Commentary: Energy Independence and Prop. 7
It's not enough to set deadlines to reduce our energy use. Incentives will help all of us take the initiative to achieve our goals.
Al Gore has outdone himself. Think what you will of the former vice president, you can’t say he doesn’t have a vision. On July 17, he called for the nation to embark on a man-on-the-moon effort to achieve 100 percent “renewable and other truly clean carbon-free” electricity in just 10 years. The bottom line is that the global and domestic energy situation requires that we act with the seriousness of purpose and focus that exceeds the efforts behind the moon landing.
California is already a leader in bringing renewable electricity online, with a relatively ambitious goal of 20 percent renewables by 2010 — a mandate that applies only to the state’s investor-owned utilities. Many of California’s publicly owned utilities, such as the Los Angeles Department of Water & Power and the Sacramento Municipal Utility District, have set their own equally ambitious goals for renewables.
But 20 percent by 2010 isn’t nearly enough. The state’s energy agencies and the utilities are ramping up planning efforts for achieving 33 percent by 2020, which is currently a goal (not a mandate). There is also a law pending in the Legislature, SB 411, which would mandate this level of renewables. Even this isn’t enough, however, if we’re serious about the transition.
For our region, Santa Barbara County, weaning ourselves from fossil fuels on a net basis by 2030 will require more than doubling our expected electricity demand by 2030 — to have enough to electrify the transportation sector and natural gas sectors — and producing all that electricity from renewables. In other words, our county needs about a 200 percent renewable portfolio standard by 2030 to achieve our goal of weaning our region from fossil fuels. At the same time, we must dramatically increase the efficiency with which we use energy in all sectors.
The first big carrot provided is a “feed-in tariff” for any size renewable energy project. Under this feed-in tariff, similar to the federal Public Utility Regulatory Policies Act, or PURPA, that was largely eviscerated by the 2005 Energy Policy Act, utilities that are behind on their renewable energy obligations must buy power from renewable energy facilities at the market price for electricity. PURPA was responsible for more than 10,000 megawatts of cogeneration and renewable energy projects coming online in California in the 1980s and ‘90s, so this part of Prop. 7 promises to be highly effective.
Prop. 7’s second big carrot is a major change in how the market price is calculated. The initiative will give this task to the California Energy Commission, taking it from the Public Utilities Commission, and will require the Energy Commission to consider the “value and benefits of renewable resources,” something that is explicitly not allowed to be considered in the current CPUC process. With natural gas prices soaring, the renewables-friendly Energy Commission calculating the market price, and the cost of many types of renewables coming down, these two carrots will likely lead to many thousands of megawatts of new renewables coming online.
The third big carrot is a major change in California’s “renewable portfolio standard” law (SB 1078). Currently, any renewable energy contract offered for CPUC approval — required for all investor-owned utilities energy contracts — is considered “per se reasonable” — and thus very likely to be approved — if it is at or below the market price for electricity. Prop. 7 changes the law to require that contracts up to 10 percent over the market price are considered “per se reasonable.” This could also be a significant boost for renewables. There are other carrots as well.
In terms of enforcement, Prop. 7 increases the penalties that may be assessed against utilities by eliminating the current $25 million cap imposed by the CPUC. Opponents of Prop. 7 charge that it reduces penalties, but some quick math reveals this is simply not true. Prop. 7 reduces the cents/kilowatt hour penalty, but by eliminating the cap, the actual effect is to increase penalties in almost all scenarios. Click here for a related column.
There are some downsides to Prop. 7, the biggest of which is allowing utilities to include signed contracts for renewable energy for compliance purposes. While this is a concern, it is not fatal by any means because, as mentioned above, Prop. 7 is primarily about carrots and not sticks.
If California is to make the necessary transition from fossil fuels, we will need the tools provided by Prop. 7. And if we are to lead the nation — as has been our historic role — we will need Prop. 7 to lead the way. The Energy Commission conducted a review of the state’s renewable energy laws in 2006 and made a number of recommendations. Prop. 7 adopts almost all of those recommendations.
My organization, the Community Environmental Council, has endorsed Prop. 7 and we urge other groups to do the same. We urge individuals to “endorse” Prop. 7 by voting for it in November.
Tam Hunt is energy program director and an attorney for the Community Environmental Council, and is a lecturer in renewable energy law and policy at UCSB’s Bren School of Environmental Science & Management. Click here for the CEC’s regional energy blueprint.