California Energy Commission California’s Renewable Energy Program Kate Zocchetti Renewable Energy Program California Energy Commission October 18, 2007

California Energy Commission 2 California’s Energy Sources in 2005/2006 PETROLEUM (2005) NATURAL GAS (2005) ELECTRICITY (2006) Source: April 2007

California Energy Commission 3 Renewable Energy in California  For decades, California led the country and the world in renewable energy procurement  From its peak in early 1990s, renewable generation declined amid market uncertainties  In 1996, AB 1890 placed surcharge on electricity sold by IOUs to be used to fund public interest programs, including renewable energy  Energy Commission designed Renewable Energy Program, a subsidy mechanism to support renewable development in a market environment  This method for supporting renewables, however, was impacted by the energy crisis of 2000 and 2001

California Energy Commission 4 From the Energy Crisis to the Renewables Portfolio Standard California’s move to a restructured electricity market and resultant energy crisis prompted policymakers to pursue a new method to encourage development of renewable power: Renewables Portfolio Standard California’s move to a restructured electricity market and resultant energy crisis prompted policymakers to pursue a new method to encourage development of renewable power: Renewables Portfolio Standard

California Energy Commission 5 California’s Renewable Energy Goals - 20,000 40,000 60,000 80, , , Year Estimated Statewide Renewables GWh/year (Excluding Large Hydro) 20% by % by % by % Renewables (RPS begins) % Renewables

California Energy Commission 6 California’s Energy Action Plan The energy crisis further underscored California’s economic reliance on a stable energy market. Consequently...  California’s energy agencies adopted the Energy Action Plan I in 2003 and EAP II in 2005 to guide energy policy decisions and actions for CA’s growing energy demand.  Top priorities in California’s loading order policy for electricity are:  Increasing energy efficiency and demand response  Meeting new generation needs first with renewable and distributed generation resources.  Governor Schwarzenegger’s energy policy promotes adequate, affordable and reliable energy supplies and technologies that protect and improve economic and environmental conditions. He strongly supports the EAP’s loading order.

California Energy Commission 7 Renewables Legislation  AB 1890 and SB 90 created the Renewable Energy Program and directed the large investor-owned utilities to collect $540 million from 1998 –  AB 995 and SB 1194 extended collection of $135 million per year through  SB 1038 authorized the Renewable Energy Program to use funds collected from IOU ratepayers from  SB 1078 established the Renewables Portfolio Standard that requires IOUs to increase renewable purchases by at least 1% per year to serve 20% of their retail sales by  SB 704 required the Energy Commission to allocate $6 million to electricity-generating facilities that increased their use of qualified agricultural biomass during fiscal year GOAL: Pursue investments in renewable resources to achieve self-sustaining renewable energy supply for California.

California Energy Commission 8 Renewables Legislation (cont’d.)  SB 67, AB 200, and AB 2189 modified RPS eligibility requirements.  AB 135 authorized the use of an additional $60 million of future Renewable Energy Program funds for the Emerging Renewables Program.  SB 1 statutorily authorizes and establishes guidelines for the $3.35 billion California Solar Initiative (CSI), a solar installation incentive program.  SB 107 requires retail sellers of electricity to increase renewable energy purchases by at least 1 percent per year with a target of 20% renewables by  SB 1250 authorizes the Renewable Energy Program to use funds collected from IOU ratepayers from 2007 –  AB 32 requires that the state’s global warming emissions be reduced to 1990 levels by Renewable energy plays a significant role.

California Energy Commission California’s Electricity Supply in 2006 In-State Generation and Estimated Energy Imports by Fuel Type Source: 2006 Net System Power Report, Energy Commission Publication, #CEC (Includes Energy Imports)

California Energy Commission 10 Renewable Energy Program Goals Goal: Achieve a self-sustaining renewable energy supply for California.  Optimize public investment and ensure that the most cost- effective and efficient investments in renewable resources are vigorously pursued.  Increase the quantity of California’s electricity generated by renewable resources, while protecting system reliability, fostering diversity, and obtaining the greatest environmental benefits to the state.  Identify and support emerging renewable energy technologies with the greatest near-term commercial promise that merit targeted assistance.

