Renewable Portfolio Standards – California

On September 12, 2002, Governor Gray Davis signed a bill (SB 1078)requiring California to generate 20 percent of its electricity from renewable energy no later than 2017. The 20 percent standard was the most stringent renewables portfolio standard (RPS) to date in the United States. The new law requires sellers of electricity at retail to increase their use of renewable energy by 1 percent per year. Since California already generates about 10 percent of its electricity consumption by renewables, the new law will nearly double the state’s existing base of wind, geothermal, biomass and solar energy resources. An estimated 9,000 MW of renewables will be needed.

Specifically,the new RPS program would require that a retail seller of electricity, including electrical corporations, community choice aggregators, and electric service providers, meet the minimum percentage of electricity generated by eligible renewable energy resources. If they fail to procure sufficient eligible renewable energy resources in a given year to meet an annual target, the electrical corporation would be required to procure additional eligible renewable resources in subsequent years to compensate for the shortfall

The California PUC is required to adopt rules for establishing a process for determining market prices of electricity from renewable generators, a process for rank ordering and selection of least-cost and best-fit renewable resources to fulfill program obligations, flexible rules for compliance that permit sellers to apply excess procurement in one year to subsequent years, or inadequate procurement in one year to the following 3 years, and standard terms and conditions to be used by electrical corporations in contracting with renewable electricity generators.

The bill requires the Energy Commission to certify eligible renewable energy resources, to design and implement an accounting system to verify compliance with the renewables portfolio standard by retail sellers, and to allocate and award supplemental energy payments to cover above-market costs of renewable energy.

A June 2005 report for the Energy Commission contains the following update:

  • The state’s Energy Action Plan and the California Energy Commission’s Integrated Energy Policy Report have since expressed a state goal of accelerating the implementation of the RPS such that the 20-percent goal is met seven years early—by 2010. The Governor has endorsed this accelerated schedule and has set a goal of achieving a 33-percent renewable energy share by 2020 for the state as a whole.
  • Much has already been accomplished under the state’s RPS. Regulatory rules implementing major portions of the statute have been completed by the California Public Utilities Commission (CPUC) and the California Energy Commission. The state’s three major investor-owned utilities (IOUs), through interim renewable energy solicitations issued in 2002 and through bilateral contracts signed since that time, have increased their purchases of renewable energy.

November 2005 Update:

  • The California Public Utilities Commission issued a draft final report, Achieving a 33 Percent Renewable Energy Target, on November 1, 2005.

    The authors of the report from the Center for Resource Solutions Team offer the following general conclusions. "It is economically and technologically feasible to achieve a 33% RPS in California by 2020. Moreover, a 33% RPS is likely to result in net savings to California’s electricity customers over a twenty year period. Using the best information available at this time, a 33 percent RPS would result in a small negative ratepayer impact in the first decade (2011-2020). This is more than offset by longer term ratepayer benefits over ten years in the 2021 to 2030 timeframe. These estimates are meant to be indicative rather than absolute since, as this analysis demonstrates, there is considerable uncertainty surrounding future rate projections and RPS costs."