2009 Integrated Energy Policy

CALIFORNIA
ENERGY
COMMISSION

2009 INTEGRATED ENERGY
POLICY REPORT

F
I
N
A
L

C
O
M
M
I
S
S
I
O
N

R
E
P
O
R
T

December 2009

CEC-100-2009-003-CMF

Arnold Schwarzenegger
Governor
CALIFORNIA
ENERGY
COMMISSION

Integrated Energy Policy
Report Committee
J effrey D. Byron
Commissioner and
Presiding Member

J ames D. Boyd
Vice Chair and
Associate Member

Melissa J ones
Executive Director

Suzanne Korosec
Program Manager

Lynette Green
Project Manager

J ennifer Williams
Principal Author

Carolyn Walker
Editor

Donna Parrow
Project Secretary
Acknowledgments

This2009IntegratedEnergyPolicyReportwouldnothavebeenpossiblewithoutthesignificant
contributionsofthefollowingEnergyCommissionstaff:
MohsenAbrishami
BryanAlcorn
BobAldrich
EileenAllen
AlAlvarado
GraceAnderson
AnissBahreinian
KevinBarker
PanamaBartholomy
JimBartridge
SylviaBender
LibbieBessman
AvtarBining
KellyBirkinshaw
SteveBonta
LeonBrathwaite
GeraldBraun
MarthaBrook
DennyBrown
SusanBrown
BarbaraByron
BillChamberlain
KristyChew
SusannahChurchill
MarkCiminelli
BarbaraCrume
TedDang
PaulDeaver
AlbertDeLeon
RhettaDeMesa
JacquelineDockum
PamelaDoughman
DevorahEden
DaleEdwards
RyanEggers
MarlenaElliott
JosephFleshman
SerenaFong
JamesFore
StevenFosnaugh
GuidoFranco
NicholasFugate
MiguelGarciaCerrutti
AsishGautam
TerajaGolston
PedroGomez
TomGorin
AndreaGough
CathyGraber
JudyGrau
MichaelGravely
CarolGreenwood
KarenGriffin
ValerieHall
NancyHassman
MarkHesters
JohnHingtgen
DavidHungerford
NickJanusch
MichaelJaske
RogerJohnson
BillJunker
HarrietKallemeyn
AdrienneKandel
ChrisKavalec
DonKazama
BrendanKeeler
LindaKelly
ThomKelly
RobertKennedy
KevinKidd
JoelKlein
DonKondoleon
KenKoyama
PramodKulkarni
LauraLawson
BryanLee
JeromeLee
KaeLewis
DavidLopez
HeatherLouie
JoeLoyer
MichaelLozano
StevenMac
JerryMagana
MignonMarks
LynnMarshall
LanaMcAllister
BobMcBride
CheMcFarlin
JimMcKinney
MadeleineMeade
DarylMetz
SarahMichael
DavidMichel
CharlesMizutani
NahidMovassagh
MarlaMueller
LarryMyer
ChuckNajarian
FaridehNamjou
BrianNeff
TerryOBrien
GaryOcchuizzo
JoeOHagan
GarryONeill
JacobOrenberg
JasonOrta
JimPage
JamiePatterson
BillPennington
PatPerez
BillPfanner
SarahPittiglio
PeterPuglia
RichardRatliffe
IvinRhyne
PaulRichins
CarolRobinson
RandyRoesser
IreneSalazar
RoySanders
SabrinaSavala
RobSchlichting
GordonSchremp
DonSchultz
GlenSharp
ConsueloSichon
MichaelSmith
ArthurSoinski
TiffanySolorio
GeneStrecker
KateSullivan
AngelaTanghetti
RubenTavares
GabrielTaylor
LaurietenHope
MitchTian
ValentinoTiangco
ChrisTooker
ClaudiaUresti
DavidVidaver
MalachiWengGutierrez
KerryWillis
MichaelWilson
LanaWong
WilliamWood
JimWoodward
GeraldZipay
KateZocchetti
Pleasecitethisreportasfollows:
CaliforniaEnergyCommission,2009IntegratedEnergyPolicyReport,FinalCommissionReport,
December2009,CEC1002009003CMF.
i
Preface
The2009IntegratedEnergyPolicyReportwaspreparedinresponsetoSenateBill1389(Bowen,
Chapter568,Statutesof2002),whichrequiresthattheCaliforniaEnergyCommissionpreparea
biennialintegratedenergypolicyreportthatcontainsanintegratedassessmentofmajorenergy
trendsandissuesfacingthestateselectricity,naturalgas,andtransportationfuelsectorsand
providespolicyrecommendationstoconserveresources;protecttheenvironment;ensure
reliable,secure,anddiverseenergysupplies;enhancethestateseconomy;andprotectpublic
healthandsafety(PublicResourcesCode25301[a]).ThisreportfulfillstherequirementofSB
1389.
ThereportwasdevelopedunderthedirectionoftheEnergyCommissions2009Integrated
EnergyPolicyReportCommittee.AsinpreviousIntegratedEnergyPolicyReportproceedings,
theCommitteerecognizesthatclosecoordinationwithfederal,state,andlocalagenciesis
essentialtoadequatelyidentifyandaddresscriticalenergyinfrastructureneedsandrelated
environmentalchallenges.Inaddition,inputfromstateandlocalagenciesiscriticaltodevelop
theinformationandanalysesthattheseagenciesneedtocarryouttheirenergyrelatedduties.
This2009IntegratedEnergyPolicyReportreflectstheinputofawidevarietyofstakeholdersand
federal,state,andlocalagenciesthatparticipatedintheIntegratedEnergyPolicyReport
proceeding.TheinformationgainedfromworkshopsandstakeholdersalongwithEnergy
Commissionstaffanalysiswasusedtodeveloptherecommendationsinthisreport.The
Committeewouldliketothankparticipantsfortheirthoughtfulcontributionsoftimeand
expertisetotheprocess.
The2009IntegratedEnergyPolicyReportproposespolicyandprogramdirectiontoaddressthe
manychallengesfacingCaliforniasenergyfuturethatarediscussedthroughoutthebodyofthe
report.SpecificrecommendationsarepresentedinChapter4,buttheEnergyCommission
believesthatcertainpoliciesandprogramshavepriorityandevenurgencyifCaliforniaisgoing
toaddressitsdiversesetofenergygoals.TheExecutiveSummarythereforeidentifiesthose
actionsandpoliciesthattheEnergyCommissionconsiderstobeofhighestimportance.
ii
iii
Table of Contents
Preface..........................................................................................................................................................i
ExecutiveSummary..................................................................................................................................1
Introduction............................................................................................................................................1
TheElectricitySector.............................................................................................................................2
SupplyandDemand..........................................................................................................................2
EnergyEfficiencyandDemandResponse......................................................................................3
Recommendations.........................................................................................................................................4
RenewableEnergy.............................................................................................................................5
Recommendations.........................................................................................................................................7
DistributedGenerationandCombinedHeatandPower.............................................................8
Recommendation...........................................................................................................................................8
NuclearPowerPlants........................................................................................................................9
Recommendation.........................................................................................................................................10
TransmissionandDistribution........................................................................................................9
Recommendations.......................................................................................................................................11
CoordinatedElectricitySystemPlanning.....................................................................................11
Recommendation.........................................................................................................................................11
AddressingProcurementintheHybridMarket.........................................................................11
TheNaturalGasSector........................................................................................................................12
TheFuelsandTransportationSector................................................................................................14
TheLandUseandPlanningSector...................................................................................................15
ThePotentialofCarbonCaptureandSequestration......................................................................16
AchievingEnergyGoals......................................................................................................................17
Chapter1:CaliforniasEnergyRelatedPoliciesandActivities.....................................................19
AssemblyBill32Framework..............................................................................................................19
ElectricitySector...................................................................................................................................20
EnergyEfficiencyandDemandResponse...............................................................................................20
RenewableEnergy.......................................................................................................................................23
DistributedGeneration...............................................................................................................................27
NaturalGasandNuclearPowerPlants....................................................................................................29
TransmissionandDistribution..................................................................................................................32
NaturalGasSector...............................................................................................................................33
TransportationSector..........................................................................................................................34
LandUseandPlanningSector...........................................................................................................39
Chapter2:EnergyandCaliforniasCitizens......................................................................................41
ElectricitySector...................................................................................................................................41
ElectricityTransmissionandDistribution....................................................................................42
iv
ElectricitySupply.............................................................................................................................43
NaturalGasFiredGeneration...................................................................................................................45
HydroelectricResources.............................................................................................................................46
NuclearGeneration.....................................................................................................................................47
RenewableResources..................................................................................................................................47
CombinedHeatandPower........................................................................................................................48
ResourceAdequacy.....................................................................................................................................49
ElectricityDemand..........................................................................................................................49
ElectricityDemandForecast......................................................................................................................50
TheEffectofEconomicUncertaintiesontheDemandForecast...........................................................52
EnergyEfficiency.............................................................................................................................53
EnergyEfficiencyandtheDemandForecast...........................................................................................54
EnergyEfficiencyandtheEnvironment...................................................................................................58
EnergyEfficiencyandReliability..............................................................................................................61
EnergyEfficiencyandtheEconomy.........................................................................................................70
DemandResponse...........................................................................................................................72
RenewableEnergy...........................................................................................................................75
RenewableEnergyandtheEnvironment.................................................................................................76
RenewableEnergyandReliability............................................................................................................85
RenewableEnergyandtheEconomy.......................................................................................................86
DistributedGenerationandCombinedHeatandPower...........................................................95
ExistingCombinedHeatandPowerinCalifornia..................................................................................96
CombinedHeatandPowerandtheEnvironment.................................................................................97
CombinedHeatandPowerandReliability...........................................................................................105
CombinedHeatandPowerandtheEconomy......................................................................................106
NaturalGasPowerPlants.............................................................................................................107
NaturalGasPlantsandtheEnvironment..............................................................................................107
NaturalGasPlantsandReliability..........................................................................................................110
NuclearPowerPlants....................................................................................................................111
NuclearPlantsandtheEnvironment......................................................................................................115
NuclearPlantsandReliability.................................................................................................................119
NuclearPlantsandtheEconomy............................................................................................................124
Transmission...................................................................................................................................126
TransmissionandtheEnvironment........................................................................................................126
TransmissionandReliability....................................................................................................................128
TransmissionandtheEconomy..............................................................................................................129
NaturalGasSector.............................................................................................................................131
NaturalGasSupplies.....................................................................................................................131
NaturalGasDemand.....................................................................................................................136
NaturalGasandtheEnvironment..........................................................................................................138
NaturalGasandReliability......................................................................................................................141
NaturalGasandtheEconomy.................................................................................................................142
FuelsandTransportationSector......................................................................................................145
TransportationFuelsSupplyandDemand................................................................................146
Demographics............................................................................................................................................146
v
FuelSupplyandDemand.........................................................................................................................147
InfrastructureAdequacy..........................................................................................................................154
TransportationandtheEnvironment.....................................................................................................163
TransportationandReliability.................................................................................................................167
TransportationandtheEconomy............................................................................................................168
Chapter3:ChallengestoAchievementofaVisionforCaliforniasFutureElectricitySystem
..................................................................................................................................................................173
Introduction........................................................................................................................................173
IssuesAffectingthePowerPlantFleet............................................................................................174
EffectsofOnceThroughCoolingMitigationPolicies..............................................................174
FactorsAffectingOnceThroughCoolingReplacementInfrastructure.............................................175
PlanningforOnceThroughCoolingReplacementInfrastructure.....................................................177
EmissionCreditsforPowerPlants..............................................................................................178
ImpactsonPowerPlantsLicensedbytheEnergyCommission.........................................................179
ImpactsonSpecificUtilities.....................................................................................................................181
PreferredResourceAdditions......................................................................................................184
UncommittedEnergyEfficiencyGoals...................................................................................................185
RenewablesPortfolioStandardGoals....................................................................................................187
RoleofNaturalGasPlants.......................................................................................................................189
RoleofEnergyStorage..............................................................................................................................192
RoleofOtherRenewableTechnologies..................................................................................................195
RoleofImprovedProductionForecastingforRenewables.................................................................196
RoleofDistributedResources......................................................................................................197
TransportationElectrification.......................................................................................................199
IssuesAffectingtheTransmissionandDistributionSystem.......................................................199
RoleoftheCaliforniaSmartGrid................................................................................................202
RoleofResearchandDevelopment.............................................................................................204
InvestmentinDesiredElectricityInfrastructure...........................................................................206
ForwardEnergyorCapacityMarkets.........................................................................................206
ForwardGenerationInvestmentbyPubliclyOwnedUtilities................................................207
InvestmentinTransmissionandDistribution...........................................................................207
EndUseCustomerInvestments..................................................................................................208
IssueswithIntegratingStatePolicyGoalswithElectricityPlanningProcesses.......................209
PlanningintheElectricitySector.................................................................................................210
NeedforStatewideIntegratedElectricityandTransmissionPlanning.................................214
APathTowardVision,BlueprintandInfrastructureAssessment.........................................216
DevelopingaBlueprintfortheFutureElectricitySystem...................................................................217
InfrastructureAssessment........................................................................................................................219
GenerationInfrastructureAssessment...................................................................................................220
TransmissionInfrastructureAssessment...............................................................................................221
IntegratedGeneration/TransmissionPlanning.....................................................................................223
Chapter4:Recommendations.............................................................................................................225
Introduction........................................................................................................................................225
vi
RecommendationsfortheElectricitySector..................................................................................226
EnergyEfficiencyandDemandResponse..................................................................................226
ZeroNetEnergyBuildings.......................................................................................................................226
BuildingandApplianceStandards.........................................................................................................227
EfficiencyinExistingBuildings...............................................................................................................227
PubliclyOwnedUtilityEnergyEfficiencyProgramsandReporting.................................................228
DemandResponse.....................................................................................................................................229
IncorporatingEfficiencyintheDemandForecast.................................................................................230
RenewableResources....................................................................................................................230
RenewablesPortfolioStandardTargets.................................................................................................231
RenewableIntegration..............................................................................................................................231
MaintainingExistingRenewableFacilities............................................................................................233
SupportingNewRenewableFacilitiesandTransmission...................................................................233
ExpandingFeedInTariffs........................................................................................................................234
DistributedGeneration..................................................................................................................235
CombinedHeatandPower..........................................................................................................236
MeetingScopingPlanTargetsforCombinedHeatandPower..........................................................236
RenewableCombinedHeatandPower..................................................................................................237
NuclearPlants................................................................................................................................238
Transmission...................................................................................................................................240
CoordinatedElectricitySystemPlanning...................................................................................241
RecommendationsfortheNaturalGasSector...............................................................................242
RecommendationsfortheTransportationSector..........................................................................243
RecommendationsforLandUseandPlanning.............................................................................245
RecommendationsforCarbonCaptureandSequestration.........................................................246
Acronyms................................................................................................................................................249
Index........................................................................................................................................................251
vii
List of Figures
FigureE1:CaliforniasGenerationMix(2008).....................................................................................2
FigureE2:ElectricityConsumptionbySector2008.............................................................................3
Figure1:BulkTransmissionSysteminCalifornia..............................................................................43
Figure2:CaliforniasGenerationMix(2008).......................................................................................44
Figure3:CaliforniaRenewableEnergyGenerationbyTechnology,2008......................................48
Figure4:ElectricityConsumptionbySector2008...............................................................................50
Figure5:StatewideElectricityConsumption.......................................................................................51
Figure6:ProjectedStatewideElectricityConsumption,CED2009AdoptedandAlternative
EconomicScenarios.................................................................................................................................52
Figure7:ProjectedStatewidePeakDemand,CED2009AdoptedandAlternativeEconomic
Scenarios....................................................................................................................................................53
Figure8:ComparisonofCommittedUtilityProgramConsumptionImpactsforInvestorOwned
Utilities......................................................................................................................................................55
Figure9:ExistingCombinedHeatandPowerinCalifornia.............................................................96
Figure10:BaseCaseCumulativeCHPMarketPenetrationbySizeCategory.............................102
IncentiveCaseResults...........................................................................................................................103
Figure11:IncentiveCasesCumulativeMarketPenetrationResults..............................................103
Figure12:GHGEmissionsSavingsbyScenariousingARBAvoidedCentralStationEmissions
Estimate...................................................................................................................................................104
Figure13:U.S.DomesticNaturalGasProduction............................................................................132
Figure14:2007CaliforniaNaturalGasReceiptsbySource.............................................................132
Figure15:NaturalGasResourceAreasandPipelines.....................................................................134
Figure16:Lower48ShaleNaturalGasProduction..........................................................................136
Figure17:HenryHubSpotPrices19962008....................................................................................145
Figure18:CrudeOilSupplySourcesforCaliforniaRefineries.......................................................148
Figure19:HistoricCaliforniaGasolineandDieselDemand...........................................................149
Figure20:InitialCaliforniaGasolineDemandForecastNoRFS2Adjustment.......................151
Figure21:U.S.EthanolUseandRFSObligations19932022..........................................................152
Figure22:CaliforniaE85DemandForecast20102030....................................................................153
Figure23:RevisedLowDemandForecast20102030......................................................................154
Figure24:KinderMorganInterstatePipelineSystem......................................................................156
Figure25:CaliforniaFFVLowDemandForecast20102030..........................................................157
Figure26:CaliforniaE85DispenserForecast20102030..................................................................157
Figure27:NaturalGasVehicleCountsbySpecificCounties,October2008.................................159
Figure28:CaliforniaTransportationNaturalGasDemandForecast.............................................159
Figure29:FullElectricVehicleCountsbySpecificCounties,October2008.................................161
Figure30:CaliforniaTransportationElectricityHighDemandForecast.................................162
Figure31:LifeCycleAnalysisCarbonIntensityValuesforGasolineandSubstitutes...............164
Figure32:PowerPlantsAffectedbyAirCreditLimitationsinSouthCoastAirBasin...............180
Figure33:ComparisonofRecentScenariosforIncrementalandExistingRenewableEnergy
(33percentby2020)...............................................................................................................................188
viii
List of Tables
Table1:2008TotalSystemGeneration.................................................................................................45
Table2:RPSDeliveryandLocationRequirementsinOtherWesternStates..................................80
Table3:TotalCHPTechnicalPotentialin2009byMarketSector..................................................100
Table4:TotalCHPTechnicalPotentialGrowthbetween2009and2029byMarketSector.......100
Table5:ComparisonofStudyResultsGHGSavingstoARBgoals...............................................105
Table6:StatewideEndUserNaturalGasConsumption.................................................................137
Table7:SummaryofCaliforniaOnRoadLightDutyVehicles......................................................168
Table8:SCECapacityImpactedbySCAQMDRule.........................................................................182
Table9:StaffPlanningAssumptionsandReserveMarginResultsforSouthernCaliforniaUsing
HighRetirements...................................................................................................................................183
Table10:StaffPlanningAssumptionsandReserveMarginResultsforSouthernCalifornia
UsingSWRCBOTCRetirements.........................................................................................................183
Table11:CaliforniaUseofNaturalGasinPowerPlants.................................................................191
ix
Abstract
The2009IntegratedEnergyPolicyReportevaluatesoverallsupplyanddemandtrendsfor
electricity,naturalgas,andtransportationfuelsinCalifornia,aswellasissuesassociatedwith
energyinfrastructure,efficiency,reliability,andcost.Thereportdescribesthevariousenergy
policiessignificantlyaffectingCaliforniasenergysectorsandoutstandingissuesthatwillneed
tobeaddressedineachsectortomaintainreliable,affordable,andenvironmentallybenign
sourcesofenergyforthestatescitizens.Thereportfocusesonissuessurroundingthe
integrationofincreasedlevelsofrenewableenergyinboththeelectricityandtransportation
fuelsectorsandmakesrecommendationsonfutureactionsthestateshouldpursue.

Key Words
AssemblyBill32,greenhousegasemissions,loadingorder,transmission,resourceadequacy,
energyefficiency,demandresponse,RenewablesPortfolioStandard,RenewableEnergy
TransmissionInitiative,renewableenergy,demandforecast,distributedgeneration,combined
heatandpower,nuclear,oncethroughcooling,emissioncredits,transportation,naturalgas.
x
1
Executive Summary
Introduction
AsCaliforniapursuesitsgoaltoaddressclimatechangebyreducinggreenhousegasemissions,
thedrivingforceforthestatesenergypoliciescontinuestobemaintainingareliable,efficient,
andaffordableenergysystemthatminimizestheenvironmentalimpactsofenergyproduction
anduse.Althoughtheeconomicdownturnhasreducedenergydemandintheshortterm,
demandisexpectedtogrowovertimeastheeconomyrecovers.Itisessentialthatthestates
energysectorsbeflexibleenoughtorespondtofuturefluctuationsintheeconomyandthatthe
statecontinuetodevelopandadoptthegreentechnologiesthatarecriticalforlongterm
reliabilityandeconomicgrowth.
AssemblyBill32(Nez,Chapter488,Statutesof2006),theGlobalWarmingSolutionsActof
2006,establishedthegoalofreducinggreenhousegasemissionsto1990levelsby2020,and
servesasthecomprehensiveframeworkforaddressingclimatechange.However,manyofthe
policiesinplacepriortopassageofAB32arealsovaluedfortheirroleinmeetingthestates
climatechangegoals.Oneofthesepoliciesistheloadingorderforelectricityresources,which
callsformeetingnewelectricityneedsfirstwithenergyefficiencyanddemandresponse;
second,withnewgenerationfromrenewableenergyanddistributedgenerationresources;and
third,withcleanfossilfueledgenerationandtransmissioninfrastructureimprovements.A
secondimportantpolicyinplacepriortothepassageofAB32istheRenewablesPortfolio
Standard,establishedin2002,whichcurrentlyrequiresretailsellersofelectricitytoprocure20
percentoftheirretailsalesfromrenewableresourcesby2010.
Morerecently,GovernorSchwarzeneggerissuedExecutiveOrdersin2008and2009that
establishedtheRenewableEnergyActionTeamtodevelopaplanforrenewabledevelopment
insensitivedeserthabitat,acceleratedtheRenewablesPortfolioStandardrequirementto33
percentby2020,anddirectedtheAirResourcesBoardtoadoptregulationsbyJuly31,2010,to
meetthatrequirement.
Whilereducinggreenhousegasemissionsisofparamountconcern,itisnottheonly
environmentalissuefacingCaliforniaselectricitysector.TheStateWaterResourcesControl
Boardhasissuedadraftpolicytophaseouttheuseofoncethroughcoolinginthestates19
coastalpowerplantstoreduceimpactsonmarinelifefromthepumpingprocessandthe
dischargeofheatedwater.AnotherissueisthelackofemissioncreditsintheSouthCoastAir
QualityManagementDistrictthatmakesitdifficulttoobtainthenecessarypermitstobuild
reliablereplacementpowerbeforeaging,lessefficientpowerplantscanberetiredor
repowered.
Thetransportationandbuildingsectorsareprimarycontributorstogreenhousegasemissions
inCalifornia.GovernorSchwarzeneggersExecutiveOrderS0107establishedalowcarbon
fuelstandardfortransportationfuelssoldinCaliforniathatwillreducethecarbonintensityof
Californiaspassengervehiclefuelsbyatleast10percentby2020.Inaddition,theAlternative
2
andRenewableFuelandVehicleTechnologyProgramcreatedbyAB118(Nez,Chapter750,
Statutesof2007)isworkingtodevelopanddeployalternativeandrenewablefuelsand
advancedtransportationtechnologiestohelpmeetthestatesclimatechangepolicies.Further,
thefederalgovernmentinJune2009,grantedCaliforniasrequestforawaiverthatallows
Californiatoenactstricterairpollutionstandardsformotorvehiclesthanthoseofthefederal
government.Thestandards(AB1493,Pavley,Chapter200,Statutesof2002)areexpectedto
reducegreenhousegasemissionsfromCaliforniapassengervehiclesbyabout22percentin
2012,andabout30percentin2016,whileimprovingfuelefficiencyandreducingmotorists
costs.
ThisExecutiveSummaryfocusesonthepolicyrecommendationsthattheEnergyCommission
believesshouldbethestatestopprioritiesformeetingthegoalofprovidingreliable,efficient,
andcosteffectiveenergysuppliesforitscitizens.Additionalrecommendationsforspecific
actionsneededinthevariousenergysectorsareprovidedinChapter4.
The Electricity Sector
Supply and Demand
FigureE1showsCaliforniaselectricitygenerationsupplymixin2008.Instategenerating
facilitiesaccountedforabout68percentoftotalgeneration,withtheremainingelectricity
comingfromoutofstateimports.
Figure E-1: Californias Generation Mix (2008)
Source: California Energy Commission

Sincederegulationin1998,theEnergyCommissionhaslicensedmorethan60powerplants:44
projectsrepresenting15,220megawattsareonline,6projectstotaling1,578megawattsare
underconstruction,and12projectstotaling6,415megawattsareonholdbutavailablefor
construction.Inaddition,theEnergyCommissionhasahistorichighlevelofmorethan30
proposedprojectsunderreview,totalingmorethan12,000megawatts,manyofwhicharelarge
scalesolarthermalpowerplantsthatpresentnewandchallengingenvironmentalimpactsthat
mustbeconsidered.
3
Onthedemandside,Californiansconsumed285,574gigawatthoursofelectricityin2008,
primarilyinthecommercial,residential,andindustrialsectors(FigureE2).TheEnergy
Commissionstaffforecastoffutureelectricitydemandshowsthatconsumptionwillgrowby
1.2percentperyearfrom20102018,withpeakdemandgrowinganaverageof1.3percent
annuallyoverthesameperiod.Thecurrentforecastismarkedlylowerthantheforecastinthe
2007IntegratedEnergyPolicyReport,primarilybecauseoflowerexpectedeconomicgrowthin
boththenearandlongtermaswellasincreasedexpectationsofsavingsfromenergyefficiency.
Figure E-2: Electricity Consumption by Sector 2008

Becauseofeconomicuncertaintiessurroundingthecurrentrecessionandthetimingofpotential
recovery,theIntegratedEnergyPolicyReport(IEPR)Committeedirectedstafftolookinits
forecastatalternativescenariosofeconomicanddemographicgrowthandtheirimpactson
electricitydemand.Staffanalyzedbothoptimisticandpessimisticscenariosandfoundonly
smalldifferencesinprojectedelectricitydemand.Annualgrowthratesfrom20102020for
electricityconsumptionandpeakdemandwouldincreasefrom1.2percentand1.3percent,
respectively,to1.3percentand1.4percentintheoptimisticcaseandfallto1.1percenteach
underthepessimisticscenario.
Energy Efficiency and Demand Response
Energyefficiencyisazeroemissionstrategytoreducegreenhousegasemissionsinthe
electricitysector.Energyefficiencyandconservationprogramsalsoreduceenergycosts,which
makesbusinessesmorecompetitiveandallowsconsumerstosavemoney.Inaddition,energy
efficiencyreducesthecostofmeetingpeakdemandduringperiodsofhightemperaturesand
highprices.Byreducingthedemandforelectricity,energyefficiencyprogramsalsoplaya
majorroleinincreasingreliabilityoftheelectricitysystembyreducingstressonexistingpower
plantsandthetransmissionsystemandreducingthedemandfornewpowerplantsand
transmissioninfrastructure.
4
Becauseofthestatesenergyefficiencystandardsandefficiencyandconservationprograms,
Californiasenergyuseperpersonhasremainedstableformorethan30yearswhilethe
nationalaveragehassteadilyincreased.However,stabilizingpercapitaelectricityusewillnot
beenoughtomeetthecarbonreductiongoalsofAB32.Tomeetthosegoals,thestatemust
increaseitseffortstoachieveallcosteffectiveenergyefficiency.Manyoftheseeffortswillbe
carriedoutbytheinvestorownedutilitiesandthepubliclyownedutilities,bothofwhichare
governedbylegislativeandregulatorymandatestoidentifyanddevelopenergyefficiency
potentialandtosetannualsavingsgoals.TheEnergyCommissionthenusesthesegoalsasthe
basisfordevelopingitsstatewideenergyefficiencygoals.
Strategiestoachieveallcosteffectiveenergyefficiencyandgreenhousegasemissionsreduction
goalsincludepromotingthedevelopmentofzeronetenergybuildings,increasedbuildingand
appliancestandards,andbetterenforcementofthosestandards.
Azeronetenergybuildingmergeshighlyenergyefficientbuildingconstruction,stateoftheart
appliancesandlightingsystems,andhighperformancewindowstoreduceabuildingsload
andpeakrequirementsandcanincludeonsitesolarwaterheatingandrenewableenergy,such
assolarphotovoltaic,tomeetremainingenergyneeds.Theresultisagridconnectedbuilding
thatdrawsenergyfrom,andfeedssurplusenergyto,thegrid.Makingzeronetenergy
buildingsarealityby2020forresidencesand2030forcommercialbuildingswillrequire
ongoingcollaborationamongtheEnergyCommission,theCaliforniaPublicUtilities
Commission,andtheAirResourcesBoard;coordinationwithlocalgovernmentsthathavethe
authorityoverlandusedevelopmentandplanning;andcollaborationwiththebuilding
industry.
Californiasbuildingandappliancestandardsprovideasignificantshareofenergysavings
fromreducedenergydemand.The2008BuildingEfficiencyStandardswilltakeeffecton
January1,2010,andwillrequire,onaverage,a15percentincreaseinenergyefficiencysavings
comparedwiththe2005BuildingEfficiencyStandards.The2009ApplianceEfficiency
RegulationsbecameeffectivestatewideonAugust9,2009,and,asrequiredbyAB1109
(Huffman,Chapter534,Statutesof2007),setnewefficiencystandardsforgeneralpurpose
lightingofaphased50percentincreaseinefficiencyforresidentialgeneralservicelightingby
2018.ThefirstphasetakeseffectJanuary1,2010.
Anotherissueassociatedwithenergyefficiencyishowtoincorporatetheexpectedenergy
savingsfrommeetingthestateslongtermenergyefficiencygoalsintotheEnergy
Commissionselectricityandnaturalgasdemandforecast.Notallofthespecificeffortsand
programstoachievethosegoalsareinplace,sinceutilityprogramsandeffortsareonly
approvedbytheCaliforniaPublicUtilitiesCommissioninthreeyearcycles.However,itis
importanttounderstandtheimpactsoftheseexpectedincrementalsavingsaspartofthe
EnergyCommissionsdemandforecastingefforts.
Recommendations
TheEnergyCommissionidentifiedthefollowingefficiencyrelatedrecommendationsasthe
highestpriorityactionsCalifornianeedstotaketoreachitsenergyefficiencygoals:
5
TheEnergyCommissionwilladoptandenforcebuildingandappliancestandardsthatput
Californiaonthepathtozeronetenergyresidentialbuildingsby2020andzeronetenergy
commercialbuildingsby2030.
TheEnergyCommissionandtheCaliforniaPublicUtilitiesCommissionshouldwork
togethertodevelopandimplementaudit,labeling,andretrofitprogramsforexisting
buildingsthatachieveallcosteffectiveenergyefficiencymeasures,maximizethebenefitof
existingutilityprograms,andexpandtheuseofmunicipalandutilityonbillfinancing
opportunities.
TheEnergyCommissionwillusethe2009adoptedforecastasastartingpointtoestimate
theincrementalimpactsfromfutureefficiencyprogramsandstandardsthatarereasonably
expectedtooccur,butforwhichprogramdesignsandfundingarenotyetcommitted.Staff
isplanningtouseandpossiblymodifyItronsforecastingmodel,SESAT,forthisnew
purpose,withItronprovidingtrainingforthemodelinearly2010.TheEnergyCommission,
incooperationwiththeCaliforniaPublicUtilitiesCommission,theinvestorownedutilities,
andthepubliclyownedutilities,willdevotesufficientresourcestodevelopinhouse
capabilitytodifferentiatethesefutureenergyefficiencysavingsfromenergyefficiency
savingsthatarealreadyaccountedforinthedemandforecast.
Renewable Energy
Renewableenergyisthefirstsupplysideresourceintheloadingorderandakeystrategyfor
achievinggreenhousegasemissionreductionsfromtheelectricitysector.Increasingtheamount
ofrenewableenergyinCaliforniaselectricitymixalsoreducestherisksandcostsassociated
withpotentiallyhighandvolatilenaturalgaspriceswhilealsoreducingthestatesdependence
onimportednaturalgasusedtogenerateelectricity.Renewableresourcesalsoprovideother
benefitssuchaseconomicdevelopmentandnewemploymentopportunitiesbenefitsthat
havebecomeincreasinglyimportantgiventhecurrentrecession.
ChallengeswithincreasingtheamountofrenewableresourcesinCaliforniaselectricitymixare
plentiful.Theyincludethedifficultyofintegratinglargeamountsofrenewableenergyintothe
electricitysystem;uncertaintyonthetimelineformeetingRenewablesPortfolioStandards
goals;environmentalconcernswiththedevelopmentofrenewablefacilitiesandassociated
transmission;difficultyinsecuringprojectfinancing;delaysandduplicationinsitingprocesses;
timeandexpenseofnewtransmissiondevelopment;thecostofrenewableenergyina
fluctuatingenergymarket;andmaintainingthestatesexistingbaselineofrenewablefacilities.
TheRenewablesPortfolioStandardrequiresretailsellers(definedasinvestorownedutilities,
electricserviceproviders,andcommunitychoiceaggregators)toincreaserenewableenergyasa
percentageoftheirretailsalesto20percentby2010.Statelawalsorequirespubliclyowned
utilitiestoimplementthestandardbutgivesthemflexibilityindevelopingspecifictargetsand
timelines.InNovember2008,GovernorSchwarzeneggerraisedCaliforniasrenewableenergy
goalsto33percentby2020inhisExecutiveOrderS1408,andinSeptember2009,Executive
OrderS2109directedtheAirResourcesBoardtodevelopregulationsbyJuly31,2010,fora33
percentRenewableEnergyStandard.
6
InJuly2009,theCaliforniaPublicUtilitiesCommissionreportedthatthethreeinvestorowned
utilitiesweresupplyingapproximately13percentoftheiraggregatedtotalsalesfromeligible
renewableresourcesasof2008,farbelowthe20percentrequiredby2010.Publiclyowned
utilitiesareshowingsomeprogressinrenewableenergyprocurementwithexpectationsforthe
15largestpubliclyownedutilitiesof12.4percentofRenewablesPortfolioStandardeligible
renewableretailsalesby2011,butthisprogressstillfallsfarshortoftherenewabletarget.
Notallrenewablegeneratorsprovidetheoperatingcharacteristicsthatthesystemneedsto
maintainlocalareareliability,andintegratingcertainrenewabletechnologiescanmakeitmore
difficulttooperatethesystemreliably.Whilegeothermalandbiomassresourcescanprovide
baseloadpower,resourceslikewind,hydro,andsolarareintermittentandnotalwaysavailable
tomeetsystemneedsduringpeakhours.Intermittentresourcescanalsodropofforpickup
suddenly,requiringquickactionbysystemoperatorstocompensateforthesuddenchanges.
Significantenergystoragewillberequiredtointegratefuturelevelsofrenewables,thus
allowingbettermatchingofrenewablegenerationwithelectricityneeds.Thesetechnologiescan
alsoreducethenumberofnaturalgasfiredpowerplantsthatwouldotherwisebeneededto
providethecharacteristicsthesystemneedstooperatereliably.However,manystorage
technologiesarestillintheresearchanddevelopmentstage,arerelativelyexpensive,andneed
furtherrefinementanddemonstration.
GovernorSchwarzeneggersExecutiveOrderS0606furtherrequiresthestatetomeet20
percentoftheRenewablesPortfolioStandardwithbiopower.However,newbiomassfacilities
continuetofacebarrierstodevelopment.Thereissignificantpotentialforrenewablegeneration
fueledbybiomethanefromthestatesdairies,butthehighcostofemissionscontrolsinterferes
withdairiesabilitytoobtainairpermits.Newsolidfuelbiomassfacilitiesalsofacechallenges
inobtainingairpermits,aswellastheaddedchallengeintheSouthCoastAirQuality
ManagementDistrictofobtainingpermitstoemitparticulatematter.Existingbiomassfacilities,
whichprovideasignificantportionofthestatesbaseloadrenewablecapacity,alsoface
challengesfromtheexpirationattheendof2011oftheRenewableEnergyProgram,which
providesproductionincentivesthatenablethemtokeepoperating.
Whilerenewableenergyprovidesobviousenvironmentalbenefitsbyreducinggreenhousegas
emissionsandcriteriapollutantsassociatedwithelectricitygeneration,theinfrastructure
requiredtoaddlargeamountsofrenewableresourcescanhavenegativeenvironmentaleffects.
EffortsliketheRenewableEnergyTransmissionInitiativeareworkingtofacilitatetheearly
identificationandresolutionortoavoidlanduseandenvironmentalconstraintstopromote
timelydevelopmentofCaliforniasrenewablegenerationresourcesandassociatedtransmission
lines.Also,GovernorSchwarzeneggersExecutiveOrderS1408establishesaprocessto
conservenaturalresourceswhileexpeditingthepermittingofrenewableenergypowerplants
andtransmissionlines.TheExecutiveOrderestablishedtheRenewableEnergyActionTeam,
comprisedoftheEnergyCommission,theCaliforniaDepartmentofFishandGame,thefederal
BureauofLandManagement,andtheU.S.FishandWildlifeService,toidentifyandestablish
areasforpotentialrenewableenergydevelopmentandconservationintheColoradoand
Mojavedesertstohelpreducethetimeanduncertaintyassociatedwithlicensingnew
renewableprojectsonbothstateandfederallands.AspartofimplementingtheExecutive
7
Order,theagenciesaredevelopingtheDesertRenewableEnergyConservationPlan,aroad
mapforrenewableenergyprojectdevelopmentthatwilladvancestateandfederalconservation
goalswhilefacilitatingthetimelypermittingofrenewableenergyprojectsindesertregionsof
thestate.
Recommendations
TheEnergyCommissionidentifiedthefollowingrecommendationsforrenewableenergyasthe
highestpriorityactionsCalifornianeedstotake:
TheEnergyCommission,theAirResourcesBoard,theCaliforniaPublicUtilities
Commission,andtheCaliforniaIndependentSystemOperatormustcontinuetowork
togethertoimplementa33percentrenewableelectricitypolicythatappliestoallload
servingentitiesandretailproviders.
Toreduceregulatoryuncertaintyformarketparticipantsandensurealongtermandstable
renewableenergypolicyframeworkforCalifornia,thestateshouldpursuelegislationto
codifythe33percentrenewabletargetthatwasidentifiedinGovernorSchwarzeneggers
ExecutiveOrdersS1408andS2109.
TheEnergyCommissionwillworkwiththeCaliforniaPublicUtilitiesCommission,the
CaliforniaIndependentSystemOperator,thefederalBureauofLandManagement,the
CaliforniaDepartmentofFishandGame,andotheragenciestoimplementspecific
measurestoacceleratepermittingofnewrenewablegenerationandthetransmission
facilitiesneededtoservethatgeneration.Thesemeasuresincludetheeliminationof
duplication,shortenedpermittingtimelines,andplanningprocessessuchastheRenewable
EnergyTransmissionInitiativeandtheDesertRenewableEnergyConservationPlanthat
balancecleanenergydevelopmentandconservation.
TomeettheGovernorstargetof20percentofthestatesrenewableenergygoalsfrom
biomassresourcesthatwasidentifiedinExecutiveOrderS0606,theEnergyCommission
willfacilitateandcoordinateprogramswithotherstateandlocalagenciestoaddress
barrierstotheexpansionofbiopower,includingregulatoryhurdlesandprojectfinancing.
TheEnergyCommissionwillalsoencourageadditionalresearchanddevelopmenttoreduce
costsforbiomassconversion,biopowertechnologies,andenvironmentalcontrols.
TheEnergyCommissionwillconductfurtheranalysistoidentifysolutionstointegrate
increasinglevelsofenergyefficiency,smartgridinfrastructure,andrenewableenergywhile
avoidinginfrequentconditionsofsurplusgeneration,orovergeneration,inwhichmore
electricityisbeinggeneratedthanthereisloadtoconsumeit.Potentialsolutionsinclude
bettercoordinationofthetimingofresourceadditionsandthemixofresourcesaddedto
meetcustomerneedsefficientlyandmaintainsystemreliability,aswellasadditional
research,development,anddemonstrationofexistingandemergingstoragetechnologies.
Inaddition,therewillbeeffortstodeterminewhatnew,moreflexible,andefficientnatural
gastechnologiesbestfitintoanelectricitygridintransition.TheEnergyCommissionwill
completeaninitialstudyofthesurplusgenerationissuetoidentifyspecificresourceand
dataneedsaspartofthe2010IntegratedEnergyPolicyReportUpdate,withanindepth
analysisforthcominginthe2011IntegratedEnergyPolicyReport.
8
Distributed Generation and Combined Heat and Power
Distributedgenerationresourcesaregridconnectedorstandaloneelectricalgenerationor
storagesystemsconnectedtothedistributionlevelofthetransmissionanddistributiongridand
locatedatorverynearthelocationwheretheenergyisused.Thebenefitsofdistributed
generationgofarbeyondelectricitygeneration.Becausethegenerationislocatednearthe
locationwhereitisneeded,distributedgenerationreducestheneedtobuildnewtransmission
anddistributioninfrastructureandalsoreduceslossesatpeakdeliverytimes.Customerscan
usedistributedgenerationtechnologiestomeetpeakneedsortoprovideenergyindependence
andprotectagainstoutagesandbrownouts.
Californiaispromotingdistributedgenerationtechnologiesthroughseveralprogramsthat
supportdistributedgenerationonthecustomersideofthemeter,suchastheCaliforniaSolar
Initiative,whichincludestheNewSolarHomesPartnership,theCaliforniaPublicUtilities
CommissionsSelfGenerationIncentiveProgram,andtheEnergyCommissionsEmerging
RenewableFacilitiesProgram.Largescaledistributedgenerationsuchascombinedheatand
power,alsoreferredtoascogeneration,isanefficientandcosteffectiveformofdistributed
generation.TheClimateChangeScopingPlanhasatargetofadding4,000megawattsofcombined
heatandpowercapacitytodisplace30,000gigawatthoursofdemand,thusreducing
greenhousegasemissionsby6.7millionmetrictonsofcarbonby2020.
DespiteconsistentemphasisinpastIntegratedEnergyPolicyReportsontheneedtoaddress
barrierstothedevelopmentofcombinedheatandpowerfacilities,insufficientprogresshas
beenmade.Inanefforttopushforward,theEnergyCommissiondevelopedanewstudyof
marketpotentialforcombinedheatandpowerfacilitiesthatincludesfacilitiessmallerthan20
megawattsinsizethatdonottypicallyhaveexcesspowertoexporttothegrid.Thestudy
examinedmarketpenetrationoverthenext20yearsforabasecase(statusquo)andfour
alternativecasesthatincludedvariousstimulusandincentivemeasures.Thebasecaseshowed
about3,000megawattsofcombinedheatandpowermarketpenetration,includingboth
generationcapacityandavoidedelectricairconditioning.(Thestudyincludedalternative
incentivescenarios,oneofwhichmadeavailableanadditional497megawattsofcombinedheat
andpowerforadditiontothebasecaseintheeventofthepassageofSB412[Kehoe,Chapter
182,Statutesof2009].ThebillbecamelawinOctober.)Implementationofallofthestimulus
effortsandincentivesusedinthealternativecaseswouldmorethandoublemarketpenetration
overthenext20yearstoabout6,500megawatts,exceedingtheAirResourcesBoards4,000
megawatttargetforcapacityadditions.
Recommendation
TheEnergyCommissionidentifiedthefollowingrecommendationasthehighestpriorityaction
Californianeedstotaketosupportcombinedheatandpowerdevelopmentinthestate:
TheEnergyCommissionwillworkwiththeAirResourcesBoardinthedevelopmentof
combinedheatandpowertomeetthestategoalsforemissionreductionsfromthis
technology.Actionsincludemandatestoremovemarketbarrierstothedevelopmentof
combinedheatandpowerfacilitiesandtheprovisionofanalyticalsupportonefficiency
9
requirementsandothertechnicalspecificationssothatcombinedheatandpowerismore
widelyviewedandadoptedasanenergyefficiencymeasure.
Nuclear Power Plants

Aspartofthe2008IntegratedEnergyPolicyReportUpdate,theEnergyCommissiondevelopedAn
AssessmentofCaliforniasNuclearPowerPlants:AB1632Report,asdirectedbyAB1632(Blakeslee,
Chapter722,Statutesof2006).Thereportaddressedseismicandplantagingvulnerabilitiesof
CaliforniasinstatenuclearplantsPacificGasandElectricCompanysDiabloCanyonPower
PlantandSouthernCaliforniaEdisonsSanOnofreNuclearGeneratingStationincluding
reliabilityconcernsaswellasconcernsoversafetyculture,plantperformance,andmanagement
issuesatSanOnofre.TheAB1632ReportalsorecommendedadditionalstudiesthatPacificGas
andElectricCompanyandSouthernCaliforniaEdisonshouldundertakeaspartoftheirlicense
renewalfeasibilitystudiesfortheCaliforniaPublicUtilitiesCommissionanddirectedthe
utilitiestoprovideastatusreportontheireffortstowardimplementingtherecommendationsin
theAB1632Reportinthe2009IntegratedEnergyPolicyReport.
Majorpolicydecisionsthatwillbemadeinthenextseveralyearswillshapethenextthree
decadesofnuclearenergypolicyinCalifornia.Anoverarchingissuewiththestatesnuclear
facilitiesisplantlicenserenewal.TheNuclearRegulatoryCommissionoperatinglicensesfor
SanOnofreUnits2and3aresettoexpirein2022,andforDiabloCanyonUnits1and2,in2024
and2025,respectively.PacificGasandElectricannouncedonNovember24,2009,itsintention
tofilealicenserenewalapplicationforDiabloCanyon,andSouthernCaliforniaEdisonplansto
fileforlicenserenewalforSanOnofreinlate2012.
TheNuclearRegulatoryCommissionlicenserenewalapplicationprocessdetermineswhethera
plantmeetsitsrenewalcriteria,butnotwhethertheplantshouldcontinuetooperate.The
NuclearRegulatoryCommissionspecificallystatesthatithasnoroleintheenergyplanning
decisionsofStateregulatorsandutilityofficialsastowhetheraparticularnuclearpowerplant
shouldcontinuetooperate.Itislefttostateregulatoryagenciestodeterminewhetheritisin
thebestinterestofratepayersandcosteffectivetocontinueoperationoftheirstatesnuclear
plants.
AlthoughtheCaliforniaPublicUtilitiesCommissiondoesnotapproveordisapprovelicense
applicationsfiledwiththeNuclearRegulatoryCommission,bothPacificGasandElectricand
SouthernCaliforniaEdisonmustobtaintheCaliforniaPublicUtilitiesCommissionsapproval
topursuelicenserenewalbeforereceivingCaliforniaratepayerfundingtocoverthecostsofthe
NuclearRegulatoryCommissionlicenserenewalprocess.Theutilitiessubmissionoflicense
renewalfeasibilityassessmentstotheCaliforniaPublicUtilitiesCommissioninitiatesthe
CaliforniaPublicUtilitiesCommissionslicenserenewalreviewproceedings.TheCalifornia
PublicUtilitiesCommissionproceedingswillnotonlyconsiderenergyplanningissuesand
whethercontinuedoperationofthenuclearpowerplantsisintheratepayersbestinterest,but
willalsoconsidermattersofstatejurisdictionsuchastheeconomic,reliability,and
environmentalimplicationsofrelicensing.
10
TheCaliforniaPublicUtilitiesCommissionsGeneralRateCaseDecision0703044required
PacificGasandElectrictoincorporatetheEnergyCommissionsAB1632assessmentfindings
andrecommendationsinitslicenserenewalfeasibilitystudyandtosubmitthestudytothe
CaliforniaPublicUtilitiesCommissionnolaterthanJune30,2011,alongwithanapplicationon
whethertopursuelicenserenewalforDiabloCanyon.LettersonJune25,2009,fromthe
presidentoftheCaliforniaPublicUtilitiesCommissiontoPacificGasandElectricandSouthern
CaliforniaEdisonreiteratedtherequirementforeachutilitytocompletetheAB1632Reports
recommendedstudies,includingtheseismic/tsunamihazardandvulnerabilitystudies,and
reportonthefindingsandtheimplicationsofthestudiesforthelongtermseismicvulnerability
andreliabilityoftheplants.ThesestudiesarenecessarytoallowtheCaliforniaPublicUtilities
Commissiontoproperlyundertakeitsobligationstoensureplantandgridreliabilityinthe
eventthateitherDiabloCanyonorSanOnofrehasaprolongedorpermanentoutageandfor
theCaliforniaPublicUtilitiesCommissiontoreachadecisiononwhethertheutilitiesshould
pursuelicenserenewal.However,theutilitiesreportstodateindicatetheyarenotonschedule
tocompletetheseactivitiesintimeforCaliforniaPublicUtilitiesCommissionconsideration.In
addition,bothutilitieshavePacificGasandElectrichasindicatedobjectionstoprovidingsome
ofthestudiesand/orrequirementsindicatedbytheAB1632ReportandtheCaliforniaPublic
UtilitiesCommissionGeneralRateCaseDecision.
TheEnergyCommissionbelievesthatthecomprehensiveness,completeness,andtimeliness
withwhichbothutilitiesprovidethestudiesidentifiedintheAB1632Reportwillbeacritical
partoftheCaliforniaPublicUtilitiesCommissionandNuclearRegulatoryCommissionreviews
oftheutilitieslicenserenewalapplications.
Recommendation
Californianeedstotaketohelpensurenuclearplantreliabilityandtominimizecostlyoutages:
PacificGasandElectricCompanyandSouthernCaliforniaEdisonshouldcompleteallofthe
studiesrecommendedintheAssemblyBill1632Report,shouldmaketheirfindingsavailable
forconsiderationbytheEnergyCommission,andshouldmaketheirfindingsavailableto
theCaliforniaPublicUtilitiesCommissionandtheU.S.NuclearRegulatoryCommission
duringtheirreviewsoftheutilitieslicenserenewalapplications.
Transmission and Distribution
Thestatestransmissionanddistributionsystemisanothercriticalcomponentoftheelectricity
sectorforservingCaliforniasgrowingpopulationandintegratingrenewableenergy.The2009
StrategicTransmissionInvestmentPlandescribestheimmediateactionsthatCaliforniamusttake
toplan,permit,construct,operate,andmaintainacosteffective,reliableelectrictransmission
systemthatiscapableofrespondingtoimportantpolicychallengessuchasachieving
significantgreenhousegasreductionandRenewablesPortfolioStandardgoals.Theplanmakes
anumberofrecommendationsintendedtomakethecriticallinkbetweentransmission
planningandpermittingsothatneededprojectsareplannedfor,havecorridorssetasideas
necessary,andarepermittedinatimelyandeffectivemannerthatmaximizesexisting
11
infrastructureandrightsofway,minimizeslanduseandenvironmentalimpacts,andconsiders
technologicaladvances.
Recommendations
TheEnergyCommissionsupportsthemanyrecommendationsmadeinthe2009Strategic
TransmissionInvestmentPlanandhighlightsthefollowingrecommendations:
TheEnergyCommissionstaffwillworkwiththerecentlyformedCaliforniaTransmission
PlanningGroupandtheCaliforniaIndependentSystemOperatorinaconcertedeffortto
establisha10yearstatewidetransmissionplanningprocessthatusestheEnergy
CommissionsStrategicPlanproceedingtovettheCaliforniaTransmissionPlanningGroup
plandescribedinChapter4ofthe2009StrategicTransmissionInvestmentPlan,withemphasis
onbroadstakeholderparticipation.
TheEnergyCommissionstaffwillworkwiththeCaliforniaIndependentSystemOperator,
theCaliforniaPublicUtilitiesCommission,investorownedutilities,andpubliclyowned
utilitiestodevelopacoordinatedstatewidetransmissionplanusingconsistentstatewide
policyandplanningassumptions.
Coordinated Electricity System Planning
Californiahasnumerousagenciesthatareinvolvedinelectricityplanning.Whilethereissome
degreeofcoordinationamongvariousagenciesandprocesses,thestateneedstofindbetter
waystocoordinateandstreamlinethecollectiveresponsibilitiesofthoseagenciestoachievethe
statesgreenhousegasemissionreduction,environmentalprotection,andreliabilitygoalswhile
reducingduplicativeorcontradictoryprocesses.Californianeedstobettercoordinateits
electricitypolicy,planning,andprocurementeffortstoeliminateduplicationandtoensurethat
plannersandpolicymakersunderstandtheinteractionsandconflictsthatmayexistamong
stateenergypolicygoals.
Recommendation
neededforthestatetoidentifyresourceneedsoverboththeshortandlongterm:
TheEnergyCommissionwillworkwiththeCaliforniaPublicUtilitiesCommissionand
CaliforniaIndependentSystemOperator,alongwithotheragenciesandinterested
stakeholders,todevelopacommonvisionfortheelectricitysystemtoguideinfrastructure
planninganddevelopment.Suchcoordinatedplanscanbeusedtoguideeachagencysown
infrastructureapprovalandlicensingresponsibilitiesandthusmaximizecoordinatedaction
toachievestateenergypolicygoals.
Addressing Procurement in the Hybrid Market
AttheOctober14,2009,IntegratedEnergyPolicyReportCommitteeHearingonthedraftIEPR,
theIEPRCommitteesolicitedcommentsfrompartiesonhowthestateshouldaddressthe
currenthybridelectricprocurementmarket(amarketsplitbetweenutilityownedgeneration
andcontractedthirdpartygeneration)andimprovetheinvestorownedutilityprocurement
processforelectricgeneration.Theseissuesarecriticaltostateenergypolicybutdidnotreceive
12
sufficientanalysisthroughoutthe2009IEPRprocess.TheIndependentEnergyProducers
Associationsubmittedcommentsexpressingsupportforanexaminationofthehyridmarket
structuretodetermineifitisfunctioningproperlyandachievingitsoriginalgoalofprovidinga
levelplayingfieldforutilityownedandindependentpowergeneration.Inaddition,the
WesternPowerTradingForumsubmittedcommentsexpressingconcernsthatutility
dominationofinfrastructureinvestmentispotentiallydetrimentaltocompetitivewholesaleand
retailmarketsandthereforepotentiallydetrimentaltotechnologicalinnovation.TheForum
assertsthattheexistinghybridmarketstructurerequiresratepayerstobearthefinancialand
operationalrisksassociatedwithnewinvestmentandignoresthemarketscapabilitiesto
activelymanageandhedgethoserisks,anditbelievesthatimprovingcompetitionatthe
wholesaleandretaillevelswouldcreatedownwardpressureonprices.
Recommendation
TheEnergyCommissionsupportsthefollowingrecommendation:
TheEnergyCommissionbelievestheseissuesdeserveafullervetting,includingan
assessmentofalternativemarketmodelsthatwouldbetterservethegoalofreducedcostto
customers.TheEnergyCommissionwillinvitetheCaliforniaPublicUtilitiesCommissionto
participateinamorecompleteevaluationoftheexistinghybridmarketstructureaspartof
the2010IntegratedEnergyPolicyReportUpdatetoidentifypossiblemarketenhancementsand
changestoutilityprocurementpracticesthatwouldfacilitatethereemergenceofmerchant
investment.
The Natural Gas Sector
Naturalgasisthecleanestofthefossilfuelsusedinthestateandwillcontinuetobea
significantenergysourcefortheforeseeablefuture.Maintainingareliablenaturalgasdelivery
andstorageinfrastructureisthereforeimportanttosupportthereceiptanddeliveryofadequate
supplytoCaliforniasmillionsofnaturalgasconsumersandkeeppriceslowfortheresidential,
commercial,industrial,andelectricgenerationsectors.AnexpandingCalifornianaturalgas
infrastructurealsowillallowfortheefficientdeliverytoCaliforniaofincreasingdomesticshale
gasproductionandliquefiednaturalgasimports.
Recenttechnologicaladvancementsinexploration,drilling,andhydraulicfracturinghave
transformedshaleformationsfrommarginalnaturalgasproducerstosubstantialand
expandingcontributorstothenaturalgasportfolio.Recoverableshalereserveestimatesrange
ashighas842trillioncubicfeet,a37yearsupplyattodaysconsumptionrates.Whilenatural
gasproductionfromshaleformationshassignificantlyincreaseddomesticproduction,thereis
ongoinginvestigationofpotentialenvironmentalconcernsrelatedtoshalegasdevelopment,
includingcarbonemissionsandpossiblegroundwatercontamination.
Asrecentlyastwoyearsago,domesticnaturalgasproductionandimportstoCaliforniawere
onthedecline,andliquefiednaturalgaswasseenasasourcetobetterservethenaturalgas
needsofCalifornia.Therecentdevelopmentofnaturalgasshaleformationshascontributedto
increaseddomesticproductionofnaturalgas,andliquefiednaturalgasdoesnotseemtobea
13
priorityfuelforCaliforniaatthistime.Ifprivateinvestorsarewillingtoinvestinliquefied
naturalgasfacilitieswithoutcommittingtaxpayerorratepayerfunds,however,liquefied
naturalgasshouldbeconsideredaviableoption.TheEnergyCommissiondoesnotoppose
developmentofliquefiednaturalgasfacilitiesaslongasliquefiednaturalgasdevelopmentis
consistentwiththestatesinterestsinbalancingenvironmentalprotection,publicsafety,and
localcommunityconcernstoensureprotectionofthestatespopulationandcoastal
environment.
Whilethereiswidespreadagreementthatthephysicalmarketfactorsofsupplyanddemand
areprimarycontributorstonaturalgaspricesandvolatility,therealsoisgrowinginterestand
concernabouttheinfluencefinancialmarketfactors,particularlycommodityspeculation,have
onnaturalgaspricesandvolatility.Thegrowthinspeculativecommoditytradingfrom
nontraditionalparticipants,suchaspensionfunds,universityendowments,hedgefunds,and
indexportfolios,haschangedthefuturesmarket.Unliketraditionalparticipantslikeutilities
andrefinerswhousedthemarkettohedgeagainstvolatileenergycosts,thesenewparticipants
usethemarketasanopportunityforprofit.Significantdisagreementexistsabouttheinfluence
speculativetradinghasonthenaturalgasmarket,prices,andvolatility.
Finally,pasteffortstoforecastnaturalgaspriceshavebeenhighlyinaccuratecomparedto
actualprices,evenwhenpricevolatilitywaslargelydominatedbytraditional,physicalmarket
factors.Additionally,astheUnitedStatescontinuesmovingtowardacarbonconstrained
existence,futuregreenhousegaspolicieswillfurthercomplicatetheseefforts,likelyrendering
futurenaturalgaspriceforecastsevenlessaccurateandmoreuncertain.Theuncertainty
associatedwithpredictingmajorinputvariablesandtheresultingnaturalgaspriceforecasts
bringintoquestionthevalueofproducingdatespecific,singlepointnaturalgaspriceforecasts.
Recommendations
TheEnergyCommissionidentifiedthefollowingrecommendationsasthehighestprioritiesfor
thestatesnaturalgassector:
Californiashouldworkcloselywithwesternstatestoensuredevelopmentofanaturalgas
transmissionandstoragesystemthathassufficientcapacityandalternativesupplyroutesto
overcomeanydisruptioninthesystem,suchasweatherrelatedlinefreezesandpipeline
breaks.ThestateshouldsupportconstructionofsufficientpipelinecapacitytoCaliforniato
ensureadequatesupplyatareasonableprice.
TheEnergyCommissionwillcontinuetomonitorthepotentialenvironmentalimpacts
associatedwithshalegasextraction,includingcarbonfootprint,volumeofwateruseand
riskofgroundwatercontamination,airpollution,andpotentialchemicalleakage.
Specifically,theEnergyCommissionstaffwillcoordinateandexchangeinformationwith
energyagenciesinstateswithshalegasdevelopment,suchasNewYork,Texas,andother
midcontinentstates,andwillreportnewfindingsintheIntegratedEnergyPolicyReport
andotherEnergyCommissionforums.
14
The Fuels and Transportation Sector
Stateandfederalpoliciesencouragethedevelopmentanduseofrenewableandalternative
fuelstoreduceCaliforniasdependenceonpetroleumimports,promotesustainability,andcut
greenhousegasemissions.GovernorSchwarzeneggersExecutiveOrderS0606established
cleartargetsforincreaseduseandinstateproductionofbiofuels.Californiaandthefederal
governmentalsohavepoliciestoimprovevehicleefficienciesandtoreducevehiclemiles
traveledineffortstoachieve2050greenhousegasreductiontargetsof80percentbelow1990
levelsasdirectedintheGovernorsExecutiveOrderS305.Untilnewvehicletechnologiesand
fuelsarecommercialized,petroleumwillcontinuetobetheprimaryfuelsourceforCalifornias
vehicles,andthestatemustenhanceandexpandtheexistingpetroleuminfrastructure,
particularlyatinstatemarineports,whileatthesametimeworkingtodevelopanalternative
fuelinfrastructure.
Thefuelsandtransportationenergysectorisresponsibleforproducingthegreatestvolumeof
greenhousegasemissionsnearly40percentofCaliforniastotal.AB32doesnotdirectly
addressgreenhousegasemissionsreductioninthetransportationsector.Instead,reductionsare
addressedthroughCaliforniasLowCarbonFuelStandard,AB1493(Pavley,Chapter200,
Statutesof2002),AB1007(Pavley,Chapter371,Statutesof2005),andAB118,theAlternative
andRenewableFuelandVehicleTechnologyProgram.Thepoliciesandstandardsresulting
fromthesemandateswillultimatelychangevehicleandfueltechnologiesinCaliforniaand
acceleratethemarketforlowcarbonfuelswellbeyondthecurrentlevelofdemand.
Thecurrentrecessionhashadasignificantimpactonthestatestransportationsector.
Californiasaveragedailygasolinesalesforthefirstfourmonthsof2009were2.1percentlower
thanthesameperiodin2008,continuingareductionindemandobservedsince2004.Daily
dieselfuelsalesforthefirstthreemonthsof2009were7.7percentlowerthanthesameperiod
in2008,continuingadecliningtrendsince2007.Jobgrowthandindustrialproduction
driversofairtravelarealsodeclining,causingtheaviationsectortoexperienceadropinair
traffic.Recentdemandtrendsforjetfuel,whichsawan8.9percentdeclinein2008,aresimilar
todieselfuelandreflecttheimpactoftheeconomicdownturnandhigherfuelprices.
TheinitialyearsintheEnergyCommissionstransportationfueldemandforecastshowa
recoveryfromtherecession.Becausetheeconomicanddemographicprojectionsusedinthese
forecastsindicateareturntoeconomicandpopulationgrowth,fueldemandinthelightduty,
mediumandheavydutyvehiclesandaviationsectorstendstoresumehistoricalgrowth
patterns.However,themixoffueltypesisprojectedtochangesignificantlyasthestate
transitionsfromgasolineanddieseltoalternativeandrenewablefuels.
Californianeedssufficientfuelinfrastructuretoensurereliablesuppliesoftransportationfuels
foritscitizens.Relianceonforeignoilimportsincreasinglyputsthestatesfuelsupplyatrisk,
notonlybecauseofsecurityandreliabilityconcerns,butalsobecausethemarineportsarenot
expandingtomeetexpectedgrowthindemand.Alternativeandrenewablefuelscouldfacethe
sameconstraintsattheportsshouldthestatebegintorelyonimportsofthosefuelstomeet
stateandfederalrenewablefuelstandards.Infact,renewableandalternativefuelsfaceeven
15
moreseriousinfrastructureissues,asmuchoftheinfrastructurethatwillsoonbeneededisnot
eveninplace.Bothpetroleumandrenewablefuelsfaceinfrastructurechallengesfromthe
wholesaleanddistributionlevelallthewaythroughtotheenduser.
Recommendations
TheEnergyCommissionidentifiedthefollowingrecommendationsasthehighestprioritiesfor
thefuelsandtransportationsector:
WiththeadventofnewCaliforniaprogramssuchastheAlternativeandRenewableFuel
andVehicleTechnologyProgram(acomprehensiveinvestmentprogramtostimulatethe
developmentanddeploymentoflowcarbonfuelsandadvancedvehicletechnologies),the
LowCarbonFuelStandard,andafederalwaiverallowingCaliforniatosetitsowncarbon
dioxidemotorvehicleemissionstandards,Californiaiswellpositionedtodevelopasystem
ofsustainable,clean,alternativetransportationfuels.Thestateshouldcontinueonits
presentcourseofactionbyprovidingresponsibleagencieswiththetimeandfundingto
implementtheseprograms.
TheEnergyCommissionwillcollaboratewithpartneragenciesandstakeholderstodevelop
policychangestoaddressregulatoryhurdlesandpriceuncertaintyforalternativefuels,
particularlybiofuels,inCalifornia.
Tomaintainenergysecurity,stateandlocalagenciesneedtoensurethatthereisadequate
infrastructureforthedeliveryoftransportationfuels.Thestateshouldmodernizeand
upgradetheexistinginfrastructuretoaccommodatealternativeandrenewablefuelsand
vehicletechnologiesastheyaredevelopedandtoaddresspetroleuminfrastructureneedsto
preservepastinvestmentsandtoexpandthroughputcapacityinthestate.
TheEnergyCommissionbelievesthattransportationenergyefficiencyshouldbepursued
throughincreasedfederalvehiclefueleconomystandardsandmoresustainablelanduse
practicesinconjunctionwithlocalgovernments.
The Land Use and Planning Sector
Althoughlandusedecisionsaremadeonthelocallevel,theyoftenhavestatewideimplications
bydirectlyinfluencingconsumertransportationchoices,energyconsumption,andgreenhouse
gasemissions.The2006IntegratedEnergyPolicyReportUpdatestatedthatthesinglelargest
opportunitytohelpCaliforniameetitsstatewideenergyandclimatechangegoalsresideswith
smartgrowthdevelopmentthatrevitalizescentralcitiesandoldersuburbs,supportsand
enhancespublictransit,promoteswalkingandbicycling,andpreservesopenspacesand
agriculturallands.The2007IntegratedEnergyPolicyReportfurthernotedthattoreduce
greenhousegasemissions,Californiamustbeginreversingthecurrent2percentannualgrowth
rateofvehiclemilestraveled.
TheEnergyCommissionisoneofseveralstateagencieshelpinglocalandregionalgovernments
makesustainablelandusedecisions.TheCaliforniaDepartmentofTransportationcoordinates
localandstateplanningthroughitsRegionalBlueprintPlanningProgram.SenateBill375
(Steinberg,Chapter728,Statutesof2008)requirestheAirResourcesBoardtosetregional
16
emissionsgoalsbyworkingwithmetropolitanplanningorganizations.SB732(Steinberg,
Chapter729,Statutesof2008),recognizingtheneedforstateagenciestoworkmoreclosely
togetheronthisissue,createdtheStrategicGrowthCouncil,acabinetlevelcommittee
composedofagencysecretariesfromBusiness,TransportationandHousing;CaliforniaHealth
andHumanServices;theCaliforniaEnvironmentalProtectionAgency;andtheCalifornia
NaturalResourcesAgency,alongwiththedirectoroftheGovernorsOfficeofPlanningand
Research.
Thesestateagenciesneedtocoordinatemorecloselytohelplocalgovernmentsachievethe
benefitsofsustainablelanduseplanning.Beforeadoptingnewstatepolicies,stategovernment
mustimproveitsoutreachtolocalgovernmentstobetterunderstandtheproblemstheyface.
Thisincludestakingintoaccountandaddressingthefiscalrealitieslocalgovernmentsconfront
indifficulteconomictimes.
Recommendations
TheEnergyCommissionmakesthefollowingrecommendationrelatedtolanduseplanning
anddecisions:
Toreduceenergyuseandsupportthetransportationgreenhousegasemissionreduction
goalsofSB375,stateagenciesincollaborationwiththeStrategicGrowthCouncilandlocal
andregionalgovernmentswillcontinuetoconductresearch,developanalyticaltools,
assembleeasytousedata,andprovideassistancetolocalandregionalgovernmentofficials
tohelpthemmakeinformeddecisionsaboutenergyopportunitiesandundertake
sustainablelandusepractices,whilerecognizingthedifferentneedsofruralandurban
regions.
The Potential of Carbon Capture and Sequestration
Californiawillneedinnovativestrategiestoaddressgreenhousegasemissionsassociatedwith
energyproductionanduse.Onesuchstrategyiscarboncaptureandstorage,alsoknownas
carboncaptureandsequestration.The2007IEPRfocusedongeologicsequestrationstrategies
forthelongtermmanagementofcarbondioxide,buttherehavebeenencouragingtechnology
advancementsandinvestmentssincethen.Technologydevelopersandpolicymakerswhoare
examiningcarboncaptureandsequestrationapplicationshaveexpandedfromaninitialfocus
oncoalandpetroleumcoketonaturalgasandrefinerygas,thepredominantfossilfuelsusedin
Californiapowerplantsandindustrialfacilities.
Recommendation
TheEnergyCommissionmakesthefollowingrecommendationrelatedtocarboncaptureand
sequestration:
TheEnergyCommissionrecommendsthat,asamechanismforachievingstateenergyand
environmentalobjectives,itcontinuetosupportandconductcarboncaptureand
sequestrationresearchtodemonstratetechnologyperformanceandfacilitateinteragency
17
coordinationtodevelopthetechnicaldataandanalyticalcapabilitiesnecessaryfor
establishingalegalandregulatoryframeworkforthistechnologyinCalifornia.
Achieving Energy Goals
Californianeedsreliable,affordable,andcleansuppliesofenergytoserveitscitizensand
maintainastrongeconomy.Thestateselectricity,naturalgas,andtransportationsectorsmust
continuouslyrespondtochangesinsupplyanddemand,newpoliciesandtechnologiesand
theirassociatedchallenges,andincreasingenvironmentalregulation.Californiamustbolsterits
currentenergyfoundationwithanaggressiveandwiderangingagendathatwillcontinueto
reduceenergydemand,promotedevelopmentofrenewableenergyresources,ensure
developmentofcleanerfossilresources,giveconsumersmoreenergychoices,andbuildthe
necessaryinfrastructuretoprotectthestatefromfuturesupplydisruptionsandhighprices.
18
19
Chapter 1: Californias Energy-Related Policies and

