A cold, rainy winter in California has exposed the challenges that can arise when a poster child for the clean energy transition isn’t fully ready to make the leap from fossil fuels.
California residents who rely on natural gas have complained of monthly energy bills approaching $800, Governor Gavin Newsom has called for an investigation into prices, and manufacturers of everything from steel to cement have said the only way to cut costs would be to move to another state.
The problem: limited storage, damage to a key pipeline and a surge in demand have sent the state’s natural gas prices to multiples of what it fetches elsewhere in the country. While California has long been at the forefront of the push into cleaner energy, its ambitions belie its reality – on some days, gas-fired generation can still make up more than half of electricity supplies in the region, and it burns more of the methane-rich combustible each year than France.
“Unfortunately for Californians, they’re going through this bumpy energy transition where everything doesn’t just fit exactly,” said Eugene Kim, a research director at consulting firm Wood Mackenzie Ltd. “It’s a battle between longer-term energy transition versus your immediate needs.”
For years, California’s politicians and regulators have hawked ambitious climate proposals that poured investment into the energy transition, while moving away from natural gas and nuclear generation and discouraging significant investment in storage and pipeline capacity.
At the same time, a years-long drought followed by a wet and chilly winter at first stymied the state’s hydropower capacity and then crippled its short-term solar generation. The gap has left California ill equipped to deal with any surge in demand or disruption to supply, both of which have happened in recent months.
Colder-than-usual temperatures meant residents have cranked up their heating and left working gas stockpiles in the Pacific region, which also includes Oregon and Washington, at their lowest level for this time of year since at least 2010.
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Unlike oil, which can be moved around in its natural state, gas must be pressurized and transported through a complex and expensive network of pipelines. The incentives in California to expand and update systems are low, given demand is expected to fall as the energy transition accelerates, and opposition from environmental groups can be fierce. Many pipelines are decades old and vulnerable to damage from extreme weather.
California relies on interstate pipeline imports for more than 95% of its supply. A lot of that comes from the Permian Basin in New Mexico and Texas, where producers have sometimes paid buyers to take their gas because limited pipeline capacity leaves supplies stranded in the region. The problems have been exacerbated by lingering disruption from a fatal 2021 explosion in Coolidge, Arizona, which hit a sprawling pipeline network managed by Kinder Morgan Inc. that helps supply the Los Angeles area.
