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San Diego politicians want to switch to renewable energy within the next 20 years. The power company has offered to help, but it’s already locked into long-term contracts to buy gas well into the future, and is about to buy a fifth gas-fired power plant.
During the past decade, San Diego Gas & Electric has moved quickly to comply with California’s ambitious clean energy policy.
By 2030, half the electricity sold in the state must be renewable, which largely means wind and solar power. Right now, only about a quarter of the state’s power is considered renewable, but 43 percent of SDG&E’s power already is.
Now, though, there’s pressure on the company to shed even more of its gas-fired power within the next two decades. Cities across California – including San Diego – are looking to a future without fossil fuels of any sort. The city has a goal of being 100 percent coal- and gas-free by 2035, a plan more ambitious than even the state’s aggressive plans.
At least 42 percent of SDG&E’s electricity is still generated by burning gas – even though the company has bought wind and solar power, and got rid of coal, nuclear and hydroelectric power.
There are all kinds of technical challenges to overcome before any major city’s grid can be fossil fuel-free. Environmentalists are counting on falling solar prices and improved battery technology to make reaching the goal both possible and affordable. Even if the city goes to 100 percent renewable, there’s some interest in keeping gas plants around to help meet peaks in demand.
But it’s become clear that SDG&E hasn’t planned for lots of gas to go away anytime soon. SDG&E owns and has long-term deals for a whole bunch of gas-fired power.
“Natural gas continues to be an essential element of the state’s overall energy picture and is needed as a critical backup to ensure reliable power,” company spokesman Joe Britton said in an email.
The company owns four gas-fired plants – three in San Diego and one in Nevada.
It’s also planning to spend $280 million to buy a fifth, the Otay Mesa Energy Center along the border.
Bill Powers, an environmental activist, said it makes no sense for SDG&E to be buying more gas-fired power right now – except that SDG&E can make customers pay for power, even if they don’t need it.
“They can get to 100 percent of this boneyard full of gas projects we’re paying for,” he said.
On top of that, another gas plant near the border came online in fall 2016. That’s known as the Pio Pico Energy Center. And yet another gas-fired plant, the Carlsbad Energy Center, is expected to fire up soon to serve SDG&E, though it’s replacing an older plant in Carlsbad that is about to be shut down. The company contracts for power from the two plants, but doesn’t own them.
The company gets power in one of two basic ways. It either owns a plant that generates power, or it signs a contract to buy power from another company that does. Almost all of the company’s renewable power comes from contracts with companies that own wind or solar farms, though one of the largest is a deal SDG&E signed to buy power from its parent company, Sempra Energy.
Much of its gas-fired power comes from plants the company owns. The biggest of those plants, the Palomar Energy Center, won’t be paid off until 2036.
According to a review of recent state and federal regulatory filings, the SDG&E’s longest renewable energy contracts of any significance expire in 2041, while its longest contract for gas power – the Pio Pico deal – expires in May 2042. That’s seven years after the 2035 deadline the city of San Diego set to be gas-free.
Pio Pico and the new Carlsbad plant are both “peaker plants,” which means they don’t run all the time. Instead, they start up and shut down when they’re needed, when demand for power peaks. The agreements for those plants require all electricity customers in SDG&E’s service territory to pay for that gas-fired power for years to come.
The city of San Diego is thinking about forming its own agency to buy and sell power, unless SDG&E can provide some way to provide only clean energy – but because of those deals, even customers who want only clean energy could be paying for gas plants.
Britton said even when the plants are not running they remain important because they’ll help provide backup for wind and solar power, because those sources become useless at night or in calm weather.
SDG&E also owns pipelines that bring gas into the region. It makes money from that, too.
On average, 42 percent of the natural gas used in San Diego goes to electric generation, though that can sometimes reach as high as 70 percent on some days.
“It’s not just the gas itself, it’s the infrastructure,” said Steven Weissman, a senior policy adviser at the Center for Sustainable Energy in Berkeley.
SDG&E recently proposed a major new pipeline to bring gas south into Southern California, but a draft decision by a CPUC judge rejected the $640 million project because the state is trying to move away from gas.
“Applicants have not shown why it is necessary to build a very costly pipeline to substantially increase gas pipeline capacity in an era of declining demand and at a time when the state of California is moving away from fossil fuels,” the draft decision said.
Still, there is some evidence the company could shift away from gas if it wanted. For one thing, it’s been able to increase its use of renewables quickly without affecting reliability.
A decade ago, just 8 percent of the company’s power was renewable. Now, 43 percent of it is. That’s a larger percentage of renewable power than California’s two other major power companies.
It’s also told the city of San Diego that it could be 100 percent renewable – even though it offered no specifics on how that would happen. That’s a change from the company’s position as recently as 2015, when it was adamant that any plan to abandon gas lacked credibility.
The energy market changes quickly. At times, SDG&E and its parent company, Sempra, have struggled to foresee changes.
A decade ago, Sempra bet big that California would import most of its natural gas from across the Pacific Ocean.
At about the same time the company opened a $1 billion plant on the west coast of Mexico to import liquefied natural gas from Indonesia, American gas drillers figured out a new way to get more gas out of the ground. This abundant gas – drawn up by fracking gas-filled rocks known as shale – transformed the energy market, shoving aside nuclear power and drowning out coal.
Today there is so much natural gas in this country, Sempra is now looking to export gas from the west coast of Mexico.
That total reversal is, in a nutshell, a sign of how rapidly things are changing.
SDG&E’s ongoing gas-related bet over the past 20 years has been on gas, particularly that gas would remain the fuel of the future, or at least the next several decades.
That idea also seems to have an increasingly short shelf life.
SDG&E’s bet isn’t a wild one. Not only is gas cheap and abundant, but even environmentalists have touted natural gas as “bridge fuel.” That’s because when natural gas is burnt to generate power, it’s cleaner than coal and can be used in places and at times where solar power and wind power is unavailable.
Cleaner is no longer clean enough, though, at least not for Californian lawmakers and environmentalists.
The company does want to shut down one gas plant a few years sooner than expected. That is its Desert Star plant in Nevada in 2026. The reason is not environmental, though: SDG&E failed to understand the terms of the lease for the land the plant sits on, according to the CPUC’s Office of Ratepayer Advocates.
Disclosure: Mitch Mitchell, SDG&E’s vice president for government affairs, sits on Voice of San Diego’s board of directors.