State Energy Policy

Below are some of the more prominent California clean energy laws and initiatives.

The Renewable Portfolio Standard

Generally considered the best renewable energy law in the nation, California’s Renewable Portfolio Standard (RPS) became effective in 2003. As originally written, the RPS required retail sellers of electricity to increase the amount of renewable energy they procure each year by one percent such that the renewable energy content of their electricity portfolios would equal 20 percent by 2017. Because of perceived progress towards this goal, the California Energy Commission (CEC) and Public Utilities Commission (CPUC) recently accelerated the 20% goal to 2010, and added a goal of 33% by 2020.

Eligible renewables include biomass, solar thermal, photovoltaic, wind, geothermal, fuel cells using renewable fuels, small hydroelectric, digester gas, municipal solid waste conversion, landfill gas, ocean wave, ocean thermal, and tidal current.

Should the state meet its 33% goal, renewable sources will provide the state with about 33,000 gigawatt hours (GWh) of additional generation. That is about the equivalent of the projected increase in natural gas demand over the same time period.

Progress, however, toward the goals of the RPS is not on target to meet the requirements of the law. As of March 2007, for example, PG&E had an RPS of about 12 percent, which is the same percentage the company recorded in 2003, when the RPS took effect. In its February 2008 billing inserts, PG&E is projecting 14% for their 2008 power mix.

The graph above demonstrates the rapid development of renewable energy needed to hit the 20% by 2010 target, which the California Energy Commission now concedes the state is “not on track” to achieve. While PG&E has announced investment in new renewable projects, they have also announced that are unlikely to reach the 20% target by 2010, though they claim that they will reach that target shortly thereafter. The California Energy Commission attributes difficulties with the RPS to a lack of transparency in the bidding processes for renewable projects, the complexity of administering the program, and an uneven application of RPS targets to retail energy sellers (i.e., the utilities).

Executive Order S-3-05

California Executive Order S-3-05 sets a long term greenhouse gas emission reduction target of 80% below 1990 levels by 2050. Reaching this ambitious target will require that California embark on a comprehensive strategy to make aggressive reductions in greenhouse gas emissions over the next four decades. The order also sets intermediate targets to reduce GHG emissions to 2000 levels by 2010 and to reduce GHG emissions to 1990 levels by 2020.

The California Energy Action Plan Loading Order

In 2003, California’s energy agencies produced a road map for energy planning called the Energy Action Plan (EAP) which was updated in 2005 with the EAP II. The EAP includes the “loading order” which describes the priority by which the state should meet new energy demands. The loading order’s first priority is energy efficiency and demand response as a preferred means to meet energy needs. The second priority is renewable sources of power and distributed generation, such as combined heat and power applications. And to the extent that efficiency and renewables cannot meet demand, the last priority is the use of what the state calls “clean and efficient fossil fuel generation.” The loading order and the Energy Action Plan are non-binding and not codified into law, and a proposed law to do so was vetoed by Governor Schwarzenegger in 2006. They do, however, reflect the political popularity of clean energy in California.

California Solar Initiative

In January, 2006, the CPUC approved the California Solar Initiative (CSI), committing a combined $3.2 billion in incentive funds for solar power over the next 11 years. The initiative provides rebates for homeowners, businesses, farmers and government projects investing in rooftop solar photovoltaics. It aims to install 3,000 MW of solar power on buildings statewide. In August 2006, the initiative was strengthened with the passage of SB1, the “Million Solar Roofs” law, which additionally requires:

  • Solar as a Standard Option: At a minimum, all new homes built in California must include solar panels as a standard option for homebuyers. This would be similar to the way marble or tile countertops have become standard options.
  • Net Metering: A key financial driver for consumers is the ability to get a credit on monthly electric bills for excess power generated by a solar system sold back to the energy grid. The law lifts the previous cap on net metering to offer a further incentive for rooftop solar.
  • Municipal Participation: Locally-controlled municipal utilities, such as Los Angeles Department of Water and Power and Sacramento Municipal Utility District, supply more than 20% of California’s electricity. Given the important role that these utilities play, they are required to offer a solar program that is at least on par with that of the investor owned utilities of PG&E, Edison and San Diego Gas & Electric.

