% renewables, in the passage of Assembly Bill 525, as in fbm.com/publications/ab-525-laying-the-foundation-for-californias-offshore-wind-industry/, which means the utilities will have to transition away from natural gas, and start developing offshore wind, which will not be low-cost. The report at energy.ca.gov/sites/default/files/2021-05/CEC-500-2020-053.pdf, notes that
"Off the coast of California, a steep continental shelf and increased wind speeds combine to make floating turbines the primary technically feasible option." and (with LCOE standing for "Levelized Cost of Electricity"),
"The average LCOE of floating projects is estimated by the DOE at about $230 per megawatt-hour (MWh) as of 2019 and is expected to decrease to about $75/MWh by 2030, as Figure 9 shows."
The U.S. Energy Information Administration calculated LCOEs in its Annual Energy Outlook for 2021, at eia.gov/outlooks/aeo/pdf/electricity_generation.pdf, and found that a combined cycle plant would have an LCOE of $34.51, while the California natural gas supplies have already largely paid off their capital costs.
So the utilities, under the current system, are not making substantial revenues, and face increased costs in the immediate future. This includes the additional cost for storage for batteries and for pumped hydro. greentechmedia.com/articles/read/california-we-need-1gw-long-duration-storage-by-2026, argued "California already throws away gigawatt-hours' worth of renewable generation monthly when production outstrips demand (and changes in consumption stemming from the coronavirus pandemic only exacerbated that trend). What's more, the state needs to wean itself off of the natural-gas plants that come to the rescue every evening when solar generation disappears and grid demand spikes.
'The reason why they call out long-duration storage is because...without pushing in that direction, they will not be able to replace natural gas in the system,” [Mateo] Jaramillo said."
iopscience.iop.org/article/10.1088/2516-1083/abeb5b details the possibilities for pumped hydro storage in the American West. There are many available sites, but the expense is not minor. Figure 14 shows the capital cost for the off-river hydro storage facilities, which are by far the most likely to be developed, and the lowest figure is well over $500 million.
To sum up: The utilities are not in good financial shape as is. PG&E may be an outlier. But they all face loss of low-cost energy supplies because of legislative decisions. Yes, this does not count environmental costs, but the adding these costs to the income statements of the utilities would only worsen their problems. The utilities have to cut expenses, and if the greentechmedia.com argument is remotely correct, the obvious choice is payments to distributed renewable generation via net metering. To repeat, this is not an argument that the existing structure of electricity provision is optimal, just that if it will be retained in remotely comparable fashion, this has to happen.
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