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FOR IMMEDIATE RELEASE
June 21, 2010
5:22 PM

CONTACT: Union of Concerned Scientists

Elliott Negin
Media Director
202-331-5439
enegin@ucsusa.org

California Legislature to Reconsider Renewable Electricity Standard

WASHINGTON - June 21 - The California Legislature and Gov. Schwarzenegger are expected to redouble their efforts to enact renewable energy legislation this year that would require California utilities to acquire 33 percent of their electricity from renewable energy like the wind and sun by 2020, up from the state's current 20 percent requirement by the end of this year.

While the governor vetoed a package of renewable energy standard bills last year, citing concerns that they would unduly restrict out-of-state renewable energy from counting towards the requirement, there is renewed interest among both branches of government to find common ground on legislation sooner rather than later. The governor issued an executive order on the 33 percent renewables issue, but the Union of Concerned Scientists (UCS), state legislators, renewable energy companies and many other stakeholders assert that an executive order does not carry the force of law, which is what's needed to send a clear market signal that California is prepared to invest in renewable energy.

On March 4, State Sen. Joe Simitian reintroduced his legislation in the form of SB 722. UCS and other supporters are working to address the issues that provoked the governor's veto last year, while strengthening enforcement provisions and ensuring the bill still includes the cornerstones of an effective Renewables Portfolio Standard (RPS). The administration has recently signaled its willingness to consider a new RPS bill that addresses the concerns that led to last year's veto.

Below is a summary of the major policy issues that will shape efforts to establish a 33 percent RPS by 2020, which would be one of the most aggressive renewable energy standards in the country.

WHY A RENEWABLES PORTFOLIO STANDARD IS NEEDED

  • Market certainty: A 33 percent RPS established in law is necessary to send a clear market signal that California is serious about renewable energy investment.
  • Cut global warming pollution: A 33 percent RPS is a cornerstone policy of the state's efforts to reduce heat-trapping pollution mandated in California's landmark Global Warming Solutions Act (AB 32).
  • Improve air quality: From 2005 to 2007, California's air pollution cost state residents more than $193 million in hospital-based medical care.[1] Shifting the state's reliance to renewable energy would reduce the amount of air pollution from burning fossil fuels for electricity.
  • Reduce exposure to volatile fuel prices: The state currently relies upon natural gas to generate about half of its electricity needs. Increasing the state's reliance on clean, local sources of energy would diversify the energy supply and reduce ratepayers' exposure to fossil fuel price volatility.
  • Stimulate California's economy: A UCS analysis found that boosting the nation's use of renewable energy sources, such as wind and solar, would create more than three times as many jobs as producing an equivalent amount of electricity from coal and other fossil fuels. That's because a larger share of expenditures for renewable energy go to manufacturing, installing and maintaining equipment. The wind industry alone employs more than 85,000 workers nationally, more than the coal mining industry.[2] A report issued by Next10 in June estimated that a 33 percent RPS also could generate more than 500,000 new green jobs over the next several decades.[3]

CORNERSTONES OF AN EFFECTIVE 33 PERCENT RPS

UCS has played a lead role in building momentum for a 33 percent RPS and is now working to ensure that the California Legislature passes a bill that maximizes the benefits of a strong, enforceable standard. According to UCS, an effective 33 percent RPS should include:

  • A clear mandate and timeline: California's RPS should set a firm floor, not a ceiling, for the amount of renewable energy utilities are required to deliver to their customers by 2020. This floor should be at least 33 percent by 2020, unwavering in its deadline, and apply to all California utilities.
  • Strong enforcement provisions: The 33 percent RPS should include strong enforcement provisions to ensure the 2020 mandate is not put off or inadequately planned. Compliance delays should be rare and granted only if a utility has made all feasible attempts to meet its interim obligations, including developing local projects at the distribution level, which would not require the construction of new transmission lines. The state should exercise its enforcement authority if a utility has not taken all feasible actions to meet its renewable energy obligation.
  • No loopholes or overly restrictive cost limitations: California's RPS should not allow loopholes, "off ramps to nowhere," or an unworkably low cost cap that would undermine the integrity of the mandate. The most expensive thing California could do is to continue its irresponsible addiction to volatile fossil fuels and other forms of dirty, expensive, unsustainable energy.
  • A strong definition of "renewable energy": California's RPS should only include technologies that are truly renewable and do not have the potential to cause significant environmental damage. Moreover, the state also should ensure that it holds renewable energy developed outside the state to the same environmental standards as those projects within California's borders.

