California's Energy Scene

California is in the midst of an intense debate over its ambitious clean energy initiatives. In 2006, Governor Schwarzenegger signed into law an emissions reduction measure known as AB 32. The law includes both a statewide cap-and-trade plan and aggressive renewable resource targets. Opponents have since launched a campaign to roll back the state's landmark climate change legislation through Prop. 23, also called the California Jobs Initiative. Prop 23, if passed in November, would suspend implementation of AB 32 until the state's unemployment level goes below 5.5 percent for four straight quarters. California's current unemployment rate is 12.5 percent.

In addition to this, the Legislature is also considering SB 722, which would establish a statutory 33 percent requirement for both public-owned and investor-owned utilities and includes stricter delivery requirements for resources coming from outside of California. For example, it appears to mandate that at least 75 percent of new (post 2009) renewables be either directly interconnected to California's ISO or dynamically scheduled into California's system.

The implications, at least initially for the Northwest, are somewhat mixed. Tighter requirements on bringing renewable electricity into California responds to a lot of the concerns raised in the region about exports going to meet California's RPS targets. (See earlier posts)

"Because it limits tradable renewable credits to 10 percent of a utility's portfolio, it should will help limit the amount of 'null' energy dumped into the Northwest market," says Jeff King, senior resource analyst for the Council. "It should also encourage transmission expansion, either through efficiencies in the existing system or through new construction," he adds. And dynamic scheduling--when resources in one balancing area are used to balance generation and load in another balancing area--would enable California resources to be used to balance wind generation in the Northwest.

All of this is likely to increase the cost of wind power from the Northwest, making other renewables like solar thermal from the Southwest more attractive to California utilities and perhaps slow the pace of wind power development here.

Still, notes King, mandating the 33 percent requirement to all utilities, not just investor-owned, provides more certainty of future demand than the current law, which could encourage investment in the Northwest-California interties to bring wind generation into California.

Overall, the bill acts as an incentive to improve wind generation transactions between the Northwest and California, either through greater coordination between balancing areas or transmission enhancements.

We'll be tracking the implications of all this for the Northwest, so stay tuned.