Planning for California’s Clean Energy Future
PG&E's work on energy efficiency and support of clean-energy-generating technologies are part of a broad energy strategy consistent with California's Energy Action Plan. The strategy relies first on an aggressive expansion of customer energy efficiency and demand-side management programs; then it looks to secure additional renewable power resources and distributed generation; and, finally, it seeks to fill the remainder of customers' energy needs through traditional, but ever more efficient, generation sources.
In 2007, PG&E's retail customers purchased 79,451 GWh of electricity. Of that amount, 26,723 GWh were generated by PG&E's own natural gas, hydroelectric and nuclear facilities, as well as small amounts of fuel oil, diesel and solar energy.
The overall electricity mix used to serve our customers in 2007, which included energy PG&E generated and purchased from third parties, is shown in the following charts.
* Due to a dry winter and the resulting reduction in the availability of hydroelectric generation, PG&E increased its power market purchases in 2007. Because California regulators require us to automatically assume that a certain portion of these market purchases are coal-fired generation, this chart shows an increase in that area. However, PG&E's direct purchases of coal have not increased, and remain at 1.6 percent.
PG&E's 2007 California-Eligible Renewable Resources**
** As defined in Senate Bill 1078, which created California's renewable portfolio standard, an eligible renewable resource includes geothermal facilities, hydroelectric facilities with a capacity rating of 30 MW or less, biomass, selected municipal solid waste facilities, solar facilities and wind facilities.
A significant amount of the power we supply to customers comes from large hydroelectric stations. However, under California law, energy from these resources does not qualify toward meeting California's renewable energy standards. With these facilities factored in, PG&E's sales from California-eligible renewable resources plus non-eligible hydroelectric represented approximately 25 percent of total energy deliveries in 2007.
PG&E's Long-Term Electric Resource Plan
In December 2007, PG&E received approval for a 10-year electric resource plan that includes energy efficiency, demand response programs, renewable generation, distributed generation (including solar power) and new, clean and efficient fossil-fuel units. The approved plan seeks to reduce demand first through energy efficiency and then relies significantly on preferred and environmentally friendly resources.
Significantly, over this time, PG&E expects to meet more than half of the anticipated demand growth in its service area through energy efficiency. PG&E estimates that in the absence of the energy efficiency and other demand-side programs, the California Energy Commission's sales forecast would grow at an average rate of 2.3 percent per year between 2007 and 2016.
PG&E's long-term plan is updated regularly as part of a CPUC proceeding in which all three state utilities and numerous other stakeholders participate. This process allows PG&E to reassess its customer needs and obtain Commission authority for a new procurement plan to meet those needs.
Projected Energy Load Growth Met By Demand-Side Resources, 2007–2016
This chart shows the projected growth in energy load in PG&E’s service area between 2007 and 2016. Projections are based on the California Energy Commission’s revised electric demand forecast (November 2007).
Since 1998, PG&E has reduced its sulfur hexafluoride (SF6) leak rate by 89 percent and its absolute emissions by 83 percent. SF6 is an extremely potent greenhouse gas, approximately 23,900 times as potent as CO2 on a per ton basis, and is used as an insulating material in high-voltage circuit breakers. PG&E achieved these reductions through a number of actions including an active breaker repair replacement program, using X-ray technology to more efficiently inspect the internal components of circuit breakers, laser imaging technology to identify leaks and verifying SF6 levels in breakers on a monthly basis to more quickly flag potential leaks. In 2007, PG&E also reviewed a new 72 kV circuit breaker design that contains no SF6 gas and plans to install one of these breakers for evaluation purposes in 2008.
The greenhouse gas emissions rate associated with PG&E's energy mix is among the lowest for any utility in the nation. In 2006, the CO2 emissions rate associated with generation resources owned by PG&E was 28 pounds per megawatt-hour (lbs/MWh), while the independently verified CO2 emissions rate associated with all of the power we supplied to customers, including purchased power, was 456 lbs/MWh. For comparison, the national average CO2 emissions rate for all power generation was approximately 1,363 lbs/MWh, while the California average CO2 emissions rate was approximately 879 lbs/MWh.
* Source: U.S. Environmental Protection Agency eGRID Version 2.1 (updated April 2007 and based on 2004 data)
** 2006 emissions rate for our delivered electricity was independently verified and registered with the California Climate Action Registry (Registry). This emissions rate is based on total emissions of 20.7 million tons (18.8 million metric tonnes), calculated in accordance with Registry protocols. Given that a portion of the electricity that PG&E delivers comes from unspecified sources, the total emissions may range between 18 and 21 million tons. Review emissions data for our owned generation resources.
The nitrogen oxide (NOX) emissions rate from PG&E-owned generation was 0.08 pounds per megawatt-hour (lbs/MWh) and the sulfur dioxide (SO2) emissions rate was 0.0031 lbs/MWh, compared with estimated national averages of 1.78 and 5.07, respectively. There were no reportable mercury emissions from PG&E's facilities.
