California’s Commitment to Renewable Energy

By Matthew Motsinger and Mary Lynch

Renewable energy remains a high priority in California. On October 7th, Governor Jerry Brown signed Senate Bill 350, which will further the state’s commitment to environmental improvement through increases in the state’s renewable portfolio standard (RPS), increased energy efficiency (EE) in buildings, and electrification of the transportation fleet, all to be achieved by 2030.

Renewable Portfolio Standard (RPS)

The bill will increase the state’s RPS requirement from 33% by December 2020 to 50% by December 2030. The California Public Utility Commission (CPUC) will establish annual RPS targets that all retail sellers under their jurisdiction, including the investor-owned utilities (IOUs), electric service providers (ESPs), and Community Choice Aggregators (CCA), must meet after December 2020 in order to achieve the following RPS requirements in each compliance period:

• 40% requirement by 12/31/2024
• 45% requirement by 12/31/2027
• 50% requirement by 12/31/2030

The bill continues the already established RPS requirements that as of 2020 and beyond, at least 75% of the RPS requirement must be met by portfolio content category (PCC) 1, which is the procurement of bundled energy and Renewable Energy Credits (RECs) produced in the California Balancing Authority (CBA), or from resources outside the state that are directly delivered to the CBA. No more than 10% of the RPS requirement may be met with PCC 3, which are unbundled RECs. The balance of the requirement, or approximately 15%, may be met using PCC 2, which is the procurement of energy and RECs that are purchased from resources outside the state, but not directly delivered to the CBA.

New features of the bill include a requirement that, beginning in January 2021, 65% of RPS compliance must come from either ownership of eligible facilities or contracts of 10 years duration or greater, and that excess RPS procurement in one compliance period can be banked to the next compliance period only if the excess is from PCC 1 resource contracts of any duration.

Integrated Resource Plan (IRP)

The bill requires all load-serving entities to file Integrated Resource Plans (IRPs) beginning in January 2017. The IRP must demonstrate compliance with greenhouse gas (GHG) emission reduction requirements, which includes a reduction of 40% from 1990 levels by 2030, minimizing localized air pollutants and other GHG emissions, and compliance with the 50% RPS requirement, along with additional provisions. In addition, the plan calls for an ESP to achieve the IRP through a diversified portfolio of both short-term and long-term electricity, electricity-related, and demand reduction products.

Energy Efficiency (EE)

SB 350 also takes steps to increase EE by setting requirements for California government agencies to establish programs intended to double energy efficiency by 2030. It establishes annual targets for statewide energy efficiency savings and demand reduction that will achieve a cumulative doubling of statewide energy efficiency savings in electricity and natural gas final end uses of retail customers by January 1, 2030.

Other Features of the Bill

There are two other features of the bill that are important. One is that the bill establishes significant incentives for new infrastructure that will support an increase in the use of electric vehicles. Other provisions will allow the California Independent System Operator (CAISO) to expand its electricity grid management to neighboring balancing areas.

Analysis and Conclusion

This newly signed bill will have deep and lasting impacts on California’s energy market, likely strengthening a west-wide market for renewable resources, and leading to large investments in new EE and transportation electrification.

The overall cost impact of the measures to our customers is not yet known with certainty.
While Constellation supports the environmental improvement that is the goal of this bill, we do have concerns about the impact of certain features of the bill, most notably the long-term contracting requirement for RPS and the IRP requirements, both of which could have implications for ESPs’ procurement flexibility to meet these new RPS requirements.

We will be working with policymakers to address these concerns in the coming months.
On a related matter, Senate Bill 286, which would expand the California Direct Access Cap by 8,000 GWH on the provision that the new Direct Access load meets a 100% RPS requirement, has been delayed until the next legislative session, that will begin in January of 2016. Stay tuned for those updates.

Constellation offers energy and environmental solutions that can help you meet renewable energy goals. To learn more, contact us today.

Source: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB350