1. November, 2008

2. Renewables Portfolio Standard (RPS) defined
An RPS is a popular policy tool in the United States, and has been enacted in 34 states and Washington DC
A Renewables Portfolio Standard (RPS) requires that a minimum (and growing) percentage of renewable generation be included in the electricity mix of a particular energy market.
The benefits of an RPS include:
Larger economies of scale for renewable technologies brings renewables down the cost curve
Environmental protection & public health – clean air, cimate change
Hedging against volatile natural gas prices
Jobs, economic development
Lower prices due to competitive procurement process

3. California’s RPS is the most Aggressive in the Country
Source:
Black and
Veatch

4. California’s RPS Policy
The RPS Program requires all retail energy sellers
to procure 20% renewable energy by 2010
Original legislation (SB 1078, 2002) was 20% by 2017; Accelerated target to 2010, effective January, 2007 (SB 107, 2006)
All RPS-obligated retail sellers must procure an incremental 1% of retail sales per year until 2010
20% obligation continues post-2010
RPS procurement compliance is measured in terms of electricity deliveries, not signed contracts
California has set a further goal of 33% renewable energy by 2020

5. California’s RPS Eligibility Guidelines
Delivery Rules
Energy must be delivered into California
Energy can be consumed by any California consumer, IOUs may remarket
Out-of-state facilities (located in WECC) can firm and shape energy to deliver into California
Eligible Resources
Biodiesel
Biomass
Conduit hydroelectric
Digester gas
Fuel cells using renewable fuels
Geothermal
Wind
Landfill gas
Municipal solid waste
Ocean wave, ocean thermal, tidal current
Photovoltaic
Small hydroelectric (30 MW or less)
Solar thermal electric
Hydroelectric (incremental generation from efficiency improvements

6. California RPS Procurement Process
CPUC approves RPS procurement plans
IOUs hold annual solicitation
IOU rank bids pursuant to “least-cost, best-fit” methodology
IOUs negotiate bids, execute contracts
Independent evaluator oversees solicitation, bid evaluation, and negotiations
Once the IOU executes contract, must submit to the CPUC for approval

7. CPUC Approval Project viability Price reasonableness
CPUC reviews contracts for price reasonableness
and project viability
Project viability
Technology
Financing
Permitting
Transmission
Online date
Developer experience
Price reasonableness
Per se reasonable at or below ‘market price referent’
Bid supply curves for recent solicitation, technology

8. 20% by 2010 RPS: Current Status
CPUC has approved 101 contracts for more than
6,100 MW of new and existing RPS capacity
Of these, 65 are contracts with new projects, totaling 4,660 MW
Were all this capacity to come online by 2010, we would more than achieve our RPS target
Response to RPS solicitations has been robust and increasing, one indication that the market is maturing
Procurement process appears to be working

9. California has all major renewable resources within its borders
Black and Veatch

10. Geothermal dominates current renewable mix

11. Current trends: Solar bids have increased dramatically since program’s inception

12. Generation costs of renewable technologies
Source: Renewable Energy Transmission Initiative Phase1A Report

13. Current Trends: Renewable generation costs are increasing
RPS bid prices have increased from
Construction costs increasing for both renewable and conventional generation
Resource mix is shifting
Little geothermal and biomass in response to recent RFOs
Increase in share of solar thermal and PV – relatively high installation costs and significant permitting challenges
Many prime resource sites have already been developed
Concern that constrained supply and policy-driven demand drive up costs

14. Current Trends: Procurement process is working, but percentage of renewables has decreased

15. Some projects are at risk for delay or failure

16. Current Trends: Multiple barriers delay project development

17. Project development is complicated and involves multiple steps
Project Development Process
RPS Procurement
Process
Permitting
Barrier to 13 projects
Municipal Agencies (authority to construct, re-zoning)
County Agencies (conditional use permit, air permits, water permits, re-zoning, CEQA)
Energy Commission (RPS certification, thermal facility certification, CEQA)
Bureau of Land Management and other federal agencies (Use permits, NEPA)
Transmission
Barrier to 24 projects
CAISO Generator Interconnection (Apply & enter queue; CAISO/utility performs studies; sign Interconnection Agreement)
CAISO Develops Overall Transmission Plan (CAISO-utility-stakeholder process; CAISO Board approval)
CPUC Approval (CEQA, CPCN)
IOU issues solicitation and reviews bids
IOU negotiates contracts with short-listed developers
Equipment Procurement
& Construction
Shortage of equipment (turbines, etc.)
Escalating commodity costs (steel, concrete)
IOU submits contract for approval
Site Control
Barrier to 10 projects
Bureau of Land Management, Other Federal Land Management Agencies may grant right-of-way/use permits based on studies (e.g., NEPA) OR
Lease/ownership contract with private party
CPUC approves contract
Financing
Barrier to 17 projects
Extension of Production and Investment Tax Credits needed

