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| Fig. 1: Wholesale Electricity Prices by Region. [4] (Source: J.Conger) |
California has one of the most ambitious renewable portfolio standards (RPS) in the country. Starting with SB 1078 in 2002, California has been rapidly shifting to renewable and carbon free sources of energy. [1] In 2018 (SB 100), California updated its targets to 60 percent of retail electricity sales in 2030 and 100 percent by 2045. [2] If it intends to complete the energy transition by 2045, California is approaching the midpoint of this 43-year journey. It is worth considering how it has performed thus far and what the next 20 years might look like.
California's RPS is administered by the California Public Utility Commission (CPUC) and the California Energy Commission (CEC). By law, the CPUC is required to publish an annual report on the states progress toward its goals. The latest report (2021) shows that retail electricity sellers either met or exceeded the 33 percent interim RPS target and almost all reported meeting their 2017-2020 compliance period requirements. [3]
Retailers have sufficient assets either online or under development to meet the RPS requirements until 2027, after which there is a growing deficit. This gives retailers a couple years to procure additional facilities and remain on track to meet the target of 100 percent renewable by 2045.
There are four types of electricity retailers in California: investor-owned utilities (IOUs), small and multi-jurisdictional utilities (SMJUs), community choice aggregators (CCAs), and electric service providers (ESPs). IOUs account for the majority of electricity sold in California. However, there has been significant consumer migration to CCAs over recent years. This could have implications for California's ability to meet its RPS since it is disaggregating the supply. Currently, IOUs have a higher percentage of renewable and zero-carbon sources than CCAs, though this some of the margin is due to the number of new CCAs coming online. [3] IOUs will exceed the RPS need every year through 2030. In contrast, the CCAs will only meet the RPS need until 2023, after which they are below the compliance level.
The transition has been aided by a precipitous decline in the cost of renewable technologies namely, solar and wind. [3] Since California instituted its RPS in 2003, the average price of renewable energy has gone from $0.14 per kWh to $0.035 per kWh in 2020. Still, wholesale electricity prices have increased over the past five years - $35 MWh-1 in 2016 to $49 MWh-1 in 2018 (see Fig. 1). [4] Last year, however, there was a rare uptick in the cost of renewable electricity, potentially signaling a crowding of ideal sites for assets. This is particularly troubling considering wholesale prices in
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| Fig. 2: Net Summer Capacity of Utility Scale Non-Hydro Storage. [6] (Source: J. Conger) |
To this point, California has been able to meet its RPS goals with relatively modest increases in electricity prices. The next 20 years, however, appear to be more challenging. In the near term, there are still opportunities for cheap solar and wind capacity, but that can only get California to roughly 80% of its goal. [5] California has ramped up investments in storage, particularly non-hydro technologies. From 2019 to 2020, California added more non-hydro storage than the rest of the country combined (see Fig. 2). This will help balance supply and demand on the grid, thus increasing its ability to bring on additional solar and wind assets.
Despite this progress, however, the last 20% will require investments in nascent and immature technologies such as biofuels, hydrogen, and direct air capture. These technologies have an estimated abatement cost ranging from $110 to $1000 per tonne. Given California emits about 400 MMT, this means the forecasted total cost of the last 20% of emissions is $8.4 billion to $80 billion. This does not include the rising electricity prices from increased investments in storage and other expensive renewable assets as the cheaper solar and winds sites diminish.
Without significant improvement in technology and careful planning, electricity prices and GHG abatement costs over the next 20 years will be quite high, particularly for household budgets with higher percentages devoted to energy costs. California officials should explore ways to protect low- and middle-income homes to maintain affordability as they strive to hit their RPS targets.
© Jordan Conger. The author warrants that the work is the author's own and that Stanford University provided no input other than typesetting and referencing guidelines. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.
[1] Sher, "Renewable Energy: California Renewables Portfolio Standard Program," Senate Bill 1078, Chapter 516, California Statutes of 2002.
[2] De León, "California Renewables Portfolio Standard Program: Emissions of Greenhouse Gases," Senate Bill No. 100, Chapter 312, California Statues of 2018.
[3] "2021 California Renewables Portfolio Standard: Annual Report," California Public Utilities Commission, November 2021.
[4] "2019 State of the Markets," U.S. Federal Energy Regulatory Committee, March 2020.
[5] A. Mahone et al., "Achieving Carbon Neutrality in California," Energy and Environmental Economics, October 2020.
[6] "2020 Electric Power Annual 2020," U.S. Energy Information Agency, October 2021.