In California, Not All Renewable Energy Investments Are Created Equal

, Senior energy analyst | July 23, 2012, 10:03 am EDT
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Last week, UCS released a report analyzing the renewable energy investments that California’s 10 largest publicly owned utilities (POUs) made towards the state’s first Renewables Portfolio Standard (RPS) goal, which encouraged POUs to source 20 percent of their electricity from renewable sources like the wind and sun by 2010. The RPS was expanded in 2011 and now requires all utilities to reach 33 percent renewables by 2020.

Photo source: Charles Benton

How do California’s public utilities measure up?

So how’d they do? Good news overall. We found that collectively, these utilities increased their clean energy investments from 4% to nearly 19% of retail electricity sales by the end of 2010. However, the degree to which these investments promoted the development of new clean energy resources varied significantly among the utilities.

Why aren’t all renewable energy investments created equal?

Utilities consider several different factors when purchasing renewable energy. Cost, location, size, type of resource, and length of commitment are all factors.

Since a primary purpose of the RPS is to increase the amount of clean electricity generating for Californians, we believe that utilities should focus on making long-term commitments for new renewable energy projects, or building new facilities themselves. These types of transactions actually get new projects built. Why is this important? Because more renewable energy generation means less reliance on coal and natural gas-fired electricity, which means less air pollution and greenhouse gas emissions. Also, new projects mean new jobs. That’s hugely important for an area like the Imperial Valley, which has one of the highest unemployment rates in the country.

Yes, it’s possible to buy renewables for three or five years to hit a specific mark, but these investments don’t usually provide the long-run financial security necessary to finance a new project, and increase a utility’s RPS portfolio temporarily. Soon, these contracts will need to be renegotiated or the utility will need to seek out other resources. Either way, going out into the market to purchase renewable energy will likely be more expensive as compliance deadlines approach.

California’s public utilities have an important role to play in helping the state transition away from fossil fuels and meet statewide greenhouse gas emissions goals. By 2010, the POUs still relied on coal and natural gas for two-thirds of their retail sales, and supplied about half of the coal-fired electricity consumed in the state.

Individual utility progress

For the report, we created three categories based on how well each utility’s RPS investments promoted the development of new renewable energy resources.

We found that Silicon Valley Power, Modesto Irrigation District, and Turlock Irrigation District were “sprinting ahead;” the Los Angeles Department of Water and Power, Sacramento Municipal Utility District, Riverside Public Utilities, and Anaheim Public Utilities were “on the right track, but must keep moving;” Roseville Electric, Burbank Water and Power, and the Imperial Irrigation District were a “false start.”

The infographic to the right breaks down each utility’s 2010 RPS portfolio by contract length and whether they invested in new or existing facilities.

While nearly all the POUs expanded their clean energy investments between 2003 and 2010, some had more impact than others on promoting new project development.

A few utilities approached or met the state’s 20% goal by focusing investments on long-term commitments for new projects or building their own; others, including the Imperial Irrigation District and Roseville Electric, did not pursue new projects as aggressively, or relied heavily on short-term contracts. The Los Angeles Department of Water and Power, the largest publicly owned utility in the country, made several investments in new wind projects, but also relied on short-term contracts for nearly a third of its RPS program.

The web page created for this report contains a cumulative analysis of the 10 POUs, an executive summary, and a detailed fact sheet on each utility. Some of the utility-specific fact sheets have been translated into Spanish. Please explore the site for more information.

Looking ahead to 33%

It’s important to keep in mind that this analysis looks at the utilities’ RPS investments between 2003 and 2010, at a time when renewable energy investments were encouraged, but not a requirement for the POUs. Our report provides a sneak peak into where the utility is at the beginning of the new RPS program, and how far they need to go to reach 33%. In most cases, the POUs are off to a great start.

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