Are Renewable Standards Wishful Thinking?

California says Forward Thinking

Ken Silverstein | Aug 17, 2011

Share/Save  

 

Will California hit its renewable energy target of generating a third of its electricity from green power by 2020? Too many variables are still in play and their ultimate resolution will affect the outcome. 

 

The state has gotten a running start, having been on the forefront of green energy development as well as the nurturing of those industries that feed such growth. As of now, California generates about 20 percent of its electricity from renewable energy, although most of that comes from hydropower. Getting the rest of the way, though, won’t be easy. 

 

“California investor-owned utilities (IOUs) are well supplied with renewables for renewable portfolio standard compliance through at least 2015,” says James Saeger, an associate director for IHS Emerging Energy Research, in a white paper it recently released. 

 

But after that, he says that the PG&E, San Diego Gas & Electric and Southern California Edison will be challenged, predicting that about 36 percent of the contracted generation will fail to come on line. That will become even more problematic as the demand for power increases. Beyond the IOUs, the research group goes on to say that the smaller public utilities and the electric service providers are behind the curve. 

 

Why the overall concern? Saeger list a number of obstacles that include permitting hurdles, transmission constraints and project finance, as well as the difficulty at securing power purchase agreements at reasonable prices. The good news is that the clean technology sector there is flourishing, which will help the state meet the growing demand for energy.   

 

Consider the solar rooftop business: According to SunRun, such distributed generation systems could deliver an additional $5 billion to the state’s economy by 2020 by allowing homeowners to affordably install solar. But the permitting process has to be streamlined so that solar makes economic sense. 

 

At the same time, the state needs to lift the net metering cap for distributed generation. Net metering credits consumers for the electricity that they don’t use and that they feed back into the system. A cap limits further adoption. 

 

“California’s renewable energy goals are achievable if we make renewable power affordable for more homeowners,” says Edward Fenster, chief executive of SunRun. “A simpler permitting process in California can make solar affordable for over 130,000 more homes – a 13 percent increase over business as usual.” 

 

Committed Leadership

 

California’s law was enacted this past April. It strengthens an earlier one signed in 2009 by the previous administration. But this law is tamper proof, meaning no future governor can alter it. The code allows regulators to grant exemptions to those power entities that are unable to reach the goals. 

 

The stakeholders are well known, with the green groups arguing that the statutes will motivate new high-technology businesses to locate in the state. They point to the growth of the Silicon Valley to support their cause. 

 

Meanwhile, the critics are saying that utilities relying on fossil fuels will get hurt. They will have to buy more expensive and less reliable green power, which means that rates can only rise -- a provision to be examined by the state’s regulatory bodies. Higher prices means more businesses will be hit and at the worst possible time. 

 

According to Ulrich Decher, who authored a piece in Oilprice.com, the state’s attempt to reach its renewable goals should be scrutinized. Biomass, geothermal and small hydro are already maxed out. That leaves wind and solar. But such sources provide a negligible amount of power now and even if they are doubled, the total contribution will still fall short of what is needed. 

 

“So far, the net effect of California’s desire to go green is to shift the coal generation to other states,” writes Decher. If such a strategy is included in the state’s ‘renewable’ mix, then it can meet its 2020 objectives, he adds. Others are worried about how the grid can accommodate more green energy without a huge investment in transmission. 

 

California Governor Jerry Brown is committed to success. Decisions are not going to be made from the top down, he says; rather, such progress will be democratic but the state’s policymakers will not allow one interest group to subvert the process. The leadership will a “find a path through the thicket,” he said during a speech, emphasizing that green energy presents a viable course forward. 

 

Whether California’s law turns out to be wishful thinking or forward leadership is yet to be known. But the policy will get a chance to play out and will provide a potential playbook for the rest of the nation. 

 

EnergyBiz Insider has been named Honorable Mention for Best Online Column by Media Industry News, MIN. Ken Silverstein has also been named one of the Top Economics Journalists by Wall Street Economists. 

Follow Ken on www.twitter.com/ken_silverstein

 

energybizinsider@energycentral.com.

