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August 31, 2009

Green-energy plan is tall task for state

By Michael Gardner
U-T Sacramento Bureau

SACRAMENTO - Still haunted by rolling blackouts and budget-bustingenergy contracts, California plans to broaden its already aggressivedirective requiring utilities to deliver more power from renewablesources.

But Gov. Arnold Schwarzenegger and lawmakers, under intensepressure from generators and renewable power advocates with conflictingpositions, have yet to deliver a final compromise package that has beendeclared a top priority going into the last two weeks of thelegislative year.

There is general agreement that the overarching goal is laudable:tap various renewable sources for a third of the state's energy needsby 2020. Still, 33 percent is a leap from the existing 20 percentmandate imposed to encourage so-called green power and partly tominimize the chances of a repeat of the 2000-01 energy crisis thatconsumed the state.

Diversifying the power portfolio, supporters say, will helpstabilize the energy market - both in supply and cost - and build acleaner industry producing solar, geothermal, wind and other renewablesources.

"All of these objectives can be achieved, but only if we make aconcerted commitment - not someday, but right now," said AssemblymanPaul Krekorian, D-Burbank, who is carrying one of the measures.

But it will not be easy or cheap.

The California Independent System Operator, which manages thestate's electricity grid, reports that it could cost up to $6.5 billionto build the transmission links and other facilities needed to complywith a 33 percent mandate.

For ratepayers, there will be trade-offs, at least initially. Powerbills will likely rise, but by how much is a long way from beingdetermined. One measure imposes a complex cap on rate increases, whichwould generally limit hikes directly tied to compliance to less than 5percent.

In return, replacing some natural gas, a price-volatile fossil fuelused to produce nearly half the power flowing in California, could helplower energy costs long-term and, by extension, reduce household bills.

"The cost is negligible when you consider the risk of marketmanipulation," said Sen. Joe Simitian, D-Palo Alto, who is carrying oneof the bills.

John Moffatt, the governor's lead negotiator on the renewable power measures, said ratepayers could be pinched.

"It depends on how you structure the program. The question is how to contain those costs," he said.

Ratepayer advocates are pressing for some price hike safeguards and question whether a 5 percent cap is overly generous.

"We don't want this to happen at any price. There needs to bereasonable cost limitations that protect consumers in the event thatthe markets don't provide green power at reasonable prices," said MattFreedman, an attorney for the advocacy group Toward Utility RateNormalization, or TURN.

Schwarzenegger launched the debate in November, issuing anexecutive order advancing the one-third requirement and clearing someregulatory barriers to building plants and transmission lines. But anexecutive order can be abolished by the next governor.

Responding, legislators are acting to mold the governor's orderinto permanent law with their own set of conditions outlined in twobills, SB 14 and AB 64.

There are some deep divisions still to be bridged. Among those: howto credit out-of-state renewable power purchases, speeding upconstruction of generation and transmission facilities, and whether the2020 target should be pushed back.

The package's fate may turn on a compromise involving out-of-statepower. Democrats and their labor allies are pushing to force most ofthe renewable energy to be generated within California, saying such arequirement will produce jobs. But there are suggestions that thegovernor will veto any bill that includes tight limits on where powercan be produced and still receive credit.

"It's an ambitious goal. We need a robust supply of in-state andout-of-state resources," said Jennifer Ramp, a spokeswoman for SanDiego Gas & Electric Co.

SDG&E and other utilities oppose stringent conditions on claiming credit for imported renewable power.

"If we find a better deal outside the state, our customersbenefit," said Pedro Pizarro, a vice president of Southern CaliforniaEdison.

The governor is aligned with utilities.

"That's one of the ways you help keep costs down," Moffatt said. "What we're saying is let the market work."

Renewable power advocates are wary of a hands-off approach.

"We shouldn't build walls around California," said Laura Wisland, aclean-energy analyst for the Union of Concerned Scientists. "At thesame time, we realize in-state generators provide additional benefits,such as job creation."

Wisland said utilities may need some leeway in transmitting poweracross state lines particularly because using more renewables willreduce greenhouse gas emissions linked to global warming.

"Green energy and the benefits it provides do not end at the California border," she said.

Added TURN's Freedman: "We shouldn't rely primarily on out-of-statepower when the primary rationale articulated by the governor himself isto produce green jobs and green investment in California."

One proposal would provide utilities flexibility, includingallowing some credit for renewable power generated out of state, butnot as much as generators would like. Providing extra credit towardmeeting the requirement with in-state power is also underconsideration.

That encourages Mark Gran, a vice president of Cal Energy, whichoperates 10 geothermal plants in the Imperial Valley with plans tobuild more. He proposes setting benchmarks to link the amount ofallowable imported power to transmission expansion.

"We need the transmission built as soon as possible. We want our power sold here," Gran said. "But we have to be realistic."

Generators warn that forcing them to overly rely on in-statesources could sharply increase transmission costs and artificiallydrive up prices if demand for renewable power spikes.

"If renewables only count from in-state it's going to drive up theprice of in-state energy unnecessarily," said Dave Kolk, energy managerfor the power side of the Imperial Irrigation District.

Kolk, whose district delivers power to parts of Riverside andImperial counties, supports the 33 percent goal. He noted that someyears renewable power with its long-term contracts can be cheaper thannatural gas.

"I may pay a little more right now, but that cost is fixed," he said. "I don't have to worry about geopolitical issues."

A broader renewable-energy portfolio excites officials in theImperial Valley. The historically agricultural region today isaggressively building a new economy around solar and geothermal power.

"We see our future as being the renewable-energy capital of the U.S.," said Gary Wyatt, an Imperial County supervisor.

The 33 percent requirement, he continued, "will be a great opportunity."

Michael Gardner: (916) 445-2934;