USA – CALIFORNIA Trends and Developments Contributed by: Nora Sheriff and Samir Hafez, Buchalter
clarity, the sector’s trajectory towards cleaner, smarter infrastructure could stall, regardless of how strong the planning framework appears on paper. For now, developers, regulators and legal advis- ers alike are bracing for a compressed devel- opment cycle, while trying to pinpoint how and when regional and national energy infrastructure plans will realign. In May 2024, the Brattle Group concluded that electricity demand growth today is higher than at any point in the last two decades, largely due to expansion of data centres and efforts to elec- trify the transportation and industrial sectors. California regulators will need to adapt existing planning efforts to address this unprecedented growth and overcome the associated challenges to the state’s reliability, affordability and decar- bonisation goals. National data centre load growth trends, driven by surging demand from artificial intelligence, cloud computing and digital service, have intro- duced a new complication in California’s energy planning efforts. Last month, PG&E reported a 40% increase in power supply requests from data centre facilities. Proponents argue that this trend could benefit ratepayers by increas- ing system utilisation, spreading fixed costs and creating new revenue streams that help offset investment in clean generation and grid mod- ernisation. However, sceptics caution that much of the proposed development is speculative and may not materialise due to permitting delays, sit- ing challenges and competition from lower-cost markets with fewer environmental constraints. If utilities commit to major infrastructure upgrades Legal and Policy Constraints on Grid Investment and Demand Planning
based on overestimated or unmaterialised load, the result could be stranded costs borne by rate- payers and misalignment with the state’s clean energy procurement targets. California’s plan- ners and regulators will need to distinguish load that is likely to materialise from transient hype, and develop a framework that enables new, eco- nomic load growth without placing the financial burden on existing customers. Recent volatility surrounding the state’s trans- portation electrification policy underscores the need for a more pragmatic approach to planning around speculative load growth. This month, the Trump administration is expected to officially revoke California’s Clean Air Act waiver, the legal foundation for the state’s Advanced Clean Cars II and Advanced Clean Trucks rules. For years, California utilities have invested heavily in grid upgrades to facilitate the forecasted electric vehicle (EV) load growth tied to these mandates. California Governor Gavin Newson has vowed to “fight back” and challenge the revocation in court, and the Port of Los Angeles has signalled that it will proceed with its zero-emission truck rules despite the federal roll-back. Nevertheless, the loss of the waiver injects significant uncer- tainty into load forecasting and infrastructure planning. The California Public Utilities Commis- sion (CPUC) may need to revisit prior decisions predicated on now-uncertain EV adoption tra- jectories, and utilities may be forced to reassess or defer investments to avoid stranded costs.
360 CHAMBERS.COM
Powered by FlippingBook