California missing goal for renewables, says regulator

SACRAMENTO, California, US, January 24, 2007 (Refocus Weekly) Electric utilities in the state of California are falling behind schedule in meeting a deadline to source 20% of their power from renewables by 2010.

“Achieving the state’s Renewable Portfolio Standard goals is an essential component of California’s greenhouse gas emission reduction targets,” says the California Energy Commission in its 2006 Integrated Energy Policy Report Update. Its 2005 report concluded that statewide renewable procurement “is not occurring at a pace that will reach RPS goals by 2010 and, as a result, the process is in need of review and correction.”

The CEC is responsible for monitoring the progress of utilities and the Public Utilities Commission in meeting the targets set in a state law approved last year. Although California's large investor-owned utilities claim progress in meeting the state's goals with contracts for 4,000 MW of green power, only 242 MW of new capacity are online now and the report warns that, even if all contracts firm up, utilities will need to add an additional 1,500 MW.

The 2006 update examines why California has made only minimal progress to date in meeting RPS goals, identifies challenges the state faces in achieving those goals, and offers recommendations. The report had input from a wide range of stakeholders, including the American Wind Energy Association, Biomass Energy Association, California Clean Energy Fund, CalPERS, Center for Energy Efficiency & Renewable Technologies and Florida Power & Light, among others.

Among the key barriers cited are lack of adequate transmission lines to heavily populated areas from the remote Tehachapi area (for wind power) and the Imperial Valley (for geothermal); uncertainty over financing; complexity of regulations and lack of publicly available data; insufficient attention to possible contract failure and delay; and aging wind facilities.

In addition to a RPS goal of 20% by 2010, the state has a 2020 goal of 33% from renewables, but California has achieved “only minimal increases in renewable generation,” the report notes. “Between 2002, the year in which the RPS took effect, and 2005, the percentage of renewable energy in California’s generation mix has remained nearly constant rather than increasing by at least 1% per year as required under the statute.”

The state’s two largest publicly-owned utilities, the Los Angeles Department of Water & Power and Sacramento Municipal Utility District, have established targets of 20% by 2010 and 23% by 2011, respectively but, “to meet their share of the statewide goal of 20% by 2010, publicly owned utilities will need to increase the percentage of eligible renewables in their system mix more than two percentage points per year between now and 2010.”

“Although stakeholders acknowledge that problems exist with the RPS structure, most parties recommend that the state not make wholesale changes to the program structure at this time,” and the report “reluctantly recommends making no major changes to this structure now, but rather, working within the current protocols to meet the 2010 goals.” It recommends that the state adopt revisions within the program structure “to accelerate progress toward reaching the 2010 target and commit itself to less-inhibited evaluation of program designs to achieve the 2020 goal.”

The state’s energy agencies and municipal utilities should actively support the California Independent System Operator’s proposal to the Federal Energy Regulatory Commission to develop a third category of transmission projects to accommodate renewable resource development, and the CEC and PUC should “jointly alter the supplemental energy payment procedures to reduce the contracting complexity of projects requiring supplemental energy payments,” it concludes. To address problems in complexity and transparency in the RPS program, it recommends that the state maintain the kWh penalties for investor-owned utilities which do not comply with the RPS goals consistent and eliminate the current per-utility cap on penalties.

The PUC and CEC should continue efforts to make the RPS process more open and transparent, “requiring investor-owned utilities to clarify least-cost, best-fit criteria and their application in selecting projects,” and investor-owned utilities “should be required either to accept all bilateral RPS offers under the market price referent or document why such offers were not accepted.” It recommends that the state evaluate “the ramifications of providing a higher rate of return for renewable energy facilities to make them more financially attractive” and that utilities be required to “procure a contract risk reserve margin of 30% or more beyond what is needed to meet the 20% by 2010 renewable goals, and the state should more clearly define how penalties will be applied in the case of contract failure.”

The CEC should provide project assistance for renewable developers similar to the ‘Green Team’ approach established during the electricity crisis and, to address lack of progress in wind repowering, the report recommends that state energy agencies evaluate “possible incentives to encourage repowering of aging wind facilities to boost renewable generation from these prime sites while reducing avian impacts.”


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