# Presentation: 909796

## Renewable Power in California

***Challenges and Opportunities in the Electricity Market***

**Tim Tutt**
**Manager (Acting)**
**Renewable Energy Program**

## Here’s The Story

**Background**
- Crisis
- Aftermath
- Future

- California Energy Commission

## California’s Renewable Energy  (31979 GWh in 2000)

**California’s Renewable Energy****  (31979 GWh in 2000)**

- California Energy Commission

## Renewable GWh By Type

**SOLAR**

**WIND**

**BIOMASS**

**GEOTHERMAL**

**Standard Offer Era**

**Uncertainty Era**

**REP **
**Era**

- California Energy Commission

**Notes:**
California has developed one of the largest and most diverse renewable energy generation industries in the world over the last 2 decades, with over 7,000 MW of renewable energy capacity in 2000.
Renewable energy development in the state arose from the Public Utility Regulatory Policies Act of 1978, requiring utilities to purchase power from non-utility generators at the utilities’ full avoided cost.
California implemented this federal law through ‘standard offer’ contracts. Most of the non-utility contracts with renewable generators provided fixed-rate payments for 10 years, based on forecasted costs. About 5,000 MW of renewable capacity was added to California’s electricity system between 1985 and 1990.
Renewable electricity generation declined from 1990 to 1998 when high fixed-price contracts were ending and current energy prices were low. 
The Renewable Energy Program was established to provide support to reduce or reverse the declining trend in California’s renewable electricity generation, especially in the face of electric industry restructuring, where public purpose needs are not adequately met in a competitive market.
1999 and 2000 record wind generation in CA
Geothermal turnaround with wastewater injection, new plants
130 MW of biomass restarts this spring

## Renewable Energy Program

- AB 1890, passed in September 1996,  allocated $540 million; ordered CEC Policy Report
- SB 90, passed in November 1997, detailed funds as Support for:
- Existing Power Plants
- Development of New Power Plants
- Emerging Renewable Technologies Such as Solar Photovoltaics
- Consumer Purchases of Renewable Power
- Consumer Education About Renewables
- Program Started in 1998

- California Energy Commission

## REP: Operating Principles

- Ties to Market Prices and Activity
- Pay For Performance
- Address Demand as well as Supply
- Flexibility To Change With Market
- Minimize Administrative Costs
- Target Funds Where Needed

- California Energy Commission

## Story - Continued

- Background
**Crisis**
- Aftermath
- Future

- California Energy Commission

## California Electricity Prices

- California Energy Commission

**Notes:**
June was first month in 2 years where average wholesale prices are lower than same month year ago.
Average wholesale prices for last 3-4 months are at pre-crisis levels.

## ISO Declared Emergencies - 1/00 to 2/02

*ISO Declared Emergencies - 1/00 to 2/02*

- California Energy Commission

**Notes:**

	1998	1999	2000	2001	
No Touch	8	12	77	166	
Alert	7	2	34	180	
Warning	8	6	85	180	
Power Watch	N/A	N/A	20	26	
Stage 1 	7	4	55	70	
Stage 2 	5	1	36	65	
Stage 3 	0	0	1	38	

## Historical Generation Outages

**Historical Generation Outages**
**Scheduled and Forced**
**(Average MW/Month)**

***Outages 2-4x greater in Fall/Winter/Spring 2000-01 ***

- California Energy Commission

**Notes:**
Here we can see just how dramatic the level of outages were.  Outages both planned and unplanned ran 2 to 4x higher than previous year.
 Outage data based on ISO #s.  Does not reflect an estimated 2-3,000 MW QF capacity that went off-line in the spring because of non-payment from the IOUs.   Gas suppliers who hadn’t been paid refused to sell gas to QFs (cogeneration projects) as well well as merchant generators.

