Update on California’s Renewable Portfolio Standard

Recently, the Committee on Regional Electric Power Cooperation (CREPC, for short) in California held a seminar on the status of the state’s Renewable Portfolio Standard (RPS). While the seminar contained many valuable data points on the efforts of the state’s electric service providers to meet the RPS requirement, the slide shown below was particularly helpful in summarizing the complex requirements around RPS.

As a refresher, the California CPUC presently mandates that all electric service suppliers provide at least 20% of their energy from renewable sources today and this moves gradually to 33% by the year 2020.

In order to satisfy the current 20% RPS requirement, load serving entities must purchase renewable energy or attributes that meet certain eligibility requirements across three content categories. Each of the content categories, or buckets as they are often referred, represents a different type of renewable energy and the percent of the total of each that must be supplied changes over time.

In short, the three buckets and the type of energy they include are:

— Bucket 1: In-state renewable generation
— Bucket 2: Firmed & shaped renewable energy products from a generator that has its first point of interconnection with a California “Balancing Authority”. (These are load serving entities located within the state like the California ISO or the Los Angeles Department of Water & Power.)
— Bucket 3: Renewable Energy Certificates (RECs) that are not included with the energy.

Under the current guidelines a typical supplier’s portfolio might be comprised of each of these resources in a manner similar to that in the first column in the graph. Since the first bucket is the most expensive type of energy to purchase, most supplier’s will procure only the minimum they need to meet the RPS requirement which is 50%. The second bucket has no minimum or maximum quantity limitation but since suppliers will try to maximize the third bucket which is the cheapest source and has a maximum procurement limit the remainder can be procured from the second. So the guidelines today will allow for 25% from both the second and third buckets when the volumes are optimized.

As a means of reference, wholesale energy from a Bucket 1 resource might garner a $34-$39/MWh premium to non-renewable system power for the applicable time period. Bucket 2 resources have recently been purchased in the range of $6-$13/MWh over system power; and RECs which are unbundled from the energy that meet Bucket 3 requirements can be sourced for about $1/MWh. Many things will of course affect a supplier’s cost. For example, because energy from Bucket 1 can be difficult to source, a supplier may elect to buy more than is necessary in anticipation of load growth or meeting a future year’s higher percent source requirement. A supplier may also commit to long term purchases to insure supply and perhaps reduce their overall purchase price. Some suppliers may even choose to build or purchase a renewable generating resource to produce supply for their own load. Ultimately, how a supplier chooses to source their needs will flow through to a customer who has elected to take their RPS charges as a pass-through item in their electric service.

For customers in California with an eye to budgeting, note the increasing minimum percent requirements for Bucket 1 sources for each of the years on the graph. Depending on how quickly new generation can be brought online, the cost of RPS requirements will likely increase over the next eight years as this is the most expensive category of renewable generation that needs to be supplied.

Find the complete presentation (including the earlier suggestions from the Governor’s office for increasing the RPS requirement beyond 33%) here: http://www.westgov.org/wieb/