CEC: Uncertainties Increase Cost of Renewables

Delays in renewable implementation are driving up the costs of alternative power supplies, speakers warned during a July 21 California Energy Commission workshop. Bureaucratic complexity and disagreement is blocking the expansion of wind, solar, geothermal and other non fossil-fueled power, pushing up the cost of energy deals each month by 1.5 percent, according to Jan Hamrin, former executive director of the Center for Resource Solutions. “That is a big risk premium.” The Energy Commission is trying to establish a framework for studies that look into the state’s energy future and assess the costs of integrating a 33 percent renewable supply by 2020. It’s also seeking input in how to get around barriers--including transmission, policy, and siting. Renewable integration models use various inputs and predict a range of variables, including ones regarding the cost of natural gas, the level of energy efficiency and demand response, and mix of wind, solar, geothermal and emerging technologies in 2020. Other unknowns include how greenhouse gas emission reduction policies will affect renewable development, as well as power plant retirements, and policies to limit aquatic harm from once-though cooled power plants. Hamrin noted that power supply predictions were notoriously off base, including those made in the 1980s when federal law required utilities to buy renewable power from independent power producers. Others speakers at the commission workshop agreed that uncertainty as to future prices and mix of power is inevitable, adding the key to attaining more renewable supplies is a commitment from policy makers. Legislation by Senator Don Perata (D-Oakland) to increase the renewable portfolio mandate from 20 percent in 2010 to 33 percent from public and private utilities in 2020 is being hashed out in the governor’s office. Bets are that it will be enacted although debate over how to resolve underlying transmission and siting problems continues. In addition, disagreement remains over the estimated costs and impacts to the grid of adding more wind, solar, and other green energy supplies into the state’s energy mix. The investor-owned utilities have signed renewable contracts that if executed would meet or exceed the 20 percent renewables law. However, there is a considerable gap between the paper and expected green power. According to the Energy Commission, only 324 MW of new or re-powered renewable energy has come online since passage of the 2002 Renewable Portfolio Standards law. Municipal utility levels are higher than the three private utilities, estimated to be 550 MW of new on-line renewables. Suzanne Korosec, CEC Integrated Energy Policy Report lead, said the agency may look to Europe as a guide for incorporating more alternative power. Hamrin noted that the voluntary market for renewable supplies in the U.S. has been far more successful the state’s complex RPS mandate. There is also no agreement on the yardstick for measuring the 33 percent supply. Under current law, the 20 percent renewable standard is supposed to be measured against the predicted level of power delivered to customers in 2010. Predictions and underlying assumptions are fraught with uncertainties. The commission estimates that a 20 percent mandate equals about 102,000 gigawatt hours in 2010. That rises to about 308,070 gigawatt hours/year to meet the 33 percent standard ten years later. The estimated cost to attain the 20 renewable level in two years is about $20 billion, and $60 billion to achieve the 33 percent mark. The E3 consulting firm estimates that customers’ costs will rise 13 percent to meet the 20 percent mandate and 17 percent to achieve a 33 percent green power supply level. Hamrin urged allowing more feed-in tariffs to provide price certainty to renewable projects near the grid. These tariffs establish a set power price. “Innovation is one benefit of a feed-in tariff,” she said. Hamrin and others also called for promoting plug-in hybrid vehicles that feed off the grid. David Hawkins, California Independent System Operator principal investigator, said these cars could help relieve the grid of surplus power, such as that from wind blowing at 2 a.m. when energy use is low. He also said the key hurdle to more renewables was related to siting constraints, including site control. Other key problems include renewable contract delays and cancellations. The key factors are the uncertainty of the federal production tax credit, transmission, and project developer constraints. The Energy Commission will hold a workshop on the role of emerging renewable technologies July 31.

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CEC: Uncertainties Increase Cost of Renewables

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