Activities
In2006,theLegislaturepassedandGovernorSchwarzeneggersignedAssemblyBill32(Nez,
Chapter488,Statutesof2006),theGlobalWarmingSolutionsActof2006,whichestablishedthe
goalofreducinggreenhousegas(GHG)emissionsto1990levelsby2020.AB32wasthefirst
lawofitskindtoaddressclimatechangebyimplementingregulatorymarketmechanismsto
achieverealandmeasurableGHGreductiontargets.AB32isthedrivingforceforCalifornias
energypolicyandprograms,andthestatemustintegratemanyexistingpoliciesandlegislation
intoasymbioticwholeunderAB32sbroadumbrella.
Atthesametime,itisimportanttorecognizethatAB32isoneofmanypoliciesthatguide
energydevelopment,production,anduseinCalifornia.Manypoliciesandprogramsin
existencepriortopassageofAB32helpedthestatemakesteadyprogresstowardmore
responsiblestewardshipoftheplanetanditsresources.Thesearediscussedlaterinthechapter
andincludethegoalofachievingallcosteffectiveenergyefficiency,theRenewablesPortfolio
Standard,theCaliforniaSolarInitiative,thepowerplantEmissionPerformanceStandard,and
regulationstoreduceGHGemissionsfrommotorvehicles.Whilemanyoftheenergypoliciesin
placearecomplementary,therecanalsobeoverlaporconflictamongthosepoliciesbecause
theyareoftendesignedtoaddressdifferentproblems.
Inadditiontothechallengeofintegratingnewandexistingpolicies,laws,andregulations,
therearechallengesincoordinatingthevariousagenciesthatimplementthosepolicies.The
EnergyCommission,theCaliforniaPublicUtilitiesCommission,CaliforniaIndependentSystem
Operator,theCaliforniaAirResourcesBoard,CaliforniaEnvironmentalProtectionAgency,and
theStateWaterResourcesControlBoardallhaveveryspecificmissions,jurisdictions,and
expertise.Workingcollaborativelyisachallengingandongoinggoal,asagenciesstriveto
integratepoliciestoestablishprioritiesandtransformbroadlyframedobjectivesintoconcrete,
efficient,andcoordinatedprogramsandactions.
Thischapterprovidesbackgroundonandabriefstatusofcurrentpoliciesandprogramsthat
affectCaliforniasthreemajorenergysectorselectricity,transportation,andnaturalgasas
wellasthosethataffectlanduseandplanning.Thepurposeistoprovidedecisionmakerswith
thecontextforthemoredetaileddiscussionsinsubsequentchaptersofthevariouspolicyefforts
underwayandthechallengesassociatedwithmeetingCaliforniasenergypolicygoals.The
descriptionoftheenergypolicylandscapemayalsohelpdecisionmakersseehowpolicies
overlaporcomplementeachother,aswellaswheregapsmayexistthatrequireadditional
actiontoensureaclean,efficient,andaffordableenergyfutureforCalifornia.
Assembly Bill 32 Framework
AB32legislationchargedtheCaliforniaAirResourcesBoard(ARB)withdeveloping
regulationsanddevelopingmarketmechanismstoultimatelyreduceCaliforniasGHG
emissionsby25percentby2020.TheARBsClimateChangeScopingPlanreport,approvedon
20
December12,2008,outlinesthemainstrategiesformeetingthatgoal.TheClimateChange
ScopingPlancontainsarangeofGHGreductionactionsincludingdirectregulations,alternative
compliancemechanisms,monetaryandnonmonetaryincentives,voluntaryactions,market
basedmechanismssuchasacapandtradesystem,andanAB32costofimplementationfee
regulationtofundtheprogram.TheARBandotherstateagenciesmustadoptthesereduction
measuresbythestartof2011.TheARBhasalreadyadoptedanumberofearlyaction
measuresrequiredbytheClimateChangeScopingPlan,suchastheLowCarbonFuelStandard,
andisnowworkingontheplansothermeasures.
1
InApril2009,theCaliforniaEnvironmentalProtectionAgency(Cal/EPA)releasedtheDraft
2009ClimateActionTeamBiennialReporttotheGovernorandLegislaturethatdescribestheimpacts
ofclimatechangeonpublichealth,infrastructure,naturalresources,andtheeconomy.In
addition,thereportdescribesresearcheffortstodate.
2
TheEnergyCommissionisakeyagency
forimplementingenergyrelatedactionsintheARBsClimateChangeScopingPlanandthe
ClimateActionTeamBiennialReport.
Electricity Sector
Californiasloadingorderprovidesanoverallframeworkformeetingthestatesgrowing
electricityneedswhileachievingtheGHGemissionsreductiongoalmandatedbyAB32.The
loadingorderwasoriginallyadoptedinthe2003EnergyActionPlanI,acollaborativeeffortby
theEnergyCommission,theCaliforniaPublicUtilitiesCommission(CPUC),andtheCalifornia
PowerAuthority(nowdefunct).TheloadingordercallsforCaliforniaselectricityneedstobe
metfirstwithincreasedenergyefficiencyanddemandresponse;second,withnewgeneration
fromrenewableenergyanddistributedgenerationresources;andthird,withcleanfossilfueled
generationandinfrastructureimprovements.Thepoliciesandprogramsaffectingtheelectricity
sectorarepresentedbelowinthesamegeneralsequenceastheloadingorder.
Energyefficiencyanddemandresponsemeasuresarethefirstresourcesintheloadingorder
becausetheycancontributetomeetingclimatechangegoalswithlittleornoimpactonthe
environmentandwithmeasurablebenefits(forexample,costsavings)totheconsumer.Since
the1970s,theEnergyCommissionhassetefficiencystandardsforbuildingsandappliancesto
reduceenergydemandandincreasesavingsfromenergyefficiency.
Thefollowingmandatesandplansintheareaofenergyefficiencyanddemandresponsewill
contributetowardreducingenergydemandandmeetingtheAB32goals:
AssemblyBill2021(Levine,Chapter734,Statutesof2006):ThisbillrequirestheEnergy
Commission,inconsultationwiththeCPUCandpubliclyownedutilities,todevelopa
1
CaliforniaAirResourcesBoard,ClimateChangeScopingPlan,December2008,availableat:
[http://www.arb.ca.gov/cc/scopingplan/scopingplan.htm].
2
ClimateActionTeamBiennialReporttotheGovernorandLegislature,March2009,availableat:
[http://www.energy.ca.gov/2009publications/CAT10002009003/CAT10002009003D.PDF].
21
statewideestimateofallpotentiallyachievablecosteffectiveelectricityandnaturalgas
efficiencysavingsandestablishstatewideannualtargetsforenergyefficiencysavingsand
demandreductionover10years.
AssemblyBill758(Skinner,Chapter470,Statutesof2009):ThisbillrequirestheEnergy
CommissiontoestablisharegulatoryproceedingbyMarch1,2010,todevelopa
comprehensiveprogramtoachievegreaterenergysavingsinexistingresidentialand
nonresidentialbuildings.
CPUCLongTermEnergyEfficiencyStrategicPlan:InSeptember2008,theCPUCadopted
Californiasfirststrategicplanforenergyefficiencythatprovidesaroadmaptoachieve
maximumenergysavingsacrossallsectorsinCalifornia.Theplanincludesfourspecific
programmaticgoals,knownastheBigBoldEnergyEfficiencyStrategies:1)allnew
residentialconstructioninCaliforniawillbezeronetenergyby2020;2)allnewcommercial
constructioninCaliforniawillbezeronetenergyby2030;
3
3)heating,ventilation,andair
conditioningwillbetransformedtoensurethatitsenergyperformanceisoptimalfor
Californiasclimate;and4)alleligiblelowincomecustomerswillbegiventheopportunity
toparticipateinthelowincomeenergyefficiencyprogramby2020.
ARBsClimateChangeScopingPlan:Theplanoutlinesemissionreductionsinthe
electricitysectorfrommaximizingbuildingandappliancestandards,implementing
additionalconservationandefficiencyprograms,increasingcombinedheatandpower
(CHP),andmoreutilityprograms.Theplanalsocallsforsimilarstrategiesinthenaturalgas
sectorsuchasincreasedinstallationsofsolarwaterheatingsystemsthroughoutthestate.
AB2021isakeylegislativestrategyfortheutilitiestoexpandtheirenergyefficiencyprograms.
UnderAB2021,theEnergyCommissionisrequiredtodevelopstatewideestimatesofenergy
efficiencypotentialandgoalsforCaliforniasprivateandpublicutilities.TheEnergy
CommissionreportsonutilityprogressinmeetingthesegoalsaspartofitsbiennialIntegrated
EnergyPolicyReport(IEPR).
The2008progressreport,AchievingCostEffectiveEnergyEfficiencyforCalifornia:SecondAnnual
AB2021ProgressReport,
4
foundthatduringtheCPUCs20062008efficiencyprogramcycle,the
investorownedutilities(IOUs)exceededtheirthreeyearenergyefficiencygoals.Duringthis
period,theIOUsachievedmorethan200percentoftheirelectricenergysavingsgoaland150
percentoftheirnaturalgassavingsgoal.However,thesesavingshavenotyetbeenverified,
andmeasurementandverificationstudiescompletedforthe20042005efficiencyprograms
indicatethatverifiedprogramsavingscouldbelessthanthosereported.Theprogressreport
3
Azeronetenergybuildingcombinesbuildingenergyefficiencydesignfeaturesandcleanonsiteornear
sitedistributedgenerationofsufficientquantityonanannualbasistooffsetanyresidualpurchasesof
electricityornaturalgasfromutilitysuppliers.
4
CaliforniaEnergyCommission,AchievingCostEffectiveEnergyEfficiencyforCalifornia:SecondAnnualAB
2021ProgressReport,December2008,CEC2002008007,
[http://www.energy.ca.gov/2008publications/CEC2002008007/CEC2002008007.PDF].
22
alsofoundthatefficiencysavingsrecordedbypubliclyownedutilitiesincreasedsubstantially
from2007to2008,reaching66percentofAB2021adoptedgoalsin2008.
TherearevariouseffortsunderwaytoincreaseenergyefficiencysavingsinCalifornia.The
EnergyCommissionsPublicInterestEnergyResearch(PIER)programhelpsimproveenergy
efficiencytechnologiesandstrategies,with$180milliondevotedtoefficiencyrelatedefforts
from19972007.
5
ThePIERprogramfundsresearch,development,anddemonstration(RD&D)
inthefollowingefficiencyprogramareas:buildingsenduseenergyefficiency,
industrial/agriculture/waterenduseefficiency,demandresponse,anddistributedenergy
resourcessystemintegration.
6
WiththepassageoftheEnergyIndependenceandSecurityAct
(EISA)of2007(TitleXIII),theevolutionofthenationssmartgridprovidesnewpotentialto
achievehigherpenetrationofenergyefficiencyanddemandresponsetechnologiesand
capabilities.ThePIERprogramisactivelyfundingnewresearchinthesmartgridareatobetter
definehowtotakeadvantageofallthecapabilitiesthesmartgridwillofferCaliforniainthe
future.
Intheareaofdemandresponseandloadmanagement,theEnergyCommissions2007IEPR
recommendedinitiatingaformalrulemakingprocessinvolvingtheCPUCandCalifornia
IndependentSystemOperator(CaliforniaISO)topursuetheadoptionofloadmanagement
standardsundertheEnergyCommissionsexistingauthority. TheEnergyCommissionopened
aninformationalproceedingandrulemakingonloadmanagementstandardsinJanuary2008.
InNovember2008,theEnergyCommissionsEfficiencyCommitteepublishedadraftanalysis
thatfocusedonadvancedmetering,timevariantratedesign,anddemandresponseenabling
technologies.TheEfficiencyCommitteeandstaffheldworkshopsanddiscussionswith
stakeholdersfromDecember2008throughMarch2009.Sincethattime,theNationalInstituteof
StandardsandTechnologyhastakenuptheissueofdemandresponsecommunication
standardsforpossiblefederalaction.Inaddition,mostCaliforniautilitieshaveaggressively
expandedtheiradvancedmeteringinfrastructurerolloutsandtheDepartmentofEnergyhas
directedsmartgridAmericanRecoveryandReinvestmentActof2009(ARRA)fundingtoward
demandresponseissueslikeadvancedmeteringinfrastructure.
7
Inlightofthesesignificant
developments,EnergyCommissionstaffiscurrentlyworkingwiththeEfficiencyCommitteeto
evaluatethenecessityofaformalregulationtoachievestatedemandresponseandload
managementpolicygoals.
AnotherefforttosupportenergyefficiencyandconservationistheEnergyEfficiencyand
ConservationBlockGrantProgram,whichisfundedbytheARRA,createdbytheEISAof2007.
Aspartoftheincreasingnationalfocusontheimportanceofenergyefficiency,ARRAis
5
CaliforniaEnergyCommission,PIERAnnualReport,March2009,CEC5002009064CMF,availableat:
[http://www.energy.ca.gov/2009publications/CEC5002009064/CEC5002009064CMF.PDF].
6
CaliforniaEnergyCommission,PublicInformationEnergyResearchprogram,availableat:
[http://www.energy.ca.gov/research/index.html].
7
See[http://www.recovery.gov/Pages/home.aspx].
23
providing$351.5millioninfundingtoCalifornia.Ofthatamount,$302millionwillgodirectly
fromtheU.S.DepartmentofEnergy(DOE)tolargeincorporatedcitiesandcountiesin
California,and$49.6millionwillbemadeavailablethroughtheEnergyCommissionto265
smallincorporatedcitiesand44smallcountiesnoteligiblefordirectgrantsfromtheDOE.
TheEnergyCommissionadoptedtheEnergyEfficiencyandConservationBlockGrantBlock
GrantGuidelinesonOctober7,2009,whichdescribetheeligibilityandproceduralrequirements
forapplyingforprogramfunds,andreleasedthegrantsolicitationandapplicationpackageon
October8.TheEnergyCommissionheldaseriesofapplicationdevelopmentclinicsthroughout
Californiatoassisteligiblesmallcitiesandcountieswiththeirapplications.Applicationsare
dueonJanuary12,2010.Overall,thisprogramisacrucialstrategyforassistingsmallcitiesand
countiesinimplementingprojectsandprogramsthatreducetotalenergyuseandfossilfuel
emissionsandimproveenergyefficiencyinbuildingandotherappropriatesectors.
ARRAisalsoproviding$226millioninfundingtotheEnergyCommissionfortheStateEnergy
Program.Earlierintheyear,theEnergyCommissionheldaseriesofinformationalworkshops
throughoutthestatetoinformstakeholdersofthefundingguidelinesandapplicationprocess.
TheEnergyCommissionadoptedtheStateEnergyProgramGuidelinesonSeptember30,2009,
whichdescribeimplementationandadministrationofspecificprogramareasfundedbythe
StateEnergyProgram.AsofNovember2009,theEnergyCommissionhadallocated$25million
totheDepartmentofGeneralServicesEnergyEfficientStatePropertyRevolvingLoan
Program,$25milliontotheEnergyConservationAssistanceAct1%LowInterestLoans,and
$20milliontotheGreenJobsWorkforceTrainingProgram.Inaddition,theEnergyCommission
isintheprocessofmaking$95millionavailableforenergyprojectsfocusedonresidentialand
commercialbuildingretrofitsforenergyefficiencymeasuresandinstallingonsitephotovoltaic
systems.Underthisprogram,localjurisdictions,nonprofits,orprivateorganizationscancreate
partnershipsandapplyforprogramfundingunderacompetitivesolicitationprocessforthree
differentareas:theCaliforniaComprehensiveResidentialBuildingRetrofitProgram,the
MunicipalandCommercialBuildingTargetedMeasureRetrofitProgram,andtheMunicipal
FinancingProgramforprogramsrelatedtoAB811(Levine,Chapter159,Statutesof2008),
whichauthorizesallcitiesandcountiesinCaliforniatodesignateareaswherewillingproperty
ownerscanenterintocontractualassessmentstofinanceinstallationofdistributedrenewable
generation,aswellasenergyefficiencyimprovements.
Overall,thisprogramisanimportantstrategyformakingbuildingsandindustrialfacilities
moreenergyefficientandwillhelpfinancesuchprojects.
Renewable Energy
Secondinthestatesloadingorderistomeetnewelectricityneedswithrenewableenergy
resources.WiththepassageofAB1890(Brulte,Chapter854,Statutesof1996),theLegislature
establishedapublicgoodschargetosupportrenewableenergydevelopment.Sincethen,the
statehasimplementedotherpoliciestoexpandrenewableenergyproductiongoalsin
California.SomeofthesepolicieswereimplementedpriortopassageofAB32,buttheyallplay
acriticalroleinmeetingthestatesGHGemissionsreductiongoals:
24
SenateBill1078(Sher,Chapter516,Statutesof2002):EstablishedCaliforniasRenewables
PortfolioStandard(RPS)requiringretailsellersofelectricity(IOUs,communitychoice
aggregators,andelectricserviceproviders)toprocure20percentofretailsalesfrom
renewableenergyby2017.Thepubliclyownedutilitiesareencouraged,butnotrequired,to
meetthesamegoal.ThebilldelegatedspecificrolestotheEnergyCommissionandCPUC.
EnergyActionPlansI(2003)andII(2005):ThefirstEnergyActionPlanrecommended
acceleratingtheRPSdeadlineto20percentby2010,andthesecondrecommendedan
acceleratedgoalof33percentrenewablesby2020.
SenateBill107 (Simitian,Chapter464,Statutesof2006):RequiredtheIOUstomeetthe20
percentby2010goalasrecommendedintheEnergyActionPlanI.Thebillexpandedthe
RPSreportingrequirementsofthepubliclyownedutilitiestotheEnergyCommissionand
expandedRPSeligibilityofoutofstaterenewableresources.
ExecutiveOrderS0606(2006):Establishedabiomasstargetof20percentwithinthe
establishedRPSgoalsfor2010and2020.
ExecutiveOrderS1408(2008):EstablishedacceleratedRPStargets(33percentby2020)as
recommendedintheEnergyActionPlanII.Theorderalsocalledfortheformationofthe
RenewableEnergyActionTeam,comprisedoftheEnergyCommission,DepartmentofFish
andGame,BureauofLandManagement,andU.S.FishandWildlifeService.Throughthe
team,theEnergyCommissionandtheDepartmentofFishandGamearetoprepareaplan
forrenewabledevelopmentinsensitivedeserthabitat.
ExecutiveOrderS2109(2009):DirectstheARBtoworkwiththeCPUC,theCaliforniaISO,
andtheEnergyCommissiontoadoptregulationsincreasingCaliforniasRPSto33percent
by2020.TheARBmustadopttheseregulationsbyJuly31,2010.
Thestatehasimplementedseveralkeystrategiesandprogramstoincreaserenewableenergy
generationconsistentwiththesepolicies.TheseincludetheEnergyCommissionsRenewable
EnergyProgram,theRPSprogramjointlyadministeredbytheEnergyCommissionandthe
CPUC,theRenewableEnergyTransmissionInitiative,theDesertRenewableEnergy
ConservationPlan,feedintariffsforrenewablegenerators,theBioenergyActionPlan,and
multipleRD&Dactivities.
TheEnergyCommissionsRenewableEnergyProgramhas,since1998,encouragedinvestments
inrenewableenergybyprovidingrebatesandelectricityproductionincentivesfornewand
existingrenewablefacilitiesandemergingrenewabletechnologies.Theprogramhassupported
morethan5,000megawatts(MW)ofexistingandnewrenewablegeneratingcapacitywith
approximately$2billioninfundingoverthelifeoftheprogram.Fundingcollectionforthe
programissettoexpireJanuary1,2012.
UnderSB1078,theEnergyCommissionandtheCPUCjointlyimplementtheRPSforallbutthe
publiclyownedelectricutilities,whoimplementtheirownRPSprograms.TheEnergy
CommissionisresponsibleforcertifyingeligiblefacilitiesasRPSeligibleandhascertified600
facilitiessince2002.TheEnergyCommissionisalsoresponsiblefortrackingandverifyingRPS
procurementandwasinstrumentalinthedevelopmentoftheWesternRenewableEnergy
25
GenerationInformationSystemastheofficialaccountingsystemfortrackingrenewableenergy
credits(alsoknownasRECs)intheWesternInterconnectionregion.
8
TheCPUCs
responsibilitiesincludeapprovingIOUprocurementplansandRPSeligiblecontractsforIOUs,
ensuringcompliance,andsettingbenchmarkpricingforinvestorownedutilityRPScontracts.
TheCPUCalsooverseesRPSprogramsforelectricserviceprovidersandsmallandmulti
jurisdictionalutilities.AsofNovember2009,theCPUChadapproved129RPScontracts
totaling10,271MW,withanadditional30contractsfor4,605MWunderreview.About900MW
oftheseapprovedcontractsareonlineanddeliveringenergytothegrid.
9
TheEnergyCommissionandCPUCareresponsiblefortrackingandverifyingutilitiesprogress
towardRPSgoals.InJuly2009,theCPUCreportedthatthethreeIOUsweresupplying
approximately13percentoftheiraggregatedtotalsalesfromeligiblerenewableresourcesasof
2008.TheEnergyCommissionhasnotyetverifiedRPSprocurementfor2008.Publiclyowned
utilitiesareshowingprogressinrenewableenergyprocurement,withexpectationsforthe15
largestpubliclyownedutilitiesof12.4percentofRPSeligiblerenewableretailsalesby2011.In
addition,theLosAngelesDepartmentofWaterandPowerrecentlysetgoalstodivestentirely
fromcoalpoweredgenerationandincreaseitsrenewableenergyportfolioto40percentby
2020.
MeetingRPSgoalsdependsinlargepartonbuildingnewtransmissionlinestoaccessremote
renewableresources.Tohelpaddresslanduseandenvironmentalconcerns,thestatelaunched
theRenewableEnergyTransmissionInitiative(RETI)in2007,toidentifyareaswhererenewable
energycouldbedevelopedeconomicallyandwithminimalenvironmentalimpactsandthe
transmissionprojectsneededtoaccessthoseareas.RETIisastakeholdercollaborative
supervisedbyacoordinatingcommitteemadeupoftheEnergyCommission,theCPUC,the
CaliforniaISO,andpubliclyownedutilities.RETIandothertransmissionrelatedissuesare
discussedinmoredetailinChapters2and3.
AnotherstrategytoaddressenvironmentalbarriersisGovernorSchwarzeneggersExecutive
OrderS1408,whichdirectsstateagenciestoworkwithfederalagenciestoprepareaDesert
RenewableEnergyConservationPlan(DRECP)fortheMojaveandColoradoDesertsof
California.ThesciencedrivenDRECPisintendedtobecomethestateroadmapforrenewable
energyprojectdevelopmentthatwilladvancestateandfederalconservationgoalswhile
facilitatingthetimelypermittingofrenewableenergyprojectsinthesedesertregions.
TheDRECPeffortswillbeinformedbymultipleenvironmentalandlanduseplanningactivities
includingtheBureauofLandManagementsSolarProgrammaticEnvironmentalImpact
Statement(SolarPEIS)andRETIactivities,suchasthecompetitiverenewableenergyzones,and
associatedtransmissionlinesegmentstoaccessthezonesintheColoradoandMojaveDesert
8
Formoreinformation,see[http://www.wregis.org/].
9
CaliforniaPublicUtilitiesCommission,RenewablesPortfolioStandardQuarterlyReport,November2009,
availableat:[http://www.cpuc.ca.gov/NR/rdonlyres/52BFA25E0D2E48C0950C
9C82BFEEF54C/0/FourthQuarter2009RPSLegislativeReportFINAL.pdf].
26
regions.TheDRECPwillcoverarangeofactivitiesrelatedtothedevelopmentofrenewable
energyprojectsandassociatedtransmissionneeds,aswellashabitatconservationand
mitigationstrategiesintheplansstudyarea.
AnadditionalstrategytohelpthestatemeetitsRPStargetsistheuseoffeedintariffsfixed,
longtermpricesforenergy.CountriessuchasSpainandGermanyhaveimplemented
successfulfeedintariffprograms,butthisconcepthasbeenslowtogainmomentumin
California.ThestatemadesomeprogresswhentheCPUCadoptedafeedintariff(Decision07
07027)inFebruary2008,forrenewableenergysystemsatpubliclyownedwaterand
wastewatertreatmentfacilities.Inthesamedecision,theCPUCexpandedthefeedintariff
approachtoanyrenewablesystemwithacapacityupto1.5MWintheSouthernCalifornia
Edison(SCE)andPacificGasandElectric(PG&E)serviceareas.
GovernorSchwarzeneggersExecutiveOrderS0606ispartofastrategytodevelopan
integratedandcomprehensivestatepolicyontheuseofbiomassforelectricitygeneration.In
response,theBioenergyInteragencyWorkingGroup
10
developedtheBioenergyActionPlanfor
Californiain2006,whichidentified63actionitemsforvariousstateagenciestoadvancetheuse
ofbioenergyinCalifornia.
11
TheExecutiveOrderrequiredtheEnergyCommissiontoprovideaprogressreportinthe
biennialIEPRonthe63actionitems.Todate,theEnergyCommissionhasfoundthatmostof
theitemshavebeenimplementedorareongoing.Forthosethathavenotbeenputintoaction,
manyarenolongerrelevant,havebeenovertakenbyotherevents,orhavenotbeenfunded.In
2008,Californiametthegoalofgenerating20percentofitsrenewableelectricityfrombiomass
sources.However,biomasscapacityinthestatehasdecreasedsince2002,from6,192MWto
5,724MW.
12
Thisdecreaseresultedfromtheexpirationofstandardoffercontractsfromthe
1990s,whileveryfewcontractshavebeensignedfornewelectricitygenerationfueledby
biomassandbiogas.Theexistingfleetofbiomassgeneratorsdependsonfinancialsupportfrom
theEnergyCommissionsRenewableEnergyProgram,fundingforwhichexpiresin2011.These
findingsareprovidedintheEnergyCommissions2009DraftBioenergyProgresstoPlanreport,
withanticipatedpublicationinJanuary2010.
Overall,RD&Dcontinuestobeanotherimportantstrategyforexpandingrenewableenergy
developmentinCalifornia.From19762007,theEnergyCommissionsPIERprogramhas
10
TheWorkingGroupisledbyCommissionerJamesBoydoftheCaliforniaEnergyCommissionand
includestheCaliforniaAirResourcesBoard,CaliforniaEnvironmentalProtectionAgency,California
PublicUtilitiesCommission,CaliforniaResourcesAgency,DepartmentofFoodandAgriculture,
DepartmentofForestryandFireProtection,DepartmentofGeneralServices,IntegratedWaste
ManagementBoard,andtheStateWaterResourcesControlBoard.
11
BioenergyInteragencyWorkingGroup,BioenergyActionPlanforCalifornia,July2006,CEC6002006
010,availableat:[http://www.energy.ca.gov/bioenergy_action_plan/index.html].
12
PresentationbyDarylMetzattheAugust10,2009,IEPRStaffWorkshoponRD&DofAdvanced
GenerationTechnologies,CaliforniaGenerationPortfolio,CaliforniaEnergyCommission.
27
dedicated$131milliontorenewableenergyresearch.Inaddition,thePIERTransmission
ResearchProgramisfocusedonspecificallyaddressingtheissuesassociatedwithrenewable
integrationintotheCaliforniatransmissionsystem,whileresearchinotherareassuchas
demandresponse,energystorage,andsmartgridtechnologieswillhelpwithrenewable
integration.
Finally,oneotherstrategyformeetingtheRPSistheCaliforniaISOsIntegrationofRenewable
ResourcesProgram,whichinvolvesworkingwiththeEnergyCommissionandotheragencies
toidentifyissuesandsolutionsfortheintegrationoflargeamountsofrenewableresourcesinto
theCaliforniaISOControlArea.
13
TheCaliforniaISOcompletedstudieson20percentRPSby
2010inJuly2009,andisworkingonthe33percentRPSby2020scenarios,whichitexpectsto
completebyDecember2009.
Distributed Generation
IncreaseduseofdistributedgenerationisanotherstrategyformeetingthestatesGHG
reductiongoals.Distributedenergysystemsarecomplementarytothetraditionalelectricpower
systemandincludesmallscalepowergenerationtechnologies(forexample,CHP,photovoltaic,
smallwindturbines)locatedclosetowheretheenergyisbeingused.Distributedgenerationhas
manyadvantages,includingincreasedgridreliability,energypricestability,andreduced
emissions,especiallyinindustrialapplications.Californiaisleadingthenationinimplementing
policiestoencouragedistributedgenerationdevelopment.Thefollowingpolicieswereenacted
toencouragetheuseofdistributedgenerationsystemsasawayofmeetingthestatesclimate
changegoalswhileincreasingreliability:
AssemblyBill1969(Yee,Chapter731,Statutesof2006):Thisbillauthorizedfeedintariffs
forsmallrenewablegeneratorsoflessthan1MWatpublicwaterandwastewatertreatment
facilities.InJuly2007,theCPUC(D.0707027)implementedAB1969,expandedthefeedin
tariffsto1.5MW,andincludednonwatercustomersinthePG&EandSCEterritories.The
powersoldtotheutilitiesunderfeedintariffscanbeappliedtowardthestatesRPStargets.
SenateBill380(Kehoe,Chapter544,Statutesof2008)codifiedCPUCsexpandedfeedin
tarifftoincludeallRPSeligiblegenerators1.5MWandbelow.Theprogramcapwasalso
expandedfrom250MWto500MW.AsofAugust2009,14.5MWofcontractedcapacityhad
resultedfromthetariff.
AssemblyBill1613(Blakeslee,Chapter713,Statutesof2007):AlsoknownastheWaste
HeatandCarbonEmissionsReductionAct,thisbillwasdesignedtoencouragethe
developmentofnewCHPsystemsinCaliforniawithageneratingcapacityofupto20MW,
resultinginmoreefficientuseofnaturalgasandreducedGHGemissions.Thebillrequires
theCPUCandtheEnergyCommissiontoestablishpoliciesandproceduresforthepurchase
ofelectricityfromeligibleCHPsystems.
13
CaliforniaIndependentSystemOperator,see[http://www.caiso.com/1c51/1c51c7946a480.html].
28
ARBsClimateChangeScopingPlan:TheARBsetatargetof4,000MWofCHPthatwould
displace30,000gigawatthoursofdemandfromotherpowergenerationresourceswiththe
overallgoalofreducingcarbondioxide(CO2)by6.7millionmetrictons.
SenateBill1(Murray,Chapter132,Statutesof2006):ThisbillenactedtheGovernors
MillionSolarRoofsprogramwiththeoverallgoalofinstalling3,000MWofsolar
photovoltaic(PV)systems.
SenateBill32(McLeod,Chapter328,Statutesof2009):Thisbillrequireseachlocalpublicly
ownedelectricutilitywith75,000ormoreretailcustomerstoofferafeedintariffforeligible
renewableenergyfacilitiesupto3MWinsizeuntiltheutilitymeetsitsproportionateshare
ofatotalstatewidecumulativecapof750MW.Thefeedintariffpriceistoreflectthevalue
ofeverykilowatthourofelectricitygeneratedbasedonthetimeofdelivery.Thepricemay
beadjustedbasedonotherattributesofrenewablegeneration.SB32alsorequiresIOUsto
expandtheircurrentfeedintariffsforeligiblerenewableenergyfacilitiesfrom1.5MWto3
MWuntiltheutilitymeetsitsproportionateshareofatotalstatewidecumulativecapof750
MW.Priortothisbill,thestatewidecapwas500MW.Thefeedintariffshallprovide
performanceguaranteesforanygeneratorgreaterthat1MW.
IncreasingCHPisakeystrategyfordisplacingconventionalpowersources.Tohelptrackthe
statesCHPgoals,theARBwillreportontheGHGemissionsreductionsresultingfromthe
increaseofelectricitygeneratedfromCHP.Also,inJanuary2010,theEnergyCommissionis
scheduledtoadoptguidelinestoestablishthetechnicalcriteriaforCHPsystemeligibilityfor
programsdevelopedbyIOUsandpubliclyownedutilities.
ToimplementSB1,thestateofficiallylaunchedGoSolarCaliforniain2007,tobringcustomer
awarenesstotheCPUCsCaliforniaSolarInitiativeandtheEnergyCommissionsNewSolar
HomesPartnership,andsolarincentiveprogramsofferedbypubliclyownedutilitiesbeginning
2008.TheCaliforniaSolarInitiativeoffersrebatestoexistinghomesandnonresidentialenergy
customersinstallingsolarsystemsinIOUserviceterritories,with226MWofnewsolarsystems
installedasofJune2009.
TheNewSolarHomesPartnershipoffersincentivesforhomebuilderstoconstructsolarhomes
inIOUserviceterritories.Thegoalsoftheprogramaretoachieve400MWofinstalledsolar
capacitybytheendof2016,createaselfsustainingsolarmarketwithouttheneedfor
governmentincentives,andfostersufficientmarketpenetrationinthenewresidentialmarket
sothat50percentormoreofnewhousingbuiltby2016andthereafterwillincludesolar
systems.However,withtherecentextremedownturninnewhomeconstruction,program
activityhasbeenslowandislikelytoremainsountiltheeconomyrecovers.
Solarincentiveprogramsofferedbythepubliclyownedutilitiesmustabidebytheminimum
guidelinesadoptedbytheEnergyCommissioninDecember2008.Thesesolarincentive
programshavetheirownprocessesandrequirementsandareexpectedtoachieve700MWof
installedsolarcapacitybytheendof2016.
AnothercustomersidestrategyistheSelfGenerationIncentiveProgram,whichis
implementedbytheCPUCthroughtheIOUsandprovidesrebatesforcustomerswhoinstall
29
windturbinesandfuelcells.Theprogramoriginallyincludedmicroturbines,smallgasturbines,
windturbines,solarphotovoltaics,fuelcells,andinternalcombustionengines,butasofJanuary
1,2008,eligibilitywaslimitedtofuelcellsandwindenergytechnologies.However,SB412
(Kehoe,Chapter182,Statutesof2009),signedinOctober2009,expandsprogrameligibilityto
includedistributedenergyresourcesthatthe[CPUC],inconsultationwiththeStateAir
ResourcesBoard,determineswillachievereductionsofgreenhousegasemissions.Asof
December2008,theIOUshavepaidmorethan$600millioninrebatesformorethan1,200
projectstotalingmorethan337MWofgeneratingcapacity.TheEnergyCommission
administersasimilarprogram,theEmergingRenewablesProgram,whichcontinuestobe
limitedtosmallwindturbinesandfuelcellsthatuserenewablefuels.
Netmeteringisanotherstrategytohelpincreasecustomersidedistributedgeneration
technologies,particularlyPV.Customerswhoinstallanonsiterenewableenergysystemcan
applyfornetmetering,whichisaspecialbillingarrangementwiththeutility.Thecustomers
electricmetertrackselectricitygeneratedbytherenewablesystemversuselectricityconsumed,
withthecustomerpayingonlyforthenetamounttakenfromthegridovera12monthperiod.
AsofOctober2009,theCPUCreportsthatmorethan90percentofthe509MWofgrid
connectedsolarinIOUterritoriesarenetmetered.
14
Inaddition,inOctober2009,PG&E
committedtoincreasetheamountofnetmeteringforrooftopsolarinitsterritoryfrom2.5
percentto3.5percenttoensurethatinvestmentinsolarcontinuestogrow.
15
Natural Gas and Nuclear Power Plants

Despitelongtermeffortstopromotepreferredresourceslikeenergyefficiency,demand
response,distributedgeneration,andrenewableenergy,Californiastillreliesonnaturalgas
andnuclearpowerplantsforabout60percentofitselectricity.Sincederegulationin1998,the
EnergyCommissionhasreviewedandlicensed66electricgenerationprojects,totaling25,744
MW.Fortysevenoftheselicensedfacilities,totalingmorethan15,000MWofnaturalgasfired
capacity,havebeenbuiltandareonline.
Thefollowingarekeypoliciesaffectingnaturalgasandnuclearpowerplants:
StateWaterResourcesControlBoardsOnceThroughCoolingResolution(2006):The
StateWaterResourcesControlBoard(SWRCB)passedaresolutiontoreducemarine
impactsfromoncethroughcooling(OTC)systemsusedby21coastalpowerplantsin
California,includingnaturalgasandnuclearplants.Thisbeganacoordinatedprocess
betweenseveralgovernmentagenciestophaseouttheuseofOTC.
AssemblyBill1632(Blakeslee,Chapter722,Statutesof2006):Thislegislationdirectedthe
EnergyCommissiontoassessthevulnerabilityofCaliforniaslargestbaseloadplants,
14
CaliforniaPublicUtilitiesCommission,CaliforniaSolarInitiativeStaffProgressReport,October2009,
Table7,[http://www.cpuc.ca.gov/NR/rdonlyres/4B6146020E764533A03A
BC01B6A89831/0/ProgrReportOct09Final_3_withcover.pdf].
15
OfficeoftheGovernor,October26,2009,pressrelease,GovernorSchwarzeneggerSecures
CommitmenttoContinueNetMeteringforSolar,[http://gov.ca.gov/pressrelease/13731/].
30
PG&EsDiabloCanyonNuclearPowerPlant(DiabloCanyon)andSCEsSanOnofre
NuclearGeneratingStation(SONGS),toanextendedshutdownduetoamajorseismic
eventoraging.AB1632alsocalledforanexaminationofpotentialimpactsfromthe
accumulationofnuclearwasteatbothlocationsandanexplorationofotherkeyissuessuch
asplantrelicensingandworkersafety.
SenateBill1368(Perata,Chapter598,Statutesof2006): Thisbilllimitedlongterm
investmentsinbaseloadgenerationbythestatesutilitiestopowerplantsthatmeetan
emissionsperformancestandardjointlyestablishedbytheEnergyCommissionandthe
CPUC.
2005and2007IEPRPolicyonAgingPowerPlants:Inbothreports,theEnergyCommission
recommendedthattheCPUCrequireIOUstoprocureenoughcapacityfromlongterm
contractstoallowfortheorderlyretirementorrepoweringofagingplantsby2012.Inthe
2007IEPR,theEnergyCommissionrecommendedthatCaliforniasutilitiesadoptallcost
effectiveenergyefficiencymeasuresfornaturalgas,includingreplacementofagingpower
plantswithnewefficientpowerplants.Inaddition,the2007IEPRrecommendedtheEnergy
Commission,theCPUC,theCaliforniaISO,andotherinterestedagenciesworktogetherto
completestudiesontheimpactsofretiring,repowering,andreplacingagingpowerplants,
particularlyinSouthernCalifornia.
ARBsClimateChangeScopingPlan:TheClimateChangeScopingPlancallsforindustrial
facilities,suchaspowerplants,toimplementcosteffectiveGHGemissionsreduction
strategies.Specifically,theClimateChangeScopingPlanrequiresareductioninGHG
emissionsfromfugitiveemissions(forexample,fromleaksinplantequipmentlikevalves,
seals,andsoon)fromoilandgasextractionandgastransmission.
AssemblyBill1318(V.ManuelPerez,Chapter285,Statutesof2009):Underexistinglaw,
airpollutioncontroldistrictsorairqualitymanagementdistrictgoverningboardsare
requiredtoestablishemissionreductioncreditsystemsthataretobeusedtooffsetcertain
futureincreasesintheemissionofaircontaminants.Thesemustbebankedpriortouseto
offsetfutureincreasesinemissions.Thisbillexemptscertainactionsonemissioncredits
undertakenbytheSouthCoastAirQualityManagementDistrict(SCAQMD)tobeexempt
fromtheCaliforniaEnvironmentalQualityAct(CEQA).
SenateBill827(Wright,Chapter206,Statutesof2009):ThisbillauthorizesSCAQMDto
issuepermitsunderspecificcircumstancesnotwithstandingthecourtdecisiononCEQA.
ThefederalgovernmentsCleanWaterAct,enactedin1972,istheprimarylawgoverningwater
pollutionintheUnitedStates.Theactimplementedapermitsystemforregulatingpoint
sourcesofpollution(forexample,industrialfacilities)tobeoverseenbytheU.S.Environmental
ProtectionAgency(U.S.EPA)orstateswithapprovedpermittingprograms,suchasCalifornia.
Section316(b)oftheCleanWaterActaddressestheadverseenvironmentalimpactscausedby
coolingwaterintakestructuresfrompowerplantsandotherindustrialsources.Thissection
requiresthatthelocation,design,construction,andcapacityofcoolingwaterintakestructures
reflectthebesttechnologyavailableforminimizingadverseenvironmentalimpacts.
31
InApril2006,theSWRCBissuedaresolutiontoreduceOTCimpactsfromexistingpower
plantstocomplywiththeCleanWaterAct.TheSWRCBissuedapreliminaryproposaltophase
outOTCandprovideditforreviewtotheEnergyCommission,CaliforniaISO,andtheCPUC.
TheSWRCBreceivedpertinentfeedbackfromtheenergyagenciesabouttheabilitytomaintain
reliabilitywhilecomplyingwithOTCpolicy.TheSWRCBissuedasecondproposedretirement
schedule,buttheenergyagenciesstillhadconcernsthattheproposedschedulewouldimpact
electricityreliability.InJune2008,theSWRCBformedtheInteragencyWorkingGrouptofoster
communicationamongsevengovernmentagencies.ThethreeenergyagenciestheEnergy
Commission,CPUC,andtheCaliforniaISOwereencouragedbytheSWRCBtopropose
alternativestoitscomplianceschedule.
TheenergyagenciessubmittedafinalstrategyinMay2009,thatcallsforreplacingexisting
OTCfacilitieswithsomecombinationofrepoweredtechnologiesonsite,newgenerationlocated
inotherareas,and/orupgradestothetransmissionsystem.TheSWRCBacceptedtheproposal
andincludedreferencestoitinitsdraftOTCpolicyonJune30,2009.
16
TheOTCconcerns
relatingtogridreliability,withemphasisonSouthernCalifornia,arediscussedinmoredetailin
Chapter3.
InadditiontomarineimpactsfromOTC,theprimaryconcernsregardingthestatesnuclear
plantsrelatetothepotentialforextendedoutagesattheplantsfromseismiceventsorplant
agingandtheabsenceofarepositoryfordisposalofthehighlevelradioactivewasteproduced
attheplants.Inaddition,theplantsposeasmallriskofpotentiallysevereimpactsfromactsof
terrorismoraccidents.
TheEnergyCommissionsreport,AnAssessmentofCaliforniasNuclearPlants:AB1632Report,
17
adoptedaspartofthe2008IEPRUpdate,recommendedthatPG&EandSCEupdatestudieson
theseismichazardattheirnuclearplants,investigateplantseismicsafetycompliancewith
currentcodesandstandards,describeplantrepairplansandtimeframesintheeventofan
earthquake,provideevidenceofstrongsafetycultures(especiallyatSONGS),andreport
findingsfromthesestudiesaspartoftheirlicenserenewalfeasibilitystudiesfortheCPUCand
infutureIEPRs.
Thestrategiesjustdescribedaremeanttominimizereliability,economic,andenvironmental
risksassociatedwithCaliforniasoperatingpowerplants.SB1368,ontheotherhand,appliesto
allnewpowergeneration.In2007,theEnergyCommissionadoptedregulationsforpublicly
16
Jaske,MichaelR.(CaliforniaEnergyCommission),Peters,DennisC.(CaliforniaIndependentSystem
Operator),andStrauss,RobertL.(CaliforniaPublicUtilitiesCommission),ImplementationofOnceThrough
CoolingMitigationThroughEnergyInfrastructurePlanningandProcurement,CaliforniaEnergyCommission,
July2009,CEC2002009013SD,availableat:[http://www.energy.ca.gov/2009publications/CEC200
2009013/CEC2002009013SD.PDF].
17
ThisreportwasbaseduponaconsultantreportbyMRWandAssociates,AB1632Assessmentof
CaliforniasOperatingNuclearPlants,FinalConsultantReport,October2008,CEC1002008005F,
availableat:[http://www.energy.ca.gov/2008publications/CEC1002008009/CEC1002008009
CMF.PDF].
32
ownedutilitiestomeettheEmissionsPerformanceStandardasrequiredbySB1368.The
regulationsrequireabaseloadstandardforgenerationof1,100poundsofCO2permegawatt
hourandestablishapublicreviewprocesstoensurecompliancewiththeEmissions
PerformanceStandard.
Transmission and Distribution
Thestatestransmissionanddistributionsystemisanothercriticalcomponentoftheelectricity
sectorforservingCaliforniasgrowingpopulationandintegratingrenewableenergy.Thestate
hasimplementedseveralkeylegislativemandatesaddressingtransmissionplanningand
permitting,andrecentpassageoflegislationrequiringasmartgriddeploymentplanreflects
thegrowingimportanceofthesetechnologiesinimprovingefficiency,reliability,andcost
effectivenessofthestateselectricalsystem.
SenateBill1565(Bowen,Chapter692,Statutesof2004):In2004,theLegislatureaddressed
theneedforanofficialstateroleintransmissionplanningwiththepassageofthisbill.
SB1565directedtheEnergyCommissiontodevelopaStrategicTransmissionInvestmentPlan
whichidentifiesandrecommendsactionstostimulatetransmissioninvestmentstoensure
reliability,relievecongestion,andmeetfuturegrowthinloadandgeneration,including
renewableresources,energyefficiency,andotherdemandreductionmeasures.TheStrategic
TransmissionInvestmentPlanisacompaniondocumenttotheIntegratedEnergyPolicyReport
andisadoptedbytheEnergyCommissionalongwiththatreport.
SenateBill1059(Escutia,Chapter638,Statutesof2006):ThisbillrequiredtheEnergy
Commissiontodesignatetransmissioncorridorzonesonstateandprivatelandsavailable
forfuturehighvoltageelectricitytransmissionprojects,consistentwiththestateselectricity
needsidentifiedinIntegratedEnergyPolicyReportsandStrategicTransmissionInvestment
Plans.
SenateBill17(Padilla,Chapter327,Statutesof2009):ThisbillrequirestheCPUC(in
consultationwiththeEnergyCommission,theCaliforniaISO,andotherkeystakeholders)
todeterminetherequirementsforasmartgriddeploymentplanconsistentwiththepolicies
setforthinthebillandfederallawbyJuly1,2010.Thebillrequiresthesmartgridto
improveoverallefficiency,reliability,andcosteffectivenessofelectricalsystemoperations,
planning,andmaintenance.Eachelectricalcorporationmustdevelopandsubmitasmart
griddeploymentplantotheCPUCforapprovalbyJuly1,2011.
TheEnergyCommissionhaspreparedandpublishedtwostrategicplansinresponsetoSB1565.
Thefirstwasreleasedin2005andtheotherin2007.Bothreportsprovidedanoverviewofthe
significanttransmissionplanningandsystemissueshinderingdevelopmentofamorerobust
highvoltagegridandidentifiedactionsnecessarytoimproveCaliforniastransmissionsystem.
The2009StrategicTransmissionInvestmentPlan,preparedinsupportofthe2009IEPR,describes
theimmediateactionsthatCaliforniamusttaketoplan,permit,construct,operate,and
maintainacosteffective,reliableelectrictransmissionsystemthatiscapableofrespondingto
importantpolicychallengessuchasachievingsignificantGHGreductionandRPSgoals.The
2009IEPRprovidesthereportstoppriorityrecommendationsinChapter4.
33
In2004,thePIERprogramestablishedtheTransmissionResearchProgramtospecifically
addresstheresearchanddevelopmentneedsofCaliforniastransmissionsystem.Theprogram
considersnewandemergingtechnologiesthatcanincreasethecapabilitiesofexisting
transmissionlinesandprovidebetterunderstandingofsystemmanagementissuesassociated
withthepenetrationofhighamountsofrenewablegenerationandintegratingnewhighspeed
datacollectiontechnologieslikesynchrophasors.
18
Researchcontinuesinareasspecifically
addressingtheissuesassociatedwithrenewableintegrationintotheCaliforniatransmission
system.
Natural Gas Sector
Californiasdependenceonnaturalgasasafuelforelectricitygenerationandforheatingand
processindustriesrequiresthestatetohavereliableandcosteffectivesourcesofsupplyand
sufficientinfrastructuretodeliverthatsupply.Duringthe2009IEPRproceedings,theIEPR
Committeefocusedonnaturalgasissuesrelatingtopricevolatility,supply,andinfrastructure
needs.AsidefromGHGemissionreductionpolicies,otherguidingpoliciesregardingnatural
gasrelatetoforecasting,supplystability,andreliability.Thefollowingpoliciesandregulations
providedirectiononnaturalgasprogramsanddevelopment:
CaliforniaPublicResourcesCode:ThecodedirectstheEnergyCommissiontoconduct
assessmentsandforecastsofallaspectsofenergyindustrysupply,production,
transportation,deliveryanddistribution,demand,andpricesatleasteverytwoyearsandto
identifyimpendingorpotentialproblemsoruncertaintiesintheelectricityandnaturalgas
markets,aswellaspotentialoptionsandsolutionsandrecommendations.
CaliforniaClimateChangePolicies:Thepoliciesdirectingthestatetomeetclimatechange
goals,suchastheRPSandtheARBsClimateChangeScopingPlan,intendtoreducethe
statesdependenceonfossilfuelssuchasnaturalgasandreplacethemwithcleanerfuel
resources.
Californiareliesonnaturalgasformorethan45percentofitstotalsystempowerneeds.
19
EightysevenpercentofnaturalgassuppliesareimportedviapipelinesfromtheSouthwest,the
RockyMountains,andCanada.ThisrelianceonoutofstatenaturalgasleavesCalifornia
vulnerabletosupplydisruptionsandpricevolatility.Since2000,theUnitedStateshas
experiencedfourmajorpricespikesthataffectedresidential,commercial,andindustrial
consumers,aswellaspowergeneratorsandgasproducers.Duringthe20002001energycrisis,
18
Synchrophasorscancollectandreportcriticalelectricalmeasurementsapproximately30timesper
second,providinginformationaboutgridconditionstosystemoperatorssotheycanmaketimesensitive
decisions.Asmorerenewableresourcesareintegratedintothegrid,operatorsneedthiskindof
technologytorespondtounpredictedchangesinoutputthatarecharacteristicofsomerenewable
technologies.
19
CaliforniaEnergyCommission,EnergyAlmanac,availableat:
[http://energyalmanac.ca.gov/electricity/total_system_power.html].
34
naturalgascostCalifornia$19.4billion,morethandoublethepricepaidforsimilaramountsin
theyearsjustbeforethecrisis.
Thisissuehasbeenaddressedbynewexpansionsofinterstatepipelines,improvementsin
utilitiesreceivingability,andtheenhancementbyutilitiesandindependentstorageownersof
theirstorageoperationstomeetfuturehighdemandconditions.Theseeffortshavegiven
Californiasutilitiestheflexibilitytochoosesupplysourcesintheirdaytodayoperationsand
haveforcednaturalgasproductionareastocompeteforashareofthestatesnaturalgas
market.However,Californiaisstillpartofaninternationalnaturalgasmarketthatincludes
Canada,theUnitedStates,andMexico.Adisruptioninonearearipplesthroughtherestofthe
market.
Asdomesticproductionofconventionalnaturalgashasdeclined,shaledepositednaturalgas
withintheUnitedStatesandCanadacouldprovideCaliforniawithamorestablesupplyof
naturalgasinthefuture.Inthelast20years,technologicalinnovationshaveeliminatedthe
barriersthatpreventedtheproductionofthisresource.Itispossiblethatthisnewsupplycould
floweastwardandallowmorenaturalgasfromtheRockiesandtheSouthwesttobesentto
California.However,furtheranalysisisneededonenvironmentalconcernsrelatedto
groundwaterimpactsandthecarbonfootprintfromdrilling,aswellasmarketuncertainties
basedoninvestmentsandtheinfancyofshaledevelopment.
Importingliquefiednaturalgas(LNG)isanotherstrategythatcouldoffsetdecliningdomestic
productionofnaturalgas.Inthe2007IEPR,staffprojectedthatasmuchas20percentofNorth
AmericannaturalgasrequirementsmightbemetwithLNGby2017.However,developmentof
newterminalsappearstobeslowing,andimportsofLNGtotheUnitedStateshavebeenlower
thanprojected.ThereisanewsensethattheUnitedStatesmaynotneedtorelyonLNGto
makeuppreviouslyprojectedsupplydeficits.
The2007IEPRrecommendedthatCaliforniashouldpromotetheuseofpipelinequalitybiogas
fromdairiesandlandfillsasastrategytodiversifysuppliesofnaturalgas.Atthe2009IEPR
ScopingWorkshopinJune2008,theNaturalResourcesDefenseCouncilrecommendedthatthe
2009IEPRpursuepoliciesthatencouragethereplacementofnaturalgaswithrenewable
resources.TheEnergyCommissionexaminedthisissueandfoundthattherearestillsignificant
barriershinderingtheinstatedevelopmentofthisresource,includingAB4037(Hayden,
Chapter932,Statutesof1988),whichdiscouragesinjectionofbiogasintonaturalgaspipelines
bypenalizinglandfillgasandpipelineoperatorsifvinylchlorideisfoundinthepipeline.This
hasresultedinpipelineoperatorspurchasingfromoutofstatesourcesthatarenotrestricted
underthelaw.
Transportation Sector
Californiahastakenaclearpolicystanceofdecreasingrelianceonpetroleumfuelsby
increasingthemixofalternativeandrenewablefuelsandimprovingfuelefficiency.Petroleum
willcontinuetobetheprimaryfuelsourceforCaliforniasvehicles,atleastinthenearterm,so
itmustbefactoredintoallpolicydecisionsregardinginfrastructureandtransportationsupply
35
anddemand.AsCaliforniareliesincreasinglyoncrudeoilimports,thestateislookingatways
toenhanceandexpandtheexistingpetroleuminfrastructure,particularlyatinstatemarine
ports.Californiahasadoptedthefollowingpoliciesaffectingthetransportationsector.
AssemblyBill1493(Pavley,Chapter200,Statutesof2002):ThebillrequiredtheARBto
developandadopt,nolaterthanJanuary1,2005,regulationstoachievethemaximum
feasibleandcosteffectivereductionofGHGemissionsfrommotorvehicles.
2003IntegratedEnergyPolicyReport:TheEnergyCommissionshowedthatitisfeasibleto
significantlyreducethestatesdependenceonpetroleumbyincreasingvehicleefficiency
andtheuseofalternativefuelsandrecommendedthatthestateincreasetheuseof
nonpetroleumfuelsto20percentofonroadfuelconsumptionby2020,and30percentby
2030,basedonidentifiedstrategiesthatareachievableandcostbeneficial.
20
2005IntegratedEnergyPolicyReport:TheEnergyCommissionexaminedpetroleum
reductionoptionsandrecommendedthatthestatedevelopflexibleoverarchingstrategies
thatsimultaneouslyreducepetroleumfueluse,increasefueldiversityandsecurity,and
reduceairpollutionandGHGemissionsandthatitimplementapublicgoodschargeto
establishasecure,longtermsourceoffundingforabroadtransportationprogram.
21
ExecutiveOrderS305(2005):TheexecutiveorderestablishedstatewideGHGemission
reductiontargetsthatprecededtheenactmentofAB32:by2010,reduceemissionsto2000
levels;by2020,reduceemissionsto1990levels;andby2050,reduceemissionsto80percent
below1990levels.
AssemblyBill1007(Pavley,Chapter371,Statutesof2005):ThisbillrequiredtheEnergy
Commissiontoprepare,jointlywiththeARB,aplantoincreasetheproductionanduseof
alternativeandrenewablefuelsinCaliforniabasedonafullfuelcycleassessmentofthe
environmentalandhealthimpactsofeachfueloption.TheStateAlternativeFuelsPlanwas
adoptedbythetwoagenciesinDecember2007.Theplanhighlightstheneedforstate
governmentincentiveinvestmentsofmorethan$100millionperyearfor15yearsand
recommendsthatthestateadoptalternativeandrenewablefuelusegoalsof9percentby
2012,11percentby2017,and26percentby2022.
BioenergyActionPlan(2006):TheEnergyCommissionadoptedthisplanwiththeintentto
maximizethecontributionsofbioenergytowardachievingthestatespetroleumreduction,
climatechange,renewableenergy,andenvironmentalgoals.Theplanrecommendsa
productiontargetofaminimumof20percentofbiofuelsproducedinCaliforniaby2010,40
percentby2020,and75percentby2050.
22
20
CaliforniaEnergyCommission,2003IntegratedEnergyPolicyReport,availableat:
[http://www.energy.ca.gov/reports/10003019F.PDF].
21
CaliforniaEnergyCommission,2005IntegratedEnergyPolicyReport,CEC1002005007CMF,available
at:[http://www.energy.ca.gov/2005publications/CEC1002005007/CEC1002005007CMF.PDF].
22
CaliforniaEnergyCommission,BioenergyActionPlan,July2006,CEC6002006010,availableat:
[http://www.energy.ca.gov/bioenergy_action_plan/index.html].
36
ExecutiveOrderS0606(2006):Thisordersettargetsfortheproductionofbiofuelsbased
ontherecommendationsoftheBioenergyActionPlanandchargedtheEnergyCommission,
alongwithothercommissionsanddepartments,toidentifyandsecurefundingforRD&D
projectstoadvancetheuseofbiofuelsfortransportation.
ExecutiveOrderS0107(2007):GovernorSchwarzeneggersorderestablishedaLow
CarbonFuelStandard(LCFS)fortransportationfuelssoldinCalifornia.By2020,the
standardwillreducethecarbonintensityofCaliforniaspassengervehiclefuelsbyatleast
10percent.TheExecutiveOrderdirectsthesecretaryfortheCal/EPAtocoordinatethe
actionsoftheEnergyCommission,theARB,theUniversityofCalifornia,andotheragencies
toassessthelifecyclecarbonintensityoftransportationfuels.ARBcompleteditsreview
oftheLCFSprotocolsandadoptedthemasanearlyactioninOctober2007.TheARB,
throughitsrulemaking,adoptedthenewstandardinApril2009.
AssemblyBill118(Nez,Chapter750,Statutesof2007):ThisbillcreatedtheAlternative
andRenewableFuelandVehicleTechnologyProgram.Thestatute,subsequentlyamended
byAB109(Nez,Chapter313,Statutesof2008),authorizestheEnergyCommissionto
developanddeployalternativeandrenewablefuelsandadvancedtransportation
technologiestohelpattainthestatesclimatechangepolicies.TheEnergyCommissionhas
anannualprogrambudgetofapproximately$100millionandisrequiredtoadoptand
updateannuallyanInvestmentPlanthatdeterminesthefundingpriorities.
TheEnergyIndependenceandSecurityActof2007:Thisfederallegislationrequiresever
increasinglevelsofrenewablefuelsaRenewableFuelStandard(RFS)toreplace
petroleum.Primarilyfocusedonethanol,thelawestablishesthenationalgoalofusing36
billiongallonsofrenewablefuelperyearby2022.Anupdatedversionofthestandard,
calledRFS2,isscheduledtotakeeffectJanuary1,2010.
23
SenateBill375(Steinberg,Chapter728,Statutesof2008):ThisbillrequirestheARBto
develop,inconsultationwithmetropolitanplanningorganizations,passengervehicleGHG
emissionreductiontargetsfor2020and2035bySeptember30,2010.ThroughtheSB375
process,regionswillworktointegratedevelopmentpatterns,thetransportationnetwork,
andothertransportationmeasuresandpoliciesinawaythatachievesGHGemission
reductionswhilemeetingregionalplanningobjectives.
UnderAB1493sauthority,theARBapprovedregulationstoreduceGHGsfrompassenger
vehiclesinSeptember2004,withtheregulationstotakeeffectin2009.However,inMarch2008,
theU.S.EPAdeniedtheARBsfirstwaiverrequesttoimplementGHGstandards.Thedenial
wasbasedonafindingthatCaliforniasrequestdidnotshowitwasneededtomeet
compellingandextraordinaryconditionsasrequiredunderthefederalCleanAirAct.
23
UnitedStatesSenateCommitteeonEnergyandNaturalResources,summaryandrelateddocuments
availableat:
[http://energy.senate.gov/public/index.cfm?FuseAction=IssueItems.Detail&IssueItem_ID=f10ca3ddfabd
4900aa9dc19de47df2da&Month=12&Year=2007].
37
Theregulationsbecamethesubjectofautomakerlawsuits,andtheirimplementationwas
stalledbytheU.S.EPAsdenial.InMay2009,partiesonbothsidesenteredanagreementto
resolvetheseissues.TheU.S.EPAgrantedARBswaiveronJune30,2009,andtheARBhelda
hearingonSeptember24,2009,onproposedamendmentstotheregulations.Itisexpectedthat
thePavleyregulationswillreduceGHGemissionsfromCaliforniapassengervehiclesbyabout
22percentin2012andabout30percentin2016,whileimprovingfuelefficiencyandreducing
motoristscosts.
OnApril22,2009,theEnergyCommissionadopteditsfirstInvestmentPlanfortheAlternative
andRenewableFuelsandVehicleTechnologyProgram.
24
TheInvestmentPlancontainsspecific
recommendationsforexpendingthe$176millionappropriatedforthefirsttwoyearsofthe
program(fiscalyears200809and200910).TheInvestmentPlanallocates$46millionfor
electricdrivevehicles,$40millionforhydrogenfuelingstations,$12millionforgenerationI
biofuels(orethanol),$6millionforgenerationIIbiofuels(orrenewabledieselandbiodiesel),
$43millionfornaturalgasdevelopmentincludingbiomethaneproductionplants,$2millionfor
propanemediumdutyvehicles(suchasschoolbuses),and$27millionforworkforcetraining,
sustainabilitystudies,standardsandcertification,andpubliceducation.
Another$83.45millionfromARRAfederalstimulusfundswillbeaddedtothiseffort,aswell
astrainingandworkforcedevelopmentneedsinthetransportationsector.Leveragingthese
federaldollarsforprojectsconsistentwiththeAB118fundinggoalswillspurinnovationand
competitioninthedevelopmentofalternativefuels,technologies,advancedvehicles,and
alternativefuelinfrastructure,leadingtoaneventualreductioninpetroleumfuelusage.
InresponsetothefederalARRAof2009,staffreleasedasolicitationonApril22,2009,titled
AmericanRecoveryandReinvestmentActof2009CostShare:AlternativeandRenewableFueland
VehicleTechnologyProgramtooffercostsharefundingopportunitiesusingAB118funds.
Projectsresultingfromthissolicitationincludethedevelopmentof55E85stations,morethan
3,100electricchargingstations,5publicaccessLNGstations,andthepurchaseof442LNG
mediumdutytrucksand123mediumdutyhybridelectrictrucks.
InadditiontotheARRAcostsharesolicitation,theEnergyCommissionhasenteredinto
interagencyagreementswithstateentitiesthatspecializeinworkforcetraining.These
agreementssupportthetransportationcomponentoftheCaliforniaCleanEnergyWorkforce
TrainingProgram,acollaborativeeffortamongtheEnergyCommission,theEmployment
DevelopmentDepartment,andtheCaliforniaWorkforceInvestmentBoard.
TheparamountmatteristheEnergyCommissionsprogressinachievingthegoalsand
objectivessetforthintheStateAlternativeFuelsPlan.AccordingtotheEnergyInformation
Administration(EIA),Californiasoverallalternativefuelusageincreasedto109,114gasoline
gallonequivalent(GGE)in2007fromjustover70,000GGEin2003.Thenumberofalternative
24
CaliforniaEnergyCommission,InvestmentPlanfortheAlternativeandRenewableFuelandVehicle
TechnologyProgram,FinalCommitteeReport,April2009,CEC6002009008CMF,availableat:
38
fuelvehiclesinusealsoincreased.Thelargestalternativefuelcategoriesinusearecompressed
naturalgas,liquefiedpetroleumgas,andliquefiednaturalgas,followedbyethanol(E85).
Federal,state,andlocalgovernmentagenciesarethepredominantconsumersofalternative
fuels.Asthetrendawayfrompetroleumfueledvehiclesgrows,thereductioninGHG
emissionswillbecomemoreapparent.Since2000,thegrowthinhybridvehiclesalonein
CaliforniahascontributedtoareductioninGHGemissionsofabout60millionmetrictons.
Asfortheinstatebiofuelsproductiongoals,thestateisnotontracktomeetthe2010target.
ThebiofuelsindustryinCaliforniaaswellastherestofthecountryenteredaperiodof
severedeclinein2009,avictimoftightcredit,aglutofproductioncapacity,dwindlingdemand,
andlowoilprices.Manybusinessmodelsforproducingbiofuelwerebasedonoilbeingpriced
above$80abarrel;withoilpricesfallingwellbelowthatbenchmark,producingethanolbecame
uneconomical.Plantsproducingethanolfromcornshutdownacrossthecountryascornprices
spikedevenasethanolpricesdropped,andmanycompaniessoughtbankruptcyprotection.
Companiesmakingbiodieselfromvegetableoiloranimalfatsufferedsimilarfates.Delayed
federalrulesonchangingfuelmixesaddedtouncertaintyforthebiofuelindustry.While
congressionalmandatesallowingbiodieselblendingandrequiringtheuseofsecondgeneration
biofuelsareslatedtotakeeffectin2010,theU.S.EPApostponedissuingregulationsneededto
implementtherequirements.
Bythefallof2009,twothirdsofUnitedStatesbiodieselproductioncapacitysatidle,according
totheNationalBiodieselBoard.
25
InSeptember2009,98percentofCaliforniasethanol
productioncapacitywasreportedtobecloseddown.
TheEnergyCommissionsPIERTransportationsubjectareaisfocusingRD&Dfundingon
vehicletechnologies,transportationsystems,andalternativefuelstohelpreducepetroleum
consumptionandGHGemissionswhileassistingeconomicdevelopmentwithinCalifornia.In
2009,PIERTransportationsubjectareasolicitationsinvestedover$5.8millioninadvanced
heavydutynaturalgasenginedevelopmentandadvancedbiofuelsdevelopment.ThePIER
fundedvehicletechnologyandalternativefuelresearchcanbedeployedthroughthe
AlternativeandRenewableFuelsandVehicleTechnologyProgram.
PIERTransportationalsoofferssmallgrantsthataddresstransportationconceptfeasibility
research.ResearchguidanceisprovidedbyPIERTransportationsthreefocusareasandroad
maps.SuccessfulprojectscanreceiveadditionalfundingfromthePIERprogramtofurther
developprovenconcepts.TheEnergyCommissionconductedthefirsttwotransportationsmall
grantsolicitationsandreceivedatotalof45proposals.Proposalconceptsincluderesearch
addressingvehicleefficiencyimprovements,batteries,electricvehicles,andsustainable
communitiesmodeling.
25
WallStreetJournal,August27,2009,availableat:
[http://online.wsj.com/article/SB125133578177462487.html?mod=googlenews_wsj].
39
Land Use and Planning Sector

Landuseplanningisalocalissue,underthejurisdictionoflocalgovernments.Decisionsabout
landuse,however,directlyaffectenergyuseandtheconsequentproductionofGHGemissions
inthestate.Inaddition,localgovernmentbuildingdepartmentsareresponsibleforenforcing
themandatoryenergyefficiencystandardsforbuildings.
Sincethe1950s,Californiaslandusepatternshaveemphasizedsuburbandevelopmentoflarge
residentialtractslocatedfarfromcitycentersandplacesofworkorbusiness.Thislanduse
planninghasresultedinmanycitizenspurchasingmoreaffordablehousinginthesuburbsand
commutinglongdistancestotheworkplace.Withtransportationbeingamajorcontributor
approximately40percenttoGHGemissionsinthisstate,smartlanduseplanningandgrowth
areincreasinglyimportantstrategiestocombatdecliningairqualityandthelossofopenspace
andwildlifehabitatandtoimprovethequalityoflifeforCaliforniasresidents.Nearly26
millionvehicles,mostofwhicharepoweredbyfossilfuels,alongwithahighrateofvehicle
milestraveled,contributesignificantlytoCaliforniasGHGemissionsandclimatechange
issues.ProjectionsshowthatthestatecannotreduceGHGemissionsto80percentof1990levels
by2050unlessvehiclemilestraveledarereducedbyatleast17percent.
26
Reducingvehiclemilestraveledinameaningfulwayrequiresreplacingtheexistingsuburban
developmentmodelwithonethatencouragesdenser,morecompactcitiesthatofferbettermass
transitoptionsandamenitiesthatencouragewalkingorbiking.Indeed,smartgrowth
applyingdevelopmentprinciplesthatmakeprudentuseofresourcesandcreatelowimpact
communitiesdemonstratingenlighteneddesignandlayoutwasidentifiedinthe2006IEPR
UpdateasthesinglelargestopportunitytohelpCaliforniameetitsstatewideenergyandclimate
changegoals.
Housing,transportationplanning,andlocalGHGreductionsallrequirelocalandregional
approaches.ButsmartgrowthbecameanincreasinglyimportantissueaftertheCalifornia
OfficeoftheAttorneyGeneralruledthatlocaljurisdictionsmustconsiderGHGemissionswhen
submittingCEQAdocumentsforplanningprojects.
Toencourageandfacilitatesmartgrowth,stateagenciesincludingtheEnergyCommission
areofferingassistancetolocalgovernments.Californiahasenactednewpoliciesthat
emphasizesmartgrowthplansatthelocallevelandincorporateenergy,transportation,climate
change,andhousingneeds.Thefollowingpoliciesprovidedirectiononlocalgovernment
assistance:
SenateBill375(Steinberg,Chapter728,Statutesof2008):Thisbillestablishedmechanisms
forthedevelopmentofregionaltargetsforpassengervehicleGHGreductions.
26
CaliforniaEnergyCommission,StateAlternativeFuelsPlan,December2007,CEC6002007011CMF,
p.75,availableat:[http://www.energy.ca.gov/ab1007/index.html].
40
SenateBill732(Steinberg,Chapter729,Statutesof2008):Thisbillestablishedafive
membercounciltohelpstateagenciesallocateStrategicGrowthPlanfundstopromote
efficiencyandsustainabilityandsupporttheGovernorseconomicandenvironmentalgoals.
SB375requiresmetropolitanplanningorganizationstoincorporateaSustainableCommunity
StrategyasanelementoftheirRegionalTransportationPlans.Thestrategywillbeeffectivelya
blueprintlikesetofplanningassumptionsthatshapethelandusecomponentoftheRegional
TransportationPlans.Thegoalistopromotedevelopmentdensitynearurbancoresandtransit
centers.SB375createsincentivesforlocalgovernmentsanddevelopersbyprovidingrelieffrom
certainCEQArequirementsfordevelopmentprojectsconsistentwithregionalplansthat
achievethetargets.
FundingisakeypartofassistinglocalgovernmentagencieswiththeirRegionalTransportation
Plans.Since2005,theCaliforniaDepartmentofTransportation(Caltrans)hascoordinatedlocal
andstateplanningthroughitsCaliforniaRegionalBlueprintPlanningProgram,avoluntary,
competitivegrantprogramencouragingmetropolitanplanningorganizationsandcouncilsof
governmenttoconductcomprehensivescenarioplanning.Thegoaloftheprogramisfor
regionalleaders,localgovernments,andstakeholderstoreachconsensusonapreferredgrowth
scenarioorblueprintfora20yearplanninghorizon(through2025).Caltranshas
awardedatotalof$20millioninfederalRegionalTransportationPlanfundssinceinitiatingthe
programin2005.In2009alone,Caltransgranted$5milliontoninemetropolitanplanning
organizationsandnineruralregionaltransportationplanningagencies.
27
TosupportthegoalsofSB375,theEnergyCommissionisconductingresearchtohelp
determinethemosteffectivewaystoreducefuelconsumptionandemissionsthrough
integratedlanduseandtransportationplanning.WorkingwiththeUniversityofCalifornia,
BerkeleyGlobalMetropolitanCenter,PIERexpectstoquantifytheimpactsthatsmartgrowth
canbringinreducingtheeffectsofglobalclimatechange.PIERfundedresearchincludesa
projecttitledAssessNewTransportationandUrbanDevelopmentPatternsinaClimate
ConstrainedFuturethatwillanalyzehowvariouspolicyoptionswouldmitigatetransportation
GHGemissionsgivenCaliforniasexpectedpopulationgrowth.
Throughnewlegislationandadoptedpolicies,Californiahasbecomealeaderintheworldwide
searchforsolutionstothegrowingproblemofclimatechange.Manyofthestatesenergy
policieshighlightedinthe2009IEPRarebeingusedastemplatesbyothergovernmentsasthey
strivetoprotectconsumers,theeconomy,andtheenvironment.
27
CaliforniaDepartmentofTransportation,CaliforniaRegionalBlueprintPlanningProgram,see
[http://www.dot.ca.gov/hq/tpp/offices/orip/blueprint/index.html].
41
Chapter 2: Energy and Californias Citizens
Thischapterdescribestheimportantconnectionsbetweentheenergypoliciesdiscussedin
Chapter1andtheeffectsofthosepoliciesonCaliforniasenergyusersindividuals,businesses,
industries,andgovernment.Thestatescitizenshavethreebasicprioritieswhenitcomesto
energy:itmustbereliable,affordable,andhaveminimalenvironmentalimpacts.These
prioritiesapplyequallytoeachofthestatesthreemajorenergysectors:electricity,
transportation,andnaturalgas.Eachsectoriscoveredinaseparatesectionthatdescribes
supplyanddemandtrendsalongwiththeenvironmental,reliability,andeconomicissues
facingthatsector.Theelectricitysectorisfurtherbrokendownbasedontheloadingorder
elementsofenergyefficiency,renewable,distributedgeneration,conventionalresources,and
transmissioninfrastructure.
However,importantoverlapsexistbetweeneachsector.Naturalgasremainsthepredominant
fuelforelectricitygeneration,socircumstancesthataffectnaturalgassuppliesandpriceswill
alsoaffecttheelectricitysystem.Changesinnaturalgassuppliesandpricescanalsoaffectthe
transportationsectorasthestatemovestowardincreaseduseofalternativetransportationfuels
likecompressednaturalgas.Similarly,increasedelectrificationofthetransportationsystemwill
affectelectricitydemand,whichcouldincreasetheneedforenergyefficiencyaswellasthe
amountofrenewableenergyneededtomeetthestatesrenewableenergygoals.Increaseduse
ofrenewableenergycouldaffectdemandfornaturalgasandthereforenaturalgaspricesand
theneedfornewnaturalgasinfrastructure.
Whilethischaptercharacterizesvariousissuesineachsectorasrelatingprimarilyeitherto
reliability,theenvironment,ortheeconomy,therearenodistinctlinesamongthesecategories
and,infact,mostissuesaffectallthreetosomeextent.
Electricity Sector
Californiaselectricitysystemisagiantmachinewithmanyinterrelatedmovingpartsin
constantneedofmaintenanceandupgrades.Thissystemofelectricitygenerators,delivery
facilities,andenergyconsumersmustconstantlyadaptsothattheamountofelectricity
generatedinstantlyandcontinuouslymatchestheamountofenergyconsumed.Thissection
providesanoverviewofthethreemaincomponentsoftheelectricitysystem:transmissionand
distribution,supply,anddemand.Itthendiscussestheenvironmental,reliability,andeconomic
issuesassociatedwiththevariousresourcesinthestatesloadingorderthatwasdescribedin
Chapter1.
Californiaselectricityneedsaresatisfiedbyavarietyofloadservingentities,including
investorownedutilities,publiclyownedutilities,electricserviceproviders,andcommunity
choiceaggregators.IntheOctober14,2009,hearingonthedraft2009IEPR,severalparties
notedtheneedforequitabletreatmentofpubliclyownedandinvestorownedutilitiesinall
energypolicyareasbutparticularlyinenergyefficiencyevaluation,measurement,and
verificationaswellasinmeetingthestatesrenewableenergygoals.TheEnergyCommission
42
agreesthatequaltreatmentisimportantgiventhatenergypolicygoalsarestatewidegoalsand
shouldthereforeapplytoallloadservingentities,butalsorecognizesthataonesizefitsall
approachmaybeproblematicgiventheuniqueneedsandcircumstancesofsomeutilities.
Electricity Transmission and Distribution
ThebackboneofCaliforniaselectricitysystemisthestatesnetworkofelectrictransmissionand
distributionlinesthatbringspowertoCaliforniaconsumersfromgeneratorsbothinandoutof
state.FollowingCaliforniasderegulationoftheelectricitysystemin1998,thethreemajor
investorownedutilities(PacificGasandElectricCompany,SouthernCaliforniaEdison,and
SanDiegoGas&ElectricCompany)andseveralpubliclyownedutilitiestransferredoperation
oftheirtransmissionsystemstotheCaliforniaIndependentSystemOperator(CaliforniaISO).
28
Theseutilitiescontinuetooperatetheirowndistributionsystems,butrelyontheCaliforniaISO
tooperatetheoveralltransmissionnetwork.Severalpubliclyownedutilities,including
SacramentoMunicipalUtilityDistrict(SMUD),theLosAngelesDepartmentofWaterand
Power(LADWP),andtheImperialIrrigationDistrict,stillcontrolandoperateboththeir
transmissionanddistributionsystems,althoughthesystemsareconnectedtotheCalifornia
ISOcontrolledgrid.
Figure1showsthebulktransmissionsystemnowinplaceinCalifornia.Keyfeaturesarethe
extensiveinterconnectionstothenorthandsoutheastthatallowimportedelectricitytoflow
intoCalifornia.ThroughtheselinesCaliforniaisconnectedtotheoverallWestern
InterconnectioncoveringmostofwesternNorthAmerica,fromBritishColumbiaandAlbertato
thenorth,BajaMexicotothesouth,andColoradototheeast.
BecauseCaliforniastransmissionanddistributionsystemisanintrinsiccomponentofthehigh
voltageWesternInterconnection,thestateneedstobebothaparticipantandapartnerin
variousregionalandfederalplanningandpermittinginitiativesthatwillaltertheway
transmissionplanningandpermittingoccurinthefuture.Mostoftheseinitiativesencourage
centralizedtransmissionanddistributionplanningattheregionallevel,supplementedby
federalincentivesandregulation.Developersofnewtransmissionarealsofocusingonthe
westernUnitedStatesbyproposingover30enhancementsandnewprojectsthatcouldincrease
thetransfercapacityinvarioussubregionsandacrosstheinterconnectiontobringrenewable
energyresourcestomarket.
28
TheCaliforniaIndependentSystemOperatorisaFederalEnergyRegulatoryCommissionregulated
nonprofitcorporationtaskedwithensuringcompetitiveandnondiscriminatoryaccesstotheCalifornia
transmissionsystemandisresponsibleformanagingtheflowofelectricpowerforthemajorityof
California.
43
Figure 1: Bulk Transmission System in California
Source: California Energy Commission, 2009.

