As with everything (my statements included) it is very tough to encapsulate California's energy market problems in a few lines.
True enough, no power plants built in CA, nor none really planned. Why?? land in Arizona, NV,NM, WY,MT is a LOT cheaper, efficiencies of transporting long distances have gotten better with HVDC and EHV transmission lines, and it's cheaper to move the kWh than the fuel.
Electricity demand forecasts are notoriously uncertain. One group forecasts to estimate future pricing, another forecasts for future facility planning. For example, buildings destined to be "server farms" are typically planned at 100W/square foot, but, actual consumption has been measured at 30-40W/sf... Which number do you use for the forecast?
To a certain extent, certainly in the long run, demand is fairly price sensitive.. The recent abnormally low prices for natural gas prompted a big move to NG, which takes several years. Now that everyone has committed to NG, amazingly, the price has risen, even though the demand hasn't gone up all that much.
I think the real problem comes in when the utilities (at their own request, of course) got themselves caught in a bind between fixed consumer prices and market wholesale prices. They thought it was great when wholesale prices were dropping... But now, the providers KNOW that the buyer has to buy, and they take advantage of it. There is no way that $2.00/kWh is related to the actual generation cost. No.. it is a clear function of a free market where the demand is inelastic, and there is a shortage.
Created on Saturday, March 31, 2001 11:25 AM EDT by James Lux