One may view California's options for managing energy supply and demand as a portfolio in which the costs, benefits and risks are balanced. An energy management portfolio mitigates risks through a well-balanced strategy of improved planning, infrastructure investment, the adoption of a greater diversity of energy supply sources, and the use of programs to moderate demand growth. The “optimal” portfolio would be one that maximizes the risk-adjusted returns or minimizes the risk-adjusted costs.
Each component of the portfolio comes with its inherent risks and returns. Wind and photovoltaics have no future fuel risks, but have some capital and operation risks. Efficiency has no fuel risks, but has implementation risks. Natural gas has out-year price and supply risks, but may have lower costs. Although finding an optimal mix is beyond the scope of this analysis, we can illustrate some scenarios that might be achievable. Figure 6.1 shows 2010 peak gas consumption under a
Figure 6.1—Impact of Different Scenarios on Gas Demand
NOTE: Cross-hatched portion of bar represents uncertainty in the forecast.