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Experts Weigh In: Will California Meet Its RPS?

About one year ago, California made history by enacting a law that would require the highest amount of renewable energy to be incorporated into a continental state's energy mix: 33 percent by 2020. That number is at least 8 percent higher than the next most aggressive state renewable portfolio standards and upwards of 10 percent more than the average renewable portfolio standard for all the states in the nation.

For background, a renewable portfolio standard is a law passed by the state legislature that compels all or certain utilities in that state to source a set percentage of the energy they supply to their ratepayers from renewable sources.  States have various definitions of renewable sources but for the most part, wind, solar, small-scale hydropower, biomass, and geothermal energy used for electricity apply.  Only some states allow thermal renewables to go towards RPS requirements like solar water heating or biomass heating and cooling but that is starting to reverse.

In any case, California embarked on its most aggressive quest to employ more renewable energy than any other continental state in the nation and so far the state has done very well in meeting its goal. As of July 2012, each of the three major investor-owned utilities were showing that about 20 percent of the energy they provide to their ratepayers comes from renewables and many other projects are underway.  ‘You know, we’ve seen significant increases in installed capacity really even in the last six months,’ said Joe Weidman, a partner with law firm Keyes, Fox and Wiedman, LLP. ‘The last report that was sent to the legislature had I believe it was PG&E and SDG&E down in the teens, SCE in the high teens,’ he continued. 
But if you look at the latest figures, everybody’s up over 20 percent.  I mean things are really starting to move,’ he concluded.

Ben Higgins, Director of Government Affairs with Mainstream Energy, an integrated solar solutions provider, concurs:  ‘California is where the future happens first and not just in solar but in lots of other things,’ he said. Higgins feels there is no question that California will meets its goal.  ‘When we look at the responses to the solicitations that utilities have offered, as of late for larger-scale, utility-scale, in-front-of-the-meter solar projects, [because smaller-scale residential and commercial projects aren’t eligible] the response has been overwhelming,’ he said.

‘By way of example,’ he continued, ‘the request for offers made by the three investor owned utilities in California late last year, saw 91 gigawatts worth of projects bid in to that single solicitation.  I mean, that’s more bid into the single solicitation than would be required to meet the RPS in 2020,’ Higgins said.

And the goal remains excellent.  Almost all renewable energy executives agree that it is a victory for renewable energy that California even passed such an aggressive RPS.  But what many analysts and solar industry executives familiar with the California market question is the infrastructure, the real means of getting all that renewable energy in the ground.  Many experts believe that the state just doesn’t have enough in place to seal the deal. 

‘I think it is a difficult goal to reach when you take a look at the problems California is experiencing in terms of its budget,’ said Paula Mints an analyst in the energy practice with Navigant Consulting.  ‘Recently, we had a large city [Stockton] go bankrupt,’ she said. With large cities struggling, utilities struggling, people struggling, social services being cut, she said that she believes the state should keep the goal but understand that California’s infrastructure ‘is not prepared for that much renewables.’

Infrastructure is defined as transmission and money and according to Mints the money just isn’t there, nor is the transmission.  A report issued by the California Energy Commission shows that the total cost of transmission to meet the 33 percent by 2020 goal is $7.2 billion dollars.  A list of the twelve transmission upgrade projects, their approval status and the renewable potential they provide is below.

Mints remains optimistic that the state will do what it can but said that the goal will take a long time to reach. ‘Obviously I believe that we are in the beginning of an energy revolution and to make that happen is going to be a long, hard struggle.’

According to a report issued by consulting firm MRW and Associates, based in Oakland, California, even though California ‘aspires to be the renewable energy promised land, there are numerous obstacles to converting the megawords into megawatts.’ The firm said that to meet the 33 percent goal, seven additional power lines must be built at a cost of $12 billion, a much higher estimate than the CEC’s $7.2 billion.  In addition, the firm also points out that not only will the cost of all that transmission be astronomical, significant siting hurdles will also have to be overcome.

Michael Ludgate, Senior Director of Sales with Sharp Solar agrees that the goal is worthy but not reachable: ‘I love the objective. The goal is good. The question is [then] is the rest of the infrastructure in place? I don’t mean utility infrastructure. I mean the money, the incentives,’ he said.

