Follow the Greener Brick Road

By Published On: June 19, 2004

In spite of their relief as the long-awaited renewables solicitation by San Diego Gas & Electric and Pacific Gas & Electric sets to launch next month, renewables advocates know they are only partly down the long and winding road leading to their market wizard?a robust green power market in California. That path is also contingent on federal lawmakers passing the production tax credit for green power suppliers, which would lower bidders? power costs. Success also relies on getting transmission lines upgraded and expanded in and outside California to make way for more renewable energy. There is little doubt that when the tornado of real-life renewables portfolio standard (RPS) bidding hits the energy community, there will be considerable debris to clean up. Last week, the California Public Utilities Commission finally nailed down some key ground rules for investor-owned utilities under the complex RPS law, making way for July bids (<i>Circuit</i>, June 11, 2004). Getting a solicitation to take place two years after the RPS bill was enacted is considered a major accomplishment. ?We were afraid it would go on forever,? said V. John White, Center for Energy Efficiency and Renewable Technologies executive director. The outcome of the CPUC?s rules?including the price threshold (the market price referent) and how much power PG&E and SDG&E will lock up in contracts?is still somewhere over the rainbow. Expectations are that PG&E will seek about 200 MW and SDG&E will take all bids with the right price. SDG&E has far fewer green supplies than PG&E and Southern California Edison. PG&E and SDG&E did not return calls seeking estimates of amounts of power they may procure. PG&E sought a 30-day delay on its solicitation and awaits word from the CPUC on whether it will be granted. The potential delay is not of concern to renewables suppliers and preferable to some because it will allow them to focus on one request for offer (RFO) at a time. Southern California Edison will not participate in the first round of RPS bids because it currently meets the state?s 20 percent green standard, according to a June 14 advice letter sent to the CPUC. Edison buys 13,000 gWh/year of renewable power. The total green portfolio of the state?s IOUs is 23,000 gWh/year, according to Gil Alexander, Edison spokesperson. In spite of Edison?s current green standing, many will be watching to see how the utility treats expiring QF contracts?partly because it?s expected to have trouble maintaining its 20 percent level once the deals come to an end. It?s not clear whether Edison will renew or replace its 2,600 MW of QF contract capacity. It also is too early to know whether the utility will tap into the limited public-goods pot set aside by the California Energy Commission to cover the price of QF projects that exceed the renewables market price referent, considered a reasonableness benchmark that was tentatively set at 5.37 cents/kWh. ?We need to urge lawmakers to keep the existing generating fleet from being lost while getting renewables built out,? said Steven Kelly, Independent Energy Producers policy director. The Emerald City/State dreams are pinned on California?s private utilities, but municipals also have a responsibility for the green road. They are not covered by the state RPS mandate because lawmakers deferred to the cries of the munis?led by the Los Angeles Department of Water and Power?to preserve local control. This week, the Sacramento Municipal Utility District announced it will seek green bids and by 2006 have 10 percent of its power supplied by renewables?as defined under the state RPS law, which excludes hydro projects 30 MW or greater. It hopes to turn one-fifth of its portfolio green by 2011, which is six years in advance of the law?s deadline for the 20 percent target. Excluding large hydropower projects, renewable power makes up about 6 percent of SMUD?s portfolio. The muni agency expects to need about 2,250 gWh/year to meet the RPS goal as well as build its green pricing program. Under the voluntary program, customers can agree to pay a premium to have renewables bought on their behalf. The district plans to use not only conventional supplies, such as wind, small hydro, geothermal, and traditional biomass resources, but also emerging technologies, including those that use natural gas. ?We need renewables for a long period of time and want to build competition into the next generation of technologies,? said Mike Angelides, manager of SMUD?s renewables program. Emerging technologies include solar thermal projects assisted by gas and biomass gasification. Unlike the RPS law, SMUD would not restrict these projects to a maximum 25 percent for gas-fueled facilities. At the same time, only the non-gas-fueled power would count toward the renewables portfolio. Not only is the state?s second-biggest power agency expected to issue power-purchase bids by the end of June, the larger Los Angeles Department of Water & Power is expected to join the RPS bandwagon. Minus large hydropower, a little more than 4 percent of LADWP?s supplies are renewables. Following considerable public and political pressure, LADWP is pushing for city approval to reach the state RPS standard by 2017. A city council committee is expected to approve the proposal June 22, though there has been some griping about the renewables surcharge that customers will face. The department is flush with supplies, so green power will displace cheaper, polluting energy. About half of LADWP?s power comes from coal-fired plants. To keep Dorothy?s famous trio intact, the scarecrow of RPS bidding and the lion of the federal production tax c-c-credit need to be joined by the tin man of transmission. Key parts of the state?s missing transmission heart are in the Tehachapi region, which could provide 4,000 MW of wind power, and the Salton Sea area, which is home to massive geothermal projects. Talks between Edison and some wind developers have begun, but the rub is who pays for upgrades that benefit a project down the road. For example, if there is 100 MW of new wind power set to come on line but a high-voltage line is upgraded to carry 500 MW, it is far from resolved who will pay for the additional 400 MW improvement. Though the green bricks are finally being laid, there are still many a flying monkey and a big field of poppies to negotiate before getting to the clean-powered Emerald City/State.

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