Implementing the Renewable Portfolio Standard in California

Cynthia WalkerDivision Of Ratepayer Advocates

November 3, 2011

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About DRA

• The Division of Ratepayer Advocates (DRA) is an independent unit within the California Public Utilities Commission that represents consumers’ interests on utility matters.

• Our statutory mission is to obtain the lowest possible rates for utility services consistent with safe and reliable service levels.

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Overview of Presentation

1. Renewable Portfolio Standard2. Background3. Progress in Renewable Procurement4. Costs5. Renewable Energy Programs 6. Conclusions and Recommendations

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Legislation Establishing the Renewable Portfolio Standard (RPS)

• SB1078 (Sher, 2002) required increasing renewables by 1% per year with a goal of achieving 20% by 2017

• SB 107 (Simitian, 2006) accelerated the RPS to 20% by 2010 with flexible compliance extending the deadline to 2013

• SB 1036 (Perata, 2007) adopted ratepayer protections through limits on total costs

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SBx1 2 (Simitian 2011) established 33% RPS by 2020

• Long term goal of competitive & self sustaining supply of renewables

• Requires reporting on total cost of program each year

• No penalty if all reasonable action taken to achieve goal

• Requires CPUC to establish a cost limitation for each IOU

• Limits procurement to resources that can be procured without exceeding a de minimis increase in rates

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CPUC Is Implementing The New Legislation

• The CPUC has opened a new Rulemaking 11-05-005 to implement the new legislation

• It aims to settle the main technical and definitional issues by the end of 2011

• The CPUC then intends to address the cost limitation mechanism

• Finally, other policy issues with implementing the new 33% standard will be addressed in 2012

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Renewable Generation Is Increasing

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Utilities on Track to meet 33% by 2020

Large IOU RPS Actual and Forecasted Generation

0

10000000

20000000

30000000

40000000

50000000

60000000

70000000

80000000

90000000

100000000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

En

erg

y (

MW

h)

/ y

ea

r

Online Generation Expiring Generation Contracted Generation

Pending Approval Under Negotiation Annual RPS Target

Source: California Public Utilities Commission, 2nd Quarter 2010

2020 33% RPS Target

2010 20% RPS Target

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All IOUs RPS Procurement Pipelineby number of milestones reached

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

GW

h

Nomilestonesachieved1 milestoneachieved

2 milestonesachieved

3 milestonesachieved

All milestonesachieved

33% RES

20% RPS

Risk Profile of Executed RPS Contracts

Data from the August 2010 Compliance Reports and Project Development Status Reports (PDSRs) filed by PG&E, SCE, and SDG&E.

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Challenges with Implementing RPS

• Renewable development encounters a number of difficulties and delays in California including: permitting, transmission, and financing

• The state has multiple and overlapping policy goals at the initiative of both the Legislature and the CPUC

• Multiple goals and mandates can increase demand for renewables and costs to ratepayers

• Not all costs are accounted for in design and approval of renewable programs

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Rate Impacts

• Renewable energy costs and prices are generally higher than conventional generation

• A substantial portion of each utility’s RPS portfolio has not yet come online and, subsequently, has not yet entered rates

• Utilities are predicting that rates will increase in the future although it is not clear how much of that increase is due to renewables

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Utility Costs

• Transmission & distribution upgrades

• Integration costs

2010 IOU Revenue Requirement Summary (000)[1]

PG&E SCE SDG&E Total%

Generation/Energy Procurement

Purchased Power$4,739,030 $3,723,745

$1,080,290

$9,543,06537%

Utility Owned Generation$1,561,807 $1,909,857 $343,157 $3,814,821

15%

Distribution (includes taxes) $3,267,148 $3,663,902 $982,858 $7,913,908 30%

Transmission $752,286 $591,273 $279,789 $1,623,348 6%

Demand Side Management $726,316 $795,646 $219,246 $1,741,208 7%

Bonds & Fees $808,151 $500,441 $111,821 $1,420,413 5%

Total 2010 Revenue Requirement$11,854,738 $11,184,863

$3,017,161

$26,056,763

100%

[1] AB 67 Report, April 2011, p. 7.

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PG&E 77% $123.46

SCE 41% $92.27

SDGE 47% $100.57

All 59% $104.08

IOUShare of contracts above applicable

MPR

Average applicable MPR

(Levelized $/MWh post-TOD)

 

Findings from Green Rush Report: Renewable Contracts Above MPR

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AMFs to 2010 for RPS-eligible ContractsAMFs allocated (total)

$-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

Billi

ons

$773,106,060 $6,007,377,760

AMFs allocated AMFs incurred to date

Data from August 2010 AMF Calculators. Figures in nominal dollars.

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Multiple Programs Created to Implement RPS Goal

• Solicitations for Contracts• Bilaterally Negotiated Contracts• Tradable Renewable Energy Credits (TRECs)• Qualifying Facilities (QFs)• Renewable Auction Mechanism (RAM)• Qualifying Facilities (QFs)• Renewable Auction Mechanism (RAM)• Feed-in-Tariff (FIT)• Solar Photovoltaic Program• Utility-Owned Generation (UOG)

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Other Programs Support RPS

• California Solar Initiative (CSI)

• New Solar Homes Partnership (NSHP)

• Net Energy Metering (NEM)

• Small Generator Incentive Program (SGIP)

• Emerging Renewables Program (ERP)

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Some Renewable Program Costs

Qualifying Facilities: $20.7 billion to be expended on renewable QFs 2003 to 2020

Solicited RPS contracts: an estimated $20.8 billion to be expended 2003 to 2020

Bilateral RPS contracts: an estimated $13.3 billion to be expended 2003 to 2020

California Solar Initiative: $2.1 billion budgeted for the program

Net Energy Metering: annual expenditures are expected to be approximately $500,000

New Solar Homes Partnership: $400 million budgeted for the program

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RPS Programs by Technology and Size

Size Solar PV Wind Other

Less than 1 MW CSINSHPERPNEM

ERPSGIPNEM

NEM

1-3 MW FITRAMSPVP

RFO PPABilateral PPA

FITRAMSGIP

RFO PPABilateral PPA

FITRAM

RFO PPABilateral PPA

1-20 MW SPVP RFO PPA

RAMBilateral PPA

RFO PPARAM

Bilateral PPA

RFO PPARAM

Bilateral PPA

Greater than 20 MW

RFO PPAUOGSPVP

Bilateral PPA

RFO PPAUOG

Bilateral PPA

RFO PPABilateral PPA

UOG

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Conclusions

• The 20% renewable goal will be achieved by 2013• The IOUs are on track to reach the 33% goal by 2020• There are multiple programs designed to increase the

amount of renewable energy developed• Past attempts to establish cost limitations have not been

successful• The cost of achieving RPS goals are not yet in customer

rates• Customer rates are expected to increase due to

renewables and other utility expenditures

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Recommendations

• CPUC work with stakeholders to determine ways to reduce time for project implementation

• Policy makers weigh in earlier on projects• CPUC should reject projects that are not

competitive• CA needs to coordinate various policy and

implementation goals for climate change

Contact Information

Cynthia Walker

CIW@cpuc.ca.gov