Electricity Supply
PowerplantscomprisethesecondcomponentofCaliforniaselectricitysystem.Tomatch
supplywithdemand,electricitysystemsrelyonaportfolioofpowerplantsthatusedifferent
fuelsandhavedifferentoperatingcharacteristics.Californiareliesongeneratingresourcesthat
44
includelargehydroelectric,naturalgas,nuclear,cogeneration,andrenewables(Figure2).This
mixcanvaryyeartoyear,seasonally,daily,andevenhourly.
Figure 2: Californias Generation Mix (2008)
Toprovidereliableenergy,Californiassystemoperatorsmustconstantlybalancesupplyand
demandinrealtime.Theavailabilityofgeneratingresourcesdependsontheleadtime
involved,withsomegeneratorsneedingafulldaytostartupandothersavailablewithin
minutes.Othergeneratorsoperateasspinningreserves,generatinglessthantheircapacity
butabletorampuptheirgenerationrelativelyquicklytomeetincreaseddemandforelectricity.
Someresources,likenuclear,coal,geothermal,biomass,andcogeneration,usuallyrunator
nearfullcapacitywhenoperatingbecauseoftechnicalconstraints,economics,orcontracts.
Otherresources,likehydroelectric,wind,andsolar,operatewhenconditionsallow.
Table1showstheentiregenerationmixthatservedCaliforniansin2008.Theinstatevalues
listedareareasonablyaccuratesnapshotoftheentireCaliforniapowermixfortheyear.The
breakdownofpowerimportedfromtheNorthwestandSouthwestisanestimatebasedon
specificclaimsbyenergyserviceproviders(retailers)andthegeneralresourcemixofthose
regionssincetherearenopubliclyavailabledatatrackingmechanismsforthegeneration
sourcesofimportedpower.TheCaliforniaAirResourcesBoard(ARB)ischargedwith
addressingthisissueinitsimplementationofAB32,includingregulationsforfirst
jurisdictionaldelivererstoreportonspecifiedimports.
29
29
Firstdeliverer,orfirstseller,istheentitywithownership/titlethatfirstdeliverspowerataCalifornia
pointofdelivery.Forinstateproduction,thefirstselleristhegenerator;forimports,thefirstselleristhe
importer.
45
TheresourcemixforimportsisbasedontheEnergyCommissions2008NetSystemPower
Report.
30
ThereportrepresentstheamountofelectricityusedbyCaliforniacustomersforwhich
noretailersclaimedaspecificsourceofgeneration.Inrecentyears,asCaliforniaretailershave
increasinglyidentifiedlargersharesoftheirgenerationascomingfromspecificsources,thenet
systempowerhaschangedintwoveryimportantways:itnowrepresentsasmallershareof
totalgenerationservingCalifornia(duetogrowingretailerclaimsonspecificsourcesof
generation),anditischaracterizedbyahigherpercentageofunclaimedcoalandnaturalgas
generationsources.Therefore,thetotalsystempowershowninTable1isusedasanindicator
ofthesourcesofgenerationservingCaliforniaendusersuntiltheARBbeginscollectingdata
fromallfirstdeliverersofpowerintoCaliforniaunderAB32.
Table 1: 2008 Total System Generation (Gigawatt Hours)
Fuel Type In-State
Northwest
Imports
Southwest
Imports
Total System
Energy
Coal 3,977 8,581 43,271 55,829
Large Hydro 21,040 9,334 3,359 33,733
Natural Gas 122,216 2,939 15,060 140,215
Nuclear 32,482 747 11,039 44,268
Renewables 28,804 2,344 1,384 32,532
Biomass 5,720 654 3 6,377
Geothermal 12,907 0 755 13,662
Small Hydro 3,729 674 13 4,416
Solar 724 0 22 746
Wind 5,724 1,016 591 7,331
0
Total 208,519 23,945 74,113 306,577
Source: Energy Information Agency, Energy Commission Quarterly Fuels and Energy Report Database, and Senate Bill 1305
Reporting Requirements
TheEnergyCommissionisresponsibleforlicensinginstatethermalpowerplants50MWand
larger.Sincederegulationin1998,theEnergyCommissionhaslicensedmorethan60power
plants:44projectsrepresenting15,220MWareonline,6projectstotaling1,578MWareunder
construction,and12projectstotaling6,415MWareonholdbutavailableforconstruction.In
addition,theEnergyCommissionhas30proposedprojectsunderreview(bothconventional
andrenewable)totalingmorethan12,000MW,whichsignificantlyexceedshistoricworkloads
andispresentingchallengesgivenexistingstaffresources.
Natural Gas-Fired Generation
Naturalgasplants(bothinstateandoutofstateplants)provideabout46percentof
Californiaselectricityneeds.Morethan15,000MWofnaturalgaspowerplantcapacityhas
30
CaliforniaEnergyCommission,2008NetSystemPowerReport,July2009,CEC2002009010CMF,
CMF.PDF].
46
comeonlinesince1998.Therearealso18proposednaturalgasfiredplantsthatarecurrently
underreviewintheEnergyCommissionspowerplantlicensingprocess.
OfCaliforniaselectricitysources,naturalgasfiredplantstendtobethemostflexible,allowing
forpeaking,cycling,andsomebaseloadduty.Naturalgasfiredgenerationtypicallyisusedto
compensateforvaryinghydroelectricavailabilityandwilllikelybeneededtohelpintegrate
higheramountsofrenewablegenerationtomeetthestatesRenewablesPortfolioStandard
goals.EmissionsfromnaturalgasgenerationaccountforalargeportionofinstateGHG
emissionsfromtheelectricitysector,soitisessentialfortheEnergyCommissiontoconsider
GHGimpactsofnaturalgasplantsinitspowerplantlicensingprocess.However,becauseof
theessentialphysicalservicesprovidedbynaturalgasplants,Californiacannotsimplyretireall
ofitsnaturalgasplantstomeetitsGHGemissionsgoals.
Hydroelectric Resources
Largehydroelectricpower(largerthan30MWincapacity)isamajorsourceofCalifornias
electricity.In2008,largehydroelectricplantsproduced33,733gigawatthours(GWhs)or11
percentoftotalsystempower.Californiahasnearly400hydroplants,mostofwhicharelocated
intheeasternmountainranges,withtotaldependablecapacityofabout14,000MW.Thestate
alsoimportshydrogeneratedelectricityfromthePacificNorthwest.Whilehydroelectricpower
offersthepotentialforlowcostbaseloadelectricity,itisalsosubjecttolargeannualfluctuations
becauseofchangesinrainfallandsnowpack.Forexample,from19951998,hydroelectric
resourcesaccountedforasmuchas28percentofCaliforniagenerationbutonlyprovided13
percentoftotalstategenerationin2001.
31
Withcurrentclimatechangeconcerns,therewillbeanincreasingneedtoevaluatethepossible
impactsonCaliforniashydropowerresources.ArecentdraftpaperbytheCaliforniaClimate
ChangeCenterlookedatpotentialclimatechangeeffectsontwohydroelectricfacilitiesin
California:theUpperAmericanRiverProject,operatedbySMUDinNorthernCalifornia,and
theBigCreeksystem,operatedbySouthernCaliforniaEdisoninSouthernCalifornia.
32
The
paperconcludedthatthesefacilitiescouldexperienceareductioninbothenergygenerationand
associatedrevenuesasaresultofclimatechange.However,theresultsoftheanalysisalso
showedthatthetwohydroelectricfacilitiesshouldstillbeabletosupplypeakpowerduringthe
springandearlysummerdaysinbothNorthernandSouthernCalifornia,althoughmeeting
increasedpowerdemandinlatesummercouldbedifficultiftheoccurrenceofheatwaves
increases.
31
MRWandAssociates,FrameworkforEvaluatingGreenhouseGasImplicationsofNaturalGasFiredPower
PlantsinCalifornia,ConsultantReport,May2009,CEC7002009009,availableat:
32
CaliforniaClimateChangeCenter,ClimateChangeImpactsontheOperationofTwoHighElevation
HydropowerSystemsinCalifornia,DraftPaper,March2009,CEC5002009019D,availableat:
[http://www.energy.ca.gov/2009publications/CEC5002009019/CEC5002009019D.PDF].
47
Nuclear Generation
Generationfromnuclearpowerplantsrepresented44,268GWhsofCaliforniastotalsystem
powerin2008.Californiareliesonthreenuclearpowerplantsforabout14percentofthestates
overallelectricitysupply:
DiabloCanyonPowerPlant:PacificGasandElectricownsandoperatesDiabloCanyon,
whichhasatotalgeneratingcapacityof2,220MWintwounits.TheDiabloCanyonfacility
islocatednearSanLuisObispo,alongthecoastbetweenSanFranciscoandLosAngeles.
SanOnofreNuclearGeneratingStation(SONGS):SouthernCaliforniaEdison,SanDiego
GasandElectric,andtheCityofRiversidearecoownersoftheSanOnofreNuclear
GeneratingStation,whichisoperatedbySouthernCaliforniaEdison.Thetwooperating
unitshaveatotalcapacityof2,254MW.TheSanOnofreNuclearGeneratingStationis
locatedneartheboundarybetweenSouthernCaliforniaEdisonsandSanDiegoGasand
ElectricsserviceterritoriesnearSanClemente,northofSanDiego,insouthernCalifornia.
PaloVerdeNuclearGeneratingStation:PaloVerdeiscoownedbyArizonaPublicService
Corporation,SouthernCaliforniaEdison,andfiveotherutilities.ArizonaPublicService
Corporationoperatestheplant.PaloVerdesthreeunitshaveanoverallcapacityof3,810
MW.PaloVerdeislocatednearPhoenixinWintersburg,Arizona.Californiautilitiesown27
percentoftheplant.
Californiasnuclearplantshavebeenoperatingforroughly20yearsandarelicensedto
continueoperatingthrough2022(SONGS)and2024and2025(DiabloCanyonUnits1and2,
respectively).TheyprovidebenefitstoCaliforniaintheformofresourcediversity,low
operatingcosts,relativelylowGHGemissions,andenhancedgridreliability.However,they
alsoposerisksassociatedwithnuclearwastestorage,transport,anddisposal,aswellas
potentiallysevereeffectsfromaccidents,actsofnaturelikeearthquakesortsunamis,or
terrorism.
Californiahasamoratoriumonbuildingnewnuclearpowerplantsuntilameansforthe
permanentdisposalorreprocessingofspentnuclearfuelhasbeendemonstratedandapproved
intheUnitedStates.In1978,theEnergyCommissionfoundthatneitheroftheseconditionshad
beenmet.In2005,theEnergyCommissionreaffirmedthesefindingsandalsofoundthat
reprocessingremainssubstantiallymoreexpensivethanwastestorageanddisposalandhas
substantiallyadverseimplicationsfornuclearnonproliferationefforts.
Renewable Resources
Californiahasawidearrayofrenewableresources,includingbiomass,geothermal,
hydroelectric,solar,andwind.In2008,renewableenergyrepresentedabout10.6percentof
Californiastotalsystempower,supplying32,532GWhs.Thebreakdownofrenewableenergy
byresourcetypeisshowninFigure3.
MuchofCaliforniasrenewabledevelopmentarosefromthefederalPublicUtilityRegulatory
PoliciesActof1978(PURPA),whichrequiredutilitiestopurchasepowerfromnonutility
generators,includingrenewablegenerators,attheutilitiesfullavoidedcost.PURPAwas
implementedinCaliforniathroughtheuseofstandardoffercontractsbetweenutilitiesand
48
nonutilitygenerators.Asaresultofthesecontracts,about5,000MWofrenewablecapacitywas
addedtoCaliforniaselectricitysystembetween1985and1990.
Californiacurrentlyhasroughly7,400MWofutilityscalerenewablegeneratingcapacity,
ranginginsizefromafewhundredkilowattstolargeprojectsinthehundredsofMW.
33
The
EnergyCommissionandtheBureauofLandManagement(BLM)arecurrentlyreviewing
applicationsforpowerplantcertificationforabout6,000MWofnewsolarcapacity.
34
In
addition,theamountofgridconnecteddistributedphotovoltaicsystemscontinuestogrow,
withabout440MWinstalledasof2008.
35
Figure 3: California Renewable Energy Generation by Technology, 2008

Combined Heat and Power
AsubsetofCaliforniasnaturalgasfiredandrenewableplantsusecombinedheatandpower
(CHP),alsoknownascogeneration.Theseplantsprovideapproximately9,000MWto
Californiaselectricitysupplyportfolio.AbouthalfofexistingCHPisintheindustrialsector,
primarilyfoodprocessingandoilrefining,andaboutonethirdisinenhancedoilrecovery.The
remainingCHPisinthecommercial,mining,andagriculturalsectors.CHPfacilitiescanusea
varietyoffueltypes,fromnaturalgastorenewablesourceslikebiomassorbiogas.
CHPplantsprovidesignificantbenefitsbecausetheygeneratebothmechanicalenergy
(electricity)andthermalenergy(heat).Sincethethermalenergycanberecoveredandusedfor
heatingorcoolinginindustryorbuildings,thesesystemsaremoreefficientthanthosethat
generateelectricityalone,andtheythereforereduceGHGemissionsassociatedwithelectricity
33
CaliforniaEnergyCommission,CaliforniaPowerPlantDatabase,see
[http://energyalmanac.ca.gov/electricity/index.html].
34
CaliforniaEnergyCommission,Siting,Transmission,andEnvironmentalProtectionDivision,see
[http://www.energy.ca.gov/siting/solar/index.html].
35
CaliforniaEnergyCommission,EnergyAlmanac,availableat:
[http://energyalmanac.ca.gov/renewables/solar/pv.html].
49
generation.GiventheGHGreductionbenefitsfromthesefacilities,theARBClimateChange
ScopingPlanhassetatargetof4,000MWofadditionalinstalledCHPcapacityby2020to
displace30,000GWhsofdemandfromother,lessefficientgenerationsources.Becauseofthe
significantadditionalamountofCHPenvisionedforthesystem,theseresourcesmustbe
carefullyconsideredwhenlookingatsystemintegrationissues.
Resource Adequacy
Animportantaspectofelectricitysupplyishavingadequatereservestoensurereliable
electricityservice.TheCPUCinconsultationwiththeCaliforniaISO,hasdevelopedresource
adequacystandardsforIOUsandelectricserviceproviderstoensurethatthestatehasenough
electricitygeneratingcapacitytomeetdemandandrequiredreservesduringpeakdemand
periods.
PubliclyownedloadservingentitiesintheCaliforniaISOcontrolareamustalsomeetbasic
requirementsrelatedtoresourceadequacyandreporting.
36
In2008,publiclyownedutilities
represented22.6percentofCaliforniapeakloadsand23.7percentofenergyneeds.Thelargest
15publiclyownedutilitiesaccountfor94percentofpubliclyownedutilitypeakloadand95
percentofenergyrequirements.
AB380(Nez,Chapter367,Statutesof2005),requirestheEnergyCommissiontoreporttothe
LegislatureaspartoftheIntegratedEnergyPolicyReport(IEPR)ontheprogressofthestates54
publiclyownedloadservingentitiesinplanningforandprocuringadequateresourcestomeet
theneedsoftheirendusecustomers.
FiftypubliclyownedutilitiesprovidedresourceadequacyorresourceplanfilingstotheEnergy
Commissionin2009.Basedonthosefilings,theEnergyCommissionhasfoundthepublicly
ownedutilitiestoberesourceadequateforboththeyearaheadandthelongterm.Thisfinding
isimportantforassuringthatthepubliclyownedutilitieswillbeabletoprovidereliableservice
totheircustomersduringnormalandpeakconditions.
Thepubliclyownedutilitiesalsoreportedanincreaseinrenewablecontractsanddeclineinthe
useofcoalresourcesascontractswithcoalfiredpowerplantsexpireovertime.Thisshiftin
resourcetypeswillcontributetostatewidegoalsforreducedGHGemissions.
Electricity Demand
Californiansconsumed286,771GWhsofelectricityin2008,primarilyinthecommercial,
residential,andindustrialsectors(Figure4).
37
36
Thereare18publiclyownedloadservingentitiesoutsidetheCaliforniaIndependentSystemOperator
controlareathatarenotsubjecttoformalrequirements.
37
ThedifferencebetweenelectricityconsumptionandtotalsystempowershowninTable1isduetoline
losses.
50
Figure 4: Electricity Consumption by Sector 2008 (GWhs)

Demandforelectricityvariesovertime,withdaily,weekly,andseasonalcycles,andcan
fluctuateconstantlyevenwithinagivenhour.Demandisgenerallyloweratnightandon
weekendsandholidays,withthemaximumdemandgenerallyoccurringduringtheafternoon
onahotsummerweekday.Thismaximumpointisknownasthepeakandisanimportant
factorinelectricityandtransmissionplanningsincegenerationandtransmissionmustbebuilt
outtocapacitythatcanmeetpeakdemandwhenneeded.

Electricity Demand Forecast
IneachtwoyearIEPRcycle,theEnergyCommissionforecastselectricityconsumptionovera
10yearperiodaswellasexpectedpeakdemandduringthesameperiod.Onceadoptedbythe
EnergyCommission,theforecastisusedinvariousvenues,includingtheCPUCprocurement
process,transmissionplanningstudies,andtheCaliforniaISOsgridstudies.
Forecastsofexpectedgrowthinelectricitydemandovertimeareanimportanttoolfor
determiningfutureelectricitygenerationandtransmissionneeds.Timelyandaccurateplanning
canensurethatCaliforniascitizenswillhavesecureandreliableenergyresourcesduring
normalandpeakconditions.Inaddition,forecastshelpthestateplanfortimesofemergency
(forexample,anaturaldisaster),whichisimportantformaintainingthehealthandsafetyofthe
generalpublic.
Figure5comparesthreeforecastsofstatewideelectricitydemand:the2007IEPRforecast(CED
2007),thedraftdemandforecastpreparedbystaffinthespringof2009(CED2009DraftMid
RateCase),andtheEnergyCommissionsadopteddemandforecast(CED2009Adopted)that
reflectstheIEPRCommitteesdirectioninresponsetoissuesandconcernsraisedintheIEPR
51
workshoponthedraftdemandforecast.TheCED2009forecastreportwasadoptedbythe
EnergyCommissiononDecember2,2009.
Figure 5: Statewide Electricity Consumption
Source: California Energy Commission, California Energy Demand 20102020 Adopted Forecast,
December 2009, CEC-200-2009-012-CMF.

Electricityconsumptionisprojectedtogrowatarateof1.2percentperyearfrom20102018,
withpeakdemandgrowingatanaverageannualrateof1.3percentoverthesameperiod.
AlthoughtheCED2009adoptedforecastprojectselectricityconsumptiontobehigherthanthe
earlierCED2009Draft(MidRateCase),itisstillmarkedlybelowtheCED2007forecast.By
2018,electricityconsumptionisforecasttobedownbymorethan5percentandpeakdemand
byaround3.5percentcomparedtoCED2007.Twofactorsexplainmostofthedifference:1)
lowerexpectedeconomicgrowthnotonlyintheneartermbutalsointhelongerterm,and2)
increasedenergyefficiencyimpactscomparedtowhatwasincludedintheCED2007forecast.
Thesechangesreflecttheincreasedemphasisonenergyefficiencyandincreasedlevelof
efficiencyexpendituresnowconsideredcommittedandthereforeincludedintheforecast,as
wellasimproveduseofrecenthistoricdatathatwasnotavailablefortheCED2007forecast.
Inthe2009IEPRcycle,stafffocusedontwoprimarytopicsrelatedtothedemandforecast.The
firstwastheuncertaintyoftheeconomicanddemographicprojectionsusedintheforecast
giventhecurrenteconomicrecessionwhichappearstobeaffectingCaliforniamorethanthe
restofthenation.Secondwasquantifyingtheeffectofenergyefficiencyprogramsinthe
demandforecastitself,particularlytheexpectedimpactsofuncommittedenergyefficiency
programsthoseprogramsthathavenotyetbeenapprovedorfunded.Inaddition,parties
continuetoexpressconcernabouttheuncertaintyregardingtheamountofcommittedenergy
efficiencyincludedintheforecast.TheEnergyCommissionisattemptingtoresolvethis
uncertaintybydistinguishingbetweencommittedanduncommittedenergyefficiency
52
programs.Committedprogramimpactsareincludedwithinthedemandforecast,while
uncommittedprogramimpactsarecountedasapotentialsupplyresource.
Newlegislation(SenateBill695,Kehoe,Chapter337,Statutesof2009)allowstheexpansionof
directaccessservicetoindividualretailnonresidentialendusecustomers,withamaximum
levelofannualkilowatthourssuppliedbyelectricserviceprovidersandthephaseinperiodto
bedeterminedbytheCPUC.SincemanymoreofCaliforniascustomerswillhavethisoption
available,theEnergyCommissionwillincorporatedirectaccessinfutureIEPRforecasts.In
addition,sincepassageofSB695willlikelyaffecttheCPUCs2010LongTermProcurement
Plan(LTTP)process,EnergyCommissionstaffplanstoprepareasupplementalanalysisthat
disaggregatesthe2009IEPRplanningareademandforecastsintobundledanddirectaccess
segmentsinearly2010.
The Effect of Economic Uncertainties on the Demand Forecast
FortheCED2009forecast,theIEPRCommitteedirectedstafftoinvestigatealternativescenarios
ofeconomicanddemographicgrowthintothefutureandtoquantifytheimpactsthata
reasonablerangeofassumptionscouldhaveonelectricitydemand.Despiteuncertaintyabout
economicimpactsfromthecurrentrecessionandwhenandhowCaliforniawillrecover,the
alternativescenariosresultinasurprisinglynarrowbandofelectricityandpeakdemand.
StaffexaminedtheimpactsoftwoalternativeeconomicscenariosforCaliforniaelectricity
demand:anoptimisticcaseprovidedbyIHSGlobalInsightandanEconomy.compessimistic
case.Figure6showstheprojectedimpactsoftheoptimisticandpessimisticscenarioson
statewideconsumption,andFigure7showsimpactsonpeakdemand.
Figure 6: Projected Statewide Electricity Consumption, CED 2009 Adopted

and Alternative Economic Scenarios
December 2009, CEC-200-2009-012-CMF.
53

Electricityconsumptionisprojectedtobe2.3percenthigherintheoptimisticeconomiccase
thanintheCED2009forecastby2020,and1.9percentlowerinthepessimisticscenario.The
peakdemandforecastincreasesby2.3percentundertheoptimisticscenarioby2020andfalls
by2.2percentinthepessimisticcase.Thepercentageofpeakreductionishigherthanthatof
consumptioninthepessimisticcasebecausetherelativedecreaseinconsumptionisprojectedto
behigherfortheresidentialandcommercialsectorsthanfortheindustrial,whichhasahigher
loadfactor.Annualgrowthratesfrom20102020forelectricityconsumptionandpeakdemand
increasefrom1.2percentand1.3percent,respectively,to1.3percentand1.4percentinthe
optimisticcaseandfallto1.1percenteachunderthepessimisticscenario.
Figure 7: Projected Statewide Peak Demand, CED 2009 Adopted
and Alternative Economic Scenarios
December 2009, CEC-200-2009-012-CMF.

Energy Efficiency
Thefirstelementinthestatesloadingorderformeetingelectricityneedsisenergyefficiency.
EnergyefficiencyanddemandresponsestrategiesareessentialtoreducingtheGHGemissions
associatedwithelectricitygeneration.TheARBsClimateChangeScopingPlancallsforenergy
efficiencymeasuresthatwouldreduceelectricitydemandby32,000GWhsrelativetobusiness
asusualprojectionsfor2020.TheARBexpectsenergyefficiencytoreduceCO2emissionsby
19.5millionmetrictonsby2020.
Everyday,Californiacitizensandbusinessesmakemillionsofenergyrelateddecisionsasthey
goabouttheirdailyactivitieswithoutrealizinghowthosedecisionsaffectenergyuseand
energydemand.Whilesomeconsumersmayperceiveenergyconservationorefficiencyas
cuttingbackonactivitiesordoingwithoutcreaturecomforts,conservationandefficiencyare
actuallyaboutusingenergyresourcesinasmarterandmoreeffectivewaysothoseresources
54
willgofartherandhavefewernegativeconsequencesontheenvironment.Welldesigned
energyefficiencyandconservationprogramscanreduceenergydependence,makebusinesses
morecompetitive,andallowconsumerstosavemoneyandlivemorecomfortably.Energy
efficiencyprogramscanalsoplayamajorroleinincreasingreliabilityoftheelectricitysystem
andreducingthecostofmeetingpeakdemandduringperiodsofhightemperaturesandhigh
prices.
Energyefficiencymeasures,includingbuildingandapplianceefficiencystandardsandutility
sponsoredincentiveprograms,reduceoverallelectricitydemandandthereforetheoverallneed
fornewpowerplants.Reducedelectricitydemandcanalsohelpsystemoperatorsinseveral
ways.First,itincreasessystemreliabilitybecauselessdemandmeanslessstrainonthe
electricitysystemsincelessenergyhastobegeneratedanddelivered.Second,because
Californiasrenewableenergygoalsarebasedonapercentageofretailsalesofelectricity,
reducingoverallelectricitydemandmeansfewerretailsalesandthereforelessrenewable
energythatmustbegenerated.Thismeansfewerrenewableplantswillneedtobebuilt,which
willreducetheoperationalandreliabilityissuesassociatedwiththoseavoidedplants.
Energy Efficiency and the Demand Forecast
TheimportanceofenergyefficiencyinreducingGHGemissionsisinfluencingbothnearterm
programfundingandthefuturetreatmentinthedemandforecastofefficiencyresultingfrom
programs.Thisinfluenceisreflectedinneartermenergyefficiencyprogramproposalsmadeby
IOUstotheCPUCinthecurrentproceedingtodeterminefundingandprogramdesignsfor
20102012.Asaresultofhistorichighlevelsoffundingforthe20102012programdesignsin
CPUCD.0909047,theamountofenergyefficiencyconsideredcommittedandtherefore
includedintheEnergyCommissionsbaselinedemandforecastissubstantiallyhigherthanin
the2007IEPR,resultinginlowerexpectedenergydemand.
Whileprogresshasbeenmadetodelineateenergyefficiencyprogramimpactsaspresentedin
theEnergyCommissionsadopteddemandforecast,numerousuncertaintiesremain.The
energyefficiencyattributionsnotedbelowarepreliminary,basedonthebestavailable
informationandanalysistodate,andwillrequirefurtheranalysistomoreclearlyand
completelyunderstandtheinteractionsamongcodesandstandards,naturallyoccurring
savings,andutilityprograms.
Figure8showsthechangeinIOUenergyefficiencyprogramimpactsbetweenthe2007IEPR
andthestaffsdraftandEnergyCommissionadoptedforecastassumptionsinthisIEPRforthe
threeIOUs.TheadoptedforecastincorporatestherecentshiftintheCPUCefficiencyprogram
cyclefrom20092011to201012.Asimilarpatternofincreasedutilityprogramimpactsis
includedintheadopteddemandforecastforthelargerpubliclyownedutilities(SMUDand
LADWP).
Thesteepdropoffshownin2013andbeyondreflectstheshortlifetimeofsomeenergy
efficiencyprogrammeasures,uncertaintiesaboutwhetherimpactsfromutilityprograms
continuebeyondthelifeofthemeasuresinstalled,andreconcilingtheseprogrammatic
questionswiththetraditionalpriceelasticityresponsewhenelectricityratesareassumedto
55
increasesteadilyintothefuture.Thereisalsogreatuncertaintyaboutthenatureofthe
consumerresponsetosubsidizedefficiencyprogramsandwhethersavingsfromvarious
measurestranslateintoactualchangesinconsumerdemandforelectricity.Forexample,the
financialbenefitsofincreasedefficiencymayinducesomeconsumerstotakebacksomeofthe
efficiencygainsbyincreasingtheirenergyuse.Itisalsounclearwhetherconsumerswill
voluntarilypayforareplacementmeasurewhenthesubsidizedmeasurewearsout,although
staffsanalysisassumesthattheywillnotinmostcases.
Forsomemeasures,bythetimeanefficiencymeasurethatwasinstalledthroughautility
programsubsidywearsout,themarketlikelywillbetransformedasaresultofnewefficiency
options,suchasthevirtualdisappearanceofsinglepanewindowsfromhomeimprovement
stores.Forothermeasures,replacementisgovernedbymandatoryefficiencystandards.An
exampleisstaffsassumptionthatAB1109(Huffman,Chapter534,Statutesof2007)combined
withfederallightingstandardswillresultinthereplacementoflightingmeasureswithefficient
devicesandaccompanyingstandardsthatessentiallyeliminateinefficientbulbtechnologies.
Figure 8: Comparison of Committed Utility Program Consumption Impacts
for Investor-Owned Utilities
December 2009, CEC-200-2009-012-CMF.

TheEnergyCommissionstaffdemandforecastingmodelshavebeendevelopedinawaythatis
especiallyappropriateforincludingefficiencystandards,whetherforappliancesorforwhole
buildings.Includingfloorspaceorthevintageofhousingandequipmentforagivenadditionof
floorspaceorhousinginthemodelsallowstherequirementsofstandardstoaffectthelimited
proportionofthepopulationsubjecttothestandardsinanyyear.Followingtheeffective
implementationdate,standardsgraduallyaffectalargerandlargerproportionofthetotalfloor
spaceorhousingstock.Eachcycleofincreasinglytightenedstandardscanbereadilyevaluated
todeterminetheadditionalenergysavingscontributedfromeachvintageofstandards,
56
assumingthatnewhousingstockornewappliancepurchaseswouldhavebeensubjecttothe
previousstandards.
However,theemphasisofmanyutilityprogramsencouragingretrofittingofexistingfloor
spaceorequipmentwithmoreefficientdevicesdoesnotfocusexclusivelyonnewlybuilt
floorspaceorhousingunits,butupontheentirestockoffloorspaceorhousingunits,whichis
notasreadilyaddressedbythismodelingapproach.Moreover,consumersvoluntarily
participateinutilityprograms,presumablybasedonsomecombinationofperceivedfinancial
benefitsandaltruism(wantingtoimprovetheenvironment).Inrecognitionoftheuneven
abilityofitsmodelstotreatutilityprograms,EnergyCommissionstaffareadaptingthe
forecastingmodelstobetterincorporatesuchretrofitactions,butonlylimitedprogresswas
madeinthetimelineofthe2009IEPRproceeding.
Asaninterimstep,staffworkedwithCPUC/EnergyDivisionandutilitiestoobtainmore
completeevaluation,measurementandverificationdata(EM&V)forIOUprogramsavings.
SincetheCPUC/EnergyDivisionitselfhasmademoreprogressinestimatingfirmsavingsfrom
programsthaninthepast,thisnewdatasometimesportraysIOUprogramsinadifferentlight
thanpreviouslyavailableselfreported,firstyearsavingsdatathathasnotbeenadjustedbased
onindepthmeasurementstudies.However,thesedetailedEM&Vexpostresultsareonly
availableforrecentyears,whichrequiredstafftomakeassumptionsabouttheperformanceof
programsandmeasuresfundedinearlieryears.Furtherefforttodevelopaconsensusabout
historicmeasureperformanceisneeded.Withcommitmenttothiseffort,andimprovementsin
accesstomeasureleveldataformultipleprogramyears,furtherprogresscanbemade
followingthe2009IEPRcycle.
Asdescribedinthe2008IEPRUpdate,theEnergyCommissionhaschosentocontinueto
distinguishbetweentheimpactsofenergyefficiencyprogramsconsideredcommittedandthose
which,althoughpartoflongtermgoals,areclassifiedasuncommittedbecauseprogram
designsarenotcompleteandfundinghasnotbeenauthorized.
38
Thus,thebaselineorreference
demandforecastonlyincludescommittedimpacts.Thesecommittedimpactscanbefrom
existingstandardsastheyaffectagrowingproportionofthestockofbuildingsand/or
appliances,orfromutilityprogramsfortheperiodoftimeduringwhichspecificprogram
designshavebeenapprovedorprogramfundinghasbeenauthorized.
BeyondtheseimpactsthereareefficiencygoalsthathavebeensetbytheCPUC,theEnergy
Commission,andtheARBforwhichnospecificprogramdesignshavebeenapprovedoractual
programfundinglevelsauthorized.TheCPUCinD.0807047establishedlongtermenergy
savingsgoalsencompassingthethreeelectricityIOUs,currentlyadoptedstateandfederal
appliancestandards,andstatebuildingcodesresultinginzeronetenergyresidentialand
38
ThetaxonomypaperdevelopedinitiallybyItronandnowbeingrefinedthroughtheDemand
ForecastEnergyEfficiencyQuantificationProjectWorkingGroupprocesscontainsprovisionaldefinitions
oftheseterms.
57
commercialconstructionin2020and2030.
39
TheEnergyCommissioninthe2007IEPR
establishedthegoalofachieving100percentofcosteffectiveenergyefficiencysavings.
FollowinginputfromtheEnergyCommissionandCPUC,theARBalsoestablished2020energy
efficiencygoalsinitsClimateChangeScopingPlan.
Partofthefoundationfordeterminingincrementaluncommittedenergyefficiencyimpacts
thoseimpactsthatareinadditiontoimpactsalreadyincludedinthebaselineforecastis
improvingthebasedemandforecastingmodelsandanalysesofcommittedenergyefficiency
programs.TheEnergyCommissionstaffdemandforecastmodelisbeingmodifiedtomore
explicitlyincorporatetheimpactsofenergyefficiencymeasures.Trackingthepenetrationof
energyefficiencymeasureswillprovidemoreaccuracyaboutwhatefficiencyisincludedwithin
thebaselineforecast,thusimprovingtheabilitytodeterminetheincrementalimpactsofhigher
levelsofpenetrationofthesemeasures.
TheefforttodirectlycapturesavingsfromutilityefficiencyprogramsintheEnergy
CommissionsdemandforecastingmodelsforallIOUprogramsistooextensiveforthe
resourcesandtimelineavailableforthe2009IEPR,sothefocusinthiscyclehasbeenonthe
mostimportantoftheprograminducedmeasures:residentialandcommerciallighting,and
heating,ventilation,andairconditioning.EnergyCommissionstaffandtheconsultingfirm
Itronarecollaboratingtorefineanexistingenergyefficiencyprojectioncapabilitytobuildoff
thelevelofenergyefficiencymeasuresinthebaselineforecasttodeterminetrulyincremental
impactsfromfurtherpenetrationofthoseorotherhighvaluemeasures.TheItronmodel
SESAT,whichwasusedfortheCPUCs2008GoalsStudy,
40
isthestartingpointforthiseffort.
ItronadaptedtheexistingSESATmodelaspartofitscontractualsupporttotheCPUCforthe
2008GoalsStudy.AmodellikeSESATcanbeconfiguredtodirectlyincorporatethe
nonprogrammaticassumptionsofthebaselinedemandforecastorusealternativeassumptions.
Someassumptions,suchashouseholdgrowthintheresidentialsector,areeasytomatch,while
otherssuchassaturationsforresidentialsectorendusesarenot.
41
Forexample,the2008Goals
StudyimplementationofSESATdidnotallowsaturationsofendusestochangethroughtime.
Incontrast,theEnergyCommissionsdemandforecastallowsforsuchchanges.
IndevelopingincrementalenergyefficiencyimpactsrelativetotheEnergyCommissions
baselinedemandforecast,allnonprogrammaticassumptionsshouldbethesame.However,to
achievethislevelofconsistencyrequiressubstantialworktorevamptheSESATdatasetusedin
the2008GoalsStudyandthiswouldlikelymeanthatthesumofthecommittedenergy
efficiencyinthebaselinedemandforecastandtheincrementaluncommittedenergyefficiency
quantifiedusingSESATwouldnolongerexactlymatchtheaggregateimpactsadoptedbythe
39
CaliforniaPublicUtilitiesCommission,Decision0807047,availableat:
[http://docs.cpuc.ca.gov/PUBLISHED/FINAL_DECISION/85995.htm].
40
CaliforniaPublicUtilitiesCommission,Decision0807047,availableat:
41
Saturationreferstotheamountofdiffusionordistributionofaproductormeasurewithinamarket.
58
CPUCinthe2008GoalStudydecision.Thedegreeofbenchmarkingtheincrementalanalyses
necessarytoassureconsistencyhasdiminishingreturnsatsomepoint.
Earlyinthe2009IEPRdevelopmentprocess,theCPUCsEnergyDivisionrequestedthatthe
EnergyCommissiondevelopademandforecastaswellasprojectionsofincremental
uncommittedenergyefficiencyforuseintheforthcoming2010LTPPproceeding.TheEnergy
DivisionrequestedthattheEnergyCommissionevaluatepreviouslyestablishedscenariosfrom
the2008GoalStudyasadoptedinCPUCD.0807047,includinghigh,medium,andlowcases.
TheIEPRCommitteedecidednottoinvestigateotherpossiblespecificationsofuncommitted
energyefficiency,suchasthelevelsincludedwithintheARBClimateChangeScopingPlan,and
todeferthatanalysistootherproceedings.
42
Developingthisincrementalenergyefficiencyprojectionmethodandapplyingittoexisting
energyefficiencypoliciescreatesfreshestimatesoftheincrementalimpactofthesepolicies
relativetothebaselinedemandforecast.Thiseffortisprincipallyintendedtoreducethe
uncertaintyaboutoverlapbetweentheEnergyCommissionsdemandforecastandother
independentlydevelopedestimatesofuncommittedenergyefficiency.The2009IEPRandthe
CPUCs2010LTPPrulemakingarethearenaswherethemeritsofthesevariousestimateswill
playout.
TheclientforthisinitialproductwastheCPUC2010LTPPproceeding,withafocuson
establishingtheprocurementauthorityforIOUsafteraccountingforpreferredresource
additions.Itwasnotintendedtoestablishanewpolicyforhighlevelsofenergyefficiency.The
IEPRCommittee,therefore,hasallowedstafftoimplementtheprojectonaschedulethat
satisfiesthetimingoftheCPUCratherthan2009IEPRitself.Thus,atthiswritingtheprojectis
underwayandscheduledtobecompletedinlateJanuary2010.Oncethedraftresultsare
completed,theIEPRCommitteewillconductaworkshoptoreceivepubliccommentsonthe
work.Aftercommentsareincorporated,theCommitteewillreviewandsanctiontheresultsfor
deliverytotheCPUC.
Theincrementalefficiencyeffortsforthe2009IEPRfocusedonevaluatingelectricityefficiency
andconservation.Staffdidnotupdatenaturalgasefficiencyimpactsfromthoseestimatedin
the2007IEPRforecast.Futureforecasts,however,willexpandtheefficiencyanalysistofully
accountforembeddednaturalgasefficiency.
Energy Efficiency and the Environment
Californiaisanationalleaderinpromotingenergyefficiency.Dueinparttoadecadeslong
focusonenergyefficiency,CaliforniahasthelowestpercapitaelectricityuseintheUnited
States,withenergyuseperpersonhavingremainedstableforover30yearswhilethenational
averagehassteadilyincreased.However,stabilizingpercapitaelectricityusewillnotbe
42
AnobvioushomeforsuchaneffortisthetriennialAssemblyBill2021energyefficiencygoalsetting
reportrequiredtobesubmittedtotheLegislaturein2010.Sincethisreportrequiresthatgoalsbe
establishedforbothinvestorownedandpublicutilities,andtheCaliforniaPublicUtilitiesCommission
itselfintendstoundertakeanothergoalstudyin2010,itisappropriatetodeferexaminationofthesemore
aggressivegoalstoallowstaffsprojectioncapabilitiestobeimprovedfurther.
59
enoughtomeetthecarbonreductiongoalssetintheARBsClimateChangeScopingPlan.Very
aggressiveeffortswillbeneededincomingyearstomeetandexceedpriorenergyefficiency
anddemandresponseprogramgoals.
WiththefocusonreducingGHGemissionsintheelectricitysector,energyefficiencytakes
centerstageasazeroemissionsstrategy.OneoftheprimarystrategiestoreduceGHG
emissionsthroughenergyefficiencyistheconceptofzeronetenergybuildings.Inthe2007
IEPR,theEnergyCommissionrecommendedincreasingtheefficiencystandardsforbuildings
sothat,whencombinedwithonsitegeneration,newlyconstructedbuildingscouldbezeronet
energyby2020forresidencesandby2030forcommercialbuildings.AsmentionedinChapter
1,theCPUCsBigBoldEnergyEfficiencyStrategiesthatwereadoptedaspartofitsLongTerm
EnergyEfficiencyStrategicPlanincludesthesegoalsaswell.Azeronetenergybuildingmerges
highlyenergyefficientbuildingconstructionandstateoftheartappliancesandlighting
systemstoreduceabuildingsloadandpeakrequirementsandincludesonsiterenewable
energysuchassolarPVtomeetremainingenergyneeds.Theresultisagridconnected
buildingthatdrawsenergyfrom,andfeedssurplusenergyto,thegrid.Thegoalisforthe
buildingtousenetzeroenergyovertheyear.TheARBrecommendsthatenergyefficiency
measuresinthesebuildingsprovideasmuchas70percentsavingsrelativetoexisting
buildings,withonsiterenewablegenerationtomeettheremainingload.
43
TheCPUCs2007
LongTermEnergyEfficiencyStrategicPlancontainsadetailedimplementationplanforzero
energybuildingswithgoals,strategies,timelines,andrecommendations.
Inadditiontotheconceptofzeronetenergy,theCPUCsplanpresentstheimportanceofnet
zeropeakenergyuse,meaningthatthebuildingdoesnotrequireextraenergyduringpeak
energyusetimes,andnetzerocarbon,meaningthatthebuildinggeneratesmorezerocarbon
energyonsitethanitusesfromthegridinanaverageyear.TheARBsClimateChangeScoping
Planalsopromoteszerocarbonfootprintnewhomes,zeronetenergyhomes,andgreen
buildingstandards.
Makingzeronetenergybuildingsarealityby2020forresidencesand2030forcommercial
buildingswillrequireongoingcollaborationamongtheEnergyCommission,theCPUC,and
theARB,aswellascoordinationwithlocalgovernmentsthathavetheauthorityoverlanduse
developmentandplanning.Itwillalsorequirecoordinationamonglocal,state,andindustry
playerstopromoteandincentivizetheinstallationofallcosteffectiveenergyefficiency
measures;expandthescopeofandacceleratecertificationofhighlyefficientappliances;push
fortheincorporationofthecostofcarbonincosteffectivenesstestsfornewcodesand
standardsandutilityprograms;encourageandexpandgreenbuildingprograms;andpromote
andincentivizeonsiterenewableenergygeneration.
TheEnergyCommissionhasadoptedseveralkeystrategiesforachievingthegoalofzeronet
energyhomesby2020andcommercialbuildingsby2030.Onesucheffort,aimedatreducing
plugloadenergyinbuildings,includesbroadeningtherangeofappliancescoveredbythe
43
CaliforniaAirResourcesBoard,ClimateChangeScopingPlan,December2008,p.42,availableat:
http://www.arb.ca.gov/cc/scopingplan/document/adopted_scoping_plan.pdf
60
Title20ApplianceEfficiencyStandardstoincludeconsumerelectronicsandotherappliancesas
theyemergeontheconsumermarket.Othereffortsincludebuildingstandardsforwater
efficiency;educationaboutexistingstandardsandincreasedenforcement;theadoptionof
voluntaryreachbuildingcodesandstandardsthatsaveenergyaboveandbeyondalready
mandatedsavings;andimplementationofthosereachstandardsthroughgreenbuilding
standards.AnothereffortistheHomeEnergyRatingSystem(HERS)PhaseIIprogram,effective
September1,2009,whichadoptedahomeenergyratingscalethatstartsatzeroconsistentwith
thelongtermgoalofachievingnetzeroenergynewhomesby2020.
MeetthegoalofzeronetenergybuildingswillrequireincreasesintheTitle24Building
EfficiencyStandardsduringeachupgradecycle.Becausehomeelectronicsandotherequipment
anddevicespluggedintoelectricaloutletsrepresenthigherloadsthanthosecurrentlyassumed
inthestandards,plugloadsneedtobetested,modeled,andupdatedinbuildingenergy
budgetsandaccountedforinTitle24compliancesoftwarecalculations.Thescopeofbuilding
efficiencystandardswillalsoneedtobeexpandedtoincludeprocessloadssuchasdatacenters,
laboratories,andrefrigerationsystems.Continuedresearchanddevelopmentisalsoneededon
buildingsciencetechnologieslikeenergyusemodeling,energyusedatacollection,andinhome
energyusemonitors.
TheBuildingsEndUseEnergyEfficiencyprogramareawithintheEnergyCommissionsPublic
InterestEnergyResearch(PIER)programfocusesonloweringbuildingenergyuseinbothnew
andexistingbuildingsinresidentialandcommercialapplications.Bydevelopinglowerfirst
costoptionsforenergyefficientproductsandhelpingtoloweroperatingcostsforenergy
consumingsystems,thePIERprogramhelpsincreasetheadoptionofenergyefficiency
measuresinCalifornia.OtherresearchanddevelopmenteffortswithinPIERthatcanhelpthe
statereachitsgoalofzeroenergybuildingsincludethoseinagriculture,foodprocessing,
demandresponse,waterrelatedenergyconsumption,demandshifting,meteringandsub
metering,tariffanalysis,urbanplanning,sustainablecommunities,codesandstandards,water
heating,dataprocessing,buildingenergyusebenchmarking,motors,andprocessheating,
amongothers.PIERsresearchanddevelopmentalsosupportsprivatesectorresearchefforts
andhelpsmovetechnologiesandtoolsintothemarket.
Thegoalofzeroenergybuildingsrequiresnotjustenergyefficiencybutalsoonsiterenewable
energygeneration.Fornewresidentialconstruction,theEnergyCommissionsNewSolar
HomesPartnershipprovidesincentivestoinstallsolarenergysystemsonnewhomesthatmeet
specificenergyefficiencyrequirements.Forexistinghomes,newandexistingcommercial
buildings,andindustrial,government,andnonprofitbuildingsintheserviceterritoriesofthe
IOUs,theCPUCsCaliforniaSolarInitiativeincludesminimumenergyefficiencyrequirements
fornewlyconstructedbuildings;theCPUCiscurrentlyexploringwhetherenergyefficiency
requirementsforexistingresidentialandcommercialbuildingsshouldbeincreased.
61
California Business on the Cutting Edge of
Energy Efficiency Research
Adura Technologies is a San Francisco-based
wireless lighting controls company founded in 2005
to commercialize research conducted at the
University of California Berkeleys Center for the
Built Environment. The original idea for wireless
lighting controls was developed at UC Berkeley with
the help of a PIER research grant. The resulting
study indicated potential energy savings from 65 to
70 percent for lighting, and Adura Technologies was
formed to commercialize the technology. Since
then, Adura has partnered with PIERs Lighting
Californias Future research program to integrate
motion and daylight sensing technology into its
system.
Aduras wireless lighting controls have enormous
energy efficiency implications for the commercial
building sector. Besides avoiding the costs of re-
wiring existing buildings, these lighting systems can
reduce energy demand and associated CO2
emissions. There may be additional potential
benefits as wireless building control systems
expand to other market segments and operating
functions like heating, daylight shading, and
demand response programs.
Adura is considered one of the most exciting clean
tech/energy efficiency companies in Silicon Valley.
Following its inception, Adura has built on its role as
a manufacturing partner and has raised more than
$7.5 million in venture capital funds. Adura won a
Flex Your Power Award (2005), the Clean Tech
Open (2006), and a UC/CSU/CCC Sustainability
Award (2008). Aduras wireless lighting control
system was named one of Buildings Magazines
Top 100 products for 2009. Adura currently employs
30 Californians and is directly involved in educating
electricians and electrical contractors on lighting
control strategies and technologies through its
involvement in the California Advanced Lighting
Controls Training Program.

The2008IEPRUpdateidentifiedtheneedforactive
policiestodeploycosteffectiveandzerocarbon
renewableenergyspaceheatingandcooling
technologies,whichcouldcontributetothestates
zeronetenergygoals.Thepotentialvalueof
renewableheatingandcoolingtechnologiescouldbe
veryhigh,sinceCaliforniaresidentialand
commercialcoolingaccountsforapproximately30
percentofelectricsystempeakload.
44
As
recommendedinthe2008IEPRUpdate,theEnergy
CommissionsPIERprogramneedstodevelopa
targetedprogramtoaddresstechnicaland
infrastructurebarrierstoemergingrenewable
heatingandcoolingtechnologies.
Greenbuildingstandardsareanothertooltohelp
achievethegoalofzeronetenergybuildings,aswell
astoreduceGHGemissionsthatimpactthe
environment.TheCaliforniaBuildingStandards
CommissionadoptedGreenBuildingStandardsfor
newlyconstructedresidentialandcommercial
buildingsinJuly2008whicharethefirststatewide
greenbuildingcodesinthenation.TheGreen
BuildingStandardscontainbothvoluntaryand
mandatorygreenbuildingmeasures,andsectionsof
thestandardsareintendedtobecomemandatoryin
thenextcodecycle.Thecodestandardizespractices
forreducingwateruseandelectricityconsumption
andexaminesotheraspectsoftypicalconstruction
practices.TheEnergyCommissionadvisedthe
BuildingStandardsCommissioninthedesignofthe
voluntarylevels,ortiers,ofenergyefficiencythatare
morestringentthanthestatewideTitle24Building
EnergyStandards,andwillcontinuetoexpandits
effortstoincorporatereachstandardsintotheGreen
BuildingStandards.
Energy Efficiency and Reliability
Byreducingdemand,energyefficiencyincreasesthereliabilityoftheelectricitysystembecause
itreducesstressonexistingpowerplantsandtransmissionanddistributioninfrastructure.
Efficiencyalsoreducesthedemandfornewpowerplants,whichcanalsohelpreducethestates
dependenceonnaturalgas.Further,lessdemandforelectricitywillhelpsoftenpotential
44
See[http://enduse.lbl.gov/info/LBNL47992.pdf].
62
reliabilityimpactsontheelectricitysystemfromtheretirementofthestatesfleetofaging
powerplantsandplantsthatuseoncethroughcooling.Finally,lessoveralldemandfor
electricitycouldmeanlessrenewableenergywillbeneededtomeetCaliforniasRenewables
PortfolioStandard,whichcanindirectlybuffertheimpactsofintegratinglargeamountsof
renewablesintothesystem.
Californiahaspursueditsenergydemandreductiongoalsthroughtwoprimaryavenues:
utilitysponsoredprogramstoreduceenduserconsumption,andcodesandstandards
designedtolowertheenergyuseofbuildingsandappliances.By2004,theseeffortshad
cumulativelysavedmorethan40,000GWhsofelectricityand12,000MWofpeakelectricity,
equivalentto24500MWpowerplants.Morethanhalfofthestatewidesavingshascomefrom
thebuildingandappliancestandards,withthebalanceresultingfromprogramsimplemented
bythestatesIOUsandpubliclyownedutilities.
Appliance Efficiency Standards
ThefirstapplianceefficiencyregulationswereadoptedinCaliforniain1976.TheEnergy
Commissionsetsminimumefficiencythresholdsthatapplytoappliancesusingasignificant
amountofenergy,arebasedonfeasibleandattainableefficiencies,andarecosteffectiveto
consumersbasedonareasonableusepatternoverthedesignlifeoftheappliance.
The2009ApplianceEfficiencyRegulationsbecameeffectivestatewideonAugust9,2009.These
regulationssetnewefficiencystandardsforgeneralpurposelightingasrequiredbyAB1109
(Huffman,Chapter534,Statutesof2007)asafirststepinachievinga50percentincreasein
efficiencyforresidentialgeneralservicelightingby2018.AB1109alsosetaggressivesavings
requirementsforlightingforcommercialbuildingsandoutdoorlightingoverthesametime
period.
TheEnergyCommissioncontinuestopressthefederalgovernmentforanexemptiontoexceed
federalstandardsforresidentialclotheswashers,whichwillresultinsubstantialsavingsofboth
energyandwater.TheEnergyCommissionwillalsocontinuetopursueaggressiveand
expansiveappliancestandardsforotherappliancesandequipment,includingbutnotlimitedto
consumerelectronics,lighting,waterusingequipmentandirrigationcontrols,andrefrigeration
systems.
Efficiency Standards for New Buildings
TheEnergyCommissionestablishedthenationsfirstenergyefficiencystandardsforresidential
andnonresidentialbuildingsin1978.Thestandardsapplytonewlyconstructedresidentialand
nonresidentialbuildings,aswellasadditionsandalterationstoexistingbuildings,andare
updatedovertimetoreflectnewenergyefficiencytechnologiesandmethods.TheEnergy
Commissionadoptedthe2008BuildingEfficiencyStandardsinApril2008.Thenewstandards
willtakeeffectonJanuary1,2010,andwillrequire,onaverage,15percentincreasedenergy
savingsfornewlyconstructedresidentialbuildingscomparedwiththe2005BuildingEfficiency
Standards.Theupdatedstandardsmakemanyenergyefficiencyimprovementsfornewly
constructednonresidentialbuildingsandadditionsandforalterationstobothresidentialand
nonresidentialbuildings.Twoexamplesofupdatesareincreasedrequirementsforcoolroof
63
productstohelpreduceairconditioninguseinareasofthestatewithhighsummerpeakload
andrequirementsforhigherperformingwindows.
Thestandardsalsofocusontheproblemofconstructiondefectsintheinstallationofenergy
efficiencyfeaturesthatcanleadtoreducedenergysavingsfromthosefeatures.Toaddressthese
constructiondefects,standardssince1998haverequiredthatfeaturespronetopoorinstallation
beverifiedbyathirdpartyHERSraterusingEnergyCommissionspecifieddiagnostictesting
andfieldverificationprotocols.Inshowingcompliancewiththeenergybudget,fieldverified
measuresaregivenhighercreditbecausetheyrequireonsiteinspectionsand/oronsitetesting.
Theemphasisonfieldverifiedmeasureshelpseducatethebuildingindustryandhomeowners
abouttheimportanceofhighqualityworkmanshipandqualityassurancetoachievehigher
performingbuildingsandlowerenergybills.Witheachnewupdate,thestandardsexpandthe
emphasisonfieldverificationanddiagnostictesting.
TheEnergyCommissionisalsodevelopingreachstandardsavoluntarystandardexceeding
existingstandardsfortheTitle24BuildingEfficiencyStandards.Aspartofthepublicprocess
ofdevelopingbuildingstandardseverythreeyears,theEnergyCommissionwilldeveloptwo
levelsofincrementalimprovementsinbuildingperformance,alowerlevelthatrepresents
mandatorystandardsandahigherlevelthatisvoluntary.Ineachsubsequentstandardscycle,
thehigherlevelfromthepreviouscycleisconsideredforsettingthenewmandatorystandards,
andanewreachstandardisdeveloped.
Adoptingvoluntaryreachstandardshasmanybenefits.Itallowsproactivecities,counties,
greenbuildingstandards,incentiveprograms,andotherstoadoptthevoluntarystandardsin
theirjurisdictions,whichmanycitiesandcountieshavealreadydone.Thereachstandardsalso
areadoptedastheeligibilitycriteriaforsolarincentiveprograms,suchastheCaliforniaSolar
InitiativeandNewSolarHomesPartnershipprograms,andaslevelsforqualifyingforhigher
publicgoodschargeincentivesthroughutilitynewconstructionprograms.
Citiesorcountiescanchoosetoadoptlocalenergystandardsthataremorestringentthanthe
statewideTitle24BuildingEnergyEfficiencyStandardsandcanenforcethestandardsona
voluntaryormandatorybasis.Voluntarystandardsmotivatethebuildingcommunityby
offeringincentivessuchasfasttrackpermittingorreducedpermitfees.Mostmandatorylocal
standardsareintendedaskeyclimatechangemitigationinitiativesandtoreduceelectricity
demand,especiallyduringpeakperiodsonhotsummerafternoons.Recentlylocalenergy
standardshavebeenadoptedaspartoflocalcomprehensivegreenordinances,andinclude
requirementsrelatedtolanduse,wateruse,recycling,indoorairquality,andGHGreduction
goalsaswellasenergyefficiencyrequirements.
64
The city of Los Altos developed a Green
Building Regulations Ordinance, effective July
2008, to conserve natural resources through
sustainable design and construction practices.
The ordinance requires all newly constructed
residential and nonresidential buildings to be
15 percent more energy efficient than what is
required by the 2005 Title 24 Building
Standards. Much of the motivation and effort
that went into developing and adopting the
local standards was supplied by a staff
member of the citys Building Division, who is a
Certified Energy Plans Examiner, Certified
HERS rater, and instructor at a local
community college teaching the Building
Energy Efficiency Standards who also provides
periodic training to city of Los Altos staff on
enforcement requirements. The ordinance
affects newly constructed residential,
commercial, and multifamily buildings in the
city of Los Altos.
Manylocalgovernmentshavealsoadoptedstringent
localstandardstoaddresslocalbuildingpatternsor
issuesandlocalair,water,landuse,orresource
constraintsortocomplywithstatelegislationor
ExecutiveOrders.TheEnergyCommissionmust
approvemandatorylocalstandardsthatexceed
statewidestandards.Citiesorcountiesadoptingsuch
standardsarerecognizedasearlyadoptersand
includelargeandsmallcitiesandcountieslocatedin
highdensityurbanareasaswellaslowerdensity
suburbanregions.TheEnergyCommission
commendsthefollowingcitiesandcountiesthathave
adoptedenergyordinancesrequiringmorestringent
energyrequirementsthanthosesetbyCalifornias
2005BuildingEnergyEfficiencyStandards:Culver
City,LaQuinta,LosAltos,LosAltosHills,Marin
County,MillValley,PaloAlto,PalmDesert,Rohnert
Park,CityandCountyofSanFrancisco,SanMateo
County,SantaBarbara,SantaMonica,andSantaRosa.
TheEnergyCommissionispleasedthatmanyofthese
governmentsarepreparingtoupdatetheirordinancestobemoreenergyefficientthanthenew
2008standards,whichgointoeffectJanuary1,2010.
Compliancewithandenforcementofthebuildingstandardsaremajorchallenges.Newly
constructedresidentialbuildingshavebeenestimatedtobeasmuchas30percentoutof
compliancewiththe2005Title24BuildingEfficiencyStandards,
45
whichcouldrepresentupto
180GWhsperyear
46
oflostenergysavingsandthereforelostopportunitiesforGHGemission
reductions.The536localbuildingdepartmentsinthestateareresponsibleforenforcing
standardsbyissuingpermitsandconductingonsiteinspectionsduringconstruction.Withthe
economicdownturnandreducedbudgets,however,manycitieshavedownsizedtheirbuilding
departmentstaffinordertomaintainothervitalstaffsuchaspoliceorfirecrews.Otherfactors
thataffectcompliancewithandenforcementofbuildingstandardsincludethecomplexityof
thebuildingstandards,theeffectsofchangesinarchitecturalstyle,andtheneedfor
performancestandardstoprovidechoiceinenergyusingfeaturesandequipment.TheEnergy
Commissionhasactivelysoughtsufficientstaffresourcestomaintainapresenceinthefieldto
encourageimprovementsincomplianceandenforcementandisworkingwiththeCalifornia
BuildingOfficialsandCaliforniautilitiestoprovidetoolsandinformationthatwillsimplify
standardsenforcementandprovideexpandedtrainingfortheindustryandbuildingofficials.
Buildingstandardsalsoapplytoadditionstoandremodelsofexistingbuildings,whichprovide
acriticalopportunitytoimproveenergyefficiencylevels.Permitsarerequiredforanyalteration
45
Quantec,LLC(mergedwithTheCadmusGroup,Inc.in2008),see[http://www.cadmusgroup.com].
46
BII&ConSol,July2009,see[http://www.consolenergy.com/].
65
thatpermanentlychangestheenergyuseofabuilding,includinginstallationandchangeoutof
heating,ventilation,andairconditioning(HVAC)equipment.Unfortunately,manyinstallers
failtoobtaintheproperpermitsforHVACchangeouts.Thisnotonlyplaceshomeownersat
riskbybypassingthehealthandsafetyprotectionsassociatedwithpermits,butitalsoreduces
revenuesthatfundenforcementactivitiesoflocalgovernments.Inaddition,withoutpermits,
buildingdepartmentsareunawareoftheHVACchangeoutsandthereforedonotreviewand
inspectthesystemstoensurecompliancewithbuildingcodesandstandards.Failuretoobtain
permitsalsohasnegativeeffectsontheentireHVACindustrybecauseinstallerswhoavoidthe
costassociatedwithpermitsandcomplyingwithlicensurelawsandbuildingcodesmaycharge
lessthancontractorswhofollowthelaw,whichrepresentsunfaircompetition.
TheHVACindustryestimatesthat30to50percentofcentralairconditioningsystemsarenot
beinginstalledproperly.TheCPUCsLongTermEnergyEfficiencyStrategicPlanreportedthat
fewerthan10percentofinstalledHVACsystemspullpermits,whiletheHVACindustry
recentlyquotedafigureoflessthan5percent.Thisrepresentsamajorproblemthatmakesit
impossibleforbuildingdepartmentstoverifycomplianceandrepresentsahugelost
opportunityforenergyefficiencysavings.
Toaddresschallengeswithcomplianceandenforcement,theEnergyCommissiondevelopsand
providescomprehensiveandaudiencespecificeducationandoutreachinformationonthe
standardstoimprovelocalenforcementandbuildingindustrycompliance.Inadditiontoits
EnergyStandardsHotline,theEnergyCommissionislaunchingaCaliforniaBuildingStandards
OnlineLearningCentertoassistbuildingdepartmentpersonnelinunderstandingand
complyingwiththestandards.TheEnergyCommissionsComplianceandEnforcementUnit
alsoinvestigatescomplaintsandprovidesassistancetoenforcementagencies,thepublic,and
otherenergyprofessionalstoincreasecompliancewiththebuildingstandards.Aspartofthis
effort,staffworkswithvariousbuildingdepartmentsthroughoutthestateandalsoconducts
regionaloutreachthroughInternationalCodeCouncilchapterstoincreasecommunicationand
cooperationbetweenbuildingdepartments.Inaddition,thereiscertificationandongoing
managementofHERSproviderswhotrain,manage,andcertifyHERSratersandare
responsibleforfieldverificationsofperformancebasedenergyefficiencymeasuresinthe
buildingstandards.
Toincreasecompliancewiththebuildingstandards,theEnergyCommissionalsoisworking
withtheContractorsStateLicenseBoardtotakeactionininvestigatinganddisciplining
unlawfulactivitybylicensedaswellasunlicensedcontractorsinrelationtothestandards.In
additiontotheboard,theEnergyCommissionisworkingwiththeHVACindustryand
CaliforniaBuildingOfficialstofocusontheproblemswithfailuretoobtainpermitsforchange
outs.Further,tohelppropertyownersunderstandthebenefitsofproperpermittingandcode
compliance,theEnergyCommissionhasdevelopededucationaltimeofsaleconsumer
information.
Californiahasagreedtoachievea90percentcomplianceratewithstatebuildingenergycodes
withineightyears,by2017,inexchangeforstimulusfunds.Tomeetthisaggressivegoal,the
EnergyCommissionneedstodevelopamethodtodeterminethelevelofcompliance,
66
enforcement,andqualityofinstallationsthroughouttheindustryandusethisinformationasa
benchmarkagainstwhichtodetermine90percentcompliance.Strategiescanincludeauditing
andscoringthe536buildingdepartmentsinthestateandprovidingthemwitheducationand
toolstoincreasetheircompliancerate,withfollowupauditsaftersomeperiodoftimeto
evaluateimprovements.
Efficiency in Existing Residential and Commercial Buildings
Existingresidentialbuildingspresentasignificantchallengetomeetingthestatesenergy
efficiencygoals.OverhalfofthesinglefamilyhomesinCaliforniawerebuiltbeforebuilding
standardswentintoeffect,andretrofittingthesehomescouldprovidesignificantsavings.At
thesametime,utilityrebateprogramshavenotdoneenoughtocapturecosteffectiveenergy
savingsinexistingbuildings.Toaddresstheexistingbuildingsector,thestatemustmove
beyondprogramsthattargetsinglemeasurerebates,suchasreplacingincandescentbulbswith
compactfluorescentbulbs,andinsteaddesigncomprehensiveprogramsthatincludebuilding
energyuseperformancelabelingorbenchmarking;comprehensivedeepretrofitprograms;
marketing,outreach,andeducationeffortspresentedinlaypersonterms;andcreativefunding
mechanismsthathelpbuildingownerswiththenecessarycapitaltocoverthecostofthe
retrofitswithanaffordablecashflowoverthelifeofthemeasurestoallowtheenergysavings
topayfortheinvestment.
Pointofsaleand/orpointofremodellegislationshouldbeintroducedtotriggerretrofitsat
timesoffinancialtransactionsormajorconstructionprojects.Innovativeincentives,suchas
refundsforHERSPhaseIIinspectionswhenapredeterminedamountofexpenditurewillgo
intoretrofits,oracaponthemaximumamountofexpenditurerequired(2.5percentofsale
priceor10percentofestimatedremodelcosts)willsafeguardagainstslowingasaleor
dissuadinghomeownersfromsellingtheirhomesormakingimprovements.Thisstrategywill
alsorequireHERSproviderstodeveloptrainingprogramssothatenoughHERSraterswillbe
availablestatewide.
Inaddition,legislation,utilityincentives,orlocalordinancesshouldconsidertriggerssuchas
pointofsaleorpointofremodeltorequireHVACequipmenttuneupbyqualifiedHVAC
servicetechnicians,similartoaDepartmentofMotorVehiclesmogcheckrequirement.Most
homeownersdonotknowthebenefitsofHVACmaintenanceanditspositiveimpactonHVAC
performanceanddonotadequatelymaintaintheirHVACsystems.
Innovativefinancingoptionsneedtobeexploredanddevelopedthatoffercompetitiveratesto
financewholehouseenergyretrofits.Recentlyemergingmunicipalfinancing,energyutilityon
billfinancing,wastecollectiononbillfinancing,andwaterutilityonbillfinancingpilots
aroundthecountryshouldbemonitoredandexploredaspossiblemechanismstoallow
paybackoutofenergysavingsandkeepthedebtwiththeproperty.
Existingcommercialbuildingsalsooffersignificantpotentialforefficiencyimprovements.
Buildingenergyperformanceratingcansetthestageforretrocommissioningandotherenergy
efficiencyimprovements.AssemblyBill1103(Saldaa,Chapter533,Statutesof2007)requires
disclosureofnonresidentialbuildingenergyperformanceratingsatthetimeoflease,lending,
67
orsale.TheEnergyCommissionhasopenedanOrderInstitutingaRulemakingtodevelop
regulationsforimplementingAB1103thatareexpectedtobeadoptedinearly2010.This
historicbuildingenergyperformanceratingdisclosurelawprovidesanimportantopportunity
toprovideenergyusedataforcommercialbuildingsatthetimethatpurchase,lease,and
financingdecisionsarebeingmade,whichwillallowdecisionmakerstovalueenergyefficiency
asabuildingpropertyasset.Buildingenergyperformanceratingswillultimatelyaddvalueto
commercialbuildingsintheformofincreasedresalevalueandincreasedmarketability.
OneissueassociatedwithimplementingAB1103isthatthenationalEnergyStarPortfolio
Managerratingsystemspecifiedinthelawwillnotprovidea1to100ratingforthemajorityof
nonresidentialbuildingsinCalifornia.Therefore,tofullyimplementthisnewenergy
performancedisclosurelaw,theEnergyCommissionhasdevelopedaCaliforniaCommercial
BuildingEnergyPerformanceRatingSystem.ACaliforniaspecificratingcanbedisclosedto
meettheintentofthislawwhenanationalratingisnotavailable.TheCaliforniaspecificrating
mayalsobedisclosedvoluntarilybybuildingownerswhoaredisclosingthenationalrating.
AnotherchallengeisthattheAB1103energyperformancedisclosurerequirementsapplyonly
toentirebuildings,nottheindividualspaceswithinthosebuildings.Manynonresidential
buildingshavetenantleasedspacesthatareseparatelymeteredandhaveindividualutility
accounts.Futurelegislationshouldthereforeaddresswaystoobtainanddisclosemeaningful
buildingperformanceratingsfortenantleasedspaces.
TheEuropeanUnions2003EnergyPerformanceofBuildingsDirective(EPBD)shouldbe
lookedtoasamodelforcommercialbuildingenergyperformanceratingmethods.TheEPBD
establishedtwotypesofperformanceratings:operationalratingsandassetratings.Operational
ratings,liketheEnergyStarPortfolioManager,cantracktheenergyperformanceofbuildings
overtimeandcompareenergyusetocomparablebuildings.Assetratings,incontrast,judgethe
efficiencyofonlythepermanentbuildingenergysystemsthatshouldbevaluedaspartofa
commercialpropertyassessment.ThisassetratingsystemisanalogoustotheHERSfor
residentialbuildings.Californiashouldparticipateinandleveragetheworkbegunatthe
nationalleveltodevelopanassetratingsystemforcommercialbuildings.
Efficiency in the Industrial Sector
Thestatesbuildingefficiencystandardsdonotapplytoindustrialplantsortheir
manufacturingprocesses.Consequently,noregulatorymechanismisinplacetoensureenergy
efficiencyimplementationintheindustrialsector.However,withapproximately50,000
industrialplantsandrelatedbusinesses,Californiasindustrialsectorconsumes15percentof
thestatestotalelectricityand50percentofitsnaturalgas,makingitessentialtoaddressenergy
usageinthissector.
TheEnergyCommissionsobjectiveistoincreaseoperatingefficiencyintheindustrialsectorto
allowplantstoreducetheirenergycostsandlowertheirGHGemissionswhileremaining
competitive.Since2004,theCommissionsIndustrialEnergyEfficiencyProgramhasconducted
industrialbestpracticestrainingworkshopsinpartnershipwiththeUnitedStates
DepartmentofEnergy(DOE),utilities,andindustry.Initialsurveyresultsontheeffectiveness
68
Publicly Owned Utility Success Stories

Lodi Electric, with a customer base of less than
30,000, reported an increase in energy
efficiency savings from 383,317 kilowatt hours
in 2007 to 3,090,527 kilowatt hours in 2008.
This quantum leap in savings was the result of
a large commercial lighting program. Lodi
Electrics efficiency program used Energy Star
appliance rebates and energy audits as well as
targeting specific customers with the Keep-
Your-Cool refrigerator door gasket
replacement program, which provided
significant savings for the customer with
minimal upfront costs. This program was
originally developed by Silicon Valley Power
and shared with members of the Northern
California Public Power Authority. Another
well-designed program is the HVAC system
performance test, which ensures that the
customers whole HVAC system is functioning
efficiently before a rebate for new equipment is
issued to maximize energy savings.

