Weekly Intelligence Brief

IN-DEPTH: RPS target is a big ask

9 July 2009

A 33% renewable portfolio standard would be unprecedented and require momentous changes, according to authorities in the US

By CSP Today staff writer

Support is growing for the establishment of a national renewable portfolio standard (RPS) in the US.

Legislatures in the Western states such as Nevada and California are also considering increasing their existing RPS.

In California imminent legislation may increase the 2010 level of 20% RPS to 33% by 2020.

In its recent report, 33% Renewable Portfolio Standard, the California Public Utilities Commission (CPUC) has admitted that achieving 33% RPS by the year 2020 is highly ambitious, given the magnitude of new infrastructure required.

To meet the current 20% 2010 target, four major new transmission lines are needed at a cost of $4 billion. Three of these lines are already under way. To meet a 33% by 2020 target, seven additional lines would be required at a cost of $12 billion.

In addition, the 33% RPS target is projected to require almost a tripling of renewable electricity, from 27 terawatt hours (TWh) today to approximately 75TWh in 2020.

Ahead of the game

A utility like Southern California Edison is well prepared and says a national RPS is not likely to have a direct impact on California as its state goals are always likely to be higher than the national standard.

“Indirectly, increasing demand on a national level will bring more competition for buyers for quality projects,” said Mike Marelli, director, contract origination and analysis for SCE’s Renewable and Alternative Power department.

Marelli also emphasised that SCE had been in the market for several years and completed contracts for many of these quality projects. SCE continues to advocate expanded access to markets and products that can broaden the RPS programme and help achieve the aggressive state goals.

Expansion of the RPS standards, both state and federal, will bring a lot of opportunities for those developers that have secured access to sites with quality resource potential.

Another utility, Pacific Gas & Electric (PG&E), says it has a longstanding commitment to its state’s leadership on renewables and climate change.

The utility supported legislation establishing the RPS and the California Global Warming Solutions Act (AB32).

“We are committed to working with the Legislature and the Governor to develop, and ultimately support, a universally applied comprehensive proposal that will achieve environmental benefits, diversify the existing market and create new economic development opportunities in a reliable and cost-effective manner,” said Hal La Flash , director, emerging clean technologies at PG&E.

The mitigation route

The CPUC has highlighted that if the 2020 timeline is the most important policy priority, then California must start implementing mitigation strategies such as planning for more transmission and generation than is needed to reach just 33%. It should also pursue procurement that is not dependent on new transmission, or concentrate renewable development in pre-permitted land that would be set aside for a renewable energy park.

Some states in the US are going further than an RPS and looking at feed-in-tariffs (FiTs).

Developers are expecting the expansion of large-scale solar to drive down output costs during peak demand and will stabilise long-term electric price certainty as part of an asset portfolio.

“Yes, it appears that FiTs can work alongside RPS policies, although that has yet to be really tested in the US. Many, but not all, US RPS policies require utilities to sign long-term contracts for power – again to provide investor certainty,” said National Renewable Energy Laboratory’s energy analyst Karlynn Cory.

Cory said that in those markets without this requirement, FiTs can provide the necessary revenue certainty.

FiT policies can also be used to target distributed generation or mid-sized projects that usually do not win in utility competitive solicitation processes. California’s proposal is an example.

Recommendations

From PG&E’s perspective, La Flash said the utility believed five principles were key to making a 33% RPS a win for the state:

• It must be universally applied to all utilities, public as well as investor-owned.
• The definition of eligible resources should be expanded to broaden the market – for example, by including out-of-state small hydroelectric power.
• There should be compliance flexibility to address the reality that renewable resources are not available at uniform times.
• Consumers should be protected against unreasonable cost shifts.
• No programme should put the reliable delivery of power in jeopardy.

All stakeholders must continue to work on overcoming continuing obstacles to the expansion of renewables, including permit delays and transmission constraints.

“Working together, we can find solutions to help maintain California’s global leadership in clean energy,” he said, adding that CSP would benefit from an RPS policy that is well-balanced and achievable.

Electric shock

The CPUC has stated that even if California makes no further investments in renewable energy, average electricity costs per kilowatt hour will rise by 16.7% in 2020 compared with 2008 in real terms. In 2020, the total statewide electricity expenditures of achieving a 20% RPS are projected to be 2.8% higher than a hypothetical all-gas scenario, where new electricity needs are met entirely with natural gas generation. In 2020, the total statewide electricity expenditures of achieving a 33% RPS utilising the current procurement strategy is projected to be 7.1% higher than the 20% RPS, and 10.2% higher than an all-gas scenario.

Read more: RPS, Southern California Edison, Pacific Gas and Electric, feed-in-tariffs