Senate Energy Chair Says Renewables Deals Must Produce

By Published On: February 9, 2007

To help reach the state’s mandated greenhouse gas reductions, utilities should ensure that 20 percent of the power they feed into the grid comes from renewable resources by 2010. Senator Christine Kehoe (D-San Diego), the new chair of the Senate Energy, Utilities, and Commerce Committee, sought assurances from Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric that they would meet the renewables portfolio standard’s 20 percent mandate in three years’ time, and not use attempts to reach the 33 percent renewables target by 2020 as an excuse for falling short. “You can be distracted by the long-term idea, but you need to reach the short-term goals,” Kehoe said during a February 6 committee meeting. Utilities have signed numerous deals, but a number of them are fraught with problems – ranging from a lack of transmission to site control. “California’s electricity from nonfossil resources must increase rapidly in response to AB 32,” added V. John White, executive director of the Center for Energy Efficiency and Renewable Technologies. AB 32 is the law passed last year mandating greenhouse gas reductions. Kehoe and state policy makers agreed that alternative energy contracts that don’t produce real electricity will not qualify toward the renewables portfolio mandate. They urged utilities to sign more renewables contracts than needed because it’s expected that a number of the deals will not come to fruition. Until recently, debate raged about whether signed deals alone constituted compliance with the state’s renewables portfolio standard (Circuit, Sept. 22, 2005). The contract failure rate is estimated to be in the 50 percent range, assuming that the same thing will occur with these contracts as happened with the agreements utilities signed with qualifying facilities in the 1980s. “That is likely representative of this universe,” said John Geesman, California Energy Commission member, during the committee hearing. Qualifying facilities, largely cogeneration plants, are privately owned power plants that sell output to utilities. They contracted with utilities prior to market deregulation. The most current figures estimate that 12.4 percent of PG&E’s power deliveries come from solar, wind, and other renewable resources. Edison’s renewables amount to 16.7 percent of its portfolio, and SDG&E’s renewables procurement reached 6.3 percent, according to the California Public Utilities Commission. The state’s public power agencies are not mandated to meet the 20 percent requirement by 2010, but they must meet that target by 2017. Municipal utilities’ amount of nonfossil power varies widely – from above the 20 percent level to well below. The Los Angeles Department of Water & Power is attempting to have one-fifth of its supplies come from renewable resources by 2010. This year, 8 percent of its power comes from hydroelectric, wind, and biomass projects. Randy Howard, LADWP assistant general manager, said he was urging his board to sign renewables contracts representing 40 percent of the needed power to “provide a large margin of safety to meet the 20 percent renewable target.” Hurdles to reaching the renewables mandate are lack of transmission, the complexity of the deals, and lack of subsidy guarantees needed for expensive renewables contracts. Another area of contention has been the ownership of the renewables projects. The utilities want to own at least 50 percent of the alternatively fueled facilities. Kehoe expressed concerns about the proposed Sunrise Powerlink transmission line and its potential impact on state park lands. The high-voltage line is expected to run from San Diego to tap renewable resources in the state’s eastern desert. She urged Mike Christman, Resources Agency secretary, to ensure that the state parks would not be harmed by that proposed line, which would run through public lands, or by other energy infrastructure projects. Another reason for the shortage of new renewable energy is the shaky availability of subsidies for pricey renewables deals – those costing more than the market benchmark price set by the CPUC. Developers of big solar projects, such as concentrated solar facilities in the desert, and large new geothermal projects are expected to need ratepayer subsidies to operate competitively. However, because annual payments from the Energy Commission’s Supplemental Energy Program are not guaranteed, project developers are unable to get project financing, said Joe Greco, Caithness Energy vice-president. There is $300 million available for the subsidies, but to date only one of eighty recent renewables deals signed is seeking supplemental energy payments. There is a move to revamp or do away with the renewables subsidies. Jan Smutny-Jones, Independent Energy Producers executive director, proposed eliminating the supplemental energy payments to ensure that low-cost bids win. In the alternative, he suggested that the Energy Commission make set payments over the life of the renewables project.

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