PG&E is greening its image…and the planet.
Gone are the days of leaving the porch light on all night or setting the thermostat to 65 degrees in the summer. Maybe the impetus is to protect the environment—or maybe we simply can’t afford the utility bill.
While most of us have one or two guilty pleasures (a long, steaming hot shower or a glut of Christmas lights) there are few of us who haven’t been affected in some way by our state’s recent focus on energy conservation. As a result, Californians are flexing their power and demanding “greener” energy, and Pacific Gas & Electric Company is answering the call.
Headquartered in San Francisco, PG&E is the largest investor-owned utility in the state. The 101-year-old energy giant serves more than 15 million people, including most of us here in the North Bay. While the utility has been using some forms of pollution-free energy for decades, it’s recently transformed itself into a champion of the green movement by expanding its portfolio of renewable energy sources and aggressively promoting energy efficiency among its customers. Some might say PG&E has been forced into its current position by the long arm of the state legislature, but there’s no question the utility, which was once in chapter 11 bankruptcy (due to the energy crisis earlier this decade), has made an impressive turnaround and is now forging a new path through uncharted green territory—and clearing the way for other utilities to follow suit.
The dirty, the clean and the green
PG&E’s power mix currently delivers, on average, a reported 60 percent less greenhouse gas emissions per kilowatt than any other major utility in the nation. But because the energy industry is a notoriously dirty one (and an easy target for both environmentalists and policymakers), it’s clearly in the utility’s best interest to continue improving its numbers. In fact, the company doesn’t have much of a choice—California has adopted strict new legislation that requires utilities to obtain 20 percent of their energy from renewable sources by 2010 (or at least have that amount contracted for future years). PG&E is on track to meet that goal according to President/CEO Peter Darbee’s opening address at the 2008 shareholders’ meeting.
Traditional power plants that rely on fossil fuels to generate electricity pollute the atmosphere with carbon dioxide (CO2) emissions, a major contribution to greenhouse gases and global warming. The dirtiest of the fossil fuels is coal. According to Keely Wachs, senior manager of public policy and issues communications (including the environment), coal-derived energy contributes only 2 percent to PG&E’s total energy mix. Wachs is quick to point out that even this relatively small amount of coal-fired energy is imported from out-of-state “under contracts we signed in the 1980s, which would never be signed today.”
While coal has historically been the dominant source of energy in our country, the balance is shifting. Unfortunately, other countries aren’t following our lead. Coal is abundant and cheap around the world, which makes it more difficult to lessen—or, better, eliminate—our global dependence on it. “China is cutting the ribbon on a new coal-fired power plant almost every week,” says Wachs, “which is frightening.”
Approximately 43 percent of PG&E’s energy mix comes from natural gas, considered the cleanest (or, put another way, the least dirty) of the fossil fuels. The rest of its mix, around 55 percent, comes from carbon-free, “clean” sources—a point the company takes great pride in. From this clean mix, currently 13 percent comes from state-sanctioned renewable resources, including geothermal, solar, wind, biomass and waste, and small hydroelectric projects, with more possibilities actively being explored.
Another 20 percent of the company’s energy comes from large, hydroelectric sources—arguably a renewable resource but ineligible for the “renewable” stamp of approval under California’s rules, presumably due to the environmental impact of large dams. Finally, around 23 percent comes from PG&E’s nuclear power plant, a low-cost, emission-free source—albeit a wildly unpopular one due to waste storage, safety and security concerns.
California has established a moratorium on new construction of nuclear plants, but lets existing plants continue production. PG&E presumably has no plans to reduce its dependence on nuclear power: Wachs calls its Diablo Canyon nuclear facility, located in San Luis Obispo County, “a reliable, clean source of energy that can run 24/7 and is cost-effective. It was essential during the blackouts and deregulation.”
