California Power Poles Getty 5e28825416972

Burying PG&E’s Lines to Stop Fires Could Cost $240 Billion

Jan. 22, 2020
New study weighs pros, cons of microgrids, underground lines.

(Bloomberg) -- Some of the most widely discussed ways to prevent the massive fires and blackouts that plague California may also be the most expensive, according to BloombergNEF.

For instance, burying all 81,000 miles (130,000 kilometers) of PG&E Corp.’s electrical distribution lines so they won’t spark blazes during windstorms could cost more than $240 billion, a BNEF study found. That’s based on a PG&E estimate that moving existing lines underground costs $3 million per mile.

A state takeover of the troubled utility would also likely have a hefty price. The book value of PG&E’s electricity assets -- the amount they’d cost if new -- is $62 billion, according to the BNEF study. The state would almost certainly negotiate a lower price to account for depreciation, but it would also have to assume PG&E’s liabilities. Plus, a takeover wouldn’t necessarily prevent fires.

“If regulators are willing to allocate enough time and money, most proposals will reduce wildfire risk. None will eradicate risk,” BNEF analyst Helen Kou wrote in the report.

The findings underscore the immense challenges California faces as it pushes to end deadly wildfires and the sweeping, deliberate blackouts intended to prevent them. PG&E, the state’s largest utility, filed for Chapter 11 last January facing $30 billion in liabilities from the blazes, which have erupted with increasing frequency as climate change fuels hot, dry weather.

In addition to burying lines and a state takeover, BNEF’s study examined four other possible responses under discussion in California: making sweeping upgrades to the electrical grid, installing backup diesel or gasoline generators, allowing cities to buy pieces of PG&E and building microgrids to limit the size of blackouts.

Diesel or gasoline generators would be the cheapest response, costing between $91 and $740 per kilowatt. But that wouldn’t necessarily prevent fires, and burning fossil fuel would undercut the state’s efforts to fight global warming.

Microgrids vary widely in price. One recent microgrid project in California cost $7,143 per customer, according to the study, while another is estimated at $5.5 million per customer.

- David R. Baker

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