Truckee-Donner Public Utilities District, with a
customer base of 13,000, reported an increase
in energy efficiency savings from 603,611
kilowatt hours in 2007 to 4,455,607 kilowatt
hours in 2008 mainly due to an increase in
residential lighting savings. To maintain and
increase customer participation during these
difficult economic times, Truckee-Donner is
focusing on direct installation and giveaway
programs. For example, their LED holiday
lighting exchange program has proven to be
very popular. Customers exchange old
incandescent holiday lighting for high efficiency
LED holiday lights that are more than 80
percent more efficient than the older holiday
lights. Like Lodi, Truckee-Donner has also had
success with a direct install Keep-Your-Cool
refrigerator door gasket replacement program.

ofthetrainingindicatethatenergyefficiencymeasures
arebeingimplementedby60percentoftheplants.
TheEnergyCommissionalsoconductsnocost
technicalenergyauditsatindustrialplantsusing
DOEsEnergySavingsAssessmentprotocol,software
tools,engineeringcalculations,andspecialized
measurementequipment.Theseassessmentshave
resultedinestimatedsavingsof22millionthermsof
naturalgas,41,000kilowatthoursofelectricity,and
147,000tonsofcarbondioxideperyear.
47
Inaddition
totheenergysavings,theassessmentsrepresent
energycostsavingstoindustrialplantsof$19million
peryear.TheEnergyCommissionexpectstoconduct
approximately10assessmentsperyearthrough2012,
withthegoalofcumulativeenergysavingsby2012of
50,000MWhsperyearofelectricityand40million
thermsperyearofnaturalgas.
Anexampleofthepotentialforsavingsinthe
industrialsectorisafoodprocessingplantincentral
Californiathatusessteamfordriedfruitprocessing
andcompressedairforproductionmachinery
operations.Theplantunderwentanonsitetechnical
auditofitssteamandcompressedairsystem.Fora
totalprojectcostof$150,000,energyefficiency
improvementsattheplantaresaving$46,000peryear
inelectricitycosts,$23,000peryearinnaturalgas
costs,and$2,000peryearinreducedwater
consumption.Totalcostssavingsperyearexceeded
$70,000,foratotalprojectsimplepaybackof2.1years.
Efficiency from Publicly Owned Utility
Programs
Becausepubliclyownedutilitiesrepresentabout22
percentofstatewideelectricityconsumption,their
contributiontomeetingthestatesenergyefficiencygoalsisveryimportant.AB2021(Levine,
Chapter734,Statutesof2006)requirestheEnergyCommissiontoestimatestatewideenergy
efficiencypotentialandestablishtargetsforenergyefficiencysavingsanddemandreduction
forCaliforniasinvestorandpubliclyownedutilitieseverythreeyears,withthegoalof
reducingenergyconsumptionby10percentoverthenext10years.TheEnergyCommission
47
PresentationofDonaldKazama,CaliforniaEnergyCommission,AssociationofEnergyEngineersWest
CoastEnergyManagementCongress,LongBeach,California,June11,2009.
69
adoptedtheinitialtargetsin2007.Inaddition,theEnergyCommissionevaluatesandreportson
theannualprogressof39publiclyownedutilitiesenergyefficiencyprograminvestmentsand
savingstothelegislatureaspartoftheIEPR.
48
From2007to2008,publiclyownedutilityexpendituresinenergyefficiencyprogramsincreased
65percentandtotal$104million.Annualefficiencysavingsincreasedbynearly58percentfor
energyandnearly46percentforpeakhourscomparedto2007.However,combinedsavings
accomplishmentsoftheseutilitiesreachedonly66percentofthe2008adoptedtargetforenergy
savings.Whilethetrendofincreasingsavingsisencouraging,publiclyownedutilitiesshould
continuetoexploreallopportunitiesforincreasedefficiencysavingstomeetthetargetsadopted
bytheEnergyCommissionandcontributetomeetingthestatewidegoalofachieving100
percentcosteffectiveenergyefficiency.
In2008,thepubliclyownedutilitiesreportedontheresultsoftheirprogrammeasurementand
verificationactivitiesforthefirsttime.Whiletheresultsarepreliminaryatthistime,publicly
ownedutilityverifiedsavingsappeartobeconsistentwithreportedprogramsavingsfor2008.
Publiclyownedutilitiesfaceseveralchallengesinincreasingtheirefficiencysavings.The
currenteconomicrecessionisaffectingcustomerswillingnesstoparticipateinefficiency
programs.Anotherissueisthatmanyofthesmallerpubliclyownedutilitiesservearelatively
smallcustomerbasesotheirprogramscanreachsaturationratherquickly.Inaddition,the
smallerutilitiestypicallyhavefewerstaffandcapitalresourcesthanthelargerutilities,making
itdifficulttoadministerefficiencyprograms.Andeventhelargerpubliclyownedutilitiesare
facingchallengesfromaretiringworkforceandbringingnewstaffuptospeedquickly.
Forthesmallutilities,successappearstobeinlargepartduetocarefulconsiderationoftheir
customersneedswhendesigningtheirefficiencyprograms.Thatknowledge,coupledwitha
commitmenttopersonalizedcustomeroutreachandeducationalefforts,hashelpedsome
utilitiessucceeddespitechallenges.Thestatespubliclyownedutilitiesarealsoworking
cooperativelythroughtheirrepresentativeassociations,theNorthernCaliforniaPowerAgency,
theSouthernCaliforniaPublicPowerAuthority,andtheCaliforniaMunicipalUtilities
Association,tolearnfromoneanothersexperiences.
Publiclyownedutilitiesneedtocontinuetousetheiruniquecustomerknowledgetofocus
attentiononnewcustomersegments,expandmeasuresthatarelowornocostoptions,and
marketnewincentivetools.Thepubliclyownedutilitiesareencouragedtoapplyintegrated
resourceplanningtocomparedemandsideresourceswithsupplysideresourcesusingcost
effectivenessmetrics.Thisapproach,alongwiththewillingnesstofundenergyefficiencyfrom
procurementsources,willincreasefutureenergysavingssufficientlytoreachadoptedtargets.
Effortstocompletemeasurementandverificationstudiesshouldcontinue.Thesestudies
48
Fordetailsonpubliclyownedutilityprogress,seeCaliforniaEnergyCommission,AchievingCost
EffectiveEnergyEfficiencyforCalifornia:SecondAnnualAB2021ProgressReport,June2009,CEC2002009
008SD,availableat:[http://www.energy.ca.gov/2009publications/CEC2002009008/CEC2002009008
SD.PDF].
70
provideanopportunitytoimproveprogramdeliveryandcosteffectivenessandtoshowthat
energysavingshavebeenrealized,andtheyshouldbefundedaccordingly.
Energy Efficiency and the Economy
Inthe2007IEPR,theEnergyCommissionrecommendedthatthestateadopttargetsforthenext
10yearperiodequalto100percentoftotalcosteffectiveenergyefficiencysavingstobe
achievedbyacombinationofstateandlocalstandards,utilityprograms,andotherstrategies.
Thetargetsaretobemetthroughacombinationofcollaborativeeffortsbyutilities,legislative
mandates,andregulatorystandards.Inaddition,theCPUCsCaliforniaLongTermEnergy
EfficiencyStrategicPlanrecommendsmaximumimplementationofcosteffectiveenergy
efficiency.
TheEnergyCommissions2007ScenarioAnalysesProjectfoundthatregardlessofthelevelof
energyefficiency,thecostisnegative.[S]ocietyisbetteroffwithhigherlevels[ofenergy
efficiency]thanwithoutevenwithoutacarboncostadderbeingincluded.Energyefficiencyis
lesscostlythanthegeneratingresourcesitdisplaces.
49
Thecombinedeconomicpotentialto
saveenergyin2016forCaliforniasthreelargeIOUsisestimatedtobe40,700GWhsof
electricity,higherthantheARBsdemandreductiongoalof32,000GWhs,and6,800MWof
peakelectricaldemand.Thisdoesnotincludepotentialsavingsfromemergingtechnologies.
50
Whendeterminingthecosteffectivenessofenergyefficiencymeasures,theEnergyCommission
believesthereisaneedtoaccuratelyvaluecarbonsavingsembeddedinenergyefficiency.The
definitionofcosteffectiveenergyefficiencyshouldincludeavalueforCO2andGHGemission
reductions,consistentwiththeTitle24BuildingEfficiencyStandards.Utilitiesshouldalso
includeanexternalityvalueforCO2andGHGemissionreductionsintheevaluationoftheir
energyefficiencyprogramimpacts.
Inaddition,theEnergyCommissionrecommendscreatingataskforcecomprisedofstate,local,
utility,andindustrystakeholderstoworkcollaborativelytoclarifydefinitions,setout
strategies,identifypotentialhurdlesandpotentialsolutions,andsetschedulesandmilestones
toreachingthegoalsof100percentcosteffectiveenergyefficiencyby2016.Thetaskforce
shoulddevelopastatewidestrategicplantoserveasaroadmapofactionsneededtoachieve
allcosteffectiveenergyefficiencypotentialinCalifornia.
Withthedownturninthenationaleconomy,energycostsrepresentalargershareofconsumers
budgets,includinglowincomecustomerswhosenumbersareincreasingasaresultofthe
financialcrisis.OneofthegoalsoftheCPUCsLongTermEnergyEfficiencyStrategicPlanisforall
49
CaliforniaEnergyCommission,2007IntegratedEnergyPolicyReport,December2007,CEC1002007008
CMF,availableat:[http://www.energy.ca.gov/2007publications/CEC1002007008/CEC1002007008
CMF.PDF].
50
Itron,CaliforniaEnergyEfficiencyPotentialStudy,May24,2006,pp.ES8ES10,
[http://www.itron.com/pages/news_articles_individual.asp?nID=itr_008890.xml].
71
lowincomehomestobeenergyefficientby2020.
51
TheCPUCissuedadecisioninNovember
2008,approvingtheLowIncomeEnergyEfficiency(LIEE)20092011programbudgetsforthe
fourmajorIOUs.
52
Thegoalisforalleligiblecustomersinthelowincomesector,estimatedat4
millionhouseholds,tohavetheopportunitytoparticipateintheLIEEprogram.Aspartof
achievingthisgoal,theCPUCisrequiringtheIOUsduring2009,todevelopanintegrated
marketing,education,andoutreachprogramforallenergyefficiencyprograms,includingLIEE.
IOUsarealsorequiredtotargettheiroutreachtoLIEEcustomerswhoarehighenergyusers,
havehighenergyburden,and/orhavehighenergyinsecurity,whilealsoaddressinglow
incomecustomerswithlowerenergyuse.TheEnergyCommissionapplaudstheCPUCs
significantcontributiontomeetingthestatesenergyefficiencygoals,particularlywithregard
tothesignificantimpacttheCPUCismakinginthelowincomesector,recentlyswollenbythe
downturnintheeconomy.
FundingforIOUefficiencyprogramscontinuestobeahighpriorityforthestate.OnSeptember
24,2009,theCPUCapprovedthe20102012utilityenergyefficiencyportfoliosfor$3.1billion
dollarsofratepayersupportedenergyefficiencyprogramsfor20102012tobeadministeredby
theIOUs.Thethreeyearprogramisestimatedtoavoidtheconstructionofthree500megawatt
powerplants,savealmost7,000gigawatthoursofelectricityand150millionmetricthermsof
naturalgas,andavoid3milliontonsofGHGemissions.Theprogramlaunchesthenations
largesthomeretrofitprogram,whichtargets20percentsavingsforasmanyas130,000homes
during20102012.Italsoprovides$175milliontolaunchCaliforniasBigBoldEnergy
EfficiencyStrategiesforzeronetenergyhomesandcommercialbuildings,includingdesign
assistance,incentivesforabovecodeconstruction,andresearchanddemonstrationofnew
technologiesandmaterials.
Theportfoliosalsoincludephasingdownsubsidiesforbasiccompactfluorescentlampswhile
shiftingtheemphasistoadvancedlightingprograms,aswellasrequiringbenchmarkingfor
commercialbuildingsinCaliforniathatreceiveenergyefficiencyfunding.Inaddition,more
than$260millioninfundingwillbeprovidedfor64cities,counties,andregionalagenciesfor
localeffortstargetingpublicsectorbuildingretrofitsandleadingedgeenergyefficiency
opportunities.Performancemetricswillberequiredtomeasuretheprogressofeachprogram
towardmarkettransformationandachievementoftheshort,medium,andlongtermgoals
andstrategiessetforthintheCPUCsLongTermEnergyEfficiencyStrategicPlan.
Achievingthestatesgoalofallcosteffectiveenergyefficiencywillbechallengingandrequire
continuedandacceleratedcollaborativeeffortsbetweenstateandlocalagenciesalongwith
meaningfulinputfromutilitiesandindustrystakeholders.Inparticular,stateenergyagencies
mustworkcloselywithlocalandregionalgovernmentstoprovideassistanceinmeetingthe
51
CaliforniaPublicUtilitiesCommission,CaliforniaLongTermEnergyEfficiencyStrategicPlan,September
2008,availableat:[http://www.californiaenergyefficiency.com/docs/EEStrategicPlan.pdf].
52
Decision0803011wasapproved50bytheCaliforniaPublicUtilitiesCommissiononNovember6,
2008.TheDecisionapprovedbudgetsfortheenergyrelatedlowincomeprogramstotaling
approximately$3.6billionforthefourmajorinvestorownedutilities:PacificGasandElectricCompany,
SanDiegoGas&Electric,SouthernCaliforniaGas,andSouthernCaliforniaEdison.
72
challengesofadoptingandimplementingenergyefficiencyprogramstoreduceGHG
emissions.Towardthatend,theEnergyCommissionisupdatingits1993EnergyAwarePlanning
GuidewithassistancefromtheLocalGovernmentCommissionandotherparties,withatarget
releaseofwinter2009.Theguidewillprovideregionalandlocalgovernmentswithasolid
referenceofenergyconserving/GHGreducingplanningideas,policylanguage,program
implementationoptions,environmentalandeconomiceffects,examplesofprogramsin
operation,andcontactinformation.
TheEnergyCommissionalsoprovidesmonetarysupporttolocalgovernmentsthroughthe
EnergyConservationAssistanceAccountProgram,alowinterestloanprogramestablishedin
1979forpublicnonprofitschoolsandhospitals,publiccareinstitutions,andlocalgovernments.
IncoordinationwiththeEnergyPartnershipProgram,theprogramprovidesawiderangeof
assistance,fromidentifyingenergysavingopportunitiesinplannedfacilitiestoauditsand
feasibilitystudiesforimprovementsinexistingfacilities.TheEnergyCommissionhas
successfullyimplementedthisrevenuebondprogramandcontinuestopursuerevenuebonds
asnecessarytocontinueprogramoperations.SinceJuly1,2006,theprogramhasprovided
technicalassistanceto149projectsandawarded31lowinterestenergyefficiencyloans.For
example,theSacramentoCityUnifiedSchoolDistrictrequestedtechnicalassistancetoevaluate
potentialefficiencyimprovementsinseveralofitshighschools.Lightingretrofits,controls,and
LEDexitsignswererecommendedateachoftheschools,leadingtoreducedenergyuseand
averagesavingsofapproximately$53,000peryear.Theprogramisexpectedtobeaugmented
withARRAfunds.
TheEnergyEfficiencyandConservationBlockGrantProgram,createdbytheEnergy
IndependenceandSecurityActof2007,willprovide$3.2billioninARRAfundingtocitiesand
countiesthroughouttheUnitedStates.Ofthatfunding,$302millionwillgodirectlytolarge
incorporatedcitiesandcountiesinCalifornia,withanother$49.6millionallocatedthrough
grantsto265smallincorporatedcitiesand44smallcountiesthatarenoteligiblefordirect
grantsfromtheDOE.TheEnergyCommissionwilldistributethefundingtohelpcitiesand
countiesimplementcosteffectiveprojectsandprogramstoreducetotalenergyuse,reduce
fossilfuelemissions,andimproveenergyefficiencyinthebuilding,transportation,andother
appropriatesectors.

Demand Response
Demandresponseeffortsseektoslowtherisingcostofelectricityandimprovethereliabilityof
theelectricitygridbyimprovingtheefficiencyofthegeneration,distribution,andconsumption
ofelectricity.Demandresponsemeasuresprovideincentivesandtoolsthatencourageand
enablecustomerstoperiodicallyreducetheirconsumptioninresponsetosystemconditions.
Thedemandforelectricityvarieswiththetimeofdayandtheseasonoftheyear.Most
Californiaconsumersdemandmoreelectricityduringthedaythanatnight,andmorein
summerthanwinter,duetotheincreaseduseofairconditioningandotherconsumerelectronic
useduringthosetimes.Themaximumpeakloadisprojectedtogrowatarateof1.3percentper
year,fasterthantheoverallgrowthinelectricitydemand.
73
The Demand Response Research Center was
launched in 2004 by the Energy Commission with the
objective of researching and developing a broad
knowledge of demand response technologies,
capabilities and opportunities. The Center has been
working toward developing many important
technologies and technical capabilities necessary for a
successful statewide demand response, including
communication techniques and devices like two-way
communicating utility devices in homes, commercial
buildings and industrial plants. These communicating
devices can be pre-programmed to react when the
system sends signals that prices or demand are high,
and can then turn off noncritical appliances (like
washing machines, dishwashers, or unnecessary lights)
or processes (like the defrost cycle of the refrigerator or
preselected commercial or industrial processes) until
the event is over and the price of energy or stress on
the utility system goes down. Research efforts at the
center also include development of open demand
response communication standards between the utility
and on site communicating devices and meters
(OpenADR); methods to analyze behaviors and
perceptions related to energy use as well as the most
effective kinds of pricing signals (automatic control with
optional override versus a reminder phone call);
structures for time-varying pricing; and methods to set
appropriate demand response program baselines and
goals. The center has also field tested different kinds of
communicating devices and has researched the
potential for demand response to transition between
sectors, such as from commercial to industrial facilities.
OpenADR has been identified as one of 16 potential
national standards to support national smart grid
development. Next steps include research studies of
small commercial customer behavior and the potential
impact of residential time-of-use rates.

Increasesinpeakdemandcreateinefficiencieswithintheelectricitysystem.Systemoperators
mustmanagegenerationoutputinrealtimetomatchdemandasitrisesandfallstoprevent
excessivevoltageandfrequencychangesthatcouldinterruptordamageelectricaldevices.As
demandgoesupduringpeakhours,powercompaniesgenerallydispatchpowerplantsin
decreasingorderofefficiency;thereforeastheloadgoesup,theoverallefficiencyofproducing
electricitygoesdown.Asefficiencygoesdown,thecosttoprovidethatpowerandtheGHG
emissionsofthatpowergoup.Whendemandfalls,theoppositeoccurs.
Notonlyarepeakingunitsgenerallylessefficient,butbecausetheyoperateonlyafewhundred
hoursperyear,operatorsmustpayfortheunits
ownershipandoperatingcostsoveramuch
shorterperiod.Thisresultsinmuchhighercosts
whencomparedwithfacilitiesthatcanspread
theirfixedcostsovermorehoursofoperation.
Peakingunitsarenecessary,however,toensure
thatadequatepowerisavailableduringpeak
timesortomeetunexpectedlyhighload
requirements.
Givingconsumersinformationontherealcost
ofelectricityasitisbeingusedisanimportant
demandresponsemeasure.Althoughthecostof
providingelectricitytoconsumerschanges
dependingonthecurrentloadonthesystem,
electricityrateshavehistoricallyonlybeen
basedonthetotalamountofenergyconsumed
monthlyratherthanonwhenthatelectricityis
actuallyused.Theseratesprovidenosignalof
actualenergycosts,nordotheyprovide
incentivesforconsumerstoreducetheir
electricityloadsduringthefewcriticalhours
eachyearwhenhighdemandstrainsthe
capacityofthesystem,systemstabilityisatrisk,
andelectricityisthemostcostlytogenerate.
TheCPUChasrecommendedpolicytomoveall
ratepayerstosomeformoftimevariantpricing
alongwithAdvancedMeteringInfrastructure
advancedtwowaycommunicatingmetersand
theEnergyCommissionhassupportedthis
policy.However,SenateBill695(Kehoe,
Chapter337,Statutesof2009)delays
implementationofdefaulttimevariantpricing
forresidentialcustomersuntil2013.Inits
currentloadmanagementstandardsproceeding,
74
theEnergyCommissionproposedadoptingarequirementthatallutilitiesinthestateadopt
someformoftimevariantpricingforcustomersthathaveadvancedmeters.Toguarantee
achievingthepotentialsystemcostsavingsofsuchapricingsystem,theEnergyCommission,
CPUC,andutilitiesneedtodevelopplansfordefaulttimevariantpricingthatcanbe
implementedwhenthelegislatedrestrictionsexpire.Theinterimshouldbeusedtoupgrade
andupdatebillingsystems,developeffectiveandfairrevenueneutraldynamicratedesigns,
anduseintervaldataasitbecomesavailabletoanalyzecustomerimpactsanddevelop
customereducationeffortstomaximizedemandresponsewhileminimizingandmitigating
customercosts.
InthestatesEnergyActionPlans,boththeEnergyCommissionandtheCPUChavesupported
timevariantpricing.TheCPUCrulemaking(R.0701041)toevaluatetheutilitiesdemand
responseprogramssoughttoestablishprotocolsforestimatingloadimpacts,costeffectiveness,
andmodificationstosupporttheCaliforniaISOseffortstoincorporatetheseprogramsinto
marketdesigns.Adecision(D.0804050)regardingloadimpactestimationswasissuedinApril
2008.
53
TheEnergyCommissionjoinedininstitutingtheCPUCrulemaking(R.0206001)to
developdemandresponseasaresourcetoenhanceelectricitysystemreliability,reducepower
purchaseandindividualconsumercosts,andprotecttheenvironment.Therulemaking
focusedondevelopingdynamicratesanddemandresponseprogramsforlargecustomersand
conductingresearchtoevaluatethepotentialcostsandbenefitsofbuildinganadvanced
meteringinfrastructuretoserveallIOUcustomers.
ResearchbytheDemandResponseResearchCenterindicatesthatwithproperapplication,the
newOpenAutomatedDemandResponse(OpenADR)standardhasthepotentialto
substantiallyincreasetheamountofdemandresponsecapabilitiesthatexistforgridoperators
inthefuture.AsCaliforniaimplementsthenewsmartgrid,increaseddemandresponse
capabilitiescanoffsettheneedforincreasingthenumberofconventionalgeneratingpower
plantsinthefuture.AkeyelementofOpenADRistheabilityofcustomerstopreselectand
automatetheirdesireddemandresponseactions(suchasloweringairconditioningorlighting),
andtheseactionswilloccurautomaticallywhencalleduponunlessoverriddenbythe
customer.Automateddemandresponseactionscanbesignaledbyanenergypriceorother
signalindicatingthegridisstressedandapreapproved/coordinatedloadreductionisdesired.
Researchindicatesthatcustomersreadilyacceptthisautomatedprocess,andintheyearsof
fieldtestingcustomercomfortcomplaintshavebeennegligible.Insomecases,commercial
businessesthathaveparticipatedinpilotsorprogramshavenotonlyfullyacceptedtheefforts
buthavealsousedtheirparticipationasasigntotheircustomersoftheirenvironmental
stewardshipandwillingnesstohelpCaliforniamakethetransitiontoamoreefficientandlower
GHGemittingfuture.
53
CaliforniaPublicUtilitiesCommission,availableat:
75

Renewable Energy
Thesecondresourceintheloadingordertomeetnewelectricityneedsisrenewableenergy,
whichwillalsohelpachieveasignificantportionoftheARBstargetforGHGemission
reductionsfromtheelectricitysector.IncreasingtheamountofrenewableenergyinCalifornias
electricitymixreducestherisksandcostsassociatedwithpotentiallyhighandvolatilenatural
gaspriceswhilealsoreducingthestatesdependenceonimportednaturalgasusedtogenerate
electricity.Renewableresourcesprovideotherbenefitssuchaseconomicdevelopmentandnew
employmentopportunities,benefitsthatarebecomingincreasinglyimportantgiventhecurrent
recession.
CaliforniasRenewablesPortfolioStandard(RPS),establishedin2002,isanessentialtooltohelp
thestatereduceitsGHGemissions.TheRPSrequiresretailsellers(definedasIOUs,electric
serviceproviders,andcommunitychoiceaggregators)toincreaserenewableenergyasa
percentageofretailsalesto20percentby2010.Statelawalsorequirespubliclyownedutilities
toimplementanRPSbutgivesthemflexibilityindevelopingspecifictargetsandtimelines.In
November2008,GovernorSchwarzeneggersExecutiveOrderS1408raisedCalifornias
renewableenergygoalto33percentby2020,andinSeptember2009,hisExecutiveOrderS21
09directedtheARBtoworkwiththeCPUC,theCaliforniaISO,andtheEnergyCommissionto
adoptregulationsbyJuly31,2010toimplementthathighergoal.
The33percentRPStargetisexpectedtoprovide15.2percentofthetotalGHGreductions
neededtomeettheAB32goalofachieving1990emissionslevelsby2020.
54
However,despite
effortstoexpandrenewablegeneration,recentutilityRPSprocurementforecastsfor2010and
2020indicatethatsubstantialchallengesremain.AsofNovember2009,theCPUChad
approved129RPScontractstotaling10,271MW;ofthatapprovedcapacity,alittlelessthan10
percent917MWhascomeonlineandisdeliveringenergytothegrid.Anadditional30
contractsfor4,605MWareunderreview.
55
WhiletheIOUshavemadeprogressadding
renewablecontractstotheirportfolios,theydonotexpecttomeetthe2010targetandwillbe
significantlybelowthe33percenttargetin2020unlesstheyaddrenewableresourcesatamuch
fasterpace.
Recentestimatesoftheamountofrenewableenergyneededby2020tomeetthe33percent
targetrangefrom45,000GWhstoalmost75,000GWhs.Thiswiderangereflectsdifferent
assumptionsaboutenergyefficiencyachievements,expectedelectricitydemandandretailsales
in2020,andtheamountofenergythatwillbeprovidedbycombinedheatandpower(CHP),
rooftopsolar,andexistingrenewablefacilities.Estimatesofexistingrenewablesvaryfrom
27,000GWhsto37,000GWhs,dependingonthevintageoftheestimate,theamountofoutof
54
CaliforniaAirResourcesBoard,ClimateChangeScopingPlan,2008,AppendixG,TableGI2,p.GI7,
availableat:[http://www.arb.ca.gov/cc/scopingplan/document/appendices_volume2.pdf].
55
CaliforniaPublicUtilitiesCommission,RenewablesPortfolioStandardQuarterlyReport,November2009,
availableat:[http://www.cpuc.ca.gov/NR/rdonlyres/52BFA25E0D2E48C0950C
9C82BFEEF54C/0/FourthQuarter2009RPSLegislativeReportFINAL.pdf].
76
staterenewablegenerationattributedtopubliclyownedutilities,andtheamountofunclaimed
renewables(renewablegenerationnotclaimedaseligiblefortheRPS)includedintheestimate.
EnergyCommissionstaffestimatethatiftheARBClimateChangeScopingPlangoalsare
achievedforenergyefficiency,CHP,androoftopsolar,thestatewillneed45,000GWhsof
additionalrenewableenergytomeettheRPSgoalsin2020.
Themainissuesassociatedwithmeetingthestatesrenewablegoalsincludetheneedfor
adequatetransmissiontoaccessrenewableresources,challengestointegratinghighlevelsof
renewableenergyintotheexistingelectricitysystem,potentialdifficultiesmeetinghigherRPS
targetsgivenprogresstodateonreachingthe20percentby2010goal,andenvironmental
concernsassociatedwithbuildingnewrenewableplantsandthetransmissiontobringthe
energyfromthoseplantstothestatesloadcenters.
Renewable Energy and the Environment
Renewableenergyprovidesobviousenvironmentalbenefitsbyreducingairandwater
pollutionassociatedwithelectricitygeneration.However,renewablescanalsofacechallenges
duetoenvironmentalconcernswithspecifictechnologiesorwhereplantsarelocated.This
sectiondiscussessomeofthoseissues,includingeligibilityrequirementsforthestatesRPSand
theirimpactonmunicipalsolidwasteplantsanddeliveriesofrenewableenergyfromoutside
California,environmentalimpactsofrenewablegenerationandtransmissioninfrastructure,and
thepotentialeffectsofclimatechangeonthatinfrastructure.
Expanding Renewables Portfolio Standard Eligibility
GiventheGovernorsexpandedgoalof33percentrenewablesby2020,theScopingOrderfor
the2009IEPRidentifiedtheneedtorevieweligibilitycriteriafortheRPS.Aspartofits
responsibilitiesundertheRPS,theEnergyCommissionsetseligibilitycriteriaandcertifies
facilitiesasRPSeligible.TheEnergyCommissioncurrentlydefineseligiblerenewableresources
byfuelsourceratherthanbyspecifictechnologies,butstatelawrelatedtotheRPSlawcontains
specifictechnologyrequirementsthatmustbeconsideredwhendeterminingRPSeligibility.
Anexampleistheuseofmunicipalsolidwaste(MSW)toproduceenergy.AlthoughtheEnergy
CommissiondefinesMSWasanRPSeligiblefuel,currentlawnarrowlydefineswhichMSW
conversiontechnologiesareallowed.Todate,noMSWgasificationfacilityhasmetthese
stringentrequirements,particularlytherequirementthattheMSWconversionoccurwithout
theuseofairoroxygenexceptambientairtomaintaintemperaturecontrol.
56
WhiletheEnergy
Commissionisnotawareofanygasificationtechnologiesthatmeetthecurrentrequirements,
staffwillcontinuetoevaluateeachRPScertificationapplicationtodeterminewhethertheMSW
conversiontechnologymeetstherequirementsforRPSeligibility.Becausethelawrequires
proposedMSWfacilitiestoobtainairpermits,itmaybedifficultforsuchfacilities,evenifthey
meetRPSeligibilityrequirements,tobebuiltinareasofthestatesuchastheSouthCoastAir
56
April21,2009,IEPRworkshopcommentsbyPhoenixEnergy:Thereisnowayyoucandothiswithout
thepresenceofoxygen.Limitedoxygen,yes,butifyoufollowthedefinitiontotheletterofthelaw,it
cantbedone.Transcriptp.74,see[http://www.energy.ca.gov/2009_energypolicy/documents/200904
21_workshop/20090421_TRANSCRIPT.PDF].
77
QualityManagementDistrict(SCAQMD)thatareinnonattainmentforfederalairquality
standards.
MostWesternElectricityCoordinatingCouncil(WECC)statesdonotexplicitlyallowMSWto
beusedforRPScompliance.CaliforniasRPSallowsMSWthathasundergonegasificationor
beenconvertedtobiodieseltobeusedforRPScompliance,butcombustionofsolid
unconvertedMSWisnoteligible(withthelimitedexceptionoffacilitieslocatedinStanislaus
CountyandoperationalbeforeSeptember26,1996).Similarly,Arizonaallowsonlygasified
MSWtobeusedforRPScomplianceanddoesnotspecificallypermitcombustionofsolidMSW.
NevadaistheonlyWECCstatetoexplicitlyallowunlimitedorunrestrictedcombustionofsolid
MSW(aswellasgasifiedMSW)tobeusedforRPScompliance.AllotherWECCstatesdonot
identifyMSWinanyformaseligibleforRPScompliance.
AsthespaceavailableforlandfillsbecomesmorelimitedinCalifornia,renewableenergy
developershaveexpressedinterestinMSWgasificationandareseekingclarificationofrulesfor
RPSeligibilityofMSWconversion.Ina2006report,theCaliforniaBiomassCollaborative
estimatesthatbiomassinthelandfilldisposalstream(23.1milliontonsplus2.6milliontonsof
greenADC[alternativedailycover])couldsupportabout1,750MWeofelectricitygeneration
withanother900MWecomingfromtheplasticsandtextilescomponents.
57
Giventhestates
aggressiverenewableenergytargetsandtheneedforadditionalrenewableenergytomeet
thosetargets,theEnergyCommissionsuggeststhatitworkwiththeCaliforniaIntegrated
WasteManagementBoardtoreviewemergingconversiontechnologiesthatuseMSWto
produceacleanburningfuelthatmostcloselymeettheintentofcurrentRPSeligibility
requirementsaswellasenvironmentalconsiderationsand,ifappropriate,suggest
modificationstoapplicablestatestatutestoallowsuchtechnologiestobeRPSeligible.
Anothereligibilityissueisthedeliveryofrenewablegenerationfromoutofstategenerators.
GenerationfromarenewablepowerplantlocatedoutsideofCaliforniaiseligibleforthestates
RPSifthefacilitybeganoperatingafterJanuary1,2005,candemonstratedeliveryofenergyinto
California,anddoesnotcauseorcontributetoanyviolationofaCaliforniaenvironmental
qualitystandardorrequirementwithinCalifornia.
58
AsofSeptember2009,theEnergy
Commissionhascertifiedonly24outofstaterenewablefacilitiesaseligiblefortheRPS,
comparedtomorethan576eligibleinstatefacilities.
57
CaliforniaEnergyCommission,BiomassinSolidWasteinCalifornia:UtilizationandPolicyAlternatives,
PIERCollaborativeReport,April2006,Contract50001016,p.2,availableat:
[http://biomass.ucdavis.edu/materials/reports%20and%20publications/2006/MSW_Biomass_White_Paper
_2006.pdf].
58
IfanoutofstatefacilitycommencedcommercialoperationsbeforeJanuary1,2005,itmaystillbe
eligibleifitmeetsoneofthefollowingcriteria:a)Theelectricityisfromincrementalgenerationresulting
fromprojectexpansionorrepoweringofthefacilityonorafterJanuary1,2005,orb)thefacilityispartof
aretailsellersexistingbaselineprocurementportfolioasidentifiedbytheCaliforniaPublicUtilities
CommissionorpartofapubliclyownedutilitysbaselineasdeterminedbyPublicUtilitiesCode
section387.
78
Thedeliveryrequirementforoutofstaterenewablefacilitiesisflexible,allowingdeliveryto
occurregardlessofwhethertheelectricityisgeneratedatadifferenttimefromconsumption
byaCaliforniaendusecustomer.
59
Thisapproachcanallowoutofstaterenewablestobe
firmedorshapedtoaddressissueslikeintermittency,inadequatetransmission,or
schedulingbarriers.Firmingandshapingcanalsoprovidegreatervaluetotheelectricity
systembyconvertingoffpeakrenewablegenerationtoonpeakenergydelivery.Allowingout
ofstaterenewablestobefirmedandshapedratherthanimmediatelyscheduledfordelivery
mayalsoincreasetheavailabilityoflowercostrenewableresources.Firmingandshaping
allowsrenewableelectricitycountedforCaliforniasRPStobeconsumedoutsideofCalifornia,
providedthatanequalamountofelectricityisdeliveredtoCaliforniawithinthesamecalendar
year.Somepartieshavearguedthatcountinglargeamountsofoutofstaterenewablesfor
CaliforniasRPScouldreduceinstateairqualityorjobcreationbenefits.Ontheotherhand,as
discussedinthe2009StrategicTransmissionInvestmentPlan,ifCaliforniadecidestobuildmost
ofitsownrenewableenergyresourcestomeetitsRPSgoals,manymilesoflandwillbeneeded
fornewtransmissionlinestoaccessthoseresources,whichcouldfacechallengesassociated
withpublicoppositionduetolanduseandenvironmentalconcerns.
AsshowninTable2,otherstatesintheWECCareawithRPSprogramshavetheirowndelivery
requirements.Arizonahasthemostrestrictiveelectricitydeliverypolicy,requiringthatall
electricitygeneratedbytherenewableresourcebeingusedforcompliancewithautilitysRPS
targetbephysicallydeliveredtothatutilitysserviceterritory.MostotherWECCstateswithan
RPSprogramallowsomeuseofunbundledrenewableenergycredits(RECs)
60
forRPS
compliance.However,theiruseisoftenconstrainedbyelectricitydeliveryrequirements,
locationrequirements,orexplicitcaps.Asaresult,someofthesestatespoliciesarearguably
morerestrictivethanCaliforniasintermsofgeographicscope.
DeliveryrequirementsareonlyoneofmanyRPSdesignissuesthataffecthowdifficultitmay
betomeetthetargets.Simplycomparingdeliveryrequirementsacrossstates,although
important,doesnotgiveacompletepictureofcomplianceflexibility.
Limitingaccesstooutofstaterenewableresourcescouldcreategeographicinequitiesbetween
Californiasutilitiesbecausetherearemoreinstaterenewableresourceslocatedinthesouthern
regionsofthestateandtransmissionfromsouthtonorthislimited.Theseinequitiescouldbe
addressedbytheuseoftradableRECs.TheCPUCissuedaproposeddraftdecisionauthorizing
tradableRECsforRPScomplianceinDecember2008,andissuedarevisedversioninMarch
59
PublicResourcesCode25741(a).
60
AsdefinedinCalifornia,arenewableenergycreditisacertificateofproof,issuedthroughthe
accountingsystemestablishedbytheCaliforniaEnergyCommission,thatoneunitofelectricitywas
generatedanddeliveredbyaneligiblerenewableresource.Unbundledrenewableenergycreditsare
thosecreditsthataresoldseparatelyfromtheunderlyingelectricity.
79
2009.Ifadopted,therevisedproposeddecisionwouldallowtransferofRPScreditswithout
regardtoconstrainedtransmissionpathways.
61
AlthoughtradableRECsdonotnecessarilymaintainthelocalbenefitsofinstategeneration,
includingenvironmentalbenefits,theycouldhelpCaliforniasRPSbyavoidingtransmission
congestionbarriersandtheirassociatedcosts.TheuseoftradableRECswouldaddrenewable
energytothegridonaregional,WECCwidebasisandcouldthereforeplacedownward
pressureoncostsforelectricity.
61
CaliforniaPublicUtilitiesCommission,DraftProposedDecisionAuthorizingUseofRenewableEnergy
CreditsforCompliancewithTheCaliforniaRenewablesPortfolioStandard,ALJSimon,March2009,
p.14,availableat:[http://docs.cpuc.ca.gov/efile/PD/99016.pdf].
80
Table 2: RPS Delivery and Location Requirements in Other Western States
State
Unbundled
RECs
Allowed
Deli very Requirements Facility Location Requirement
Arizona No Delivered to the utility system No requirement, but 1.5 multiplier
for in-state solar installed before
2006 and for in-state renewables
with components manufactured in-
state and installed before 2006.
California No For out-of-state facilities, matching quantity of
energy delivered to in-state zone or node.
Facilities must have come on-line after J anuary
1, 2005, if not included in the baseline
procurement portfolio of a California IOU or
publicly owned utility.

Must be interconnected to the
Western Electricity Coordinating
Council area (WECC)
Colorado Yes None No requirement, but 1.25 multiplier
for in-state generation.
Montana Yes Delivered to state if not located in-state. Out-of-
state renewables must have commenced
commercial operation after J anuary 1, 2005.
None
Nevada Yes Delivered to the state None
New
Mexico
Yes Delivered to the state, unless waived by the New
Mexico Public Services Commission based on a
determination that there is an active regional
market for trading renewable energy and
renewable energy certificates in any region in
which the [utility] is located.
(c)

None
Oregon Yes,
subject to
caps

Unbundled RECs: None
Bundled RECs: Delivered to the transmission
system of the utility, to Bonneville Power
Administration, or to a designated point for
subsequent delivery to the utility.
Unbundled RECs: WECC
Bundled RECs: U.S. portion of
WECC
Washington Yes Delivered to state only if not located in Pacific
Northwest. If generator is located outside of the
Pacific Northwest, the electricity must be
delivered to the state on a real-time basis
without shaping, storage, or integration
services.
Unbundled RECs: Pacific Northwest
Source: KEMA, Inc.
81
Environmental Impacts of Renewable Infrastructure
WhileCaliforniansaregenerallysupportiveofrenewableenergyanditsenvironmental
benefits,manycitizensareconcernedaboutproposedrenewableenergyprojectsandassociated
transmissionlinesbecauseofpotentialenvironmentalimpacts.Forexample,proposedsolar
plantslocatedintheCaliforniadesertmayaffectsensitivespecieshabitatorculturalresources
orrequirelargeamountsofwater.
Initiativesarealreadyunderwaytofacilitatetheearly
identificationandresolutionoflanduseand
environmentalconstraintstopromotetimelydevelopment
ofCaliforniasrenewablegenerationresourcesand
associatedtransmissionlines.TheRenewableEnergy
TransmissionInitiative(RETI)collaborativeprocess,
discussedinmoredetailinthetransmissionsectionlater
inthischapter,hasidentifiedandrankedrenewable
resourcedevelopmentareasandassociatedtransmission
linestodeliverrenewablepowertoloadcenters.TheRETI
Phase2AReportisoneofthedatasourcesforrankingthe
transmissionprojectstointerconnectrenewablesthatare
inthestatesbestinterests.
Tohelpaddresspotentialimpactsofnewrenewable
powerplantsandrelatedtransmissionlines,theEnergy
CommissionandCaliforniaDepartmentofFishandGame
areimplementingGovernorSchwarzeneggersExecutive
OrderS1408,whichestablishedaprocesstoconserve
naturalresourceswhileexpeditingthepermittingofrenewableenergypowerplantsand
transmissionlines.TheExecutiveOrdersprimaryobjectivesaretoidentifyandestablishareas
forpotentialrenewableenergydevelopmentandconservationareasintheColoradoand
Mojavedesertstoreducethetimeanduncertaintyassociatedwithlicensingnewrenewable
projectsonbothstateandfederallands.FederalparticipationwassecuredinNovember2008,
whenthetwostateagenciessignedaMemorandumofUnderstandingwiththeBureauofLand
Management(BLM)andU.S.FishandWildlifeServicetocreatetheRenewableEnergyAction
Team(REAT).
TheREATisdevelopingtheDesertRenewableEnergyConservationPlan(DRECP)andabest
managementpracticesanddeveloperguidancemanual.TheREATmeetsregularlytodiscuss
renewableenergyprojectpermittingissuesandtoassistdeveloperswhoarepreparing
applicationstothedifferentagencies.Federalparticipationwasfurthersupportedbythe
SecretaryoftheInteriorsMarch2009SecretarialOrder3285directingallDepartmentofthe
Interioragenciesanddepartments(whichincludetheBLMandU.S.FishandWildlifeService)
toencouragethetimelyandresponsibledevelopmentofrenewableenergy,whileprotecting
andenhancingthenationswater,wildlife,andothernaturalresources.
In August 2009, California's Natural
Resources Agency released a
comprehensive plan to guide adaptation to
climate change, becoming the first state to
develop such a strategy. Adaptation
generally refers to adjustments in natural or
human systems to actual or expected
climate changes to minimize harm or take
advantage of opportunities.
The 2009 California Climate Adaptation
Strategy Discussion Draft summarizes the
latest science on how climate change could
affect the state and recommends adaptation
strategies for the electricity sector.
The Natural Resources Agencys plan
recommends encouraging renewable energy
development in the least-sensitive
environmental areas of the state to maintain
natural habitats and healthy forests that will
further buffer the environmental impacts of
climate change.
82
TheDRECPwilldevelopaconservationstrategythatwilluseCaliforniasuniqueNatural
CommunityConservationPlanprocessandmaydevelopafederalHabitatConservationPlan
processand/oramendexistingresourcemanagementplansaccordingly.TheDRECPwillalso
coordinatewithexistingdesertconservationplanswithintheMojaveandColoradoDeserts
(i.e.,theWestMojavePlan),renewableenergydevelopmentprojectplans,theBLMsSolarPEIS,
andRETIplanningtoformanintegratedframeworkforbalancingnaturalresource
conservationandrenewableenergydevelopmentwithintheMojaveandColoradoDeserts.
OnOctober12,2009,GovernorSchwarzeneggerandSecretaryoftheInteriorKenSalazar
signedanotherMemorandumofUnderstanding(MOU)directingCaliforniaagenciesandU.S.
DepartmentoftheInterioragenciestotakethenecessaryactionstofurthertheimplementation
oftheGovernorsExecutiveOrderS1408andtheSecretarysOrder3285inacooperative,
collaborative,andtimelymanner.Tothisend,stateandfederalagencieshaveaccelerated
processingofprojectsseekingARRAfundsthatmeetthemilestonespublishedpursuanttothe
MOUsothatrenewableenergyprojectsthathavebeenpermitted
62
canmeettheDecember2010
startofconstructiondate.Thestateandfederalagenciesalsoarecoordinatingcloselytoreview
inatimelymannerotherrenewableenergyprojectsthatarenotseekingARRAfunds.
WorkontherenewableenergypermittingelementsofExecutiveOrderS1408issplitintosix
tasksincluding:1)developingtheDRECPPlanningAgreement;2)publishingabest
managementpracticesmanualforthedevelopmentofrenewableenergyprojectsbyDecember
2009;3)developingandgatheringpublicstakeholderandindependentscientificinput;4)
developingthedraftDRECPConservationStrategybyDecember2009;5)developingthedraft
DRECPbyDecember2010;and6)completingthefinaldraftDRECPenvironmentalreviewand
approvalbyJune2012.
Anotherenvironmentalissueassociatedwithrenewableinfrastructureispotentialairquality
concernswithnewbiomassfacilitiesinCalifornia.WiththeGovernorsdirectioninExecutive
OrderS0606tomeet20percentoftheRPSwithbiopower,itwillbeimportanttoaddressthese
concerns.Thereissignificantpotentialforrenewableelectricitygenerationfueledby
biomethanefromthestatesdairies,butthehighcostofemissionscontrolscaninterferewith
dairiesabilitytoobtainairpermits.Californiaisthelargestdairystateinthenation,withmore
than1.7millioncowsonabout1,800farms.Thesecowsproduce65billionpoundsofmanure
peryearthatcouldproducebiogasthatcanbeburnedtoproduceelectricity.
In2006,theEnergyCommissionapprovedgrantsforfivenewdairydigesterprojectsintheSan
Joaquinairbasinwithgeneratorstomeetthedairieselectricityneedsand,withapproved
powerpurchaseagreements,tosellexcesselectricitytolocalutilities.However,becausetheair
basinisanextremenonattainmentarea,theSanJoaquinAirQualityManagementDistrict
imposedstrictnitrogenoxide(NOx)requirementsonthesegeneratorsthatrequiredtheuseof
advancedemissioncontrolsystems.Becauseoflowmilkprices,thedairieswereunabletomeet
theincreasedcostsofinstallingemissionscontrolsandcouldnotagreetotheconditionsofthe
62
CaliforniaEnergyCommission,RenewableEnergyActionTeam,availableat:
http://www.energy.ca.gov/33by2020/documents/20091015_Milestones_REAT.PDF
83
permit.Althoughdiscussionsbetweentheairdistrict,thedairymen,theCalifornia
EnvironmentalProtectionAgency,theARB,localairdistricts,andotherstakeholdersresulted
inconditionalagreementonpermits,thesemayhavebeenthelastonesissuedfordairieswith
generators.
63
NewsolidfuelbiomassfacilitiesalsofacechallengesinobtainingNOxpermits,aswellasthe
addedchallengeintheSCAQMDofobtainingpermitstoemitparticulatematter(PM).For
example,a25MWsolidfuelbiomassprojectwouldneedpermitsforabout90tonsperdayof
PM10emissionoffsetsoremissionreductioncredits.
64
Atacostofapproximately$350,000per
poundperday(or$31.5million),thisrequirementcouldmakenewbiomassprojectsinthe
southernpartofthestatenonviablefromafinancialperspective.
Climate Change Effects on Renewable Infrastructure
Changesintheenvironmentcanalsoaffectrenewableenergy.
65
Renewableenergydependson
naturalresourceslikewater,biomass,wind,andthesun,soitcanbeparticularlysensitiveto
climatevariability.TheU.S.ClimateChangeScienceProgramhasidentifiedimpactsofclimate
changeonthecountrysrenewableenergyresources,includingchangesinavailabilityofwater,
biomass,andincomingsolarradiationaswellassignificantchangesinestablishedwind
patternsandpotentialeffectsongeothermalresources.
66
Climatechangeimpactsthataffect
aspectsofconventionalenergyfacilities,suchaspowerplantcoolingandwateravailability,
wouldalsoapplytocertainrenewabletechnologiessuchasbiomass,geothermal,andsolar
thermal.
InCalifornia,onlysmallhydroelectricfacilities,those30MWorlessinsize,areeligibleforthe
RPS.Smallhydroelectricfacilitiesprovideabout1.5percentofCaliforniaspowerbutabout13.5
percentoftotalrenewablegeneration,
67
sopotentialimpactsonprecipitationlevelsandthe
63
April10,2009,letterfromtheWesternUnitedDairymentoGovernorArnoldSchwarzenegger,
availableat:[http://www.energy.ca.gov/2009_energypolicy/documents/200904
21_workshop/comments/Letter_from_Western_United_Dairymen_to_the_Governor_041009_TN
51189.pdf].
64
CaliforniaAirResourcesBoard,facilitydetailsforBurneyMountainPower,availableat:
[http://www.arb.ca.gov/app/emsinv/facinfo/facdet.php?co_=45&ab_=SV&facid_=42&dis_=SHA&dbyr=20
07&dd=].
65
CaliforniaEnergyCommission,PotentialImpactsofClimateChangeonCaliforniasEnergyInfrastructure
andIdentificationofAdaptationMeasures,January2009,CEC1502009001,availableat:
66
UnitedStatesClimateChangeScienceProgram,EffectsofClimateChangeonEnergyProductionandUsein
theUnitedStates,February2008,areportbytheU.S.ClimateChangeScienceProgramandthe
subcommitteeonGlobalChangeResearch,availableat:
[http://www.climatescience.gov/Library/sap/sap45/finalreport/sap45finalall.pdf].
67
CaliforniaEnergyCommission,2008TotalSystemPower,see
[http://energyalmanac.ca.gov/electricity/total_system_power.html].
84
timingandrateofsnowmeltcouldaffecttheamountofelectricityprovidedbysmallhydro
facilitiesandultimatelytheircontributiontothestatesrenewablegoals.
WhilelargehydroelectricresourcesarenotRPSeligible,theyarealargesourceofcarbonfree
electricityinCalifornia.In2008,11percentofCaliforniaselectricitywasproducedfromlarge
hydroelectricpowerplants,presentlythestateslargestsourceofrenewableenergy.Thestates
hydroelectricityproductionreliesonpredictablewaterreserves.Withchangesinsnow
elevations,snowpack,andsnowmelt,lesswatermaybeavailableforhydroelectricgeneration
whenitisneededmostduringthesummer.Whenrepeateddryyearsleadtoadrought,
reservoirlevelscanbetoolowforhydroelectricpowergeneration.
Biomassgenerationsourcesincludethewastesandbyproductsfromforestryandagriculture.If
climatechangeresultsindrierconditionsorvariationsincropyield,itcouldaffectthetypeand
amountofbiomassfeedstocksavailabletoexistingandfuturebiomassfacilities.However,
higherdailyandseasonaltemperaturescanalsoaffectinsectpestanddiseaselifecyclesas
wintersbecomemilder,whichcouldincreaseforestmortality,potentiallymakingmorebiomass
fuelavailablefollowingdiseaseoutbreaksbutreducinglongtermsupplies.
Californiahasaggressivepoliciestargetingrooftopphotovoltaicsystems,whichdependboth
ontheamountofincomingsolarradiationandchangesintemperature.Analysisofsystems
outsideofCaliforniahaveshownthata2percentdecreaseinsolarradiationresultedina6
percentdecreaseintheelectricityoutputofsolarcells.
68
Windgenerationwillmostlikelybeaffectedregionallybyclimatechangeratherthanuniformly
throughoutCalifornia.AnalysisconductedbyBreslowandSailorsuggestthataveragewind
speedsintheUnitedStateswilldecreaseby1.0to3.2percentinthenext50yearsandwill
eventuallydecrease1.4to4.5percentoverthenext100years.
69
Meanwhile,geothermal
resourcescouldbeaffectedbydecreasedefficiencyduetotheincreasedambienttemperatureat
whichheatisdischarged.AccordingtotherecentassessmentbytheU.S.ClimateChange
ScienceProgram,Foratypicalaircooledbinarycyclegeothermalplantwitha330Fresource,
poweroutputwilldecreaseabout1%foreach1Friseinairtemperature.
70
Clearly,moreresearchisneededontheeffectsofclimatechangeonrenewableandlowand
noncarbonresources,including:effectsonbiomasssuppliesandtheinfluencethatthiswould
haveontheoptimalsitingofabiomassfacility;theCaliforniaspecificimpactsofclimatechange
onphotovoltaictechnologies;andthelocationandscaleofchangesinCaliforniaswind
68
FidjeA.andT.Martinsen,2006:EffectsofClimateChangeontheUtilizationofSolarCellsintheNordic
Region.ExtendedabstractforEuropeanConferenceonImpactsofClimateChangeonRenewableEnergy
Sources.Reykjavik,Iceland,June59,2006.
69
BreslowP.andSailorJ.,VulnerabilityofWindPowerResourcestoClimateChangeintheContinentalUnited
States,TulaneUniversity,April2001.
70
Bull,S.R.,D.E.Bilello,J.Ekmann,M.J.Sale,andD.K.Schmalzer,EffectsofClimateChangeonEnergy
ProductionandUseintheUnitedStates,February2008,areportbytheU.S.ClimateChangeScience
ProgramandthesubcommitteeonGlobalChangeResearch.Washington,D.C.
85
patterns,especiallyinareastargetedforextensivewindenergydevelopment.Inaddition,the
2009CaliforniaClimateAdaptationStrategyDiscussionDraft
71
recommendsusingtheEnergy
CommissionsPIERregionalclimatemodelingandrelatedstudyeffortstoassessthepotential
impactsofclimatechangeonenergyinfrastructurefromsealevelrise,precipitation,and
temperaturechangesandotherimpacts.
Renewable Energy and Reliability
Thereareseveralwaysrenewableresourcescanaffectenergyreliability.Renewableresources
helpreducethestatesdependenceonnaturalgas,makingthestatelessvulnerabletonatural
gassupplydisruptions.Byreducingtheamountofnaturalgasneededintheelectricitysector,
renewablescouldalsofreeupmorenaturalgastobeusedforindustrialprocessesorresidential
cookingandheating.Inaddition,diversifyingthestateselectricityportfolioreducescustomer
riskinmuchthesamewaythatdiversifyinganinvestmentportfolioreducesfinancialrisk.
However,notallrenewablesprovidetheoperatingcharacteristicsthatthesystemneedsto
maintainlocalareareliability,andintegratingcertainrenewabletechnologiescanmakeitmore
difficulttooperatethesystemreliably.Necessaryoperatingcharacteristicsincludeproviding
baseloadpowerthatcanmeetdemandaroundtheclockandthroughouttheyear,peaking
powerthatmeetsdemandduringhotsummermonths,rampingabilityinresponsetochanging
demand,andvoltagesupport.
Challengesassociatedwithintegratingrenewablesintothesystemarecoveredinmoredetailin
Chapter3.Simplyput,Californiassystemoperatorsmustconstantlybalancechangingsupply
anddemandtoprovidereliableelectricityandtoensurethattheelectricgridremainsstable.
Whilegeothermalandbiomassfacilitiescanprovidebaseloadpower,intermittentresources
likewind,hydro,andsolaroperatewhennatureallowsandarethereforenotalwaysavailable
tomeetsystemneedsduringpeakhours.Intermittentresourcescanalsodropofforpickup
suddenly,requiringsystemoperatorstoquicklycompensateforsuddenchanges.Forexample,
photovoltaicarraysareverysensitivetocloudcover,whichcancausegenerationtodrop
substantiallyinlessthanaminuteandjumpbacktofullgenerationafewminuteslater.
72
Naturalgasplantstendtoprovidetheflexibilitythesystemneedsforpeaking,cycling,and
somebaseloadoperation.Becauseoftheengineeringrealitiesofhowthesystemoperates,
naturalgasplantscansupporttheintegrationofrenewableresourcesbyprovidingthe
71
CaliforniaNaturalResourcesAgency,2009CaliforniaClimateAdaptationStrategyDiscussionDraft,
August2009,availableat:[http://www.energy.ca.gov/2009publications/CNRA10002009027/CNRA
10002009027D.PDF].
72
Curtright,AimeeE.andJayApt.,Applications:TheCharacterofPowerOutputfromUtilityScale
PhotovoltaicSystems,ProgressinPhotovoltaics:ResearchandApplications,2008,16:241247,see
[http://www.clubs.psu.edu/up/math/presentations/CurtrightApt08.pdf].Seealso,DanRastler,EPRI,
presentationattheApril2,2009,IEPRworkshop,availableat:
[http://www.energy.ca.gov/2009_energypolicy/documents/200904
02_workshop/presentations/0_3%20EPRI%20%20Energy%20Storage%20Overview%20
%20Dan%20Rastler.pdf].
86
operationalcharacteristicsthesystemneedstooperatereliably.Thechallengewillbetoidentify
whereandwhattypesofnaturalgasplantswillbestallowrenewablestobeintegratedintothe
systemtomeetrenewablegoalswhilemaintainingreliability.Othersolutionssuchasenergy
storageandhybridrenewableplants,arealsopossibleandcouldbepreferableinthelonger
termasmoreaggressiveclimatemitigationtargetsareaddressed.
Anotherissuewithintegratinglargeamountsofrenewablesintothesystemisthepotentialfor
overgeneration,particularlyinthespringwhenthereisaneedtospillwaterstoredindamsto
makeroomforsnowmelt.Overgenerationiswhengenerationexceedsdemanddespitethe
actionsbythesystemoperatortoreducegeneration.Overgenerationcanleadtocircumstances
wheremarketpricesforelectricityactuallybecomenegativeasthesystemoperator,tomaintain
systemoperations,mustliterallypayadjacentbalancingauthoritiestotaketheexcessenergy.
Onestrategytoimprovereliabilitybyaddressingthevariabilityofrenewableresourcesand
overgenerationconcernsistheuseofutilityscaleanddistributedenergystorage,whichis
discussedinmoredetailinChapter3.Energystorageprovidestheabilitytomakebestuseof
renewablegenerationfacilitiesbyaddressingpotentialmismatchesbetweengenerationand
loadwhilealsoaddressingotherissueslikerampingratesandpowerquality.Largeutilityscale
energystoragetechnologieslikepumpedhydroelectricstorage,compressedairenergystorage,
orlargemultimegawattbatterystoragesystemscanstorerenewableenergygeneratedoffpeak
forlateruseduringpeakperiodsortoprovidefirming.Pumpedhydroelectricstorageuses
waterpumpedfromalowerelevationreservoirtoahigherelevationusinglowcostoffpeak
electricpower(includingrenewableenergy)torunthepumps.Thewateristhenallowedto
returnandgenerateelectricityduringtimeswhentherenewablegenerationneedsfirmingorto
matchtherenewableloadtotheneedsoftheutilityelectricalsystem.Compressedairenergy
storageusesacompressortopressurizeastoragereservoirusingoffpeakenergyandthen
releasestheairthroughaturbineduringonpeakhourstoproduceenergy.Largecompressed
airenergystoragesystemsuseundergroundcavernssuchasdepletednaturalgasminesto
storetheairandcanprovideenergystorageforlongperiodsoftime.Batteryenergystorage
technologyhasimprovedovertimetothepointwherethereareseveralemergingbattery
technologiesthatcanprovideutilityscaleenergystorage.
Anothertooltohelpincreasereliabilitybyreducingtheimpactsofrenewablevariabilityonthe
systemistoimprovetheabilitytoforecastexpectedgenerationfromintermittentresources.
Progresshasbeenmadeinreducingforecastingerrorinhouraheadanddayaheadgeneration
fromwindfacilities,butadditionalworkisneededtoimproveforecastingcapabilityforsolar
facilities.
Renewable Energy and the Economy
Aseconomicconcernscontinuetodominatethedailynews,theUnitedStatesnew
administrationisshiftingenergypolicystrategiestoembraceanewcleanenergyeconomy,
makingdevelopmentofrenewableenergyresourcespartofthenationseconomicrecovery
plan.
87
Atthesametime,Californiascitizenscontinuetofacetheriskofpotentialsustainedhigh
naturalgasprices.In2008,45.7percentofthestateselectricitycamefromnaturalgasfired
generation,upfrom36.5percentin2002.Becausetheelectricitygenerationsectoristhestates
largestconsumerofnaturalgas,priceincreasesandvolatilitycanhavemajoreffectson
electricitypricesandontheoperatingcostsofexistingandnewnaturalgasplantsthatare
neededtomeetCaliforniasincreasingelectricitydemand.Diversifyingtheelectricitysystemby
addingrenewableshelpstoreducetheseeffects.
Californiahasalreadyinvestedbillionsofdollarstopromoterenewableenergy.SenateBill1
(Murray,Chapter132,Statutesof2006)enacteda$3.35billionsetofsolarincentiveprogramsto
achieve3,000MWofsolarenergysystemsby2016.Theprogramsareadministeredbythe
EnergyCommission($400million),CPUC(about$2.1billion),andpubliclyownedutilities
($784million).TheCPUCisresponsibleforprovidingincentivestothenonresidentialand
existingresidentialmarketsinIOUserviceareas.TheEnergyCommissionsNewSolarHomes
Partnershipprogramoffersincentivestoencouragesolarinstallations,withhighlevelsof
energyefficiency,intheresidentialnewconstructionmarketforIOUserviceareas.Publicly
ownedutilitiesareresponsibleforsolarincentiveprogramsintheirserviceareas.
TheEnergyCommissionsRenewableEnergyProgramthatwasestablishedin1998represents
anadditional$2.1billiontosupportthecontinuedoperationofexistingrenewablefacilitiesand
thedevelopmentofnewrenewablegeneratingfacilitiesandemergingrenewabletechnologies.
73
TheconsumereducationcomponentoftheRenewableEnergyProgramalsofundedthe
developmentoftheWesternRenewableElectricityGenerationInformationSystem,which
tracksrenewablegenerationintheWesternElectricityCoordinatingCouncilareatoensurethat
generationiscountedonlyonceforpurposesofCaliforniasRPS.
AlthoughtheRenewableEnergyProgramwasestablishedpriortopassageofthestatesRPS,it
isanimportanttooltohelpthestateachieveitsRPSandGHGemissionreductiongoals.The
programhassupported4,500MWofexistingfacilitiesandhashelpeddevelopnearly500MW
ofnewlargescalegeneratingcapacityaswellasabout130MWfromnewcustomerscale
facilities.TheprogramisalsoensuringthatCaliforniacanreliablytrackandverifyrenewable
generationclaimedtomeettheRPS.However,authorizationtocollectfundsfortheprogramis
slatedtoendJanuary1,2012.BecauseoftheimportanceoftheRenewableEnergyProgramin
helpingtosupportthestatesrenewableenergygoals,theEnergyCommissionrecommends
thattheLegislatureextendthecollectionofpublicgoodschargefundingfortheprogram
through2020.
NewrenewablepowerplantsthatarebeingproposedanddevelopedinCaliforniatomeetthe
statesRPSalsorepresentasignificantinvestmentinrenewableenergy.AsofAugust2009,nine
solarthermalprojectswereunderreviewbytheEnergyCommissionandtheBLMtotaling
73
FundingfortheNewSolarHomesProgramundertheRenewableEnergyProgramisincludedinthe
totalfortheCaliforniaSolarInitiative.See
[http://www.energy.ca.gov/renewables/quarterly_updates/20091Q_FIANACIAL_SUMMARY.PDF]fora
descriptionofRenewableEnergyProgramfundingexpendituresasofMarch2009.
88
morethan4,500MWofnewrenewablecapacity.Anadditional19solarthermalprojects
totaling5,600to5,900MWhavebeenannouncedbuthavenotyetappliedtotheEnergy
Commissionforcertification.
74
Theseprojectsrepresentbillionsofdollarsofcapital
investments,aswellassignificantjobandtaxbenefitsfromtheconstructionandcontinued
operationoftheprojectsthemselves.
Integratingrenewableresourcesintotheelectricitysystemhaspotentialeconomic
consequencesprimarily,increasedpotentialcosts. Totheextentthatnaturalgasremainsa
lowcostfuel,gasfiredgenerationcanhelptheelectricitysystemabsorbthecostsof
transitioningtoahigherlevelofrenewableenergyintheelectricitysystem.Butdeterminingthe
actualcostsofincreasedlevelsofrenewablesisdifficult.Coststudiestodatehavewidely
varyingassumptions,uncertainties,andapproaches.However,studyresultsareinfluencedby
somecommonfactors:
Estimatesoffuturenaturalgasprices
Estimatesofthecostofgenerationforgasfiredandrenewablegeneratingtechnologies,
includingthepotentialcostofGHGallowancesforgasfiredgeneration,costsforsitingand
permitting,andthecostofcapitaltofinancenewrenewableprojects
Availabilityoftaxcreditsandotherincentivesforrenewablegeneration
InJune2009,theEnergyDivisionoftheCPUCissuedthepreliminaryresultsofastudyonthe
impactsofthe33percentby2020renewabletargetthatexaminedfourdifferentpotential
scenariosandidentifiedthecostsandtradeoffsofeachapproach.
75
Thestudysuggeststhat
achieving33percentrenewableenergycouldincreasecostsbyabout10percentcomparedtoan
allgasscenarioandabout7percentcomparedtosimplymaintaining20percentrenewables
through2020.Thestudyalsoindicatedthatthestateneedstobuildfourmajornew
transmissionlinesatacostof$4billionforthe20percentreferencecase,whichholdsrenewable
energyat20percentofretailsalesthrough2020.Tomeeta33percentby2020RPStarget,the
studyindicatesaneedforsevenadditionaltransmissionlinesatacostof$12billionbut
assumesthattheARBsClimateChangeScopingPlangoalsforenergyefficiency,combinedheat
andpower,androoftopsolararenotmet.
Becausethecostofgenerationisoneoftheimportantvariablesinstudiesevaluatingthecostsof
movingtoincreasedlevelsofrenewables,theEnergyCommissionhascontinuedtoupdateits
CostofGenerationModeltoprovideaconsistentsetofassumptions.TheCostofGeneration
Modelwasintroducedinthe2003IEPRandhasbeenrevisedineachIEPRcycletoimprovethe
74
Announcedreferstoprojectsthathavebeenpubliclyannouncedinthenewsmedia,havepower
purchaseagreementspendingwithorapprovedbytheCaliforniaPublicUtilitiesCommission,orhave
madeofficialdeclarationsofintent.See[http://www.energy.ca.gov/siting/solar/index.html]fora
completelistofprojects.
75
AnneGilletteandJaclynMarks,CaliforniaPublicUtilitiesCommission,33%RenewablePortfolio
StandardImplementationAnalysisPreliminaryResults,June2009,availableat:
[http://www.cpuc.ca.gov/NR/rdonlyres/1865C207FEB543CF99EB
A212B78467F6/0/33PercentRPSImplementationAnalysisInterimReport.pdf].
89
modelsaccuracy,flexibility,andtransparency.Thegoalofthemodelistohaveasinglesetof
currentcostestimatesthatcanbeusedinenergyprogramstudiesattheEnergyCommission
andelsewhere.
TheEnergyCommissions 2009ComparativeCostofCaliforniaCentralStationElectricityGeneration
TechnologiesReportupdatedtheestimatesoflevelizedcoststhatwerepreparedforthe2007
IEPR.Levelized,orannualized,costsareequaltothenetpresentvalueofcurrentandfuture
annualcosts,whichallowstechnologieswithdifferentannualcoststobecomparedwitheach
other.Thecurrentversionofthemodelhasbeenimprovedtocapturelongtermchangesin
technologycostsovertime.Italsonowincludesrangesofcostsforeachtechnology,recognizing
thattherangeofcostforatechnologycanbemoresignificantthandifferencesinaveragecosts
betweentechnologies.Singlepointestimatesdonotreflectactualmarketdynamicsorthewide
arrayofcomponentcosts,operationalfactors,orunpredictablefuturetaxbenefits.
Forthe2009IEPR,theEnergyCommissionstaffupdatedthelevelizedcostestimatesforplants
thatcouldbedevelopedbyIOUsandpubliclyownedutilities,aswellasmerchantplants
financedbyprivateinvestorsthatsellelectricitytothecompetitivewholesalepowermarket.
Theupdatealsoincludedlongtermchangesincostvariablesthatdeterminelevelizedcost,the
mostsignificantofwhichisinstantcost.Instantcost,sometimesreferredtoasovernightcost,is
theinitialcapitalexpenditure
Basedoninitialcapitalexpenditure,windandsolartechnologiesshowasignificantcostdecline.
Solarphotovoltaictechnologyhasshowndramaticcostchangessince2007,andisexpectedto
showthemostimprovementofallthetechnologiesevaluatedinthemodel,bringingitscapital
costwithinrangeofthatofnaturalgasfiredcombinedcycleunits.
76
Ingeneral,IOUplantsarelessexpensivethanmerchantfacilitiesbecauseoflowerfinancing
costs.However,themodelindicatesthatmerchantplantsforsomeoftherenewable
technologies,suchasthesolarunits,becomelessexpensivebecauseoftheeffectofcashflow
financingandtaxbenefits.
Aspartofthecostanalysis,theEnergyCommissioncompareditscostassumptionsfor
renewabletechnologieswiththoseusedintheRETIprocessandintheCPUCsevaluationof
thecostofRPSimplementation.TheEnergyCommissionscostassumptionsweregenerally
consistentwiththeRETIassumptionswiththeexceptionofthecostofsingleaxisPV,which
waslower.RelativetotheCPUCscostassumptions,theEnergyCommissionsresultswere
higherforsolarthermalpowerplantsandlowerforwind.
Evaluationofthegenerationcostsforrenewabletechnologiesisongoing,anditisdifficultat
thispointtodrawconcreteconclusionsfromtheanalysestodate.However,inlookingatthe
inputsfordeterminingthecostofrenewablegenerationtechnologies,thereisaclearneedfor
76
Fordetailedtablesshowingindividualtechnologycosts,seeCaliforniaEnergyCommission,2009
ComparativeCostofCaliforniaCentralStationElectricityGenerationTechnologiesReport,August2009,CEC
2002009017SD,pp.1619,availableat:[http://www.energy.ca.gov/2009publications/CEC2002009
017/CEC2002009017SD.PDF].
90
futurestudiestoconsidereitherqualitativelyorquantitativelymacroeconomicand
externalityfactorsassociatedwithrenewablegenerationthatmayinfluencecosts.Factorsthat
shouldbeconsideredinclude:
CO2abatementcosts,includingcarboncaptureandstorage
Environmentalsensitivityandlanduseconstraints
Permittingrisk
Transmissionlimitationsandequityissuesrelatedtowhobearsthecostofnew
transmission
Systemintegrationcostsandsystemdiversitybenefits
Availabilityoffinancingandtaxcredits
Macroeconomicbenefits(jobscreation,security,fueldiversity,etc.)
Naturalgaspriceandwholesalepriceeffectsfromincreasedpenetrationofrenewables
Costsofenergystoragetechnologies
BecausecostscanchangedramaticallymoreoftenthanthebiennialIEPRcycle,thereisaneed
forongoingcostanalysiseffortsintegratedacrossutility,community,andbuildingscale
applicationsofrenewableenergytechnologies.Also,becauselevelizedenergycostsvalueeach
kilowatthour(kWh)deliveredtothegridequallyregardlessofthetimeitisdeliveredandits
impactontheremainderofthesystem,morecomprehensivecostanalysisshouldbe
complementedbyvalueanalysisthatsupportsplanningforleastcostoverallelectricsystem
operation.
Recognizingthatrenewablesoftenaremorecostlythanconventionalenergysources,theRPS
lawpriorto2008setasideafixedamountofpublicgoodschargefundingtooffsetpotentially
highercoststotheIOUsofprocuringrenewableenergy.In2008,legislativeactiontransferred
administrationofthesefundsfromtheEnergyCommissiontotheCPUC,refunded$462million
inunusedfundstotheIOUs,andeliminatedthecollectionofthatportionofthepublicgoods
charge.Thereisnowacostlimitationforeachutilitythatisequaltotheactualamountof
fundingcollectedforthispurposefrom20022007plustheprojectedamountthatwouldhave
beencollectedfrom20082011.
UndertheRPSlaw,oncethecostlimitationisreached,theCPUCcannotrequireIOUsto
purchaseanyadditionalrenewableenergythatismoreexpensivethanthebenchmarkmarket
pricereferentpricesetbytheCPUC.IOUscan,however,voluntarilyprocurerenewable
energypricedabovethemarketpricereferent,andtheCPUCisallowedtoapproverecoveryof
theabovemarketcostsofthosecontractsthroughrates.AsofMay2009,PG&EandSDG&Ehad
reachedtheircostlimitations($381.9millionand$69million,respectively),andasofSeptember
2009,SCEappearstohavereacheditscostlimitationaswell.
77
WiththecostlimitationreachedbythethreeIOUs,thestateneedsanotherapproachto
maintaindownwardpressureonthecostsofrenewables.Somerecentstudiessuggestthatwell
designedfeedintariffsfixed,longtermpricesforrenewableenergycanhelpwiththe
77
CaliforniaPublicUtilitiesCommissionResolutionE4253,September24,2009,page2,
[http://docs.cpuc.ca.gov/word_pdf/AGENDA_RESOLUTION/107332.pdf].
91
developmentofrenewableresourcesatlowercoststhanotherpolicies.
78
Feedintariffscanbe
basedonageneratorscostofgenerationplusareasonableprofit,onthevaluethatgenerator
providestothesystem(suchasdeliveringduringpeakperiods),oronahybridofthetwo.A
costbasedapproachcanbemosteasilytailoredtoputdownwardpressureoncosts,buta
hybridapproachmaybenecessarybecauseutilitiesandstatesmaynothavethelegalauthority
tosetwholesaleelectricitypricesbasedonthecostofgeneration.
79
Ifacombinedapproachis
used,careisneededtomaintaintransparency,certainty,andaclearlinktothecostof
generationforfeedintariffstostimulatedevelopmentofrenewableenergy.
Insettingfeedintariffs,therearetwoimportantconsiderations.First,tokeepdownward
pressureoncosts,feedintariffsshouldnotbeonesizefitsall,butinsteadshouldbebased
onthesizeandtypeofrenewableresource.Forexample,thecostofgeneratingenergyfroma
100MWwindfarmismuchlessthanthecostofgeneratingenergyfroma2MWfieldof
photovoltaicpanels.Differentiatingfeedintariffsbytypeandsizecanensureagoodmixof
newrenewableenergyprojectsandavoidpayingtoomuchforsometechnologiesandtoolittle
forothers.Settingadifferentfeedintariffforeachtypeofrenewableenergytechnologycan
alsostimulatecompetitionamongequipmentmanufacturerstobringcostsdownandmaximize
profitmarginsforprojectdevelopers.
80
ThisapproachisbeingusedinGermany,wherefeedin
tariffsarestimulatingdevelopmentinabroadrangeofrenewableenergytypesandproject
sizes.
Second,onceacontractissigned,theoriginalpriceshouldbesetforthelifeofthecontractto
providerevenuecertaintythatisneededforprojectstogetfinancing.Toencouragefaster
renewabledevelopment,lowertariffscouldbeofferedforprojectsthatcomeonlineinlater
years,withtherateofdeclineforeachfeedintariffrevisitedatspecifiedintervalstoensureitis
consistentwithmarketconditions.Forexample,solidfuelbiomassfacilitiescaninvestinmore
efficientequipmenttoreducetheircosts,buttheyhavelittlecontroloverthecostsofcollecting
78
Studiesinclude:SummitBlueConsulting,&RockyMountainInstitute,(2007),Ananalysisofpotential
ratepayerimpactofalternativesfortransitioningtheNewJerseysolarmarketfromrebatestomarketbased
incentives,FinalReport,Boulder,CO:SummitBlueConsulting,preparedfortheNewJerseyBoardof
PublicUtilities,OfficeofCleanEnergy;deJager,DavidandMaxRathmann(EcofysInternational,BV),
PolicyInstrumentDesigntoReduceFinancingCostsinRenewableEnergyTechnologyProjects,October2008,
PECSNL062979,InternationalEnergyAgencyImplementingAgreementonRenewableEnergyTechnology
Deployment,availableat:[http://www.iearetd.org/files/RETD_PID0810_Main.pdf];Ragwitzetal
(OPTRES),AssessmentandOptimizationofRenewableEnergySupportSchemesintheEuropeanElectricity
Market,FinalReport,February2007,EuropeanCommission,availableat:
[http://www.optres.fhg.de/OPTRES_FINAL_REPORT.pdf];andNREL,FeedinTariffPolicy:Design,
Implementation,andRPSPolicyInteractions,KarlynnCory,TobyCouture,andClaireKreycik,March
2009,p.9,availableat:[http://www.nrel.gov/docs/fy09osti/45549.pdf].
79
Formoreinformation,seeCaliforniaPublicUtilitiesCommissionRulemaking(R.)0808009.
80
Grace,Robert,W.Rickerson,K.Corfee,K.Porter,andH.Cleijne(KEMA),CaliforniaFeedInTariffDesign
andPolicyOptions,FinalConsultantReport,preparedfortheCaliforniaEnergyCommission,
CEC3002008009F,pp.2425,availableat:[http://www.energy.ca.gov/2008publications/CEC3002008
009/CEC3002008009F.PDF].
92
andtransportingfueltotheirfacilities.Ifthecostofbiomassfuelortransportrisessignificantly,
thefeedintariffmayneedtoberevisedtoreflectmarketrealities.Ontheotherhand,iffeedin
tariffsprovetoosuccessfulatbringingrenewableenergyonlinefasterthanwhatisneededto
meetthestatesrenewablegoals,acapcouldbeusedtocontaincosts.However,acappedfeed
intariffraisessomedoubtsfordevelopersaboutwhethertheywillobtainafeedintariff
contract.Itcanalsocreateuncertaintyformanufacturersregardinglongtermmarketgrowth
unlessthecapissetasalongtermtarget.
TherenewableenergydatausedintheEnergyCommissionsstaffCostofGenerationModel
couldprovideagoodstartingpointfordevelopingeithercostbasedorhybridfeedintariffsin
California.AreviewoffeedintariffratesettingprocessesinEuropeandtheUnitedStates
suggeststhatusingcostofgenerationdatatocalculatefeedintarifflevelswouldrequire
decisionsonthefollowingkeycriteria:
Thelevelofreturnonequityand/ordebtconsistentwiththeriskprofileofthespecific
technologies.
Theownershipstructure,iftariffswillbedifferentiatedbyownertype.
Thedegreeofleverage(debtversusequity).
Howcostsareallocatedfortransmission,distribution,andinterconnection.
Howtoaddresstherangeofcostsforeachtechnologytobalancecoststoratepayersagainst
stimulatinginvestment.
Howcomplextheratesettingmodelwillbeandtheoptimallevelofstakeholder
involvement.
Overthepastseveralyears,theEnergyCommissionhasexploredthepotentialbenefitsofa
feedintariffinCaliforniaasawaytoacceleraterenewableenergygenerationandincreasethe
likelihoodofmeetingCaliforniasRPSgoals.The2007IEPRrecommendedsettingfeedintariffs
initiallyattheCPUCsmarketpricereferentforallRPSeligiblerenewablesupto20MWwhile
continuingtoexplorefeedintariffsforlargerprojects.The2008IEPRUpdatereiteratedthis
recommendation,addingthatfeedintariffsforlargerprojectsshouldincludemusttake
provisionsaswellascostbasedtechnologyspecificpricesthatgenerallydeclineovertimeand
arenotlinkedtothemarketpricereferent.
Feedintariffsforsmallerprojectsmakesenseasaninterimsteptowardbroaderdevelopment
offeedintariffsbecausesmallerprojectscaninterconnecttothegridatthedistributionlevel
andtypicallydonotrequirenewtransmissioninvestment.
81
Also,smallerprojectsoftendonot
requireasextensiveanenvironmentalrevieworaslengthyapermittingprocessaslarger
81
KEMA,CaliforniaFeedInTariffDesignandPolicyOptions,May2009,CEC3002008009F,availableat:
[http://www.energy.ca.gov/publications/displayOneReport.php?pubNum=CEC3002008009F].
93
projects.AnalysisintheRETIprocesshassuggestedthatthereistechnicalpotentialforasmuch
as27,500MWofwholesaledistributedPVprojectsupto20MWinsizenearsubstations.
82
Opinionsregardingtheeffectsoffeedintariffsvary.Somepartiesareconcernedthatfeedin
tariffswouldbetoocostlyandwouldincreaseelectricityratesforutilitycustomers.Others
arguethatprovidingclearupfrontfeedintariffguidelineswouldreducethetimeandexpense
ofobtainingalongtermcontractbyallowingpreapprovalofprojectsthatmeetthose
guidelines.
83
Feedintariffscouldalsoreducefinancingcostsbyprovidingincreasedcertainty
forinvestors.
84
Andaswithallstrategiestoreducetheimpactsofclimatechange,determining
thecosteffectivenessoffeedintariffstoincentivizerenewableenergymustfactorinthe
potentialhealthandenvironmentalcostsofnotmeetingthestatesGHGemissionreduction
goals.
FeedintariffshavealreadyproventobecosteffectiveinsomeEuropeancountries.In
Germany,forexample,thecostofthefeedintariffforpowercustomersin2007wasquitesmall:
onlyabout3percentofthepriceofpowerforresidentialcustomers.
85
TheNationalRenewable
EnergyLaboratorystatesthattheEuropeanexperiencewithfeedintariffsshowsthat
renewableenergydevelopmentandfinancingcanhappenmorequicklyandoftenmorecost
effectivelythanundercompetitivesolicitations.
86
WithintheU.S.,theGainesvilleRegionalUtilitiesinGainesville,Florida,hasidentifiedfeedin
tariffsforsolarPVasitsleastriskandmostcosteffectivemethodforsecuringrenewables,
notingthelowriskandguaranteedrateofreturnasfavorabletoinvestorsandtheminimal
effectonitscustomerrates,whichareaboutaverageforFlorida.
87
82
CaliforniaEnergyCommission,RETIPhase1B,January2009,availableat:
[http://www.energy.ca.gov/2008publications/RETI10002008003/RETI10002008003F.PDF].
83
RightCycleandFITCoalition,writtencommentsforMay28,2009,IEPRworkshop,availableat:
28_workshop/comments/RightCycle_and_the_FIT_Coalition_Comments_TN_51944.pdf].
84
deJager,DavidandMaxRathmann(EcofysInternational,BV),PolicyInstrumentDesigntoReduce
FinancingCostsinRenewableEnergyTechnologyProjects,October2008,PECSNL062979,International
EnergyAgencyImplementingAgreementonRenewableEnergyTechnologyDeployment,availableat:
[http://www.iearetd.org/files/RETD_PID0810_Main.pdf].
85
HansJosefFell,memberoftheGermanBundestag,March2009,FeedinTariffforRenewableEnergy:An
EffectiveStimulusPackagewithoutNewPublicBorrowing,p.21,availableat:
[http://www.boell.org/docs/EEG%20Papier%20engl_fin_m%C3%A4rz09.pdf].
86
NREL,FeedinTariffPolicy:Design,Implementation,andRPSPolicyInteractions,KarlynnCory,Toby
Couture,andClaireKreycik,March2009,p.9,availableat:
[http://www.nrel.gov/docs/fy09osti/45549.pdf],referenceslistedonpp.1417.
87
CommentsbyJohnCrider,GainesvilleRegionalUtilities,May28,2009,IEPRworkshop,transcriptpp.
119120,availableat:[http://www.energy.ca.gov/2009_energypolicy/documents/200905
28_workshop/20090528_TRANSCRIPT.PDF].
94
Feed-In Tariffs and Transmission
Transmission remains one of the major
barriers to meeting Californias renewable
energy goals, and while feed-in tariffs alone
are not a solution, they could be structured to
coordinate the development of renewable
projects and the transmission lines needed to
access those projects.
Several countries, including Germany, Spain,
and France, have created feed-in tariffs to
target specific locations and technologies.
Under Germanys feed-in tariff, for example,
developers receive higherincentives for
developing off-shore wind in deeperwaters
and further from shore. China is also
beginning to use a geographic approach to
feed-in tariff development that uses
competitive bidding to set feed-in tariffs for
specific areas.
In California, utility solicitations for RPS
energy do not coincide with the permitting or
construction of transmission expansions or
extensions required to access renewable
resources. This can result in facilities being
selected that will depend on transmission
expansion that may not be actively pursued in
a reasonable time frame. Tying feed-in tariffs
to areas where transmission lines are
permitted and construction funding is
committed could help bring renewable
generation on-line as soon as a new
transmission lineis commissioned, allowing
the transmission and generation facilities to
be developed in parallel.
InCalifornia,IOUshaveofferedafeedintariffsince
2008forprojectsupto1.5MWbasedonthemarket
pricereferent.
88
AsofAugust2009,thisfeedintariffhas
resultedinonly14.5MWofcontractedcapacity,
suggestingthatthemarketpricereferentdoesnot
provideenoughrevenuetostimulatedevelopmentof
smallscalerenewableprojects.TheCPUCisconsidering
expandingitsfeedintariffstorenewableprojectsas
largeas10or20MW.
89
OnMarch27,2009,theCPUCadministrativelawjudge
(ALJ)inRulemaking0808009filedanEnergyDivision
staffproposalforcomment.Thestaffproposaladdresses
thedesignandcontracttermsforanexpandedfeedin
tariffprogramwitheligibilityforprojectsupto10MW
insize.Italsoproposestermsandconditionstoinclude
inastandardfeedintariffcontractforprojectsbetween
1.5MWand10MWinsize.Thestaffproposaldoesnot
considerpricingforanexpandedprogram,butassumes
thatpriceswillcontinueatthecurrentmarketprice
referentlevel.
OnAugust27,2009,theALJfiledanadditionalstaff
proposalforcomment.Theadditionalproposal
addressesapricingmechanismforsystemside
distributedgeneration,whichEnergyDivisionstaff
assertsisconsistentwiththeprogramgoals,guiding
principles,andthefeedintariffproposalfiledonMarch
27,2009.Thestaffpricingproposalfocusesonsystem
siderenewabledistributedgeneration,definedassmall
projects(from1to20MW)thatexportalloftheprojectselectricitytotheutilityandconnectto
thedistributiongrid.Neitheroftheseproposalstakesintoaccountpotentiallegalissuesraised
bypartiesinlegalbriefsfiledinJuneandJuly2009onthequestionoffederalandstate
jurisdictioninsettingthepricepaidtoawholesalegeneratorbyautilityunderafeedintariff.
88
CaliforniaPublicUtilitiesCommission,SummaryofFeedinTariffs,availableat:
[http://www.cpuc.ca.gov/PUC/energy/Renewables/feedintariffssum.htm].Seealso,CaliforniaPublic
UtilitiesCommissionEnergyDivision,ResolutionE4137,February2008,
[http://docs.cpuc.ca.gov/PUBLISHED/AGENDA_RESOLUTION/78711.htm].
89
SeeCPUCR.0808009,AdministrativeLawJudgesRulingonAdditionalCommissionConsideration
ofaFeedinTariff,seehttp://docs.cpuc.ca.gov/efile/RULINGS/99105.pdfandAdministrativeLaw
JudgesRulingRegardingBriefsonJurisdictionintheSettingofPricesforaFeedinTariff,availableat:
[http://docs.cpuc.ca.gov/efile/RULINGS/101672.pdf].
95
Californiastwolargestpubliclyownedutilitiesarealsodevelopingfeedintariffs.TheLADWP
isdevelopingafeedintariffforsolaronrooftopsofpublicorganizationsthatarenoteligiblefor
taxcredits,suchastheLosAngelesUnifiedSchoolDistrict,LosAngelesCommunityCollege
District,theUniversityofCalifornia,andCaliforniaStateUniversity.
90
SMUDisalsomoving
forwardwithafeedintariffbeginninginJanuary2010thatisaimedatsystemsupto5MW
connectedtoSMUDslocaldistributionsystem,withasystemwidecapof100MW.
91
Thefeed
intariffappliestobothrenewableandfossilfuelgenerationtechnologies.
Distributed Generation and Combined Heat and Power
ThenextelementinCaliforniasloadingorderformeetingnewelectricityneedsisdistributed
generationandCHP.Asstatedinthe2005EnergyActionPlan,Aftercosteffectiveefficiency
anddemandresponse,werelyonrenewablesourcesofpoweranddistributedgeneration,such
ascombinedheatandpowerapplications.
92
Distributedgenerationresourcesaregridconnectedorstandaloneelectricalgenerationor
storagesystems,connectedtothedistributionlevelofthetransmissionanddistributiongrid,
andlocatedatorverynearthelocationwheretheenergyisused.Thebenefitsofdistributed
generationgofarbeyondelectricitygeneration.Becausethegenerationislocatednearthepoint
whereitisneeded,distributedgenerationreducestheneedtobuildnewtransmissionand
distributioninfrastructureandalsoreduceslossesatpeakdeliverytimes.Customerscanuse
distributedgenerationtechnologiestomeetpeakneedsortoprovideenergyindependenceand
protectagainstoutagesandbrownouts.
Californiaispromotingdistributedgenerationtechnologiesthroughsuchprogramsasthe
CaliforniaSolarInitiative,theSelfGenerationIncentiveProgram,theNewSolarHomes
Partnershipprogram,andtheEmergingRenewablesProgram,allofwhichsupportdistributed
generationonthecustomersideofthemeter.Ontheutilitysideofthemeter,effortstosupport
distributedgenerationincludethefeedintariffforsmallrenewablegenerators(discussedinthe
earliersectiononrenewableenergyresources)andthefeedintariffforsmall,new,highly
efficientCHPtobeimplementedunderAB1613(Blakeslee,Chapter713,Statutesof2007).The
CPUCopenedarulemakinginJune2008toimplementtherequirementsofAB1613,including
establishingthepoliciesandproceduresforpurchasingelectricityfromnewCHPsystems,and
theEnergyCommissionisintheprocessofdevelopingguidelinesestablishingtechnical
eligibilitycriteriaforprogramstobedevelopedbytheCPUCandpubliclyownedutilities.
AssemblyBill1613requiresthattheguidelinesbeadoptedbyJanuary1,2010.
90
CommentsbyLosAngelesDepartmentofWaterandPoweratMay28,2009,IEPRworkshop,transcript
p.170.
91
SacramentoMunicipalUtilityDistrictnewsrelease,July17,2009,availableat:
[http://www.smud.org/en/news/Documents/09archive/071709_smud_feedintariff.pdf].
92
CaliforniaEnergyCommissionandCaliforniaPublicUtilitiesCommission,EnergyActionPlanII,
September21,2005,http://www.energy.ca.gov/energy_action_plan/20050921_EAP2_FINAL.PDF
96
CHP,alsoreferredtoascogeneration,isthemostefficientandcosteffectiveformofdistributed
generation,providingbenefitstoCaliforniacitizensintheformofreducedenergycosts,more
efficientfueluse,fewerenvironmentalimpacts,improvedreliabilityandpowerquality,
locationsnearloadcenters,andsupportofutilitytransmissionanddistributionsystems.Inthis
sense,CHPcanbeconsideredaviableenduseefficiencystrategyforCaliforniabusinesses.
WidespreaddevelopmentofefficientCHPsystemswillhelpavoidtheneedfornewpower
plantsorexpansionofexistingplants.
Existing Combined Heat and Power in California
CaliforniaisoneofthemostprolificstatesinthecountryintermsoftheamountofCHPinthe
statesenergymix.Californiahasalmost1,200sitesrepresentingnearly9,000MWofinstalled
CHPcapacity(seeFigure9).
Figure 9: Existing Combined Heat and Power in California
Source: ICF International

