Green Energy Action Plan Protecting California s Climate, Health, and Economy

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1 Technologies Page 1 Center for Energy Efficiency and Renewable Technologies Green Energy Action Plan Protecting California s Climate, Health, and Economy Introduction California has adopted many policies and laws promoting non-fossil, zero-carbon electric energy resources, but implementation of these measures remains sluggish. California is blessed with a wide choice of affordable green energy options, and the public is fully supportive of more clean energy development and deployment. Nevertheless, the use of fossil fuels to generate electricity continues to grow, as shown in Figure 1. To accomplish the state s energy goals, a coordinated effort is needed to accelerate the development of zero-carbon energy resources. Figure 1. Percentage Change in California Greenhouse Gas Emissions by Sector % Change in California CO 2 Emissions from Fossil Fuels Electricity Transportation Industrial Commercial Residential

2 Technologies Page 2 Assembly Bill 32 and Senate Bill 1368 implementation should lead to a fundamental shift in California s electricity system. The state must ramp up production of wind, solar, geothermal, and bio energy. The state must reduce its dependence on the dirtiest fossil fuels, and substantially and quickly increase production of wind, solar, geothermal, and bio energy if we are going to meet our climate targets. The state s transmission system will require substantial upgrades in order to access these resources. This paper outlines the problem and sketches a green energy action plan to rebuild the state s electricity infrastructure and expand investment in renewable energy resources with little or no greenhouse gas emissions. Renewable Power Development Lags Over the last 10 years, California s electric sector climate change emissions have been growing faster than any other sector including transportation. This has come about because of an increase in coal imports, continued high levels of natural gas consumption to produce electricity, and stalled investment in renewable energy. Energy efficiency, solar and other clean, demand-side management (DSM) investments by utilities have increased substantially in the last few years. But progress has proven insufficient to keep up with rapidly increasing demand, especially on the peak and in the fast-growing Inland Empire and Central Valley. Figure 2 - Population and Electric Load Growth Projections Population Electricity The Schwarzenegger Administration s implementation of California s new climate legislation has focused heavily on development of a cap and trade platform. The California Air Resources Board has largely delegated the design of the cap and trade mechanism for the electric utility sector to the State Public Utilities Commission and

3 Technologies Page 3 California Energy Commission, where the design of a load based cap for the utility sector has just begun. (A load based cap is a cap on global warming pollution applied to the utility or electric service provider. A source based cap limits emissions from power plants, and other sources of electricity) The implementation of California s renewable portfolio standard and the development of supportive transmission infrastructure have been growing remains very slow. Other states, such as Texas, Arizona, Colorado, Minnesota, and the Pacific Northwest have become far more attractive places to invest and build renewable projects. California s complex energy market, arcane procurement rules, multiple regulatory venues, and difficult environmental permitting process add up to a tough place to do business. Investors and developers who want to build wind, solar, and geothermal plants try to figure out the guessing game of how to get a contract, and how to plan billions of dollars of new investment in a regulatory environment where uncertainty and risks are high. Despite our policy goals and programs, twenty new gas-fired peaking plants are proposed for California, some of which are in communities disproportionately impacted by air pollution. Environmental justice groups have filed lawsuits to protest the allocation of scarce pollution offset credits for gas fired power plants, and are pushing instead for more renewables and energy efficiency. Even though there are billions of dollars in new, green investment available to rebuild the state s electric system, it is clear that California s response has been long on rhetoric and painfully short on execution. California s New Green Economy Tens of billions of dollars in new green energy infrastructure investment can be brought to California, if state government is prepared to act and create a strategy for success. California has a global reputation for environmental leadership, with some of the toughest and most comprehensive laws and regulations in the US. Most of the world s renewable energy technologies were born here in the late 1970 s and early 1980 s. And California is home to a booming green tech sector led by the venture capital firms that launched the personal computer and internet revolutions. In the 21 st century, California has once again become a world leader, with an unprecedented suite of new laws mandating reductions in global warming pollution, acceleration of renewable energy, and expanded incentives for solar and other ultra clean distributed energy sources. ( distributed energy sources are installed onsite in businesses and homes). California s potential green energy opportunity is huge, and attractive to investors and green energy technology firms throughout the world. The green energy opportunity comes both from California s huge, and growing, electricity demand, and the state s high quality renewable resource base. We have within our borders world-class wind,

4 Technologies Page 4 geothermal and solar resource areas that, if developed, could displace dirty coal, and limit the need for imported liquefied natural gas. The Central Valley also has an abundance of animal and agricultural waste with the potential to be converted to clean renewable fuels and green electricity. California s renewable reserves represent a mother lode of green energy that could lead the world, and secure the state s economic and environmental future. In addition to its large renewable reserves, California is home to dozens of emerging green technology companies that can help green the grid with development of hightech and efficient means of displacing fossil fuels. The Governor s bipartisan California Solar Initiative has already stimulated global investment in solar panels. Other green grid technologies are speeding to market, such as high-efficiency fuel cells, advanced solar heating and cooling systems, and ultra-clean combined heat and power. Greening the grid can save small and big businesses money on their energy bills, and transform local electric and natural gas delivery systems with zero-carbon options. Rebuilding California s Electric Infrastructure and Expanding Investment in Renewables California needs a multi-year investment strategy to build out California s abundant renewable resource base. This strategy should be based on coordinated investment in both renewable power plants and electric transmission upgrades in California s four major renewable resource areas: 1) Wind resources in Solano, Riverside and Kern Counties 2) Bio energy resources in the Central Valley; 3) Geothermal and solar resource in Imperial County; and 4) Solar resource in the Greater Mohave desert. The world s first concentrating solar power (CSP) fields were developed in the 1980 s, and the region is poised to launch a new wave of modern, zero-emissions peaking power from concentrating solar power plants. Figure 3. California Electric Energy Resources in the Zero Coal Constant Gas Scenario

