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United States: California not so neighbourly - Stronger mandate with drawbacks

A new bill moving through the California legislature could make it more difficult for wind plants in neighbouring states to sell power into the California grid.

The law's main purpose is to increase the volume of green power that the state's utilities must acquire from renewable energy sources, so it has wide backing among lawmakers and environmental groups.

But it would also require simultaneous delivery of not only the renewable energy credits (RECs) utilities must acquire, but also the associated electricity. In a region short of capacity for more generation on its wires, the requirement represents a significant barrier to utility efforts to comply with green power regulation.

By using RECs to represent green power acquisition, California utilities and out-of-state wind plant operators have employed a variety of market-based approaches for accommodating wind power's variable supply to the grid while also satisfying the state's renewables portfolio standard (RPS) law. The new bill would put the brakes on similar deals going forward, says Seth Hilton, an attorney with Stoel Rives. "Given the intermittent nature of wind and the realities of transmission constraints, that would essentially mean that out-of-state wind could not meet California's RPS requirements," he says.

Last month, however, a compromise seemed to be emerging in a proposal for a certain percentage of the RPS green power mandate to be met by RECs alone. What that percentage should be is under discussion, with the utilities wanting it to be as high as possible and the unions and some environmental groups wanting it to be low, to force green energy development within California, says Faramarz Nabavi of the California Wind Energy Association (CalWEA).

The RPS currently calls for 20% green energy by 2010, which the new bill seeks to extend to 33% by 2025. This is a good thing, says CalWEA's Nancy Rader. But by shutting the door on facilitating mechanisms that have helped out-of-state wind power generators sell electricity into the California grid, it could prevent projects from going ahead. This so-called "shaping and firming" of green power breaks the link between RECs and the actual delivery of electrons.

Critics and renewables purists have argued that the firming and shaping arrangements, which are often complicated, result in a lot of dirty coal power entering California under the guise of renewable energy. "Technically, some is certainly possible because they're all electrons entering the grid," says Rader. But California is also one of the most difficult states in which to build wind plants because transmission capacity from wind resource areas to load centres is inadequate and the permitting environment is difficult. Out-of-state wind plants have helped bridge the gap not being filled by state resources.

Organised labour groups, however, are not happy to see a California green mandate supporting renewable energy generators in other states, says Rader. Major backers of the revised law include California's Coalition of Utility Employees and California's International Brotherhood of Electrical Workers.

Oregon open

Wind projects linking to the nearly 1800 kilometre AC/DC Western Intertie line that has for decades connected Los Angeles with Oregon would continue to qualify under a transmission link rule. It specifies that the first point of contact to the California grid for a wind plant in a neighbouring state be on wires that are either part of the immediate California grid, operated by the California Independent System Operator, or a line owned by a municipality, feeding directly into California. Because the line to Oregon is owned and operated by the Los Angeles Department of Water and Power, the city's municipal utility, the Oregon wind has an entry permit. By paying to use the wire, the wind power is of benefit to California's purse.

The California Public Utilities Commission has proposed that the state's three largest utilities not be allowed to meet more than 5% of their annual targets with RECs. That would "put a serious crimp on the ability of out-of-state wind projects to sell into California," says Hilton.

The bill is not likely to become law until the end of the current legislative session in August, says Rader. Between now and then, CalWEA is working with the wind industry and other stakeholders to amend it, potentially with a raised percentage for acceptance of RECs in California while the electricity flows elsewhere. "There will be some opening up of the door to out-of-state wind, but the question is how wide can we open it up," Rayder adds.

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