California Legislature to Reconsider Renewable Electricity Standard

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:
https://www.ucsusa.org/assets/documents/clean_energy/Clean-Power-Green-...

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