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California’s Transition To Local Renewable Energy: 12,000 Megawatts By 2020; A Report on the Governor’s Conference on Local Renewable Energy

Jeffrey Russell and Steven Weissman, June 7, 2012 (Center for Law, Energy & the Environment)

Executive Summary

Background

California has one of the most ambitious renewable energy programs in the country, with a target of procuring 33 percent of its electric energy from renewable sources by 2020. Governor Jerry Brown has raised the bar even higher, calling for California to reach and surpass the 33 percent target by developing 12,000 megawatts of local renewable energy: renewable energy electric generation located near the homes, businesses and communities that it serves. 12,000 megawatts represents an extraordinary amount of energy; for perspective, the state’s two nuclear generating facilities are each capable of generating approximately 2,200 megawatts of electricity.

By accelerating the development of local renewable generation, Californians will get more of their power from neighborhood sources. Indeed, the state is already well on its way: Californians from Chula Vista to Crescent City are installing solar panels on their roofs, wind turbines on their farms, and bioenergy generators at their landfills and sewage treatment plants, harvesting the state’s abundant wind, solar, geothermal and bioenergy resources to generate local electricity.

In order to meet its ambitious goals for renewable energy deployment, California must rely on projects both large and small. Along with the 12,000 megawatt goal for local renewables, the Governor has called for development of 8,000 megawatts of larger “utility-scale” renewable energy projects. Those projects – such as the wind farms in the Tehachapi Pass and the solar fields in the desert – have the benefit of adding substantial amounts of clean, renewable energy to the grid through a relatively small number of installations. However, those projects entail their own special planning, permitting, and construction challenges that relate both to the generation facilities and the transmission lines necessary to convey the power from their remote locations to California’s metropolitan areas. Local renewable power can complement the larger-scale projects by enabling a more widely-distributed system of installations situated within or nearer to the built environment.

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In addition to clean power, 12,000 megawatts of local renewables will yield other benefits for the state, including new jobs and economic development in communities affected by the recession, ratepayer savings by avoiding costs for new power generators in remote locations and requisite transmission lines, and additional consumer autonomy to influence both power sources and power rates.

Achieving the 12,000 megawatt goal and maximizing its benefits will not be easy. Development of local renewables at that scale will require a coordinated statewide effort to address a host of financial, regulatory and technical barriers. It will require collaboration, creativity and strong leadership to develop comprehensive and cost-effective solutions.

To address those challenges, Governor Brown convened a conference in July 2011 at UCLA with representatives of agencies, businesses and organizations from across the state that will be involved in or affected by the 12,000 megawatt goal.2 The two-day event , co-hosted by UCLA’s Luskin Center for Innovation, was attended by over 250 key figures from state and local government, utilities, energy developers, public agencies, environmental organizations, ratepayer advocates, and labor and trade groups. Attendees participated in a series of expert-led panels dedicated to different parts of the planning and development pipeline for local renewables. Each panel identified the most critical barriers to achieving the 12,000 megawatt goal and discussed solutions that the public and private sectors can adopt to address those barriers.

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The Conference was a pivotal event: over the months since it occurred, several of the key figures and organizations in attendance have already taken steps to implement solutions discussed at the Conference, including the following:

Renewables on State Buildings: In April 2012, Governor Brown signed Executive Order B-18-12, which sets a target of achieving zero net energy consumption for 50% of the square footage of existing state-owned buildings by 2025, and zero net energy consumption for all new or renovated state buildings designed after 2025.

Faster interconnection: In March 2012, the Rule 21 Working Group released its proposed revisions for the Rule 21 interconnection rules that address most of the critical interconnection barriers identified by Conference participants. The Public Utilities Commission will review and rule on the revisions.

Streamlined permitting: The Governor’s Office is working with local governments, industry representatives and other stakeholders to streamline local permitting for solar photovoltaic installations and to standardize requirements for these installations across jurisdictions.

Robust net metering: In May 2012, the Public Utilities Commission issued a decision clarifying how utilities should calculate the cap on net metering projects.The decision requires utilities to set the denominator for the statutory 5% cap equal to non-coincident aggregate peak customer demand, an interpretation that would support the continued growth of the program and is consistent with the legislature’s intent.

Better siting: Under the auspices of its 2012 Integrated Energy Policy Report, the Energy Commission is examining different metrics for siting of local renewables and strategies to identify areas with preferred characteristics.

Regional strategies: Ongoing efforts by stakeholders, local governments and not-for-profits are making advances toward the 12,000 megawatt goal in cities and counties throughout California. In March 2012, Pacific Environment released “Bay Area Smart Energy 2020,” a comprehensive roadmap to convert 25 percent of existing Bay Area homes and businesses to net zero energy buildings by 2020. In December 2011, the federal Department of Energy awarded a $700,000 grant to a coalition from Southern California comprising Los Angeles County, ten cities and two energy not-for-profits for the purpose of developing model permitting rules and interconnection processes that can bring a streamlined approach to 21% of California’s population.