So while many Californians might like to see our nuclear power plants shut down forever, PG&E will continue to invest in Diablo Canyon—approximately $1 billion over the next few years—to ensure safe, continued operation. “It’s a delicate topic,” acknowledges Wachs, “because many of our customers are pretty vocal about being anti-nuclear.”
Luckily, California has a wealth of alternative renewable resources we can plug into, and one would be hard-pressed to name any negative consequences associated with their use.
If any state can wean itself from conventional energy sources and move toward primary use of renewable sources, it’s California. We have wind, sun, waves, tides, geothermal hotspots and cows (yes, cows). Add to that our state’s progressive public policy and the willingness of our utilities and residents to invest in renewable resources, and we’re in a prime position to make the switch. “[PG&E] strives to be environmentally friendly,” says Wachs. “It’s the right thing to do—it’s what our customers want…and it’s what the state wants.”
Since 2001, PG&E has added more than 2,500 megawatts of renewable energy to its portfolio—enough to power 1.5 million homes—and more is on the way. After small hydroelectric sources, PG&E’s renewable leaders are biomass and waste, wind and geothermal energy, all of which are purchased through contracts with independent providers. Biomass energy comes from organic resources, such as scrap timber or plants grown for this purpose, that are converted to fuel. Waste projects obtain fuel from solid waste, primarily landfills. Wind energy is on the rise; a large contract signed in October 2007 brought the total amount of wind energy in the cumulative power mix to 1,061 megawatts.
The Geysers, the world’s largest geothermal field (located in Sonoma County), partners with PG&E to provide geothermal energy. Simply put, geothermal energy is produced by the steam that results from the underground interaction of water with hot magma. The availability of geothermal energy is yet another example of why the North Bay is fertile ground for the green movement—we have unique, viable energy resources that aren’t readily found in other parts of the world.
And given California’s abundant sunshine, it should be no surprise that solar power is increasingly making a significant contribution to the grid. PG&E has recently incorporated more than 1,600 megawatts (the equivalent of three large traditional power plants) of solar thermal contracts into its portfolio mix. Using a different, more efficient technology than rooftop photovoltaic panels, solar thermal uses a vast system of mirrors that concentrate the sun’s energy, heating water to create steam. The steam then powers an electricity-generating turbine. While the price of the energy obtained is cost-competitive with natural gas-generated power, there’s the downside of added transmission costs—getting all that power from the solar farms in the desert to urban areas where it’s needed takes time and money. This is, of course, a challenge for wind-generated power as well, and one shared by all utilities. But despite the added cost of transportation, solar thermal is considered a cost-effective resource, according to Wachs.
New, ecofriendly energy sources are coming. Already underway is a project that uniquely attests to PG&E’s commitment to the cause. “Cow power” technology converts the methane released by cow manure into natural gas, which is then piped to customers for their energy needs. PG&E is already using cow power gas to fire power plants. It’s considered beneficial on many fronts: It’s a renewable energy source that helps diversify the power mix; it removes methane—an extremely potent greenhouse gas—from the atmosphere; and it brings an alternative source of income to dairy farmers.
PG&E is also actively exploring ways to harness the power of our oceans. Projects are already underway to study the feasibility and impact of developing wave farms off the Mendocino and Humboldt coasts, and the possibility of tapping tidal power in the San Francisco Bay is in the early stages of exploration. About the “WaveConnect” project, PG&E spokesperson Jana Morris says the potential is excellent, as studies show waves generate significantly more energy than wind.
Far from acting alone, PG&E relies on key partnerships with cutting-edge green-energy entrepreneurs. When California began its deregulation of the utility industry, major utilities were directed to sell off many of their power plants (PG&E still owns its Diablo Canyon nuclear plant and all of its hydroelectric facilities, plus a few natural gas plants). This facet of deregulation turned out to be a blessing in disguise, since it allowed customers to choose who they purchased their energy from, which opened the door to greener energy providers. While it might seem risky for an established corporation to invest heavily in unproven technology, it’s a risk PG&E must take to meet the state-mandated renewable-energy target of 20 percent by 2010.
