CAPITAL IDEAS: California Following Dangerous Energy Path

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On a sweltering June day, the California Independent System Operator

(CalISO), the group that oversees the state’s electricity grid, issued the first

“flex alert” of the year. That same week, a major California utility announced

it had reached an agreement with the environmental community

to close down a large nuclear power plant in the state. It was an ominous

combination for California’s future.

A flex alert is a warning that certain areas need to conserve energy or face

blackouts, which are normally the province of third-world countries rather

than wealthy states such as California.

Blackouts, forewarned or not, leave businesses idled, unable to serve customers,

make widgets, or do whatever else they are doing to create wealth.

For a state like California, with an already miserable business climate, an

unreliable power grid is a 20-penny nail pounded into its economic coffin.

Now, imagine the state’s energy system as a business. Think of a flex alert

as a bankruptcy warning, telling everyone that the day’s liabilities (energy

demand) might exceed the day’s assets (energy supply). Then imagine that

business announcing revenues were going down nine-percent, but they

would make up the loss by employing less reliable, more expensive equipment.

That stock would tank!

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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