State mulls tough renewables law

JUNE 30, 2010

By JOHN SEILER

The dream of Gov. Arnold Schwarzenegger and a majority of the California Legislature is to move California into a green future. Carbon-based fuels will be sharply reduced in favor of battery power, which will be recharged through renewable electricity generation, especially wind and solar power.

“The Gulf of Mexico oil spill is spurring California legislators and conflicting interest groups to settle past differences and adopt the nation’s toughest renewable energy law to reduce the state’s dependence on oil and serve as a model for other states,” reported Mark Lifsher in the Los Angeles Times. Gov. Schwarzenegger is supporting similar legislation this year, even though he vetoed a similar bill last year, because he is “eager to burnish his environmental legacy before leaving office in January.”

The main legislation is SB722, by state Sen. Joe Simitian, D-Palo Alto. It passed the Assembly Utilities and Commerce Committee, 9-2, on June 24. It will be heard on June 30 in the Assembly Natural Resources Committee.

It would mandate that, by 2020, renewable electricity in California must be 33 percent of all that is generated. Unlike previous bills on this issue, according to Simitian, “Senate Bill 722 does not require utilities to reach the goal at any cost, however. If the California Public Utilities Commission (PUC) determines that no reasonably priced renewable energy is available, a utility will be permitted to postpone meeting the deadline.”

Currently, no California electricity producer meets even the current 20 percent goal for the end of 2010. Southern California Edison comes closest, at 17 percent.

In vetoing similar legislation last fall, the governor called it too “complex.” However, he supports the 33 percent renewables goal by 2020. Indeed, his state environmental legacy will be strong if he signs into law some form of SB722, and also defeats Proposition 23 in November. Prop. 23 effectively would repeal AB32, his law to combat global warming.

At a recent alternative fuels conference, Schwarzenegger said, “One needs only to look to the Gulf of Mexico and the tragedy and what happens when you just rely on oil. It is shameful how desperate and how dependent we have become on fossil fuels.”

The governor’s chief of staff, Susan Kennedy, sometimes called the “little governor,” said of renewables legislation, “I’m very optimistic. There’s always been a consensus around the goal. It’s simply a matter of identifying what the obstacles are in the implementation.”

A big problem concerns how much “green” energy, under a system of credits, will be allowed to be purchased from other states in the West. Green activists insist that there’s not much point in just shifting the production burden to other states.

A system of “tradable renewable energy credits” already was established earlier this year by the California Public Utilities Commission. Reported the March 25, 2010 CalFinder, a network of solar contractors:

Renewable energy credits, or RECs, are certificates that designate a certain amount of renewable electricity generated. 29 states have mandatory renewable portfolio standards requiring utilities to create a set percentage of their electricity from renewable sources by a specific year in time. These RPSs create a demand for RECs, which those utilities can purchase to offset fossil fuel generation and contribute to their renewable goals.

However, in May that system was suspended by the PUC pending a review of controversies over the decision.

Negative prices…added pollution

“The big issue is: Is it deliverable power?” asked Robert Michaels when I talked to him. He’s a professor of economics at Fullerton State University and senior fellow at the Institute for Energy Research. He testified on energy policy twice this month before the U.S. Congress. “You can talk about trading credits. But you still will have to operate your local system.”

He said that “the politics of wind” involves federal subsidies for wind power. In Texas, this has meant that renewable energy companies actually pay to put their power on the electricity grid, thus bumping off cheaper power from non-renewable sources.

Michaels testified on June 16, 2010 before the Energy and Environment Subcommittee of the U.S. House Committee on Science and Technology. He said there:

Texas’ wind capacity is mostly far from load centers, and its power is priced by market bidding. As they compete for access to the constrained transmission lines, prices are bid to lower levels. In Texas, however, those prices are quite frequently becoming negative, 14 percent of all hours in 2008.[1] This growing problem is indicative of both a need for transmission and strong evidence on the effects of subsidies. Wind generators will pay to put power into the grid because subsidies are high enough that they retain a small profit after making that payment.

Some might view negative prices in Texas as curiosities, or as an embarrassing consequence of an otherwise desirable subsidy system. Newer research has found that increasing the scale of wind operations sometimes produces a strikingly perverse outcome.

Gas marketer Bentek Energy examined a seeming paradox in Texas and Colorado: Large increases in wind power production were responsible for decreases in the output of coal-burning generators, but emission of pollutants from those plants had had actually increased, and CO2 emissions were unchanged.[2]

Operating data showed how wind’s variability meant that coal units had to make many quick output adjustments, and that those adjustments were responsible for the added pollution. Bentek’s controversial conclusion was that the total load in the area could have been produced with lower total emissions had the wind units never existed.

Jobs creation

California unions also are worried about losing green jobs to other states. Reported the Times story:

“You’ve got to build a big chunk of it here,” said Scott Wetch, a lobbyist for the Coalition of California Utility Employees, whose members work for public and private electric companies.

The utilities counter that California needs to be part of a regional energy market if it wants to ensure adequate supplies of competitively priced electricity.

Michaels testified again before the U.S. House Energy and Environment Subcommittee on June 28. He was asked about renewable energy and jobs creation, an obvious concern with U.S. unemployment in May at 9.7 percent; and at an even higher 12.4 percent in California. He testified about a model by the National Renewable Energy Laboratory (NREL) study purporting to show that renewables created jobs:

No matter what numerical data is input into NREL’s model, the only result it can possibly produce is that renewables result in job creation. With job creation its only possible finding, the model is valueless for evaluating any claims about either job creation or job destruction. NREL is well aware of this weakness, but continues using this model despite the availability of less-flawed alternatives.

Michaels also pointed to Vermont, a very “green” state, and a study that found wind electricity jobs creation to be negligible. The December 2009 white paper is “The Economic Impacts of Vermont Feed in Tariffs,” by the Division of Energy Planning of the Vermont Department of Public Service. It found:

The Department of Public Service evaluated the economic consequences of The Vermont Energy Act of 2009 which established mandatory cost based prices for 50 MW of renewable energy technologies. These prices were generally higher, and in many cases significantly higher, than current estimates of prices for market based alternatives….

Following an initial increase in temporary construction-related jobs long term employment averaged 13 full time jobs per year. This total includes both direct and indirect employment in the energy sector as well as the job and income related effects of increased electricity costs.

John Seiler, an editorial writer with The Orange County Register for 19 years, is a reporter and analyst for CalWatchDog.com. His email: [email protected].

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[1] Peter Hartley, Some Preliminary Comments on Wind Generation in ERCOT, presentation graphics, Rice University, n.d. http://www.rice.edu/energy/research/carbonsolutions/Hartley%20Presentation%20Aug09Workshop-SECURE.pdf

[2] Bentek Energy, How Less Became More: Wind, Power and Unintended Consequences in the Colorado Energy Market (April 10, 2010).