A counterpoint on energy independence and Proposition 7
This is a response to this post about California’s Proposition 7 by Adam Browning.
Al Gore has outdone himself. Think what you will of him, you can’t say he doesn’t have a vision. On July 17, he called for the nation to embark on a man-on-the-moon effort to achieve 100 percent “renewable and other truly clean carbon-free” electricity in just 10 years. The bottom line is that the global and domestic energy situation requires that we act with the seriousness of purpose and focus that exceeds the efforts behind the moon landing.
Climate change, economic security, peak oil and, more specifically, declining global oil exports (“peak oil 2.0”), require that we act with the utmost alacrity to wean our economies from oil and other fossil fuels. The best long-term package of solutions for making the transition from fossil fuels is increasing energy efficiency, conservation, renewable electricity, and sustainable biofuels (see here for our energy blueprint for our region). “Electrification of the transportation sector” will become possible once electric vehicles and plug-in hybrid vehicles are widely available. Electric motors are significantly more efficient than gasoline engines. We can also electrify much of the natural gas sector, which is a surprisingly large portion of total energy consumption, used for water and space heating and for cooking.
California is already a leader in bringing renewable electricity online, with a relatively ambitious goal of 20 percent renewables by 2010 — a mandate that applies only to the state’s investor-owned utilities. Many of the state’s publicly-owned utilities, such as Sacramento Municipal Utility District and L.A.’s Department of Water & Power, have set their own equally ambitious goals for renewables.
But 20 percent by 2010 isn’t nearly enough. The state’s energy agencies and the utilities are ramping up planning efforts for achieving 33 percent by 2020, which is currently a goal (not a mandate). There is also a law pending in the Legislature, SB 411, which would mandate this level of renewables. Even this isn’t enough, however, if we’re serious about the transition.
For our region, Santa Barbara County, weaning ourselves from fossil fuels on a net basis by 2030 will require more than doubling our expected electricity demand by 2030 — so we have enough to electrify the transportation sector and natural gas sectors — and producing all that electricity from renewables. In other words, our county needs about a 200 percent renewable portfolio standard by 2030 to achieve our goal of weaning our region from fossil fuels. At the same time, we must dramatically increase the efficiency with which we use energy in all sectors.
At the state level, similar numbers pertain. This is why we need serious tools for achieving higher levels of renewables. While many decry even the 20 percent by 2010 level as overly ambitious, Prop. 7 on the November ballot (known officially as the Solar and Clean Energy Act of 2008) will require all the state’s utilities — public and private — to achieve 50 percent renewables by 2025. Prop. 7 is not a meaningless mandate. It contains a number of tools for achieving much higher levels of renewables, following a “big carrot” approach more than a “big stick” approach.
The first big carrot provided is a “feed-in tariff” for any size renewable energy project. Under this feed-in tariff, similar to the federal PURPA law that was largely eviscerated by the 2005 Energy Policy Act, utilities that are behind on their renewable energy obligations must buy power from renewable energy facilities at the market price for electricity. PURPA was responsible for over 10,000 megawatts of cogeneration and renewable energy projects coming online in California in the 1980s and 1990s, so this part of Prop. 7 promises to be highly effective.
The second big carrot offered by Prop. 7 is a major change in how the market price is calculated. Prop. 7 will give this task to the California Energy Commission, taking it from the Public Utilities Commission, and will require the Energy Commission to consider the “value and benefits of renewable resources,” something that is explicitly not allowed to be considered in the current CPUC process. With natural gas prices soaring, the renewables-friendly CEC calculating the market price, and the cost of many types of renewables coming down, these two carrots will likely lead to many thousands of megawatts of new renewables coming online.
The third big carrot is a major change in the state’s “renewable portfolio standard” law (SB 1078). Currently, any renewable energy contract offered for CPUC approval (required for all investor-owned utilities energy contracts) is considered “per se reasonable” — and thus very likely to be approved — if it is at or below the market price for electricity. Prop. 7 changes the law to require that contracts up to 10 percent over the market price are considered “per se reasonable.” This could also be a significant boost for renewables. There are other carrots as well.
In terms of enforcement, Prop. 7 increases the penalties that may be assessed against utilities by eliminating the current $25 million cap imposed by the CPUC. Opponents of Prop. 7 charge that it reduces penalties, but some quick math reveals that this is not the case. Prop. 7 reduces the cents/kilowatt hour penalty, but by eliminating the cap, the actual effect is to increase penalties in almost all scenarios (see here for more detail).
There are some downsides to Prop. 7, the biggest of which is allowing utilities to include signed contracts for renewable energy for compliance purposes. While this is a concern, it is not fatal by any means because, as mentioned above, Prop. 7 is primarily about carrots and not sticks.
Some opponents have also pointed to a potential size limitation for renewable energy projects as a flaw in Prop. 7. Prop. 7 provides an expedited permitting process (subject to strict rules that make this process unlikely, in my opinion, to be used very often, if ever) for renewable energy projects and transmission lines. This expedited process only applies to projects 30 megawatts and up, but Prop. 7 does not change current law regarding the size of qualifying Renewable Portfolio Standard projects more generally. The debate is quite complicated on this issue, but the short summary is that it is highly unlikely that any agency or court will interpret Prop. 7 to disqualify projects 30 megawatts and under from inclusion. It requires a fairly tortured legal analysis to make this interpretation. Instead, under established principles of legal interpretation, the far better argument is that Prop. 7 does not change the key definitions in a way that will have any impact on size limitations.
If California is to make the necessary transition from fossil fuels, we will need the tools provided by Prop. 7. And if we are to lead the nation — as is our historic role — we will need Prop. 7 to lead the way. The Energy Commission conducted a review [PDF; see page 4] of the state’s renewable energy laws in 2006 and made a number of recommendations. Prop. 7 adopts almost all of those recommendations.
My organization has endorsed Prop. 7 and we urge other groups to do the same. We urge individuals to “endorse” Prop. 7 by voting for it in November.
(Note: We have not received any compensation from the Prop. 7 campaign, nor will we accept any compensation. Our advocacy work is independent.)