Fortnightly
SMUD Plans a 'Renewable' Future
December 01, 1994
What does the future hold for utilities, and more importantly, their customers?
s Building materials will serve double duty as power generators.
s Suburban homeowners won't need to buy electricity from a utility, but will produce it themselves at neighborhood fuel-cell modules that serve the whole community.
While it may sound fanciful, these next-generation possibilities are prophesied in the Sacramento Municipal Utility District's (SMUD's) development plan for advanced and renewable technologies.
If there is such a thing as a "green" utility, SMUD is it. By 2000, SMUD hopes to meet 54 percent of its projected power needs with renewable energy sources \(em up from 49 percent today \(em and increase to 60 percent by 2004.
After local residents voted to close SMUD's troubled Rancho Seco nuclear plant in 1989, following numerous outages, the embattled municipal utility embarked on an aggressive demand-side management and renewables technology program. Among SMUD's achievements to date:
\(bu The nation's largest photovoltaic power plant, located next to the closed Rancho Seco nuclear facility, which provides 2 megawatts (MW) of solar power to 500 homes.
\(bu The largest utility-owned commercial wind-turbine project in the United States \(em the first 5 MW were brought on line this summer; another 45 MW are projected by 1997.
\(bu The largest solar home project in the nation \(em 100 customers a year place a 4-kilowatt (Kw) photovoltaic panel system on their rooftops, and pay the installation price themselves in a test of "green pricing" to boost solar energy development.
\(bu One of only two photovoltaic recharging stations for electric vehicles in the United States.
\(bu Two geothermal projects with a total generating capacity of 134 MW.
\(bu Numerous demonstration projects: A 200-Kw phosphoric-acid fuel cell installed at a local hospital, with a second at SMUD's headquarters building; the first solar substation (200 Kw) designed to bring solar generation closer to where the power is needed; and the first demonstration of a utility-scale, molten-carbonate fuel-cell power plant (2 MW).
"SMUD is in a unique position," notes Jan E. Schori, SMUD general manager. "When we closed Rancho Seco in 1989, we lost 913 MW on a 2,100-MW system. It became an opportunity for us to start over."
In the aftermath of Rancho Seco, SMUD contracted for purchased power from other utilities to fill the gap, and developed a far-reaching integrated resource plan (IRP) that relies heavily on advanced and renewable technologies. "When completed near the turn of the century, SMUD will have one of the cleanest generating systems of any major utility in the world," boasts the company's annual report.
Today, hydropower provides 660 MW, or 80 percent, of the utility's self-generated power. Purchased-power agreements comprise 70 percent of the company's total 2,385-MW requirement. SMUD has served notice to Pacific Gas & Electric Co. (PG&E) and Southern California Edison Co. that it intends to slash its purchased-power requirements in the years ahead. The gap will be closed by construction of four small natural gas-fired cogeneration plants, additional purchased power from the Pacific Northwest, development of renewable technologies, and conservation. Construction on the first cogeneration plant has begun; when all four are completed, the plants will provide 500 MW of generating capacity. On the demand-management side of the equation, SMUD's conservation programs are projected to reduce load growth by about 650 MW by the end of the decade.
Schori was promoted to general manager in February, succeeding David Freeman, who left to become president of the New York Power Authority. Schori joined SMUD in 1979 and has been the district's general counsel for the past five years.
Schori believes that the rush to restructure California's electric industry may be "short-sighted," and that advocates of free-wheeling retail wheeling are in danger of losing perspective.
"One of the risks in some of the models being debated is to become very focused on the short term, particularly where the only thing that becomes relevant is the half-hour spot-market price for electricity," Schori says. "If we pull all utility support out from under the advanced and renewable technologies, it's not clear to me they will survive.
"What's needed is a strong partnership between government and industry to bring these technologies into being. SMUD cannot do this alone; it must be an industrywide commitment."
As part of its renewables campaign, SMUD plans to issue a "request for proposals" in 1996 for renewable energy projects that could come on line in 2004. The company's current IRP calls for 350 to 400 MW of advanced and renewable capacity to come on line
in 2000. The utility will substantially revise its IRP next year, but with economic growth slower than anticipated, SMUD may reduce the amount of renewable capacity in the new plan and push back its implementation.
Costs are coming down for renewable tech-nologies, especially biomass and windpower, Schori says. Solar, with perhaps the greatest potential of all, is still expensive. SMUD's development plan predicts that photovoltaic costs could drop to less than
5 cents/ kilowatt-hour (›/Kwh), given a sustained push by utilities and continued federal credit in the years ahead.
The availability of relatively cheap hydropower, about 3›/Kwh, allows SMUD to offset the high cost of renewable and demand-side programs \(em currently at 5 to 7›/Kwh, compared to about 4›/Kwh for natural gas generation. SMUD's rates are the lowest among California's large utilities, averaging 8›/Kwh compared to 12›/Kwh for PG&E, its direct competitor. There has been no rate increase since 1990.
However, SMUD's long-term strategy to reduce its dependence on expensive purchased power will increase pressure to raise rates by an estimated 25 percent between 1995 and 2000, one utility analyst said. Schori says there will be no rate increase for 1995, but beyond that, she won't commit. SMUD's capital costs will hit $1.2 billion over the next five years, some of which will be raised through revenue bonds.
SMUD expects the Nuclear Regulatory Commission to approve its decommissioning plan for Rancho Seco sometime next year. The total cost of decommissioning is estimated at $344 million; SMUD's trust fund contains $141 million to date. The plant will remain in a storage phase until 2008, when it will be dismantled. Rancho Seco, placed in service in 1974, was one of the nation's first commercial nuclear plants to be shut down.
SMUD was formed by local voters in 1923, but did not begin electric utility operations until 1947, when it acquired a portion of the PG&E system. Among the nation's municipal utilities, SMUD currently ranks 5th in customers served (467,177), 6th in revenues ($656 million), and 16th in electric sales (8,448 million Kwh).
Looking to the future, Schori sees that SMUD must be able to compete in a restructured industry: "It won't be good enough just to benchmark against PG&E, as we've done historically." t
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