Sulfur Hexafluoride (SF6) Absolute Emissions
Securing Renewable Power Resources
California's Renewable Portfolio Standard (RPS) requires each investor-owned utility to have 20 percent of its supply be comprised of California-eligible renewable resources by 2010. In 2007, more than 9,000 GWh, or approximately 12 percent of PG&E's total retail sales, qualified as a California-eligible renewable resource.
PG&E continues to aggressively add renewable electric power resources to its supply and now has contractual commitments to have more than 20 percent of its future deliveries come from renewables. Since we began working toward the RPS target, through 2007, PG&E has entered into contracts for additional supplies of approximately 2,100 MW of renewable energy—wind, solar, geothermal, biomass, wave and small hydro resources. These include agreements for future supplies from projects that must be successfully permitted, built and connected to the grid before they can deliver. PG&E is also seeking opportunities to further diversify its renewable resource portfolio through utility-owned resources.
Renewable Portfolio Standard—Contracts Signed in 2007
*Now IBERDROLA RENEWABLES
Renewable Portfolio Standard—Contracts Signed 2002–2007
For example, PG&E has taken the first steps toward developing projects that could generate power using the abundant wave energy off the coast of Mendocino and Humboldt Counties.
Last year, we filed preliminary permit applications with the Federal Energy Regulatory Commission for two projects. The "WaveConnect" projects will begin with resource, environmental and ocean use studies and, if developed, would be the first in North America to demonstrate multiple wave energy conversion devices at a common site. Each project could provide up to 40 MW of clean renewable electric supply.
Separately, PG&E entered into a long-term, 2 MW commercial wave energy power purchase agreement with Finavera Renewables Inc., also located off the northern California coast. The project is expected to begin delivering renewable, clean electricity in 2012.
PG&E also joined forces with San Diego Gas & Electric Company to propose an innovative new initiative to support emerging renewable energy technologies. The Emerging Renewable Resource Program would facilitate demonstration projects to gauge the potential associated with such resources as ocean energy, bioenergy and energy storage. If the program is approved by the CPUC, PG&E plans to commit up to $30 million over a two-year period to support promising new renewable energy technologies or resources that have completed proof of concept but have not been deployed on a large scale. PG&E hopes to obtain CPUC approval in 2008.
Beyond the need to advance new technologies, PG&E is also addressing other potential barriers that could slow the expansion of renewable resources.
The California Energy Commission identified some of these obstacles in a report it issued in 2007. The report stated that meeting the state's renewable energy goals will require coordinated efforts in transmission planning, a more flexible and integrated electric system, several transmission initiatives and streamlined permitting, contracting and construction.
PG&E is cooperating with our renewable energy partners and others in response to these issues. For example, we are working on several federal, regional and state initiatives, including the development of transmission corridor and renewable energy zones in the West and California. The CPUC also approved our request for funds to study the merits of constructing a transmission line from California to the Pacific Northwest and Canada to access renewable energy supplies in that region.
PG&E is also working at the federal level to extend and expand crucial production and investment tax credits for a variety of renewable generating technologies. These tax credits have helped to make the costs of some new and emerging technologies more competitive and are critical to facilitating the growth of a healthy renewable energy industry, both in California and throughout the United States.
Investing in Cleaner Conventional Generation
Although energy efficiency and renewable energy are playing larger roles in our plans to meet future demand, investment in new conventional generation facilities is also necessary to meet our customers' needs. Currently, we are at work on three new natural-gas-fueled plants that will be owned and operated by PG&E. Importantly, we are working to minimize the environmental impacts associated with these investments by using advanced clean and efficient technologies. Examples of these efforts in 2007 included the following:
- Gateway Generating Station: We received authorization to use "dry cooling" technology at the 530 MW power plant, currently under construction near the San Francisco Bay Area. Dry cooling technology uses up to 97 percent less water and discharges 96 percent less wastewater than a conventional water cooling system. Its use at Gateway will help avoid an impact to the delta smelt, an endangered endemic species. Additionally, the design of the plant will decrease fuel use and greenhouse gas emissions by about 35 percent compared with older plants.
- Colusa Generating Station: We reached an agreement to acquire the state-of-the-art 659 MW combined cycle natural gas facility from E&L Westcoast, LLC, and obtained CPUC approval to directly develop and construct the facility. Expected to come on-line in 2010, the dry-cooled generating facility will generate zero wastewater discharge and utilize the latest in fuel-efficient technologies to minimize the environmental impact, while ensuring reliable electricity at reasonable costs.
- Humboldt Bay Repowering Project: As part of our plan to build a new generation facility on the site of an old PG&E power plant, to be decommissioned, we are employing technology that will produce significantly fewer ozone precursors and less CO2 than the previous facility. The new design will also reduce water use by eliminating the need for "once-through" cooling.
