State red tape trips up green energy efforts

- Mark Martin, Chronicle Sacramento Bureau
Sunday, September 24, 2006

As Gov. Arnold Schwarzenegger prepares this week to sign into law the nation's most ambitious effort to address global warming, a key component of California's push to reduce greenhouse gas emissions -- increasing the use of renewable power to create electricity -- has faltered.

Despite overwhelming public and political support for renewable power, ratepayer contributions of $319 million, and a 2002 law mandating a dramatic increase in the use of sun and wind to create megawatts, California has boosted its use of renewable energy by less than 1 percent of the state's overall electricity use in the past four years.

In the meantime, Texas has surpassed California as the nation's leader in wind power. PG&E, which ran television commercials in the Bay Area earlier this year promoting its environmentally friendly practices, has actually reduced the amount of renewable power in its portfolio during the past two years. And the world's largest wind-power company -- which is investing $2 billion around the country on wind projects this year and next -- is not spending any of that money in California, complaining that overly complicated and time-consuming regulations are slowing development.

While the state's major utilities argue they are on the way to a renewable energy building boom, independent analysts predict California probably will not meet a regulatory deadline -- one frequently touted by Schwarzenegger -- that calls for 20 percent of the state's electricity use to be fueled by renewable power by 2010.

Missing the deadline may threaten the targets set in the new global warming law Schwarzenegger is expected to sign with much fanfare this week. Reducing carbon dioxide and other gas emissions by 25 percent by 2020, as the new law mandates, probably will not happen without major changes to the way electricity is produced.

The struggle California has faced in tapping into clean electricity sources is partially rooted in the state's energy crisis, which still looms over the energy industry here and has slowed the development of all new power. But it also suggests the difficulty politicians, regulators and businesses may encounter as they make the dramatic move away from a carbon-based fuel economy.

For now, the promise of a future powered by the sun, wind and Earth remains a reality only on paper, much to the disappointment of many of the people involved in trying to green the state's electricity supply.

"After four years, the public rightfully should expect more," said John Geesman, a member of the California Energy Commission who is overseeing the commission's effort to implement parts of the 2002 law that calls for increased renewable power.

Harnessing the wind

Along the Sacramento River and near the Carquinez Strait in rural Solano County, 100 new wind turbines, standing 250 feet tall, tower over herds of sheep and rolling hills as they quietly spin wind into electricity.

Each turbine creates enough power to light more than 750 homes for less than what Californians are paying for electricity from a power plant that produces carbon dioxide and other gases scientists say cause global warming.

The new turbines are a rarity in California.

Since the state's Renewable Portfolio Standard went into effect four years ago, requiring utilities to contract for much more renewable power, only 241 megawatts of new projects have been built.

One megawatt is enough to light between 750 and 1,000 homes, and experts say the state needs as much as 8,000 new megawatts to meet the 2010 deadline.

A small charge that is assessed to every utility ratepayer in the state in their monthly electric bill to help subsidize renewable power has generated $319 million so far. None of it has been spent.

Power developers, regulators and independent observers all complain that the standard the 2002 legislation set up has required years to develop and calls for new projects to clear too many regulatory hurdles.

"We like to say this project was built in spite of the RPS, not because of it," said Jim Caldwell, director of regulatory affairs for PPM Energy, which owns the new Solano County wind project. The company bypassed the state's regulatory process and simply built the project without a guarantee that any utility would buy the power.

"If we would have gone through the process, we thought we'd never get the damn thing built," Caldwell said.

The gamble paid off: The company is selling half of the power generated in Solano County to PG&E, and the rest to other municipally owned utilities.

"It is an extraordinarily complicated process compared to any other state in the country," said Ryan Wiser, a scientist at Lawrence Berkeley National Laboratory who has studied efforts by 21 states to mandate increases in the use of renewable power. Wiser wrote a paper on California's process titled "Does it Have to be this Hard? Implementing the Nation's Most Complex Renewables Portfolio Standard."

Wiser said that here, unlike anywhere else, two state agencies -- the California Energy Commission and the Public Utilities Commission -- have regulatory oversight of renewable projects, forcing developers and utilities to work with two distinct bureaucracies.

