Pacific Gas &Electric Co. has under contract all of the renewable power it needs to meet state mandates by 2010, if the promised power systems can be built in time.
It’s a big if.
Expiring tax credits, the lag in building utility-scale renewable energy and increased competition for renewable power sources are potential roadblocks for the Northern California utility and the state’s two other major utilities.
California has the strictest renewable mandates in the country. The state requires an investor-owned utility’s energy portfolio to consist of 20 percent renewable energy by 2010. By comparison, Colorado, Hawaii and New Mexico give utilities an extra 10 years. The Maryland Public Service Commission requires 9.5 percent renewables by 2022. Missouri, Virginia and Vermont have set voluntary targets, and 21 states have no renewable mandates.
All of California’s major utilities are struggling to meet the goals because they say there’s just not enough renewable energy for them to buy, and even if they get the contracts in place, the infrastructure – for instance, solar thermal power plants and transmission lines – can’t be built quickly enough. If they miss the deadline, they could be subject to fines.
PG&E expects to get 14 percent of its energy from renewable sources by the end of the year. In 2007, PG&E delivered 11.9 percent renewables. That was made up of 2.5 percent small hydroelectric, 4 percent biomass, which produces energy from decomposing organic material, 3.5 percent geothermal, which produces energy from the earth’s heat, and 1.8 percent wind.
“We could use more of everything we’ve got,” said Hal LaFlash, director of emerging clean technology policy at PG&E.
PG&E, which has about 15 million customers, has signed 38 contracts since the mandates were created in 2002, which would give the company between 2,200 and 3,000 megawatts by 2010. One megawatt can power approximately 650 homes. About 2,600 megawatts would constitute 21 percent of the utility’s total energy portfolio.
Because PG&E was in bankruptcy in 2002, the utility fell behind on the mandates. Its major renewable contracts have come only in the past few years. Large-scale projects – like BrightSource Energy’s solar thermal power plants that PG&E will tap for up to 900 megawatts – can take two to five years to actually produce power PG&E can use. That’s because obtaining environmental and building permits is a long and complicated process, so contracts signed now will likely miss the deadline.
Solar thermal power plants, for instance, require approvals from the Energy Commission and the federal Bureau of Land Management, and are subject to reviews from the National Environmental Protection Agency and the California Public Utilities Commission. Plus, they will require building permits and evaluations from the California Independent System Operator, which controls power lines in the state. There’s also the time it takes to build a solar thermal power plant.
“The fastest you might get a project online is two years, but that’s only if you have hardware available,” LaFlash said. Expiring credits
Expiration of federal tax credits – that have spurred the development of new renewable sources and offset the cost of financing them – complicates the issue.
“Without the tax credit, a number of these projects wouldn’t happen,” LaFlash said.
The renewable mandate gives some leeway for utilities that can show they have enough renewable energy under contract by 2010, even if the sources of that energy are not yet online.
The first power plant from BrightSource isn’t expected to go live until 2011, and that one will only account for 100 megawatts – and will depend on getting land, building permits and financing.
Another issue for PG&E and the other utilities is that costs are rising 20 percent per year for renewable power. Some of that is attributed to global demand. Several European countries pay long-term tariffs, which has sped up the adoption of renewable energy. And with 30 states (including Washington, D.C.) that now have renewable mandates for utilities, competition is intensifying nationally, and that’s driving up prices. PG&E lost a contract for geothermal power in late 2007 when the seller pulled out to negotiate for a higher price.
Southern California Edison, which has about 13 million customers, is trying a new approach to boost its renewable portfolio that PG&E has not yet tried. It announced in March that it would install 250 megawatts covering 65 million square feet of solar panels on residential and commercial rooftops for a cost of about $875 million. Rooftop solar – or distributed solar – is faster and cheaper to install than utility-scale solar and can take only a few weeks to get connected to the grid once installed. Still, the utility won’t get all 250 megawatts installed until 2013. None will be online before 2011.
Another similarly sized project for a solar power tower – a utility-scale solar project Southern California Edison signed in early June – won’t be online until 2013 either.
Even if both projects met the 2010 deadline, Southern California Edison is delivering 2,685 megawatts of renewable energy today or only about 16 percent of its total portfolio. Projects of 250 megawatts and less are essentially drops in SoCal Edison’s renewable energy bucket.
The utility said it should have the contracts in place by 2010 to meet the standards.
“By 2010, we expect to have contracts in place to make the RPS. But it’s impossible to say what will be online by then,” spokeswoman Vanessa McGrady said. Power risks
A report to the California Legislature by the California Public Utilities Commission showed that risks to renewable energy projects include the lengthy and multi-staged permitting process many projects undergo, tax credit expirations and the uncertain availability of construction materials.
Further, the PUC said transmission issues could affect up to 40 percent of projects. Even if utilities can afford utility-scale projects, most would be built in the desert, where the sun is hottest and space is available, but where there are no transmission lines to move power to urban centers.
This issue is the worst for San Diego Gas and Electric, the state’s third-largest utility, which gets less than 6 percent of power from renewable sources. Capacity on its lines is nearly maxed out. The utility has pushed for the Sunrise Powerlink, a $1.3 billion transmission line to link renewable energy sources to the power grid. All three major utilities would split the cost.
“Without the Sunrise Powerlink, it’s going to be very difficult, if at all, for SDG&E to make the 2010 mandate,” said spokeswoman Jennifer Briscoe.
Southern California Edison has $19 billion in energy infrastructure projects in the works, including a $5 billion, five-year transmission expansion project to connect to wind energy sources in the Tehachapi area.
The appetite for projects by utilities is encouraging the development of new technologies. PG&E announced June 12 two new contracts to acquire 106.8 megawatts of electricity from a solar thermal power plant that also contains steam turbines powered by biomass fuel that can produce electricity around the clock. It should begin producing power by 2011, PG&E said.
Lindsay Riddell – San Francisco Business Times
16 June 2008
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