LAST YEAR'S STICKING POINTS AND HOW TO FIX THEM

The underlying goal of California's RPS policies is to drive the development of new renewable energy facilities and displace the need to generate in-state electricity from fossil fuels. Doing so would provide a host of benefits to California's environment and economy – and help solve climate change. The biggest sticking point last year was how to determine the appropriate balance of in-state renewable energy, out-of-state renewable energy imports, and renewable energy credit-only (REC-only) transactions. Below are the main sticking points that contributed toward last year's veto, as well as the UCS policy solution:

  • In-state renewable energy generation: When a renewable energy facility is built inside the state and generates electricity inside the state, we have the highest level of certainty that electricity produced will displace generation from in-state fossil fuel facilities. This means air pollution and global warming pollution inside California is reduced. An in-state facility also will generate jobs for Californians.
  • Out-of-state renewable energy generation: If an out-of-state facility is not directly connected to a California grid, it is impossible to ensure that actual "green" electrons from the facility make it into California. Out-of-state facilities do not create local jobs and may reduce the pressure to upgrade California's electricity infrastructure, including transmission lines, to accommodate larger amounts of renewable energy in California. However, California imports a significant amount of its conventional electricity from outside the state, and the California power grids are part of a larger western grid, so it does not make sense to completely restrict out-of-state renewable energy from contributing toward California's renewable energy goals. Plus, an explicit restriction on the amount of power that could count from outside the state likely would be a violation of the Interstate Commerce Clause. Out-of-state renewable energy transactions should be allowed to count toward a portion of the California RPS requirement. Out-of-state transactions that qualify as "bundled" products must be able to prove that the electricity import associated with the transaction is entering California only because of the RPS contract. (For more on RECs see below.) This incremental electricity import will reduce the need to generate electricity from fossil fuels inside the state, thereby reducing in-state pollution. If the transaction cannot be linked to a new electricity import, then it should be considered "REC-only."
  • Renewable energy credits (RECs): Renewable energy credits are the "green attribute" of renewable energy generation. 1 REC equals 1 megawatt hour (MWh) of renewable energy generated. RECs can either be sold with their underlying energy as a "bundled" product, or they can be sold as a separate commodity as a "REC-only" or "unbundled REC" or "tradable REC." If the REC and its underlying energy are separated, the energy can no longer be considered "green" or renewable. Allowing utilities to simply buy a REC and not worry about also bringing out-of-state energy into California offers flexibility and potential cost savings, but it does not provide the same amount of benefits that a "bundled" product provides. This is because REC-only transactions do not include energy, which means that there is no energy import to displace in-state fossil fuel generation. Even though a REC displaces global warming emissions somewhere on the western grid, California is not receiving important, additional local benefits. Furthermore, a REC by itself does not help California diversify its resource portfolio or reduce our exposure to volatile natural gas prices.

How to fix it: UCS is working with environmentalists, labor groups, legislators, the administration and other stakeholders to propose a solution that would allow certain out-of-state energy transactions that deliver energy to California at a different time from when the renewable energy is actually generated to be considered bundled so long as they:

  • Drive new, western renewable energy development that would serve California RPS requirements in the long-run; and
  • Deliver an incremental energy import, which in turn reduces the need for fossil fuel electricity generation inside the state.

CALIFORNIA NEEDS MORE RENEWABLE ENERGY NOW

Global warming is under way, mainly due to burning fossil fuels for energy. The latest peer-reviewed climate science suggests that warming is happening even faster than what the world's best climate models projected in 2007. To avoid the worst consequences of climate change, the nation must rely on cleaner forms of energy to power the economy. The RPS is a proven way to do that affordably, and now is the time for California – the world's eighth largest economy – to lead the way by increasing its RPS.


[1] J. Romley, A. Hackbarth, D. Goldman, The Impact of Air Quality on Hospital Spending, RAND Corporation, 2010.

[2] Union of Concerned Scientists, Clean Energy, Green Jobs, 2009, available at: http://www.ucsusa.org/assets/documents/clean_energy/Clean-Power-Green-Jo...

[3] Roland-Holst, Energy Pathways for the California Economy, Next 10, June 2009

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The Union of Concerned Scientists is the leading science-based nonprofit working for a healthy environment and a safer world. UCS combines independent scientific research and citizen action to develop innovative, practical solutions and to secure responsible changes in government policy, corporate practices, and consumer choices.


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