Delivering Natural Gas
Each day, PG&E serves approximately 4.3 million natural gas customers. Natural gas is a clean-burning fuel that is used in a wide variety of applications, including heating homes, cooking meals and driving manufacturing processes. With more than 40,000 miles of natural gas distribution pipelines and 6,000 miles of transmission pipelines, PG&E operates one of the largest natural gas distribution networks in the country and takes seriously our responsibility to ensure its safety and integrity.
Methane Avoided (Tons CO2-equivalent)*
* Values for 2005 and 2006 revised based on improved reporting procedures
Authorities, including the CEC, forecast that demand for natural gas in California will continue to grow each year, even with effective energy efficiency programs in place. At the same time, North American production is expected to remain flat.
Accordingly, PG&E is seeking to diversify its supplies of natural gas to ensure that they remain reliable and affordable for customers. The utility has reserved capacity on a proposed new pipeline to tap gas fields in the Rocky Mountains. In response to a request for information from the CPUC, PG&E has also asked regulators to support moves by the utility industry to explore the cost and feasibility of entering into contracts with suppliers of LNG. We also favor continued research into the lifecycle greenhouse gas emissions of LNG imports, to better inform state policy toward this potentially significant new source of supply.
A potential impact associated with the delivery of natural gas is the release of methane, a greenhouse gas that is at least 21 times more potent on a per ton basis than CO2 in terms of its impact on global warming. As part of our participation in the U.S. EPA's Natural Gas STAR Partnership, the company avoided the release of more than 2,060 tons of methane, or approximately 43,270 tons of CO2-equivalent, in 2007.
These savings were achieved primarily by replacing old cast iron and steel gas mains, and by implementing a technique called cross compression, a process by which natural gas is transferred from one pipeline to another during large pipeline construction and repair projects. Cross compression reduces the amount of natural gas vented to the atmosphere by 85 to 90 percent.
PG&E also gained regulatory approval for two dairy biogas contracts, with Microgy, Inc. and BioEnergy Solutions, to deliver renewable natural gas generated from the anaerobic digestion of dairy manure. These contracts will result in several state-of-the-art production facilities on the site of large dairy farms in California and other locations in the western United States.
PG&E is also participating in a study to establish a nationwide dairy biogas quality standard, a critical step toward attracting more investment and providing greater certainty for gas quality. Our interest in expanding this resource also led us to issue a formal Request for Information in 2008 seeking biomethane demonstration projects to test new technologies that produce pipeline-quality, renewable natural gas from biomass.
As the need to reduce global greenhouse gas emissions becomes increasingly apparent, the need for safe, reliable and carbon-free energy is greater than ever. The Diablo Canyon Power Plant (DCPP) is helping PG&E meet this need—generating 23 percent of the electricity used by our 5.1 million customers, and 12 percent of the electricity produced in the state.
Since beginning commercial operation in 1985, DCPP has built an operating record as one of the safest and most efficient nuclear power plants in the nation, receiving top ratings from industry peers.
In 2007, the plant set an annual net generation record and had a total annual capacity factor of 95.07 percent (actual energy produced as a percentage of maximum dependable plant capacity).
Last year, we moved forward with a $700 million project to replace DCPP's eight steam generators, which drive the plant's electric turbines. The new generators will be installed during refueling outages scheduled in 2008 and 2009. This will be the largest construction project since the plant was built and will help ensure DCPP is prepared to continue safely and reliably generating electricity for our customers into the future.
As with all nuclear facilities, safely storing spent nuclear fuel and maintaining the security of the plant are among the most important responsibilities for operators. Last year, we continued taking steps that will ensure PG&E continues to meet these obligations going forward.
In 2007, we completed the majority of the construction work on DCPP's Interim Spent Fuel Storage Installation (ISFSI). Loading is scheduled to begin in 2009. This facility will provide secure storage of Diablo Canyon's used fuel on site until the federal government opens a permanent storage facility. Accordingly, it is a critical step to enable the long-term operation of the plant.
Also in 2007, PG&E broke ground on the Humboldt Bay Power Plant ISFSI project. Once the facility is completed in 2008, we will transfer all of the plant's used fuel to the facility, allowing for the final decommissioning of the retired Humboldt Bay Power Plant Unit 3, which ceased operations in 1976.
Since Sept. 11, 2001, DCPP has spent more than $25 million to enhance security. These enhancements include extending and reinforcing defensive perimeters, controlling access through physical barriers, increasing inspections and installing additional surveillance technology. The plant has also increased the number of armed Nuclear Security Officers (NSOs) by more than 50 percent—making DCPP's security force the largest law enforcement agency in San Luis Obispo County. In 2007, the plant's NSOs performed well in test exercises conducted by the Nuclear Regulatory Commission.
Also last year at DCPP, about 2,000 representatives from local cities, state agencies and the county participated in county-led emergency preparedness training. PG&E supports this training by providing funding and working with our counterparts to make available all the necessary information about DCPP's operations and its emergency response and security programs.
Existing California law prohibits the building of any new nuclear power plants in the state until a permanent national waste storage facility is established. For additional information on waste storage and other issues, please see page 79 of PG&E's 2007 Annual Report to Shareholders.