TheindustrialsectorrepresentsabouthalfofexistingCHP,thebulkofwhichisinfood
processingandrefining.Theremainderoftheindustrialsectorisfromprocessindustrieslike
chemicals,metals,paper,andwoodproducts.AboutonethirdofexistingCHPisinenhanced
oilrecoverybecauseofthelargesteamloadtoproduceheavyoil.Thethirdlargestgroupof
CHPinstallationsisinthecommercialsector,whichincludesuniversities,hospitals,prisons,
utilitygeneration,watertreatment,andothercommercialapplications.TheremainingCHPisin
theminingandagriculturalsectors.
ExistingCHPinstallationsinCaliforniacanalsobecharacterizedintermsoffacilitysize,
primaryfuel,andtechnology(primemover).Largeinstallationsmakeupmostoftheexisting
capacity,withsystemssmallerthan5MWrepresentingonly5.5percent.Systemslargerthan
100MWrepresentalmost40percentofthetotalexistingcapacity.Themarketsaturationof
CHPinlargefacilitiesismuchhigherthanforsmallersites;muchoftheremainingtechnical
marketpotentialforCHPisforsmallersystems.
97
ThedominantfuelusedforCHPisnaturalgas,representing84percentofthetotalinstalled
capacity.Renewablefuelmakesup4.5percentofthetotalcapacity,mostlyinthewood
products,paper,andfoodprocessingindustriesandinwastewatertreatmentfacilities.
BecauseoftheconcentrationoflargescalesystemsintheexistingCHPpopulation,themost
commonprimemoversaregasturbines.Intheverylargesizes,theseareofteninacombined
cycleconfiguration.Inintermediatesizes,simplecyclegasturbinesareused.Renewablefuels
orwastefuelsareusedinboilersdrivingsteamturbinesinthewood,paper,food,and
petrochemicalindustries.Mostofthesmallsystemsaredrivenbygasfiredreciprocating
engines;whiletotalcapacityissmall(5percent),thereciprocatingenginetechnologyrepresents
thegreatestnumberofCHPsites(62percent).
WithinexistingCHP,thereareapproximately6,000MWofCHPcapacityunderqualifying
facilitycontractsunderwhichalloraportionoftheoutputissoldtotheutilities.Thecontinued
existenceandviabilityofthispowerisamajorissue;the2007IEPRnotedthatasmuchas2,000
MWofCHPcapacitycouldshutdownby2010ascontractsexpire.
Combined Heat and Power and the Environment
InDecember2008,theARBadopteditsClimateChangeScopingPlanwithatargetof4,000MWof
CHPtodisplace30,000GWhsofdemandandreduceGHGemissionsby6.7millionmetrictons
ofCO2by2020.ACHPfacilityproduceselectricityandutilizestheexcessheat,thusincreasing
efficienciesandreducingGHGemissions.
ForCHPtomeetARBsgoals,anewgenerationofhighlyefficientCHPfacilitiesmustbe
encouragedandsupported.Criticaltoachievingtheseefficienciesandmeetingthesetargets
willbethelegislativelymandatedminimumefficiencystandardof60percenttoguide
developmentandoperationofthesefacilitiesovertime.AB1613isintendedtoencouragethe
developmentofnewCHPsystemsinCaliforniawithageneratingcapacityofnotmorethan20
MW.AssemblyBill1613directstheEnergyCommissiontoadoptguidelinesbyJanuary1,2010,
establishingtechnicalcriteriaforeligibilityofCHPsystemsforprogramstobedevelopedbythe
CPUCandpubliclyownedutilities.Whentheseguidelinesareadopted,theywillsetan
efficiencystandardforCHPfacilitydevelopmentandassurethatfacilitiesaredesignedand
operatedinawaythatreducesGHGemissionsandwillcreateanewbenchmarkforCHP
efficienciesinCalifornia.AsCHPtechnologycontinuestodevelop,efficienciesmorethan70
percentcanbeexpectedtobecomestandardandcosteffective.
AnotherenvironmentalbenefitofCHPthatisoftenoverlookedhastodowithwateruse.In
California,centralstationthermal,watercooledpowergeneratorsuseenormousamountsof
waterforcooling.TheNationalRenewableEnergyLaboratoryestimatesthatalmosthalfa
gallonofwaterisevaporatedatcentralstationthermoelectricplantsforeverykWhofelectricity
consumedatthepointofuse.
93
CHPgenerallydoesnotusecondensersorcoolingtowers,
therefore,itswaterconsumptionismuchlower.
93
NationalRenewableEnergyLaboratory,ConsumptiveWaterUseforU.S.PowerProduction,December
2003,NREL/TP55033905,availableat:[http://www.nrel.gov/docs/fy04osti/33905.pdf].
98
CHPthatusesrenewablefuelsprovidesadditionalenvironmentalbenefitstoCalifornia.There
ispotentialfordoublingtherenewableCHPatthestateswastewatertreatmentplants.Sludge
fromwastetreatmentplantscanbefedintoananaerobicdigestertocreatebiogas(methane),
whichisthenburnedinaCHPsystem.Thewastewatertreatmentplantscanalsocodigest
otherbiodegradablewastestreams,suchasthedairyandfoodprocessingindustryand
restaurantwaste.Manywastetreatmentplantsareexploringcodigestiontoincreasetheir
biogasproductionandtotakeadvantageofunderuseddigestercapacity.Californiasdairyand
foodprocessingindustriesareexploringcodigestiontosolvetheproblemofwastedisposal.
UsingthesewastesforelectricitygenerationalsoaddressestheadverseimpactoftheGHG
emissionsfromuntreatedwastes,aswellastheGHGimpactsfromtransportingwastesfor
disposalelsewhere.ArecentreportbytheEnergyCommissionstaffidentifiedamarket
potentialof450MWofCHPcapacityfromcodigestingsludgeandotherbiodegradable
waste.
94
Thereare,however,someeconomicandregulatorybarriers,includingstreamliningthe
permittingprocessandprovidingsomefinancingoptionsthatmunicipallyownedwaste
treatmentplantsrequire.
AnassessmentofstatewideCHPtechnicalandmarketpotential,discussedinmoredetail
below,suggeststhatthelargestuntappedmarketforCHPisinthecommercialandinstitutional
sectors(20MWandless).
95
UnlikeindustrialsectorCHP,thesesmallersystemswilluse
distributedgenerationapplicationsthatwillbelocatedatornearexistingcustomersthermal
loads.BecauseaCHPunitmustbeincloseproximitytothefacilitywherethewasteheatwillbe
utilized,newgreenspacewillnotbeneededtodevelopthisnewgeneration,meaningfewer
environmentalimpacts.Additionally,mostsmallCHPanddistributedgenerationare
interconnectedtothedistributionsystem.Developinggenerationclosertoloadcentersinstead
ofinremoteareasmileswhereitwillbeconsumedwouldhelpreducetheneedtobuildnew
transmissioninfrastructureandtherebyavoidtheassociatedenvironmentalimpacts.
Combined Heat and Power Technical Potential
ThetechnicalpotentialofCHPisanestimationofmarketsizeconstrainedonlybytechnological
limitstheabilityofCHPtechnologiestofitcustomerenergyneeds.CHPtechnicalpotentialis
calculatedintermsofCHPelectricalcapacitythatcouldbeinstalledatexistingandnew
facilitiesbasedontheestimatedelectricandthermalneedsofthesite.Thetechnicalmarket
potentialdoesnotincludescreeningforeconomicrateofreturn,orotherfactorssuchasability
toretrofit,anownersinterestinusingCHP,availabilityofcapitalornaturalgas,andvariations
inenergyconsumptionwithincustomerapplication/sizeclass.Identifyingthetechnicalmarket
potentialisapreliminarystepinassessingactualeconomicmarketsizeandultimatemarket
penetration.
94
CaliforniaEnergyCommission,CombinedHeat&PowerPotentialatCaliforniasWastewaterTreatment
Plants,FinalStaffPaper,September2009,CEC2002009014SF,availableat:
[http://www.energy.ca.gov/2009publications/CEC2002009014/CEC2002009014SF.PDF].
95
CombinedHeatandPowerMarketAssessment,DraftConsultantReport,October2009,CEC5002009094
D,availableat:[http://www.energy.ca.gov/2009publications/CEC5002009094/CEC5002009094
D.PDF].
99
CHPisbestappliedatfacilitiesthathavesignificantandconcurrentelectricandthermal
demands.Intheindustrialsector,CHPthermaloutputhastraditionallybeenintheformof
steamusedforprocessheatingandforspaceheating.Forcommercialandinstitutionalusers,
thermaloutputhastraditionallybeensteamorhotwaterforspaceheatingandpotablehot
waterheating,andmorerecentlyforprovidingspacecoolingthroughtheuseofabsorption
chillers.
TwodifferenttypesofCHPmarketswereincludedintheevaluationoftechnicalpotentialfor
thisassessment.ThefirstisthetraditionalCHPmarketwheretheelectricaloutputmeetsallora
portionofthebaseloadneedsforafacilityandthethermalenergyisusedtoprovidesteamor
hotwater.Inthismarket,industrialfacilitiesoftenhaveexcessthermalloadcomparedto
theironsiteelectricload(meaningtheCHPsystemwillgeneratemorepowerthancanbeused
onsiteifsizedtomatchthethermalload).Inthecommercialsector,CHPsystemsalmost
alwayshaveexcesselectricloadcomparedtotheirthermalload,sothesefacilitieswilluseall
powergeneratedonsite.InCalifornia,interestinthecombinedcooling,heating,andpower
marketcouldpotentiallyopenupthebenefitsofCHPtofacilitiesthatdonothavetheyear
roundheatingorhotwaterloadstosupportatraditionalCHPsystem.Atypicalsystemwould
providetheannualhotwaterload,aportionofthespaceheatingloadinthewintermonths,
andaportionofthecoolingloadduringthesummermonths.
Theprevioustwocategoriesarebasedontheassumptionthatallofthethermalandelectric
energyisusedonsite.Withinlargeindustrialprocessfacilities,thereistypicallyanexcessof
steamdemandthatcouldsupportCHPwithsignificantquantitiesofelectricityexporttothe
wholesalepowersystem.Theexportpotentialwasquantifiedandevaluatedasaseparate
market.
Table3showsthetotaltechnicalpotentialforCHPinexistingfacilitiesinCaliforniafor2009.
Thereismorepotentialincommercialfacilitiesthaninindustrialfacilities,whichisaswitch
fromthetraditionalcharacterizationofCHPtargetmarkets.Thereisalsoaheavyconcentration
ofpotentialinthesmallsizeranges,indicatingthatmanylargefacilitiesalreadyhaveCHP
systemsfortheironsiteneeds,leavingtheremaininglargesizesystempotentialintheexport
market.
TheutilitywiththelargestamountofCHPtechnicalpotentialisPG&E,withSCEaclose
second.SincePG&EalsohasthelargestamountofexistingCHPinstallations,theremaining
CHPpotentialindicatesthatSCEhasmoreroomforgrowthinCHPcapacityasapercentageof
currentCHPinstallations.TheLADWPalsohasasignificantamountofremainingpotential
giventhesmallsizeofitsservicearea.
100
Table 3: Total CHP Technical Potential (MW) in 2009 by Market Sector
Facility Size
Market Type
50-500
kW
500 kW-
1 MW
1-5 MW
5-20
MW
>20
MW
Total
Industrial Onsite 966 501 1,403 1,042 245 4,157
Commercial Traditional 297 133 124 15 0.0 568
Commercial Heating & Cooling 2,862 760 1,668 907 604 6,802
Export Existing 71 110 261 571 3,530 4,544
Total 4,197 1,504 3,456 2,535 4,379 16,071
Whilethe2009technicalpotentialestimateisbasedonthefacilitydatainthepotentialCHPsite
list,the2029estimateincludeseconomicgrowthprojectionsfortargetapplicationsbetween
2009and2029(Table4).Toestimatethedevelopmentofnewfacilitiesandgrowthinexisting
facilitiesbetweenthepresentand2029,economicprojectionsforgrowthbytargetmarket
applicationsinCaliforniawereused.
96
Duetorecenteconomicfactors,theoutlookongrowth
ratesforseveralindustriesarenotasstrongastheyoncewere,leadingtoaloweramountof
newtechnicalpotentialadditionsintheforecastperiod.
Table 4: Total CHP Technical Potential Growth (MW) between 2009 and 2029
by Market Sector
Facility Size
Market Type
50-500
kW
500 kW -
1 MW
1-5 MW
5-20
MW
>20
MW
Total
Industrial Onsite 132 62 154 64 26 438
Commercial Traditional 47 15 19 4 0.0 85
Commercial Heating & Cooling 622 190 416 181 117 1,526
Export New Facilities 22 16 39 45 175 297
Total 823 283 628 294 318 2,346
96
ThesegrowthprojectionswerederivedfromdataintheAnnualEnergyOutlook2009stimuluscase
developedbytheU.S.DepartmentofEnergysEnergyInformationAdministration.Thegrowthrates
wereusedinthisanalysisasanestimateofthegrowthinnewfacilitiesorcapacityadditionsatexisting
facilities.Incaseswhereaneconomicsectorisdeclining,itwasassumedthatnonewfacilitieswouldbe
addedtothetechnicalpotentialforCHP.
101
Clearly,CaliforniacontainssignificanttechnicalpotentialforgrowthinCHPinstallations.
Consideringthemarketforbothexistingandnewcommercialandindustrialfacilities,thereisa
totaltechnicalmarketpotentialthatismorethan18,000MWby2029.Themostsignificant
regionsforgrowthareinPG&EandSCEserviceterritory;howevertheotherutilitiesin
Californiaalsohavesignificantroomforgrowth.
Combined Heat and Power Market Potential
TodeterminetheoutlookforCHPmarketpenetrationinCalifornia,severalfactorswere
consideredintheanalysis:
Therelationshipofdeliverednaturalgasandelectricityprices,orsparkspread.
ThecostandperformanceoftheCHPequipmentsuitableforuseatagivenfacility.
Theelectricandthermalloadcharacteristicsofcommercial,industrial,andinstitutional
facilitiesinthestate.
IncentivepaymentstotheCHPuserthatreflectsocietalorutilitybenefitsofCHP.
CustomerdecisionsabouttheeconomicvaluethatwilltriggerinvestmentinCHPorthe
willingnesstoconsiderCHP.
AllofthesefactorsareaccountedforintheforecastsofCHPmarketpenetrationbetween2009
and2029.Abasecasetoreflectcurrentmarketconditionsandpolicieswasdevelopedfirst,
followedbyfouralternativecasesthatincludeCHPstimulusmeasuresincludingrestorationof
theSelfGenerationIncentiveProgram(SGIP),implementationofpaymentstoCHPoperators
forCO2emissionsreductionscomparedtoseparatelypurchasedfuelandpower,additionofan
effectiveeconomicmechanismfortheexportpowerfromfacilitieslargerthan20MW,andan
allincasethatincludesallofthesemeasurescombined.
Base Case Results
Inthe20yearforecastperiod,thebasecasemarketpenetrationofCHPgeneratingcapacity
equals2,731MWwithanadditional267MWofavoidedelectriccapacityforairconditioning
suppliedbyCHPforatotalmarketimpactof2,998MW.(WiththepassageofSB412[Kehoe,
Chapter182,Statutesof2009],anadditional497MWofcombinedheatandpowerwasmade
availableforadditiontothebasecase,inaccordancewithanalternativeincentivescenario
analyzedforthisassessment.)Figure10showsthegeneratingcapacitymarketpenetrationby
CHPsystemsize.Inthebasecase,thelargestshareofthemarketpenetrationwillbeinsizes
below5MW.ThisdistributedgenerationCHPmarketmakesup65percentofthetotalmarket
penetration.The5to20MWsizecategorymakesup25percentofthemarket.Withouta
mechanism(suchasaQualifyingFacilitycontract)forexportofpowerinthegreaterthan20
MWsizecategory,theselargesystemswillmakeuponly10percentofthenewmarket
penetrationexpectedoverthenext20years.

102
Figure 10: Base Case Cumulative CHP Market Penetration by Size Category
0
500
1,000
1,500
2,000
2,500
3,000
2009 2014 2019 2024 2029
C
H
P

C
a
p
a
c
i
t
y

M
W
>20 MW
5-20 MW
1-5 MW
500kW-1,000kW
50-500 kW
Source: ICF CHP Market Model

Incentive Cases
TheassessmentofCHPpotentialincludeddifferentincentivescenariosandanallinincentive
case.Followingarebriefdescriptionsoftheassumptionsusedfortheincentivecasesanalyzed
forthisassessment.
CO2PaymentsCase.CHPisamoreefficientuseofenergythanpurchasingboilerfueland
electricityseparately.TheCHPoperatordoesnotgainanyspecialbenefitfromthisfact,
onlyfromthereductioninoperatingcostsatthesite.BenefitsofCHPthatcontributeto
StateorfederalpolicygoalssuchasincreasedefficiencyorCO2emissionsreductionare
externaltothedecisionstobuildandoperateCHP.ProvidingCHPoperatorswitha
paymentforreducingoverallCO2emissionswouldinternalizethisbenefitintotheCHP
deploymentdecisionandstimulatetheCHPmarketbasedonthesocialvalueofemissions
reductionthatisprovided.Anaveragevalueof$50/tonofCO2emissionsreductionis
providedforallCHPelectricoutputandalsoforavoidedelectricitygenerationduetoCHP
suppliedairconditioningaswell.
RestoretheSelfGenerationIncentiveProgrameligibility.SenateBill412(Kehoe,Chapter
182,Statutesof2009)expandsprogrameligibilitytoincludedistributedenergyresources
thatthe[CPUC],inconsultationwiththeStateAirResourcesBoard,determineswillachieve
reductionsofgreenhousegasemissions.ThisincludesCHPfacilitiesthatmeetspecified
emissionsandefficiencystandards.TheCPUCwillberequiredtoimplementtheSelf
GenerationIncentiveProgramusingitsowndiscretionaboutprogramdetails.Forthis
analysis,conductedbeforeSB412spassage,itwasassumedthatallpaymentswouldbe
restoredastheyexistedbeforetheyweresuspendedin2007andthatthecurrentphased
expansionofbenefitsforprojectsupto5MWwouldbeincludedaswell.
103
BasicLargeExportCase.WhentheAB1613feedintariffsfornewCHParefinalizedthey
willapplyonlytosystems20MWorless.Inthebasecase,nomechanismforexporting
powerfromlargerfacilities(greaterthan20MW)wasassumed.Inthisfirstoftwo
expandedexportscenarios,exportofpowerfromlargefacilitiesisassumedtobeata
contractpricereflectingthecostofpowergenerationfromacombinedcyclepowerplant
usingtheplantcostandperformanceassumptionsdefinedinanEnergyCommissionstaff
report.
97
StrongStimulusLargeExportCase.AsecondcontractpricetrackforlargeexportCHP
projectswasalsoevaluatedthatincludedanaggressivecontractprice.
AllIncentivesCase.TheallincaserepresentsacombinationofrestorationoftheSelf
GenerationIncentiveProgram,additionofCO2emissionsreductionpaymentsof$50/ton,
andencouragementoflargeexportprojectswiththeaggressivecontractpricingmechanism
andaccompanyingCO2payments.Thelargeexportmarketcontributes2,714MWtothis
case.
Incentive Case Results
Figure11showsthecumulativeCHPmarketpenetrationfortheincentivecases.
Figure 11: Incentive Cases Cumulative Market Penetration Results
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2009 2014 2019 2024 2029
M
W
All In
Large Export
SGIP
CO2 Add
Base

ThefigureincludesbothCHPgenerationandavoidedairconditioning.Therangeofmarket
penetrationfromthebasecasetotheallincaseisfrom3,000to6,500MW.Thecaseresultscan
besummarizedasfollows:
97
CaliforniaEnergyCommission,ComparativeCostsofCentralStationElectricityGeneration,DraftStaff
Report,August2009,CEC2002009017SD,availableat:
[http://www.energy.ca.gov/2009publications/CEC2002009017/CEC2002009017SD.PDF].
104
CO2paymentsincreasemarketpenetrationby244MW.
TherestorationoftheSelfGenerationIncentiveProgramforthenexttenyearsincreases
marketpenetrationby497MW.
Expandingexportcontractingtofacilitieslargerthan20MWwithabasiccontracting
mechanismincreasesmarketpenetrationby1,441MW.Allofthisincreaseinexportmarket
penetrationisforfacilitieslargerthan20MW.
Intheallincase,whichincludesallmeasuresplusamoreaggressivelargeexportcontract
price,themarketincreasesby3,521MW,with79percentofthisincreaseintheexport
market.
GHG Emissions Savings
EmissionsreductionsbyscenariowerecalculatedandareshowninFigure12.AnnualGHG
savingsbytheendoftheforecasttimehorizon(2029)rangefrom2.7millionmetrictonsCO2eto
7.0millionmetrictonsintheallincase.ThegraphalsoshowstheARBtargetforCHPof6.7
millionmetrictonsreductionby2020.
Figure 12: GHG Emissions Savings by Scenario Using ARB Avoided Central
Station Emissions Estimate
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2009 2014 2019 2024 2029
T
h
o
u
s
a
n
d

M
e
t
r
i
c

T
o
n
s

C
O
2
Base
CO2 Add
SGIP
Large Export
All In
ARB Target

Table5comparesthestudyresultswiththeARBtargetofGHGemissionssavingsfromCHPby
2020.Inthebasecase,marketpenetrationbyCHPisprojectedtobe56percentoftheARB
targetestimateforadditionalCHPcapacitymarketpenetration,andpowergenerationand
avoidedairconditioningfromCHPislessthanhalfoftheARBestimate.Intheallincase,2020
marketpenetrationandgenerationbothexceedtheARBtargets,andtheexpectedGHGsavings
reach90percentofthetarget2020GHGemissionsreduction.
105
Table 5: Comparison of Study Results GHG Savings to ARB goals
Scenario Capacity MW
Output
GWhs/year
Average
Load
Factor
Avoided
CO
2

MMT/year
CO
2
Savings
Rate lb/MWh
ARB 2020 Goal 4,000 30,000 85.6% 6.70 492
Base Case 2020 2,240 14,486 73.8% 1.93 294
Base Case 2029 2,998 18,293 69.6% 2.67 322
All In Case 2020 5,532 39,545 81.6% 6.05 337
All In Case 2029 6,519 45,779 80.2% 7.20 347
Source: ARB and ICF International
BecauseboththeARBestimatesandthisstudyarebasedontheARBassumptionforavoided
GHGemissions,thedifferencestotheCO2savingsratesshowninthetable492lb/MWhfor
ARBand294347lb/MWhforthisstudyareprimarilyduetochangesintheoperatingprofile
andperformanceassumptionsforCHP.Thedifferencesareasfollows:
ARBassumesan85percentloadfactorforCHP,whilethecalculatedvaluefortheallin
caseis80.2percent.
ARBassumesanoverallCHPefficiencyof77percent,whilethecalculatedvalueforthe
allincaseis67.8percent.
Combined Heat and Power and Reliability
Asbusinesses,governmentfacilities,hospitals,anddatacentersincreasinglydependon
sophisticatedtechnologiesandcomputersandinformationsystemstoruntheiroperations,itis
criticaltoprovideprotectionfrombothshortandextendedpoweroutagesresultingfromgrid
failures,naturaldisaster,terroristattacks,orotherdisruptions.Hospitalsanddatacentersin
particulararevulnerableshouldpowerbeinterrupted.Reliablepowerisessentialtokeep
coolingandventilationssystemoperating,hightechdiagnosticsystemsworking,andelectronic
patientinformationavailable.EncouragingandsupportingthedevelopmentofCHPat
hospitalsthroughoutCaliforniawillassuretheseessentialservicescontinuetooperatereliably,
evenifthereisamajordisruptionofregionalpower.
Traditionally,onsitedieselgeneratorsareusedtoprotectfacilitiesfromutilitypoweroutages.
However,recenteventssuggestthatthesegeneratorsmaynotbereliableandabletooperate
duringbothshortandextendedoutages.DuringtheAugust2003Northeastblackout,about
halfofNewYorkCitys58hospitalsexperiencedfailuresoftheirbackupdieselgenerators.
Eventhoughperiodictestingisrequired,infrequentuseofconventionaldieselbackup
generatorsincreasesthepotentialforfailurewhentheyareneededmost.
Inaddition,ifthereisaprolongedoutage,fuelsuppliesfordieselgeneratorsmayalsobea
problem.AfterHurricaneKatrina,dieselfuelforbackupgeneratorscouldnotberesuppliedfor
manyreasonsincludingblockedordestroyedroadsandcontaminatedfuelsupplies.Because
106
CHPsystemsoperatecontinuously(orforextendedperiodseveryday)andbecausethey
operate(typically)onnaturalgas,CHPsystemseliminatemanyoftheseissues.Duringand
afterHurricaneKatrina,naturalgaslinesremainedpressurized.Asaresult,naturalgaswasthe
onlyfuelavailableforseveralweeksafterwards.
98
EncouragingandsupportingthedevelopmentofCHPathospitalsandotherfacilitiesor
institutionsthatsupportessentialhealthandsafetyfunctionsforthestatecanprovidearange
ofbenefitsbeyondassuredreliability.Benefitsforhospitalsincludecostsavings,improved
patientservice,andimprovedreliabilityandpowerqualitytoensureexpensiveandsensitive
electronicsandequipmentarenotdamagedwhenvoltagefluctuates.Fromthestates
perspective,encouragingtheinstallationofCHPinhospitalsandotheressentialfacilitieswill
assurethatifelectricsuppliesareinterruptedforhours,days,orweeks,aswasthecasewhen
HurricaneKatrinadevastatedNewOrleans,Californiacitizenswillbeabletofindasafe
havenathospitalsandothersimilarinstitutionsinthestatethatareequippedwithCHP
systems.AsecondarybenefitofincreaseduseofCHPathospitalsthroughoutthestateisthe
retirementofolddieselbackupgeneratorsandthereductionofemissionsassociatedwiththeir
operation.
Combined Heat and Power and the Economy
Afacilitywithconstantthermalload,constantelectricalload,andhenceauniformpowerto
heatratio(orelectricalloadtothermalloadratio),isanidealCHPprospect.However,many
oftheremainingCHPprospectshavefluctuatingloadsandvariableloadprofiles.Forthese
facilities,electricityexportloosenstheoperatingconstraints.AthermallymatchedCHPsystem
willcompeteeconomicallyandenvironmentallywiththeseparateproductionofelectricityata
centralstationplantandtheproductionofsteamorheatonsite.However,thefollowing
barrierslimittheeconomiccompetitiveness:
Uncertaintyaboutthedifferentialbetweenthecostofbuyingelectricpowerfromthegrid
andthecostofnaturalgas.
Arequiredpaybackperiodofaslittleastwoyearsandusuallynolongerthan5years.The
newassessmentofCHPpotentialindicatesthatthesefactsimplyaveryhighriskperception
onthepartofpotentialCHPprojectdevelopers.
TheabilityofaCHPsystemownertooffsetonlyabout80percentoftheelectricalretailrate
becauseofstandbyanddemandcharges.Tariffsinotherstatesprovidehigheroffsets.
CurrenttariffsdonotfullyaccountforthesystemandsocietalbenefitsthatCHPprovides.
Facilitieswithfluctuatingloadsfaceadditionaltechnicaleconomicandtechnicaldesign
challenges.
ThevariationinCHPmarketpenetrationforecastsundervariouseconomicassumptions
illustratestheeffectsofthosefactorsontheattractivenessofCHP.Anexporttariffwould
mitigatesomeofthebarriers,dependingonthetariffssimplicity,atermofatleast10years,
98
Gillette,StephenF.,CHPCaseStudiesSavingMoneyandIncreasingSecurity,availableat:
[http://www.chpcenternw.org/NwChpDocs/Microturbines_Capstone_overview_cases.pdf].
107
andpricesthatreflectcapacity,energy,environmentalvalues,andlocationalvalues.
RestorationoftheSGIPthatprovidesupfrontincentivepaymentstooffsetsomeofthecapital
costsoftheCHPsystemandaCO2emissionreductionpaymentforCHPelectricoutputare
examplesofeconomicincentivesthatcanontheirownorincombinationpromoteCHPin
Californiamarkets.
Natural Gas Power Plants
NaturalgasplaysasignificantroleinprovidingpowertoCaliforniacitizens.In2008,46.5
percentofCaliforniaselectricitycamefromnaturalgas.Citizens,communityactivists,and
environmentalgroupshaveenvironmentalandsafetyconcernswithbuildingnewnaturalgas
plants,butatthesametime,Californianswantreliableandaffordableelectricityfortheirhomes
andbusinesses.Abalancebetweenthesecompetingobjectivescanbedifficulttoachieve,as
almosteveryenergytechnologyhascostsandbenefits.
Natural Gas Plants and the Environment
NaturalgashasbecomeCaliforniasfuelofchoiceformostnewpowerplantsbecauseitis
cleanerthanotherfossilfuels.Yet,emissionsfromnaturalgasgenerationaccountfor(on
average)78percentoftheinstateelectricGHGemissions.
99
However,naturalgaspowerplants
canalsoplayakeyroleinmeetingthestatesclimatechangegoalsandRPStargets.TheEnergy
CommissionsFrameworkforEvaluatingGreenhouseGasImplicationsofNaturalGasFiredPower
PlantsinCaliforniareportidentifiesspecificrolesandexpectationsforgasfiredgenerationto
supporttheintegrationofrenewablesunderthepolicymandatestoreduceGHGemissions
fromtheelectricitysector.Thereportfoundthatanaturalgasplantprovidingsupportto
integraterenewableenergyundera33percentRPSwillyieldaGHGemissionbenefitifthe
additionraisestheoverallefficiencyoftheelectricsystem,orifthenewplantservesincreased
demandforelectricitymoreefficientlythantheexistingpowerplantfleet.Theanalysisfound
thatalthoughasinglenaturalgasfiredpowerplantproducesGHGemissions,undercertain
circumstancestheadditionofagasfiredplantmayyieldasystemwideGHGemission
benefit.
100
Marineimpactsfromoncethroughcooling(OTC)powerplantsareanothermajor
environmentalconcernwiththestatesnaturalgasandnuclearpowerplants.Aspartofan
interagencyworkinggroup,theEnergyCommission,CPUC,andCaliforniaISOhavebeen
workingwiththeStateWaterResourcesControlBoard(SWRCB)tooutlineaproposalto
maintainelectricgridreliabilitywhilereducingOTCinCalifornias21coastalpowerplants.
Theseplantstogetherpumpupto17billiongallonsofocean,bay,orestuarywatereachday.
101
99
100
Ibid.
101
StateWaterResourcesControlBoard,WaterQualityControlPolicyontheUseofCoastalandEstuarine
WatersforPowerPlantCooling,March2008,availableat:
[http://www.energy.ca.gov/2008publications/SWRCB10002008001/SWRCB10002008001.PDF].
108
Thepumpingprocessimpingesonfish,invertebrates,andcrustaceans,anddestroysbillionsof
fisheggsandlarvae,andtheheateddischargewateralsoharmsmarineorganismsby
increasingthewatertemperature.Thedrafthasissuedacompliancescheduleforretiring,
refitting,orrepoweringOTCplantstocomplywiththefederalwaterpolicy.
ItiscrucialthatthestatedevelopnewgeneratingcapacitytoreplaceOTCpowerplantsthat
mayretireinthenearfuture.PlantsmostlikelytoretirearelocatedinandaroundtheSouthern
Californiaarea,whichhassomeoftheworstairqualityinthenation.Replacementpower
sourceswillhavetomeetstringentlocalairqualityrequirements;however,emissionoffsetsare
inshortsupplyintheSCAQMD,constrainingtheEnergyCommissionsabilitytolicensenew
powerplantsinSouthernCalifornia.Chapter3describesthesystemintegrationchallenges
associatedwithpotentialretirementofOTCplantsaswellasdifficultiesinproviding
replacementpowerduetolimitsonemissionreductioncredits.
OnOctober8,2008,theEnergyCommissionadoptedanOrderInstitutingInformational
proceedingtosolicitcommentsonhowtosatisfyitsresponsibilitiesundertheCalifornia
EnvironmentalQualityAct(CEQA)relatedtoGHGimpactsofproposednewpowerplants.
TheEnergyCommissionsSitingCommitteereleaseditsCommitteeGuidanceonFulfilling
CaliforniaEnvironmentalQualityActResponsibilitiesforGreenhouseGasImpactsinPowerPlant
SitingApplicationsinMay2009,whichoutlinedthepowerplantsitingprocessduringthe
interimperiodbeforetheAB32regulationstakeeffect.TheSitingCommitteerecommended
thattheEnergyCommissionanalyzeeachprojectaccordingtobasicCEQApreceptsfor
determining(1)whethertheprojecthasasignificantadversecumulativeeffect,(2)ifso,
whetherfeasiblemitigationcanberequiredfortheproject,and(3)ifnot,whethertheproject
hasoverridingbenefitsthatjustifylicensingtheproject.TheSitingCommitteealso
recommendedthattheEnergyCommissionrevisitthisapproachoncetheARBsAB32
regulationsareineffect.
AsCaliforniamovestowardreducingGHGemissionsassociatedwithelectricitygeneration,it
willneedinnovativestrategiestoaddressemissionsfromfossilpowerplantsthatmaybe
requiredtosupportsystemoperationorintegrationofrenewableresources.Onesuchstrategy
isCO2captureandstorage,alsoknowncarboncaptureandsequestration(CCS).Aspartofthe
2007IEPR,theEnergyCommissionandtheCaliforniaDepartmentofConservationdevelopeda
reportfocusedongeologicsequestrationstrategiesforthelongtermmanagementofcarbon
dioxide,entitled,GeologicCarbonSequestrationStrategiesforCalifornia:ReporttotheLegislature.
102
Therehavebeenencouragingtechnologyadvancementsandinvestmentssincepublicationof
the2007IEPR,andtechnologydevelopersandpolicymakersexaminingCCSapplicationshave
expandedtheirviewfromaninitialfocusoncoalandpetroleumcoketonaturalgasand
refinerygas,thepredominantfossilfuelsusedinCaliforniapowerplantsandindustrial
facilities.
102
CaliforniaEnergyCommissionandDepartmentofConservation,GeologicCarbonSequestration
StrategiesforCalifornia:ReporttotheLegislature,February2008,CEC5002007100CMF,availableat:
109
Intermsoftechnologyimprovement,newandimprovedsolventsarebeingcommercially
offeredortestedthatreducetheenergyrequirementsofpostcombustionclosedloopabsorber
stripperCO2capturesystems.SuchimprovementsareimportantbecausethecostofCO2
captureisusuallythemostexpensiveelementofCCS,particularlytheenergycostassociated
withsteamheatinginthestripperreboiler.Inaddition,theexpandingnumberofcommercial
developersworkingonmultiplecompetingprocessesisindicativeofarobustmarketthatis
morelikelytoachievethenecessarytechnologyscaleupsoonerandproducefuturecostsaving
advancements.Nonetheless,CCSprojectsarelargecapitalendeavorsandmultiyeartestingof
fullscale,integratedCO2capture,compression,pipelinetransportation,andgeologicinjection
systemsisnecessarybeforewidespreadcommercialapplicationcanbeexpected.
Inthelasttwoyears,oxycombustionCO2capturecomponentsandsystemshavebeentestedat
tentimesthesizeofpreviouspilotunits,includingCaliforniasCleanEnergySystemsrocket
enginederivedgasgenerator.PrecombustionCO2capturesystemsarenowbeingproposedin
commercialpowerplantsbasedonsolidfuelgasification,suchastheHydrogenEnergy
CaliforniaprojectinKernCounty(ajointventureofBPandRioTinto).
TheU.S.DepartmentofEnergy(DOE)recentlysolicitedproposalsforlargescaleindustrialCCS
projectsatfacilitiesfueledchieflybynoncoalenergy;itispoisedtoawardmorethan$1.3billion
inprojectcofundingauthorizedbytheARRAof2009.Further,DOEhasaddedfundstoits
cooperativeagreementwiththeEnergyCommissionfortheWestCoastRegionalCarbon
SequestrationPartnership(WESTCARB;apublicprivateresearchcollaborativeinvolvingmore
than80organizations)toworkwithPG&Etoconductanengineeringeconomicevaluationof
CCSatnaturalgascombinedcycleplantsinCalifornia.WESTCARBalsocontinuestowork
withtheCaliforniaGeologicalSurveyandindustrypartnerstocharacterizeCaliforniadeep
salineformationssuitableforcommercialscaleCO2storage;twoCO2storagefieldtestsinthe
CentralValleyareplanned.
AlthoughthecostofapplyingCCStonaturalgaspowerplantsoroilrefineryfurnacesis
relativelyhighusingproventechnologies(about$75permetrictonofCO2avoided),
103
the
prospectofenergysavingtechnologyimprovementsandthesaleofcapturedCO2tooilfield
operatorsforoilrecoveryhasincreasedthelikelihoodthatCCScanbeeconomically
competitiveand,asaconsequence,theinterestofstateagenciesworkingonAB32compliance.
PositivepubliccommentwasalsocitedasacontributingfactortoincreaseddiscussionofCCS
andsupportforneartermtechnologydevelopmentintheARBsClimateChangeScopingPlan.
Thismomentumappearstobecontinuing,withaninteragencygroupformedinAugust2009to
developrecommendationsonCCSrelatedpolicyissues.
Addressingpolicyquestionsintandemwithtechnologydevelopmentanddemonstrationis
particularlyimportantforCCSbecauseinstitutionalbarriershavebeenasmuchofan
impedimentashighcost.Inmanycases,thenecessaryregulatoryandstatutoryframeworksare
unclearordonotyetexist.
104
Atthefederallevel,theU.S.EnvironmentalProtectionAgencyin
103
Ibid.
104
Ibid.
110
2008proposednewrulesforwellsusedtoinjectCO2forlongtermgeologicstorage.
105
These
rulesareexpectedtobecomefinalbyearly2011,andfurtherfederalrulesmaybeforthcoming
restrictingemissionsofCO2asanairpollutant.However,manyofthelegalandregulatory
issuesneedingresolutionarewithinthedomainofstateratherthanfederallaw.
Inparticular,legalclarityisneededonownershipofsubsurfaceporespacewhereCO2is
stored,theabilitytoindependentlytransferporespacerightsandthedominanceofsuchrights
relativetosurfaceandmineralrights,proceduresbywhichaccessrightstomultipleadjoining
porespaceparcelsmaybesecuredforCO2storagezonesspanningmultipleestates,and
potentiallongtermliabilitiesforstoredCO2.Morethan30statesarecurrentlywrestlingwith
theseissues,withseveralstateshavingpassedlawsthatsuggestapproachesforconsideration
bytheCaliforniaLegislature.
RegulatoryissuesneedingclarityincludeproceduresbywhichoperationspermittedforCO2
enhancedoilrecoverybecomelongtermCO2storageprojectsaswell;CEQAresponsibilityand
sitingjurisdictionforpowerplantprojectswithCO2capture,pipelinetransportation,andoff
sitegeologicCO2storage(similarjurisdictionalquestionsmayariseforotherindustrialproject
types);responsibilityformonitoring,reporting,andremediation(ifnecessary)whencustodyof
capturedCO2istransferredfromaregulatedindustrialsourcetoasubsurfacestoragesite
operator;andrulesforoffshore(subseabed)CO2storageprojects.Mostoftheseissuesrequire
legislativesolutions,althoughAB32rulemakingmayprovidesomeguidance.Inthecaseof
oilfieldCO2injectionwells,U.S.EPAhasrequestedpublicinputontreatmentoftheir
conversiontogeologicsequestrationwells,aspartofthenewClassVIrulemakingfor
dedicatedgeologicsequestrationwells(undertheundergroundinjectioncontrol[UIC]program
forgroundwaterprotection).Californiamustdecidewhethertoseekprimacyforadministration
oftheUICprogramforClassVIgeologicsequestrationwells,asitdoesforUICClassIIoiland
naturalgasexplorationandproductionwells.
ResolutionoflegalandregulatoryuncertaintieswillbecrucialtohelpingspurCCSinvestment
andfurtherprojectdevelopment,buteconomicchallengeswillremainsolongasthevalueof
CO2emissionallowancesremainslow.Capandtradeproposalswithsafetyvalvesandother
measurestolimittherateatwhichallowancepricesrisetotheirexpectedlongtermvaluecould
hamperprivateinvestmentinCCSwithoutsomeformofpolicyincentives.Giventheexpense
andleadtimeofthefullscaledemonstrationsneededtoestablishCCStechnologyviability,and
thesocialbenefitofassociatedlearningbydoingcostreductions,Californiashouldcontinue
stateinvestmentinCCSR&DanddemonstrationsintandemwithinvestmentbyDOEand
privateindustry.PublicprivatepartnershipsforCCSdemonstrationareexpectedtoprovevital
torealizingfuturedividendsintermsofmorecosteffectivecommercialapplicationandan
overallreductioninthecostofmeetingthestateslongtermGHGreductiongoals.
Natural Gas Plants and Reliability
AstheCaliforniaspopulationcontinuestogrow,thestatewillhavetoensurethatenoughnew
powerplantsarebuilttomeettheincreaseinenergydemand.Atthesametime,statepolicy
105
See[http://www.epa.gov/safewater/uic/wells_sequestration.html#regdevelopment].
111
goalstoincreasetheuseofpreferredresources,likerenewables,alongwithpoliciestoreduce
theuseofOTCandtoretireagingpowerplants,willaffectsystemreliability.Theimpactsof
variousstatepoliciesonreliabilityarediscussedinmoredetailinChapter3.
TheEnergyCommissions,FrameworkforEvaluatingGreenhouseGasImplicationsofNaturalGas
FiredPowerPlantsinCaliforniafoundthatasCaliforniasintegratedelectricitysystemevolvesto
meetGHGemissionsreductiontargets,theoperationalcharacteristicsassociatedwith
increasingrenewablegenerationwillincreasetheneedforflexiblegenerationtomaintaingrid
reliability.Thereportassertsthatnaturalgasfiredpowerplantsaregenerallywellsuitedfor
thisroleandthatCaliforniacannotsimplyreplaceallnaturalgasfiredpowerplantswith
renewableenergywithoutendangeringthesafetyandreliabilityoftheelectricsystem.The
reportacknowledgesthatCaliforniawillneedtomodernizeitsnaturalgasgeneratingfleetto
reduceenvironmentalimpacts,however.Overall,thereportfoundthatthefutureofnaturalgas
plantswilllikelyfillfiveauxiliaryroles:1)intermittentgenerationsupport,2)localcapacity
requirements,3)gridoperationssupport,4)extremeloadandsystememergenciessupport,and
5)generalenergysupport.Thequestionremainsastothequantity,type,andlocationofnatural
gasfiredgenerationtofillremainingelectricityneedsoncepreferredresourcetargetsare
achieved.
Giventheroleofnaturalgaspowerplantsforelectricityreliabilityandintegratingrenewable
energy,effortstomitigateOTCincludeacomplianceschedulethatmaintainselectricgrid
reliabilityandstabilitywhilereducingOTCinCaliforniasexistingcoastalpowerplants.Itis
likelythatplantoperatorswillchooseretirementinthefaceofcostlyretrofitsorrepowering.If
replacementresourcesarenotbuilt,thiscouldgreatlyimpactelectricityreliabilityforthe
citizensofCalifornia.ThecomplianceschedulefocusesonlyonnaturalgasplantsusingOTC,as
nuclearplantswillrequirespecialstudies.
ReplacementofOTCplantsiscomplicatedbythecurrentemissioncreditlimitationsinthe
SouthCoastAirBasin,asdiscussedinearlierinthissection.Theselimitationsarecausingdelay
inenvironmentalimprovementsthataccompanyinvestmentsinnewandupdated
infrastructure.Fortunately,becauseSWRCBhasagreedtodelayitsoriginalcompliance
schedule,inpartduetotheseaircreditissues,thesedelaysarenotjeopardizingthelongterm
reliabilityoftheregionselectricitysupplies.Theseissuesrelatedtoemissionscreditsinthe
SouthCoastAirBasinarediscussedfurtherinChapter3.
Nuclear Power Plants
Majorpolicydecisionsthatwillbemadeinthecomingyearswillshapethenextthreedecades
ofnuclearenergypolicyinCalifornia.Nuclearplantownersandstateofficialswillface
decisionsaboutplantlicenserenewalandOTCatthesametimethatthefederalgovernmentis
reassessingitsapproachtonuclearwastedisposal.Inaddition,Californiaisaddressingcritical
environmentalissuesassociatedwiththeelectricitysector.Thecostsandbenefitsofnuclear
powerarebeingreexaminedinCaliforniaandnationwidebecauseofmajorshiftsinpoliciesto
limitGHGemissionsandencouragenewnonfossilfueledelectricgenerationsources.
112
Reactor Vessel Integrity
The NRC recently revised its regulations to
provide licensees with a new alternative for
assessing the probability of a crack forming
through the wall of a reactor pressure vessel. If
such a crack occurred, it could damage the
reactor core and, in rare cases, release
radioactive materials into the environment. The
probability of crack formation relates directly to
the extent of reactor pressure vessel
embrittlement, which determines the ability of
metals that make up the reactor pressure
vessel to withstand stress without cracking.
The old regulations required licensees to
demonstrate that reactor pressure vessel
embrittlement would not exceed a screening
limit corresponding to a one-in-200,000-year
probability of through-wall crack formation.
While NRCs recently adopted regulations
expand this requirement to a one-in-a-million-
year probability, they also allow for the use of a
less-conservative method for assessing the
probability. With the old methodology, Diablo
Canyon Unit 1 and nine other reactors would
have exceeded the screening limit during a
20-year license extension and would not be
eligible for license renewal unless they could
reduce the embrittlement rate or demonstrate
that operating the reactor would not pose an
undue public risk. In contrast, the new method
results in a much lower calculated
embrittlement for most reactors, and is no
longer expected to limit any U.S. reactor from
obtaining a 20-year license renewal. (NUREG-
1806, p. xxii and Appendix D)

NuclearpowerplantsplayasignificantroleinCaliforniasenergymix,providingabout14
percentofthestatestotalelectricityin2008fromtwooperatinginstatefacilities,PG&Es
DiabloCanyonPowerPlant(DiabloCanyon)andSCEsSanOnofreNuclearGeneratingStation
(SONGS),andfromthePaloVerdeNuclearGeneratingStationinArizona.Aspartofthe2008
IEPRUpdate,theEnergyCommissiondevelopedAnAssessmentofCaliforniasNuclearPower
Plants:AB1632Report,
106
whichaddressedseismicandplantagingvulnerabilitiesofCalifornias
instatenuclearplants,includingreliabilityconcerns.In
addition,thereportidentifiedanumberofotherissues
importantforthestatesnuclearpolicyandelectricity
planning.Theseinclude:
ContinuingNuclearRegulatoryCommission(NRC)
concernsoversafetyculture,plantperformance,and
managementissuesatSONGS.
Theevolvingfederalpolicyonlongtermwaste
disposal.
Costsandbenefitsofnuclearpowercomparedto
otherresources.
Potentialconversionfromoncethroughcoolingto
closedcyclewetcooling.
Anoverarchingissuewiththestatesnuclearfacilitiesis
plantlicenserenewal.TheNRCoperatinglicensesfor
Californiasnuclearplantsaresettoexpirein2022
(SONGSUnits2and3)and2024and2025(Diablo
CanyonUnits1and2,respectively).
107
Itisunknown
whethertheNRCwillapproveapplicationsbyPG&E
andSCEfor20yearlicenserenewals,buttheNRChas
yettodenyasingleapplicationandhasissuedlicense
renewalsfor54ofthenations104nuclearpower
reactors.SCEplanstofileaSONGSlicenserenewal
applicationinlate2012.PG&EannouncedonNovember
24,2009itsintentiontofiletheDiabloCanyon
application.
TheNRClicenserenewalapplicationprocess
determineswhetheraplantmeetstheNRCrenewal
criteria,notwhetheritshouldcontinuetooperate.TheNRCstates,Althoughalicenseemust
106
CaliforniaEnergyCommission,AnAssessmentofCaliforniasOperatingNuclearPowerPlants:
AB1632CommissionReport,November2008,CEC1002008108CMF,availableat:
107
NuclearRegulatoryCommission,FacilityInformationFinder,see[http://www.nrc.gov/info
finder.html].
113
havearenewedlicensetooperateaplantbeyondthetermoftheexistingoperatinglicense,the
possessionofthatlicenseisjustoneofanumberofconditionsthatmustbemetforthelicensee
tocontinueplantoperationduringthetermoftherenewedlicense.Stateregulatoryagencies
andtheownersoftheplantwouldultimatelydecidewhethertheplantwillcontinuetooperate
basedonfactorssuchasneedforpowerorothermatterswithintheStatesjurisdictionorthe
purviewoftheownerstheNRChasnoroleintheenergyplanningdecisionsofState
regulatorsandutilityofficialsastowhetheraparticularnuclearpowerplantshouldcontinueto
operate.
108
TheNRClicenserenewalproceedingfocusesonplantagingissues,suchasmetalfatigueorthe
degradationofplantcomponents,aswellasenvironmentalimpactsrelatedtoanadditional20
yearsofplantoperation.TheNRChasconsistentlyexcludedfromitsproceedingsissuesraised
bystatesandpublicinterestgroupsthatarenotdirectlyrelatedtoplantagingortodeficiencies
intheenvironmentalimpactassessment.Forexample,duringthelicenserenewalproceeding
fortheIndianPointPowerPlantinNewYork,theNRCdismissedfromtheproceedingmostof
theStateofNewYorkscontentions,includingthoseregardingseismicvulnerability,plant
vulnerabilitytoterroristattack,andtheinadequacyofemergencyevacuationplansforthe
plant.
AlthoughtheCPUCdoesnotapproveordisapprovelicenseapplicationsfiledwiththeNRC,
bothutilitiesmustobtainCPUCapprovaltopursuelicenserenewalbeforereceivingCalifornia
ratepayerfundingtocoverthecostsoftheNRClicenserenewalprocess.
109
TheCPUC
proceedingswilldeterminewhetheritisinthebestinterestofratepayersforthenuclearplants
tocontinueoperatingforanadditional20years.Theproceedingswilladdressissuesthatare
importantforelectricityplanningbutarenotincludedintheNRCslicenserenewalapplication
review.
ThepurposeoftheCPUClicenserenewalreviewistoconsidermatterswithinthestates
jurisdiction,includingtheeconomic,reliability,andenvironmentalimplicationsof
relicensing.
110
Forexample,theCPUCwillconsiderthecosteffectivenessoflicenserenewal
comparedwithandreplacementpoweroptions.
ToinitiatetheCPUClicenserenewalreview,PG&EandSCEarerequiredtosubmitlicense
renewalfeasibilityassessmentstotheCPUC.Forexample,theCPUCrequiredPG&Etosubmit
anapplicationbyJune30,2011,onwhetherrenewingDiabloCanyonsoperatinglicensesis
costeffectiveandinthebestinterestofPG&Esratepayers.
111
InletterstoSCEandPG&Ein
108
NuclearRegulatoryCommission,GenericEnvironmentalImpactStatement,NUREG1437,VolI,see
[http://www.nrc.gov/readingrm/doccollections/nuregs/staff/sr1437/v1/part01.html#_1_12].
109
CaliforniaPublicUtilitiesCommission,D.0703044inproceedingA.0512002,March15,2007.
110
TheStateWaterResourcesControlBoardandtheCaliforniaCoastalCommissionwouldalsohavethe
opportunitytoreviewimpactstoCaliforniafromlicenserenewalwithinthecontextoftheirpermitting
authorityandproceedings.
111
PacificGasandElectricisrequiredtosubmititsapplicationbyJune30,2011.SouthernCalifornia
Edisonhasnotbeengivenadeadline.CPUCdecisionD.0703044.
114
June2009,theCPUCemphasizedthattheutilitiesmustaddressintheirfeasibilityassessments
alltheissuesraisedintheAB1632Report.
112
TheCPUCspecificallydirectedtheutilitiesto
undertakethefollowingactivities:
Reportonthefindingsfromupdatedseismicandtsunamihazardstudiesandassessthe
longtermseismicvulnerabilityandreliabilityoftheplants.
SummarizetheimplicationsforDiabloCanyonandSONGSoflessonslearnedfromthe
responseoftheKashiwazakiKariwanuclearplanttothe2007earthquake.
Reassesswhetheraccessroadssurroundingtheplantsareadequateforemergencyresponse
andevacuationfollowingamajorseismicevent.
Studythelocaleconomicimpactofshuttingdowntheplantsascomparedtoalternative
usesfortheplantsites.
Reportonplansandcostsforstoringanddisposingoflowlevelwasteandspentfuel
through20yearlicenseextensionsandplantdecommissioning.
Quantifythereliability,economic,andenvironmentalimpactsofreplacementpower
options.
ReportoneffortstoimprovethesafetycultureatSONGSandontheNRCsevaluationof
theseeffortsandtheplantsoverallperformance(SCEonly).
Thecomprehensiveness,completeness,andtimelinessoftheseactivitieswillbecriticaltothe
CPUCsabilitytoassesswhetherornottheutilitiesshouldapplytotheNRCforlicense
renewals.However,theutilitiesreportstodateindicatetheyarenotonscheduletocomplete
theseactivitiesintimeforCPUCconsideration.Inaddition,PG&Ehasobjectedtoprovidingthe
seismicstudiestotheCPUCaspartofalicenserenewalreview.
InOctober2008,PG&EcommentedtotheEnergyCommissiononthedraftAB1632Reportthat
itdoesnotinterprettherequirementtosubmitalicenserenewalfeasibilitystudytotheCPUC
asincludingseismicsafety,whichitconsiderstobeoutsidethescopeoflicenserenewal,or
thoseissuesthatarenotwithintheCPUCsjurisdiction.
113
PG&Ealsoarticulateditsbelief
thattheplanfortheEnergyCommissionandtheCPUCtoreviewthecostsandbenefitsof
licenserenewalandtoassesswhetherornottheutilitiesshouldpursuelicenserenewal
improperlyinfringesuponthesolejurisdictionoftheNRCtodeterminewhetherornot
nuclearlicenseshouldbeextended.
114
PG&EreiteratedthispointinalettertotheCPUC,
specifyingthatitwouldprovidetheinformationrequestedintheAB1632Report,subjecttothe
112
LetterfromCPUCtoAlanFohrer,CEOofSouthernCaliforniaEdison,June25,2009;LetterfromCPUC
toPeterDarbee,CEOofPacificGasandElectric,June25,2009.
113
PacificGasandElectricCompanycommentsonDraftCommitteeReport,CaliforniaEnergy
Commission,AnAssessmentofCaliforniasNuclearPowerPlants:AB1632Report,October22,2008,p.1.
114
PacificGasandElectricCompany,October22,2008,p.4.
115
CPUCsjurisdiction.InitslettertoPG&E,theCPUCindicatedthattherequestedinformationis
allsubjecttoCPUCjurisdictionsinceitinformsprocurementplanning.
115
PG&EcontinuestoobjecttoaCPUCreviewofDiabloCanyonseismicstudiesaspartofa
licenserenewalreview,anditscurrentschedulewouldinfactnotallowtimeforthisreview.
116
PG&EisrequiredtosubmititslicenserenewalfeasibilityassessmenttotheCPUCbyJune30,
2011,
117
butdoesnotexpecttocompleteupdatestotheseismichazardmodelandtheseismic
vulnerabilityassessmentuntil2012and2013,respectively.
118
Furthermore,PG&Esaidthatit
willrequireratepayerfundingtoundertakethe3Dseismicmappingsurveysrecommendedin
AB1632andthatitmayusetheCPUClicenserenewalreviewproceedingasanopportunityto
requestthisfunding.Ifthisoccurs,theresultsofthesestudieswilllikelynotbeavailablefor
CPUCconsiderationduringthisproceeding.
AsimilarissueariseswithSCE.TheutilityplanstosubmitanapplicationtotheCPUCinlate
2010topursueanNRClicenserenewalapplicationandtoaddressissuesfromtheAB1632
ReportandtheCPUC.
119
However,SCEanticipatesalsousingthisapplicationtorequestfunding
tocompleteAB1632recommendedstudies.Furthermore,SCEanticipatesfilingitsCPUC
applicationinthethirdquarterof2010,butdoesnotanticipatecompletingmanyofitsstudies
untiltheendof2010.Asaresult,SCEacknowledgesthattheapplicationlikelywillnotinclude
resultsfromalloftheAB1632studies.
120
However,SCEbelievesitwillbeabletoprovide
sufficientinformationfortheCPUCtoreachaninformeddecision,withsomestudiesincluded
initsapplicationandothersprovidedastheyarecompleted.
121
Nuclear Plants and the Environment

