A drought exacerbated by climate change sent California’s hydropower supply to its second lowest level since 2001, causing electricity prices in the state to soar 150% in three months.
Yet some of the biggest beneficiaries of the price spikes, according to a report released yesterday by a rating agency, are fossil-fueled power producers whose emissions only exacerbate global warming.
California’s predicament – in which emission-free hydropower is replaced by global warming energy from natural gas-fired power plants – underscores the need to rapidly decarbonize the power grid, sustainability experts say.
“That way, if we have problems with the production of one renewable energy sector, we can compensate with the renewable energy of another,” said Kristen Averyt, research professor at the University of Nevada, Las Vegas, which focuses on climate resilience efforts.
In May, monthly electricity prices in California were less than $ 30 per megawatt hour, Moody’s Investors Service said in the report. By July, they had exceeded $ 80 per MWh, their highest level since at least 2016.
“High electricity prices are positive for non-hydropower producers who sell into the California electricity market,” the report said.
Moody’s has highlighted three power producers who stand to benefit from the state’s drought-induced decline in hydropower: Calpine Corp., Vistra Corp. and Generation Bridge LLC.
Houston-based Calpine has 35 power plants in California with a production capacity of 6,425 megawatts, according to company data. Of this production capacity, 88% is powered by fossil fuels.
Vistra, another Texas company, is even more dependent on fossil fuels. The Carbon Tracker Initiative, a clean energy think tank, estimates that 90% of its fleet’s electrical capacity comes from natural gas and coal-fired power plants.
Generation Bridge, meanwhile, is a holding company made up entirely of state-of-the-art gas and oil-fired power plants, according to a Moody’s report released earlier this month.
In California, Generation Bridge has two peak gas-fired power plants that can produce 773 MW when the state’s electricity demand is highest. The holding company is owned by a fund of ArcLight Capital Partners LLC, a Boston-based private equity firm.
Supplying energy to these companies may help keep California on in the short term, but it hurts the nation’s long-term climate goals, Averyt said.
“The last thing we want to do right now is increase our emissions,” she said.
Calpine, Vistra and ArcLight did not respond to requests for comment.
Historically, hydropower has provided about 15% of California’s electricity. But a drought that lasted for decades caused the sector’s output to plummet.
Earlier this month, low water levels at the Oroville Dam forced the state to shut down the Edward Hyatt Power Plant, one of its largest hydroelectric facilities (Green wire, August 6).
Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2021. E&E News provides essential information for energy and environment professionals.