Renewable power is heating up fast in California

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Renewable power is heating up fast in California
Dec 7, 2010 San Francisco Chronicle 
California's electric utilities have spent the last four years scrambling to meet an aggressive goal set by the state - get 20 percent of their power from renewable sources by the end of 2010.

They won't make it. But they won't miss by much. And the process of trying to reach that goal has helped make California the center of renewable power development in the United States, although the cost to consumers remains to be seen.


With less than a month to go, state regulators expect the utilities to get, on average, 18 percent of the electricity they sell this year from wind farms, solar power plants and geothermal plants tapping the Earth's underground heat. Next year, if all goes as planned, they should hit 21 percent.


The state law that established the 20 percent goal, known as the "renewable portfolio standard," allows late compliance. Any utility that falls short of 20 percent at the end of this year must overshoot that goal by an equal amount next year. The companies have, in fact, three years to meet or beat the goal.


"The program was a little slow to get started, but it really has momentum now," said Julie Fitch, director of the energy division of the California Public Utilities Commission. "There is a tremendous amount of activity. ... We're seeing a lot of projects, in fact a lot more projects than the utilities need."


The 2010 deadline has for years driven the development of California's small but growing renewable power industry. So has another deadline, set by the federal government, that by coincidence will arrive at the same time.

Stimulating growth


Renewable power plant developers who start construction before the end of this year can get a federal cash grant worth 30 percent of their project's total cost, in lieu of taking a tax credit of equal size. The grants are part of President Obama's $787 billion economic stimulus package, approved by Congress in early 2009. The package devoted roughly $26.6 billion to renewable power generation.


Together, the dual deadlines set off a two-year mad dash among utility companies, renewable project developers and state regulators that will soon wind down.


Developers raced to secure government permits and scrounged for financing, scarce after the 2008 economic meltdown. Utilities needing to sign power purchase agreements had to decide which proposed solar plants, wind farms and geothermal plants stood the best chance of getting built. Regulators faced a slew of renewable projects seeking government approval at once. And regulators hadn't approved any big solar plants since the 1980s.


"They had to wrap their brains around how to permit these projects - they hadn't done this in a very long time," said Rachel McMahon, director of government affairs for Solar Millennium. The German company, which has an office in Oakland, won commission approval in September to build a solar plant in Riverside County capable of generating up to 1,000 megawatts at peak capacity. A megawatt is equal to the amount of electricity used by 750 typical homes at any given instant.


"Obviously, doing things in a rush made things more difficult," McMahon said.


Still, the dash produced results. The California Energy Commission approved construction of seven large solar thermal power plants - which use mirrors to generate steam and produce electricity - that together will be able to generate up to 2,979 megawatts at peak capacity. Another two plants could receive approval later this month.

Further capacity


Meanwhile, other companies are building wind farms and large photovoltaic solar facilities, which use the same kinds of solar cells that cover many California rooftops. Those projects are harder to track because they don't require state approval, their developers working with county governments instead. But an incomplete list compiled by the energy commission counted enough proposed wind and photovoltaic projects to generate 6,434 megawatts. And those are just the ones seeking federal financing.


The utilities won't need all of those projects to reach 20 percent. But Gov. Schwarzenegger and state regulators have set a further goal of 33 percent renewable power by 2020. And while that higher standard has not yet been enshrined in law, utilities and project developers are gearing up to meet it. State Sen. Joe Simitian, D-Palo Alto introduced legislation on Monday that would require the utilities to meet the 33 percent renewable standard by 2020.


The cost could be substantial.


The state utilities commission, which must approve the power purchase contracts that utilities sign with renewable power plant owners, allows the companies to keep private the financial details of each deal. As a result, it's impossible for the public to know exactly how much the drive to reach 20 percent has added to monthly electricity bills.


Critics of the renewable portfolio standard (RPS) have often worried that the 2010 deadline would allow owners of wind farms, solar facilities and geothermal plants to charge a high premium for their power, because the utilities had to buy it.


"By creating this deadline, it gave the sellers leverage," said Michael Shames, executive director of the Utility Consumers' Action Network watchdog group. Meanwhile, the price of natural gas, which fuels most of California's power plants, has fallen dramatically, making renewable power look even more costly in comparison.

Higher electricity bills?


A study released in 2009 by the utilities commission estimated that California's electricity prices would rise 16.7 percent by 2020 if the state stopped adding renewable power and stuck with natural gas plants instead. If the renewable portfolio standard stayed at 20 percent through 2020, prices would rise an additional 2.8 percent. Raise the standard to 33 percent renewable power, and prices would rise another 7.1 percent.


"I think the RPS is a really good objective," Shames said. "It's something we should be striving for. But it's going to turn out to be far more expensive than people expected because of the low cost of natural gas."


Prices will depend largely on the number of renewable projects built in coming years. That, in turn, will depend on the private and public financing available to project developers. Many analysts expect the number of large-scale renewable projects under development to fall in 2011, after the stimulus grant ends. Solar and wind companies want Congress to extend the grant program but may not succeed.


"I do think we'll continue to see renewable energy projects proposed in California, but I wouldn't be surprised to see some drop-off in the next year," said Karen Douglas, chairwoman of the California Energy Commission.


The energy commission is now studying ways to speed up its process for approving large solar and geothermal projects. In the last two years, it added staff to handle the workload and found ways to coordinate its work with the U.S. Bureau of Land Management, which controls many of the desert areas coveted by solar developers.

Green energy, red tape


Developers say they appreciate the extra effort - but the process still needs improvement. Tandy McMannes, vice president of business development for Abengoa Solar Inc., said his company's proposed solar plant in San Bernardino County had to meet more than 200 specific environmental conditions before winning approval.


"We're a solar plant, and we have 67 conditions for air quality," McMannes said. "The actual process worked. Having said that, the process is expensive, and the conditions of certification are onerous."