WhilenuclearpowergenerateslowerGHGemissionsthanpowerfueledbynaturalgasand
otherfossilfuels,itisnotexpectedtocontributesignificantlytothestatesneartermGHG
emissionsgoalsgiventhesignificantfinancialriskandexpenseofbuildinganewnuclear
powerplant,theregulatoryhurdlesassociatedwithlicensinganewplant,andthe
environmentalissuesassociatedwiththistechnology.Theseissuesincludenuclearwaste
115
LetterfromCaliforniaPublicUtilitiesCommissiontoPeterDarbee(PacificGasandElectricCompany),
June25,2009.
116
WrittencommentsbyPacificGasandElectricCompanyonthe2009DraftIEPR,October29,2009,pp.
1618,see[http://www.energy.ca.gov/2009_energypolicy/documents/200910
14_workshop/comments/PGE_Comments_on_the_2009%20IEPR_Draft%20Committee_Report_200910
29_TN53877.pdf].
117
CaliforniaPublicUtilitiesCommissiondecisionD.0703044.
118
PacificGasandElectricdatarequestresponsesF.01andF.03.
119
LetterfromAlanFohrer(SouthernCaliforniaEdison)toCPUC,August4,2009.
120
SouthernCaliforniaEdisondatarequestresponseL.01.
121
WrittencommentsbySouthernCaliforniaEdisononthe2009DraftIEPR,October30,2009,p.15,
14_workshop/comments/Southern_California_Edison_TN53916.PDF].
116
disposal,leakageofradioactivelycontaminatedwater,andoncethroughcoolingimpactson
aquaticenvironments,aswellaspotentialsevereconsequencesfromactsofterrorism,nature
(earthquakes,tsunamis),oraccidents.Inaddition,thenuclearpowerlifecycleorcradleto
graveimpactsresultinGHGemissionsfromuraniumminingandenrichment,plant
construction,decommissioning,andwastestorage,transport,anddisposal.
Evenmoresothanwithnaturalgasplants,citizenstendtobevocalaboutpotentialnegative
impactsofnuclearfacilitiesoperatingneartheircommunities.Concernsincludethedisposalof
radioactivewaste,plantsafety,andtheuseofoceanwaterforpowerplantcooling.
Nuclear Waste Issues
Afterdecadesoffederaleffortstoestablishapermanentgeologicrepositoryforspentnuclear
fuelandhighlevelwasteatYuccaMountain,Nevada,developmentoftheYuccaMountain
RepositoryProgramwillbesuspendedin2010.Theprogramhaslongbeenchallengedby
scientificandtechnicaluncertaintyaboutitssuitabilityforisolatingthewastesfromthe
environmentandhasfacedstaunchpoliticalandlegalopposition.
122
Thefederalenergyandwaterappropriationsbillforfiscalyear2010,signedintolawinOctober
2009,eliminatedallfundingfordevelopmentofYuccaMountain,includingfurtherland
acquisition,transportationdevelopment,andsiteengineering.
123
Thisbudgetcut,initiatedby
thePresidentsbudgetproposal,demonstratestheObamaAdministrationsbeliefthatthe
YuccaMountainrepositoryisnotaworkablesolutiontotheproblemofnuclearwaste
disposal.
124
ThisrepresentsamajorshiftinU.S.nuclearwastepolicy.
125
HaltingdevelopmentofYuccaMountainmeansthatthefederalgovernmenthasnoclearpolicy
inplaceforthelongtermdisposalofnuclearwaste.Possibleoptionsincludelongtermdrycask
storageatreactorsitesoratafewcentralizedstoragefacilities,and/orthedevelopmentof
commercialreprocessing.
122
ForanoverviewofthescientificconcernswithYuccaMountain,seetheinterviewwithDr.Allison
MacfarlaneinDavidTalbotsLifeafterYuccaMountain,TechnologyReview,MIT,July/August2009.For
alongerdiscussionofthescientificandtechnicalconcernsandthelegalandpoliticalchallenges
surroundingYuccaMountain,seeCaliforniaEnergyCommissionsNuclearPowerinCalifornia:2007Status
Report,October2007,CEC1002007005F.
123
Terminations,Reductions,andSavings:BudgetoftheU.S.Government,FiscalYear2010,Officeof
ManagementandBudget,availableat:[http://www.whitehouse.gov/omb/budget/fy2010/assets/trs.pdf.
p.68]andEnergyandWaterDevelopmentandRelatedAgenciesAppropriationsAct,2010,signedas
PublicLaw11185onOctober28,2009.
124
Appendix:BudgetoftheU.S.Government,FiscalYear2010.OfficeofManagementandBudget,p.432,
availableat:[http://www.whitehouse.gov/omb/budget/fy2010/assets/appendix.pdf].
125
AlthoughfundingtocontinuedevelopmentofYuccaMountainmaybeeliminated,thefederal
governmentisstilllegallyobligatedtodevelopapermanentnuclearwastedepositoryatYuccaMountain
pursuanttoa1987amendmenttotheNuclearWastePolicyActthatexplicitlytargetsYuccaMountainas
theexclusivesiteforanuclearwasterepository.Congresswouldhavetopassanamendmenttothe
NuclearWastePolicyActbeforeanalternatesitecouldbedevelopedasapermanentrepository.
117
Thefederalappropriationsbillsetsaside$5milliontoestablishaBlueRibbonCommissionof
expertstoinvestigatesuchalternativesolutionsandmakerecommendationstothe
Administration.ItisnotclearhowtheCommissionwillbechosen.
126
TheuncertaintysurroundingU.S.nuclearwastedisposalpolicymeansthatnuclearreactor
operators,includingPG&EandSCE,cannolongercountontransferringspentfueltoafederal
nuclearwasterepositoryinthenearormediumtermfuture.Asaresult,theutilitiesmust
continuetostorespentnuclearfuelatthereactorsites.ForCalifornia,thismeansthatthe6,700
assembliesofspentfuel(2,600metrictonsofuranium)currentlybeingstoredatoperatingand
decommissionednuclearplantsinstatewillremainatthesesitesfortheforeseeablefuture.
127
PG&EandSCEhavebuiltintermediatetermwastestoragefacilitiesattheirplants,knownas
independentspentfuelstorageinstallations(ISFSIs).TheISFSIsatDiabloCanyonandSONGS
arecurrentlylicensedfor20years,buttheymaybeeligibleformultiplelicenseextensions.
128
TheNRCallowsspentfueltobestoredatreactorsitesinabovegroundstoragefor100years
andisconsideringextendingthatlimitby20years.PG&EandSCEreportenoughstoragespace
attheirrespectivenuclearplantsitesforallspentfuelgeneratedthroughtheplantscurrent
licenses.
TheutilitieshavenotreportedplanstopursuetheEnergyCommissionrecommendationto
modifytheirspentfuelpoolsrackingtoalessdenseorientation.
129
However,thedensityofthe
spentfuelpoolsshoulddecreaseastheutilitiesmoveassembliesintodrycaskstorage.Thusfar,
PG&Ehastransferred96spentfuelassembliestotheDiabloCanyonISFSI,andSCEhas
transferred827spentfuelassembliestotheSONGSISFSI.
Withthefederalnuclearwasteprograminlimbo,atreactorstoragecontinuestobethedefacto
federalspentfuelstoragepolicy.IfYuccaMountainispermanentlyabandoned,afederal
permanentgeologicrepositoryorcentralizeddrycaskstoragefacilitylikelywillnotbe
availablefordecades.Consequently,eveniftheplantsoperatinglicensesarenotrenewed,itis
likelythatspentfuelwillremainatthereactorsitesforanextendedperiod.Asdiscussedinthe
AB1632Report,onsiteISFSIswouldnotnecessarilyrestrictthedecommissioningoftherestof
thesiteanditsconversiontootheruses.
Inadditiontospentfuel,thenuclearplantsgeneratelowlevelradioactivewastethatmustbe
disposedofatspecialfacilities.Inthepast,theutilitiesshippedtheirlowlevelwastetoseveral
disposalfacilities,butthereiscurrentlyjustonefacilitythatwillacceptlowlevelwastefrom
Californiareactors,anditacceptsonlytheleastradioactivegradeofwaste.Asaresult,PG&E
126
H.R.3183andS.1436.
127
UtilityresponsestoCaliforniaEnergyCommissiondatarequests,2007and2009.
128
SanLuisObispoMothersforPeaceischallengingDiabloCanyonsISFSIlicensebeforetheNinth
CircuitCourtoftheU.S.CourtofAppeals.
129
PacificGasandElectricandSouthernCaliforniaEdisondatarequestresponses,C.15.
118
andSCEarealsostoringmorehighlyradioactiveclassesoflowlevelwasteatthereactorsites.
Eachplantgeneratesaround150cubicfeetperyearofthiswastefromregularoperations.
130
Once-Through Cooling
Asdiscussedinthesectiononnaturalgaspowerplants,theSWRCBreleasedadraftpolicyin
June2009ontheuseofcoastalwatersforpowerplantcooling.
131
TheSWRCBandtheCalifornia
EPAhavefoundthatSONGScoolingsystemisresponsibleforaboutonethirdofallOTC
relatedimpingementmortalityandentrainmentlossesalongtheCaliforniacoast.
132
The
proposedpolicycallsforcoastalpowerplantstocutwaterintakeby95percenttoreducethe
harmfulimpactsonmarinelife.Tomeettheserequirements,thenuclearplantswouldneed
retrofittingforclosedcyclewet,drycoolingtowers,orothercoolingmeans.Previousstudies
havefoundthatforCaliforniasnuclearplants,theseoptionswouldbeveryexpensiveand
possiblyinfeasiblefromanengineeringperspective.
133
TheEnergycommissionexpectsto
reviewandcommentonthestudiesrequiredinthedraftOTCpolicyregardingcompliance
implicationsandcompliancealternativesforthetwonuclearfacilities.
IftheSWRCBspolicyisapproved,theagencywilldirectPG&EandSCEtocommission
independentstudiestoassessthecostsofalternativeoptionsforSONGSandDiabloCanyonto
meettherequirementsoftheSWRCBspolicy.Thesestudieswouldbecompletedwithinthree
yearsoftheeffectivedateofthepolicy.TheEnergyCommissionbelievesthatthesestudies
shouldalsobeincludedinthecostbenefitassessmentoftheplantslicenserenewalfeasibility
studies.
Climate Change Impacts
Onefinalenvironmentalissueisthepotentialimpactofclimatechangeonthenuclearfacilities.
TheEnergyCommissionstaffreport,PotentialImpactsofClimateChangeonCaliforniasEnergy
InfrastructureandIdentificationofAdaptationMeasures,discussedpotentialimpactsofclimate
changeonpowerplantinfrastructure.Powerplantslocatedalongthecoastcouldbeimpacted
bycoastalerosion,sealevelrise,andstormconditions.Forexample,DiabloCanyonpumps
coolingwaterthroughanintakepipethattakesthefullbruntofnorthernswellsfromPacific
storms.Toavoidshuttingdownortrippingtheunits,thefacilityhashadtocurtailpowertwice
perstormseason(onaverage)becauseofdebrisbuildupontheintakescreens.Theshutdowns
canlastanywherefrom18hourstoseveraldays.
130
UtilityresponsestoCaliforniaEnergyCommissiondatarequests,2009.
131
See[http://www.swrcb.ca.gov/water_issues/programs/npdes/cwa316.shtml].
132
StateWaterResourcesControlBoardandCaliforniaEnvironmentalProtectionAgency,WaterQuality
ControlPolicyontheUseofCoastalandEstuarineWatersforPowerPlantCooling:DraftSubstitute
EnvironmentalDocument,July2009,p.47,availableat:[http://www.swrcb.ca.gov/water_issues
/programs/npdes/docs/cwa316/draft_sed.pdf].
133
CaliforniaEnergyCommission,AnAssessmentofCaliforniasNuclearPowerPlants:AB1632Report,pp.
297300,availableat:[http://www.energy.ca.gov/2008publications/CEC1002008009/CEC1002008009
CMF.PDF].
119
Nuclear Plants and Reliability
Anissueofcriticalimportancetothestateforreliabilityplanningisthepossibilityofanuclear
plantshutdownorevenanextendedoutage,suchasthemultiyearoutageattheKashiwazaki
KariwaplantinJapanfollowingamajorearthquake.TheAB1632Reportfoundthat,giventhe
currenttransmissionsystem,aprolongedshutdownofSONGScouldresultinseriousgrid
reliabilityshortfalls,whereasaprolongedshutdownofDiabloCanyonwouldgenerallynot
posereliabilityconcerns.
134
However,theAB1632Reportalsofoundthatfurtherreliability
assessmentsareneededtofullyunderstandthereliabilityimplicationsofextendedoutagesat
thenuclearplants.
InasupportingdocumentappendedtotheSWRCBsdraftoceancoolingpolicy,theEnergy
Commission,CPUC,andCaliforniaISOnotedthedifficultiesfacedbyregulatorsinevaluating
theelectricsystemreliabilityimpactsofshuttingdowneitherSONGSorDiabloCanyon.
Furtherstudiesareneededtounderstandwhatnewgenerators,transmissionlines,and/or
demandresponseinitiativeswouldbeneededtopreparefortheeventualshutdownsofthe
nuclearplantsortoplanforpossibleextendedoutageswhilemaintaininggridstabilityand
localreliability.Theneedforandcostofthesealternateresourcesshouldbeconsideredinthe
costbenefitassessmentoftheplantslicenserenewalfeasibilitystudiesandshouldalsobe
consideredinthecontextofCPUCandCaliforniaISOreliabilityplanning.Giventhelongtime
framerequiredforpermittingandbuildingnewgenerationandtransmissionresources,these
studiesshouldbecompletedsoon.
Seismic Issues
DiabloCanyonandSONGSarelocatedalongCaliforniasseismicallyactivecoastline.The
plantsweredesignedtowithstandlargeearthquakeswithoutreleaseofradiationormajor
damage;however,scientificunderstandingofthecoastalfaultzoneshasimprovedoverthe
decadessincetheplantsweredesigned,withanewfaultdiscoveredoffshoreofDiabloCanyon
justlastyear.Plantcomponentsthatdonotserveasafetyfunctionweredesignedforless
stringentseismicstandardsthanthecoreofthenuclearplants.Alargeearthquakecouldcause
enoughdamagetothesecomponentstonecessitateextendedplantshutdownsfiveofthe
sevenreactorsattheKashiwazakiKariwaplantinJapanremainshutdownmorethantwo
yearsafterbeingdamagedbyanearthquake.
135
Anextendedplantshutdownwouldhaveeconomic,environmental,andreliabilityimplications
forratepayers.
136
TheCPUCwillthereforeconsidertheriskofanextendedoutageaspartofits
134
CaliforniaEnergyCommission,AnAssessmentofCaliforniasNuclearPowerPlants:AB1632Report,pp.
2324,availableat:[http://www.energy.ca.gov/2008publications/CEC1002008009/CEC1002008009
CMF.PDF].
135
WorldNuclearAssociation,NuclearPowerPlantsandEarthquakes,availableat:[http://www.world
nuclear.org/info/inf18.html].
136
WorldNuclearAssociation.Findingsshowtheshutdownofthe8,000MWKashiwazakiKariwaplant
costtheplantowneranestimated$5.6billionininspections,repairs,andreplacementpowerduringthe
firsteightmonthsofoutage.
120
licenserenewalcostbenefitassessment.Tosupportthisassessment,theAB1632Report
recommendedthatutilitiesupdatethenuclearplantsseismicassessments,including
assessmentsoftheearthquakeandtsunamihazardsattheplants,thevulnerabilityofnonsafety
relatedpartsoftheplants,andthetimeneededtorepairtheplantsfollowinganearthquake.It
iscrucialthattheutilitiescompletethesestudiesandsubmitthemaspartoftheCPUCslicense
renewalreview.
InJuly2009,theutilitiesreportedtotheEnergyCommissionthattheyintendtocompletethese
assessments.However,bothutilitiesreportedplanstouseaprobabilisticapproachtotheir
seismichazardassessmentsratherthanthedeterministicapproachrecommendedbytheAB
1632Report,andSCEdidnotcommittousingsomeoftheadvancedmappingandsurvey
techniquesthatwererecommended.
137
Furthermore,SCEstightscheduleforcompletingthe
studiesraisesquestionsabouthowcomprehensiveitsseismicassessmentwillbe.Asdescribed
above,theutilitiesdonotintendtocompleteallthestudiesintimeforsubmittaltotheCPUC
withtheirlicenserenewalfeasibilitystudies.
PG&EhasbeguntoupdatetheDiabloCanyonseismichazardandvulnerabilityassessments
andexpectstheseassessmentstobecompletedin2013.
138
PG&Eisusinganumberofadvanced
techniquestoidentifyandbettercharacterizefaultzonesnearDiabloCanyon,includingmulti
beambathymetry,highresolutionmarinemagnetics,andaeromagneticsurveys,andis
purchasingindustryseismicdatainthevicinityoftheplant.
139
PG&Eisalsosponsoring
researchonnumericalsimulationsofnearfaultgroundmotionstoimprovegroundmotion
models.
140
Inaddition,PG&Eisplanningtorequestratepayerfundingtoundertakethethree
dimensionalgeophysicalseismicreflectionmappingsurveysrecommendedintheAB1632
Report.
141
PG&EwillnotincludetheUnitedStatesGeologicalSurveyNationalHazardMapping
Projectmodelsinitsstudiesbecausethemodelsdonotincludedetailedinformationpertinent
totheDiabloCanyonarea.Instead,PG&Ebelievesthatinformationdevelopedinitsown
studieswillinformtheUSGSdatabases.
142
PG&Ehasalreadycompletedinitialassessmentsoftwospecificseismichazardsintheareaof
DiabloCanyon,concludingthatseismicactivitythatcouldbegeneratedbythenewly
discoveredShorelineFaultiswithinthedesignmarginsofDiabloCanyon.TheNRCs
137
PacificGasandElectricdatarequestresponseF.09;SouthernCaliforniaEdisondatarequestresponse
F.01.
138
PacificGasandElectricexpectstocompletethetsunamiassessmentbyDecember2009,theseismic
reliabilitystudiesonnonsafetyrelatedplantcomponentsbyApril2010,theseismichazardassessmentin
early2011,andtheseismicvulnerabilityassessmentin2013.ThedatarequestresponsesF.03,F.09,F.12,
F.13.
139
PacificGasandElectricdatarequestresponseF.07.
140
141
PacificGasandElectricdatarequestresponseL.02.
142
121
preliminaryassessmentconcurswiththisconclusion.
143
PG&Eisconductingadditional
geophysicalstudiesandwillprovideafinalreportinDecember2010.
144
PG&Ehassimilarly
concludedthatnewestimatesofthenearfaultgroundmotionsfromlargestrikeslip
earthquakes,includingdirectivityandmaximumcomponenteffects,revealalowerhazardthan
previouslythoughtandthereforedonotrepresentanincreasedhazardtoDiabloCanyon.
145
ResearchindicatesthatSONGScouldexperiencelargerandmorefrequentearthquakesthan
wasanticipatedintheoriginalplantdesignandthatadditionalresearchisneededto
characterizetheseismichazardatthesite.TheAB1632ReportrecommendedthatSCEdevelop
anactiveseismicresearchprogramforSONGS,similartoPG&EsLongTermSeismicProgram,
toassesswhethertheplanthassufficientdesignmarginstoavoidmajorpowerdisruptions.
AsofJuly2009,SCEhadnotbegunitsupdatestotheSONGSseismichazardandvulnerability
assessments.Yet,theutilitystatesthatitexpectstocompletethesebytheendof2010.
146
The
studiesaretoincludeseismicsourcecharacterization,reviewofGPSdata,probabilisticseismic
hazardanalysismodeling,reviewofearthquakerecurrencerelationships,groundmotion
updatesforcurrentattenuationrelationships,reviewofnewtsunamidatafromtheUniversity
ofSouthernCaliforniaandtheNationalOceanicandAtmosphericAdministration,andan
assessmentofthereliabilityimplicationsoftheplantsnonsafetyrelatedcomponents.
147
ItisnotclearwhetherSCEcancompleteallofthesestudiesinacomprehensivemannerbythe
endof2010.Indeed,theutilityhasnotcommittedtousingthreedimensionalgeophysical
seismicreflectionmappingandotheradvancedtechniquesaspartofthesestudiesorto
installingapermanentGPSarray.Instead,SCEcommittedonlytoevaluatingthecostsand
benefitsofthesetechniques,
148
anevaluationtheEnergyCommissionhasdeterminedshouldbe
conductedbystateagencies,nottheutilities.
149
ItremainstobeclarifiedwhetherSCEplansto
collectanynewdataontheseismichazardsintheSONGSregionorwhetheritisplanning
simplytoreviewcurrentlyavailabledata.
SCEestablishedaSeismicAdvisoryBoardtoguideandreviewtheSONGSseismicstudies.
150
SCEplansfortheboardtoperiodicallyreviewtheseismichazardatSONGSandtodetermine
143
NuclearRegulatoryCommission.PreliminaryDeterministicAnalysisofSeismicHazardatDiablo
CanyonNuclearPowerPlantfromNewlyIdentifiedShorelineFault.ResearchInformationLetter09
001.April8,2009.
144
PacificGasandElectricdatarequestresponsesF.01,F.06.
145
146
SouthernCaliforniaEdisondatarequestresponsesF.01,F.13F.15.
147
SouthernCaliforniaEdisondatarequestresponsesF.01,F.12.
148
SouthernCaliforniaEdisondatarequestresponsesF.07,F.11.
149
CaliforniaEnergyCommission,AnAssessmentofCaliforniasNuclearPowerPlants:AB1632Report,p.9,
CMF.PDF]
150
SouthernCaliforniaEdisondatarequestresponseF.05.
122
theneedfornewresearchandinvestigationsintotheplantsseismicsetting.Ascurrently
structured,theboardincludesgeologistsfromPG&Eandprivateconsultantsingeology,
seismology,andstructuralengineeringwhoarefamiliarwiththeSONGSplantfromprevious
workforSCE.
151
ItincludesjustoneexpertnotpreviouslyemployedbySCEorcurrently
employedbyPG&E.Thisisunfortunatesinceamoreindependentadvisoryboardwouldlikely
contributetostrongerstudies.
Nuclear Plant Safety Culture
Thestateisconcernedwithanumberofotherissuesthatmayaffectthedecisiononwhetherthe
utilitiesshouldpursueplantrelicensing.Theseincludethereliabilityimplicationsoflapsesin
thesafetycultureatSONGSandplansforemergencyevacuationsfrombothplants.
In2007,theNRCidentifiedanumberofconcernsaboutthesafetycultureatSONGS,
particularlywithrespecttohumanperformanceandproblemidentificationandresolution.
Sincethen,SCEsmanagementputanewleadershipteaminplaceatSONGSandinstituteda
seriesofsafetyreformsandmonitoringprograms.
152
Forexample,SCEimplementedsafety
improvementplansandconductedextensiveevaluationstoidentifytherootcausesofsafety
lapses.Theutilityalsoinstitutedweeklymonitoringofcoreperformanceindicators,established
weeklysitewidemeetingsonhumanperformanceandsafetyissues,setupasystemfor
employeestovoicetheirconcernsregardingsafetyissues,andconductedasafetyculture
assessment.
TheNRCrecentlyconcludedthattheseimprovementswerenotadequateinaddressingthe
overallsafetycultureatSONGS.TheNRCwasparticularlyconcernedthatithadidentified
problemsintheareasofhumanperformanceandproblemidentificationandresolutionoverthe
courseoffourconsecutiveassessments,includingitsmostrecentassessmentinSeptember
2009.
153
DuringtheSeptember2009assessment,theNRCalsoidentifiedanadditionalsafety
relatedissueoffailingtouseconservativeassumptionsindecisionmaking.
154
Asaresultofthesesafetyculturefailures,theNRCintendstomaintaintheadditionaloversight
thatitinitiallyimposedoverSONGSinDecember2008.Atthattime,theNRCdiscoveredthata
batteryusedtopowerabackupgeneratorattheplanthadbeeninoperablesince2004.Although
theNRCrankedthisasafindingoflowtomoderatesafetysignificance,theagencynotedthat
thepersistenceoftheproblemforfouryearspointedtoinadequatemaintenanceproceduresfor
151
SouthernCaliforniaEdisondatarequestresponseF.05.September18,2009.
152
SouthernCaliforniaEdisondatarequestresponse,M.09.
153
NuclearRegulatoryCommission,MidcyclePerformanceReviewandInspectionPlanSanOnofre
NuclearGeneratingStation,September1,2009,p.1,availableat:
[http://www.nrc.gov/NRR/OVERSIGHT/ASSESS/LETTERS/sano_2009q2.pdf].
154
NuclearGeneratingStation,September1,2009,p.2.
123
theplantoverall.TheNRCalsoexpresseddissatisfactionthatSONGSselfevaluationshadnot
identifiedsevenotherproblemsattheplant.
155
Inlightoftheseperformancelapses,SenatorBarbaraBoxerandCaliforniaStateSenator
ChristineKehoewrotetotheNRCexpressingconcernaboutSCEsfall2009steamgenerator
replacementproject.TheNRCrespondedbyexpressingconfidenceinSCEsabilitytocomplete
theprojectsafelywithoutanyadditionalrestrictionsorNRCoversight.Thisisconsistentwith
theNRCspositionthat,whileSONGSprogressinimprovingsafetyculturehasbeen
inadequate,theplantcontinuestobeoperatedinasafemanner.
156
TheInstituteforNuclearPowerOperations(INPO),apeeroversightagency,mayalsobe
dissatisfiedwithSONGSrateofimprovement.AfteraJanuary2009inspection,INPO
reviewersreportedlyconcludedthatthesitehadmadeinadequateprogressinalloftheareas
identifiedasneedingspecialfocussixmonthsearlier,andrankedSONGSinthebottomquartile
ofU.S.commercialnuclearplants.
157
Lackofprogressmayalsobeevidentinreducedplantperformance.SONGSs2008capacity
factorwasjust81percent,
158
significantlylowerthanthe92percentindustryaverage.
159
This
relativelylowlevelofavailabilitywaspartiallytheresultofUnit3srefuelingoutageextending
66days,
160
28dayslongerthantheindustryaverage.
161
ImprovementstothesafetycultureandplantperformanceatSONGSwillbereflectedin
improvedratingsbytheNRCandINPOandbyshorteroutagesandhighercapacityfactors.If
sufficientimprovementsarenotdemonstratedinthecomingyears,theimplicationsof
sustainedsafetyculturelapsesandthepossibleimpactonreliabilityoftheplantswillneedto
beconsideredaspartofthestateslicenserenewalassessmentfortheplant.
Anotherissueisemergencyevacuationplanning.TheAB1632Reportrecommendedthatthe
utilitiesreassesstheadequacyofplantroadsforallowingaccessforemergencyresponseteams
andforallowinglocalcommunitiesandworkerstoevacuate.Thereportrecommendedthatthis
155
NuclearRegulatoryCommission,OfficeofPublicAffairs,NRCtoProvideAdditionalOversightto
SanOnofreNuclearGeneratingStation,December22,2008.
156
NuclearGeneratingStation,September1,2009,p.1.
157
See[http://www.voiceofsandiego.org/articles/2009/02/26/science/963songs022509.txt].
158
SouthernCaliforniaEdison,2008FinancialandStatisticalReport,p.24,availableat:
[http://www.edison.com/files/2008_Financial&StatisticalRpt.pdf].
159
U.S.EnergyInformationAdministration.U.S.NuclearStatistics,see
[http://www.eia.doe.gov/cneaf/nuclear/page/operation/statoperation.html].
160
SouthernCaliforniaEdison,2008FinancialandStatisticalReport,p.24,availableat:
[http://www.edison.com/files/2008_Financial&StatisticalRpt.pdf].
161
NuclearEnergyInstitute,U.S.NuclearRefuelingOutageDays,availableat:
[http://www.nei.org/resourcesandstats/documentlibrary/reliableandaffordableenergy/graphicsandcharts/
refuelingoutagedays/].
124
reassessmentbeconductedaspartoflicenserenewalstudiestoensurethatplantassetswould
beprotectedinanemergency.PG&Ehascommissionedastudy,tobecompletedinearly2010,
onevacuationtimeestimatesforDiabloCanyon.
162
SCEreassessesitsevacuationtimestudies
annually.
163
Nuclear Plants and the Economy

Nuclearpowerplantsfaceanumberofeconomicbarriers,includinghighcapitalcostsandlong
constructionleadtimes.Whilenuclearplantsarerelativelycheaptorun,constructioncostsare
high.Thesecostsarealsohighlyuncertainsincefewnuclearplantshavebeenconstructedinthe
U.S.sincethe1980s.
164
Duringthelate1990sandearlypartofthisdecade,vendorestimatesfornewnuclearplants
wereontheorderof$1,000$1,500perkW.However,thesegeneralestimateswerenottiedto
particularprojects.Inrecentyearsassomecompanieshavebeguntoseriouslyevaluateoptions
fornewnucleargeneration,vendorbidshavebeenmuchhigher,ontheorderof$4,000$6,000
perkW.
165
Foratypical2,200MWnuclearplant,thisamountsto$9$13billionincapitalcosts.
Recently,severalutilitiesreportedevenhighercostestimatesof$14billion($6,300perkW)for
proposedplants,
166
andMoodysInvestorsServiceestimatedthatcostsforanewplantcould
potentiallyreach$7,000$7,500perkW.
167
UntiloneormorenewnuclearplantsareconstructedintheU.S.,theseestimateswillremain
preliminary,makingconstructionofanewnuclearplantariskyendeavor.Theriskofcapital
costincreasesiscompoundedbythelonglengthoftimethatittakestogetapprovalforand
thenconstructanewnuclearplant,whichraisestheriskofcostincreasesduetoregulatory
delays,inflation,andincreasestofinancingcosts.Asaresult,Moodyscautionedthatthey
viewnewnucleargenerationplansasabetthefarmendeavorformostcompaniesand
warnedthatcompaniesthatpursuenewnucleargenerationmayfacecreditratingdowngrades
iftheydonotmitigatethisrisk.
162
PacificGasandElectricdatarequestresponseM.06.
163
WrittencommentsbySouthernCaliforniaEdisononthe2009DraftIEPR,October30,2009,p.19,
14_workshop/comments/Southern_California_Edison_TN53916.PDF].
164
U.S.NuclearRegulatoryCommission.20092010InformationDigest,p.36,availableat:
[http://www.nrc.gov/readingrm/doccollections/nuregs/staff/sr1350/v21/sr1350v21.pdf].
165
KEMA,RenewableEnergyCostofGenerationUpdate,PIERInterimProjectReport,August2009,CEC500
2009084,AppendixA.
166
FloridaPower&LightsTurkeyPointplant,GeorgiaPowerandGeorgiaPublicServiceCompanys
Vogtleplant,andDukeEnergysLeeNuclearStation,see[http://progress
energy.com/aboutus/news/article.asp?id=20482];
[http://southerncompany.mediaroom.com/index.php?s=43&item=353];
[http://www.bizjournals.com/charlotte/stories/2008/11/03/daily19.html].
167
MoodysCorporateFinance,NewNuclearGeneratingCapacity:PotentialCreditImplicationsforU.S.
InvestorOwnedUtilities,May2008,pp.1and15.
125
Othercostissuesrelatingtonuclearpowerplantsincludesecurity(toprotectsitesfrom
terrorismandtheft),plantdecommissioning,andnuclearwastestorage,transport,and
disposal.ThefederalNuclearWastePolicyActof1982madethefederalgovernment
responsibleforthepermanentdisposalofspentnuclearfuelandhighlevelwaste.Since1982,
nuclearplantownershavebeenrequiredtopay0.1centsperkWhofpowergeneratedfrom
theirplantsintoaNuclearWasteFundtofinancefederaleffortstobuildapermanentnuclear
wasterepository.Inreturnforthesepayments,theDOEcommittedtoopeningarepositoryby
January31,1998.
AsofSeptember2008,theNuclearWasteFundcontained$31.4billion,with$1.4billionfrom
California.However,morethan11yearsafterthedeadline,arepositoryhasyettobe
constructed.Asaresult,PG&E,SCE,andmanyotherutilitieshavesuedtheDOEforbreachof
contract.PG&Eclaimeddamagesof$90.6millionthrough2004forcostsatDiabloCanyon
($36.8million)andHumboldtBay($53.8million).
168
InOctober2006,theU.S.CourtofFederal
ClaimsawardedPG&E$42.8million.PG&Ewonanappealontheawardamount,andthe
lawsuithasbeenremandedtotheU.S.CourtofFederalClaimsforarecalculationofdamages.
TheDOEhasconcededthatPG&Eisentitledto$75million,butcontinuestocontest$15.6
millionofadditionalcoststhataremostlyrelatedtoonsitestorageofGreaterthanClassC
wasteatHumboldtBay.PG&EplanstofileanadditionalclaimtocoverISFSIrelatedcosts
incurredfrom20052009.
169
SCEclaimed$150millionindamagesthrough2005.InadditiontoISFSIlicensing,construction,
andoperatingcosts,SCEisseekingadditionalcompensationforpaymentsmadetoGeneral
ElectricforstorageofUnit1spentfuelandinvestmentsintheproposedPrivateFuelStorage
facilityinUtah.
170
AtrialwasconductedinlateApril2009,andadecisionisexpectedinlate
2009orearly2010.
171
Ifafederalrepositoryisestablished,spentfuelwillneedtobepackagedfortransport,aging,
anddisposal.Drycaskstorage,aninterimstoragesolution,couldprovecostlytoutilitiesinthe
longterm,especiallyiftheyneedtopaytotransfertheirfuelfromtheirdrycasksintofederally
approvedtransport,aging,anddisposalcasks.Thenuclearplantswillalsoneedtodisposeofa
substantialquantityoflowlevelradioactivewastewhentheyaredecommissioned,andthecost
totransportanddisposeofthiswasteisexpectedtobehundredsofmillionsofdollarsormore.

168
PacificGasandElectricsinitialdamageclaimwasfor$92.1million.PacificGasandElectric
recalculateditsclaimbasedontheappellatecourtsdecision.
169
PacificGasandElectricdatarequestresponseD.09.
170
MRW&Associates,Inc.AB1632AssessmentofCaliforniasOperatingNuclearPlants:FinalReport,
preparedfortheCaliforniaEnergyCommission,October2008,pp.220221.
171
SouthernCaliforniaEdisondatarequestresponseD.09.
126
Transmission
SenateBill1565(Bowen,Chapter692,Statutesof2004)requirestheEnergyCommissionto
adoptastrategicplanforthestateselectrictransmissiongridaspartoftheIEPRproceeding.In
furtherrecognitionoftheimportanceofthestatesroleintransmissionplanning,SenateBill
1059(EscutiaandMorrow,Chapter638,Statutesof2006)createsalinkbetweentransmission
planningandpermittingbyauthorizingtheEnergyCommissiontodesignatetransmission
corridorzones(transmissioncorridors)onnonfederallandsthatwillbeavailableinthefuture
tofacilitatethetimelypermittingofhighvoltagetransmissionprojects.
The2008IEPRUpdatenotedthattheprimarybarriertoincreaseddevelopmentofrenewable
generationcontinuestobethelackoftransmissiontoaccesstheseresources,particularlythose
generatingresourceslocated(orproposed)inremoteareasofthestate.Inparticular,thatreport
identifiedtwomajortransmissionrelatedbarrierstoachievingthestatesrenewablesgoals.
First,thereisaneedformechanismstoremovebarrierstojointtransmissionprojectsbetween
publiclyownedutilitiesandIOUs.Thisissueisdescribedbelowinthesectionontransmission
andtheeconomy.Second,withregardtotransmissionsiting,thestatemustcontinuetoactively
addressenvironmental,landuse,andlocalpublicoppositionissuesbyworkingcloselywith
stakeholdersduringtheplanningprocess.Thisissueisdescribedbelowinthesectionon
transmissionandtheenvironment.
The2009StrategicTransmissionInvestmentPlan,preparedinsupportofthe2009IEPR,describes
theimmediateactionsthatCaliforniamusttaketoplan,permit,construct,operate,and
maintainacosteffective,reliableelectrictransmissionsystemthatiscapableofrespondingto
importantpolicychallengessuchasachievingsignificantGHGreductionandRPSgoals.This
sectionbrieflysummarizessomeofthemajorissuescoveredintheplan.
172
Transmission and the Environment

Inthe2007StrategicTransmissionInvestmentPlan,theEnergyCommissionidentifiedthe
importanceofearlyconsiderationofnonwiresalternativesinstatewidetransmissionplanning
processes.Essentially,nonwiresalternativesarethepreferredresourcesidentifiedinthestates
loadingorderandincludeenergyefficiency,demandreductionmeasures(demandresponse
andloadmanagement),andtheuseofsmallscaleandcustomerleveldistributedgeneration
resourcesand/orcleanfossilfiredcentralstationgenerationlocatedwithintheloadservice
area.CosteffectiveenergyefficiencyistheresourceoffirstchoiceformeetingCalifornias
energyneeds;atthesametimeitisimperativethatCaliforniareachits33percentRPSgoalsand
expanddistributedgenerationapplications,particularlyrooftopsolarPVandCHP.Nonwires
alternativesareincreasinglyidentifiedasviablealternativestonewconventionalgeneration
andtransmissionfacilitiesrequiredtoconnectnewgenerationtodemandcenters.TheCPUC
currentlyperformsaprojectspecific,nonwiresalternativeanalysisaspartofitsenvironmental
172
Foradditionaldetail,seeCaliforniaEnergyCommission,2009StrategicTransmissionInvestmentPlan,
FinalCommissionReport,December2009,CEC7002009011CMF,availableat:
127
reviewprocessforpermittingtransmissionprojects,initiatedwiththefilingofaCertificateof
PublicConvenienceandNecessity(CPCN).
Asnotedinthe2008IEPRUpdate,integratinglanduseandenvironmentalconcernsinto
transmissionplanningprocessescanbeachallenge.Effortsarealreadyunderwaytoaidinthe
earlyidentificationandresolutionortoavoidlanduseandenvironmentalconstraintsto
promotetimelydevelopmentofCaliforniasrenewablegenerationresourcesandassociated
transmissionlines.TheRETIhasproventobeasuccessfulmodelforbringingtogether
renewabletransmissionandgenerationstakeholderstolinktransmissionplanningand
transmissionpermitting.Thiswillensurethatneededprojectsareplannedfor,havecorridors
setasideasnecessary,andarepermittedinatimelyandeffectivemannerthatminimizes
environmentalimpacts,makesthebestuseofexistinginfrastructureandrightsofway,and
takesadvantageoftechnologicaladvances.
InAugust2009,RETIreleaseditsPhase2AReport,whichpresentsaconceptualtransmission
expansionplantoincreasethecapacityofthestatestransmissiongridtodeliverrenewable
generationtoloadcenters.Italsoformsthebasisforthedevelopmentofadraftmethodfor
identifyingwhichoftheRETIlinesegmentsshouldbeconsideredforcorridordesignationby
theEnergyCommission.NextstepsincludeapossibleupdateofthePhase2Areporttoaddress
developmentsinthetaxcodethataffecttheeconomicrankingsofcompetitiverenewable
energyzones.StakeholdersarealsoconsideringparticipationintheCaliforniaISOAnnual
TransmissionPlanproceedingandtheelectricutilitiesCaliforniaTransmissionPlanningGroup
(CTPG).
173
Beyondthis,thestakeholdersareevaluatingthebenefitsofconductingPhase2B
worktoprioritizethetransmissioninfrastructureidentifiedintheconceptualtransmissionplan,
addressingreaterdetailoutofstaterenewableresourcesandrevisethetransmission
infrastructureaccordingly,anddevelopaninteriminterconnectionplantoexploitinitial
renewablegenerationopportunitiesthatcanrelyontemporaryfixestotheexistinggridtobe
broughtonline.
Anotherimportantefforttointegratelanduseconcernswithtransmissionplanningisthe
EnergyCommissionstransmissioncorridordesignationprocessestablishedunderSB1059.The
transmissioncorridordesignationprocesswillhelppromoteimprovedpublicinvolvementin
transmissionplanningprocessessothatpublicconcernscanbeheardandaddressed.In
addition,earlyoutreachbyutilitiestolocalgovernmentsandlanduseagencieswillhelpwith
earlyidentificationoflanduseandenvironmentalconflicts,whicharetypicallythemajor
impedimentstosecuringanytransmissionpermit.Thecorridordesignationprocesscanalso
providebettereducationtothepublicandlocalgovernmentagenciesaboutwhynew
transmissioninfrastructureisneededandhowitwillhelpthestatemeetitsenvironmental
goals.
173
TheCaliforniaTransmissionPlanningGroupincludestheCaliforniaIndependentSystemOperator,
theCaliforniaMunicipalUtilitiesAssociation,theImperialIrrigationDistrict,theLosAngeles
DepartmentofWaterandPower,PacificGasandElectricCompany,SouthernCaliforniaEdison
Company,SanDiegoGas&ElectricCompany,andtheTransmissionAgencyofNorthernCalifornia.
128
Transmission and Reliability
Toensureareliablenetwork,regulatorschallengeistoidentifythebestmixoftransmission
projects.PolicydecisionsliketheretirementofagingpowerplantsorOTCplantsmayrequire
transmissionsolutionstomaintainsystemreliabilityinthesouthernpartofthestate.Successin
meetingRPSandGHGreductiongoalsdependsinlargepartontheabilitytointerconnect
substantialamountsofnewgenerationfromrenewableresources.Occasionallocalopposition
topowerplantsinloadcentersnecessitatesremotegenerationthatmayprompttheneedfor
increasedtransmission.
Inthe2009StrategicTransmissionInvestmentPlan,theIEPRandSitingCommitteesnotethatthe
highestpriorityistocontinuetosupporttheprojectsidentifiedinpreviousstrategicplans.The
EnergyCommissionfoundthattheseprojectsmetthecriteriaforstrategictransmission
resourcesbecausetheyprovidedstatewidebenefits.Ascurrentlyplanned,theseprojectswould
significantlyincreasethetransmissionnetworksabilitytoreliablyconnectrenewable
generationtoCalifornialoadcenters.Theseprojectsinclude:
ImperialIrrigationDistrictUpgrades
SCETehachapiUpgrades(Segment1AntelopePardee;Segment2AntelopeVincent;
Segment3AntelopeTehachapi;andSegments411TehachapiRenewable
TransmissionProject)
SCEDeversPaloVerde2(theentireCaliforniaArizonainterconnection,aswellasthe
Californiaonlyvariation)
LADWPTehachapiUpgrade(BarrenRidgeRenewableTransmissionProject)
PG&ECentralCaliforniaCleanEnergyTransmissionProject(C3ETP)
SDG&ESunrisePowerlinkTransmissionProject
LakeElsinoreAdvancedPumpedStorageProjectTransmissionPortion
GreenPathNorthCoordinatedProjects
SCEElDoradotoIvanpahTransmissionProject(newprojectnotinpreviousstrategic
plans)
The2009StrategicTransmissionInvestmentPlanprovidesacompletedescriptionoftheseprojects
andtheircurrentstatus.
ThesecondpriorityshouldbetransmissionsegmentsidentifiedintheRETIprocessas
foundationanddeliverysegmentsthatlimitenvironmentalimpactsbyusingorexpanding
existingtransmissionsegments.Togetherwiththefirstpriorityprojectslistedabove,these
segmentswouldprovideastrongsystemtomoveanddeliverelectricitythroughoutCalifornia.
RETIhasnotperformedthethoroughplanningstudiesthatarerequiredtomovetheseprojects
forwardtowardpermittingapprovals.Thedetailedanalysisoftheseprojectsshouldbe
conductedthroughRETIorthenewlyformedCTPG,describedinmoredetailinthesectionon
transmissionandtheeconomy.
129
Sixconceptualtransmissionprojectsmeetthesetwoprioritycriteria.Theyarethenoregrets
RETIlinesthatcouldbebuiltwithinanexistingtransmissioncorridororbyexpandingan
existingcorridor.Twoadditionalprojects(GreggAlphaFourandTracyAlphaFour)donot
meetthesecriteriabutareneededtocompletealinktoNorthernCalifornialoadcenters;
withoutthesetwolines,therenewableenergywouldreachFresnobutnotloadcentersinthe
BayArea.
174
ThethirdpriorityshouldbetocontinuetheanalysisoftheRETIrenewablefoundationand
renewablecollectorlinesthatrequirenewcorridorsandbegintheplanningworkforthe
priorityrenewableareasoutsideTehachapi,theImperialValley,andeasternRiversideCounty.
PublicoutreachandcorridoridentificationfortheRETInoregretslinesthatrequirenew
corridorsshouldcontinuewithlocalRETIforums,andthetransmissionplanningshouldbe
developedthroughtheCTPG.WhichareasorCREZsshouldbegivenpriorityshouldbe
revisitedbecausethereareseveralfactorsthatwillaffecttheviabilityoftheareas.Theproposed
nationalmonumentintheMojaveDesertareacouldreducethesizeofseveraloftheCREZs.
TheSolarPEIScurrentlybeingdevelopedbytheBLMwilllikelyidentifypreferredsolar
developmentareaswhileremovingotherareasfromdevelopment.TheCaliforniaISOis
completingitsfirstclusteredinterconnectionstudiesbasedonthenewGenerator
InterconnectionProcess.Whilethesestudieswillonlyidentifytransmissionneedsforasmall
partofthegenerationpotentialofmanyoftheCREZs,thenewstudieswillidentifysomeofthe
transmissionupgradesthatarerequiredtoconnectproposedgeneratorstotheexisting
transmissiongrid,andtheextentoftheserequiredupgradescouldaffectthedevelopmentof
renewableareas.Allofthesestudieswillhelpidentifypreferredrenewablegenerationareasfor
Californiaandwillhelpprioritizetheplanningandpermittingoffuturetransmissionneeds.
Transmission and the Economy
JointtransmissionprojectsbetweenIOUsandpubliclyownedutilitiespromoteeconomic
efficiencybyeliminatingpotentiallyredundantfacilities,therebyreducingratepayerexpenses
andenvironmentalimpacts.Withrespecttotheissueofovercomingobstaclestojoint
transmissionprojects,the2008IEPRUpdaterecommendedthattheEnergyCommissionusethe
2009IEPRand2009StrategicTransmissionInvestmentPlanprocessesasforumstoidentifyand
evaluateregulatoryorpolicychangesthatwouldreducebothlegalandmarketobstaclesto
jointprojectdevelopment.Towardthatend,twojointIEPR/SitingCommitteeworkshopswere
heldinsupportofthe2009StrategicTransmissionInvestmentPlanthatvettedtheissueof
coordinatedstatewidetransmissionplanningtomeetCaliforniasRPSgoals.Inthe2009
StrategicTransmissionInvestmentPlan,theEnergyCommissionrecognizestheformationofthe
CTPGandthesignificantprogresstheCTPGappearstobemakingtowardestablishinga
coordinatedstatewideutilitytransmissionplanningprocessthatcouldleadtojoint
IOU/publiclyownedutilityprojects.
174
TheeightsecondpriorityconceptualtransmissionprojectsincludefiveRETIRenewableFoundation
lines(KramerLugo500kV,LugoVictorville#2500kV,DeversMiraLoma#1and#2500kV,Gregg
AlphaFour500kV,andTracyAlphaFour500kV1&2)andthreeRETIRenewableDeliverylines
(DeversValley#3500kV,TeslaNewark230kV,andTracyLivermore230kV).
130
AsdescribedbythecommentsreceivedunderthisproceedingbytheCTPG,
175
thepurposeof
theCTPGistofindthebesttransmissionsolutionsformeetingCaliforniasenvironmental,
reliability,economic,andotherpolicyobjectives.UndertheCTPG,IOUs,publiclyowned
utilities,andtheCaliforniaISOareplanningtoworktogethertoavoidtransmission
duplication,optimizeuseofexistingrightsofway,reduceenvironmentalimpacts,andlower
costsforconsumers.TheCTPGisintended,alongwithexistingefforts,tofulfilltheCTPG
membersobligationsandrequirementsunderOrderNo.890issuedbytheFederalEnergy
RegulatoryCommission(FERC).OrderNo.890requirementsincludeninetransmission
planningprinciplesthataddressmanyoftheissuescentraltoanopenandinclusiveplanning
process,including(1)coordinationwithcustomersandneighboringtransmissionproviders;(2)
openmeetingsavailabletoallparties;(3)transparencyinmethodology,criteria,andprocesses;
(4)opportunitiestousecustomerdataandmethodologicalinput;(5)theobligationtomeet
specificservicerequestsoftransmissioncustomersonacomparablebasis;(6)acleardispute
resolutionprocess;(7)regionalcoordination;(8)studyofeconomiceffectofcongestionand
integrationofnewresources;and(9)aprocessforallocatingcostsofnewprojects.
TheEnergyCommissionsupportstheplansoftheIOUs,publiclyownedutilities,andthe
CaliforniaISOtoworktogethertoavoidtransmissionduplication,optimizeuseofexisting
rightsofway,reduceenvironmentalimpacts,lowercostsforconsumers,anddevelopaprocess
forcostallocationforjointprojects.IfCTPGsconsolidatedutilityapproachissuccessful,this
collaborationcouldresultinthedevelopmentofjointtransmissionprojectsnecessaryfor
implementingatruestatewideplanningprocessthatreflectsbroadstakeholderinterests.
176
Anotherhighpriorityeconomicissuefortransmissionisthebroadercostallocationissuefor
interstatetransmissionprojects.The2007StrategicTransmissionInvestmentPlandescribedthe
resultsofaPIERfundedstudythatexaminedcostallocationandcostrecoveryproceduresin
otherregionsofthecountryforinsightsthatcouldapplytoaCaliforniawesternregioncontext.
Thestudyalsoidentifiedanumberofbasicprinciplesfordevelopingcostallocationprocedures
thatcouldguidewesternplanners.
Currently,thereisahighdegreeofinterestatthefederallevelinmovingtowardinter
connectionwidetransmissionplanningandfederalinterventioninplanning,permitting,and
costallocation.CongressisconsideringlegislationthatwouldestablishnewFERCauthorityfor
transmissionsitingandcostallocation.ThisissueisofconcerntoCaliforniabecauseifFERC
mandatesacostallocationmethod,Californiacouldberequiredtopayforprojectsnot
consistentwiththeCaliforniaRETIeffort,CaliforniaRPSgoals,andcarbonreductionpolicies.
175
PostWorkshopCommentsofJointPartiesCommentsonTransmissionPlanningInformationand
PolicyActions,May29,2009,availableat:
04_workshop/comments/Joint_Parties_PostWorkshop_Comments_052909_TN51751.pdf].
176
FormoreinformationontheCaliforniaTransmissionPlanningGroupanditsroleinstatewide
transmissionplanning,seechapters2and4ofthe2009StrategicTransmissionInvestmentPlan,September
2009,CEC7002009011CTD,availableat:[http://www.energy.ca.gov/2009publications/CEC7002009
011/CEC7002009011CTD.PDF].
131
TheWesternGovernorsAssociation(WGA)hasrecentlyassertedwesternpoliciesthaturge
Congresstoguidecentralizedregionaltransmissionplanning,implementedthroughactions
andpoliciesoffederalagenciessuchasFERC,BLM,andDOE.Itspolicylettersexplicitlyurge
Congresstorequirearegionaltransmissionplan,chosenandapprovedbyWGA,whichcould
beenforcedbyDOEandFERCthroughmechanismssuchasincentives,federalcorridor
designation,NationalInterestElectricityCorridorDesignation,possiblesiting
preemption/backstopauthority,andprescriptivecostallocationundermethodsspecifiedbythe
FERC.
177
ThedetailedimplementationoftheWGApolicystatementswilltoasignificantdegree
dependonwhat,ifany,legislationisapprovedbyCongressin200910(orbeyond).
AnothereconomicissuethatisspecifictotheEnergyCommissionstransmissioncorridor
designationprocessisCaliforniaIOUsuncertaintyofcostrecoveryforlandpurchasedwithin
anEnergyCommissiondesignatedcorridorforfuturetransmissionprojects.ThecurrentFERC
declaratoryorderrequiresthatanIOUobtainaCPCNfromtheCPUCforaspecific
transmissionprojectwithinadesignatedcorridortoqualifyforcostrecoveryforland
purchases.Thisrequirementisapotentialbarriertothesuccessfulimplementationofthe
EnergyCommissionstransmissioncorridordesignationprogram.Toeliminatethisbarrierthe
IOUsneedassurancefromFERCthattheywillbeallowedtorecoverintheirelectricratesthe
costoflandpurchasedwithinanEnergyCommissiondesignatedcorridor.TheEnergy
CommissionbelievesthatFERCshouldallowanIOUtoqualifyforcostrecoveryifthelandis
setasideforoneormoretransmissionprojectsthatmaybeconstructed1015yearsinthefuture
andiswithinanEnergyCommissiondesignatedcorridor.
Natural Gas Sector

Naturalgasprovidesalmostonethirdofthestatestotalenergyrequirementsandcontinuesto
beamajorfuelinCaliforniassupplyportfolio.Naturalgasisusedinelectricitygeneration,
spaceheatingforhomesandcommercialbuildings,cooking,waterheating,industrial
processes,andasatransportationfuel.
Natural Gas Supplies
Californiassupplyofnaturalgascomesfromfourareas:instateproduction,southwestern
UnitedStates,theRockyMountainRegion,andCanada,with87percentofthestatesnatural
gascomingfromoutofstatesources.AfternearlyadecadeofrelativelyflatordecliningU.S.
naturalgasproduction,domesticproductioninthelower48statesbeganrisingin2006andby
2008returnedtolevelslastseenin1974(Figure13)
.178
Twentyyearsago,Californiaproduced20percentofthestatessupplyofnaturalgas,the
Southwestprovidednearly60percent,andtherestcamefromCanadaandotherbasins.
177
WesternGovernorsAssociation,LettertotheHonorableJeffBingaman,May1,2009,availableat:
[http://www.westgov.org/wga/testim/transmission5109.pdf].
178
Domesticnaturalgasproductionwas21.60trillioncubicfeet(Tcf)in1974and21.40Tcfin2008.
132
However,instatenaturalgasproductionhasbeendecliningovertime(Figure14),andthe
downwardtrendmaycontinuefromthecurrent825millioncubicfeetperday(MMcf/d)to
possibly700MMcf/dby2020.
Productionfromconventionalnaturalgasbasinsthatprovidedthemajorityofdomesticsupply
begantodeclineinthelate1990sandearly2000sbutasnaturalgaspriceshaveincreased,so
haveexplorationandproduction.Therehavealsobeenadvancesinhorizontaldrilling,amore
efficientandcosteffectivemethodforrecoveryofdomesticunconventionalnaturalgasreserves
thatprovidesthepotentialforgreatergasproductionperwell.Findinganddevelopmentcosts
Figure 13: U.S. Domestic Natural Gas Production
Source: EIA AEO 2009 Early Release.
Figure 14: 2007 California Natural Gas Receipts by Source
Source: Pipeline and Utility Filings with the California Energy Commission
133
ofatypicalverticalwellaverage$1.71perthousandcubicfeet(Mcf),whilecostsforahorizontal
wellaveragebetween$1.06/Mcfand$1.34/Mcf.
179
NaturalgasfromoutofstateisdeliveredintoCaliforniausingtheinterstatenaturalgas
pipelinesystem.FiveinterstatepipelinesbringgastoCalifornia:GasTransmissionNorthwest
pipelinecarriesCanadiannaturalgas;ElPaso,Transwestern,andQuestarsSouthernTrails
transportgasfromtheSouthwest;andtheKernRiverpipelinesystemmovesRockyMountain
productiontomarket.ExceptforSouthernTrails,eachofthesepipelinesservesothercustomers
beforereachingCalifornia.Figure15showsnaturalgaspipelinesandresourceareasinwestern
NorthAmerica.
InterstatepipelinesandCaliforniaproductioncurrentlyhavethecapacitytosupplyCalifornia
consumersupto10,230MMcf/d.However,becauseofupstreamdemandandutilitymultiple
receivingpoints,thestatecanonlyrelyonreceiving8,315MMcf/dofsupplyfrompipelinesand
nativeproduction.Simplybecauseaninterstatepipelinehasacertaindeliverycapacitydoesnot
meanthatallofitscapacityisavailabletoCalifornia.EachpipelineservingCaliforniahasfirm
deliverycontractsnotonlyforCaliforniacustomersbutalsoforcustomersupstreamfrom
California.Becauseoftheseupstreamcommitments,notallofapipelinescapacityisavailable
fordeliverytothestate.
Ifdemandexceedsreliablesupply,utilitiesandnoncorecustomerswillstillbeabletomeet
demanduptothepipelinedeliverycapacitybutpriceswouldincreasedramatically.Tomeet
theirneeds,Californiautilitiesandnoncorecustomerswouldthenhavetopurchasenaturalgas
thatotherwisewouldhavebeendeliveredtocustomersoutsideofCalifornia.Toattractthe
supply,theywouldhavetopayelevatedpricesthatwoulddriveCaliforniapricesabove
currentmarketlevelsandcostthestatesconsumersanunknownamount.
179
CaliforniaEnergyCommission,ShaleDepositedNaturalGas:AReviewofPotential,May2009,CEC200
2009005SD,availableat:[http://www.energy.ca.gov/2009publications/CEC2002009005/CEC2002009
005SD.PDF].
134
Figure 15: Natural Gas Resource Areas and Pipelines
Source: 2008 California Gas Report
OncenaturalgasarrivesinCalifornia,itisdistributedbythenaturalgasutilitycompanies.The
threemajorutilitiesSouthernCaliforniaGasCompany(SoCalGas),SDG&E,andPG&E
collectivelyserve98percentofthestatesnaturalgascustomers.Theremaining2percentare
servedbymunicipalandsmalleroroutofstateutilities.
Theamountofavailablenaturalgasstorageisalsoimportant.PG&Esstoragefieldshavethe
abilitytocyclesmallquantitiesofgasthroughtheyear.Theutilityneedsmostoftheinjection
periodtofillitsstoragetomeetwinterdemand.PG&Ehasindicatedthatitmaymaintaina
1,451MMcf/dwithdrawalratethroughthewinter.AlthoughSoCalGashasgoodnaturalgas
cyclingcapabilities,theindependent,nonutilityLodiandWildGoosefacilitieshavebetter
cyclingabilities.Eachmaywithdrawandinjectseveraltimesthroughouttheyearandmayalso
In Operation:
1. El Paso Natural Gas
2. Gasoducto Bajanorte (GB)
3. Gas Transmission Northwest
(GTN)
4. Kern River Pipeline
5. Mojave Pipeline
6. North Baja Pipeline
7. Northwest Pipeline
8. Paiute Pipeline
9. Pacific Gas Electric Company
10. Questar Southern Trail
Pipeline
11. Rockies Express (REX)
12. San Diego Gas &Electric
Company
13. Southern California Gas
Company
14. Transportadora de Gas
Natural (TGN)
15. TransCanada Pipeline
16. Transwestern Pipeline
17. Tuscarora Pipeline
Proposed:
18. Bronco Pipeline
19. Ruby Pipeline
20. Kern River Expansion
21. Sunstone Pipeline
135
holdthesamedeliverylevelsasvolumesofgasinstorageareextracted.SoCalGasassertsthat
itcanmaintainupto2,225MMcf/d
180
ofgaswithdrawalsthroughoutalllevelsofstorage.
ApotentialadditionalsourceofnaturalgassupplyisLNG.Inthenearfuture,Californiacould
receivenaturalgasfromanLNGfacilitylocatedatCostaAzul,Mexico.Theconstructionofthe
CostaAzulLNGTerminalwascompletedlastyearandstillawaitsthefirstofitscommercial
deliveries.LNGisavailable,butsuppliersatthemomentarereluctanttoenterthelowerpriced
PacificCoastmarket.Whensupplydoesstarttoflow,NorthBajaMexicowillhavefirstchoice
toreceiveupto300MMcf/dtomeetitsindustrialandpowerplantneeds.Anyexcessinsupply
wouldaddtoCaliforniassupplymix.Undernormalconditions,thiswouldleadtoprice
competitionformarketshare.However,LNGisapricetaker,meaningitdoesnotsettheprice;
withthereluctancefordeliveriestothePacificCoast,itisunclearwhatimpactCostaAzulwill
haveonsupplyandprice.
Anotheroptionfornewsuppliesofnaturalgasisshalegas.
181
Naturalgasaccumulatesinthree
typesofformations:limestone,sandstone,andshale.Before1998,limestoneandsandstone
formationsproducednearlyalldomesticsuppliesofnaturalgas.Explorationandproduction
companies,however,havelongknownaboutthepotentialfornaturalgasinshaleformations.
Thispotentialledtheindustrytopursuetheengineeringinnovationsneededtoaccessthese
naturalgasresources.
Inthemid1990s,shaledepositednaturalgasprovidedabout1percentofproductioninthe
lower48states.
182
Thedevelopmentofthreedimensionalandfourdimensionalseismicsurveys,
improveddrillingtechnologies,andtechnologicalinnovationsinwellcompletionand
stimulationhasincreasedtheproductivityofwellsdrilledintoshaleformationssothatbymid
2008,shaleproductionrepresentedalmost10percentofproductionfromthelower48states
(Figure16).TheNaturalGasSupplyAssociationbelievesthatproductionfromtheshales
coulddoubleinthenext10yearsandprovideonequarterofthenationsnaturalgas
supply.
183
180
2008CaliforniaGasReport,p.90,availableat:
[http://www.socalgas.com/regulatory/documents/cgr/2008_CGR.pdf].
181
CaliforniaEnergyCommission,ShaleDepositedNaturalGas:AReviewofPotential,DraftStaffPaper,
May2009,CEC2002009005SD,availableat:[http://www.energy.ca.gov/2009publications/CEC200
2009005/CEC2002009005SD.PDF].
182
Lower48excludesAlaskaandHawaii.
183
NaturalGasSupplyAssociation,NewsRelease,October8,2008,NaturalGasfromShaleCould
DoubleinNextTenYears,availableat:
[http://www.ngsa.org/newsletter/pdfs/2008%20Press%20Releases/22%20
%20Natural%20Gas%20from%20Shale%20to%20Double%20w%20graphic.pdf].
136
Figure 16: Lower 48 Shale Natural Gas Production

Source: Lippman Consulting, Inc.
Natural Gas Demand
Asastate,CaliforniaisthesecondlargestnaturalgasconsumerintheUnitedStates,
representingmorethan10percentofnationalnaturalgasconsumption.
184
Customersinthe
residentialandcommercialsectors,referredtoascorecustomers,accountedfor29percentof
thestatesnaturalgasdemandin2008.Largeconsumerssuchaselectricitygeneratorsandthe
industrialsector,referredtoasnoncorecustomers,accountedforabout71percentofdemand
inthesameyear.Californiaremainsheavilydependentonnaturalgastogenerateelectricity,
whichaccountedformorethan40percentofnaturalgasdemandin2008.
185
Mostofthenaturalgasusedintheresidentialsectorisforspaceandwaterheating.Since1970,
thenumberofhouseholdsinCaliforniahasalmostdoubled,whichhasincreasedoverallnatural
gasconsumption,butasaresultofCaliforniasbuildingandapplianceefficiencystandards,the
averageamountofnaturalgasconsumedperhouseholdhasdroppedmorethan36percent.
184
EnergyInformationAdministration,NaturalGasAnnual2007,availableat:
[http://www.eia.doe.gov/pub/oil_gas/natural_gas/data_publications/natural_gas_annual/current/pdf/tabl
e_002.pdf].
185
SouthernCaliforniaGasCompany,2008CaliforniaGasReport,availableat:
[http://www.socalgas.com/regulatory/documents/cgr/2008_CGR.pdf].
137
In2009,theEnergyCommissionstaffpreparedacomprehensiveforecastofnaturalgasdemand
byendusers(excludingelectricitygeneration)aspartofthe2009IEPR.
186
Table6comparesthe
2009naturalgasforecastwiththe2007forecastforselectedyears.
Table 6: Statewide End-User Natural Gas Consumption

CED 2007
CED 2009 (High-
Rate Case)
Percent
Difference
(MM Therms)
1990 12,893 12,893 0.00%
2000 13,913 13,913 0.00%
2007 13,445 12,494 -0.07%
2010 13,616 12,162 -10.68%
2018 14,058 12,894 -8.28%
Historic values are shaded

Annual Average Growth Rates
1990- 2000 0.76% 0.76%
2000- 2008 -0.43% -0.89%
2008- 2010 0. 63% -1.34%
2010- 2018 0.40% 0.73%
Source: California Energy Commission, 2009
The2009staffforecastislowerinthenearterm(2010)becauseofcurrenteconomicconditions
andbecauseactualconsumptionin2008,thestartingpointforthe2009forecast,waslowerthan
theforecasted2008consumptionthatwasusedinthe2007forecast.By2018,consumptionis
expectedtobeabout8percentlowerthaninthepriorforecast.Astheeconomyrecovers,
projectedannualgrowthinnaturalgasconsumptionisexpectedtoexceedCED2007forecast
growthfor20102018.
Althoughthemethodtoestimateenergyefficiencyimpactshasbeenrefined,thestaffdraft
forecastusesessentiallythesamemethodsasearlierlongtermstaffdemandforecasts.Amore
detaileddiscussionofforecastmethodsanddatasourcesisavailableintheEnergyDemand
ForecastMethodsReport.
187
EnergyCommissionstaffalsoevaluatedwinterpeakdaynaturalgasdemandtrendsandthe
effectofthatdemandonpipelinesandnaturalgasstorage,usingdemanddatafromthe2008
CaliforniaGasReport
188
andfromutilityandpipelinefilingsmadetotheEnergyCommission.
Winterdemandisdrivenprimarilybyheatingrequirementsintheresidentialandcommercial
sectors,whilenaturalgasforelectricitygenerationrepresentsabout14percentofwinter
demand.Demandfromtheindustrialsectorhasverylittleseasonalvariation.
186
CaliforniaEnergyCommission,CaliforniaEnergyDemand20102020AdoptedForecast,December2009,
CEC2002009012CMF,availableat:[http://www.energy.ca.gov/2009publications/CEC2002009
012/CEC2002009012CMF.PDF].
187
CaliforniaEnergyCommission,EnergyDemandForecastMethodsReport,June2005,CEC4002005036,
availableat:[http://www.energy.ca.gov/2005publications/CEC4002005036/CEC4002005036.PDF].
188
2008CaliforniaGasReport,see[http://www.socalgas.com/regulatory/documents/cgr/2008_CGR.pdf].
138
Thestateisshiftingtorenewableenergysourcestoprovidealargershareoftheelectricity
generatedtomeetCaliforniasneeds.Unlesstheyarepairedwithonsiteenergystorage
technologies,certainrenewablegenerationtechnologiesarenotdispatchabletofollowloadand
maynotbeavailabletomeetpeakdayrequirements.Solarthermalandphotovoltaicgeneration
bettermatchesloadthandoeswindgeneration.Toinsurereliableserviceduringpeakdemand
periods,naturalgasfiredgenerationwillbeneededtomeetpeakingrequirements,provideload
followingandbackupservicesfortherenewablegeneration,andprovidebaseloadservices.
Thetypeofnaturalgasunitneededtosupplementrenewablegenerationwillaffecttheneedfor
naturalgas.Whileolderunitshaveheatratesinexcessof10,000BtuperkWh,thenewer
combinedcyclefacilitiesaremoreefficientandoperateatapproximately7,500BtuperkWh.A
40percentlossofrenewablegenerationwouldbeequivalenttoanincreaseof480MMcf/din
combinedcyclefueluse.However,peakingunitsarelessefficientand,dependingontheageof
theunit,willuse50to100percentmoregasperMWhthananewcombinedcycleunit.
Replacingrenewablegenerationwithapeakerplantwouldthereforeincreasegasdemandby
770MMcf/d.
189
Natural Gas and the Environment

