[continuing the NYT story] Pressure on Suppliers
In Gerlach, Nev., 100 miles north of Reno, a high desert butte was made ready two years ago for its wedding to the Granite Fox Power Project, a plant designed to burn pulverized Western coal. Electrical transmission lines were close by. But, like Miss Havisham in Dickens's "Great Expectations," Gerlach waits for a groom that may never arrive. The plant was a certain source of significant new carbon dioxide emissions. Mr. Cavanagh predicted that it "would wipe out all the carbon dioxide savings from California's spectacularly successful efforts to save electricity during 2001 and 2002." Southern Californians would likely be the eventual customers. But last fall, the California Public Utilities Commission barred the investor-owned utilities it regulates from signing long-term contracts for electricity if the emissions exceeded those of the cleanest gas-driven plants. The only technology that could accomplish that with coal is expensive and has not been perfected. Said Mr. Peevey of the commission, "All we're saying is, Fine, you send it here, but it has to be, in terms of air quality and greenhouse gas emissions, it has to be comparable to the newest combined-cycle gas turbine." One fifth of California's electricity comes from coal, the vast majority of it from outside the state. This past winter, Sempra Energy, the parent of San Diego Gas & Electric and Sempra Generation and the developer of Granite Fox, put the project up for sale. Neal E. Schmale, Sempra's president, said the ruling had had a negligible impact on the decision. High natural gas prices prompted the company to invest in gas storage and terminals instead, Mr. Schmale said. Among California environmentalists, however, the "for sale" sign on Granite Fox was taken as a victory for a pioneering policy that reaches beyond the state's borders. V. John White, an environmental lobbyist in Sacramento, compares building a Southwestern power plant to building a mall: California is a desirable anchor tenant. But California is also the state where electricity deregulation foundered in 2000; bills soared and an economic crisis ensued. Even without a crisis, Californians' electricity rates are about 40 percent above the national average. Robert McIlvaine, a coal industry consultant from Northfield, Ill., said, "If you are going to generate electricity from gas, the cost of doing so is going to be considerably greater than coal — 50 percent more or 100 percent more." But, Mr. Harvey said: "People don't pay rates. They pay bills. You can have twice the rate and half the consumption and be just as happy." On Aug. 31, legislators enacted the bill sponsored by the State Senate president, Don Perata, Democrat of Oakland, and extended the commission's rule to all power providers. Business people ask if this could provoke another crisis. Power-plant siting experts, like Thomas A. Johns, the vice president of development at Sithe Global Power, a New York company, say that, in the short term, the loss of California business may not matter much to the merchants of power in the Southwest. Fast-growing cities like Phoenix and Las Vegas are ready markets. In the long run, however, "California is a big piece" of the total consumption in the West — 40 percent, Mr. Johns said. "If 40 percent of the Western load will not buy coal, you will have less coal." The risk, both Mr. Johns and Mr. Schmale said, is in increasing the state's reliance on natural gas, whose price has been extremely volatile in recent years. (California law bars construction of nuclear plants until the questions of waste disposal are resolved.) "When you exclude coal and nuclear from your base load," Mr. Johns said, "you've only got one option, and that's natural gas." Another measure awaiting the governor's signature toughens standards by requiring that by 2010, 20 percent of the energy sold in California comes from a portfolio of renewable sources, like geothermal and wind. Last year, 10.7 percent of California's power came from renewable sources. New renewable energy sources could make prices less volatile, but Mr. Schmale of Sempra said California's policy makers need to muster "the political will" to build transmission lines and "all those other things that would be necessary to make the environmental things work." Caps, Costs and Credits Perhaps the most ambitious measure California has undertaken is the newly mandated 25 percent reduction in carbon dioxide emissions. "If we do it right," Mr. Schwarzenegger said at a news conference, "it can be an example for the rest of the world and the rest of the country to see." If not, the concept could be discredited. The law, sponsored by Ms. Pavley and the Assembly speaker, Fabian Núñez, Democrat of Los Angeles, gives the California Air Resources Board authority to set industry-specific targets for emissions reductions, effective in 2012, and to establish mechanisms — including the creation of emissions allowances that companies might trade or bank — to facilitate compliance. These targets would be adjusted from 2012 to 2020 to meet the 25 percent goal. Those who have studied the question agree that the new system will cost consumers more. "A cap-and-trade system will raise the cost of electricity to consumers to some degree," said Lawrence H. Goulder, a professor of environmental and resource economics at Stanford University. As the European Union found after the 1997 Kyoto Protocol, figuring out how to assign emissions credits is not easy. Whatever the decisions, chances are that they will be met by a lawsuit. Margo Thorning, the chief economist at the American Council for Capital Formation, a group supporting business interests, argues in a study that "sharp cutbacks in California's energy use would be necessary to close the 41 percent gap in 2020 between projected emissions" and the cuts the law requires. Dr. Thorning added in an interview, "The technologies that will enable us to move quickly in a cost-effective way away from fossil fuel just aren't there yet." Allan Zaremberg, president of the state Chamber of Commerce, predicted that businesses would flee to unregulated areas and continue to emit climate-changing gases. Dr. Thorning's study was countered in mid-August with a study by David Roland-Holst, an adjunct professor of agricultural and resource economics at the University of California, Berkeley. Professor Roland-Holst argued that the new law would add $60 billion and 17,000 jobs — in fields like alternative energy — to the California economy by 2020 by attracting new investment. James D. Marston, the head of state global warming programs for Environmental Defense, the New York group that helped lead the fight for California's new carbon cap, said, "We'll look back in 10 years and say this was the final breakthrough and the final political consensus that we have to do something meaningful on global warming." -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante.
