Schwarzenegger to Veto 33% RPS Bill

Governor Arnold Schwarzenegger says he will veto the Legislature’s adoption of the 33% RPS standard he proposed because they added a provision requiring all these renewable resources to come from within California.

Unrealistic and too expensive for ratepayers

That is the Governor’s conclusion, he is right, of course, and he also recognizes the subtle but growing push back coming from some significant players and advocates of green energy who fear over-reaching especially in the current economy might hurt green energy more than help it—if California stumbles.

Why fear California might stumble?

Because achieving the AB32 goal of emissions reduction goes beyond what California can realize on its own.  It requires financial and policy support from the Federal Government and other states.  Boosting California’s renewable portfolio standard to 33% by 2020 is, by itself, a breathtaking goal for any state—even the sixth largest economy in the world. Attempting to do so when your state is co-dependent on others is a very daunting challenge.  Depriving other Western states with substantial renewable energy resources and the transmission access California requires from selling into the California energy market is—well, to be honest—dumb!

California’s Energy Co-Dependency

Realizing that 33% renewable energy goal required that California must triple the amount of renewable electricity from 27 terawatt hours (TWh) today to about 75 TWh in 2020 and means building seven new transmission lines to deliver that additional 75 TWh of electricity just within the state.

The CPUC report outlining its preliminary analysis of what it will take to implement the RPS goal said that achieving the 33% target would take longer—2024 not the 2020 desired, and cost more—-as much as $12 billion in capital investment in new transmission lines just in California to get such large scale renewable energy to market; raise utility rates even higher—-CPUC estimates that under its current 20% renewable portfolio standard the average residential electric bill will already increase 16.7% by 2020; and may not be cost effective—- because natural gas prices would have to be higher than $13.87/MMBtu and any proposed CO2 tax would have to be higher than $100 per ton for renewable energy to be an effective hedge against fossil fuel prices from today’s typical utility portfolio. [1]

Rising Costs of Renewable Energy in California Risk Ratepayer Backlash

Meanwhile back on the ratepayer’s energy bill bottom line, California’s punch list of coming rate shocks continues to worry renewable energy advocates:

  • Let’s Make Efficiency More Efficient. On May 28th, the California Division of Ratepayer Advocacy (DRA), part of the CPUC, released its analysis of the California investor owned utilities energy efficiency proposals to the CPUC concluding that the $4 billion request to double energy efficiency program spending would result in only 6 percent more in energy savings than previous programs that cost ratepayers 50% less.[2]
  • Does Doubling Down on Solar Roofs Make Sense? On June 18th DRA also complained state regulators were making a bad decision by doubling the size of the SoCalEd solar rooftop program telling the CPUC the program is not worth the $2 billion utility customers may have to pay for it given cheaper alternatives available.
  • Celebrate Achieving Net Metering Goals, Don’t Raise them. San Jose Mercury News reported June 19th that PG&E opposed Assembly Bill 560 increasing the cap on net metering from 2.5% to 10%.  PG&E is near the current 2.5% cap, ahead of other utilities, argues expanding the cap is unfair non-solar customers who must subsidize solar customers.  AB 560 proponents say raising the 2.5% cap is necessary to achieve the one million solar roofs goal by 2016, but Northern California interests say utilities in Southern California should catch up to PG&E before a 400% expansion of net metering.
  • Solar Credit Rules are not Broken, Don’t Fix Them. AB 920 requires utilities to rollover solar credits to the power grid or pay them out in cash at year end at a lower rate.  PG&E also opposes this bill as well, according to news reports, saying the bill requires non-solar customers to further subsidize solar users.  PG&E is ahead of other California utilities in reaching its solar use goals, but is under increasing pressure to raise those targets. Under current California rules, solar customers receive full retail rate credit on their monthly bill for surplus power provided to the grid and use those credits during the calendar year to offset their energy use when consuming power from the grid.  Unused credits expire each year.

California Electricity Rates will be higher in 2020 no matter what

According to the CPUC, average California electricity costs per kilowatt-hour will go up 16.7% in 2020 because of current renewable procurement compared to 2008 in real terms even if no new renewable energy is added.

Total California electricity expenditures will be 2.8% higher in 2020 because of the existing 20% RPS standard than they would be under the CPUC scenario where future demand is met by natural gas.

If the 33% RPS goal Schwarzenegger now says he will veto had been approved by 2020 total California electricity expenditures would have risen by at least 7.1% more compared to the 20% RPS, and 10.2% more compared to the cost of gas according to the CPUC—BUT that assumed California could import wind and solar energy from other Western states.  By requiring that all the incremental renewable resources must come from within California, the Legislature effectively killed California’s AB32 greenhouse gas emissions implementation and made it impossible to achieve the Governor’s 33% RPS goal.

In this case, the end of session stumble by the California Legislature in screwing up the 33% RPS bill so badly that even its sponsor, Governor Schwarzenegger must veto it has probably done ratepayers and the reputation of renewable energy a big favor.