Power hungry
What if there was a way you could essentially cancel out the environmental impact of your energy use? PG&E believes it’s possible, and the company is counting on its environmentally conscious customers to buy into the idea. PG&E’s new ClimateSmart program invites energy users to contribute to environmental projects that stop or reduce greenhouse gas emissions, in effect balancing out the greenhouse gases put into the atmosphere by their energy use. This practice is called “carbon offsetting.” Customers volunteer to make a donation each month—the amount varies with energy use, but averages only $5—which is used to make their energy use “climate-neutral.” Two ClimateSmart projects—the purchasing and preservation of large tracts of forest land in Northern California—are already complete. Because trees are voracious consumers of CO2, the more trees we have around, the less greenhouse gas we put into the atmosphere.
ClimateSmart is just one example of how PG&E is orchestrating its green evolution. The utility offers 82 different customer education and incentive programs geared toward energy conservation. For example, any PG&E customer can get instant rebates when purchasing compact fluorescent light bulbs (CFLs), lamps and related fixtures—look for the company logo sticker on qualifying products (the rebate is built into a lower price). Additionally, you can receive more sizable rebates for efficiency upgrades to your home or business: the addition of wall or roof insulation; the purchase of an energy-saving appliance such as a washing machine, hot water heater or pool filtration pump; or the replacing of high pressure sprinkler systems with low pressure or drip systems.
One of PG&E’s most exciting innovations is called a SmartMeter. Designed to replace standard gas and electric use meters, this new, high-tech model is part of a smarter grid that allows for remote meter readings (no more human meter readers) and automated outage alerts. The newest SmartMeter models transmit customers’ energy use in real time and even automate appliance usage to coincide with periods of low demand. “We’ll be issuing about 10 million SmartMeters for electricity and natural gas throughout the service territory by 2012,” Wachs says. SmartMeter installation has already started in Bakersfield and is now moving north. North Bay residents and businesses can expect to see them in the next few years.
Though PG&E’s push for energy conservation seems counterintuitive, it’s actually good for business, because California utilities are typically governed by a different set of rules than out-of-state utility companies: If they sell more energy, they don’t make more money. In fact, due to conservation incentives, the opposite is often true. More than 30 years ago, state policymakers decided to decouple the utilities’ revenues from the amount of energy sold, removing the sales incentive for the utilities. Instead, utillities receive a preset amount of revenues regardless of actual customer energy usage.
The “decoupling laws” represent just one aspect of a heavily regulated industry. The California Public Utilities Commission (CPUC) regulates comprehensively the state’s investor-owned utilities; including retail rates, purchase agreements and rebate programs; almost everything PG&E does is with the approval and partnership of the CPUC. “We’re a regulated monopoly, and we take our responsibility very seriously,” says Wachs.
Regulation certainly doesn’t seem to harm the bottom line. PG&E makes its impressive revenues (more than $1 billion in 2007) in a couple of ways. First, the company gets a set return on CPUC-approved investments and capital expenditures. If the commission determines consumer demand requires a new power plant or transmission line, PG&E can earn up to 11.35 percent on that investment, explains Wachs. So if the utility invests $100 million this year into new power plants, it earns $11.35 million in revenue.
PG&E also makes money by helping its customers save money. If CPUC-approved energy saving goals are met by its customers, PG&E is rewarded with a certain percent return on realized savings, awarded in the form of permission to increase retail rates. “We have a very extensive energy efficiency program; it’s been going on for 30 years,” Wachs says. “During that time, we’ve helped our customers save $22 billion.” That big number equals big earnings for the energy giant. It’s easy to see why PG&E is bending over backward to get customers to reduce energy consumption—for California utilities, less is definitely more.