Theshifttoagreaterrelianceonhorizontal,ratherthanvertical,wellsinshaleformations
elevatestheissueofpotentialenvironmentalimpacts.Whileregulatoryagenciesand
environmentalgroupshighlightedtheseissuesinthepast,inthelast10yearstheincreased
activitiesinshaleformationsbroughtgreaterfocusonthepotentialenvironmentalimpacts,
whichcanoccurinanyoffiveareas:surfacepreparation,drillingandcompletion,production
andcleanup,transmissionanddistribution,andconsumption.Asaresult,theincreased
developmentandproductionofnaturalgasinshaleformationshasraisedfourprimary
environmentalconcerns:surfacedisturbance,GHGemissions,otheraircontamination,and
potentialleakageofchemicalsintothegroundwater.
Surfacepreparationbeforedrillinganynaturalgaswellcancreateenvironmentalstressin
sensitiveareas.Thepotentialimpactonwildlifehabitatandwildernessareashasledto
moratoriumsonnaturalgasdrillingintheRockyMountainsandothersensitiveareasofthe
lower48states.Drillingoperationscanalsohavesignificantimpacts,andsomestates,including
NewYorkandPennsylvania,haveissuedrestorationrequirementrules.
Becausenaturalgasismadeupmostlyofmethane(aGHG),smallamountsofmethanecan
sometimesleakintotheatmospherefromwells,storagetanks,andpipelines.TheEnergy
InformationAdministrationsaysthatmethaneemissionsfromallsourcesaccountforabout1
percentoftotalU.S.GHGemissions,butabout9percentofthegreenhousegasemissions
basedonglobalwarmingpotential.
190
189
CaliforniaEnergyCommission,NaturalGasInfrastructure,May2009,CEC2002009004SD,available
at:[http://www.energy.ca.gov/2009publications/CEC2002009004/CEC2002009004SD.PDF].
190
Anindicatorofthecarbondioxideequivalent.
139
Theindustryisattemptingtoaddresssomeoftheenvironmentalimpactsofnaturalgas
extractionbyusingsmallerrigsthatreducesurfacedisturbance.Theuseofhorizontaland
directionaldrillingallowsproducersgreaterflexibilityaboutwheredrillingrigsarelocated.
191
Theshifttohorizontaldrillingandawayfromverticaldrillingcanalsolessensurface
disturbancebyrequiringfewerwellstorecoveranequivalentamountofresource.
OnapermillionBtu(MMBtu)basis,totalemissionsfromnaturalgasproducedfromshale
formationsdifferlittlefromthoseofnaturalgasfromconventionalsources.However,the
carbonfootprintofthehorizontalwellsusedtoextractshalegasfarexceedsthatofatypical
verticalwellsincethedrillingprocess,thecompletionprocess,andtheproductionstimulation
process(hydraulicfracturing)requiremorecarbonbasedfuels,moredrillingmud,andmore
water.Further,runningtherequiredequipmentandpumpsproducesmoreemissions.
Developingequivalentamountsofnaturalgasresources,though,requirestwotothreetimes
moreverticalwellsthanhorizontalwells.Forexample,extracting20,000millioncubicfeetof
naturalgasmayrequireupto30verticalwellsbutonly10horizontalwells.Thenaturalgas
industryusesbothwelltypestoreachpotentialnaturalgasresourceslocatedthousandsoffeet
beneaththeEarthssurface,buteachhorizontalwellrecoversmorenaturalgasonaveragethan
averticalwell.Asaresult,theoverallcarbonfootprintfortheentiredevelopmentofashale
formationmaynotdifferfromthatofanequivalentsizedformationdevelopedusingvertical
wells.
Therearealsoenvironmentalissuesassociatedwiththewaterusedinshalegasextraction.The
hydraulicfracturingprocessusedtoextractnaturalgasfromshaleformationsuseshundredsof
thousandsofgallonsofwatertreatedwithchemicals.Inthedevelopmentofanentirefield,the
amountofwaterinjectedintoashaleformationcouldreachintothehundredsofmillionsof
gallons.Thevolumeofwaterusedinthedevelopmentofnaturalgasfromshaleformations
raisesotherenvironmentalconcerns,includingtheconsumptionoflargewaterquantitiesand
recoveredwaterdisposal.Althoughfieldoperatorsretrievemostoftheinjectedwateroncethe
hydraulicfracturingiscompleted,asignificantquantityofwaterandchemicalsremainwithin
theformation.
Whendevelopmentofshaleformationsoccursnearmajorpopulationcenters,
environmentalistswithconcernsthatpotentialleakageofchemicalsusedinthehydraulic
fracturingprocesscouldposeahealthandsafetyrisk,arecallingforstricterregulation.Some
stateshavedevelopedregulatoryrequirementsfordevelopmentofshaleformations.For
example,NewYorkhasissuedregulationsthatincludeguidelinesfortheuseanddisposalof
water,theprotectionofgroundwater,andtheuseofchemicals.
192
Pennsylvaniahasalso
institutedrulesgoverningtheextractionofnaturalgasfromshaleformations,notingthat
developingourenergyresourcescannotcomeattheexpenseofourenvironmentalresources
191
NaturalGasSupplyAssociation,see[http://www.naturalgas.org].
192
DepartmentofEnvironmentalConservation,NewYorkState,FinalScopeforDraftSupplementalGeneric
EnvironmentalImpactStatementontheOil,GasandSolutionMiningRegulatoryProgram,February2009,
availableat:[http://www.dec.ny.gov/docs/materials_minerals_pdf/finalscope.pdf].
140
ourwater,ourlandandourecosystems.
193
In2008,inspectorsfromthestatesDepartment
ofEnvironmentalProtectionorderedthepartialshutdownoftwodrillingsitesafterdiscovering
violationsofstateregulations.
194
Investigationintotheenvironmentalissuesraisedbynaturalgasexplorationandproductionis
anongoingeffortthatwillcontinuetobeaddressedbyEnergyCommissionstaff.Shalegasis
onlythelatestadditiontoaportfolioofnaturalgasextractiontechnologiesthattheEnergy
Commissionstaffmonitors.Staffwillcontinuetomonitorandreportondevelopmentsinall
formsofnaturalgasexplorationandproduction.
AnothernaturalgassupplysourcewithpotentialenvironmentalissuesisLNG.LNGtendsto
containhigherBtucontenthydrocarbonsthathavenotbeenprocessedoutasistypicallydone
withdomesticallyproducednaturalgas.Thiscancauseincreasedparticulateemissionsandhas
raisedsomehealthandenvironmentalconcernsabouttheuseofLNG.However,thereappears
tobeagrowingconsensusthatthecarbonfootprintforLNG,onalifecyclebasis,issmaller
thanthatofcoalfiredgeneration.
195
IntheEnergyCommissionsreport,PotentialImpactsofClimateChangeonCaliforniasEnergy
InfrastructureandIdentificationofAdaptationMeasures,staff reportedpotentialimpactsofclimate
changeonthenaturalgasinfrastructure.Itappearsthatsealevelriseasaresultofclimate
changewillhavelittleimpactonnaturalgasavailabilitysincemostofthesupplycomesfrom
basinslocatedinAlberta,theRockies,andthesouthwesternUnitedStates.Also,potentialnew
sourcesofshalegasarelocatedinregionsthatcannotbeaffectedbyrisingsealevels.However,
climatechangecouldcausechangesinconsumerenergydemandbasedontemperature(for
example,increasedneedforairconditioningbecauseofwarmingtrends)andcoulddecrease
hydroelectricproductionbecauseofchangestoprecipitationpatternsandsnowpack.Amajor
changeinconsumerdemandandhydroavailabilitycouldaffectthegeneralpatternofnatural
gaswithdrawalfromstoragefacilities.Ifutilitiescannotkeepupwithtraditionalstoragelevels,
consumerscouldbeimpactedbyhighercosts.
ReducingtheenvironmentalfootprintofnaturalgasuseinCaliforniashouldfollowtheloading
orderapproachusedinthestateselectricitysystem.Firstandforemostisimproving
residential,commercial,andindustrialenergyefficiency,aswellastheefficientuseofnatural
gasasatransportationfuel,toreduceemissionsassociatedwithconsumptionofnaturalgas.An
exampleofCaliforniassuccessfulenergyefficiencyeffortsarethepreviouslymentioned
statisticsthattheaverageCaliforniahomeconsumed120Mcfofnaturalgasperyearfortyyears
ago,buttodayconsumeslessthan50Mcfperyear.Thesecondpriorityistoacceleratethe
193
KathleenMcGinty,SecretaryofPennsylvaniasDepartmentofEnvironmentalProtection,speakingata
departmentsponsoredsummit,June2008.
194
EnvironmentalNewsService,June16,2008.
195
Jamarillo,P.;W.Griffin;H.Matthew,ComparativeLifeCycleAirEmissionsofCoal,Domestic
NaturalGas,LNG,andSNGforElectricGeneration,EnvironmentalScienceandTechnology2007,Vol.
41,No.17,6290andPACE(2009).LifeCycleAssessmentofGreenhouseGasEmissionsfromLiquified
NaturalGasandCoalFiredGenerationScenarios:AssumptionsandResults.
141
adoptionofcleanalternativestoconventionalnaturalgasresources,suchasbiogasforboththe
electricityandtransportationsectors,aswellasimprovedtechnologies.Finally,the
performanceandreliabilityofthenaturalgassystemandinfrastructuremustbeimproved.
Natural Gas and Reliability
Californiasdependenceonnaturalgasasanenergysourcerequiresthestatetomaintaina
reliablenaturalgasdeliveryandstorageinfrastructure.EightysevenpercentofCalifornias
naturalgassupplyisfromoutofstateanddeliveredbypipelinesthatextenddeepintoCanada,
theRockyMountains,andtheU.S.southwestproductionareas.
Californianeedsadequatedeliverypipelinesandutilityreceivingcapacitytoensurethestate
hassupplytomeetitsneedsatcompetitiveprices.Theconsequencesofinadequatenaturalgas
infrastructurewereparticularlyapparentduringthe20002001energycrisis.Interstate
pipelinesdeliveringnaturalgastoCaliforniawererunningatornearcapacityformorethana
year.Theutilitiesreceiving,localtransmissiondeliverysystems,andstorageoperationswere
attheirlimits.Becausetherewerenosupplyoptionsavailable,Californiaincurrednaturalgas
coststhatweredoublethosepaidintheyearsjustpriortothecrisis.
Duringandafterthecrisis,Californiaincreaseditsinterstatepipelinedeliverycapacity,utilities
improvedtheirreceivingability,andtheutilityandindependentstorageownersenhancedtheir
storageoperationstomeetfuturehighdemanddayconditions.Theseimprovementshave
givenCaliforniautilitiestheflexibilitytochoosesupplysourcesintheirdaytodayoperations,
whichhasforcedproductionareastocompeteforashareofthestatesnaturalgasmarket.
Thereareconcernsaboutwhetherincreasednaturalgasdemandforelectricitygenerationinthe
SouthwestwillreducetheamountofnaturalgasavailableforCalifornia.AlongElPasos
southernpipelinesystem,morethan10,000MWofnaturalgasfiredpowerplantshavebeen
built.Ifalloftheseplantsrampupatthesametimetomeetelectricitydemand,itcouldaffect
theabilityofthepipelinetomeetthenaturalgasdemandforthoseplants,possiblyleadingto
unstablenaturalgassuppliesforCalifornia.KernRiverpipelinealsomakesupstreamdeliveries
inUtahandNevadathateffectivelyreduceitsabilitytodeliverfullcapacitytoCalifornia.
NaturalgasstorageisanimportantpieceofCaliforniasnaturalgasinfrastructure.Withoutit,
thesupplypipelineswouldhavetoincreaseinsizetomeetwinterdemand,leavingahuge
investmentstandingidleduringhalfoftheyear.Storagefieldsarebasicallydepletednatural
gasfieldsthathavehadinjectionandwithdrawalwellsalreadydrilledandcompressionand
processingequipmentaddedtocleanupextractednaturalgas.Naturalgasiswithdrawnfrom
storageduringperiodsofhighdemand,suchasinthewinterforspaceheatingandinthe
summerforpowergeneration.Naturalgasisinjectedintostorageduringthespringandfall
whenoveralldemandislow,makingpipelinecapacityavailabletobringinadditionalnatural
gastofillthestoragefacilities.
CaliforniadoeshavepotentialnewsourcesofnaturalgasfromanexistingLNGimportfacility
inBaja,Mexico,alongwithpipelineprojectsonthehorizon.Threepipelineprojectsshould
significantlyincreasetheflowofnaturalgastothestate:
142
TheRubyPipelineprojectisplanningtodelivernaturalgasfromOpal,Wyoming,to
Californiaatarateof1.2billioncubicfeetperday(Bcf/d).Thispipelineisscheduledtobein
serviceby2011andwilldelivernaturalgastoMalin,Oregon.
TheSunstonePipelineplanstodeliver1.2Bcf/dofnaturalgasfromOpal,Wyomingto
Stansfield,Oregon.Thispipelineisplannedtobeonlinein2011andcoulddisplacemuch
naturalgasinOregon,thusfreeingupsuppliesforCalifornia.
TheKernRiverpipelineexpansionprojectwillincreasedeliveryofnaturalgasfrom
WyomingtoSouthernCaliforniaby0.2Bcf/d.Theexpansionoftheexistingpipelineis
scheduledtobecompletedin2010.
Inthe2007IEPR,staffprojectedthatasmuchas20percentofNorthAmericannaturalgas
requirementsmightbemetwithLNGby2017.However,UnitedStatesLNGimportsin2008
weresignificantlylowerthantheamountsprojectedbyEnergyCommissionstaffandothers,
owingtoarangeofmarketdevelopments,bothglobalanddomestic.Inaddition,UnitedStates
andWestCoastLNGterminaldevelopmentappearstobeslowing,andthereisanewsense
thattheUnitedStatesmaynothavetorelyonLNGtomakeuppreviouslyprojectedsupply
deficits.ThenumberofLNGfacilitiespreviouslyproposedforCaliforniahasbeenreducedto
two,onlyoneofwhichhasfiledapplicationsforbuildingpermits.
Naturalgasisalsousedinthetransportationsectorinabroadrangeofapplications,including
personalvehicles,publictransit,commercialvehicles,andfreightmovement.Naturalgas
vehiclesmayusecompressednaturalgasorLNG.ThenumberofCaliforniaonroad,lightduty
vehiclespoweredbynaturalgashasincreasedsince2001from3,082to24,810in2008.While
thesenumbersaresmallcomparedtothetotalvehiclepopulation,increasingalternative
transportationfuelstohelpmeetthestatesGHGreductiongoalswillrequirecarefulevaluation
oftheimpactsonthenaturalgassupplysystem.
Natural Gas and the Economy
Wideandfrequentswingsinnaturalgaspricesaffectnaturalgasconsumers,producers,and
investors.Naturalgaspricevolatility,measuredasthemagnitudeandrateofchangesina
commoditypriceoveragivenperiod,affectsthenationaleconomyasalargerportionofgross
domesticproductisconsumedbyrisingenergycosts.Asnaturalgaspricesrise,theycanhavea
negativeimpactonresidentialconsumersbyconsumingmoreofahouseholdsdiscretionary
income.Consumersarealsoaffectedbecausevolatilityaddsuncertaintyintheelectricity
generationindustry,whichultimatelyaffectsthepriceofelectricity.Volatilityalsomakes
budgetingandcostmanagementmoredifficultforcommercialandindustrialconsumersthat
usesignificantamountsofnaturalgasintheiroperations.Fornaturalgasproducers,volatility
contributestotheboombustcycleofdrillingactivity,ultimatelyaffectingavailablenaturalgas
supplies.Naturalgaspricevolatilityalsoaffectstheenergyplanningprocessbecausetheadded
uncertaintyinpredictingmarketmovementsaffectstheabilitytoaccuratelyforecastnaturalgas
prices.
During2008,naturalgasspotpricesthepriceofnaturalgasfornextdaydeliveryataspecific
location
tradedashighas$13.32perMcfandaslowas$5.63/Mcf.Thelargepricefluctuations
143
in2008increasedthefocusonpricevolatilityanditsimpactsonnaturalgasmarket
participants.Factorsthatinfluencenaturalgaspricesandpricevolatilityincludeweather,
supplyanddemandimbalances,infrastructureissues,unreliabledata,regionalandglobal
economicconditions,speculativetrading,andmarketmanipulation.
Theimpactsofnaturalgaspricechangesvaryfordifferentconsumers.Forexample,residential
andsmallcommercialcorecustomerdemandtendstobesomewhatlessaffectedbyprice
swings.Demandbythesecustomersislargelydrivenbyheatingneedsduringcoldweather,
andbecausecorecustomersareoftenunawareofnaturalgaspricechangesuntilamonthlybill
arrivesinarrears,thereislittleopportunityforthemtoreduceconsumptioninresponsetoprice
changes.Inaddition,theratesthatutilitieschargethesecorecustomersarestillsubjectto
oversightbygovernmentagenciesandarenotsubjecttodailypricechanges.
However,longertermwholesalepricechangesdoaffecttheretailratesthesecustomerspay
whenutilitiesreceiveapprovaltoadjusttheirnaturalgastariffratestoreflectachangeincosts.
Theseincreasedpricesnegativelyaffectcorecustomers,especiallylowincomehouseholds,
resultinginmoreresidentialcustomersthatareunabletopaytheirmonthlybills,increasingthe
numberofconsumersthatrequireassistancethroughprogramssuchastheLowIncomeHome
EnergyAssistanceProgram.
Industrial,ornoncore,consumersofnaturalgastendtobemuchmoresensitivetoprice
volatility.Theseconsumerstypicallypurchaselargequantitiesofnaturalgasdirectlyfromthe
marketandareimmediatelyaffectedbychangingprices,makingbudgetingandcost
managementmoredifficult.Forexample,nitrogenfertilizermanufacturersusesignificant
amountsofnaturalgas,thecostofwhichcanaccountfor90percentofthetotalmanufacturing
costs.Pricevolatilitycanthereforehaveadramaticimpactontheirmanufacturingoperations.
Also,becauseindustrialconsumersoftenarelargeusersofnaturalgas,significantchangesin
naturalgaspricescaninfluencemanyoperationaldecisions.Ifpricesbecometoohighorare
extremelyvolatile,industrialusersmightconsiderswitchingtoadifferentfuelifpossibleor
evenshuttingdowntheiroperations.
Whilepricevolatilitycanhavematerialconsequencesfortheindustrialsector,somelarge
industrialconsumershavetheabilitytotakeadvantageofhedgingopportunitiestoreducerisk.
Largeuserspotentiallycouldpurchaseandstorenaturalgaswhenpricesarelow,enterinto
longtermfixedpricecontracts,orusefinancialinstrumentslikeoptionstolowertheriskand
uncertaintyofchangingprices.
Theelectricitygenerationsectoristhelargestconsumerofnaturalgas,bothnationallyandin
California,
196
sonaturalgaspricevolatilitysignificantlyaffectsthissectorandultimatelythe
priceofelectricity.Naturalgaspricevolatilityleadstoincreaseduncertaintyforbothregulated
utilitiesandmerchantpowerfirmsabouttheongoingcostsofoperatingnaturalgasfiredpower
plants,bothexistingandnew.Increaseduncertaintyalsoheightensconcernregarding
196
EnergyInformationAdministration,NaturalGasConsumptionbyEndUsedata,availableat:
[http://tonto.eia.doe.gov/dnav/ng/ng_cons_sum_dcu_nus_a.htm].
144
investmentinnewnaturalgasfiredplants,whichmaybeseenasmoreriskywhencomparedto
othergenerationtechnologiesthatusecoalorrenewablefuels.
Naturalgasproducersarealsoaffectedbypricevolatility,makingprojectevaluationand
investmentdecisionslesscertain.Pricevolatilitycantriggerconcernsbylendersandinvestors
andincreasethecostofcapitalaslendersandinvestorsdemandgreaterreturnsbecauseof
increaseduncertainty.Pricevolatilityalsocontributestorecurringboombustproductioncycles
andassociatedoperationalproblems,suchasemployeeturnoverandexpensivestartupand
shutdowncosts.Thecurrentperiodoffallingnaturalgaspricesprovidesagoodexample.
Naturalgasproductionislargelyacapitalintensiveventureduringwelldevelopmentbuthas
lowermarginalproductioncostsoncethewellisproducinggas.Duringperiodsoflowprices,
activewellscanremainprofitabletooperatebut,inthelongerterm,decliningpricescanleadto
reducedproductionwhenthenumberofdrillingrigsisreducedinresponsetosustainedlower
prices.SincepricespeakedinJuly2008,UnitedStatesdrillingrignumbersdroppedeachweek
aspricescontinuedtodecline.
197
Figure17showsaperiodofrelativelystablenaturalgaspricesinthelate1990s,followedby
severalperiodsoflargepricespikesafter2000.HenryHub
198
spotpricestradedwithina$2/Mcf
to$3/Mcfbandthroughoutthelate1990sandearly2000s,roseto$4/Mcf,andsurpassed$6/Mcf
bythemiddleofthedecade.Onekeyfactorthatcausedpriceincreaseswasthegrowthin
domesticdemandthatexceededUnitedStatesdomesticproductioncapabilitiesbecauseNorth
Americanbasinswerematuringandproducinglessgas.Thecombinationofincreasing
domesticdemandanddecliningdomesticproductionresultedinnaturalgaspricesmoving
higher.
Therehavebeenfourmajorpricespikessince2000thatwerecausedbymanyofthephysical
andfinancialmarketfactorsmentionedearlierinthissection.However,eachpricespikewas
influencedtodifferentdegreesbythevariousfactors.Forexample,aseverecoldwinterstorm
playedthesignificantroleintheFebruary2003pricespike,andbacktobackhurricanesplayed
thesignificantroleinthefall2005pricespike.Thepricespikesofwinter20002001andsummer
2008weretheresultofanumberofdifferentfactors,includingmarketmanipulationand
marketspeculation.
197
EnergyInformationAdministrationsApril23,2009,NaturalGasWeeklyupdatereportsthatthe
domesticdrillingrigcountisdownover50percentfromitshighinAugust2008,reachedinresponseto
July2008peakprices.
198
HenryHubislocatedinLouisianaandisNorthAmericasmainnaturalgastradinghubandmost
widelyquotednaturalgaspricingpoint.Itinterconnectsfourintrastateandnineinterstatepipelinesthat
cantransportenoughnaturalgastosatisfyaboutthreepercentoftotalUnitedStatesdemand.
145
Figure 17: Henry Hub Spot Prices 19962008
Source: Natural Gas Intelligence data

Theflexibilityfromhavingextrainfrastructure,coupledwithsuppliesfromlowerpriced
productionareas,helpsshieldthestatefromthebruntofpricevolatility.SinceCaliforniaispart
ofaninternationalnaturalgasmarketthatincludesCanada,theUnitedStates,andMexico,a
disruptioninonearearipplesthoughtherestofthemarket.Californiaisnotimmunetothe
ripples,buttheripplesaremuchsmallernowwhentheyreachthestate.Pricesofnaturalgasat
Californiasborderareamongthelowestinthenation,withcurrentpricesconsiderablyless
thantheHenryHubprice.
Fuels and Transportation Sector

Althoughthefuelsandtransportationenergysectorisresponsibleforproducingthegreatest
volumeofGHGemissionsnearly40percentofCaliforniastotaltheissuesconfronting
thissectorgofarbeyondclimatechange.ReducingCaliforniasdependenceonpetroleumin
generalandforeigncrudeoilinparticularareequallypressingissues.Doingsowouldnotonly
reduceGHGemissions,butwouldalsomitigatetheeffectsthatglobaldemand,geopolitical
events,crudeoilrefiningcapacityandoutages,andpetroleuminfrastructurechallengeshave
onfuelpricesandtheaveragecostofproductionofgoodsandservices,bothofwhichdirectly
affectthestateseconomyandgrossstateproduct.
AB32doesnotdirectlyaddressGHGemissionsreductioninthetransportationsector,but
legislationatboththestateandfederalleveldoes.CaliforniasAB1007(Pavley,Chapter371,
Statutesof2005),AB118(Nez,Chapter750,Statutesof2007),AB1493(Pavley,Chapter200,
Statutesof2002),CaliforniasLowCarbonFuelStandard(LCFS),andthefederalEnergy
146
IndependenceandSecurityActsrevisionstotheRenewableFuelStandard(RFS2)setpolicies
andstandardsthatwillultimatelychangevehicleandfueltechnologiesandacceleratethe
marketforlowcarbonfuelswellbeyondthecurrentlevelofdemand.
ThefollowingsectionsummarizestheEnergyCommissions2009transportationsupplyand
demandforecast.Providingthisdatawillgivedecisionmakersasnapshotofthestatesfuture
fueldemandandsupplyforpetroleum,aswellasrenewableandalternativefuelsandvehicles.
Thisdataisimperativetounderstandingfuturefuelsupplyandinfrastructureneedsthatcould
haveamajorimpactonconsumerreliabilityandtheenvironment.InpastIEPRs,theEnergy
Commissionforecasthasonlyincludedprojectionsforpetroleumtransportationfuels.Forthe
2009IEPRcycle,staffexpandedthelistoftransportationfuelstoincludedemandforecastsfor
E85(ablendof15percentgasolineand85percentethanol),B20(ablendof80percentdiesel
and20percentbiodiesel),electricity,compressednaturalgas(CNG),andLNG,withmore
limitedanalysisofhydrogenandpropane.
Transportation Fuels Supply and Demand
Initstransportationforecasts,theEnergyCommissionanalyzestrendsoftransportation
demandrelatedindicators,aswellasdemographicandeconomicvariables.Thetransportation
demandforecastsencompassfourprimarytransportationsectors:
Commercialandresidentiallightdutyvehicles(under10,000pounds)
Mediumandheavydutytransitvehicles,includingrail(over10,000pounds)
Mediumandheavydutyfreightvehicles,includingrail
Commercialaviation
Eachofthesesectorsisassociatedwithadistinctforecastingmodelthatestimatesthedemand
forthattransportationsector.TheCaliforniaConventionalAlternativeFuelResponse
Simulator,Freight,Transit,andAviationmodelsrepresenteachofthecorresponding
transportationsectors.Staffusedarangeoffuelpricecases,aswellaseconomicand
demographicprojectionsfromtheDepartmentofFinance(DOF)andMoodysEconomy.comto
covertheforecastperiod.
Demographics
Demographicgrowthtrendsarekeyindicatorsoffutureconsumertraveldemand.Forthenext
20years,DOFforecastsgrowthinCaliforniaspopulationof25percentandMoodys
Economy.comforecastsgrowthinpersonalincomeof76percent.Between2009and2030,
populationisprojectedtoincreaseatanannualcompoundaveragerateof1.15percent,
comparedwithagrowthrateof2.94percentinrealpersonalincomeoverthesameperiod.
ThesegrowthratesindicatethattraveldemandinCaliforniawillalsolikelyincreaseoverthe
forecastperiod.
Toprovidehistoricalcontext,Californiasgrossstateproduct(GSP)increasedby40percentin
realtermsfrom1998to2008.Duringthatsameperiod,employmentgrowthwasonly10
percent.TheimpactoftheeconomicrecessionisevidentinthatbothGSPandemployment
decreasedbetween2008and2009.TheGSPisprojectedtoreturntoapositivegrowthrateby
2010,whiletotalnonfarmemploymentprojectionsdonotbegintoexhibitpositivegrowthuntil
147
2011.Nonfarmemploymentisprojectedtogrowby20percentduringtheforecastperiodof
20092029,incontrastwithhigherprojectedgrowthratesforbothpopulationandGSP.
TheEnergyCommissionsdraftstaffreport,TransportationEnergyForecastsandAnalysesforthe
2009IntegratedEnergyPolicyReportcontainsmoredetailsonthesedemographicfindings.
199
Fuel Supply and Demand

Therecessionhashadasignificantimpactonthestatestransportationsector.Consumer
demandforgasolineanddieselfuelscontinuestodecline.Jobgrowthandindustrialproduction
driversofairtravelarealsodeclining,causingtheaviationsectortoexperienceadropin
airtraffic.Inresponsetothisandhigherfuelprices,theaviationsectorhasreducedthenumber
ofplanesinserviceandtakentheleastefficientaircraftoutofservice.Inaddition,thefreight
sector(railandtrucking)isexperiencingadecreaseincontainermovementatthestatesthree
majormarineportsLosAngeles,LongBeach,andtheBayArea.
TheearlyyearsoftheEnergyCommissionstransportationfueldemandforecastshowa
recoveryfromtherecession.Becausetheeconomicanddemographicprojectionsusedinthese
forecastsindicateareturntoeconomicandpopulationgrowth,fueldemandinthelightduty,
mediumandheavydutyvehiclesandaviationsectorstendstoresumehistoricalgrowth
patterns.However,themixoffueltypesisprojectedtochangesignificantlyasthestate
transitionsfromgasolineanddieseltoalternativeandrenewablefuels.
Petroleum
Althoughthestates20crudeoilrefineriesprocessedmorethan1.8millionbarrelsadayof
crudeoilin2008,Californiacrudeoilproductioncontinuestodecline,despiterecordcrudeoil
pricesandincreaseddrillingactivitygreaterthanatanypointsince1985.Since1986,California
crudeoilproductiondeclinedbymorethan41percentatanaveragerateof3.2percentperyear
overthelast10yearsandslowedtoanannualaverageof2.2percentbetween2006and2008.
Figure18indicatesthedeclineinCaliforniasourcedoilandtheincreasingrelianceonmarine
imports,primarilyfromforeignsources,asAlaskaproductionalsodeclines.Thestatesrefinery
capacityisexpandingataslowerratethanthatoftheUnitedStatesandtherestoftheworld.
Refinerycapacitygrowth,knownasrefinerycreep,isrelativelylowandexpectedtoincreaseat
anannualaverageratebetween0and0.45percentperyearthrough2030.
Increasedexplorationanddrillinginstateandfederalwaterscouldreversethecontinuing
declineofthestatescrudeoilproduction,butanysignificantproductionofoffshoreoilisat
leastadecadeaway.In2008,thefederalgovernmentliftedthemoratoriumondrillinginthe
OuterContinentalShelfoffthecoastofCalifornia.Itisuncertainifoffshoredrillingwill
proceedbecauseofnumerousenvironmentalandeconomicconcerns.Ifexpandedoffshore
explorationanddevelopmentisallowedtoproceed,however,crudeoilproductionoffthecoast
199
CaliforniaEnergyCommission,TransportationEnergyForecastsandAnalysesforthe2009Integrated
EnergyPolicyReport,August2009,CEC6002009012SD,availableat:
148
couldincreasefrom110,000barrelsperdayin2008toapproximately310,000barrelsperdayby
2020and480,000barrelsperdayby2030.
200
Crudeoilimportsaredeterminedbytrendsinconsumerdemand,Californiarefineryoutput,
andexportsofpetroleumproductstoneighboringstates.In2008,Californiarefinersimported
406millionbarrelsofcrudeoil.Differencesincrudeoilimportforecastsresultfromcontrasting
assumptionsontheproductioncapabilitiesofCaliforniasrefineriesandtheproductionof
Californiacrudeoil.
Figure 18: Crude Oil Supply Sources for California Refineries
0
50
100
150
200
250
300
350
400
450
500
550
600
650
700
750
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
M
i
l
l
i
o
n
s

o
f

B
a
r
r
e
l
s

P
e
r

Y
e
a
r
Foreign Alaska California

Source: Annual crude oil supply data from the California Energy Commissions Petroleum Industry Information
Reporting Act database
InthestaffsLowCrudeOilImportforecast,refineryproductioncapabilitiesremainedconstant
overtheforecastperiod,andCaliforniacrudeoilproductiondeclinedatarateof2.2percent.
TheHighCrudeOilImportforecastassumedrefineryproductioncapabilitiesincreasedatarate
of.45percentayearandCaliforniacrudeoilproductiondeclinedatarateof3.2percent.Under
theLowCrudeOilImportforecast,annualcrudeoilimportsincreasedby34millionbarrels
between2008and2015,by55millionbarrelsby2020,andby91millionbarrelsby2030(a22.5
percentincreasecomparedto2008).UndertheHighCrudeOilImportprojection,annualcrude
oilimportsroseby70millionbarrelsbetween2008and2015,by113millionbarrelsby2020,
andby190millionbarrelsby2030(a47percentincreasecomparedto2008).Itshouldbenoted
200
DOE/EIAAnnualEnergyOutlook2009andU.S.EnergySecurity,DeputyAssistantSecretary,Officeof
PetroleumReserves,Washington,D.C.,February2009presentation,datafromslide6.PacificRegionis
assumedtoincludeonlyCalifornia.
149
thatmostcrudeoilimportsnowcomefromforeignsources.Thismeansthatevenunderalow
importcase,thestatesdependenceonimportedcrudeoilwouldgrow.Duringtheforecast
period,thechangesinlevelsoftransportationfuelimportsaredeterminedbytrendsin
consumerdemand,Californiarefineryoutput,andexportsofpetroleumproductsto
neighboringstates.ThestaffforecastshowsthatCaliforniasgasolineimportswoulddecrease
significantlyoverthenext15years(undertheHighPetroleumProductImportCase),while
importsofdieselandjetfuelwouldstillrisetokeeppacewithgrowingdemandforthose
products.UndertheLowPetroleumProductImportCasescenario,thegrowingimbalances
betweengasolineandtheothertransportationfuelsareevenmoreextreme,resultinginatotal
netdeclineofimportsofatleast116,000barrelsperdayby2025,wherebyCaliforniasgasoline
supplybalancewouldswitchfromanetimporterofover51,000barrelsperdayin2008toanet
exporterofover218,000barrelsperdayin2025.Thelatteroutcomeisunlikelysincerefiners
wouldadjustoperationstodecreasetheratioofgasolinecomponentsproducedfromeach
barrelofcrudeoilprocessed.
TheEnergyCommissionstaffrecentlyanalyzedtaxablefuelsalesdatafromtheBoardof
EqualizationtodetermineconsumptiontrendsasshowninFigure19.

Figure 19: Historic California Gasoline and Diesel Demand
Source: California Energy Commission staff-adjusted Board of Equalization sales data

Overall,Californiaisexperiencingadownwardtrendinsalesforgasoline,diesel,andjetfuel.
Forexample,Californiasaveragedailygasolinesalesforthefirstfourmonthsof2009were2.1
percentlowerthanthesameperiodin2008,continuingareductionindemandobservedsince
2004.Dailydieselfuelsalesforthefirstthreemonthsof2009were7.7percentlowerthanthe
150
sameperiodin2008,continuingadecliningtrendsince2007.Recentdemandtrendsforjetfuel
(8.9percentdeclinein2008)aresimilartodieselfuelandreflecttheimpactoftheeconomic
downturnandhigherfuelprices.
Staffexpectsannualgasolineconsumptiontodecreaseovertheforecastperiod,largelybecause
ofhighfuelprices,efficiencygains,competingfueltechnologies,andmandatedincreasesof
alternativefueluse.TheestimateoffuturegasolineanddieselfueldemandforCaliforniawas
theresultoftwodistinctstagesofanalysis.Thefirststepwastoquantifydemandlevelsusing
inhousecomputermodelsforbothtraditionalfuels(gasolineanddieselfuel)andspecifictypes
ofalternativefuels.Thesecondstepwastodeterminetheimpactofthefederalrenewablefuel
mandates(discussedlaterinthissection)thatwilllikelyresultinevenhigherlevelsofethanol
andbiodieselusebeyondthelevelsinitiallyforecastduringthefirststepoftheanalysis.Higher
levelsofrenewablefuelscalculatedinthesecondstepoftheanalysiswouldresultinslightly
lowerlevelsofgasolineanddieselfueldemandforallmodelingscenarios.
IntheinitialresultsoftheforecastsLowPetroleumPriceCase(HighDemand),therecovering
economyandlowerrelativepricesledtoagasolinedemandpeakin2014of16.40billiongallons
beforefallingtoa2030levelof14.32billiongallons,4.0percentbelow2008levels(Figure20).
TheinitialHighPetroleumPriceCase(LowDemand)forecastprojectsagasolinedemandpeak
of15.69billiongallonsin2014beforedecliningto13.57billiongallonsby2030,adecreaseof9.0
percentcomparedto2008.Between2008and2030,staffexpectstotaldieseldemandin
Californiatoincrease49.8percentintheinitialresultsoftheHighPetroleumPriceCase(Low
Demand)to5.14billiongallonsand57.4percentintheLowPetroleumPriceCase(High
Demand)to5.40billiongallons.Between2008and2030staffexpectsthatjetfueldemandin
Californiawillincreaseby62.8percentto5.12billiongallonsintheHighPetroleumPriceCase
(LowDemand)and82.9percentto5.75billiongallonsintheLowPetroleumPriceCase(High
Demand).
Renewable and Alternative Fuels
Policiesmandatingincreasedrenewablefueluseareprojectedtoplayasignificantrolein
reducingthestatesdependenceonpetroleum.Atthefederallevel,thecurrentRenewableFuel
Standard(RFS1)program,implementedundertheEnergyPolicyActof2005,amendedthe
CleanAirActbyestablishingthefirstnationalrenewablefuelstandard.TheEnergy
IndependenceandSecurityActof2007madechangestothegoalsofRFS1,mandatingincreased
useofethanolandbiodiesel.Thesenewrequirements,knownastheRFS2,establishnew
specificvolumestandardsforcellulosicethanol,biomassbaseddiesel,advancedbiofuel,and
totalrenewablefuelthatmustbeusedintransportationfueleachyear.TheRFS2alsoincludes
newdefinitionsandcriteriaforbothrenewablefuelsandthefeedstocksusedtoproducethem,
includingnewGHGthresholdsforrenewablefuels.TheU.S.EPAisintheprocessofa
rulemakingandthetargetdateforchangestotakeeffectisJanuary1,2010.
201
201
UnitedStatesEnvironmentalProtectionAgency,see
[http://www.epa.gov/OMS/renewablefuels/420f09023.htm].
151
Figure 20: Initial California Gasoline Demand Forecast No RFS2 Adjustment
12,000
12,500
13,000
13,500
14,000
14,500
15,000
15,500
16,000
16,500
17,000
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
3
0
M
i
l
l
i
o
n
s
o
f
G
a
l
l
o
n
s
InitialHighDemandForecast
InitialLowDemandForecast

Specifically,theRFS2willrequirerefiners,importers,andblenderstoachieveaminimumlevel
ofrenewablefueluseeachyeareitherthroughblendingorpurchasingofRenewable
IdentificationNumbercreditsfromothermarketparticipantswhoblendmorerenewablefuel
thanneededfortheirindividualobligations.For2009,theCaliforniaRFS2obligationisjustover
10percentandassumesthat11.1billiongallonsofrenewablefuelwillbeblendedintogasoline
anddieselfuelnationally.Figure21depictstheserenewablefuelsobligations.
Inrecentyears,theincreaseduseofethanolasatransportationfuelhasresultedinanexpanded
domesticproductioncapacity,fluctuatingquantitiesofimports,andinventorybuildordraws
asnecessarytobalanceoutdemand.AsofJune2009,therewasanestimated2.2billiongallons
ofsurplusethanolproductioncapacityintheUnitedStates.Thisoversupplyofdomestic
ethanolisprimarilyresponsiblefortherecentclimateofsustained,poorproductioneconomics,
whichbroughtabouttheclosureofseveralnationalandallCaliforniaethanolproduction
operations.However,thisdevelopmentwilllikelybetemporaryasdemandforethanolis
forecasttosignificantlyincreaseoverthenextseveralyearsbecauseoftheRFS2regulations.
152
Figure 21: U.S. Ethanol Use and RFS Obligations 19932022
0
5
10
15
20
25
30
35
40
1
9
9
3
1
9
9
4
1
9
9
5
1
9
9
6
1
9
9
7
1
9
9
8
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
B
i
l
l
i
o
n
s
o
f
G
a
l
l
o
n
s
OtherAdvancedBiofuel
CellulosicEthanol
BiomassBasedDiesel
CornStarchEthanol
EthanolDemand

Sources: Energy Information Administration, U.S. EPA, and California Energy Commission
Thisoversupplyofethanol,alongwithrelativelylowethanolpricesintheUnitedStates,has
reducedethanolimportstomodestlevels.ImportsofethanolplayalesserroleinCalifornias
supplypicture,butthiscouldchangebecauseofcarbonintensityrequirements,thestates
LCFS,andthefuelobligationsofRFS2.Specifically,Californiaisexpectedtostartimporting
moreethanolfromBrazil,asithaslowercarbonintensityrelativetoMidwestethanolandwill
meettheLCFSpolicyrequirements.
Asforbiodiesel,productionhasincreaseddramaticallyintheUnitedStatessince2005in
responsetofederallegislationthatincludeda$1pergallonblendingcreditforallbiodiesel
blendedwithconventionaldieselfuel.AsofJuly2009,therewasmorethan2.3billiongallonsof
biodieselproductioncapacityforalloperatingUnitedStatesfacilities,alongwithanother595
milliongallonsperyearofidleproductioncapacityandanother289milliongallonsperyearof
capacityunderconstruction.EventhoughtheLCFSwillgreatlyincreasetheuseofbiodieselas
ablendingcomponent(becauseofitslowercarbonintensities),itappearstherewillstillbe
sufficientdomesticsupplyfrombiodieselproductionfacilitiestomeettheRFS2blending
requirementsforseveralyears.
Increasedoutputofbiodiesel,duetotheblendingcreditandattractivewholesaleprices,has
resultedinincreasedUnitedStatesexportstotheEuropeanUnion(EU).In2008,UnitedStates
producersexportednearly70percentoftheirsupplytotheEU.However,inJuly2009theEU
officiallyimposedimportdutiesonUnitedStatesbiodieselforthenextfiveyears.Becauseof
thisruling,UnitedStatesexportstotheEUarelikelytodeclinedramatically.
153
Asalreadyshown,aprojectedimpactoftheRFS2isthatitwouldincreaseethanolandbiodiesel
demandinCalifornia.UndertheHighPetroleumPriceCase(LowDemand)forgasoline,staff
forecasttotalethanoldemandinCaliforniatorisefrom1.2billiongallonsin2010to2.1billion
gallonsby2020.UndertheLowPetroleumPriceCase(HighDemand)forgasoline,staffprojects
totalethanoldemandinCaliforniatorisefrom1.2billiongallonsin2010to2.6billiongallons
by2020.Staffalsoforecastthatethanoldemandwouldexceedanaverageof10percentby
volumeinallgasolinesalesbetween2012and2013.However,becauseofvariousfuel
specificationandvehiclewarrantylimitations,itisunlikelythatthelowlevelethanolblend
limitinCaliforniawouldbegreaterthanthecurrent10percentbyvolume(E10),eveniftheU.S.
EPAultimatelygrantspermissionforUnitedStatesrefinersandmarketerstoblendE15
gasoline.
TomeetRFS2requirements,theavailabilityofE85atretailsiteswillneedtoincrease
dramaticallytoensurethatsufficientvolumescanbesold.Thisscenariowouldrequire
significantincreasesinboththenumberofE85dispensersandFlexFuelVehicles(FFVs).For
example,assuminga10percentethanolblendinglimit,orblendwall,E85salesinCalifornia
areforecasttorisefrom2milliongallonsin2010to1.3billiongallonsin2020and1.6billion
gallonsby2030undertheLowPetroleumPriceCase(HighGasolineDemand).E85
consumptionrequiredtomeettheRFS2isshowninFigure22;Figure23showstheimpactof
theRFS2onthefinalLowGasolineDemandforecast.However,thepaceofthisexpansionstill
maynotbeenoughtoachievecompliancebecauseofspecificinfrastructurechallengesandlack
ofincentives(seetheInfrastructureAdequacysectionbelowformoredetails).
Figure 22: California E85 Demand Forecast 20102030
0
500
1,000
1,500
2,000
2,500
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
3
0
M
i
l
l
i
o
n
s
o
f
G
a
l
l
o
n
s
E85 Base Case
E85 LowGasoline Demand RFS2
E85 HighGasoline Demand RFS2

Source: California Energy Commission, Transportation Energy Forecasts and Analyses for
the 2009 Integrated Energy Policy Report

154
Figure 23: Revised Low Demand Forecast 20102030
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
3
0
M
i
l
l
i
o
n
s
o
f
G
a
l
l
o
n
s
InitialLowGasolineDemandForecast
RevisedLowGasolineDemand RFS2Scenario
RevisedE85LowDemand RFS2Scenario
InitialE85Forecast

Asforbiodieseldemand,theHighPetroleumPriceCase(LowDemand)showsbiodieselfair
share,orCaliforniasshareofmandatedbiodieseluseproportionaltoitsshareoftotalUnited
Statesdieseluse,wouldincreasefrom38milliongallonsin2010to57milliongallonsby2030.
UndertheLowPetroleumPriceCase(HighDemand),biodieselfairsharerangesfrom37
milliongallonsin2010to58milliongallonsby2030.Basedontheseprojectedvolumes,
Californiasaveragebiodieselblendingconcentrationisnotexpectedtobehigherthan1.8
percent.However,CaliforniasLCFSrequirementsareanticipatedtoincreasethelevelof
biodieselusetosignificantlyhigherlevelsthathaveyettobefullyquantified.
Infrastructure Adequacy
Californianeedssufficientfuelinfrastructuretoensurereliablesuppliesoftransportationfuels
foritscitizens.Petroleumandalternativeandrenewablefuelsfacesignificantinfrastructure
issuesfromthewholesaleanddistributionleveltotheenduser.Thepetroleuminfrastructureis
strainedatmarineportsandthroughoutthedistributionsystem.Inthecaseofalternativeand
renewablefuels,muchoftheinfrastructurethatwillsoonbenecessaryisnoteveninplace.Itis
criticalthatthestateexpanduponthecurrentpetroleumfuelinfrastructuretoensurea
continuedsupplyoftransportationfuelforCaliforniaandneighboringstatesandthatitbuild
newinfrastructuretoensurethatCaliforniacanmeetitsmandatedrenewableandalternative
fuelgoals.
Thefollowingtwosectionsdescribethemostpressingissuesandbarriersaffecting
developmentofthepetroleumandrenewableandalternativefuelsinfrastructureinCalifornia.
155
PetroleumInfrastructure
TheEnergyCommissionforecaststhatcrudeoilimportswillcontinuetoincrease,requiring
expansionoftheexistingcrudeoilimportinfrastructure.Thisinfrastructureiscriticalin
ensuringacontinuedsupplyoffeedstockstoenablerefinerstooperatetheirfacilitiesand
maintainareliablesupplyoffuelforCaliforniaandneighboringstates.
TheEnergyCommissionforecaststhattheexistingcrudeoilimportinfrastructureinSouthern
Californiamustexpandtoavoidshortagesinsuppliesforrefineryoperations.Although
progresshasbeenmadeondevelopingafacilityatPier400,Berth408inthePortofLos
Angeles,thepermittingprocesstostartconstructionhasstretchedtomorethanfouryears.In
fact,PlainsAllAmerican,theprojectdeveloper,stilldoesnothavealloftherequisiteapprovals
tostartconstruction.
Toaddfurtherstrain,especiallyinSouthernCalifornia,staffexpectstheincreasedimportsof
crudeoiltoresultinagreaternumberofmarinevesselsarrivinginCaliforniaports,with46to
272additionalarrivalsperyearby2030. Additionalstoragetankcapacitybeyondthatalready
identifiedaspartofBerth408projectmustbeconstructedtohandletheincrementalimports
anditisunclearwherethesecanbelocatedgiventhecompetitionforlandinandaroundthe
ports.Also,theopeningofoffshoredrillingalongCaliforniascoastcouldrequireadditional
infrastructureinthewayofplatforms,interconnectingpipelines,crudeoiltrunklines,and
pumpstations.Itisrecognizedthatsomeneartermoffshoredrillingprojectsusingexisting
platformsorshorebasedoperationswouldmostlybeabletouseexistingcrudeoildistribution
infrastructure.
CaliforniaexportslargeamountsoftransportationfuelstoNevadaandArizona.Pipelinesthat
originateinCaliforniaprovidenearly100percentofthetransportationfuelsconsumedin
Nevadaandapproximately55percentoffuelsconsumedinArizona.KinderMorgansrecent
EastLinepipelineexpansionfromTexastoArizona(seeFigure24)causedadropinArizonas
demandforCaliforniafuelexportsin2008,asrefinersandmarketersshiftedtoTexasandNew
Mexicoforsupply.IfKinderMorgandoesnotmakeadditionalexpansionstothepipeline
distributionsystems,thecontinuedgrowthoftransportationfueldemandinNevadacould
exceedpipelinecapacity,butnotuntil2021.Overall,thenearandlongtermforecastperiods
indicatethattransportationfueldemandgrowthinNevadaandArizonacouldplaceadditional
pressureonCaliforniasrefineriesandpetroleummarineimportinfrastructure.
Renewable and Alternative Fuels and Vehicles Infrastructure
TomeettherequirementsofRFS2andtheLCFS,severalissuesmustberesolvedregardingthe
adequacyofadditionalbiofuelsuppliesandtheinfrastructureneededtoreceiveanddistribute
increasedquantitiesofethanolandbiodieseltoCaliforniaconsumers.Theprimarychallenges
facedbymakersofalternativefuelvehiclesincludealackofinfrastructureinbothfuel
productionandrefueling,theneedtodeveloptechnologiestoreducebatterycosts,theneedfor
standardizedtesting,andconsumeracceptanceofvehicles.Simplystated,therefueling
infrastructurehastobeinplacewhenthevehiclesarrive.Moreover,theserefuelingsitesmust
meetconsumerexpectationsforaccess,convenience,andfuelqualityassurance.
156
Figure 24: Kinder Morgan Interstate Pipeline System
Source: Kinder Morgan Pipeline Company
FFVsaredesignedtorunwitheithergasolineorablendofupto85percentethanol(E85).As
showninFigure25,thenumberofFFVsregisteredinCaliforniamustincreasefrom382,000
vehiclesinOctober2008toasmanyas2.4millionby2020toprovidedemandforenoughE85to
besoldtomeettheRFS2.However,Californiascurrentretailinfrastructureisnotadequateto
handleanincreaseinE85sales.Thegeneralpubliconlyhasaccesstoabout25E85stationsin
Californiatoday,soavastmajorityofFFVownersarefuelingwithregulargasoline.Retail
stationownersandoperatorsarenotrequiredtomakeE85availableforsaletothepublicunder
RFS2.
ConsumersmaycontinuetobuymoreFFVs,butthatwillhavelittleimpactondecreasing
petroleumconsumptionormeetingRFS2standardsifE85isnotavailableatfuelingstations.
DependingontheaveragequantityoffuelsoldbyatypicalE85dispenser,Californiacould
requirebetween3,200and23,300E85dispensersby2020(Figure26).E85retailinfrastructureis
expensive.Costsforinstallinganewundergroundstoragetank,dispenser,andassociated
pipingrangebetween$50,000and$200,000.Statewide,theE85retailinfrastructureinvestment
costscouldbeaslowas$192million,toupwardof$4.7billionbetween2009and2020.Between
2009and2030,theE85dispenserinfrastructurecostscouldrangefrom$251millionto$6.1
billion.OneapproachtoreducethisanticipatedinfrastructurecostisfortheCalifornia
Legislaturetoconsiderrequiringnewbuildingcodestandardsthatallgasolinerelated
equipment(undergroundstoragetanks,dispensers,associatedpipingandsoon)beE85
compatibleforconstructionofanynewretailstationsorreplacementofanygasolinerelated
equipmentbeginningJanuary1,2011.Thisapproachwouldincreasethelikelihoodofsuccessof
renewablefuelpenetrationpolicygoals.
157
Figure 25: California Flex Fuel Vehicle Low Demand Forecast 20102030
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
3
0
N
u
m
b
e
r
o
f
F
l
e
x
F
u
e
l
V
e
h
i
c
l
e
s
E
8
5
S
e
l
e
c
t
i
o
n
R
a
t
e
P
e
r
F
u
e
l
i
n
g
E
v
e
n
t
ForecastE85SelectionRate
MinimumNumberofFFVs E85
Fueling50%ofTime
MinimumNumberofFFVs E85
Fueling75%ofTime
ForecastNumberofFFVs

Figure 26: California E85 Dispenser Forecast 20102030
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
3
0
N
u
m
b
e
r
o
f
E
8
5
D
i
s
p
e
n
s
e
r
s
E85 LowDemand 74K/Year
E85 HighDemand 74K/Year
BaseCase
158
Thestatescurrentretailinfrastructurecanhandlebiodieselblendsatconcentrationsof5
percent(B5)orless.Onthewholesaleandretailreceiptanddistributionlevels,expandeduseof
biofuels(ethanolandbiodiesel)canusetheexistingnetworkofstoragetanksandretail
dispenserswithlittletonomodificationsforlowlevelblends(E10andB5).However,higher
concentrationsofethanol(E85)andbiodiesel(B20)wouldrequiresignificantinfrastructure
modificationsrequiringtheinstallationofthousandsofnewdispensersandunderground
storagetanks.Inaddition,wholesaledistributionterminaloperatorswouldneedtoinstall
additionalstoragetankstoenabletheblendingofbiodieselatB5orB20levels.
TheEnergyCommissionsPIERTransportationsubjectareaispursuingtwoclassesofresearch
initiativesthatmayallowtheuseofexistingfuelinfrastructuretoreducethecostof
implementingrenewableandalternativefuels.Thefirstclassisresearchintotechnologiesor
methodologiessuchasadditives,blendingtechniques,andthermalthresholdsformaking
renewableandalternativefuelscompatiblewiththeexistinginfrastructure.PIERisinitiatinga
solicitationtitledResearchforBiofuelsInfrastructureCompatibility.Thesecondisthe
developmentofalternativefuelsdesignedforconventionalfuelcompatibility.PIERis
investigatinglargemoleculealternativefuels,suchasrenewabledieselorgreengasoline,
whichcontainmixturesofcomplexchemicalsandmimicthepropertiesofconventionalfuels.
Manyarefungiblewithstandardpetroleumfuels.Therefore,theemergingfieldoflarge
moleculeresearchanddevelopmentholdsoutthepotentialforbiofuelsthatrequirelittleorno
newinfrastructureorenginemodificationandaretransparenttotheirendusers.
CNGorLNGvehiclesrunonnaturalgasandhavebeeninuseinCaliforniaformorethan20
years.In2008,therewere24,810lightdutyCNGvehiclesregisteredandoperatinginCalifornia;
halfofthesevehicles(10,747)wereregisteredtoindividualowners.
202
Thisrepresentsa
significantincreaseover2000totalsof3,082;however,thelightdutynaturalgasvehicle
populationhasbeenrelativelyflatsince2001.Stateandlocalgovernmentsaccountedfor31
percentoftheownershipoflightdutyCNGvehicleswith78percentofthosevehiclesexisting
ingovernmentvehiclefleetsof1,000vehiclesormore.Inaddition,therewere9,674medium
andheavydutynaturalgasvehiclesregisteredinCaliforniain2008,with7,144ofthosevehicles
beingCNGpoweredbuses.
Figure27illustratesnaturalgasvehiclecountsforspecificCaliforniacounties.
Thestatehadmorethan460naturalgasstationsatthebeginningof2009,withmorethanone
thirdofthesestationsofferingpublicaccess.
203
CNGrefuelingoptionscouldbeincreased
throughtheuseofarefuelingappliancelocatedatanownershome.
204
Thisrefuelingprocess
takesonaverageanywherebetweenfivetoeighthourstofill50milesworthofnaturalgasand
requirestheownertohaveaccesstoanaturalgasline.
202
Forthisdiscussion,dualfuelCompressedNaturalGas/gasolinevehiclesareconsideredas
CompressedNaturalGasvehiclesinvehiclecounts.AllvehiclecountscomeviatheDepartmentofMotor
Vehiclesdatabase.
203
See[http://www.cngvc.org/whyngvs/fuelingoptions.php].
204
See[http://www.pge.com/myhome/environment/pge/cleanair/naturalgasvehicles/fueling/].
159
Figure 27: Natural Gas Vehicle Counts by Specific Counties, October 2008
OtherCounties*
SantaClara County
SanFrancisco County
SanDiego County
SanBernardino County
SacramentoCounty
RiversideCounty
OrangeCounty
LosAngeles County
AlamedaCounty
Medium&HeavyDuty Vehicles
LightDuty Vehicles

Source: California Energy Commission analysis of DMV Vehicle Registration Database
*The Other Counties category is composed of counties with less than 500 light duty natural gas vehicles
Californiasuseofnaturalgasinthetransportationsectorisforecasttoincreasesubstantially.
Asmeasuredintherms,theforecastshowsdemandrisingfrom150.1millionthermsin2007to
270.3millionthermsby2030undertheHighPetroleumPriceCase(HighNaturalGasDemand
Case)and222.9millionthermsby2030undertheLowPetroleumPriceCase(LowNaturalGas
DemandCase(Figure28).ThenumberofCNGvehiclesisexpectedtogrowfrom
approximately17,569in2007to112,025by2020and206,071by2030.
Figure 28: California Transportation Natural Gas Demand Forecast

160
In2008,theEnergyCommissionsPIERvehicletechnologiescompletedtheNaturalGas
VehiclesResearchRoadmap,whichidentifiedinitiativesandprojectsthatresearch,develop,
demonstrate,anddeployadvancedfuelefficientnaturalgaspoweredtransportation
technologiesandfuelswitchingstrategiesthatresultinacosteffectivereductionofpetroleum
fueluseintheshortandlongterm.
205
ThisPIERsubjectareaisalsocompletingalightduty
vehicleresearchroadmapthatwilladvancescienceandtechnologytoenablealternativefueled
vehicledeployment.Initialroadmapfindingshaveidentifiedneartermresearchinitiativesto
increasevehicleefficiency.Forexample,PIERvehicletechnologieswilltargetresearchto
developefficiencyfeedbacksystems,whichwillprovidedriverswithrealtimefuel
consumptionandefficiencyinformationtoinfluencedrivingbehaviorandreducefueluse.This
strategywillalsohelpwiththedeploymentofalternativefuelvehicles.Whilethetechnologyis
largelydeveloped,thereisanopportunityforresearchtoaddresssystemoptimizationto
determinethemosteffectiveinterfacebetweenthedriverandfeedbacksystem.
Therewere14,670fullelectricvehicles(FEVs)operatinginCaliforniain2008.Althoughthisisa
substantialincreaseoverthe2,905operatingin2001,itissubstantiallylessthanthe23,399in
operationin2003.Since2004thispopulationhasremainedrelativelyflat.TheseFEVsare
primarilyneighborhoodelectricvehiclesandsubcompacts.
Figure29showsFEVcountsforspecificCaliforniacounties.AccordingtoSCE,theutilityis
expectingbetween400,000and1.6millionelectricvehiclesby2020.
206
Pluginhybridelectric
vehicles(PHEVs)combinethebenefitsofelectricvehicles(thatcanbepluggedin)andhybrid
electricvehicles(thathaveanengine)andarescheduledformassproductionasearlyas2011.
TheEnergyCommissionforecaststhenumberofFEVsandPHEVstoreachnearly3millionby
2030.
Severalinfrastructurebarriersmustbeovercometostimulategreaterpenetrationofelectric
vehiclesintothemarketplace.Utilitieswillhavetodevelopprocedures,standardized
equipment,andratesthatmeettheneedsofvehicleusers.Initially,utilitiesshouldprobably
focusoninhomerecharging.Mostconsumerswouldbecomfortablewithhomechargingif
timeofusemeteringratesandequipmentwereavailable,asrechargingcouldeasilybe
accomplishedinmostlyoffpeakhours.Consumerscouldbefurthermotivatediftheywereable
toreceivethecarboncreditsthataccruedwiththeuseofthisenergysource.
207
Tohelpovercomeinfrastructurebarriers,theGovernorsignedSenateBill626(Kehoe,Chapter
355,Statutesof2009)intolawonOctober11,2009.Thisbillwillmodifycurrentlawtorequire
theCPUC,inconsultationwiththeEnergyCommission,theARB,utilities,andthemotor
vehicleindustry,toevaluatepoliciesthatwillhelpdevelopaninfrastructuresufficientto
205
See[http://www.energy.ca.gov/2008publications/CEC5002008044/CEC5002008044D.PDF]
206
TestimonyofRobertGraham,SouthernCaliforniaEdison,attheApril14,2009,IEPRworkshop,
availableat:[http://www.energy.ca.gov/2009_energypolicy/documents/2009041415_workshop/200904
14_Transcript.pdf].
207
Ibid.
161
overcomebarrierstothewidespreaduseofpluginhybridandelectricvehicles.TheCPUCis
requiredtoadoptrulestoaddressthisissuebyJuly1,2011.
Figure 29: Full Electric Vehicle Counts by Specific Counties, October 2008

Source: California Energy Commission analysis of DMV Vehicle Registration Database
*The Other Counties category is composed of counties with less than 300 electric vehicles.
Astheelectricvehiclepopulationgrows,therechargingsystemcanexpandtotheworkplace
andtopublicrechargingstations.Compatibleandconsistentstandardswillneedtobe
developedforrechargingconnectorsandotherequipment,including120/240voltcompatibility
andsmartchargers.Trainingofworkerstoinstallandservicerechargingequipmentneedsto
increase,sincetodaysexpertiseislimitedtoafewspecializedtechniciansconnectedwith
electricvehicledealers.
208
Additionally,utilitieswillneedtoevaluateandupdatetheir
distributioninfrastructuretoaccommodatetheincreasedelectricitydemand.
Californiasuseofelectricityinthetransportationsectorisforecasttoincreasesubstantially,
primarilyasaresultoftheanticipatedgrowthinsalesofPHEVs.AsmeasuredinGWhs,
demandisforecasttorisefrom828GWhsin2008tonearly10,000GWhsby2030.AsFigure30
illustrates,thesurgeintransportationelectricityuseundertheHighPetroleumPriceCase
(HighElectricityDemandCase)ismainlyfromPHEVsandtoalesserextentfullelectric
vehicles.ThenumberofPHEVsisexpectedtogrowfrom32,756in2011to1,563,632by2020
and2,847,580by2030.Electricityusefortransitisnearlyflatovertheforecastperiod.The
transportationportionofstatewideelectricitydemandisexpectedtorisefrom0.29percentin
2008tobetween1.57and1.79percentin2020.
208
Ibid.
162
Thereare400to500hydrogenpoweredvehiclesintheUnitedStates,
209
withabout190onthe
roadinCalifornia.
210
Thesevehiclesusestoredhydrogen,whichiscombinedwithoxygen(from
theatmosphere)throughanelectrochemicalreactioninafuelcelltoproduceelectricitythat
powersanelectricmotor.Thistechnologyisstillrelativelyexpensivebecauseofhigh
productioncostsofbothfuelcellsandthehydrogen,yetitisseenasanattractivetechnology
becauseofitscleanemissionscapabilities.
Whilehydrogenhasairqualitybenefits,itcurrentlyhasnofuelqualityormeasurement
standardsforconsumptionandsale.
211
Nationalandinstatestandardsneedtobedeveloped
thataddressfuelquality,testingandcertificationmethods,andsamplingtechniques,aswellas
themethodofretailsale,dispensingfacilities,andeventheunitusedtomeasureasale.Fire
regulationsaddressmostofthesafetystandardsinthepermittingprocess.
Figure 30: California Transportation Electricity High Demand Forecast
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3
2
0
1
4
2
0
1
5
2
0
1
6
2
0
1
7
2
0
1
8
2
0
1
9
2
0
2
0
2
0
2
1
2
0
2
2
2
0
2
3
2
0
2
4
2
0
2
5
2
0
2
6
2
0
2
7
2
0
2
8
2
0
2
9
2
0
3
0
G
W
H
o
u
r
s
PHEVs
Transit
ElectricVehicles