18. The CPUC is working to create multi-agency solutions to known barriers
Increasing contracting flexibility
New out-of-state delivery rules, deciding on tradable Renewable Energy Credits (RECs)
Transmission
Streamlined permitting process
Initiated Renewable Energy Transmission Initiative (RETI)
Working closely with California ISO on queue reform
Permitting/ Site control
Beginning to work with Bureau of Land Management (BLM), other relevant agencies
California Energy Commission (thermal facilities)
County agencies (wind, thermal <50 MW)

19. Renewable Energy Credits may increase supply
RECs can provide greater compliance flexibility, procurement efficiency, and potentially lower costs
CPUC is currently deciding whether unbundled/ tradable RECs can be used for California RPS compliance:
CPUC  issued a proposed decision authorizing the use of tradable RECs for RPS compliance  (starting 1/1/09) :
SB107 authorized CPUC to allow unbundled/tradable RECs to be used for RPS compliance
Draft resolution adopting a Joint Staff Report determining that WREGIS  is operational  (required by legislation before CPUC can authorize tradable RECs) mailed Sept 23, 2008

20. Transmission is the most significant barrier
Almost 50% of RPS projects are at risk of project delay due to transmission
Many of California’s most valuable renewable resources are far from load centers
Existing transmission lines are often congested
Significant transmission expansion required to bring resources to market
Chicken-and-egg problem:
utilities don’t want to build transmission until generation development is confirmed
generators don’t want to commit to projects unless transmission access is confirmed
Permitting of transmission lines often contentious

21. CPUC response to the “Transmission Problem”
CPUC has taken multiple steps to overcome transmission siting, permitting, and construction challenges
Streamlined transmission permitting process
Backstop rate recovery
Agency culture of proactive collaboration with California ISO, utilities, stakeholders, and federal land use agencies to minimize delays
New RPS Transmission investigation opened this year
Public education
Initiated the Renewable Energy Transmission Initiative (RETI)

22. The Renewable Energy Transmission Initiative (RETI): One solution to the transmission problem
Statewide collaborative study effort to identify the transmission needed to access and deliver the most cost-effective renewable resources in CA and neighboring states
Phase I – will be finalized this month
Report ranks competitive renewable resource zones (CREZs) through stakeholder consensus to reflect commercial potential, economic potential, and environmental restrictions
Phase 2
Conceptual transmission plans for the highest ranking CREZs
Phase 3
Transmission plans of service that result in applications to construct new transmission infrastructure to meet RPS goals

23. What’s Next? California is considering a 33% by 2020 RPS
The CPUC, California Energy Commission, and the California Air Resources Board recommended 33% renewables by 2020 to meet the state’s climate change goals
The governor has also endorsed a 33% by 2020 RPS and is working with the legislature to make it law
CPUC staff are analyzing the barriers to reach a 33% RPS and will work with other state entities to develop and implement solutions

24. 20% 33% Magnitude of a 33% by 2020 RPS
One scenario for achieving a 20% by RPS would require:
One scenario for achieving a 33% by 2020 RPS (starting today and using primarily in-state resources) would require:
20%
by 2020
29,000 GWh of new renewable energy in 2020, in addition to 31,000 GWh of generation from renewables in existence today
33%
70,000 GWh of new renewable energy in 2020, in addition to 31,000 GWh of generation from renewables in existence today
2 New Major Transmission Lines (6,700 MW) at cost of $3.5 Billion
7 New Major Transmission Lines (15,900 MW) at cost of $6.4 Billion

25. More information
RPS website:
Renewable Energy Transmission Initiative (RETI):

26. Renewable Portfolio Standard Policy – Key Resources
CPUC Decisions/Resolutions[1]
Initial implementation of Senate Bill 1078, D
Least-cost best-fit criteria (used to evaluate RPS bids), D
Initial participation rules for ESPs, CCAs, SMJUs, D
2005 Market Price Referent, D
2006 Market Price Referent, Resolution E
Reporting and compliance methodology for RPS program, D
2007 IOU procurement plans approved, D
Rules for ESP and CCA participation, D
Minimum procurement from long-term contracts and new facilities, D
CPUC RPS Website[2]:
CEC RPS Eligibility Guidebook:
WREGIS:
2007 Renewable RFO links Pacific Gas and Electric:
San Diego Gas & Electric:
Southern California Edison:
[1] CPUC Rulemakings to Implement RPS
R : OIR to Implement RPS
R : OIR to Develop Additional Methods to Implement RPS
R : OIR to Continue RPS Implementation and Administration
[2] Includes links to Status Reports