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In 2001, the renewables portfolio standard (RPS), created by state law SB 1078, was launched with great fanfare. California committed to aggressively diversifying its generation sector while improving overall environmental performance. Importantly, the Legislature consciously chose to measure RPS compliance in terms of kilowatt-hours of renewable energy sold as a percentage of total kilowatt-hours sold by the utility. At the time, some parties advocated that compliance be measured in terms of contracts entered. But the Legislature realized that true environmental improvement would be realized only if the standard was "real" and measured by energy (kilowatt-hours) actually delivered to the grid. The importance of the renewables portfolio standard is reflected in the governor's greenhouse gas (GHG) emissions reduction program. The governor called for a reduction of greenhouse gas emissions to 2000 levels by 2010; a reduction to 1990 levels by 2020; and a reduction to 80 percent below 1990 levels by 2050. Attainment of these greenhouse gas emission goals is highly dependent on the "accelerated renewables portfolio standard" of 33 percent by 2020. Under the governor's plan, the accelerated renewables portfolio standard represents nearly 23 percent of the 2010 targeted emissions reductions. It represents more than 16 percent of the 2020 targeted emissions reductions. The big question is this: How is California doing and what are the prospects of achieving the renewables portfolio standard-related goals critical to the success of the governor's greenhouse gas emissions reduction program? What's happened from a procurement perspective so far? Recent end-of-the-year investor-owned utility filings suggest that we may be going backward in increasing the amount of green energy delivered to the grid as a percentage of total annual retail sales. Take a look at what the utilities reported this past December. Southern California Edison conducted a renewables portfolio standard procurement bid in 2003 and an additional renewables procurement in 2005. The 2003 procurement resulted in eight signed contracts. On December 7, 2005, the utility announced in a filing to the commission that six of the eight contracts were with projects that either did not have final locations or had not begun the studies necessary to determine the cost of interconnecting to the grid (supplement to Edison's renewables procurement plan 2005-14, pp. 2-3, filed in R.04-04-026 on December 7, 2005). In the same filing, Edison indicated a low probability of meeting its 2010 RPS compliance goals. Perhaps more importantly, the California Energy Commission's February 8 Renewables Portfolio Standard Procurement Verification Report indicates that in 2004, Edison failed to meet its "incremental procurement target" - that is, its 1 percent of additional renewables sales annually - by approximately 54 percent. Pacific Gas and Electric in its December 7, 2005, renewable energy procurement plan supplemental filing announced that "it is unlikely that it will achieve actual deliveries of 20 percent of its bundled retail sales by 2010." Furthermore, PG&E adds, "it is unlikely that a sufficient quantity of such new projects [i.e., projects with contracts entered into in prior solicitations] will be on-line and delivering energy as of January 1, 2010, so that 20 percent of all retail electricity sales in 2010 are supplied by RPS eligible resources." And the California Energy Commission?s renewables portfolio standard verification report indicates that PG&E failed to meet its incremental procurement target by approximately 60 percent. San Diego Gas & Electric conducted a series of requests for offers. The public version of SDG&E's December 7, 2005, long-term procurement plan supplemental filing focuses primarily on transmission and contingency planning. It does not speak directly to the probability of compliance with the 2010 renewables portfolio standard objectives. In its March 1, 2006, compliance filing regarding the annual procurement target, it indicates that it's meeting its target for 2005. However, neither report clearly addresses how many megawatts of new generation are under contract and can become operational by 2010, 2017, or 2020. Nor does it specify whether that energy can be deliverable absent significant transmission upgrades and expansions. It does appear, however, from the commission's renewables portfolio standard verification report, that SDG&E is meeting its incremental renewables procurement targets. What does this mean for program implementation and success? From the limited publicly available information, it appears that the state's two largest investor-owned utilities are not keeping up with renewables portfolio standard procurement targets. In addition, a significant number of contracts executed as part of renewable portfolio standard procurement have little if any chance of delivering real energy to the grid by 2010 because a lack of site control and/or transmission. How can this be? In the context of renewables portfolio standard solicitations, the methodology for determining winners and losers in procurements, as prescribed by law, is designed to specifically incorporate transmission factors and locational attributes. The methodology is known as "least-cost/best-fit." What it really means is that locational and transmission factors are explicitly taken into account when selecting renewable portfolio standard winners and losers. Yet, as noted above, a surprisingly high number of contracts (and, presumably, megawatts associated with those contracts) will require significant transmission upgrades apparently not considered in the selection of winning projects. This experience raises fundamental questions about the implementation of the commission's renewable portfolio standard procurement practices. How can a utility evaluate bids using the least-cost/best-fit methodology and end up with an outcome wherein 75 percent of the "winning projects" fail to have site control and/or transmission necessary to deliver to the grid? This is equally troublesome in light of the utility admissions that attainment of the 2010 RPS goal is problematic at best. That begs the question of what happened to losing projects that had incurred the costs of providing information needed for a proper evaluation of integration costs, including the recovery of those costs in their bids. If integration costs were properly considered for all bidders, would they have been among the winners? Could these other projects have been operating and delivering renewable power by 2010 to help meet the renewables portfolio standard goals? At a minimum, this experience demonstrates the need for more transparency in the RPS program. That will help ensure that policy makers, consumers, and market participants know how likely it is that the renewables portfolio standard goals and, by association, the greenhouse gas emission goals will be achieved. Because so many of California's environmental goals rest on the success of the state's renewables portfolio standard, perhaps it's time for an audit of the program to determine its status and prospects for success. --Steven Kelly is the Independent Energy Producers' policy director.

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