U.S. utilities and states must do a better job of explaining the potential costs of complying with renewable portfolio standards or risk consumer backlash if those costs show up in power bills, officials at Standard & Poor’s said in a conference on Tuesday.
Twenty-nine states and the District of Columbia have some type of RPS. Other states and the federal government, which has not yet been successful, are considering the standards.
Some states with RPS moreover are looking to increase renewable targets even before reaching their initial goals.
RPS requires utilities to acquire a certain percentage of power supply from renewable sources such as wind or solar.
That renewable power is often sold at above-market prices.
Some studies forecast RPS costs will not significantly boost customer rates, and some reports predict RPS will actually reduce costs.
S&P however said the states and utilities have not provided much data that assesses the actual RPS costs incurred to date.
In California, with an RPS of 20 percent by 2010, renewable contract data is considered commercially sensitive.
California’s governor supports a 33 percent goal by 2020, while a voter initiative would require a 50 percent RPS by 2025 could receive the required signatures to reach the November 2008 ballot.
NEED FOR MORE RENEWABLES
In most states, RPS compliance is mandatory and utilities face financial penalties if they do not meet the targets.
Renewable energy facilities generated about 9 percent of total U.S. generation in 2006, including conventional hydro, which does not qualify as renewable in many states. Renewable sources, excluding conventional hydro, generated just 2.4 percent of U.S. generation.
S&P noted studies showing the required construction of renewables would be unprecedented and some utilities, including California’s three investor owned utilities – PG&E Corp’s Pacific Gas and Electric, Edison International’s Southern California Edison and Sempra Energy’s San Diego Gas & Electric – will likely not meet their targets.
Unless the state relaxes its rules, the California utilities would face fines of up to $25 million per year.
In California, as elsewhere, S&P said transmission and siting issues are the largest factors stalling the construction of renewables.
Renewable resources are usually located in remote regions, far from load centers and therefore require investment in transmission.
Southern California Edison, for example, has plans to spend $1.8 billion in transmission to support renewable projects. Consumers ultimately will pay those costs, S&P noted.
By Scott DiSavino
(Editing by Marguerita Choy)
19 March 2008
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