Ambitious renewable requirements in California could add more than 10% to 2020 electricity costs, PUC finds


California lawmakers are currently developing legislation to increase the state’s Renewable Portfolio Standard (RPS), which specifies the procurement of renewable energies as a percentage of retail sales by electric corporations, from the current 20% by 2010 to 33% by 2020. But this is highly ambitious and could add more than 10% to the cost of electricity in 2020, the California PUC states in a new report.

The report, providing preliminary results of an implementation analysis of the 33% RPS, says that to meet the current 20% RPS by 2010 target, four major new transmission lines are needed at a cost of $4 billion, of which three are already underway. To meet a 33% RPS by 2020 target, seven additional lines at a cost of $12 billion would be required. In addition, the 33% RPS target is projected to require an almost tripling of renewable electricity, from 27 TWh today to approximately 75 TWh in 2020.

Thus, achieving a 33% RPS by the year 2020 is highly ambitious, given the magnitude of the infrastructure build-out required, the report says. “The magnitude of the infrastructure that California will have to plan, permit, procure, develop, and integrate in the next ten years is immense and unprecedented.”

Based on current practices, a “best case” projection for a 33% RPS is from 2021 to 2024. However, there are also numerous external risks that could delay the attainment of the target well beyond those dates, if ever. Among these are the scale of the infrastructure investment, estimated at approximately $115 billion by 2020, and legal challenges and public opposition to large-scale renewable energy infrastructure.

On the costs, the report notes that the cost of electricity in California will be higher in 2020 regardless of the RPS requirements. Even if the state makes no further investments in renewable energy and its future electricity needs are met with gas-fired generation, the average electricity cost per kilowatt-hour can be expected to rise by 16.7% in 2020 compared to 2008. With a 20% RPS the average cost would be 2.8% higher, but with a 33% RPS the cost would be 10.2% higher (and 7.1% higher compared to the 20% RPS).

Achieving a 33% RPS by 2020 will require tradeoffs amongst various policy goals and objectives, the PUC says. If the 2020 timeline is the most important policy priority, California must start implementing mitigation strategies such as planning for more transmission and generation than is needed to reach just 33%, pursuing procurement that is not dependent on new transmission, or concentrating renewable development in pre-permitted land that would be set aside for a renewable energy park.

While the PUC and California Energy Commission (Energy Commission) have endorsed the change to a 33% RPS by 2020, and it is a key greenhouse gas (GHG) reduction strategy in the California Air Resources Board’s (ARB) Assembly Bill (AB) 32 Scoping Plan, the PUC says it has learned many lessons that can help guide the design of a higher mandate and several recent analyses have cast light on various aspects of renewable energy development and integration. The aim of the report is to provide an analytical framework for policymakers to weigh the tradeoffs inherent in any future 33% RPS program for California.