California Energy Commission 11 Renewable Energy Program Goals (cont’d.) Renewables Portfolio Standard Goals New Renewable Facilities Program Existing Renewable Facilities Program Emerging Renewables Program Consumer Education Program RPS goals inform the policies of the other elements in the Renewable Energy Program.

California Energy Commission 12 Renewable Energy Program 2002–2006 Funding Allocations $675 Million* *Dollars collected are estimated at an average of $135 million per year for five years. The total amount collected each year is adjusted annually at a rate equal to the lesser of the annual growth in electric commodity sales or inflation, as defined by the gross domestic product deflator. New Renewable Facilities and RPS 51.5% ($348 M) Emerging Renewables 26.5% ($179 M) Consumer Education 2% ($13 M) Existing Renewable Facilities 20% ($135 M)

California Energy Commission 13 Renewable Energy Program Funding Allocations $750 Million* *Dollars collected are estimated at an average of $150 million per year for five years. The total amount collected each year is adjusted annually at a rate equal to the lesser of the annual growth in electric commodity sales or inflation, as defined by the gross domestic product deflator. New Renewable Facilities and RPS 51.5% ($386 M) Emerging Renewables 37.5% ($281 M) Consumer Education 1% ($8 M) Existing Renewable Facilities 10% ($75 M)

California Energy Commission 14 New Renewable Facilities Program  Currently provides production incentives to 59 “new” in- state renewable generating facilities.  Incentives capped at 1.5 cents per kilowatt-hour. Of the 59 active projects, 47 have been completed and are producing electricity representing 489 MW of capacity. More than $69 million in incentive payments has supported about 7,545 gigawatt-hours of generation. When completed, all 59 facilities will bring 809 MW of new renewables capacity to California’s electricity grid.  Under RPS, will provide supplemental energy payments (SEPs) for above-market costs of procuring renewable energy. Goal: Accelerate the addition of new renewable capacity to meet California’s growing demand for electricity.

California Energy Commission 15  Provides production incentives to existing renewable generation facilities.  Payments tied to market prices.  Eligible technologies: solid-fuel biomass, solar thermal, wind. Has helped 273 existing renewable facilities remain competitive or return to service by paying more than $249 million for 4,400 MW of renewable energy capacity. Provided $6 million for 2004 Agriculture-to-Biomass Program to improve air quality in CA’s agricultural areas. Existing Renewable Facilities Program Goal: Encourage economic viability of existing renewable projects.

California Energy Commission 16 Emerging Renewables Program  Provides rebates for purchasing and installing eligible renewable energy systems to offset electricity needs at homes or businesses.  Reduces up-front costs for customers.  Through 2006, eligible technologies were solar photovoltaic, small wind, fuel cells using renewable fuels, solar thermal electric. Effective 1/1/07, only small wind and fuel cells are eligible. Provided $374 million for distributed PV and wind energy systems installed on 25,680 homes and businesses, providing 113 MW of capacity. Encumbered $49 million for 3,493 additional systems under construction, to provide 18.2 MW. Goal: Reduce costs and accelerate market acceptance through high volume production of emerging renewable technologies.