 

Related Topics

Comments

Renewable Standards and Levelized Cost of Renewables

Ken,

You raised a number of interesting points. I would add that renewable portfolio standards are only realistic to the extent that federal and state governments are willing to subsidize solar PV and off shore wind technologies. The essential problem is that electricity generated from these renewable sources is more expensive than electricty from fossil fuel counterparts. The bench mark dominating this isssue is the levelized cost of elecrtricity (LCOE). For more information, please see http://www.jheversonconsulting.com/blog/2011/09/08/when-can-renewable-energy-subsidies-end/

Dr. Jeffrey Everson,  www.jheversonconsulting.com

Big Bird Weighs In

After reading many,many months of well documented facts about the solar industry from energybiz, I have come to the conclusion, that without solar we would simply be nothing and unemployment would reach 80%.

Theft by Regulation

"At the same time, the state needs to lift the net metering cap for distributed generation. Net metering credits consumers for the electricity that they don’t use and that they feed back into the system. A cap limits further adoption."

 

Net metering is "theft by regulation". Utility service charges recover only a portion of the utilities' fixed costs. The balance of the fixed costs are recovered through the variable portion of the rate. Net metering cheats the utilities by requiring them to forfeit the portion of their fixed costs recovered through the variable portion of the rate for all power consumption later netted-out by on-site generation. These costs must ultimately be passed-on to the utilities' remaining customers.

 

The "cap" was the only reason the utilities did not "go to the mat" in opposition to net metering. If the "cap" is removed, the utilities will be forced to challenge net metering in court.

 

Smart meters would make it possible for the utilities to pay for power sent to the grid by customers at the prevailing wholesale power rate, rather than at the all-in delivered price. However, that is not the current market reality.

California Can Hit the Targets

...though I think the 2020 timetable is a bit too aggressive.  There are problems to be worked out, just as there were when nuclear units were first introduced.  I'm not sure utility traditionalists have the imagination to find cost-effective solutions, but cost-effective solutions do exist.

One of the other comments I have to take issue with is the notion of more "baseload" generation.  It's the last thing any grid needs, whether that includes a lot of renewable supply or no renewable supply.  What every grid does need more of is flexible generation that can react to variability in demand and supply.  Unless, of course, power system engineers have figured out how to teach metaphorical elephants in the form of large coal and nuclear plants to dance.

As far as jobs are concerned, just as John Kennedy put America on a course to shoot for the moon because it would motivate our society and create momentum for higher education and whole new industries, I think political leaders have the same objectives in mind by pushing a renewable energy agenda.  Unfortunately, the notion of wind and solar energy doesn't quite capture the nation's imagination in the same way, but there is still some logic to it.  Unless, of course, someone has other ideas for whole new industries that will create enough jobs and economic growth to put people back to work.  If you don't think renewable energy is the next new thing, then by all means share your ideas with us.

Jack Ellis, Tahoe City, CA

FULL DISCLOSURE REQ'D

"Consider the solar rooftop business: According to SunRun, such distributed generation systems could deliver an additional $5 billion to the state’s economy by 2020 by allowing homeowners to affordably install solar. But the permitting process has to be streamlined so that solar makes economic sense. "

Just once I like to see a serious examination of the cost/benefit figures...no hand waiving or vague generalities but fully loaded installed costs (including subsidy costs) vs. benefits.

For large projects, I think the project figures should be openly available for public scrutiny. It is very, very rare for a developer to actually quote the terms & conditions of their PPA. Without the figures, who's to know what "makes sense" and what doesn't.

Who is fighting this?

The groups fighting this proposal hardest are the coal and oil industries. They have some good arguments. Green energy is less reliable and the price will go up. Their subsidies should be cut in this economic time. However, oil and coal motives are to increase their own bottom lines. I'm amazed that when we speak of shared sacrifice and the need to avoid subsidies that the oil companies don't man up. They certainly find the money to do PR and to knock wind and solar programs. 

See you in a few years

It may be wise to take a breather from the ITC, PTC, Cash in Lieu programs and see how these variable, intermittent unknown true cost technologies perform since we are demanding baseload type performance.  Give the US tax payer and rate payer a break for a few years while we work on larger more important issues such as unemployment, how to reduce the money supply, how to control inflation (non core) with little tools left, the healthcare system and our military deployment challenges.  This green movement needs to hold on.  We will get back to you.  You have shown us that your technologies have worked and capcity has certainly increased and you have made your money in the name of national security.  Now take a back seat, you have had your rally at most people's expense.  See you  in a few years.

What about consumer choice?

Comparing investments in green energy to investments in consumer electronics is not valid.  The primary difference is that there is a public demand for the consumer electronics from individuals, businesses, and governments.  When it comes to electricity the demand from the individual and business consumers is for electricity--not electricity produced by a certain method.

Right now, the entire USA has economic problems.  Green energy technologies cost a lot because they were introduced before fully developed.  We keep getting promises the prices of the technologies will be coming down to competitive levels but the fact that the developers still need federal and state subsidies belies that assertion.  And there are two hidden costs that have not been counted into the cost of those techologies:  1) the cost of building out hundreds, or perhaps more accurately thousands, of miles of transmission to bring the electricity from remote sites where wind and large solar farms are located, and, 2) the cost of building back up fossil power to make up for the low capacity factors, variable outputs, and lack of frequency stability from these technologies.  A third set of costs that I choose to mention separately since it might be more arguable include the ecological costs associated with avian and bat mortality, altering wind patterns around and behind wind farms, the effects of wind turbine noise, the effects of massive ground shading in wilderness areas, the habitat destroyed to make access for constructing and maintaining wind and solar farms, the habitat destroyed to make access to construct and maintain long distance transmission, the effects of reradiation of unconverted light as infrared energy from massive solar panel arrays in solar farms (if I am not mistaken that is what blackbodies do--absorb all wavelengths of light and reradiate it as infrared energy). What about the effects on the prices of building materials due to the massive amounts of such material used per MW capacity for wind farm construction.

This country right now needs to concentrate on getting its manufacturing base built back up.  This will lead to more employment from the most highly educated to the least educated in society which will, in turn, lead to the demand for more 'green' electricity rather than just electricity and the means to pay for it, particularly the R&D needed to bring down the costs.  To adopt RPS standards now and enforce them will lead to further economic decline because we will continue to pour tax dollars into subsidies or mandate purchase of electricity that is more expensive than other sources.  Adopting RPS standards right now will increase the national debt while simultaneously increasing the cost of doing business.  Businesses will either not locate here or they will close up here and move out.  More people will be unemployed and tax revenues will fall and will effectively generate a spiral of economic doom like the vortex of a bathtub drain.

For those who blindly believe the IPCC report on global climate change, I suggest reading "Climate of Extremes", "Climate Coup", and some of the materials referenced in those two books in which scientists who have actually employed the scientific method and published peer reviewed literature dispute the "consensus science" of the IPCC report. 

Speech manipulated for political reasons

America's energy independence is a must
Speech manipulated for political reasons

One idea of our nation is that of strong, harmonious communities in which each individual is has the opportunity to grow and flourish. The wellness of the community depends on the wellness of every individual within the community, for the whole is a reflection of its parts. Thus, to insure our safety, we know that we must insure the safety of others.


Another idea of our nation is that of a divided nation, full of fearful citizens threatened by a multitude of dangers. In our fear, we follow who ever has the most might, even when it means our bondage. Nowhere is safe, for the danger lies within us and we carry it wherever we go.


We make the world as we perceive it. History has demonstrated time and again that taking on extremist beliefs comes at a high personal and national price. Are we headed there once again, this time led by conservatives and liberals alike?


The world is our classroom. The fundamental truth we come to learn is that we are not separate. We cannot destroy the truth, but we can deny it.


COMMENT

Obviously, extremists of either persuasion will be followed by those who are not willing to study and form their own informed and educated opinion. I prefer to think that those who do care enough to study and participate in our government through citizen leadership are our best guarantee for the future of this country.