According to a recent article from the LA Times, California’s budget deficit hit $16 billion in January, which means that more cuts will need to be made in order for the state to balance its budget just this year alone. Finding billions of dollars more for new transmission lines and transmission upgrades could prove to be problematic, especially for a state grapping with unemployment above 10 percent and a real estate market that has lost as much as 35 percent of its value since the housing bubble burst in 2008.

Evan Vogel, VP of sales for Ampt, a company that makes optimizers for solar power agreed that the money California needs to meet its goal just isn’t there: ‘You’ve got the bragawatts and the megawatts,’ he said. ‘So the answer is no [the state won’t meet the RPS]. And it’s not because of anything else except funding.  The state can’t afford anything and the deals are out of the money,’ he said. 

Mints takes a very realistic look at the landscape and pointed out that California has often struggled for funds: ‘In market research, you shouldn’t take anything out of context and solar operates in the ecosystem of the world,’ she said. ‘So what is happening around solar affects whether or not the market is there. For example, I remember when PG&E declared bankruptcy many years ago. ‘

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One the other hand, Weidman said that we must consider that the RPS was only just enacted and that the state will continue to ramp up over the next few years. ‘I think the RPS got off to a slow start because people were very focused on making sure that the RPS was as competitive as possible,’ he pointed out.  ‘ Just last year, the commission authorized 4200 MW of renewable energy through power purchase contracts,’ he continued.   So we’re moving along on the stage we need to move on. It’s just taken a while to get started but now it’s really moving,’ he said.

And the large-scale development arena remains full to the brim. Of those 91 GW that Higgins pointed to ‘certainly many of those project are not going to come online, he said, but ‘the large-scale development sector is a very, very crowded one.’

Weidman thinks no matter what, California will find the money to meet its RPS and points to other important reasons that the state will pursue it, such as clean air and job creation:  ‘I think the money is definitely there and I think that in the long run when people look back they’ll see that this energy transition and upgrades to the grid have resulted in net benefits to ratepayers and also a cleaner environment,’ he said.  Further, ‘I think it’s also important to point out that the jobs that are created by these industries are not outsource-able.’ He said that the installers and other folks working on infrastructure projects must be located in the state and that those are ‘good quality jobs.’

He agreed that the state is struggling but said that indeed even in tough economic times, states need to continue to invest in the future.  ‘As a matter of fact, that’s what ensures we have the infrastructure in our society so that when the economy does pick back up, the infrastructure is there and ready and waiting,’ he said.

‘So I think we are headed on that path and California is wisely making those investments now,’ he concluded.

Wendy Arienzo, the CEO Array Power, a California-based microinverter company pointed out that meeting the RPS will also be a political struggle.  ‘We’ve made life very difficult this year with the loss of the 1603 and the pending [solar cell] tariffs, so in an industry that’s struggling to grow, we’ve made it a little bit more difficult,’ she said.  She said that she felt if all the stakeholders involved were able to work uniformly toward the RPS goal, of course the state could meet it, but ‘in the divisive political structure and in an election year, it just makes things that much more complicated,’ she said.

Higgins remains steadfast in his belief that California will not have any trouble installing 13 percent more renewable energy in the next eight years and said that there may in fact be the opposite problem. ‘I think the larger problem that we are facing in solar -- and this is true nationally -- is in fact, over-compliance with renewable portfolio standard and renewable energy standard targets,’ he said.  He pointed to states such as New Jersey and Maryland where the legislature has passed bills that accelerated their solar mandates in order to deal with the over-compliance issue.  ‘So, it’s over-compliance not under-compliance that is the large challenge,’ he believes.

All in, Mints doesn’t want the RPS to change or be watered down like what happened to the national renewable fuel standard (RFS). The RFS was amended to require less ‘second-generation’ biofuels to be on the market because, well, there just weren’t enough commercial-scale biofuel refineries out there to provide what was needed.  Mints would like to see California accomplish the RPS but she remains realistic. ‘It’s problematic assuming that we’re going to actually achieve that goal,’ she concluded,  ‘but I don’t want to see it go away. At the same time I also want to see school kids have hot lunches and the elderly have home care,’ she said.

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