California Energy Commission 17 California Solar Initiative GOAL: Move California toward a cleaner energy future by creating a sustainable solar market in California. Beginning 2007:  California Solar Initiative, largest solar program of its kind in the country, part of Governor Schwarzenegger’s Million Solar Roofs Initiative  $3.35 billion effort by CPUC, CEC and POUs  Residential and nonresidential customers  3,000 MW combined POU/IOU goal  Solar industry self-sufficiency in 10 years  Emphasis on energy efficiency  High performance installations

California Energy Commission 18 California Solar Initiative (cont’d.) CPUC Program Commercial, Industrial, Existing Residential $2 Billion* CEC Program New Residential Construction (NSHP) $400 Million Publicly-Owned Utility Programs Eligibility Requirements under Development $784 Million *Additional $100 Million for Solar Thermal and Solar Water Heaters plus $50 Million for Solar R&D

California Energy Commission 19  Incentive of ~$2.50/watt or more based on expected performance  Provides assistance to builders  Requires 15% higher energy efficiency than state building standard (Title 24)  New residential construction only: new homes/developments, Affordable Housing New Solar Homes Partnership GOALS:  400 MW installed capacity by end of 2016  All solar systems must be highly energy efficient and high performing  Solar on 50% of new homes GOALS:  400 MW installed capacity by end of 2016  All solar systems must be highly energy efficient and high performing  Solar on 50% of new homes

California Energy Commission 20  Provides information to California consumers to help build a market for renewable energy.  Supports market development of emerging renewables technologies. Provided over $7 million for market research, 21 outreach and demonstration grant projects, and 3 public awareness campaign contracts. GOALS  Raise consumer awareness about renewables and their benefits  Increase purchases of emerging technologies  Develop renewable energy education partnerships  Track and verify renewable energy procurement GOALS  Raise consumer awareness about renewables and their benefits  Increase purchases of emerging technologies  Develop renewable energy education partnerships  Track and verify renewable energy procurement Consumer Education Program

California Energy Commission 21 What is WREGIS? W estern R enewable E nergy G eneration I nformation S ystem  A voluntary, independent renewable energy registry and tracking system for the Western Interconnect region that: – Uses verifiable renewable energy generation data – Creates renewable energy certificates (WREGIS certificates) – Accounts for transactions involving certificates – Supports voluntary and regulatory markets for certificates  WREGIS launched June 2007  Retail sellers and renewable facilities participating in the California RPS will be REQUIRED to register with and use the WREGIS by January 1, –WREGIS fees are being waived for 2007!

California Energy Commission 22 Source: Center for Resource Solutions, 2006 ERCOT NEPOOL GIS MRETS PJM GATS RRC NJ SRECS WREGIS Attribute Tracking Systems NY GTS

California Energy Commission 23 California’s Renewables Portfolio Standard (RPS)  RPS signed into law in 2002 assigning roles to Energy Commission, CPUC, and POUs.  Current legislative goal of 20% of retail sales from renewables by 2010, with increase by at least 1% per year.  Governor Schwarzenegger’s expanded goal to 33% by GOAL: Increase the diversity, reliability, public health and environmental benefits of California’s energy mix.

California Energy Commission 24 Renewables Portfolio Standards DSIRE: September 2007 State Goal State RPS Solar water heating eligible

California Energy Commission 25 CEC-CPUC RPS Collaboration CEC ROLE  Certify renewable facilities as eligible for the RPS.  Design and implement accounting system to track and verify RPS compliance.  Distribute Supplemental Energy Payments. CEC ROLE  Certify renewable facilities as eligible for the RPS.  Design and implement accounting system to track and verify RPS compliance.  Distribute Supplemental Energy Payments. CPUC ROLE Oversight of IOU procurement:  Approve procurement plans.  Set baselines and targets.  Develop market price referent.  Develop least-cost-best-fit process to evaluate bids.  Set rules for flexible compliance.  Standardize contract terms.  Approve/ reject contracts.  Ensure RPS competitiveness. Oversight for other “retail sellers.” CPUC ROLE Oversight of IOU procurement:  Approve procurement plans.  Set baselines and targets.  Develop market price referent.  Develop least-cost-best-fit process to evaluate bids.  Set rules for flexible compliance.  Standardize contract terms.  Approve/ reject contracts.  Ensure RPS competitiveness. Oversight for other “retail sellers.”