R&D funding: In December 2011, the Public Utilities Commission established the Electric Program Investment Charge, a funding mechanism intended to fill the void left by the recent expiration of the Public Goods Charge.

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This report summarizes the concerns, observations and suggestions of Conference participants and other stakeholders for clearing a path toward the 12,000 megawatt goal. The report also proposes solutions and immediate and longer-term “next steps”: actions that government leaders, private industry and public agencies can take to implement those solutions. The proposed solutions reflect a combination of input from the conference, post-conference investigation, and extensive research and analysis by the authors. The proposed solutions are presented in this report to inform local, state and national policies that affect efforts to meet the 12,000 megawatt goal, and do not represent the views of the Governor’s Office or any of the other sponsors of the July 2011 Conference.

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Summary of Recommendations

If California’s markets for local renewable generation continue to flourish, Governor Brown’s 12,000 megawatt goal will become just a milestone – rather than a finish line – on the state’s path to a clean energy future. The purpose of the goal, then, is to provoke a conversation about what California needs to do to move beyond the admirable successes it has already achieved to expand local renewable energy deployment in a dramatic way. The solutions lie not with a single body, but with each and every agency, business and organization that will affect our ability to reach the goal. The following is a summary of recommended actions discussed in this report that each sector should take in order to clear the path forward and accelerate California’s transition to local renewable energy.

1. STATE GOVERNMENT…The Governor should…Establish a definition for “local renewable energy” …Articulate the policy objectives…[D]esignates a Local Renewables Action Officer…Adopt an aggressive plan to develop renewables on state property…

Regulators must…Strengthen the net metering program…[S]et and implement regional targets…[I]mprove programs utilities use to buy power from local renewable projects…Require greater transparency…Adopt faster, less expensive and more transparent utility interconnection processes…[T]ransition from the utilities’ traditional top-down, service territory-wide planning approach to a geographically-based plan…

2. ELECTRIC UTILITIES…Provide the quantity and quality of data about the capacity and constraints of the distribution grid…Embark on a geographically-based planning process…Develop local integration strategies…Retain and deploy more electrical engineers and other “grid experts”…

3. LOCAL GOVERNMENTS…Amend general plans to incorporate energy elements or otherwise include policies and specific objectives for local renewable energy…[U]tilize collaborative procurement and project aggregation…Create efficient and regionally-consistent permitting processes…[E]nsure that their local renewable targets and land use plans are consistent with energy resource and grid constraints…Establish Community Choice Aggregations…

4. RENEWABLE ENERGY INDUSTRY…Ensure that public agencies and utilities have the most current technical information about renewable energy equipment…Embrace health and safety and local environmental requirements…Develop ongoing training and certificate programs for installers…

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Overview

1. Grid Planning…POTENTIAL SOLUTIONS: Establish Policy Objectives…Develop an Integrated Mosaic Resource Plan…

2. Integration And Reliability…POTENTIAL SOLUTIONS: Require Local Integration Strategies…Initiate Regulatory and Market Reforms…

3. Financing And Procurement…POTENTIAL SOLUTIONS: Restore Residential PACE Financing…Expand On-Bill Financing…Raise Net Metering Cap and Allow Meter Aggregation…Enable Creation of Community Renewable Energy Systems…Provide Start-up Financing for Community Choice Aggregation…Allow Renewable Energy Developers to Form Master Limited Partnerships…Extend Federal Tax Incentives for Local Renewables…Promote Stability in the Tradable Renewable Energy Credit Market…Clarify Policies for Local Energy Procurement Programs…

4. Interconnection…POTENTIAL SOLUTIONS: Clarify State Jurisdiction Over Interconnection…Increase Transparency of Interconnection Data, Requirements and Costs…Rectify Uneven Interconnection Cost Allocations…

5. Permitting…POTENTIAL SOLUTIONS: Stage a Statewide Permitting Summit for Local Renewables…Encourage Energy Elements in General Plans…Facilitate Coordinated Planning Between Utilities and Local Governments…Promote Community Choice Aggregation Programs…Ensure Widespread Adoption of Most Current Safety Standards and Training Programs for Emergency Responders…Identify State Agencies and Processes that Affect Development of Local Renewables…

6. Public Buildings and Lands…POTENTIAL SOLUTIONS: Improve State Agency Coordination and Expertise…Develop State Building and Lands Inventory…Streamline Agency Procurement and Approval Processes…Research Solutions to Financing Challenges…

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Conclusion

The complexity of the current political and financial environment poses especially difficult challenges to development of local renewables and California’s transition to clean energy. Overcoming those challenges demands a level of cooperation, tenacity and creative thinking that California has repeatedly demonstrated in spite of challenging odds and naysayer skepticism. Thanks to the ongoing work of the state’s visionary private sector, not-for-profit organizations and public servants, California already leads the nation in the development of local renewable energy sources. By setting ambitious targets and working through the development challenges, California will firmly establish itself as a role model for achievement of aggressive renewable energy targets for communities across the country and around the world.

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