AB 893 would mandate that utilities and CCAs buy 2,500
megawatts of solar and wind by 2022, before federal tax credits expire.
On Thursday, California legislators were introduced to a new
clean energy bill, one with a decidedly shorter-term goal than shifting to a
100 percent clean energy grid by 2045 (SB 100), or creating a pan-Western
region grid over the coming decade (AB 819).
Instead, the new bill, AB
893, aims to force utilities to buy about 2,500 megawatts of wind and solar
power over the next four years — a move its supporters say will fill a
widening gap in the state’s utility-scale renewables market, and save hundreds
of millions of dollars in federal tax credits that could otherwise be
lost.
At least that’s what AB 893 would do under the new
amendments added to it this week. Prior to this late-breaking change, the bill
was solely about requiring the state’s investor-owned and public utilities,
community-choice aggregators (CCAs) and direct energy providers to buy about
5,000 megawatts of geothermal power under the state’s renewable portfolio
standard — a proposal that was rejected by the legislature in 2014.
But the newly amended bill makes several important changes
to the original framework, according to Rick Umoff, California director of
state affairs for the Solar Energy Industries Association.
First, it splits up the mandate, with about 2,500 megawatts
to be made up of wind and solar power, and the remaining 2,500 megawatts to
come from geothermal and biomass resources, he said. Second, it would put those
2,500 megawatts of wind and solar power on a fast track for procurement
starting in 2019, to ensure that they’re eligible for federal tax credits set
to expire for projects not started by the end of next year.
“If we’re going to take advantage of those, we need to start
moving now on procurement,” Umoff said. “But we’re not seeing very robust
procurement of wind and solar at the moment."
That’s a problem for meeting the state’s goal
of reducing economy-wide greenhouse gas emissions 40 percent from 1990
levels by 2030.
According to the California Public Utilities Commission
(CPUC), California will need to procure about 10.3 gigawatts of solar and wind
by 2030 to meet the utility sector’s share of this goal, said Umoff. But if it
isn't able to meet part of that requirement with projects that receive the
existing federal tax credits, the total cost to consumers of meeting that goal
is likely to increase.
Resolving market uncertainty
Analysis done as part of the CPUC’s integrated resource plan
filed last year indicates that failing to develop a significant amount of
projects that are able to take advantage of federal tax credits could cost
California ratepayers an additional $143 million per year, he noted.
While tax credits are just one of nearly two dozen variables
that could affect these long-range costs, the CPUC's “model results indicate
that utility-scale solar PV and wind procured within [the] next 1-3 years to
take advantage of federal tax credits are part of [a] least-cost solution for
2030,” the CPUC wrote in a November staff report.
AB 893 is meant to create a pathway to capturing the value
of these tax credits in a California renewable energy market that’s now filled
with “near-term uncertainty around who is procuring, and how the procurements
will be structured,” Umoff said.
California's utility-scale renewables market has slowed in
the past year. Investor-owned utilities Southern California Edison, Pacific Gas
& Electric and San Diego Gas & Electric have already satisfied their
RPS requirements, leaving them with little incentive to buy more. And while
CCAs have launched around the state with the express goal of increasing their
customers’ share of renewable energy, most lack the balance sheets and
creditworthiness to contract for renewables on their own.
“One thing this bill is trying to do is resolve this
uncertainty in the market,” said Umoff. AB 893 would apportion these
procurements across the various load-serving entities in the state, roughly
based on their proportion of load. CCAs would have the opportunity to procure
projects on their own behalf, or if they’re unable to, have the investor-owned
utility procure on their behalf, he said.
Political opposition and support
The bill faces significant political opposition. Prior to
this week’s amendments, AB 893 was opposed by the state’s investor-owned
utilities, its two big public utilities in Los Angeles and Sacramento, and the
CalCCA group representing CCAs across the state, along with Shell Energy North
America, a big direct-access energy retailer in the state. Business groups
including the California Chamber of Commerce and building, real estate,
shopping center and farming organizations are also opposing the bill.
This opposition was largely centered on the concern that the
massive new geothermal procurement mandate would force utilities into expensive
contracts and increase electricity costs for ratepayers.
But AB 893’s supporters, which include the Solar Energy
Industries Association, the California Wind Energy Association, the Large-Scale
Solar Association, and geothermal project developers, say the bill’s new emphasis
on short-term solar and wind procurement, at today’s low prices and with the
benefit of federal tax credits, should significantly reduce the risk of
procurement costs rising out of control.
AB 893 backers are also seeking the support of labor unions,
which may see it as promoting more in-state jobs for solar, wind, geothermal
and biomass projects, Umoff said.
The groups that have opposed the old version of AB 893 did
not immediately issue statements on the newly amended version introduced
Thursday. However, the business groups opposing the original version of AB 893
wrote in a letter that they were concerned that version of the bill would force
utilities to meet its geothermal mandate by “purchasing out-of-state power and
purchasing geothermal at the expense of other renewable resources” — which
is a concern that the new version of the bill might be seen as allaying.
Umoff also noted that, compared to the state’s current
portfolio of about 24,000 megawatts of solar and nearly 13,000 megawatts of
wind power, an additional 2,500 megawatts over four years represents “a limited
number of procurements.”
AB 893 would also subject its 10-year contracts to a
cost-containment review process similar to the one performed under the current
renewable portfolio standard, and would apply more relaxed timelines for the
procurement of the geothermal resources that were the bill’s original focus, he
said.
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