TODAY’S STUDY: CALIFORNIA BUILDING A NEW ENERGY ECONOMY

Renewables Portfolio Standard Quarterly Report; 4th Quarter 2011
February 2012 (California Public Utilities Commission)

ABOUT THE RPS AND THIS REPORT

California’s Renewables Portfolio Standard (RPS) is one of the most ambitious renewable energy standards in the country

Public Utilities Code §§ 399.11 – 399.19, established in 2002 under Senate Bill 1078 (Sher) and modified in 2006 under Senate Bill 107 (Simitian), requires retail sellers (investor-owned utilities (IOUs), electric service providers (ESPs) and community choice aggregators (CCAs)) regulated by the California Public Utilities Commission (CPUC) to procure an additional 1% of retail sales per year from eligible renewable sources until 20% is reached, no later than 2010.

In 2011, Senate Bill SB 2 of the First Extraordinary Session (SB 2 (1x)) (Simitian) (Stats. 2011, ch.1) made significant changes to §§ 399.11-399.31; it increased the renewable target to 33% by 2020 and required both retail sellers and publicly-owned utilities to achieve a 33% RPS. The CPUC and the California Energy Commission (CEC) are jointly responsible for implementing the program.

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While the RPS program is the primary vehicle for new utility-scale renewable energy development in California, there are other programs that stimulate development of customer-sited renewable generation. The California Solar Initiative (CSI) and Self-Generation Incentive Program (SGIP) provide incentives for customers to install renewable distributed generation technologies that directly serve their on-site load.1 The electricity generated from power systems installed through CSI and SGIP may contribute to the RPS provided that RPS eligibility requirements established by the CEC are met. 2 Also, generation from these facilities indirectly contributes to the RPS by reducing electricity demand when serving customer load. Furthermore, it provides the customer clean, renewable, carbon-free electricity.

The Commission issues this report on the RPS program every quarter pursuant to the 2006 Budget Act Supplemental Report Item 8660-001-0462. This report focuses on California’s three large IOUs: Pacific Gas and Electric (PG&E), Southern California Edison (SCE), and San Diego Gas & Electric (SDG&E). These IOUs currently provide approximately 68% of the state’s electric retail sales and analyzing this data provides significant insight into the state’s RPS progress.

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EXECUTIVE SUMMARY

RPS Cost Reporting Pursuant to SB 836

• This report presents historical data on cost trends since the RPS program was first implemented.

• The weighted average time-of-delivery adjusted cost of all contracts approved from 2003-2011 was approximately 11.9 cents per kilowatt hour (kWh), with a range of 5.4 cents in 2003 to 13.3 cents in 2011. Most recently, bids from the 2011 RPS Solicitation, not yet available for inclusion in the report, show significantly lower costs than bids from the past few years, which will be reflected in future IOU contracts.

• The overall picture is that the renewable market is robust, competitive, and has matured since the start of the RPS program.

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Status of RPS Procurement

• Collectively, the large IOUs reported in their August 2011 RPS Compliance Reports that they served 17.0% of their electricity with RPS-eligible generation in 2010. PG&E served 15.9% of its 2010 load3 with RPS-eligible renewable energy, SCE with 19.3%, and SDG&E with 11.9%. Per the procurement requirements in SB 2 (1x), the utilities must average 20% RPS from 2011-2013, which all three utilities are projected to attain.

• Since 2003, 2,541 MW of new renewable capacity achieved commercial operation under the RPS program. Over 830 MW of new renewable capacity came online in 2011.

• The IOUs submitted 68 contracts representing 4,525 MW of renewable capacity in 2011. In the same time period, the CPUC approved 44 contracts representing 2,461 MW of renewable capacity.

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Highlights of Recent and Upcoming Events

• On May 5, 2011, the CPUC began implementing SB 2 (1x) through the RPS Rulemaking (R.) 11-05-005. On December 1, 2011, the CPUC approved Decision 11-12-020, which establishes the new RPS procurement requirements for three compliance periods through 2020 (2011-2013, 2014-2016, and 2017-2020). On December 15, 2011, the CPUC approved Decision 11-12-052, which implements the new RPS portfolio content categories, set out in new Public Utilities Code § 399.16. A third proposed decision establishing new compliance rules is expected in the first quarter of 2012.

• On December 15, 2011, Energy Division issued a request for proposal (RFP) to solicit consulting services for the development of a new cost containment mechanism pursuant to SB 2 (1x), which directs the Commission to establish a limitation for each IOU on the procurement expenditures for all eligible renewable energy resources used to comply with the RPS. The Energy Division issued three more RFPs in 2012 to solicit additional RPS support services.

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• On January 10, 2012, Administrative Law Judge DeAngelis and Commissioner Ferron issued a Ruling directing the IOUs to work together to create a uniform standard contract for the renewable feed-in tariff program. Energy Division staff will hold a workshop on February 22, 2012 for stakeholders to review the IOUs’ proposed contract. The Ruling noted that a decision on program pricing and design is expected in the first quarter of 2012 and a second decision adopting a uniform contract is expected in the second quarter of 2012.

• On January 31, 2012, the three IOUs offered standardized, non-negotiable contracts to the successful bidders resulting from the first Renewable Auction Mechanism solicitation, which closed on November 15, 2011.