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Viewpoint: California nat gas faces uncertain future

02 Jan 2018 12:00 GMT
Viewpoint: California nat gas faces uncertain future

Houston, 2 January (Argus) — Pending legislative and regulatory decisions in 2018 will impact the future of how natural gas is moved, consumed and stored in California, the most densely populated energy market in the western US.

Stalled gas-fired power plants, a proposal to close a major gas storage site, and the shift to renewable energy during the past year may signal that the trend toward gas for power generation in California has plateaued.

The dim outlook in California stands in contrast to other areas of the country, where gas has provided a low-cost solution to cutting emissions and meeting future power demand. Gas is still a major fuel in California and can provide up to 53.5pc of the state's electricity, but its share of the power mix is waning.

In June, the Los Angeles Department of Water and Power (LADWP) deferred plans to rebuild and modernize several gas-fired plants, so that an independent study could examine renewable alternatives.

Repowering activities have been proposed at the Scattergoods generating station in Playa del Rey, as well as at the Haynes generating station in Long Beach. Both projects involve replacing existing steam boiler units with cleaner, more efficient technology. The study should be completed by early 2018, officials said.

In addition, members of a California Energy Commission (CEC) committee in October recommended rejecting a proposal from NRG Energy to build the Puente Power Project, a gas-fired plant in Ventura county. A study found that renewables and energy storage could meet regional needs, although at greater cost. NRG Energy has asked state regulators to suspend their review while the company determines whether it will withdraw the application.

The outcome of the commissioned study, along with pending decisions over the Puente project, will not only affect the future of those projects, but whether other projects in California can move forward.

Lawmakers have mandated that at least 50pc of California's electricity must come from clean energy sources by 2030. The state is ahead of schedule to meet that deadline.

A proposed bill would also close the Aliso Canyon gas storage site within the next decade. The facility, owned and operated by Southern California Gas, was the site of a massive gas leak discovered in October 2015. The leak was successfully sealed in February 2016, and Aliso Canyon was approved to reopen at a reduced capacity in late July of this year.

AB 127 is the first legislative proposal to outline a clear timeline for closing Aliso Canyon. The bill has been ordered to a third reading, which may take place when the California legislature reconvenes in January 2018.

Another factor to consider is Pacific Gas and Electric's (PG&E) proposal to close Diablo Canyon, the state's only remaining nuclear power plant. PG&E studies have determined that there will be less future demand for power from Diablo Canyon. The company has requested funding to procure energy-efficient resources to replace that output, but more investigation will be needed to determine how California can fill the gap.

While incentives already exist for the adoption of renewables, the outcome of these pending legislative and regulatory decisions could ultimately set the tone of where natural gas use in California is headed in the next decade.