Renewable Energy in California

1. Renewable Energy in California Rasa Keanini and Heather Raitt Renewable Energy Program Efficiency, Renewables & Demand Analysis Division November 16, 2005

2. Renewables Legislation GOAL: Pursue investments in renewable resources to achieve self-sustaining renewable energy supply for California. • AB 1890 and SB 90 created the Renewable Energy Program and directed the large investor-owned utilities to collect $540 million from 1998 – 2002. • SB 1038 authorizes Renewable Energy Program to allocate and distribute $675 million collected from IOU ratepayers 2002 - 2006. • SB 1078 established Renewables Portfolio Standard, requires IOUs to increase renewable purchases by 1% per year until total reaches 20% of their purchases by 2017, within certain cost restraints. • SB 67 and SB 183 clarified RPS eligibility requirements. • AB 200 addresses RPS requirements for Sierra Pacific and PacifiCorp.

3. CA Renewables Portfolio Standard Goal: To increase diversity, reliability, public health and environmental benefits of California’s energy mix. • RPS signed into law in 2002 • Legislative goal of 20% of retail sales from renewables by 2017, with increase by at least 1% per year • In 2003, state energy agencies set goal of 20% by 2010 • 20% in 2010 is estimated to be about 56,000 GWh • California’s technical potential is more than 260,000 GWh/yr • Technical potential for western-region is 3.7 million GWh/yr • Energy Commission’s Integrated Energy Policy Report recommends more ambitious goal for post-2010 • Governor Schwarzenegger’s goal is 33% by 2020

4. CEC-CPUC RPS Collaboration CPUC ROLE • Set RPS baseline & procurement targets • Approve/ deny IOU procurement plans • Develop methodology for MPR, calculate • Develop least-cost-best-fit process IOUs use to evaluate bids • Develop and implement rules for flexible compliance • Set standard contract terms & conditions • Ensure that RPS solicitations are competitive • Approve or reject proposed contracts • Define rules for ESPs & Community Choice Aggregators CEC ROLE • Certify eligible facilities • Establish criteria for “incremental” output from existing geothermal facilities • Award and distribute supplemental energy payments • Develop accounting system to track and verify RPS compliance

5. California’s RPS Process • CPUC calculates utilities’ annual procurement target • Utilities develop RPS procurement plans for CPUC approval • Generator applies to Energy Commission for certification as eligible for the RPS • Utilities hold RPS solicitations for long-term delivery from RPS eligible generators (10, 15, 20 years) • Each utility uses least-cost, best-fit evaluation process to rank bids and selects “short list” of bidders • After utilities select short lists, CPUC calculates and announces Market Price Referent (the estimated cost for a similar long-term natural gas electricity product) • Winning bids priced higher than MPR may be eligible for supplemental energy payments • Contracts priced at or below MPR are considered reasonable

6. California’s RPS Process, con’t. • Utilities negotiate contracts with short-listed bidders and sign contracts using standard terms and conditions. • If contract is priced above MPR, generator applies for supplemental energy payments from the Energy Commission • Energy Commission evaluates public goods charge funds availability for supplemental energy payments , subject to caps • Energy Commission awards supplemental energy payments to eligible RPS generators (new or repowered) • Utilities request contract approval from CPUC • CPUC approves or rejects contracts • Generator begins providing electricity per RPS contract • Energy Commission makes monthly supplemental energy payments for generation

7. Renewable Energy Certificate & CA RPS • Allows the use of RECs for accounting purposes only • CPUC Decisionwww.cpuc.ca.gov/word_pdf/FINAL_DECISION/27360.doc “…we will need a clear showing that a REC trading system would be consistent with the specific goals of [CA’s RPS including providing public health, economic development, job creation, and environmental benefits to California], would not create or exacerbate environmental justice problems, and would not dilute the environmental benefits provided by renewable generation.” • Various bills introduced this year proposed allowing unbundled RECs for RPS compliance, but such provisions were struck out • CA RPS Standard Contract Terms and Conditions define “Environmental Attributes” www.cpuc.ca.gov/Published/Final_decision/37401.htm (June 9, 2004)

