California’s renewable energy standard remains a rapidly evolving area of regulation. The RES raises California’s renewable energy mandate to 33 percent by 2020, one of the most aggressive standards in the United States. The RES represents a significant new regulatory requirement for California’s retail sellers of electricity and will have important ramifications on energy markets throughout the western states.
The RES represents a significant new regulatory requirement for California’s retail sellers of electricity
On September 23, 2010, the California Air Resources Board (CARB) unanimously adopted the “Renewable Electricity Standard” (RES) to require a 33 percent by 2020 renewable energy procurement mandate for most retail sellers of electricity in California, including but not limited to publicly owned utilities (POUs) and the state’s three largest investor-owned utilities (IOUs), Pacific Gas & Electric (PG&E), Southern California Edison (SCE) and San Diego Gas & Electric (SDG&E). The RES is an independent requirement from California’s existing Renewables Portfolio Standard (RPS), which requires a 20 percent by 2010 renewable energy procurement mandate. The RES also applies to a broader range of regulated entities than the RPS such as the Publically Owned Utilities.
The RES compliance deadlines are phased in over time:
Proposed Compliance Deadlines
|Year||Renewable Electricity Standard3|
|2012 through 2014||20 percent|
|2015 through 2017||24 percent|
|2018 through 2019||28 percent|
|2020 and annuallythereafter||33 percent|
The RES is a major new regulatory requirement. A 33 percent by 2020 renewable mandate will require almost a tripling of available renewable electricity supplies. The California Public Utilities Commission (CPUC) has estimated that the “magnitude of the infrastructure that California will have to plan, permit, procure, develop and integrate in the next ten years is immense and unprecedented,” potentially requiring $115 billion in new infrastructure investment and at least seven major new transmission lines. However, the RES’s enhanced flexibility compared to the RPS — including eliminating delivery requirements for out-of-state renewable resources and allowing an unlimited use of tradable renewable energy credits — is expected to reduce costs and facilitate compliance.
RES Complements RPS But Expands Requirements to Publicly Owned Utilities
Overview of the RPS
The RPS applies to large and small investor-owned utilities, electric service providers and community choice aggregators, but does not apply to publicly owned utilities. The RPS program is collaboratively implemented by the California Energy Commission (CEC) and the California Public Utilities Commission (CPUC).
A REC represents one megawatt-hour (MWh) of renewable electricity generated from a certified renewable facility.
Comparison of the RES and RPS
CARB designed the RES to maximize compatibility with the RPS. The RES relies on many of the same compliance mechanisms as the RPS. However, the RES is intended to broaden the scope of California’s renewable energy requirements and increase the flexibility of procuring electricity from out-of-state renewable resources. Distinctions between the RES and RPS include the following:
RES Eliminates Delivery Requirement. The RES eliminates “delivery” requirements under the RPS that generally mandate the delivery of renewable electricity into California.
RES Allows Unlimited Unbundled/Tradable RECs. The RES allows an unlimited use of “unbundled” or “tradable” RECs (TRECs) for compliance purposes. In contrast, the CPUC has limited the use of TRECs under the RPS, at least temporarily. TRECs allow the environmental benefits associated with renewable electricity to be sold or traded separately from the underlying electricity.
RES Offers More Flexible Certification Process. Similar to the RPS, facilities must be certified under the RES before electricity can count towards compliance obligations.
Solar Land Partner’s expect further regulatory and legislative action on the new REC standard. We will be sharing this information with our clients as issues develop.