California Ups the Stakes for Renewable Energy Programs
What started out as a rate-reform bill that had
been pushed by California’s utilities ended up as a
law to increase the state’s renewable energy
offerings. Among the big winners are the rooftop
solar businesses, which expect to see more people
buy their product now that the law has passed.
The law, known as
AB 327, will ensure that the net metering laws,
which had been set to expire in a year, will remain
in place. It’s a complicated calculation but the end
result is that the three major investor-owned
utilities there -- Sempra, Southern California
Edison and PG&E Corp. -- must have installed at
least 5,200 megawatts of net metered generation,
which allows customers to sell any unused power that
they self-generate back to the utility.
The law will also remove the cap set on the amount
of power -- and therefore reimbursements -- that had
been previously set under the net metering laws. It
had been 5 percent of a utility’s non-peak load.
Finally, the law lifts what had been a ceiling on
the amount of renewable electricity that a utility
would need to generate. There had been a 33 percent
renewable portfolio standard. Now, that level is
considered to the minimum amount that the utilities
must offer.
Can the state handle all those renewables
requirements? That is, does the grid have enough
space on it? “The best way to do more renewables is
to keep those electrons completely off the grid and
to put it on people’s roofs,” says Bryan Miller,
vice president of public policy at
Sunrun in San Francisco, which provides such
rooftop solar panels. “At its most basic level, the
law removes the regulatory constraints that had been
on California’s renewable markets.”
Right now, California generates about 20 percent of
its electricity from renewable energy, although most
of that comes from hydropower. A report recently
issued by the
California PUC says that as of January 2013,
there was enough renewable generation on line or
under construction to reach the 33 percent goal by
2020. It expects much of that future generation to
come from solar power.
To be exact, since 2003, 5,142 megawatts of
renewable capacity were added to California’s grid.
There will be 3,521 megawatts added this year, which
far exceeds 2012 levels that had been 1,957
megawatts. Total: 8,019 megawatts. Still, the agency
says that it is keenly aware of the issues that
could thwart further development, namely a
lack of sufficient infrastructure as well as the
array of environmental permits that are required to
build such transmission.
Nationwide Debate
Beside finding space on the grid, other concerns are
that wind and solar power are
intermittent sources. That means if the wind is
not blowing or the sun is not shining, then the
utility must provide back-up power, which is
transported along the gird. And that brings up
another hurdle that had to be overcome and it is one
that is also getting fiercely debated in other
states such as Arizona and Colorado.
Indeed, 29 states have renewable portfolio standards
while 43 states have net metering laws that outline
exactly who gets paid for what when consumers
generate their juice. Those laws are especially
important to rooftop solar developers. As discussed,
California re-calibrates all costs and
reimbursements, as well as creates the framework to
institute a completely new set of net metering laws.
“There are still elements of the bill that will play
out in the market, but with this extension, we
expect the state to hit 5,000 megawatts of
net-metered customers in California by 2017 --
representing hundreds of schools, families,
businesses, hospitals, community centers and
churches -- that were able to invest in solar and
reduce their reliance on fossil fuel energy for the
coming decades,” says Mike Hall, chief executive of
Borrego Solar Systems.
"While the economics of solar are attractive in many
regions without policy support, Governor Brown's
signing of California AB 327 into law will help
continue the momentum for solar innovation and
adoption in the state,” adds Mike Dooley, VP of
marketing at San Jose-based
Advanced Energy Solar Energy.
California’s utilities have gone along with the
bill. But, historically, those companies -- and
others around the country -- have been skeptical of
the net metering laws. That’s because those power
companies must still procure enough electricity to
meet what could be their peak demand -- all to send
electrons to consumers using distributed generation
when the sun dims or the winds cease.
At the same time, grid maintenance is not free and
even if those “self-reliant” customers infrequently
use such services, they still need to pay their fair
share. Otherwise, those costs would fall on a fewer
people and raise their price of power. The
Edison Electric Institute has said that the
industry collectively spends $25 billion a year to
keep up the grid.
Basically, if financial incentives cause more people
to go off the grid it would affect revenues. That
diminishes utilities’ means of improving overall
grid performance, says the institute. It also hurts
their ability to access the capital markets. “The
financial risks created by disruptive challenges
include declining utility revenues, increasing
costs, and lower profitability potential,
particularly over the long-term.”
In the end, Californians of most stripes coalesced
around this law. Now the debate will continue in
other sections of the country.
Twitter: @Ken_Silverstein
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