8. Delivery Requirement • RECs and electricity must be sold together as a bundled product to satisfy CA RPS compliance • www.cpuc.ca.gov/word_pdf/FINAL_DECISION/27360.doc (June 19, 2003) • Adopts ”…the general presumption that all environmental and renewable attributes associated with the production of electricity be transferred to the utility and retired…” • The transfer of environmental attributes for RPS compliance need not include fuel related subsidies or local subsidies received by the generator for the destruction of particular pollutants • CPUC requires the IOUs to allow bids for delivery anywhere in CA ISO and IOUs may accept delivery to non-CA ISO points in-state • www.cpuc.ca.gov/WORD_PDF/FINAL_DECISION/48266.DOC (July21, 2005) • Delivery requirement applies to in-state and out-of-state facilities • Out-of-state facilities annually report to Energy Commission their compliance with RPS delivery requirements by submitting NERC tags as described in RPS Guidebook

9. Progress in Meeting the Renewables Portfolio Standard Includes all contracts for new renewable energy capacity submitted to or approved by the CPUC since 2002. Table updated through October 28, 2005. Capacity additions do not include four contracts that SCE signed under its 2002 interim RFO, as at least one of those contracts has subsequently been terminated (TrueSolar), and information on the resource type and/or project size of the other three is not publicly available. Total incremental renewable energy capacity and supply derives from data submitted to the CPUC (Advice Letter filings and RPS compliance reports), and from other data (for SDG&E, new renewable energy contract information from before its 2004 RFO came from SDG&E’s website; assumed capacity factors were used to convert MW to GWh - 35% for wind, 23.9%for solar thermal electric [same as SCE’s solar thermal contract], and 85% for biomass). RPS contracts executed to date are priced at or below the MPR and will not need supplemental energy payments.

10. Barriers to Renewable Resource Development Addressed through current RPS • Lack of long term purchase agreements for electricity Needs further work • Need new/upgraded transmission to access remote renewables • Ensure electricity grid reliability with integration of large amounts of intermittent renewables • Repower aging wind facilities and reduce the number of bird deaths associated with the operation of wind turbines • Avoid under-procurement due to contract failure, establish a “contract-risk reserve margin” (e.g. delays due to difficulty getting land easements, unanticipated increase in project costs…) • Apply RPS targets consistently for all retail sellers (public utilities are self regulated, no rules established yet for electric service providers, community choice aggregators) • Reduce administrative complexity, increase transparency

11. Western Renewable Energy Generation Information System (WREGIS) • WREGIS is a tracking system for implementing CA's RPS • Developed by the Energy Commission and the Western Governors' Association with input from stakeholders • This voluntary independent accounting system for the region covered by the Western Electricity Coordinating Council will: • create renewable energy certificates (WREGIS Certificates) based on verifiable, reliable meter-read data • support market participants in their transactions involving WREGIS Certificates • support regulators and voluntary program administrators by providing information to assist in verification • The Energy Commission estimates WREGIS will be operational early 2007

12. WECC Attribute Tracking Systems WREGIS

13. Why is WREGIS Important? • Establishes a Western regional system to register electricity generating units, and issue and track renewable energy certificates. • Provides a tool to support verification of compliance with regulatory and voluntary programs. • Develops standard definitions and operating guidelines for WREGIS participants.

14. Renewables Portfolio StandardAdditional Information • Renewables Portfolio Standard Eligibility Guidebookdescribes the criteria and process for certifying renewables as eligible for California’s RPS & SEPs (Publication #500-04-001F) • New Renewable Facilities Program Guidebook describes the requirements applicants must satisfy to receive SEPs (Publication #500-04-026) • Overall Program Guidebook for the Renewable Energy Program describes how the Renewable Energy Program will be administered (Publication #500-04-026) • Documents available at: www.energy.ca.gov/portfolio -click “documents page”