Big price hikes for peak power likely for Californians

If you run the dryer in the daytime and live in California, expect to pay for the privilege in the future.

Peter Darbee, CEO Pacific Gas & Electric, said the utility is currently running a smart meter trial at 25,000 homes and one of the goals is to figure out how to price peak power. Electricity demand is highest in the afternoon and PG&E is trying to figure out much the utility will have to charge for the power to curb demand. By curbing demand, PG&E can cut back on greenhouse gas emissions and, possibly, cut back on power plant construction.

So far, the early data indicates that the answer is high.

"It will require a significant amount of price premium for peak power to shake that behavior," he told an audience at the Dow Jones Alternative Energy Innovations Conference taking place in Redwood City this week.

To this end, the utility is applying to the state's public utility commission for permission to impose a price hike for peak power. Darbee further added that he is confident that the PUC will "approve a rate delta that is pretty sharp."

Texas and other states are experimenting with ways to curb peak power. In Texas, Centerpoint, a utility, is offering customers discounts if homeowners allow the utility to install sensors that will prevent energy-gobbling appliances like dryers from working during the daytime.

PG&E and others are also installing interfaces to household gas and electricity meters so that homeowners can analyze how much power they are consuming. PG&E's current meters can give homeowners a snapshot of energy use every 15 minutes. That may be sped up to a real time snapshot, Darbee added.

Some consumers may object to these plans, claiming that it involves government intrusion into the market, but look at it another way. PG&E is just trying to analyze what the market will bear. (This is my opinion. Darbee didn't say that, by the way.)

Other gems from Darbee:

Wind can only probably account for 15 percent of California's electricity, and 20 percent at the theoretical best. Wind tends to die down during the hottest part of the day here, so there's an imbalance. The utility will spend $14 million on an experiment to see if wind power generated in British Columbia can be transferred here. If it works, the amount of wind power could increase significantly.

PG&E likes solar thermal power too. It has already signed a contract for 550 megawatts of solar thermal power with Solel, an Israeli company that is increasing the size of its solar thermal fields in the Mojave Desert. (Solel has been out there for two decades.). The utility will announce new contracts with new companies in the very near future, he added. Many expect some of that new business to go to Ausra or Brightsource Energy.

Solar thermal energy now costs about 10 to 12 cents a kilowatt hour, Darbee said, and will likely drop to 10 cents or less. Electricity from a gas-fired plant goes for around 8 cents. "We're coming into the range of conventional generation," he said.

Don't expect a cap-and-trade system for carbon to be installed in the U.S. for at least 18 to24 months. You need a new president first, probably, he said. Even if a cap system is installed in two years, we won't see the effect for five years from now, he added.