And each project faces multiple, and sometimes redundant, monthslong proceedings in front of regulators before getting approval, while most other states only require one.

There is a clear reason why California lawmakers set up a process with heavy-handed oversight. The law was signed a year after the state's calamitous energy crisis, and lawmakers -- many of whom had voted for power deregulation in 1998 -- wanted to ensure regulators had control over everything from how much renewable power would cost to how the state's transmission system would be affected by new projects. Both topics take months to work through during proceedings at the PUC.

Despite good intentions, the result is that renewable-power projects take several years to complete in California. Compare California's 241 new megawatts of renewable power to Texas' more than 2,200 megawatts of wind energy since it adapted renewable targets in 1999.

Texas' legislation enacting the renewable requirement was 10 paragraphs long. California's legislation was 13 pages.

The world's largest wind developer, FPL Energy in Florida, announced earlier this year that it would not propose new wind projects in California during the next two years, even as it invests $2 billion around the country. The company won a bid through the California RPS process in 2004 to add 30 megawatts of wind power to an existing project, but a company official pointed to the project's estimated completion date -- April 2008, four years later -- as an example of why investing in California is difficult.

"We are committed to California, but we look at where we can actually move forward and build projects," said Diane Fellman, director of regulatory affairs for FPL Energy.

Doubts persist

There are other factors that also have slowed California's progress and have many believing the state will not meet the 2010 deadline.

Transmission lines to renewable-rich areas need to be upgraded. Despite more than a decade of discussions on ways to hook up PG&E, Southern California Edison, and San Diego Gas and Electric to the windy Tehachapi region in Kern County and a key solar area, the Imperial Valley east of San Diego, the process to build new power lines is still ongoing.

And there are questions about whether some of the projects the utilities have selected to pursue are viable. Edison and San Diego Gas and Electric, for example, have signed deals for hundreds of megawatts with an Arizona company that uses a solar technology that has never produced power on a large scale.

"There are some real doubts about whether some of the projects will really happen," said Wiser.

Wiser and analysts at Cambridge Energy Research Associates have stated in recent reports that it seems unlikely California utilities will actually be generating 20 percent of their electricity by 2010. And Sean Gallagher, director of the energy division for the Public Utilities Commission, acknowledged that "it is not at all clear that we will make the deadline."

PG&E, however, insists it will meet its mark.

"We think we're on our way to hitting the target," said spokeswoman Darlene Chiu.

Recent trends don't bode well for PG&E, however. While the utility has increased its use of renewable power in the past six years, between 2003 and 2005 its use of renewables actually went down, from 12.4 percent of its portfolio in 2003 to 11.9 percent last year, according to the company.

Chiu said the utility has signed numerous contracts that will come to fruition in the next few years.

Others note that there may finally be progress in improving transmission lines this year, which is a key step in significantly increasing the use of renewable power.

Clean power is probably a key to Schwarzenegger's greenhouse-gas-reduction goals -- power plants are second only to motor vehicles in California as the biggest emitter of carbon dioxide and other gases that cause global warming. Administration officials have said this year that to cut carbon dioxide and other emissions by 25 percent by 2020, the state will need to generate one-third of its electricity from clean energy sources by then.

Most involved in the energy industry believe a significant increase in wind, solar and geothermal power is possible in California.

Renewable energy is incredibly popular -- a Public Policy Institute of California poll earlier this year showed that 83 percent of adults interviewed supported more government spending to boost renewable energy. The state has plenty of sun and wind -- experts suggest the Tehachapi region could generate enough wind power to light 3 million homes. And, with the price of natural gas having tripled in the last few years, wind power is cheaper to produce than electricity supplied by a natural-gas-fueled power plant.

"The frustrating thing is this: Of all the places in the country, California is blessed with all kinds of natural resources that we need to produce renewable energy," said Jan Smutny-Jones, executive director of a trade group representing some renewable-power developers. "We're awash in riches. And there does not appear to be any significant political resistance to more renewables. But we're stumbling when it comes to turning all of this into real, steel-in-the-ground projects."