California Enacts RPS Legislation

Reaffirming California’s strong commitment to the development and utilization of renewable energy sources, Governor Jerry Brown recently signed Senate Bill X1 2, which requires all California utilities to generate 33% of their electricity from renewables by 2020. The new 33% renewable portfolio standard (RPS)—the most ambitious RPS in the country—sends a strong message to renewable energy developers that California will continue to support both short-term and long-term investment in renewable energy sources in the state.

While SB X1 2 revises a number of details in the existing California RPS statutes, the bulk of its impact for developers will derive from a few key provisions. The bill sets a three-stage compliance period requiring all California utilities, including independently owned utilities (IOUs), energy service providers, and community choice aggregators (CCAs) to generate 33% of their electricity from renewables by 2020.

  • 20% by December 31, 2013
  • 25% by December 31, 2016
  • 33% by December 31, 2020

This requires the RPS to be met increasingly with renewable energy that is supplied to the California grid and is located within or directly proximate to California. SB X1 2 mandates that renewables from this category make up

  • At least 50% for the 2011-2013 compliance period
  • At least 65% for the 2014-2016 compliance period
  • At least 75% for 2016 and beyond

Sets rules for the use of Renewable Energy Credits (RECs):

  • Establishes a cap of no more than 25% unbundled RECs going towards the RPS between
  • 2011 and 2013, 15% from 2014 to 2016, and 10% thereafter
  • Does not allow for the grandfathering of Tradable REC contracts executed before 2010, unless the contract was (or is) approved by the California Public Utilities Commission (CPUC)
  • Allows banking of RECs for three years only
  • Allows Energy Service Providers, CCAs, and IOUs with less than 60,000 or fewer customers to use 100% RECs to meet the RPS

It also eliminates the Market Price Referent (MPR), which was a benchmark to assess the above-market costs of RPS contracts based on the long-term ownership, operating, and fixed-price fuel costs for a new 500 MW natural gas-fired combined cycle gas turbine. Using the MPR, the CPUC would provide above-market funds to cover contract costs that exceeded the MPR requires the CPUC to establish a cost limit for each IOU, and authorizes IOUs to stop procuring renewable energy beyond the cost limit. It also requires the CPUC to adopt a standard tariff for renewable projects up to 3 MW in size with a 750 MW statewide cap on eligibility for the tariff.

Source: Solar Power Engineering

 

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