Excess California Power Means Penalty for Renewables

In what some have described as a simplistic reaction to its electricity crisis, the state of California has committed to buy more power than consumers are likely to use over the next few years, a move which may harm renewable energy sources.

SACRAMENTO, California, US, 2001-11-28 [SolarAccess.com] Renewable energy facilities are not subject to the type of price fluctuations and shortages of other energy sources that contributed to the crisis, according to green energy advocates. Notwithstanding, 95 percent of new generation in California for the next five years will come from natural gas-fired plants, according to the California Energy Commission. The actions by state officials has left renewable generators without any substantial avenue of expansion and, with an end to deregulation, consumers have no new options to buy green power. Some alternative energy suppliers have pulled out of the state because lenders will not finance new green power ventures if the companies don’t have prospective customers, and large utilities can buy power to supplement their own generation from the generation ensured under the state contracts. The renewable energy industry in California was ready to take off, with annual supplies from solar, wind, hydro, geothermal and biomass reaching 25,000 GWh and wind power falling to 5 cents per kWh, to be competitive with other sources. The California Energy Commission wants to increase renewable energy from its current 12 percent of consumption to 17 percent in five years. Instead of being paid on a fluctuating basis tied to the price of natural gas, renewable energy suppliers will be paid 5.4¢/kWh for the next five years, which could be a favourable development if they can expand. The CEC’s renewable energy manager, Marwan Masri, is concerned but says that some renewable energy ventures should be able to move ahead. He adds that such projects can last 30 years, but the state’s power purchases will peak in the next three years and then decline, making room for other power providers. State policy encourages renewable energy projects, providing $135 million a year in various incentives with money raised from a 30¢ monthly fee on residential electricity bills. The subsidies have been helpful, but are viewed as of little use if renewable energy companies cannot find customers for their energy. John White, executive director of the Center for Energy Efficiency & Renewable Technology in Sacramento, would like the state to negotiate out of enough long-term power purchases to open the market to alternative power ventures. CEERT is working with a variety of environmental, consumer and industry groups to respond to what it calls California’s “repeat mistake of over-reliance on natural gas.” CEERT’s solution is more renewable energy in the state through the introduction of a Renewable Portfolio Standard, to double in-state use of renewable energy to 20 percent by 2010, which would be a 1 percent increase every year. Not only is an RPS an obvious environmentally sound energy policy, according to CEERT, but California has relied on solar, wind, geothermal and biomass technologies for more than 10 percent of its electricity for 15 years. Renewable energy sources are not subject to price fluctuations and expanding the ratio of renewables in California’s electricity mix will hedge against price volatility of natural gas, protecting consumers against increases in electricity rates and providing long-term rate stability. Another proposal would allow green energy suppliers to offer residential and small commercial customers with a new ‘direct access’ plan. White says consumers should be able to purchase power directly, as long as the providers are renewable energy generators.