Power struggle
In Northern California, “leaving the grid” is often romanticized as a sort of utopian ideal, akin to “living off the land.” Many individuals and business owners in the North Bay have switched to solar power, but most aren’t completely divorced from the grid. When customers install a rooftop photovoltaic system, most choose to maintain a connection to the grid for backup access—at night for example, or whenever energy demands exceed the capabilities of the solar panels. And it’s a reciprocal relationship, because the grid can absorb any extra solar power generated by the solar system. That may be one reason PG&E provides rebate incentives for anyone who invests in rooftop solar panels and maintains a connection to PG&E’s power lines. The payment amount is commensurate with the amount of power generation the rooftop system is designed to produce.
In 2006, Governor Schwarzenegger launched his California Solar Initiative, creating more than $2.2 billion in solar panel incentives over the next decade for residential, commercial, industrial and agricultural properties. Administered by PG&E along with the other entities in California, the California Solar Initiative is designed to make solar power more mainstream, with the ultimate goal of making solar power self-sustaining in California.
Because buying and installing solar panels is still expensive (although the price is coming down, home systems can cost an average of $25,000), rebates are an important incentive. The rebate program helps customers manage their energy bills while greening our local environment. Numerous North Bay individuals and organizations have benefited from rebates, most notably Sonoma State University, whose Salazar Hall renovation—an extensive efficiency upgrade that includes a rooftop photovoltaic solar installation—earned the university rebates of $450,000.
With aggressive incentive plans and dropping costs of roof panels, the number of residents and businesses installing solar panels is on the rise. But if you’re thinking about going solar as an investment opportunity, you might be disappointed. Currently, surplus energy accumulated at the end of the year cannot be sold back to the utility. Users can, however, roll over excess credits from month to month, offsetting charges from PG&E for hours when demand exceeds their solar supply.
But the solar rebate story is still unfolding. There’s a bill being proposed this year that would require utilities to compensate homeowners or businesses for surplus energy fed back into the grid. The bill’s backers say it’ll create added incentive to reach the lofty goals set by the Million Solar Roofs Initiative. On the other hand, PG&E says the bill’s passage would create an incentive for people to “supersize” their systems, resulting in rate hikes to compensate for the large rebates.
Solar panels aside, some California municipalities have elected to flex their power by obtaining their own supplies. Healdsburg and Ukiah both operate their own power companies, and there’s a growing movement among Californians toward breaking away from the state’s power monopolies and purchasing or generating their own electricity. These breakaway groups are called Community Choice Aggregations (CCAs) (see “Buying Power,” pg. 43), and are often formed with the expectation that their energy will mostly come from renewable sources. A particularly vocal group is found in San Francisco, PG&E’s home base. This isn’t just a fringe of naysayers, either—the city’s board of supervisors has already approved a CCA implementation plan, all but guaranteeing its imminence.
While PG&E appreciates the interest in procuring additional renewable supplies that’s been shown by some of the communities it serves, it’s also concerned about the likely cost impacts associated with CCA plans. David Rubin, PG&E’s director of service analysis/pricing and payment products, explains that, if a city or county wants to invest in local renewable resources (for example, the untapped wave power off the Sonoma coast), there are a number of different ways they could use the power generated without taking the drastic step of creating its own CCA entity.
First, the energy could be used onsite (for example, the installation of rooftop solar panels on a government building); they could also transport the power to another energy provider using PG&E lines for a fee; or they could sell it to the utility company.
“We’re enthusiastic buyers of renewable power,” says Rubin. Of CCA proponents, he says, “They want to move in this direction to acquire more renewables than what they’re getting with PG&E, but we’ve been doing this a long time, and we’re concerned their proposals are overstating availability and understating price.”
PG&E is certainly moving in the right direction, but whether its new green makeover will be enough to appease CCA advocates throughout Northern California remains to be seen. What’s sure is, as PG&E continues its green metamorphosis, it will further establish itself as the prominent industry leader, a position that should enable it to weather most challenges and thrive for many years to come.
