California’s RPS shakes up the renewable energy market across the West


California’s Renewable Portfolio Standard (RPS) is ambitious: a mandate for 33% of the state’s energy consumption to come from renewable sources by 2020.*  It has sparked a flurry of new project development in what is now the biggest renewable energy market in the country.  But there have also been ripple effects across the West: out of state energy producers have expressed concerns that the regulations contained in the RPS might prohibit them from exporting their energy to the Golden State.

California’s RPS is amongst the most robust in the country, and not just for the “big sticker” number of 33%.  Part of what makes it such a powerful mandate for renewable energy (compared to other states’) is its 75% requirement of “Category 1”-type energy, meaning from facilities directly interconnected to the California grid.  The Governor’s office expressed doubts about new out-of-state projects aimed at exporting power to California, citing the problems of permitting and construction for new transmission lines, and the inefficiencies of spending billions of dollars to transport energy that could just as easily be generated in California.

There has been some speculation that, despite the aforementioned reasoning, the reasons behind the Category 1 restriction are more political: having 75% of RPS energy sourced in California means jobs, spending, and economic productivity.  Whatever the reason, the restrictions are not simply the whim of Gov. Brown; they are codified into law as a part of the RPS, and will be gradually phased in by 2020 (see the below chart, courtesy of the California Public Utilities Commission).

Perhaps a stronger argument for local production of renewable energy is that of transmission loss, that is electricity that is lost as it is being transmitted across the country.  While not as big of a problem with the extremely high voltage lines we use today, transmission and distribution losses nationwide run at about 7% per year, according to the Energy Information Administration.  In an industry that is operating on very slim margins (both economically and carbon-intensively) as it begins to gain its footing, these losses could impact the net carbon-savings of projects such as these.

This esoteric piece of a rather esoteric law has been generating big headlines over the past few weeks, as the Denver Post broke a story on January 20th about billionaire oil and gas tycoon Phil Anschutz’s plan to build an unprecedentedly large wind farm on property he owns in Wyoming, with the intent to ship it to California.  He hopes to build a 3,000 MW wind farm, which would be three times larger than the largest wind farm currently in California, at Tehachapi Pass.  He would then build the TransWest power line, a 725-mile-long line to just near the California border south of Las Vegas.  Wyoming regulators and officials have been on a goodwill tour across California, presumably hoping to get the RPS altered to allow out-of-state wind energy, which they claim will be much cheaper than California-generated wind energy, due to lower land acquisition and environmental mitigation costs.

The future of renewable energy production in California beyond the 2020 target date for our RPS is uncertain.  As more states come on board with large-scale renewable energy generation, the map of renewable energy is changing dramatically, and it remains to be seen whether policy will flex with the market.

*For a primer on RPS statutes, please see my post at this blog from last year