California?s Renewables Law Faces Hurdles

By Published On: January 31, 2004

The creator of innovative legislation that helped put California on the map as a leader in renewable energy this week said the need for costly transmission upgrades could trip up the requirement for new renewables in the state. State Senator Byron Sher (D-Palo Alto), who authored the state?s renewables portfolio standard (RPS), also expressed dismay at the California Public Utilities Commission?s delay in nailing down rules that will allow bids to go out the door. In January 2003, the portfolio standard began requiring investor-owned utilities to increase renewables purchases by 1 percent annually to reach 20 percent by 2017. The Energy Action Plan, an interagency effort to coordinate energy policy and strategy, aims to advance this goal by shortening the period to 2010. However, a December 2003 report by the CPUC noted that up to $2 billion in transmission upgrades are needed for renewables goals to be realized. For instance, the mountainous and wind-swept Tehachapi region in Southern California could produce about 4,000 MW of wind power?to meet about one-tenth of the state?s power needs?reports the California Wind Energy Producers (<i>Energy Circuit</i>, November 14, 2003). But transmission lines to get potential power from that area to load centers are lacking. Transmission ?could be a serious problem,? conceded Sher. Utilities might think twice before investing in renewables that need to be delivered from remote locations, he added. While the author of the renewables legislation had his doubts, some of those who are concerned with implementation, such as Rachel McMahon, policy analyst with the Center for Energy Efficiency and Renewable Technologies (CEERT), were far more certain. ?To set transmission policy is to set renewables policy because what transmission lines are built will dictate what project goes on line,? McMahon contended. CEERT, along with Pacific Gas & Electric and other entities, is discussing transmission access to the Tehachapi power. While transmission upgrades in different regions will likely be needed in the long term, this should not hamper the process of tapping several hundred megawatts of available renewables, said John White, CEERT executive director. Transmission is only one hurdle slowing renewables implementation. Another is the CPUC?s lack of attention to creating the ground rules for managing the new projects, according to observers. Sher expressed disappointment with the CPUC?s handling of rules needed to start the renewables bid solicitation process mandated by RPS law. The agency appears to be ?committed to renewables philosophically but has been slow getting the rules for the process up and running,? he said. Prior renewables contracts have been part of the CPUC interim procurement process. Progress on state agency plans, such as the interagency energy action plan, ?isn?t going to happen unless [the commission] gets started,? Sher added. On the list of unfinished rules required by statute is the need to determine a ?market price referent,? a benchmark used to compare the price of renewables with the market price of electricity. Specifically, this mechanism will measure renewables? costs, using price calculations for a new gas-fired facility with long-term contracts as the equivalent. This benchmark will pave the way for projects to tap roughly $76 million in annual funds from the California Energy Commission when renewables project costs exceed the market reference price. Establishing workable rules for standard contract terms is crucial, stressed Nancy Rader, California Wind Energy Producers executive director. ?Onerous? terms can drive up the price of renewables and drive bidders away by fashioning requirements that do not fit for wind because of its unique characteristics, she said. For example, she noted that very few wind bidders responded to Edison?s request for proposals, because the utility?s protocol for scheduling energy did not allow for the intermittency of wind. CEERT?s White said there has been ?a lot of smoke? but until there is a transparent solicitation for renewables in compliance with renewables portfolio law, it is hard to know the scope of available resources. Language in the procurement framework decision approved last week requiring public scrutiny of procurement data is a positive signal, said White. He hopes the CPUC is able to keep its promise to start the bidding process by June. A solicitation ?is the test? of whether requirements of the renewables portfolio law are being met, he said. Meanwhile, investor-owned utilities have shown responsiveness to the renewables portfolio standard. Southern California Edison reported that last June its renewables sales to customers hit a high of 23 percent. Looking ahead, Pacific Gas & Electric projects that renewables will account for 13 percent of its power mix this year, up from 9 percent in 2002. San Diego Gas & Electric expects renewables contracts to hit at least 9 percent by the end of 2007. SDG&E reported almost no renewables purchases before 2001. Edison, however, has resisted picking up initial capital investment in infrastructure to support these resources. A current legal challenge in a Los Angeles appellate court argues that renewables developers should bear project costs (<i>Energy Circuit</i>, November 14, 2003). PG&E?s stance is that developers should pay the initial costs for upgrades. The utility will reimburse these costs ?with interest? in five years. This will provide incentives to developers to build projects in areas that are least costly for ratepayers, according to Paul Moreno, PG&E spokesperson. SDG&E points to the CPUC?s rejection of the 500 kV Valley-Rainbow transmission project as thwarting its efforts to provide infrastructure for renewables transmission. ?If we can?t build transmission anyway, what difference does it make who bears the costs?? wondered Ed Van Herik, SDG&E spokesperson.

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