Article on SB 532 (RPS)

FYI -

[An overview of the SMUD recommendations referenced in this article can be found at: <http://www.smud.org/res_plan/summary/recommendations/03pubgoods.html<)

Green energy sources seen as ripe for growth

By Carrie Peyton
Bee Staff Writer
(Published Sept. 10, 2001)

Wind and hot water, sunshine and rotting garbage.

They all could keep California's lights on -- for a price.

Around the state, more people are beginning to suggest that price is worth paying to help smooth out the ride on the state's power roller coaster.

This week, Sacramento's municipal utility will begin hearings on an ambitious 10-year plan that would nearly triple its reliance on non-hydroelectric sources of renewable electric power, such as wind farms and solar panels.

In the Legislature, a hotly debated bill would require every power seller in the state to provide increasing amounts of "green" power, rising to 20 percent of their portfolios by 2010. That would roughly double current supplies.

"This may be the silver lining of the energy crisis if we can get this passed," said state Sen. Byron Sher, D-Palo Alto, author of SB 532.

More than a dozen states and many nations already have "portfolio standards" that require each utility or other power venders to provide a set share of electricity from renewable sources. The amounts can be as low as 2 percent or 3 percent, or as high as 30, partly depending on what gets called "renewable."

Environmental and some consumer groups have embraced the idea, saying it would bring a constellation of advantages.

The air would be cleaner, they say. Finite resources such as coal, natural gas and other fossil fuels would be used more sparingly. And in California, the state would be a little less vulnerable next time prices sail through the stratosphere for natural gas, the chosen fuel for virtually all new power plants.

But free-market advocates and some utilities are dubious.

They worry that a state-mandated portfolio standard would drive up prices. It could reward inefficiencies in energy sources that are otherwise too expensive to stand on their own. And in the push to diversify from natural gas, critics of such standards don't want to see the state turn its back on potentially lower cost power sources, including coal, nuclear power and new large dams.

"Ignoring hydroelectric power is shortsighted, and I think not considering nuclear options within the state, at least giving it some public hearing, is shortsighted," said Karal Cottrell, a Sacramento Municipal Utility District director.

It is a debate that will help shape California's power future, and it comes as the state has begun loading up on natural gas plants.

Just over half of in-state electricity production now is fueled by natural gas, but that could rise to 65 percent by 2010 if all currently proposed gas-fired plants are built, said Mark Bernstein, an energy analyst at RAND.

Long viewed as relatively cheap and comparatively clean, natural gas still could pose risks if it dominates the state's power picture.

"We have a very hard time predicting the price of anything, particularly energy these days," said Bernstein. "What happens if the pressures on price are so great that they go way up?"

That fear has been sobering for the Sacramento Municipal Utility District, whose officials worry the utility might be becoming too dependent on two mainstays: hydro power, with its risks of short supplies in dry years, and natural gas.

Already considered a leader in renewable power, SMUD gets about 7 percent of its electricity from non-hydro renewables. In a series of workshops beginning Tuesday , it will seek public feedback on a proposed 10-year plan that would raise that amount to 10 percent by 2006 and 20 percent by 2011.

"If we commit to this, this will be the largest renewable commitment, I believe, in the state right now," General Manager Jan Schori told directors.

Renewable power would cost more, but the benefits in diversification and price stability should be worth it, said SMUD planning chief Jim Tracy. His proposal calls for spending no more than an extra penny per kilowatt-hour for renewables.

At first, SMUD plans to expand its Solano County wind farm, continue subsidizing solar panels and consider working with the county to expand the Kiefer landfill plant, which runs on methane seeping out of rotting garbage. That should get the utility close to 10 percent.

By 2003, staffers would return to the board with a study on how to reach the far more challenging second phase: boosting green power another 10 percent at a livable price.

The likeliest cost-effective sources so far look like wind and geothermal power, said Tracy.

That's also the consensus among those who hope the state will pass its own portfolio standard before the Legislature adjourns Friday.

Wind turbines -- once disparaged as generating more tax breaks than electricity -- have become bigger, more powerful and far more dependable in the past decade. Aided by a federal tax credit, they now can supply power at between 3 cents and 6 cents a kilowatt-hour, depending on location, according to the American Wind Energy Association. At its lower end, that makes wind nearly competitive with a new natural gas plant.

Geothermal power, tapped by drilling into underground beds of hot steam or water, runs between 4.5 cents and 7 cents a kilowatt-hour, and could go lower if it, too, qualifies for the next round of federal credits, plant developers say.

Both sources of power are plentiful in California.

The state is the 13th best source of wind in the nation, with untapped wind resources along mountain ridges running almost the length of the state.

Geothermal power already makes up 5 percent of the state's supply and could rise by thousands of megawatts, with rich beds in the Imperial Valley and elsewhere still not fully tapped.

By comparison, solar power costs more than 10 cents a kilowatt-hour, although it can have special appeal to homeowners living far from power lines or those who want to produce their own electricity.

Both wind and geothermal could be "a shoo-in" economically if natural gas prices float higher, said Matt Freedman of the Utility Reform Network, a consumer group that usually advocates for lower power costs.

Today, it's also one of the biggest lobbyists for a renewable portfolio standard.

"We think the standard is going to save consumers money, or in the worst case, it's like an insurance policy," said Freedman. "I think consumers are willing for that to be part of the mix these days."

But with only a week left to go, Freedman said, "the enemy of (Sher's) bill is time."

That's actually just one of the enemies.

Others include Sempra Energy, parent company of San Diego Gas & Electric Co., and the California Manufacturers Association, which fear it would boost electric rates.

"When a major thrust of the state is to reduce prices as much as possible, is this really a good time for this?" asked Sempra spokesman Ed Van Herik.

Both Sempra and the Assembly's Republican caucus point out that more than $100 million a year already is collected from consumers' electric bills and funneled into a fund that supports renewable energy.

The portfolio standard could have Californians paying again -- up to the 1.5 cents per kilowatt-hour cap in the bill -- for power that they've already helped subsidize, they say.

"Renewable energies are becoming more efficient on their own," said Assemblyman Dennis Hollingsworth, R-Temecula. "To artificially prop them up will stifle that innovation."

California already gets about 9 percent of its total energy supply, including imports, from non-hydro renewables, and an additional 3 percent from small hydro. The state Energy Commission predicts that current programs could boost that to 17 percent by 2006.

So to Sher, author of the renewables bill, raising that amount to 20 percent by 2010 is actually a modest goal.

"We're well on our way there," he said.