Are Renewable Standards Wishful Thinking?
California says Forward Thinking
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.”
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.
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