California Energy Commission 26 RPS Eligible Technologies  Biomass  Biodiesel  Conduit hydro  Fuel cells using renewable fuel  Digester gas  Geothermal  Landfill gas  Municipal solid waste conversion  Ocean wave, ocean thermal, tidal current  Photovoltaic  Small hydro  Solar thermal electric  Wind

California Energy Commission 27 Renewable Development Goals and Statewide Potential Technical Potential 20% by ,160 GWh/yr *Estimated potential for other WECC states is 3.7 million GWh/yr 262,150 GWh/yr* 108,000 GWh/yr 33% by 2020 Source: Renewable Resources Development Report and Implementing California’s Loading Order for Electricity Resources

California Energy Commission 28 IOU Progress toward 20 Percent Renewables by 2010 Note: IOU percentages based on retail sales; Statewide percentages based on generation. Sources for 2001, 2004 and 2005 data: California Energy Commission, August 7, 2007, Renewables Portfolio Standard Procurement Verification Report (Tables 7, 15, and 20), CEC CMF, located at 001/CEC CMF.PDF. *2006 data was submitted by the IOUs in RPS Track Forms, to be verified in the forthcoming 2006 RPS Procurement Verification Report. Total statewide percentages include generation data from the three large IOUs, electric service providers, small and multi-jurisdictional utilities, and local publicly-owned utilities. The data source for the total statewide percentages is the California Electricity Generation database located at XLS. Although the total statewide data is incomplete because some entities have failed to report, it represents data from entities serving approximately 95 percent of total state retail sales California Electricity Generationwww.energy.ca.gov/electricity/ELECTRICITY_GEN_ XLS

California Energy Commission 29 California IOU Renewable Progress

California Energy Commission 30 IOU RPS Contracts by Technology (MW) Source: California Energy Commission, Database of IOU Contracts for Renewable Generation, August 6, 2007 update, PG&ESCESDG&ETotal Wind3311,939-2, ,609-2,971 Biogas50– 558 – Biomass45 – 6544 – Geothermal242 – – Small Hydropower1056 Solar Thermal – – 9991,452 – 2,402 Solar Photovoltaic7108 TOTAL 1,228 – 1,3812,572 – 3, ,3984,598-6,230

California Energy Commission 31 RPS Certification  534 facilities are certified as RPS eligible representing 7,453 MW of capacity –71 facilities are pre-certified representing 7,654 MW of proposed new capacity.

California Energy Commission 32 Barriers to Achieving RPS Goals  Inadequate transmission infrastructure to connect remotely-located renewable resources  Binding 33% goal needed for all retail sellers  Uncertainty regarding whether projects with SEPs awards will be able to obtain project financing  Complexity and lack of transparency in RPS process  Insufficient attention to the possibility for contract failure and delay  Lack of progress in repowering aging wind facilities  Unclear requirements for POUs

California Energy Commission 33 Recommendations to Reach 20% by 2010  Provide transmission access  Improve financeability of SEPs  Enforce penalties for noncompliance  Increase transparency  Incorporate risk of contract failures and delays  Require bilateral contracts at or below MPR  Use financial incentives  Use consistent natural gas price forecasts  Encourage repowering of aging wind facilities

California Energy Commission 34 Long-Term Strategies to Reach 33% by 2020  Transmission: streamline process, improve CAISO queue, cost allocation  Integration of nondispatchable & intermittent renewables  Capture full benefits of renewables in MPR and/or joint CPUC-CEC process to consider feed-in tariffs  Establish market-based mechanisms to value renewable energy benefits; e.g., GHG adder  Evaluate potential structural changes to SEP process California’s aggressive greenhouse gas reduction goals place added importance on achieving 33% by 2020.

California Energy Commission 35 Additional Information Web Sites:  Renewable Energy Program  New Solar Homes Partnership/California Solar Initiative  California’s Consumer Energy Center

California Energy Commission 36 Thanks for visiting California! Kate Zocchetti Renewable Energy Program (916) or