Sempra Energy's New Power Lines Will Be First Of Many

A new highway to nowhere has just been approved at the cost of California taxpayers, but it’s not the sort of highway America is best known for. Instead, electrical utility owner Sempra Energy has been granted permission to build a $2 billion power line into the Sonoran Desert over 100 miles from San Diego, where the company owns and operates San Diego Gas & Electric Co.

The pipeline is one of the first new transmission investments intended to get renewable power from a remote region to a metropolitan area. To win approval, the project had to gain acceptance from the California Public Utility Commission, whose five member board decided that it is indeed necessary to pump money not only into renewables like solar and wind, but also into infrastructure that can move power from sunny and windy places to the cities where it will be used.

That’s a bigger milestone than one might think. A dissenting opinion held that California could meet its target of 20 percent renewable energy by 2020 without such new lines. If that were the case, utilities would have to figure out ways to generate renewable electricity close to home, like rooftop solar — an option that could ultimately be more expensive.

Companies like Brightsource Energy, which has developed a solar thermal technology that involves building massive power plants in the deserts of California and Nevada, will appreciate the precedent set by the so-called Sunrise Powerlink, as well as investors like T. Boone Pickens, who is fighting for government support of a much larger line in Texas for wind power. (Incidentally, the first renewable power source for Sunrise will not be solar but geothermal power from CalEnergy Generation, which sources heat from beneath the earth’s crust.)

The CPUC’s decision to allow Sempra to charge its customers for the lines suggests a growing acceptance among politicians and bureaucrats that their constituents must pay higher rates for electricity in the future. California is famously a bellwether for what the rest of the nation will do years later, but the new administration of President-elect Barack Obama is likely to accelerate that process enormously, providing a boom for the companies that build transmission capacity.

Sempra, of course, has the ability to do some of the work on its own. But investors are looking out for other companies to benefit from a potential rush to build new power lines, including specialists like General Cable and Pike Electric, as well as diversified giants like Siemens.