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Carbon cap would boost wind market -- California emissions

Plans for a cap on California greenhouse gas (GHG) emissions from electricity generation could ultimately result in a development bonanza for the state's wind power industry. The proposed cap, announced by the California Public Utilities Commission (CPUC), would apply to all of the global warming pollution produced in the course of generating electricity for customers of the state's investor-owned utilities and non-utility power providers. The CPUC also set the foundation for a process to explore a range of flexible compliance options that minimize the cost of meeting the cap.

"I'm comfortable saying that if the commission establishes a firm carbon cap that declines over time and it's set at a sufficiently challenging level, then wind power will win out," says John Galloway of the Union of Concerned Scientists. "Because there's no doubt that we'll continue to see wind power as one of the most affordable energy sources."

Details of the cap will be worked out in coming months and a key objective will be to ensure that the system is compatible with any future GHG cap-and-trade system developed in California, the Western Region, nationally or internationally. To that end, the load-based cap will be measured in the form of tons of carbon dioxide equivalent.

"Establishing the cap itself is the key," says Galloway. "How do we not penalise past action? In other words, if a utility has already gone out and invested in significant clean energy resources over a number of years, it's not fair to say, OK, you have to start over to meet the cap."

Banking and trading

The CPUC intends to explore different approaches to flexible compliance, including banking, offsets and trading. While the commission is considering establishing penalties for under-compliance, it will also investigate GHG emission allowances based on superior performance that the utilities could sell outside California to the benefit of shareholders. "We're already seeing states and regions get into this before the federal government," Galloway says. "And we should eventually see regions interacting with each other."

The CPUC plans to continue work with the California Governor's Climate Action Team to ensure that municipal utilities are also subject to a GHG emissions reduction regime that will assist in meeting the state's aggressive GHG reduction goals. "I think we can expect that the CPUC will begin defining the specifics in the summer or fall," says Galloway. "And they may answer some of the fundamental questions earlier. But I also think this could be somewhat of a long road and when the cap will actually be confirmed is still an open question."

The action is part of an overall plan to meet the GHG reduction goals articulated in the governor's executive order of June 1, 2005. The CPUC is also continuing its ongoing initiatives in energy efficiency, solar power and renewables, and is beginning to push toward requiring that 33% of California's electricity be derived from renewables by 2020. California still stands as the nation's wind power leader with 2112 MW installed capacity, but it added only 61 MW in 2005 despite a record setting year of more than 2400 MW installed in the US overall.

"We're well positioned to be a climate leader in California and there's usually a willingness among other states to follow California's lead," Galloway says. "The wind industry here is certainly going to be booming and the cap should accelerate things."

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