In a strange but interesting demonstration of cynicism, Governor Schwarzenegger recently signed an executive order directing state agencies to develop regulations requiring all utilities to achieve 33 percent renewable energy by 2020 — while at the same time promising to veto a far stronger and smarter mandate in two similar bills finally passed by the Legislature.
California political observers will recall that Schwarzenegger campaigned in his first gubernatorial race on a 40 percent by 2020 goal, making renewable energy the front piece of his effort to paint himself as the environmentalist governor to outdo the likes of Governor Moonbeam (Jerry Brown) himself, the once and perhaps future governor. As I mentioned, however, in my last column, the state is failing to meet current renewable energy mandates, backsliding from over 13 percent renewables in 2002 (excluding large hydro, which is about 20 percent of the state total), when the current system was put in place, to about 10.6 percent in 2008. What gives?
The current system, SB 1078’s Renewable Portfolio Standard, which governs utility-scale renewable energy, has been very slow to produce new projects for a variety of reasons. The main reasons have been lack of adequate transmission and inadequate pricing for renewable energy other than wind power. These problems may be on their way to being solved, with a slough of new projects in the pipeline and transmission line construction proceeding, albeit sloooowly. But it’s still clear that we need some major changes to our current system if we are to achieve the current 20 percent by 2010 (which has already slipped to 2012 or so) mandate, let alone the 33 percent by 2020 mandate.
Readers who follow California energy politics may also recall that the Legislature’s new bills (SB 14 and AB 64) are only the latest efforts in a multi-year battle to get a 33 percent bill passed. Last year’s casualty was SB 411, which failed even though it was a toothless mandate, gutted by the opposition before it was finally killed. Similar bills failed in the preceding three years. It is, then, quite a feat that the Legislature finally got its act together to pass these two bills. It is also testimony to the seriousness of the legislative leaders that these bills passed and attracted the support of two of the big three utilities, as well as most of the large environmental groups. Each of the bills makes a number of changes to the RPS system, attempting to correct the flaws that have made the program so ineffective in the first seven years of its operation.
The Governor threatened his veto mainly based on the argument that the bills allow only 30 percent of out-of-state “unbundled” renewable energy certificates (“RECs,” which represent the green attributes of renewable energy as a separate commodity from the power itself) to satisfy the mandate. SB 14 actually allows only 25 percent of RECs to satisfy the mandate.
The Governor’s spokesman also made the bizarre argument that the bills would “kill the California solar industry.” This seems to be a standard argument regarding renewable energy legislation in California, as it has been used erroneously many times in the past (with last year’s ill-fated Prop 7, for example, when it was argued, equally bizarrely, that it would kill the state’s solar industry).
Assuming charitably that the REC limitation is the real reason for the threatened veto, it seems a strange rationale. Yes, if climate change is our sole concern for a higher mandate, it matters naught where the renewable energy is produced. But advocates of renewable energy have never argued that climate change is the only motivation for better renewable energy policies.
Rather, there are many other benefits from more wind, solar, biomass, geothermal and hydropower, including local job creation in manufacturing, construction, operations and maintenance. If projects are out of state, many of the new jobs will also be out of state. Similarly, the tax revenue from such projects will also be out of state. And the energy independence benefits will be out of state.
So it makes quite good sense to limit the degree to which out-of-state projects can satisfy the mandate. I think a 25-30 percent limitation is quite reasonable and this was debated by all sides working on the bills.
Joe Simitian, the author of SB 14, argued correctly that an executive order is a far worse way than legislation to enact a new mandate: “As soon as he leaves office, the next governor could undo the order,” Simitian said. “The order could be wiped off the books in 18 months.” Executive orders may be used to implement details of already existing legislation, not to effectively make new law without due process.
The executive order itself is also sneaky: paragraph one directs the Air Resources Board (CARB, which is the agency tasked with implementing AB 32, the Global Warming Solutions Act, the “big daddy” of California’s climate change legislation) to complete regulations regarding a 33 percent mandate, but leaves the date for reaching this goal up to CARB. There have, however, been numerous analyses of this target, including a recent analysis by the Public Utilities Commission (CPUC), finding that achieving the 33 percent mandate by 2020 is “highly ambitious” but achievable if action is taken quickly and will lead to a utility rate increase of only 0.5-1.1 cents per kilowatt hour above the reference case scenario (this is a 3-6 percent increase by 2020, which is a bargain when we consider the benefits of renewable energy). The CPUC projections do not, however, include any cost reductions in renewable energy technologies, which is an unfortunate and unrealistic assumption.
The executive order contains almost no details regarding implementation of the 33 percent RPS — and this is obviously intentional. The Governor apparently preferred to leave all details to CARB, the CPUC and the Energy Commission (which must be consulted by CARB in its regulatory process). Sometimes this approach can be good. But in this case, because we obviously need a major overhaul of the current RPS system, simply directing the state agencies to implement rules for a 33 percent RPS seems unwise. It’s unlikely that these agencies will take big risks or put forth big ideas for revamping the RPS system. This is the Legislature’s and the Governor’s job. The Governor has said, with his order, effectively: “I don’t like the Legislature’s bills, but I don’t have any better ideas of my own. So I’m going to punt this to the state agencies.”
We can do much better and we can hope that the Governor will re-consider his veto threats. Now that he has accrued some increased limelight with his executive order and the accompanying press attention, let’s hope he’ll return to work with the Legislature and the state agencies in implementing real reform.
Tam Hunt is president of Community Renewable Solutions LLC, a developer of medium-scale wind, solar and biomass projects. He is also a Lecturer in climate change law and policy at UC Santa Barbara’s Bren School of Environmental Science & Management.