Gino DiCaro

Report focuses on renewable energy contract failure

By Gino DiCaro, VP, Communications

Capitol Update, Jan. 20, 2006 Share this on FacebookTweet thisEmail this to a friend

The California Energy Commission (CEC) released a study on January 12 that finds that an overall contract failure rate of 20-30 percent should be expected for large renewable energy solicitations by California investor-owned utilities (IOUs).

The CEC-commissioned report, "Building a Margin of Safety into Renewable Energy Procurements: A Review of Experience with Contract," warns that renewable contracts do not always provide the promised energy on the agreed-upon timeline.  The report then goes on to point out that this could lead to grid reliability problems for the State if left unaddressed.  

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Pursuant to the "The Energy Action Plan", a joint agency policy document adopted by the CEC and California Public Utilities Commission (CPUC), the California Renewable Portfolio Standard (RPS) requires IOUs and certain other retail sellers to increase their level of renewable resources by one percent a year until a 20 percent renewable portfolio is achieved.  The RPS requirement applies only to the extent that Public Goods Charge (PGC) funds are available to pay for costs exceeding a market benchmark price established by the CPUC.

The IOUs have conducted RPS solicitations and are well on their way to meeting the 2010 target.

CMTA supports the goal of ensuring that the State has a diverse portfolio of energy resources.  At the same time, all generation resources, including renewables, should be developed and brought online in a cost-effective manner.  This means a rigorous examination of the cost-effectiveness of resources and a continuation of the present statutory cap on the PGC charge (which funds above-market RPS costs and other renewable programs).  Recent utility solicitations indicate that prices for some renewable resources, including wind and biomass, have come down.  The CEC-commissioned report is a valuable tool to help policymakers and regulators assess whether ratepayers are getting their money's worth on renewable energy contracts, now and into the future.  At a minimum, it helps us ask the right questions.

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