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Status of California Renewable Policy in 2011

As the new year begins, those in the renewable energy business know that California still has many unanswered questions as to how it will achieve its renewable energy policy goals. The state has repeatedly made it clear on several fronts that its major environmental policy target is to procure 33% of the state’s electricity from renewable resources by 2020. The various state agencies still have a lot of questions to answer before one can consider this a stable policy environment, but there is a lot of momentum and work happening to resolve these questions and advance the renewable energy movement in California.

As the State Legislature continues its endeavor to craft a 33% bill that will pass and that the Governor will sign, many other pieces of the puzzle are taking shape in 2011. Newly elected Governor Jerry Brown made the 33% standard a central theme in his energy and environmental platform, but it is only now becoming clear how his administration will move forward to implement these renewable energy policies. His initial Commissioner appointments to the California Public Utilities Commission (CPUC) and California Energy Commission (CEC) provide some insight.

Governor Brown recently filled two of the three vacancies at the CPUC and both of the vacancies at the CEC. Mike Florio and Catherine Sandoval were appointed to the CPUC. Commissioner Florio is a longtime advocate for consumer interests, and Commissioner Sandoval is a former law professor with expertise in the telecommunications industry. Former Commissioner Nancy Ryan was reappointed to her previous position as Deputy Executive Director for Policy and External Relations. At the CEC, Commissioner Robert Weisenmiller was reappointed and Commissioner Carla Peterman was appointed to the environmental seat. Commissioner Peterman previously held an academic position.

This year, California Senator Joe Simitian has championed the push to codify the 33% renewable energy standard once again. In December 2010, he introduced SB 23. With many new legislative members, a new governor/administration, and with an existing regulatory mandate on the books, this year’s state’s legislative dynamics will be very different than the dynamics last year. It remains to be seen if this year will accomplish what last year’s Legislature session could not. And if so, questions remain whether the bill will look similar to last session’s SB 722, or whether the author will take into account some of the additional administrative work completed at the CPUC and the California Air Resources Board (CARB).

CARB and the CPUC have indeed continued to move ahead with regulatory proceedings. CARB continues to advance their 33% renewable energy standard regulation, and bring the regulatory adoption process to a close. CARB’s actual rulemaking proceeding is still pending, but it is anticipated that many of the big issues raised when the regulation was adopted will be resolved when CARB makes the revised language public in the near future. CARB is currently waiting to receive input from the new Brown Administration and the rulemaking must be completed by June 2011.

Likewise, the CPUC has been busy working on policy mechanisms for the existing 20% renewable portfolio standard (RPS) before turning their attention to the 33% standard. Specifically, the CPUC continues its efforts to establish criteria for the use of Tradable Renewable Energy Credits (TRECs). These credits allow for the environmental attributes of generated power to be sold or traded independently of the power itself, and are viewed as critical for the success of any renewables program. On January 13, 2011, the CPUC adopted a decision to authorize the use of TRECs for compliance with the existing 20% RPS program. The decision limits investor-owned utilities to meet up to 25% of their total RPS purchase obligation with unbundled RECs, and establishes a price cap of $50.00/REC. But the debate over these requirements is not over, as multiple parties have recently filed requests for rehearing or petitions to modify the decision. While the CPUC has made clear that the limitations on the use of tradable, unbundled, and out-of-state RECs established in the decision apply only to the 20% RPS, the bigger question is whether or not the CPUC will apply the same criteria, when finalized, to the 33% standard, be it in CARB’s renewable energy standard or a new legislative mandate.

Despite the remaining unanswered questions, California continues to progress towards its goals. The CPUC reports that in 2010 alone, 653 MW of new renewable capacity came on line, which is almost double the amount that came on line in 2009. In 2009, California’s investor-owned utilities collectively served 15.4% of their electric load with renewable energy.

As the year unfolds, lawmakers and regulators must work to achieve the State’s goals as quickly as possible. Until then, time will tell whether California will achieve the regulatory certainty necessary to promote a robust renewable energy market.

Jon Costantino is a Senior Advisor at law firm Manatt, Phelps & Phillips, LLP, in the Sacramento Government practice group. He manages complex political and regulatory issues for clients in the area of  climate change, clean energy and environmental issues and previously served as Climate Change Planning Manager within the Office of Climate Change at the California Air Resources Board. Mr. Costantino can be reached at (916) 552-2365 or jcostantino@manatt.com.

Tara Kaushik is an Associate with Manatt, Phelps & Phillips, LLP in the San Francisco office, where she focuses her legal practice on energy regulatory matters. She has primarily represented renewable power, clean technology, natural gas pipeline, oil refinery, and water utility companies before the California Public Utilities Commission. Ms. Kaushik can be reached at (415) 291-7409 or tkaushik@manatt.com.

One thought on “Status of California Renewable Policy in 2011

  1. Well one thing is for certain in California – the RES will NOT be achieved with distributed solar on a million residential rooftops! There is no commitment by the CPUC or utility providers to pursue solar PV at the point of load where it makes the most sense from an environmental perspective, reliability, safety, and infrastructure. No, with an incentive of only $1.65W AC net inverter output, a mandate for commercial (read UNION) installation, and local installers charging $9/W AC net inverter and you have a market that is very quickly going to zero.

    We can fix this issue by freeing up the home/building owner to install solar on a DIY basis and still receive the full incentive. Further, the incentives need to be brought back to the $4 or even $5/W level with a caveat that the incentive may not exceed 50% of the gross installed costs. With DIY systems now eligible for full incentives the pressure will remain on the professional installers to keep their prices in line and not raise them once again (as they do every time there are new incentives).

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