## Renewables in the Crisis

- 130 MW of Biomass came back on-line
- 200 MW of New Renewable powerplants on-line
- Wind generation came on just in time on at least 2 occasions
- Existing Renewables continued to generate during financial crisis

- California Energy Commission

## Story - Continued

- Background
- Crisis
**Aftermath**
- Future

- California Energy Commission

## Green Market: Customer Credit Account

**April, 1998**

**May 2000**

- California Energy Commission

**Notes:**
19 active providers in last half of 2000, 9 only by April 2001, now down to 3

renewable percentage of direct access customers grew to 90% or more by mid-1999; DA market in CA unprofitable without credit

## Buydown Activity:  Quarterly Reservations

**Buydown Activity:****  ****Quarterly Reservations**

- 1998

- 1999

- 2000

- 2001

- California Energy Commission

**Notes:**
Governor requests that rebates increase in February

CEC and new CPUC program respond by May

Prior to 1998, grid-connected installations averaged less than 1 per month.

## New Account: On-Line By Year

- California Energy Commission

**Notes:**
180 MW operational today, 70 MW wind, 60 MW geothermal, 30 MW LFG

Most of remaining capacity is wind

Have had difficulty with power purchase contracts during the crisis

## Existing Renewables

- Most Now or Soon-to-be Covered by Fixed-Price 5-year Contracts at 5.37 cents/kWh plus capacity payments
- Exceptions:
- Facilities that had moved to competitive market, no longer under Standard Offer contracts
- Biomass Facilities that returned to service in 2001
- These facilities will probably receive similar deals

- California Energy Commission

## Story - Continued

- Background
- Crisis
- Aftermath
**Future**

- California Energy Commission

## INVESTMENT PLANWhere We Are Going

**GOAL: Pursue investments in renewable resources to achieve self-sustaining renewable energy supply.**

- California Energy Commission

**Notes:**
The Energy Commission’s goal is to vigorously pursue investments in renewable resources with the long-term view of a fully competitive and self-sustaining renewable energy supply in California. 
The Commission developed an Investment Plan for recommending allocation of public goods funds for renewables for 2002-2006.
The Commission adopted targets for renewable energy consumption in the state, beginning with the current baseline of 12 percent of California’s total. The target percentage is an annual increase of one percent point per year, reaching 17 percent of generation for use in California by 2006. 
The Plan contains built-in flexibility so that the program can be modified as needed to respond to market changes.
Pending legislative approval, SB 532 would authorize the Commission to implement the Investment Plan.

## INVESTMENT PLANRenewables Generation Goals

**Renewable Energy Program**

**GOALS**

- California Energy Commission

**Notes:**
Electricity generated from renewable energy sources enjoyed a rising trend in the 1980’s and early 1990’s. By the mid-90’s renewable energy generators were faced with a ‘price-cliff’ situation created when they moved from the high fixed-prices for energy to the variable energy price periods of  their long-term contracts. Energy prices were much lower than forecasts predicted. Energy payments would sharply decline and renewables generation would continue to decrease.
The Renewable Energy Program began operation in 1998, as shown by the yellow trend line, and successfully reversed the declining trend in California’s renewable electricity generation.
The high energy prices and market fluctuations seen in 2000 and 2001 create a highly uncertain atmosphere in which developers and their financial backers might be reluctant to commit to renewable energy projects.
To provide a measure of market certainty while ensuring effective use of funds, the Renewable Energy Program’s Investment Plan recommends continuing to provide incentive programs linked to the market to reach the goals shown in green.

## Other California Policies

- CPUC Self Generation Program
- California Power Authority Investment Plan
- Solar/Wind Income Tax Credit
- SF Solar bond Issue
- Possible Renewable Portfolio Standard
- Research and Development - PIER

- California Energy Commission

## California Renewables:Installed VS Potential

**Way too much to show on a graph**

**MW**

- California Energy Commission

## Down the Road

- Technology Improvements
- Cost Reductions
- Increased Efficiency
- Reduced Maintenance
- Enhanced System Value
- Nexus Between Resource and Need
- Secondary Benefits:   e.g. - Cooling Reductions
- Reactive Power ---- Electronically
- Spinning Reserve ---- Distributed PV
- Reliability --- Multiple distributed renewable systems

- California Energy Commission

## Conclusions	

- In the Near Term - Look for significant expansion of  Renewable Supply In CA
- In the Long Term - Look for significant role for renewables - particularly distributed renewables - in a quite different electricity market structure
- For more information:
- Tim Tutt  --  (916) 654-4590
- www.energy.ca.gov/renewables

- California Energy Commission