Public Utilities Code section 2827(h)(3)

This “net metering” legislation allows residential, commercial, and industrial customers to offset part or all of their own electrical requirements by generating solar or wind electricity on their premises and feeding it back on to the grid. Customers can offset up to the total amount of the energy used in their facilities over a 12 month period. Any excess electricity over the 12 month period is retained by the electric utility.

Renewable Energy Transmission Initiative

The Renewable Energy Transmission Initiative (RETI) is a statewide initiative to help identify the transmission projects needed to accommodate the state’s renewable energy goals, support future energy policy, and facilitate transmission corridor designation and transmission and generation siting and permitting. RETI will be an open and transparent collaborative process in which all interested parties are encouraged to participate.

RETI will assess all competitive renewable energy zones in California and possibly also in neighboring states that can provide significant electricity to California consumers by the year 2020. RETI also will identify those zones that can be developed in the most cost effective and environmentally benign manner and will prepare detailed transmission plans for those zones identified for development.

California Green Building Initiative

In December 2004, Governor Schwarzenegger signed an executive order mandating energy efficiency measures. The order has a goal of reducing energy use in state-owned buildings by 20 percent by 2015 (from a 2003 baseline) and encourages the private commercial sector to set the same goal. According to the order, the goal will be accomplished by adhering to the standards of the United States Green Building Council (USGBC), which uses building design, lighting, heating and cooling, and solar panels to minimize outside energy usage. The energy saved in state buildings alone will amount to 1,935 GWh by 2015, or about 1 percent of the total amount of electricity used by the state in 2005. This does not account for commercial buildings.

Natural Gas Reduction Efficiency Measures

The CPUC has set, and achieved, aggressive goals of reducing natural gas usage. Since 2000, California’s use of natural gas has declined by about 9 percent. The state has a stated goal of doubling the annual gas savings by 2008, and tripling them by 2013.

AB32 – Global Warming Solutions Act

This law was approved by the California legislature and was signed by Governor Schwarzenegger in September 2006. The law caps greenhouse gas emissions at 1990 levels by 2020, representing a 25% reduction. This requires the elimination of 174 million metric tons of greenhouse gases by utilities, oil refineries, steel mills, and other heavy industries. The law requires the Air Resources Board to adopt regulations to meet the goal. Actual reductions will be required beginning in 2012.
While this law makes California a national leader in the reduction of greenhouse gas emissions, it is only a beginning. Mark Hertsgaard writes in The Nation, “Talk about an inconvenient truth! Returning California's greenhouse emissions to 1990 levels by 2020 is even less ambitious than the Kyoto Protocol, which requires industrial nations to lower emissions approximately 5 percent below 1990 levels by 2012. And Kyoto's targets are only a tiny step toward the cuts that are truly necessary.”

Assemblyperson Fran Pavley, author of the bill, has herself expressed caution about overestimating the actual benefits of the bill. “Is this bill enough to really address global warming? Absolutely not,” she says. “But it’s an important first step. The real idea behind the bill is to get other states to follow our lead. And we will build on this.”

SB1368: Greenhouse Gas Emissions Performance Standard

In February of 2006, the five members of the CPUC unanimously adopted a resolution calling for, among other things, utilities to only procure electricity from sources that emit the equivalent or less than what is produced by a combined-cycle natural gas turbine. These turbines are widely considered as state-of-the-art, in terms of efficient use of natural gas and the emissions they produce. The language of this proceeding is echoed in a law - SB1368 - that took effect in 2007.

A companion bill to AB32, SB1368 requires that all new base load electricity generation be at least as clean as a modern combined cycle natural gas plant. Under this standard, integrated gasification coal plants using carbon sequestration are the only coal plants that could potentially qualify, though even this is questionable. If the technology can be made commercially viable, it is likely to significantly increase the price of electricity from coal.

The intent is to reduce greenhouse gases by limiting investment in heavily polluting new fossil fuel projects. The law applies to both in-state and out-of-state energy production, and is specifically targeted at the push for new coal-fired power plant development in the Western states that will largely serve California. In order to truly reduce greenhouse gases, the law should also apply to Liquefied Natural Gas import projects, as the LNG supply chain adds up to 25% more greenhouse gases into the atmosphere than what comes from domestic natural gas. As the Emissions Performance Standard of the law is currently written, however, the law does not cover the lifecycle emissions of power generation, only what is emitted from a power facility.