5 Technologies Page California Electric Energy Resources ZeroCoal_Constant Gas Scenario (Billion Kilowatt-hours) Renewable Natural Gas Coal 100 Hydroelectricity 50 Nuclear Each of these renewable resource areas can provide great benefits for California s electric system. Wind energy displaces natural gas and coal, geothermal is a base load resource that is competitive with new IGCC coal plants with sequestration. CSP can provide dispatchable peaking energy when air conditioning drives electricity demand on hot summer afternoons and evenings. Development of each of these regions will require billions of dollars in investment capital. Such investment can only happen with a stable climate for green business investment. The 13 years in which these changes must be accomplished is a dauntingly short amount of time. Planning for these changes must begin as soon as possible, and decisions about what resources we will rely on in 2020 and beyond must be made in the next year. We Shall Overcome! California s Green energy action plan All of the elements for the successful build-out of California s green energy reserves are present. State agencies, utilities and other stakeholders are now working more cooperatively. The road is long, and time is of the essence. A coordinated set of actions by the Governor and the Legislature are needed to make our climate goals in the energy sector a reality. We know what we need to do to get there. We need a green energy infrastructure financing plan to cut the costs and speed the development of California s abundant renewable reserves. The Governor and the Legislature worked together last year to fashion a bipartisan plan for transportation, water quality, affordable housing and flood control infrastructure that was approved by the voters in the November election.

6 Technologies Page 6 We believe that the same kind of bipartisan cooperation and leadership is needed to develop and finance a new mother lode of zero-carbon energy from California s resource zones, and modernize and green the state s natural gas and electric distribution grid. A bi-partisan green energy initiative by the Governor and Legislature, which builds upon the successful passage of AB 32 and voter approval of State Infrastructure Bonds for levees, transportation, and resources, could increase voter turnout and enthusiasm for the February 2008 primary election. Possible elements include: A) Green Energy Bond for 2008 Ballot A $10 billion bond issue for the February or November 2008 ballot would support renewable transmission and accelerated procurement through low-cost financing and loan guarantees. Implementation and expenditure of bond funds would be carried about by Legislative Appropriation in the Budget Bill, and would be overseen by the Treasurer s office, either under an existing finance authority, or some variation of the Power Authority, with CPUC and CEC Commissioners. The bond would support and accelerate the build out of renewable resource zones, through construction of both transmission and renewable projects, based on existing statewide planning efforts of the PUC and CEC, and including the ISO and municipal utilities. Loan guarantees and financing would lower the cost of debt and encourage clean, renewable and energy efficient technologies. Transmission planning to achieve greenhouse gas reduction goals must be conducted on a statewide level. Since renewable generating projects are built as needed in small increments, but new transmission lines are inherently built in advance for long term growth, careful thought must be given to the ultimate resource plan so that the first small project is not saddled with the transmission burden for the ultimately very large resource. The bond could also be used to award loans to industry-specific and cross-cutting technologies and designs that reduce energy consumption. Financing will also be given to proposals that would increase production capacity for clean energy systems. In addition to approving the bonds, the vote of the people would give clear direction that California should implement a large scale expansion of green energy infrastructure and establish a political consensus that would reduce risk and uncertainty. Unlike most general obligation bonds, these bonds could actually be paid back from electricity revenues, instead of by the General Fund. B) Tax Incentives for Green Energy The installed cost of renewables and ultra clean power could be significantly reduced for capital and equipment investment if we could provide property tax exemptions for solar,

7 Technologies Page 7 geothermal, wind, and other zero-carbon energy projects. We could also provide sales tax exemptions for renewable and clean energy equipment. Because tax credits and property exemptions (except for solar) have died in the Legislature because of concerns about loss of state General Fund revenues, we propose linking the new green energy tax credits to an auction of carbon dioxide allocations under a future cap and trade program. Revenues from the sale of carbon dioxide allocations would be used to reimburse state and local governments for lost revenues from the tax exemptions. A green energy tax incentive program could be implemented by legislation and the state budget process. C) Green Team to Coordinate and Streamline Development and Permitting Requirements for Green Energy Infrastructure Governor s office should establish a green team to convene and coordinate federal, state, and local land use and environmental permitting for renewable projects in the renewable resource zones. The goal would be to streamline and consolidate, where possible, federal state, regional, and local permitting for green energy projects, based on a ten-year renewable infrastructure development plan and schedule for transmission, procurement, and project development by investor owned, municipal utilities, and project developers. The Green Team could be established by Executive Order. Conclusion The whole world is watching as California tries to realize the promise of our pioneering climate and renewable energy initiatives. We have the vision--now we need to show that we can execute. A green energy action plan that provides low cost financing, tax incentives, and permit streamlining could help us get the job done faster and at lower cost. The voters seem ready to agree if a plan can be developed and put before them.