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California’s $10 Billion Blackouts

We often discuss how electricity prices in Minnesota, and around the country, have been increasing due to mandates for wind and solar. Because these sources of electricity are dependent on the weather, we can’t rely on them as our only source of electricity or else we would experience blackouts, which are also incredibly expensive.

A few weeks ago, I wrote about how California uses diesel-powered generators to keep some electricity flowing when the utility proactively cuts power to prevent live wires from sparking fires. After writing the article, it occurred to me that I had buried the lede: California’s blackouts, which forced millions of homes and businesses to go without electricity for days at a time, cost the state $10 billion, according to a rough estimate from Michael Wara of the Stanford Woods Institute for the Environment.

Blackouts Are Bad For Businesses

American businesses run on electricity. Customers are increasingly using cards, rather than cash, and COVID-19 has sped up this trend. Point of sales machines are increasingly electronic, and manufacturing equipment is increasingly computerized. This means the disruption of electricity has broad implications for every business.

An article on the website for Bloom Energy (which sells fuel cells for electricity backup) details the story of a manufacturing company in California that was forced to hook up a diesel generator to their plant or face the prospect of losing $280,000 in revenue over four days. According to the article:

As an experienced manufacturing manager, Neal Beardmore thought he had encountered everything that could trip up a production run. But that was before his team had to wire his factory to a backup generator at 4 a.m., with only car headlights to guide them.

As production director at Heath Ceramics, which designs and creates handcrafted tiles and tableware from a 25,000-square-foot factory in Sausalito, California, Beardmore is responsible for business continuity—keeping his people working and his production line running.

So in late October, when word spread of what would amount to a four-day power outage at his facility, Beardmore did the math and didn’t like what he saw. Shutting down his line, which produces $70,000 of retail ceramic goods a day, could be devastating.

The $280,000 in revenue “would have been lost forever,” he says. And it could have put some 90 employees out of work for a week.

“Our first priority was to look after our staff,” many of whom lost power as well, says Beardmore. Idling the shop’s 50 hourly factory workers would have cost each employee nearly a week’s pay, about $672 each for those four days. “We know that a lot of people are struggling with the costs of living in the Bay Area,” says Beardmore. He also wanted to make sure his employees “had a place to come to for comfort,” for hot water, and a working kitchen.

Beardmore knew if he was going to keep the plant online he was going to have to throw money at the problem. In early October, when he first heard power outages were possible, he rented a 175-kilowatt, portable diesel generator at a cost of $8,000 a month, and an added cost of about $300 in daily diesel fuel usage. He also stocked a pair of 60-gallon drums of diesel fuel as a backup.

Still, when the factory’s power went out on October 29, in the middle of a Saturday night, he and his crew had little idea how much effort it would take to hook up the generator. “On Sunday, at 4 a.m., I was here with my head of engineering, with a pair of car headlights and a cup of coffee, watching him wire up the plant,” says Beardmore.

“It was a pretty tricky changeover,” he says. But four hours later, the factory was up and running.

Beardmore, who has been a ceramics production manager for nearly 20 years, in both the U.S. and his native U.K., has never seen anything like the challenge of managing multi-day blackouts. And with utilities telling the public to expect another decade of them, Beardmore is now spending his days trying to figure out how to maintain his energy resilience and business continuity.

For now, he’s holding onto his $8,000-a-month generator, “just to see us through to the wetter weather” when the wildfire risk dies down and with it the possibility of sustained power outages for millions of residents and businesses. Beardmore and the executives at Heath are even considering the purchase of their own generator, which could cost $100,000.

The company will also spend money relocating its data servers, which are currently housed at the Sausalito facility. The servers support the company’s ecommerce site and went down during the first hours of the blackout, costing additional revenue.

“There are a lot of things we need to look at now,” says Beardmore. “The scale of this disruption is the biggest thing we’ve seen. We need to be ready to keep our business running and our people safe.”

More Power Plants, Less Power Available

California is experiencing blackouts even though the state has more power plant capacity than ever before. The graph below shows electricity generation has declined since 2005 despite the fact that the Golden State has seen it’s power plant capacity increase by about 23 percent since that time.

So much time and money was put into building wind and solar facilities that Pacific Gas and Electric (PGE) neglected their power lines, which is one of the key reasons the blackouts in California occurred last year. Now, the blackouts are adding economic insult to injury.

Conclusion

Those who advocate for stopping the use of fossil fuels to generate electricity and advocate for switching to wind, solar, and battery storage often talk about the cost of carbon dioxide emissions from these fuels, but they never want to acknowledge that their preferred electric grid would result in higher costs with less reliability than the grid we currently have.

Americans have never been as dependent upon electricity than we are today, and we will never be less dependent on electricity than we are today, either. This means if we are going to secure a bright future for all Americans, we need reliable, affordable sources of electricity, not intermittent ones.

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