209
EnergyInformationAdministration,see
[http://www.eia.doe.gov/oiaf/aeo/otheranalysis/aeo_2009analysispapers/ephev.html].
210
See[http://www.cafcp.org/sites/files/Action%20Plan%20FINAL.pdf].
211
TestimonyofJohnMough,CaliforniaDepartmentofFoodandAgriculture,DivisionofWeightsand
Measures,attheApril14,2009,IEPRworkshop.
163
Existinghydrogenstationsinthestatecannotsellhydrogenattheirpumpsbecauseofthelack
ofmeteringsystemsanddispensingrulesapprovedbyCaliforniaDepartmentofFoodand
AgriculturesDepartmentofWeightsandMeasures.
Transportation and the Environment
Currently,highfuelpricesandtherecessionhavereducedconsumerdemandforgasoline,
therebybenefittingtheenvironment.Theseeconomicfactorsarealsocausingmorecitizensto
choosetransitovervehicletravel.However,tosignificantlyreducepetroleumconsumptionin
thelongertermandachievethestatesclimatechangetargets,Californiamustmakelarge
stridesinmakingrenewableandalternativefuelsavailableforconsumers.
TheStateAlternativeFuelsPlansettargetsfortheuseofalternativeandrenewablefuelsinthe
Californiamarket,andtheBioenergyActionPlansetaggressivegoalstoaccelerateinstate
biofuelsproduction.ThesegoalshelptoframeCaliforniasstrongsupportforalternativefuels
andaconcertedandmeaningfultransitionawayfrompetroleumfuelsandtheattendant
economicandenvironmentalbenefits.
Meetingthe2022targetintheStateAlternativeFuelsPlanwouldincreaseannualdemandfor
alternativeandrenewablefuelstoapproximately4billiongallons.Reachingthisgoalwould
requiretheadditionofmorethan1milliongallonsofnewalternativeandrenewablefuelsper
dayintotheCaliforniamarketforthenext13years.TheEnergyCommissionrecognizesthat
introducingtheselargevolumesofalternativeandrenewablefuelscarriestheriskof
encouragingorpromotingenvironmentallyandsociallydestructiveproductionpracticesin
California,NorthAmerica,andthroughouttheworld.
Togaugetheenvironmentalimpactsofvarioustransportationfuels,theEnergyCommission
employsatechniqueknownasafullfuelcycleassessmentorFFCA.Since1989,theEnergy
CommissionhasreliedonFFCAtodeveloppoliciessupportingtheuseofalternative
transportationfuels.TheFFCAisusedtoevaluateandcomparethefullenergy,environmental,
andhealthimpactsofeachstepinthelifecycleofafuelincluding,butnotlimitedto,feedstock
extraction,transport,andstorage;fuelproduction,distribution,transport,andstorage;and
vehicleoperation,refueling,combustion,conversion,andevaporation.TheEnergyCommission
andARBhavedevelopedacommonFFCAmethodologythatisusedasabasisforinvestment
decisionsintheAlternativeandRenewableFuelsandVehicleTechnologyProgramandthe
LCFS.
212
ThefocusofthisFFCAworkhasbeenincomparingGHGemissionsofalternativeand
renewablefueloptionswiththoseofgasolineanddieselfuels.
ThevalueofFFCAisdeterminedbytheunderlyingdata,models,methodologies,and
treatmentofuncertaintiesinthedevelopment,presentation,anduseofresults.Theseareasare
provingtorequireadditionalwork.Akeyareaofinteresttoresearchersisthetreatmentof
indirectemissionsingeneralandlandusechangeemissionsinparticular.Theinclusionof
indirectGHGemissionsinanyFFCAcansignificantlyaltertheoutcomeandpotentialpublic
policysupportforvariousfueloptions.ThiseffectisillustratedinFigure31.
212
See[http://www.energy.ca.gov/2007publications/CEC6002007004/CEC6002007004REV.PDF].
164
Thenascentnatureofthisworkcreatesuncertaintyastothebestapproachfortreatingindirect
emissionsinapolicy,programmatic,regulatory,ormarketframework.Inadoptingitsinitial
LCFSregulationin2008,theARBincludedindirectlandusechangeemissionsindetermining
carbonintensityvalues,butonlyforbiofuel.However,allfuelsmustbeevaluatedequally.The
ARBwillreassessthisaspectoftheLCFSin2010,andtheEnergyCommissionandtheARBare
continuingjointresearchintothistopic.
AsshowninFigure31,notallbiofuelsarecreatedequal.Dependingontheoriginofthefuel,
thefeedstock,andthetypeofenergyusedinitsproduction,theGHGimplicationsofagiven
biofuelonanFFCAbasiscanvarydramatically.Ethanoliscurrentlythedominantbiofuelof
choicetodayandwillbeneededtoachievefederalenergyandenvironmentalpolicymandates
andgoals.However,traditionalcornbasedethanoloriginatingfromfacilitiesintheMidwestis
estimatedbyARBtohavefullfuelcycleassessmentGHGemissionsroughlyequivalentto
gasolineproducedatCaliforniarefineries.
Figure 31: Life-Cycle Analysis Carbon Intensity Values
for Gasoline and Substitutes
Source: Air Resources Board Low Carbon Fuel Standard
TohelpachievecompliancewiththeLCFS,obligatedpartieswillneedtolowercarbonethanol.
ProducingcornbasedethanolinCaliforniaprovidesroughlya16percentreductioninGHG
emissionscomparedtogasoline.However,sugarcanebasedethanol(forexample,producedin
BrazilandimportedtoCalifornia)orsecondgenerationcellulosicethanol(forexample,using
96
68
51
12
22
2
41
43
30
30
46
18
0%
2%
16%
39%
77%
79%
57%
56%
25%
0%
25%
50%
75%
100% 0
24
48
72
96
120
California
Reformulated
Gasoline,
CaRFG
Ethanol,
Midwestcorn
(98g)
Ethanol,Calif.
corn(81g)
Ethanol,
Brazilian
sugarcane
(58g)
Cellulosic
ethanol,forest
waste
Cellulosic
ethanol,
farmedtrees
(20g)
Californiaavg.
electricity
(EER=3.0)
H2FuelCell,
onsiteNG
reformation
(EER=2.3)
Percentage carbonreduction
gCO
2
e/MJ
(gramsCO
2
emittedperunitofenergyadjustedforenergyeconomyratio[EER])
Adjustedcarbonintensity IndirectLandUseChange
Californiagasolinebaseline
g
C
O
2
e
/
M
J
165
Californias Leadership Role in
Environmental Sustainability
AB 118 was created to help transform
California's transportation market by reducing
California's dependence on petroleum and
helping California meet climate change goals.
While increasing alternative fuels is a key
strategy, projects around the world have
discovered that producing new fuels can
sometimes harm the environment. A rapid
transition to alternative fuels has the potential
to encourage environmentally destructive
production practices, said Energy
Commission Chair Karen Douglas. We have
developed sustainability goals and criteria for
AB 118, and will consider sustainability in
every funding decision we make.
California is one of the first states in the nation
to use sustainability as a basis to fund energy
projects. The Energy Commission is taking a
leadership role in working closely with state
partners and global organizations in advancing
the state-of-science in this emerging field. To
receive AB 118 funding, proposed projects
must meet the sustainability goals and
evaluation criteria outlined in the Alternative
and Renewable Fuel and Vehicle Technology
Program regulations. The first goal is to
substantially reduce GHG emissions, and the
second is to protect the environment while
striving to achieve superior environmental
performance. The third requirement is to
achieve project goals in accordance with
certified sustainable production practices.
Preference is given to projects that use
certified sustainable feedstocks and create
alternative fuels that will be in accordance with
sustainability certification standards.
By integrating sustainability in all aspects of
fuel production, the Energy Commission is
encouraging the next generation of alternative
and renewable fuel makers as the state
transitions away from fossil fuels.
biomasssuchasnonfoodpartsofcropsand
municipal,agricultural,andforestwastematerialasa
feedstock)willreduceGHGemissionsby79percent
overgasoline.
Similarly,biomassbaseddieselfuels(including
biodieselandrenewablediesel,aswellasspecific
feedstockandprocessbaseddieselssuchasalgae
baseddiesel,biomasstodiesel,anddieselfrom
thermaldepolymerizationofindustrialandprocessing
waste)couldbesignificantcontributorstoreducing
GHGemissionsinCalifornia.Ofthesefuels,only
biodieseliscommerciallyavailableinCaliforniaand
theUnitedStatestoday.
BiodieselproducedtodayinCaliforniareducesGHG
emissionsby10to50percentcomparedtodieselthat
meetsARBsdieselfuelregulations.Thesefacilities
userecycledcookingoil(yellowgrease)astheir
lowestcostfeedstockoption,butalsousemore
expensiveandabundantsoybean,palm,andavariety
ofplantandanimaloils.Movingbeyondtheseoils
andintofacilitiesusingcellulose,waste,andalgaeare
necessarytoachievedeeperGHGemissionreductions.
Dependingonthefeedstock,fuelproductionprocess,
blendconcentration,andvehicletype,thesebiodiesel
andrenewabledieselfuelscouldreduceGHG
emissionsby61to94percentcomparedto
conventionaldieselfuelmeetingARBsregulations.
FEVsandPHEVshavenumerousbenefitsthatmake
themattractiveinaddressingcarbonreductionand
petroleumdependence.BasedontheCalifornia
averageelectricitymix,FEVshavethepotentialto
reduceGHGemissionsby57percent;thereductions
fromPHEVswillbelessduetothepartialrelianceon
aninternalcombustionengine.However,several
utilitiesinCaliforniarelyonelectricityimportsfrom
outofstatecoalfiredplants.ThiswillaffecttheGHGreductionpotentialandneedscareful
considerationinformulatingbroadpublicpoliciessupportingFEVsandPHEVs.Useof
substantialnumbersofthesevehicleswouldalsoprovidelocalizedairqualitybenefitsby
reducingcriteriapollutantemissionscomparedtoconventionalvehicles.
Naturalgasvehiclesemit30to40percentlessGHGemissionsthangasolineanddiesel
poweredengines.Theenvironmentalprofileofnaturalgascanbefurtherimprovedthrough
166
advancementsinbiomethaneorbiogas,whicharerenewablesourcesfortheproductionof
naturalgas.Biomethanecanbeproducedbycapturingmethanefromlandfills,dairyfarms,and
wastewatertreatmentplantsandbyanaerobicdigestionoforganicmattersuchasmunicipal
solidwaste.Theuseofbiomethaneinstateoftheartnaturalgasvehicleshasamuchgreater
GHGbenefit,reducingemissionsbyasmuchas97percent.Californiabiomethaneresource
potentialisestimatedtoprovidetransportationfuelsforupto250,000vehiclesperyearfrom
dairyoperations,representingroughly1percentoftheexistingpopulationoflightduty
vehiclesinthestateasofOctober2008.
213
Naturalgasiscurrentlytheprimaryfeedstockneededformanufacturinghydrogenandresults
inareductionofGHGemissionsbyabout56percentcomparedtogasoline.Theuseof
electrolysistoproducehydrogen(aprocesswherehydrogenisseparatedfromwater)hasthe
potentialofreducingGHGemissionsevenfurther.However,thistechniquedependsonthe
sourceoftheelectricityusedfortheprocess.Renewablepowerhasthegreatestpotentialto
reducetheemissionstonearzero.Hydrogencanalsobecreatedfrombiomethanetofurther
improveitsenvironmentalprofile.
Propaneisproducedasabyproductofrefineryoperationsandisacoproductintheextraction
ofoilandnaturalgas.PropanereducesGHGemissionsupto19percentcomparedtogasoline.
Whilenotyetavailablecommercially,studiesarebeingconductedatMississippiState
UniversityandMassachusettsInstituteofTechnologyonthegenerationofrenewablepropane.
Renewablepropanecanbederivedfromalgae,rowcrops,andwood.WhiletheGHGprofileof
renewablepropaneisnotknownatthistime,productionrequireslittleadditionalenergyand
resultsinaproductthatcontainsthesameenergycontentaspropanederivedfrompetroleum.
Whileconsiderableworkisfocusedonunderstandingthecarbonimplicationsofvariousfuel
options,FFCAmethodologiesdonottypicallyreflectthenotionofembeddedcarbon.
Regulatoryandmarketincentivepoliciesencouragetheintroductionofnewvehiclestoachieve
GHGemissiontargets.Theimportanceofthisstrategyisclear.However,theenergyandraw
materialinputsinvolvedinmanufacturingnewvehiclescauseGHGemissions.Anewmore
fuelefficientvehiclemayhavetotraveltensofthousandsofmilestocompensateforthe
emissionsresultingfromthemanufacturingprocess.Embeddedcarbonalsoraisesthequestion
ofthetensofmillionsofexistinggasolineanddieselvehiclesthatwillcontinuetoemitcarbon
asnewadvancedvehiclesarebeingintroducedintothemarketplace.Astrategythatwould
provideincentivestoretrofitsegmentsoftheexistingfleetwithlowcarbontechnologiesshould
beexaminedfromapublicpolicyperspective.
ItisclearthatCaliforniawillremainheavilydependentonpetroleum,atleastinthenearterm,
asitsprimarytransportationfuel.Therewillbeaneedforstrategiestoaddressthecarbon
emissionsassociatedwithpetroleumrefining.Californiahasbeenconductingextensive
researchoncarboncaptureandsequestrationasaGHGmitigationstrategyforindustrial
sources,includingoilrefineries.OnOctober2,2009,theDOEawarded$3millioninARRA
fundingtoC6Resources,anaffiliateofShellOilCompany,toconductasevenmonthscoping
213
BiomethaneResourcePotential,CALSTART,StevenSokolsky,IEPRWorkshop,April15,2009,slide6.
167
studyonaprojectthatwillsequesterapproximately1milliontonsperyearofCO2streamsfrom
aMartinez,California,refineryandinjectitintoasalineformationmorethantwomiles
underground.Attheendofthestudy,C6willsubmitaproposalfortheactualproject.
Transportation and Reliability
AsproductionfromCaliforniascrudeoilfieldscontinuestodecline,andasCaliforniasoil
refineriescontinuetoexpandtheirproductioncapacity,refinerswillturntoimporting
additionalvolumesfromsourcesoutsidethestate.SinceAlaskacrudeoilproductionhas
declinedatagreaterratethanCaliforniaproduction,refinersmustseeksubstitutecrudeoil
fromforeignsources.Thereisconcernaboutthepoliticalstabilityofoilproducingnationssuch
asIraqandNigeriaanditspotentialimpactoncrudeoilavailability.Offshoredrillingcould
increasethedomesticsupplyandhelpensurereliability.However,environmentalconcerns
withdrillingactivityinsensitivemarinehabitatcouldpreventordelaynewproduction.These
factors,alongwithaninadequatemarineimportinfrastructure,couldsignificantlyimpactfuel
securityandreliabilityforCaliforniaandneighboringstates.
Uncertaintyregardingfuturesuppliesofcrudeoilrepresentsanopportunityforthestateto
movemoreaggressivelyinexpandingtheuseofalternativeandrenewablefuels.However,
thesefuelsarenotwithouttheirownchallenges.Unlessthestatetakesconcertedstepstogrow
thealternativeandrenewablefuelindustrydomestically,policymakersmaybefacedwith
similarpotentialsupplyinterruptionsfromanoverrelianceonforeignsourcesoffueland
feedstock.Tocompoundtheissue,theLCFScouldpushtheindustrytoimportcommercial
quantitiesoflowercarbonintensityfuels,furtherstressingCaliforniasmarineinfrastructure.
Increasingrelianceonforeignsourcesofrenewablefuelsalsocreatesuncertaintyastothetrue
carbonintensityofthefuelandthereforebringsintoquestionthesuitabilityofthefuelforthe
Californiamarket.
Increasingimportsofrenewableandalternativefuelswillrequireadditionalinfrastructure
includingnewofftaketerminals,storageanddistribution,andretailsites.Also,buyersof
alternativeandrenewablefuelvehiclesmustbeassuredthatfuelorrechargingstationsare
availableandthattheyhaveaccesstovehicleparts,maintenance,andmanufacturerwarranties.
AsCaliforniatransitionsfromconventionalbiofuelstomoreadvancedsecondgeneration
biofuels,agreatemphasiswillbeplacedonidentifyingsustainablefeedstocks.Californias
municipal,agricultural,andforestbiomasswastestreamisamassiveunusedresourcethat
couldbeusedasafeedstockforbiofuels.Californiacurrentlyproducesatotalof83million
grossbonedrytonsperyear(BDT/y)ofcombinedbiomasswaste;thisisprojectedtoincreaseto
99millionBDT/yby2020.However,onlyabout32millionBDTmaybeaccessibleasanenergy
feedstockbecauseofeconomicandenvironmentallimitations.Atthecurrentrateofuseofjust5
millionBDT/y,thisisanunderusedresource.Still,biofuelproducerswillbecompetingwith
operatorsofbiomassfiredpowerplantsandusersofnonenergybioproducts.Itisimperativeto
determineiftherewillbesufficientbiomasswastetomeetthesegrowingandcompeting
demands.Preliminarydatasuggeststhattheremaybesufficientbiomasswasteinthenearterm
forcompetingenergyuses,butmorethoroughandindepthanalysisisneededforboththe
biofuelsandelectricityindustry.
168
Alternatively,purposegrowncropsmaybeanimportantcomplementtobiomasswasteasan
energyfeedstock.Biodieselcanbederivedfromoilcrops,cellulosicsources,andalgae.The
ethanolindustryhasbeenlookingatsugarcane,sugarbeets,sweetsorghum,grainsorghum,
andcullfruits.Thesecropsalsomayrepresentnewsourcesofincomeineconomically
depressedcommunities.Ifenergycropsareusedasabiomasssource,additionalanalysiswill
beneededtodeterminelifecyclecarbonimplications,includingbothdirectandindirectland
usechanges,andtoensurethatcropsarebeinggrowninacertifiablysustainablemannerusing
bestmanagementpractices.
Transportation and the Economy
Theeconomicrecessionhasimpactedthetransportationindustryatalmosteverylevel.Atthe
consumerlevel,behaviorchangesareevident.Consumersarereducingvehicletripsandcutting
backonpersonalspendinginresponsetohighergasolinepricesandtherecession.Inaddition,
consumersareshowingapurchasingtrendofsmallercars,alongwithmoreFFVsandhybrids
(Table7).Thishasresultedinanoverallshiftinproductiontomorefuelefficientvehicles.In
difficulteconomictimes,priceandfuelcostaresignificantfactorsinvehiclechoice,suggesting
thatCaliforniaconsumersareawareofthetradeoffbetweenthesecostfactors.
Table 7: Summary of California On-Road Light-Duty Vehicles
Light Duty Vehicle Counts
Gasoline Diesel Hybrid Flex Fuel Electric
Natural
Gas
2001 22,779,246 316,872 6,609 97,611 2,905 3,082
2002 23,384,639 334,313 15,159 129,734 11,963 25,682
2003 24,516,071 364,411 24,182 183,546 23,399 17,228
2004 24,785,578 391,950 45,263 195,752 14,425 21,269
2005 25,440,904 424,137 91,438 269,857 13,947 24,471
2006 25,741,051 449,305 154,165 300,806 14,071 24,919
2007 25,815,758 465,654 243,729 340,910 13,956 25,196
2008 25,654,102 463,631 333,020 381,584 14,670 24,810
Compound
Average
Growth
Rate
1.71% 5.59% 75.06% 21.50% 26.03% 34.71%
Source: California Energy Commission analysis of California DMV data
Consumersareparticularlyaffectedbyfuelpricevolatility.Lastyear,crudeoilpricesroseto
over$140perbarrelinJuly2008,declinedsharplytoalevelbelow$30inDecember,andthen
steadilyclimbedagaintoabout$70inSeptember2009.Theseeventsledtovolatilegasoline
prices,impactingconsumersdirectlyatthepump.Atitshighestpeak,inJune2008,theU.S.
EnergyInformationAdministrationreportedtheaveragepriceofCaliforniaregulargrade
169
motorgasolinewas$4.48pergallon.ByDecember2008,thepricefellto$1.82,beforerising
againto$3.10inSeptember2009.Consumersrespondedtothispricevolatilityandoverall
economicconditionsbyreducinggasolineconsumption;accordingtoBoardofEqualization
data,Californiasalesofgasolinefellby6.2percentfrom2004to2008.
Forthe2009IEPRtransportationfuelforecast,staffdevelopedhighandlowcrudeoilprice
forecastsforCaliforniatransportationfuelsandusedtheseasthebasisforCaliforniaspecific
highandlowcaseregulargradegasolineanddieselpriceforecasts.TheEnergyCommissions
HighPetroleumPriceCasestartsat$2.90pergallonforgasolineand$3.09fordieselin2009,
jumpsto$4.36and$4.43,respectively,in2015,andthencontinuestoriseto$4.80and$4.87by
2030(allpricesarein2008dollarstoadjustforinflation).TheEnergyCommissionLow
PetroleumPriceCasepriceforecastsstartat$2.34forgasolineand$2.42fordieselpergallonin
2009,climbto$3.17and$3.19,respectively,in2015,andthenholdconstantuntil2030. Ifthe
HighPetroleumPriceCaseforecastholdstrue,thestatecouldseemoreconsistentand
sustainedbehaviorchangesincitizensrelatedtodrivingpatterns,gasolinedemand,andvehicle
purchasingdecisions.
Cheaperfuelsourceswouldbeamajormotivatingfactorforconsumerstochoosealternative
fuelvehicles.Thealternativefuelpriceforecastsshowmostofthesefuelscostingaboutthe
same(orsometimesmore)thangasolineordiesel,butthereareconsiderableuncertaintiesin
theseprojections.Moreover,otherfactors,suchastheefficiencywithwhichthevehicle
technologyusestheenergyinitsfuelaswellasinsuranceandmaintenancecosts,willalso
affecttotaloperatingcosts.Finally,thepurchasepriceofmanyalternativefuelvehicletypes
exceedsthatofconventionalgasolinevehicles.
Thedownturnoftheeconomyhasgreatlyaffectedthebiofuelsindustry.Allsevenofthe
ethanolproductionplantsinCaliforniaarecurrentlysittingidle.Californiaethanolproducers
citetheprimaryreasonforceasingproductionaspoormarketconditionsandtheeconomicsof
producingethanol.OnMay17,PacificEthanol(oneofthelargerCaliforniaethanolproducers)
filedChapter11bankruptcyprotection.Ethanolproducersinotherpartsofthecountry,
particularlytheMidwest,arefeelingstrainfromtheeconomy,buttheeffectsarenotas
detrimentalasthosefeltinCalifornia.Midweststatessupportagriculture,cornproduction,and
ethanolplantssimultaneously,andCaliforniamayneedtotakeasimilarroleforitsethanol
industrytosurvive.Also,companieshaveceasedconstructiononanumberofbiofuelprojects
becauseoftheirinabilitytosecurefinancing.Financialinstitutionsarenotfundingunique
biofuelinfrastructureprojects,whichallposerisks.
TheCaliforniabiodieselplantsarealsostruggling.TheSWRCBprohibitionofbiodieselin
undergroundstoragetanks(whichwasrescindedinMay2009)andtherecessioncreated
detrimentaleconomichurdles.Californiahasninebiodieselplantswithacombined2009
theoreticalcapacityof63milliongallons;theseplantswilllikelyproducelessthan25million
gallons.Today,sixbiodieselplantsareidle.
214
Thebiodieselindustryhastoworkdoublyhard
toreestablishitselffromtherescindedprohibitiontostorebiodieselinundergroundstorage
214
DocketCommentsbytheCaliforniaBiodieselAlliance,February16,2009.
170
State and Federal Funding Efforts Stimulate
Electric Vehicle Market
California is home to start-up companies like
Tesla Motors, Aptera Motors, and Fisker
Automotive that are promising to bring upscale
all-electric vehicles to market soon. Today,
major manufacturers including Ford, Chrysler,
BMW, Toyota, Mitsubishi, Subaru, and
General Motors are actively exploring electric
technology with the help of federal funding.
California is providing state funding support as
well. Through AB 118, the Energy Commission
is offering $9 million to manufacturers of
electric vehicles and electric vehicle
components willing to locate in California. The
incentives will create several thousand green
California jobs and help to boost local
economies. Overall, AB 118 offers a total of
$46 million in state funds to support electric
transportation.
As automobile manufacturers in Asia, Europe,
and the U.S. rush to capture a growing
worldwide market for more efficient,
environmentally friendly vehicles, California
and the federal government are helping
American companies compete in the race to
develop vehicles for the 21
st
century.
tanksduringtherecession.TheaddeduncertaintyfromARBsLCFStreatmentofindirect
emissionsfurtherexacerbatesthelackofeconomicsupportforbiofuels.
TomovehighlevelsofbiofuelsintoCaliforniaspredominantlygasolinemarket,incentives
maybeneededtostimulateinstateproductionaswellasinfrastructureinvestments.Itis
importantthatCaliforniaefficientlymaximizethebenefitsfromfederalgrantsaswellas
assistancewithstatefundingandassistanceresources.Thiswillbeakeyaspectofleveraging
AB118monieswithfederalstimulusfunding.
EconomicbarrierstowiderspreadpurchaseofFEVs
andPHEVsincludethelackofcommerciallyavailable
modelsanddelaysindelivery,theirhigherprice,and
concernsabouttheirsizeandrange.
215
These
perceptionsofFEVsbypotentialvehiclepurchasers
maybeintensifiedbyalackoffamiliaritywiththe
technologyanduncertaintiesoverhowthevehicles
wouldberechargedortheexpenseofreplacing
batteries.Batterycostcouldbereducedthroughmass
productionofbatteries,butthereisstillagreatdealof
research,development,anddemonstrationtakingplace
toimprovevehiclerange.Improvingperformanceis
importantbecauseasthetechnologycurrentlystands,it
isnotpossibletoexceedvehiclerangewithouta
lengthypausetorechargethebattery.Overall,the
initialcostsofelectricvehicles(EVs)arehigherthanfor
gasolinevehiclesbecauseoftheadditionalcostofthe
batteryandhomerecharginginstallation.
Severaldifferentvehiclemanufacturershaveproduced
lightdutyCNGvehicles,butcurrentlyonlytheHonda
GXCNGisofferedforsaleintheUnitedStates.Alack
ofvehicleofferingswasidentifiedbytheState
AlternativeFuelsPlanasoneoftheprimaryhurdlesto
naturalgasbecomingamajorpubliclyused
transportationfuelinCalifornia.
216
AnotherbarrieristhatlightdutyCNGvehiclesoftenrequire
morefrequentrefuelingduetohavingapproximately25percentlessrangethangasolineor
dieselvehiclesperonetankoffuel.Andlikeelectricvehicles,naturalgasvehiclesareso
215
ArecentstudycompletedbytheGovernmentAccountabilityOfficedescribesthevariouschallenges
facingincreaseduseofPHEVs,aswellaselaboratingonspecificdevelopmentsthatwouldbenecessary
forPHEVstobecompetitive.GovernmentAccountabilityOffice,PluginVehiclesOfferPotentialBenefits,
butHighCostsandLimitedInformationCouldHinderIntegrationintotheFederalFleet,June2009,GAO09493,
availableat:[http://www.gao.gov/new.items/d09493.pdf].
216
StateAlternativeFuelsPlanAB1007ReportDocket#06AFP1,see
[http://www.energy.ca.gov/ab1007/index.html].
171
unfamiliartothemajorityofconsumersthattheyareunabletogeneratefavorableimpressions
amongmanypotentialcarbuyers.
Thepriceofnaturalgasfuelcanbeattractivetohighvolumepurchasers,butvehiclecostcanbe
abarriertomorelight,medium,andheavydutyvehiclepurchasesunlessalleviatedby
decliningproductioncostsdrivenbyonboardfuelstorageneedsorconsumerincentives.The
EnergyCommissionsStateAlternativeFuelsPlanAB1007Reportalsoidentifiedseveralactions
thatwouldencouragethedevelopmentoftheindustry:developnewutilityratestructuresfor
homerefuelingappliances;stimulatethedevelopmentofbiomethane/biogasforuseinnatural
gasvehiclesandasafeedstockforhydrogen;improveonboardstoragetechnologytoimprove
therangeandcostsofnaturalgasvehicles;developnaturalgashybridelectrictechnology;and
usetheGHGemissionbenefitcreditsininvestmentandbusinessoperationplans.
TheARRAincludesmultipleelementstoadvancealternativefuelandvehicletechnologies.For
example,Fordreceived$5.9billioninloansfromtheU.S.DOEtohelpitretoolitsplantsto
produce13fuelefficientmodels,includingasmanyas10,000EVsayearbeginningin2011.
Nissanreceived$1.6billioninloanstoretoolitsTennesseeplanttomakeEVs.InAugust2009,
Ford,GM,Chrysler,andothersreceived$2.4billioninfederalgrantstoencouragethe
developmentofHEVsandEVs.Thegrantsinclude$1.5billionforbatterymakers,$500million
forcompaniesdevelopingelectricmotorsanddrivecomponents,and$400milliontotesta
rechargingsystemforelectriccars.Thegrantsarepartofthefederalgovernments$787billion
economicstimulusprogram.
Asitspopulationcontinuestogrow,Californiamustplantoensureithasenoughfueltokeep
itseconomicenginerunning,whileprotectingthestatespublichealthandnaturalresources.
Regulationsalreadyinplacedemandthatthestatesenergysupplybecomesincreasingly
sustainableasCaliforniansworktocutGHGemissions.Sustainabilityisbecomingevermore
importantastheU.S.triestoweanitselffromconstrainedresourceslikeforeignoil.Thestate
mustavoid,however,tradingonevulnerabilityforanother,suchasbecomingdependenton
electricautomobilebatteriesthatrequirerarelithiumfromother,perhapslessthanfriendly
countries.TherecessionmakesitincreasinglyimportantthatCaliforniadevelopUnitedStates
resourcesandprovideUnitedStatesjobsinasustainableway.
172
173
Chapter 3: Challenges to Achievement of a Vision for

Californias Future Electricity System
Introduction
Californiasnumerousenergypolicygoalsmustbalancetheneedtominimizeenvironmental
impactswhilemaintainingreliabilityandaffordabilityofelectricpower.Thosegoalsinclude
increasingtheuseofpreferredresources(energyefficiency,demandresponse,renewable
energy,combinedheatandpower,rooftopphotovoltaic,andotherdistributedrenewables),
decreasingtheuseofoncethroughcoolingtechnologiesinpowerplants,retiringagingpower
plants,andmodernizingthestatessystemofpowerlines.Overlayingthesegoalsisthestate
mandatetoreducegreenhousegas(GHG)emissions.Becauseelectricitygenerationisthe
secondlargestsourceofCaliforniasGHGemissionsaftertransportation,makingchangesinthe
electricitysectoriscritical.
Thusfar,thesegoalshavebeenonlyweaklyintegrated.Tocoordinateplanning,procurement,
andpermittingofpowerplantsintoanintegratedsystem,decisionmakersmustreconcile
priorities,identifytradeoffs,andtransformbroadlyframedobjectivesintoconcretemeasures.
Formingaunifiedvisionandtranslatingthatvisionintoablueprintofspecificgoalsand
objectiveswillprovideafoundationforindepthplanningforspecificgenerationand
transmissionprojects.Clearlyidentifyingwhichgenerationprojectsareneeded(andwhichare
not)willeaseconcernsfromenvironmentaladvocatesthatthestatehasnotfullyembraceda
futuredrivenbyGHGemissionreductions.Moreefficientandcoordinatedtransmission
planningwillavoidcontentious,lengthy,andineffectiveprocessesthatcandelaythe
transmissionneededtomeetthestatesenvironmentalgoals.Further,anintegratedprocesswill
minimizeduplicationamongthestatesenergyagenciesandprovidecomplementaryand
reinforcingforumsforintegratingthevariousanalysesandothereffortsunderwayatthose
agencies.Integrationinthiscontextrefersnotonlytothestatesactualgenerationand
distributionresources,butalsotothesubstantialnumberofpolicies,laws,andregulationsthat
governthesystem,aswellasthemultipleagenciesinvolvedinestablishingandexecutingthose
mandates.
Thischapterisorganizedinthreeparts.Thefirstidentifiesthemajorchallengesresultingfrom
theeffectsoftheStateWaterResourcesControlBoardsoncethroughcoolingmitigation
policiesoncoastalpowerplants,theextremescarcityofaircreditsintheSouthCoastAirBasin
thatisinhibitingdevelopmentofreplacementpowerplants,andimpactsoftheseissueson
EnergyCommissionpowerplantlicensing.Thesecondsectiondiscussesimplementationissues
associatedwiththepreferredresourceadditionsthatareakeyelementofthevisionforanew
electricitysystemofthefuture.Thefinalpartaddressestheinstitutionalcoordination
challengesofgettingalloftheaffectedpartiestoefficientlystudy,plan,andacttosteer
infrastructuredevelopmenttowardacommonfuturevision.
174
Issues Affecting the Power Plant Fleet

Inits2005IntegratedEnergyPolicyReport(2005IEPR),theEnergyCommissioncalledforthe
retirement,replacement,and/orrepoweringofagingpowerplantsinthestate.Theseplants
operateathighheatrateswhencomparedwithnewgenerationtechnologiesandresultinless
efficientuseofnaturalgasandhigherlevelsofairpollutants,includingGHGemissions.The
EnergyCommissionalsorecommendedthattheCaliforniaPublicUtilitiesCommission(CPUC)
ensurethatlongtermresourceprocurementexplicitlytakeintoaccounttheretirement,
replacement,and/orrepoweringofagingpowerplantsincludingthoseintheLosAngeles
Basinwithcleaner,combustionbasedtechnologiesthatoperateathigherefficiencies.Inits
2006LongTermProcurementPlan(LTPP)decision,D.0712052,theCPUCincluded
substantialretirementsindeterminingfutureinvestorownedutility(IOU)needs.
Inadditiontothispolicygoal,thefollowingfourexternalforcescontinuetoexertmajor
influenceovertheelectricityindustry:
Policiestoreduceoreliminatetheuseofoncethroughcoolinginpowerplants.
Thescarcityandhighcostofemissionscreditsneededfornewpowerplants.
Theneedtoshiftthemixofresourcestowarddemandsideresourcesandrenewablesand
awayfromfossilpowerplantsinresponsetoglobalclimatechangeinitiatives.
Multiplejurisdictionsresponsibleforpermittingpowerplants.
Effects of Once-Through Cooling Mitigation Policies

Attheendof2008,19powerplants(20,400MW)inCaliforniausedoncethroughcooling(OTC)
technologies.InJune2009,theStateWaterResourcesControlBoard(SWRCB)publishedadraft
policythatestablishesclosedcyclewetcoolingtowersasthebenchmarkforcompliancewith
OTCmitigationrequirements.Thedraftpolicyalsoproposesacomplianceschedulebasedon
thesuggestionbytheEnergyCommission,theCPUC,andtheCaliforniaIndependentSystem
Operator(CaliforniaISO)onhowtoaddressreliabilityconcernsgiventheproposedtimeline
forOTCmitigationcompliance.
217
Thethreeenergyagenciesagreedthatafixedyearouter
boundonOTCmitigationcompliancecanbeestablished,provideditallowsfortheorderly
developmentofnecessaryreplacementinfrastructureandcanbeamendedifconditionssuchas
permittingandconstructiondelaysindicatesuchchangeisneededtoensurereliability.
TheproposedcompliancescheduleforeachOTCplantisbasedonthetimerequiredtocreate
replacementinfrastructure.AwiderangeofcircumstancesexistswithintheOTCfleet.Asnew
facilitiesbecomeoperational,someOTCpowerplantsarelosingtheirimportanceforlocal
217
CaliforniaEnergyCommission,CaliforniaPublicUtilitiesCommission,andCaliforniaIndependent
SystemOperator,ImplementationofOnceThroughCoolingMitigationthroughEnergyInfrastructurePlanning
andProcurement,July2009,CEC2002009013SD,availableat:
175
reliability.Forothers,theproposedscheduleincorporatestheconstructiontimelinefor
replacementinfrastructurewhenthatisalreadyunderway.Formanypowerplants,substantial
analysisoftheoptions,decisionsamongtheenergyagencies,andthenprocurement,
permitting,andconstructioncreatelongleadtimesbeforereplacementinfrastructurecanbe
operational.Thecomplexitiesoftheseanalysesdifferfromoneregiontoanother,withtheLos
AngelesBasinbeingthemostproblematicgivenseverelimitationsontheaircreditsneededfor
newgenerationdevelopment.Forthisreason,thescheduleofdatesforreplacement
infrastructuremayoccurfurtherintothefuturefortheexistingOTCplantslocatedintheLos
AngelesBasin.
Itiscriticaltointegratetheperspectiveofenvironmentalregulatorsintoreliabilityconcerns.
TheSWRCBmustestablishapolicywithafixeddeadlinetoforceactionbytheplantoperators
andtoallowregionalboardstoissuepermitstoexistingplantswithknowledgethatOTC
mitigationwilloccuronafixedschedule.Atthesametime,theenergyagenciesstronglybelieve
thatimplementationofanOTCmitigationpolicyforexistinggeneratorshastobeintegrated
withplanninganddevelopmentofthereplacementinfrastructurenecessarytosupportsystem
reliability.
InthejointenergyagencyproposaltotheSWRCB,theenergyagenciesprovidedestimated
operationdatesfornewinfrastructure.Theenergyagenciesmustreviewandupdatethese
datesperiodically,whicharethenreviewedbytheSWRCB.Wheresignificantchangeshave
beenmade,theSWRCBmustusethemasthebasisforchangingthepermitsforexistingOTC
plants.TheenergyagenciesarecommittedtoworkingtogetherandwiththeSWRCBtoachieve
thisobjective,andSWRCBstaffsdraftproposedpolicyincorporatesthejointagencyproposal.
Factors Affecting Once-Through Cooling Replacement Infrastructure
WithinthebroadumbrellaoflinkingOTCmitigationtothedevelopmentofreplacement
infrastructure,thestatecouldproposemanyalternativeplans.Stateagencypoliciesemphasize
preferredresourcetypes,includingenergyefficiencyanddemandresponse,renewables,and
distributedgeneration.Includingtheseresourcesintheanalysiswilllikelyresultinasetof
proposedreplacementplantsthatdonotrelystrictlyonconventionalfossilpower.
TheenergyindustryscompliancewiththeCaliforniaAirResourcesBoards(ARB)Climate
ChangeScopingPlanregulationswillpresumablyleadtoalowerelectricitydemandforecast
becauseadditionalenergyefficiencymeasureswillreducedemand,androoftopphotovoltaic
(PV)andotherdistributedgenerationresourceswilldisplacesalesofelectricityfromthebulk
powersystemtoendusers.Alowerdemandforecastwouldrequirefewercentralstation
generatingfacilitieswithinloadpocketstosatisfyreliabilitycriteria.Compliancewithclimate
changeregulationspresumablyalsostrengthenstheroleofrenewablepowergeneration,which
encouragesmoretransmissiondevelopmenttointerconnectremoterenewableresources,
lesseningtheneedforenergyfromtraditionalfossilgenerationbutsimultaneouslyincreasing
theneedfordispatchablefacilities(thosethathavetheabilitytocontroltheiroutput)toprovide
reliabilityservices.Recognizingtheselikelyconsequencescouldleadtochangesinboththemix
176
andcapabilitiesoffossilgenerationneededinloadpockets,whetherfromrepoweredOTC
plantsorfromnewfacilitiesthatareelectricallyequivalent.
Inaddition,airpermittingissuesintheSouthCoastAirQualityManagementDistrict
(SCAQMD),discussedinmoredetailinthenextsection,willaffectthetypeofreplacement
powerthatcouldbebuilt.TheSuperiorCourtdecisionvoidingtheSCAQMDsPriorityReserve
RulewillresultinseriouslimitationsonpowerplantdevelopmentintheSouthCoastAirBasin
andnearbyareasforsometime.
218
SCAQMDsairqualitypermittingprocessesaffect7,500
megawatts(MW)ofexistingfossilcapacityintheLosAngeleslocalcapacityareaofthe
CaliforniaISOandtheLosAngelesDepartmentofWaterandPower(LADWP).Newfacilities
totaling1,750MWincapacityhavepowerpurchaseagreementswithSouthernCalifornia
Edison(SCE)butcannotbelicensedbecausetheydonothaveaccesstothePriorityReserve.If
thisissueremainsunresolved,thesefacilitieswillnotbeavailabletoreducethereliabilitythreat
fromtheproposedlimitationontheuseofOTC.Thiswouldsignificantlyincreasethechallenge
ofsitingnewpowerplantsneededtoimplementtheOTCpolicyandrequiresolutionsthatrely
ontransmissionsystemupgradestoaccessremotelylocatedgeneration.
Thestatemustalsoconsiderlocalcapacityrequirementswhendiscussingreplacementpower.
TheEnergyCommission,CPUC,andCaliforniaISOaredevelopingenhancedlocalcapacity
requirementsanalysesforeachlocalcapacityarea,orloadpocket,withintheCaliforniaISO
balancingauthorityarea.Someareaslackexcesscapacityandmustdevelopreplacement
capacitytomeetincreasesinpeakloadorpowerplantretirements.Othershavesurplusesand
couldthereforetoleratesomeretirements.Basedonloadandresourceassumptions,thelocal
capacityrequirementanalyseswillextendcurrentrequirementsto10yearsandidentifythe
amountandvariousoperatingcharacteristicsneededtoplanforOTCretirementinsomeload
pockets.
TheresultswillbeusedaskeyinputsforanOTCpowerplantinfrastructurereplacementplan
thatwouldproducespecificreliabilitydesignations,orretirementdatesforspecificpower
plants,asdeterminedbythephysicalrequirementsintheloadpocketandexpectedtimingof
replacementinfrastructuredevelopment.Theplanwouldidentify,foreachregion,therequired
actionsforeliminatingrelianceuponapowerplantorunitusingOTC.Mostimportantly,this
planwouldidentifythecompletesetofinfrastructureadditionsthat,onceoperational,would
allowOTCtobeeliminated.
Recognizingtheseproblems,theLegislatureproposedmultiplebillsinits2009sessionto
addressOTCmitigationandrestorationofafunctioningairqualitycreditmechanismfornew
powerplantsintheSouthCoastAirBasin.Ofthese,onlyAB1318(V.ManuelPerez,Chapter
285,Statutesof2009)andSB827(Wright,Chapter206,Statutesof2009)passedthroughthe
LegislatureandweresignedbytheGovernor.AB1318willrequiretheARB,inconsultation
withtheCPUC,theEnergyCommission,theCaliforniaISO,andtheSWRCB,tosubmitareport
218
NaturalResourcesDefenseCouncil,Inc.,etal.vs.SouthCoastAirQualityManagementDistrict,
SuperiorCourtoftheStateofCalifornia,CountyofLosAngeles,CaseNo.BS110792.
177
totheLegislatureandGovernorevaluatingtheelectricsystemreliabilityneedsoftheSouth
CoastAirBasinandrecommendstrategiestomeetthoseneedswhileensuringcompliancewith
AB32,OTCmitigationrequirements,stateandfederalairpollutionlawsandregulations,
resourceadequacyrequirements,andrenewableandenergyefficiencyrequirements.AB1318
wouldalsoauthorizeissuanceofaircreditstospecificplantssatisfyingeligibilitycriteria.
Similarly,SB827wouldauthorizeSCAQMDtoissueneededaircreditsforalimitednumberof
specificplantsmeetingeligibilitycriteria,butthosecriteriaaredifferentthanthoseinAB1318.
ThesebillsweresignedintolawbytheGovernoronOctober11,2009,butdonotprovidea
comprehensivesolutiontothelackofaircreditsforpowerplantsintheSouthCoastAirBasin.
Planning for Once-Through Cooling Replacement Infrastructure
Thestatewillhavetomakesignificantdecisionsregardingtheplanning,procurement
authorization,andpermittingofspecificenergyinfrastructureprojectstoaccomplishthe
retrofit,repowering,orretirementofwhatamountstomorethan30percentofthestatespower
generatingcapacitythatOTCplantsrepresent.
219
Allofthe19generationplantswithOTCunits
arelocatedintheCaliforniaISOandtheLADWPcontrolareas.Ofthe16OTCplantsinthe
CaliforniaISOcontrolarea,13arelocatedintransmissionconstrainedregions.Transmission
constraintsalsoinfluencetheneedforandoptionsamongrefitting,repowering,andreplacing
thethreeOTCplantswithintheLADWPbalancingauthority.Thus,theCPUC,theCalifornia
ISO,andtheEnergyCommissionhaverecommended,ratherthanfollowafixedcompliance
schedule,thatregionswithlessneedforcomplexanalysesandmoreadvancedpossible
solutionsreduceOTCharmmorequicklythanregionswithmoreextensiveconstraintson
implementingsolutions.
TheproposalsubmittedtotheSWRCBencompassesthreebroadefforts.First,theagencies
wouldconductaseriesofstudiesexaminingtheconsequencesofretiringindividualorclusters
ofexistingOTCpowerplantsunderarangeofalternativefuturesandtransmissionsystem
configurationstoidentifygenerationandtransmissionoptionsforreplacingeachOTCfacility.
Thesefutureswouldencompassincreasedeffortstoreduceloadthroughdemandsidepolicy
initiativesandalternativewaysinwhichhighrenewablegenerationcouldbedeveloped
throughtime.TheEnergyCommissionwouldfacilitateareviewoftheLADWPpowerplants,
whichareoutsidethejurisdictionofboththeCPUCandtheCaliforniaISO.
Second,theagencieswouldreviewkeyanalyticresultstodetermineastrategythatis
compatiblewithbroadenergypolicypreferences.TheARBsAB32ClimateChangeScoping
Planincorporatesanumberofthebroadenergypolicyinitiativesbeingpursuedbytheenergy
agenciesasfarbackasthe2003EnergyActionPlan.Assessmentofalternativefuturesthatare
compatiblewiththeseelementsoftheClimateChangeScopingPlanandsystem/localreliability
requirementscanidentifyoptionsforreducingrelianceuponfossilgeneration(eithernew
219
Retrofittingorrefittingreferstotheinstallationofacoolingsystemthatcomplieswiththeproposed
SWRCBpolicy.Repoweringentailsreplacementoftheexistingboilerwithadvancedgeneration
technologyimprovingthermalefficiencyandinstallingacompliantcoolingtechnology.Retirement
may,andoftendoes,requirereplacementoftheforegonecapacitywithgenerationatanotherlocation.
178
greenfieldplantsorrepoweredexistingplants)throughthesepreferredresourcesor
transmissionsystemupgrades.Whenresultsareavailable,theywouldbeenteredintothe2010
or2012CPUCLTPPproceedingforfurtheranalysisbytheIOUsandconsiderationbythe
CPUC,withtheobjectiveofissuingprocurementguidancetoIOUstoacquireresources,andto
theCaliforniaISOannualtransmissionplanningprocesstoidentifyspecifictransmission
projects.
Finally,theCPUCwouldapprovenecessarypowerplantadditionsandtransmissionprojects.
TheEnergyCommissionwouldlicensethepowerplantprojects.Staffoftheenergyagencies
wouldmonitorprogress,periodicallyreporttotheSWRCB,andasappropriate,recommend
changes.
SomepowerplantoperatorssuggestedtheymayretrofittheirpowerplanttosatisfySWRCBs
proposeddraftpolicy.Forparticularunits,thismightmakesense,especiallyiftheinvestments
arelowerthanforrepoweringandtheexpectedlifeoftheunitmakessuchinvestmentscost
effectivetoratepayers.SinceAB32encouragesdeploymentofrenewablestotheextentfeasible,
retirementsarebeingdelayed,comparedtoearlierIEPRrecommendations,tosynchronizewith
renewabledevelopmentschedules.TheEnergyCommissionfirstarticulateditspolicyinfavor
ofretiringagingpowerplantsinthe2005IEPRandthenmodifiedittoexplicitlyencompass
repoweringinthe2007IEPR.Therefore,itisappropriatethattheEnergyCommissionmodify
thepolicyheretosupportlimitedretrofittingofunitstothosemostefficientandusefulto
integrationofrenewablesandothersystemsupportfunctions.Forthe2020timehorizonand
beyond,thestateshouldstillpursuethegoalofretiringorrepoweringtheseagingfacilities.
Emission Credits for Power Plants
Thesecondmajorissueaffectingtheelectricitysectoristhescarcityofemissionscreditsfornew
powerplants.NewgeneratingcapacitydevelopmenttoreplaceagingorOTCpowerplantsis
criticaltoachievingreducedGHGemissionsfrommoreefficientuseofnaturalgas.However,
recentcourtrulingslimitingthesupplyofairemissionscreditsintheSCAQMDpresentnew
challengesforCaliforniatoachieveitsenvironmentalgoalswhileensuringsufficientgenerating
suppliesforsystemresourceneedsandlocalareareliability.
SouthernCaliforniaairbasinshavesomeoftheworstairqualityinthenation,resultingin
stringentlocalairqualityrequirements,includingoffsettingnewsourcesofemissionswith
reductionsinemissionsfromexistingsources.Theseoffsets,oremissioncredits,areinshort
supplyintheSCAQMD,makingitdifficulttolicensenewpowerplantsorrepowerexisting
agingplantsinSouthernCalifornia.In1990,theSCAQMDestablishedaPriorityReserveof
emissioncreditssetasideforusebyentitiesservingapublicinterest,butdidnotexplicitly
includepowergenerationasaneligibleindustry.
InAugust2007,theSCAQMDamendeditsPriorityReserveRulestoallowoffsetstobe
purchasedfornewpowerplantslicensedbytheEnergyCommission.TheSCAQMD,under
Rule1309.1,limitedthesepowerplantcredits,requiringdeveloperstohaveaoneyearpower
salescontractandalicensefromtheEnergyCommissiontoconstructtheirfacilitybeforethe
SCAQMDboardwouldreleaseanycredits.Plantsbeingproposedbymunicipalutilitieswere
179
allowedonlyenoughcreditstobuildprojectstoservetheirnativeload.TheSCAQMDalso
limitedthetotalamountofnewelectricitygeneratingcapacitythatcouldaccessPriority
Reservecreditstonomorethan2,700MW.
TheSCAQMDPriorityReserveRulewaschallengedinLosAngelesCountySuperiorCourtand
inJuly2008,thecourtdecisionfoundtheairdistrictsCaliforniaEnvironmentalQualityAct
(CEQA)analysisinadequateandindicatedthatasufficientenvironmentaldocumentwould
requiresignificantnewanalysisthattheSCAQMDbelievesitcannotreasonablyprovide.Asa
consequence,theSCAQMDisunabletoissueanyoffsetsforpowerplantsorforanyfacilities
requiringapermitforemissions.TheSCAQMDisnowworkingtomodifyitsregulationsto
allowpermitsfornonpowerplantfacilities,buthasnospecificplanstodevelopnewrules
specifictopowerplants.Instead,powerplantproponentsandSCAQMDsponsoredlegislation
inthe2009sessionthatwouldoverturnthestatecourtruling.Staffisconductinganalysesto
identifytheneedforresourceadditionsintheLosAngelesBasinundervarioussetsoffuture
conditionsthatwillallowamoreanalyticallybaseddebateaboutmeanstofindthe
correspondingaircreditsneeded.InitialresultsofthiseffortwerediscussedataSeptember24
workshop.
220
Figure32showsthegeographiclocationoftheexistingOTCpowerplantsimpactedandthose
currentlyintheEnergyCommissionlicensingprocessaffectedbySCAQMDsproblemsissuing
aircreditstonewpowerplants.
IfnewgasfiredpowerplantscannotbelicensedintheLosAngelesBasinbecauseairemission
creditsfromtheSCAQMDPriorityReserveareunavailableandotherrulesfavorabletopower
plantdevelopmentaredisallowed,systemreliabilitywillrequirecontinuedandongoing
operationofaging,lessefficient,higheremissionpowerplantstomaintainplanningreserve
marginsbetween15and17percent.MostofthesearealsoOTCplants,sotheSWRCBsdraft
policyencouragingreplacementbynewinfrastructurewouldlikelybedelayed.Eventually,the
shortageofemissioncreditscouldhaveanegativeimpactonSouthernCaliforniasabilityto
meettheCaliforniaISOsummerpeakandlocalcapacityrequirementsifnonewfossilplants
canbebuiltandifdemandsidepreferredresourcescannotovercomeloadgrowthyearafter
year.LocalcapacityrequirementsaredesignedbytheCaliforniaISOtoensurethatthereis
sufficientgenerationtoprovideuninterruptedserviceduringallhoursevenifamajorpower
plantortransmissionlinefails.In2008,theLosAngelesBasinismeetingnearlyhalfofits
electricalloadwithlocalgeneratingcapacity,includingagingpowerplants.
Impacts on Power Plants Licensed by the Energy Commission
TheEnergyCommissionhaspermittingjurisdictionforallthermalpowerplantswithcapacity
of50MWorgreater.TheEnergyCommissionspermittingprocessdoesnotsubstituteforthe
requirementsofotherentities,sothedifficultiesinacquiringaircreditsintheSouthCoastAir
220
EnergyCommissionstaffpresentation,availableat:
[http://www.energy.ca.gov/2009_energypolicy/documents/index.html#092409].
180
Figure 32: Power Plants Affected by Air Credit Limitations

in South Coast Air Basin

BasinmeansthatprojectsthatwouldnormallygetapermitfromtheEnergyCommissionhave
beendelayed.ThreepowerplantslicensedbytheEnergyCommissionarelocatedintheLos
AngelesBasinloadpocketandcould,ifdeveloped,allowretirementofsomeoftheexisting
agingpowerplants.
SentinelUnits1and2totaling800MWnameplate
221
completeditsEnergyCommission
review,butdependedonPriorityReservecreditsandhadtoawaitresolutionofthisissue.
221
Nameplatereferstothemanufacturersratingforoutputofpowerplantequipment.
181
WiththepassageofAB1318,Sentinelislikelytoacquireaircreditsandcompletethe
EnergyCommissionprocess.
TheowneroftheexistingElSegundopowerplant,NRGEnergy,securedalicensefor
repoweringofUnits1and2fromtheEnergyCommissionin2005(nameplatecapacityof
existingunitsis350MW;licensewasgrantedforarepoweredfacilitywithnameplate
capacityof630MW).InJune2007,NRGpetitionedtoamenditslicensesoitcouldshift
fromanOTCtechnologyandbuilda560MWaircooledfacility.Withthechangeinfacility
size,NRGdidnothavesufficientemissionreductioncreditstomoveforwardwith
constructionofitsElSegundorepowerprojectwithanameplatecapacityof560MW.
PassageofSB827mayallowtheownersofElSegundotomakeuseofSCAQMDsRule
1304toavoidpurchasingaircreditsiftheydecidetoretireanotheroftheolderunitsatthe
facility.
WalnutCreekEnergyCenter(nameplatecapacity500MW)receivedapermitfromthe
EnergyCommissioninsummer2008usingtheSCAQMDPriorityReservecredits.The
facilityiscurrentlyonholdwithconstructiontostartinlate2009,pendingresolutionofthe
aircreditissues.WalnutCreekisnothelpedbyeitherAB1318orSB827,andacomparable
bill,SB388(Calderon),createdtoauthorizeaircreditsforit,didnotpasstheLegislaturein
2009.
OtherpowerplantscurrentlyinthelicensingprocessattheEnergyCommissioncould,if
permittedandbroughtonline,allowevenmoreagingpowerplantretirement.However,atthis
timethereisnoclearpathforwardfortheseunits.
SB827,byallowinguseofSCAQMDsRule1304exemptionforrepoweringprojects,createsan
incentiveforrepoweringinplacethatcannotbematchedbynewgreenfieldpowerplants.Itis
unclearwhethersuchrepoweringwilltakeplace.Theplaintiffsinasecondlawsuitagainst
SCAQMDspermittingpracticescontinuetoexpressconcernsaboutwhethertheaircreditsin
SCAQMDsinternalaccountsarevalid(accumulatedthroughshutdownsandotherorphan
usesneverconvertedintomarketablerenewableenergycredits).SCAQMDassertsthatU.S.
EPAsreviewofitsRule1315establishesfederalsatisfactionoveritsinternalaccount.Others
maybereadytotestthisbeliefinfederalcourt.RepoweringprojectsthatsatisfyRule1304s
exemptionrequirementswouldnotincreasecapacity,sotheymaynotbeundertheEnergy
Commissionslicensingjurisdiction.Suchplantswouldbelicensedbylocalauthorities,and
someplantshavewellorganizedoppositiongroupsthatseekconversionofthesesitesinto
otheruses.Insum,whetherSB827sreopeningofSCAQMDsRule1304forrepowering
exemptionscreatesapathwaytoassuresufficientcapacityoftherightkindandrightlocationof
powerplantsisstillverymuchindoubt.
Impacts on Specific Utilities
AnysubstantialdelaysintheconstructionofnewfossilfuelfacilitiesproposedintheLos
AngelesBasinwillimpacttheelectricitysuppliesavailabletomeetsummerpeakloads.SCEis
themajorutilityintheLosAngelesBasin;however,manymunicipalutilitiesarealsolocated
thereincluding:LADWP,BurbankWaterandPower,GlendaleWaterandPower(allinthe
LADWPcontrolarea)andAnaheim,Riverside,Pasadena,andothersmallermunicipalsinthe
182
CaliforniaISOcontrolarea.SCElikelywillbethemostaffectedbytheSCAQMDruling.The
SCAQMDrulingthreatens1,757MWofthecapacitythathadbeenexpectedtocomeonline
from2010to2013(Table8).
Table 8: SCE Capacity Impacted by SCAQMD Rule

Year Facility Capacity (MW) Cumulative (MW)
2010 Sentinel I 455
2011 El Segundo Repower Units 1&2 550 1,005
2012 Sentinel II 273 1,278
2013 Walnut Creek 479 1,757
EnergyCommissionstaffevaluatedthesupplydemandbalanceintheSouthofPath26region
(SP26).
222
TheresultingstaffpaperusedSouthernCaliforniaEdisonandotherutility
assumptionssincethe2009IEPRhadnotyetbeencompiled.Thepapercomputedtwo
alternativeretirementscenariosjuxtaposedagainstthelimitedamountofnewadditionsthat
couldbepermittedgiventheSCAQMDaircreditlimitations.Anupdatedanalysisusingstaffs
planningassumptionsandplanningreservemargincalculationsfortheSouthernCalifornia
regionoverthenextfiveyearswaspresentedattheSeptember24workshoponSCAQMDair
creditissues.
223
TheresultsusingtheCPUCprocurementauthorizationassumptionsareshown
inTable9.TheSouthernCaliforniaportionoftheCaliforniaISOcontrolareahasmorecapacity
thannecessarytosustaina15percentreservemarginthrough2011,butfallsbelowthatlevelin
2012andgetsprogressivelyworse.Thisincreasesvulnerabilitytosituationslikeunexpected
outages,whichthefull15percentplanningreservemarginisdesignedtoaddress.Fortunately,
thisassessmentisnolongerrealisticsincetheSWRCB,inconsultationwiththeenergyagencies,
hasdelayedthecompliancedatesforOTCpowerplantsintheLosAngelesBasintoallowtime
forreplacementinfrastructuretobedevelopedandbroughtonline.
ByrevisingtheOTCretirementassumptionstomatchthescheduleproposedbytheenergy
agenciesandacceptedbySWRCBstaffinitsdraftOTCpolicy,thedeficitsrelativetothe
designedplanningmarginareeliminated,andtherearecomfortablesurplusesthroughoutthe
fiveyearperiod.Table10showstheseresults.Thenegativeimpactsofafastretirement
schedule,inlightofaircreditlimitationsonnewpowerplantdevelopment,whichtheenergy
agencieswereabletogetSWRCBtoaccommodate,allowstimefortheaircreditissuestobe
222
CaliforniaEnergyCommission,PotentialImpactsoftheSouthCoastAirQualityManagementDistrictAir
CreditLimitationsandOnceThroughCoolingMitigationonSouthernCaliforniasElectricitySystem,February
2009,CEC2002009002SD,availableat:[http://www.energy.ca.gov/2009publications/CEC2002009
002/CEC2002009002SD.PDF].
223
AfurtherupdateusingthefinaldemandforecastsadoptedbytheEnergyCommissioninthisIEPR
proceedinghasbeenmadetotheresultsprovidedinthischapter,butthedemandforecastchangesare
sufficientlysmallthatthereisnomaterialchangeintheconclusionsreached.
183
resolved.However,oncethefullOTCretirementsoccurinlateryears,the15percentplanning
reservemargincannotbesatisfiedunlessadditionalresourcesarebroughtonline.
Table 9: Staff Planning Assumptions and Reserve Margin Results
for Southern California Using High Retirements
Supply/Demand Forecast 2010 2011 2012 2013 2014
Peak Demand 27,995 28,363 28,800 29,256 29,620
Existing Generation 22,927 22,927 22,927 22,927 22,927
Net Imports 10,100 10,100 10,100 10,100 10,100
DR & Interruptible 1,491 1,512 1,534 1,547 1,551
New Thermal 995 1,707 1,992 1,992 1,992
New Renewable 162 251 533 965 1,157
Retirements (354) (354) (354) (354) (708)
Total Generation 35,321 36,142 36,731 37,177 37,020
Reserve Margin w/o OTC Retirements 26% 27% 28% 27% 25%
Surplus over 15% 3,127 3,525 3,611 3,532 2,957
Add'l Retirements (CPUC Decision) (1,850) (3,050) (4,500) (5,350) (5,350)
Reserve Margin w OTC Retirements 20% 17% 12% 9% 7%
Surplus over 15% 1,277 475 (889) (1,818) (2,393)
Table 10: Staff Planning Assumptions and Reserve Margin Results

for Southern California Using SWRCB OTC Retirements
Supply/Demand Element 2010 2011 2012 2013 2014
Peak Demand
27,995 28,363 28,800 29,256 29,620
Existing Generation 22,927 22,927 22,927 22,927 22,927
Net Imports 10,100 10,100 10,100 10,100 10,100
DR & Interruptible 1,491 1,512 1,534 1,547 1,551
New Thermal 995 1,707 1,992 1,992 1,992
New Renewable 162 251 533 965 1,157
Retirements (354) (354) (354) (354) (708)
Total Generation 35,321 36,142 36,731 37,177 37,020
Reserve Margin w/o OTC Retirements 26% 27% 28% 27% 25%
Surplus over 15% 3,127 3,525 3,611 3,532 2,957
Add'l Retirements (SWRCB OTC) 0 0 0 0 0
Reserve Margin w OTC Retirements 26% 27% 28% 27% 25%
Surplus over 15% 3127 3525 3611 3532 2957
184
TheSCAQMDcourtrulinghashadsimilarimpactsonpubliclyownedutilitiesintheSouthern
CaliforniaportionoftheCaliforniaISOcontrolarea.LADWPhasthreepowerplantstotaling
over2,000MWofcapacitythatuseOTCandapparentlyintendstorepowermostoftheunitsin
theseplantsinordertocomplywithSWRCBdraftOTCpolicy.Insecuringairqualitypermits,
LADWPhasfacedthesamechallengesasotherentitieswithintheSCAQMDsjurisdiction,
sinceitsabilitytouseSCAQMDsRule1304exemptionfromprovidingaircreditsforits
repowershasbeenblockedbythecourtruling.SB827wouldapparentlyrestorerepowering
exemptionsviaRule1304,soLADWPsstrategyofOTCcompliancethroughrepoweringmay
nolongerbeblockedbyaircreditlimitations.Thisanalysisshowsthestronginterdependencies
ofthelikelyconsequencesoftheSWRCBsOTCmitigationpolicieswithaircreditavailabilityto
supportnewpowerplantdevelopment.IntheLosAngelesBasinthereisaclearconflict.This
conflicthasbeenshiftedoutbeyond2014theneartermperiodrequiringimmediateaction
towardtheendofthe2010decade.
The2009legislativesolutionshavenotaddressedthefullissue,buthavesanctioneduseofair
creditsatalimitednumberofspecificpowerplantsalreadywellintothelicensingprocess.The
workshopconductedSeptember24revealedstronginterestinacomprehensivesolutiontothis
issue,ratherthanaseriesofpiecemealattemptstolicensespecificpowerplants.Staffsanalytic
projectisontherighttrackandshouldbecontinuedinconjunctionwithinputsfromother
stakeholders.ThereliabilitystudyrequiredbyAB1318canbuilduponstaffsinitialworkand
perhapsbecomethebasisforbroaderrecognitionofthescaleoftheproblem.
224
Eventually
legislationisprobablyrequired,butitshouldprovideforasystematic,evenhandedmethodfor
determiningwhichpowerplantsareabletoobtainscarceaircredits,
225
whiletheenvironmentis
protectedfromexcessivecriteriapollutantemissions.ThatothersourcesintheLosAngelesair
shedhavetoberegulatedmoretightlytoallowforneededpowerplantcapacitymaybethe
pricethisregionneedstopaytosecurereliableelectricityservices.

Preferred Resource Additions
Californiahaslongpursuedapathtousemoreenvironmentallysensitivetechnologiesto
satisfyconsumerenergyneeds.Evenduringtheenthusiasmformarketsinthemidandlate
1990s,publicgoodschargeswereestablishedtoensurethatfundingforenergyefficiencyand
renewableswouldcontinuetoachievegoalsforthesepreferredresources.TheEnergyAction
Planprocesssignaledinteragencysupportforthesetechnologies.Themorerecentmotivation
tomitigateclimatechangeaccentuatesthesepastefforts.
224
AB1318(V.ManuelPerez,Chapter285,Statutesof2009),requirestheAirResourcesBoard,in
consultationwiththeEnergyCommission,CPUC,CaliforniaIndependentSystemOperator,andState
WaterResourcesControlBoard,tocompleteareliabilitystudyoftheSouthCoastAirBasinbyJuly2010.
225
Whenaircreditsareprocuredfrommarketsources,oraspecialprogramopentoallcategoriesof
powerplant,thenallpowerplantspayforthemonthebasisoftheprospectivemissionsfromthefacility.
Exemptionsforrepoweringandlegislativegiftsofcreditstospecificpowerplantstiltawayfromalevel
playingfield,withthepotentialforunintendedconsequencesandsuboptimaloutcomes.
185
BecausetheelectricitysectorrepresentsasignificantsourceofGHGemissions,itisviewedasa
sourceformajoremissionreductionstosatisfythestatesGHGemissionreductiongoals.
Californiascontinuingemphasisonenergyefficiencyandshiftingthemixofgenerating
resourcesfromfossilplantstorenewableresourceswillprovidethebulkofthereductionsfrom
theelectricitysector.Additionalreductionswillcomefrommovingtomoreefficientfossil
sourceslikecombinedheatandpower(CHP)andstateoftheartnaturalgasplants.
Uncommitted Energy Efficiency Goals
SincetheoriginalEnergyActionPlan,energyefficiencyhasbeenassignedthehighestpriority
amongallpreferredresources.PriorIEPRsandnowtheARBClimateChangeScopingPlanhold
outhighaspirationsforadditionalenergyefficiencyimpactsbeyondthoseincludedinthe
baselinedemandforecast.The2007IEPRcalledforachievingallcosteffectiveenergy
efficiency.Inlate2008,theARBadoptedhighgoalsforadditionalenergyefficiencyaspartof
itsClimateChangeScopingPlan.
226
The2008IEPRUpdatedescribedthereviewoftheapproachofsegregatingbetweencommitted
anduncommittedenergyefficiencyandonlyincludingwhattheEnergyCommissioncalls
committedimpactsinthebaselinedemandforecast.TheEnergyCommissiondidthistocall
attentiontotheneedfornumerousactionsbeforebroad,uncommittedgoalscanbeachieved
forexample,programshavetobedesignedandfunded,utilitiesandotherprogram
administratorshavetosuccessfullyimplementprograms,endusershavetoparticipateeither
voluntarilythroughutilityprogramsorinvoluntarilythroughmandatedstandards,
technologiesmustmeetorexceedthetechnologicaldevelopmentratesassumedinbroad
projections,andthegeneralscopeandpaceofeconomicdevelopmenthastocontinueas
assumedwhenmakingestimatesofprogrampotentialandparticipation.Manythingscanand
dodeviatefromtheexpectedwhenhundredsofthousands,ormillions,ofendusecustomers
havetoparticipateinordertogeneratethesavingsestimatedinpotentialstudiesandsavings
goaldecisions.
Asnotedlaterinthischapter,thedegreetowhichthehighgoalsestablishedforuncommitted
energyefficiencyareachievedinteractsstronglywiththegoalsforrenewables.Simplysaid,the
amountofrenewableenergyrequiredundera33percentby2020RenewablesPortfolio
Standard(RPS)formulaisnearly50percenthigherwithouttheimpactsofadditionalefficiency.
Assumingrenewablesarepursuedinareasonablylogicalmannerofeasiest,cheapestfirst,the
successofenergyefficiencyaspirationsdetermineswhetherthestatehastoconstructthe
difficultandmoreexpensivesubsetofrenewablepotential.Thus,thesuccessofachievingthe
33percentrenewablesgoalby2020maydependonwhetherenergyefficiencygoalsare
achieved.
Chapter2describedtheeffortsthatEnergyCommissionstaffispursuingtodevelopestimates
oftheincrementalimpactsofthreescenariosofuncommittedenergyefficiencyprogram
226
CaliforniaAirResourcesBoard,ClimateChangeScopingPlan,December2008,availableat:
[http://www.arb.ca.gov/cc/scopingplan/document/scopingplandocument.htm].
186
initiativesderivedfromCPUCD.0807047.TheCPUCwishestousetheseestimatesinits
forthcomingLTPPproceedingasadjustmentstothebaselinedemandforecast.TheCPUC
intendstorequiretheIOUstoevaluatethealternativefuturesimpliedbythesethree
manageddemandforecasts(baselinelessincremental,uncommittedimpacts)when
conductingitsportfolioanalyses.Examiningthreealternativefuturesishighlycommendable,
butthesethreedonotreflectthefullrangeofuncertaintyabouttheincrementalimpactsof
uncommittedenergyefficiency.ThethreescenariosestablishedbytheCPUCreflectdifferences
inthebreadthofprogramsthatareimaginedtounfoldthroughtimeviafundingforutility
programs,numberandstrengthofratchetsinbuildingstandards,federalappliancemandates,
andpursuitofnetzerobuildingdesigns.Therearenumerousothersourcesofuncertainty
aboutincrementalimpactsthatthestaffsanalyticeffortisnotexamining.Amongtheseare:
Willingnessofcustomerstoparticipateinvoluntaryprograms.
Theextenttowhichhighefficiencybuildings,appliances,andproductionprocesses
encouragehighlevelsofusethustakingbacksomeportionofengineeringestimatesof
savings.
Measuresoftechnologicalperformancethroughtime.
AstheEnergyCommissionstaffdevelopsacapabilitytoprojectincrementalimpactsofaless
highlystructuredsetofenergyefficiencyproposals,theseotherelementsofuncertaintyshould
beaddressedinthemethodandassumptionsusedinmakingtheprojections.
OnSeptember24,2009,theCPUCunanimouslyadopteda$3.1billion,threeyearStrategicPlan
forEnergyEfficiency,tobeadministeredbythestatesIOUs.Implementingtheplanwillavoid
theneedforthreeadditional500MWpowerplants.Itwillalsocreatebetween15,000and
18,000newjobs,launchthenationslargesthomeretrofitprogram,andprovide$175millionto
launchCaliforniasBigBoldEnergyEfficiencyStrategiesforzeronetenergyhomesand
commercialbuildings.TheplanwasdedicatedtoEnergyCommissionerArthurRosenfeldin
recognitionofhiscontributionstothefieldofenergyefficiency.During2010,thetriennialAB
2021(Levine,Chapter734,Statutesof2006)processofestablishinglongtermenergyefficiency
goalsforeachutilitywillberevisited.ThiseffortprovidesanotheropportunityfortheEnergy
CommissionandCPUCtoworkcollaborativelyinsettinggoalsthatcanreduceforecastloadsin
waysthatareachievableandcosteffective.
TheEnergyCommissioncollaborateswithCaliforniaspubliclyownedutilitiestopromotecost
effectiveenergyefficiencyactivities.AsrequiredbyAB2021,eachyearthepubliclyowned
utilitiesreporttheirefficiencyexpendituresandenergysavingstotheEnergyCommission,
whichevaluatesprogress.Inaddition,everythreeyears,publiclyownedutilitiesidentifyall
potentiallyachievablecosteffectiveelectricityenergysavingsandestablishannualtargetsfor
energyefficiencysavingsanddemandreductionforthenext10yearperiod.Coordinatingwith
theCPUCfortheIOUsandthepubliclyownedutilities,theEnergyCommissiondevelops
statewideenergyefficiencypotentialestimatesandadoptstargetsforCaliforniasIOUsand
publiclyownedutilities.
187
Renewables Portfolio Standard Goals

AmajorissueinimplementingclimatechangepolicyishowtomeettheRPSgoalof33percent
renewableenergyby2020,giventhechallengesofintegratingsuchlargeamountsofrenewable
energyintothesystem.
227
Whilesomerenewableresourceslikegeothermalandbiomasscan
operatemuchlikeconventionalbaseloadpowerplants,intermittentandremotelylocated
renewablegenerationpresentsnewchallengesformatchingthepowerproducedwith
consumerdemands.Intermittencyofproductionmeansthatcapacityisderatedfromnameplate
valuesaspartoftheresourceadequacyprocess,anditalsomeansthatdispatchableresources
arerequiredtorampupordowntomatchthecharacteristicdailypatternsandsuddenchanges
inelectricityproductionfromwindandsolarresources.Integratinghigherlevelsofrenewables
intotheelectricitysystemmustalsobeintegratedwithotherstatepoliciestoreducethe
negativeimpactsofOTC,reducewastethroughenergyefficiencyandcombinedheatand
power,modernizethetransmissionanddistributiongrids,anduseelectricityasanalternative
transportationfuel.
AprimaryquestionistheamountofaddedrenewableenergyneededtomeettheRPSgoal,
referredtoastherenewablenetshort.ThisisanissuebecausetheexistingRPSlawfocuses
onrenewablesasapercentageofretailsales.Anythingthatreducesretailsalesenergy
efficiencyprogramsavings,rooftopsolarPV,andothercustomersideofthemeterdistributed
generationreducestherenewablerequirement.AsshowninFigure33,assumptionsaboutthe
resourcemixoffuturerenewableadditionsvarieswidely,andnostudieshaveexamineda
scenariothatwouldmaximizetheuseofbaseloadbiomassandgeothermalresourcesrather
thanvariablewindandsolartechnologies.
228
Recentestimatesofthe2020renewableenergynetshortvaryfrom45,000gigawatthours
(GWhs)toalmost75,000GWhs,dependingonforecastedelectricitydemandalongwiththe
amountofexpectedenergyefficiency,CHP,rooftopsolar,andexistingrenewablesincludedin
theanalysis.SincetheRPStargetisbasedonretailsalesofelectricity,estimatesoftherenewable
netshortwillchangeovertimeasforecastsofelectricitydemandchange.Similarly,meetingthe
statestargetsforenergyefficiency,CHP,androoftopsolarwillaffecttheamountofrenewable
energyultimatelyneeded.
Neededadditionswillalsodependonhowmuchrenewablepowerisalreadyflowingintothe
system.Estimatesofexistingrenewablegenerationvaryfrom27,000to37,000GWhs,
dependingonthevintageoftheestimate,theamountofoutofstaterenewablegeneration
attributedtopubliclyownedutilities,andtheamountofunclaimedrenewables(renewable
227
Thechallengesofaccomplishingthisintegrationareverysimilarwhetherthedetailsoftheprogram
aredefinedbystatuteorbyregulation.
228
TheEnergyCommissionstudyandpresentationsoftheICFInternationalstudyareavailableat:
[http://www.energy.ca.gov/2009_energypolicy/documents/index.html#062909];theCaliforniaPublic
UtilitiesCommissionstudy,underlyingcalculator,andsupportingwhitepapersareavailableat:
[http://www.cpuc.ca.gov/PUC/energy/Renewables/hot/33implementation.htm].
188
generationnotclaimedaseligiblefortheRPS)thatisincludedintheestimate.
229
Thewide
variationbetweenestimatesillustratestheneedforcommonassumptionsandcounting
conventionssothatthepubliccanbeconfidentinboththetargetsandreportedprogress.
Figure 33: Comparison of Recent Scenarios for Incremental and Existing
Renewable Energy (33 percent by 2020)

ImplementingtheOTCmitigationpoliciesdiscussedearlierinthechapterwillaffectthe
integrationofrenewablesbecauseitisunclearwhatcharacteristicsreplacementpowerwillhave
andthereforehowitcouldsupportrenewableintegration.OTCunitsmayneedtobereplaced
withinthesamelocalcapacityarea,elsewhereonthegrid,ornotatall.Replacementplants
couldbecombustionturbineswithrelativelyfewhoursofoperationornew,efficientcombined
cycleplantsthatwouldoperatemorehoursperyearthantheplantstheyreplace.Inaddition,
thestrictregulationofcriteriaairpollutantsintheSouthCoastAirBasinwillrestrictthe
229
ThestudiesdiscussedattheJune29,2009,IEPRworkshopusedthe2007NetSystemPowerReportasthe
basisfortheirestimatesofexistingrenewables,butvariedinthewaythedatafromthereportwasused.
TheCaliforniaPublicUtilitiesCommissionhadthelowestestimateofexistingRPSrenewable;theRETI
Phase1Breporthadthehighestestimate.
189
amountofinbasinreplacementpower,increasingtheamountofgenerationneededfrom
outsidethearea.TheamountofenergyimportedtomeetloadintheSouthCoastAirBasin
couldbereducedwithincreasedamountsofwholesaledistributionlevelrenewables,although
someamountofgasfiredgenerationorothertypesofspinningreservesmaystillbeneeded
toallowtransmissionlinestocontinuetobringinelectricityfromoutsidethearea.
ExpiringcoalcontractswillalsoaffectCaliforniassystemmixandtheoperationalattributes
replacementplantswillneed.Coalcontributedabout56,000GWhsofenergyin2008,withmore
than11,000GWhsofcoalfiredgenerationprovidedthroughcontractsthatwillexpireby
2020.
230
Reservemarginsarealsoanissue.Toensuresystemreliability,utilitiesarerequiredtohavea
minimumplanningreservemarginof15to17percent.Reservemarginscoveruncertaintiesin
loadforecasting,forcedandplannedoutages,largestsinglecontingenciesandotheroperational
problems.Plannerswantenoughreservesonhandtohandlecontingencies,butdonotwantso
muchextracapacitythatratepayersenduppayingforunusedgeneratingunitsortransmission
lines.Becauseresourceslikewindandsolarmayproducealargeamountofenergyattimes
otherthansystempeak,conventionalresources,technologyimprovementinpowerplants,or
storagemaybeneededtoprovidethenecessaryreserves.
Role of Natural Gas Plants
Indesigningafuturelowcarbonelectricitysystem,questionshavebeenraisedregardingwhy
newnaturalgasunitsareneeded,iftheyareneededinspecificlocales,iftheyareahelpora
hindrancetothedevelopmentofotherpreferredresources,andgenerallywhatrolenaturalgas
willplayinthetransformedelectricityresourcemix.TheEnergyCommissionchoseto
investigatetheroleofnaturalgas,bothinitsfunctionasthesitingagencyforthermalunitsover
50MWsandaspartofitsintegratedresourceplanninginfrastructureforgeneration,
transmission,storage,andpipelines.Naturalgasgenerationhasmanyfeaturesthat
complementratherthancompetewithvariableresourcessuchaswindandsolarandis
thereforepartofthesuiteofoptionstohelpcreatealowcarbonsystem.
Whattypeofnaturalgasfacilitiesmightbeaddedandwhentheyareneedediscomplicated.If
highlevelsofenergyefficiencyareachieved,lessoverallenergywillbeneeded,though
capacityrequirementsmaystillbehefty.Ifcombinedheatandpowerunitsarebuiltinsteadof
centralstationgasgeneration,differentsystemattributeswillbeaffected.Finally,policiesother
thansupportingincrementalrenewablesareaffectingthetypeandtimingofnewnaturalgas
firedunits.TheseincludereducinguseofOTCatexistingplants,meetinglocalareacapacity
requirements,andabidingbythecriteriapollutantlimitsintheSCAQMD.
230
Totalutilityoutofstatecoalgenerationcomesfromthe2007selfreportedclaimsfromtheutilitiesfor
thePowerSourceDisclosureProgram.LosAngelesDepartmentofWaterandPowerclaimedaround
10,000GWhsofimportedcoalgenerationfromtheNavajoplant,andCaliforniaDepartmentofWater
Resourcescontractsaround1,300GWhsofcoalgenerationfromReidGardner.
190
Aspartofthemultiagencyeffortstounderstandtheimpactsofintegratinghigherlevelsof
renewablesintothegrid,EnergyCommissionstaffanalyzedthepotentialimpactsonnatural
gasuseandgeneration.
231
ThestudyusedareferencecasethatdidnotincludetheARBClimate
ChangeScopingPlanpoliciesandonlyassumedthatthe20percentRPSgoalwasmetby2012
statewide.StaffdevelopedtwobookendcasesthatincludedtheClimateChangeScopingPlan
policiesandmeetingthe33percentRPStargetby2020.Thetwobookendcasesincludedahigh
solarandahighwindcase.IncludingthedemandreducingpoliciesfromtheClimateChange
ScopingPlanandreducingtheamountofincrementalrenewablesrequiredtoreach33percentof
retailsalesaddedonly45,000GWhsofincrementalrenewablescomparedtothe75,000GWhs
addedinstudiesthatdidnotincludetheClimateChangeScopingPlanmeasures.
Thestudyfoundthatthepotentialimpactsofaddinglargeamountsofintermittentrenewables
onnaturalgasfiredgenerationwereaffectedbytwoprogramsthathadsignificantdirect
impactsonnaturalgasuseandthetypeofplantstobebuilt.TheClimateChangeScopingPlans
energysavingstargetstranslatedintoanincremental4,700MWofCHPinthestaffsmodel.By
2020,CHPconsumed20percentofallCaliforniasnaturalgasusedforpowergeneration.This
amountofCHPreducedelectricitysalestoendusecustomersbutdidnotcreateaproportional
reductioninnaturalgasuse.ItalsoaddedalargeamountofbaseloadgenerationtoSouthern
California,where60percentofpotentialhostsitesforlargeCHParelocated.
OTCpoliciesalsoaffectedthepotentialimpactsofintermittentrenewablesinthemodelbecause
muchofthegenerationneedingretrofitorreplacementserveslocalfunctionsthatcontinuetobe
supportedbygenerationlocatedinlocalreliabilityareas.Ofthe15,069MWofexistingOTC
units,964MWwereretained,1,450MWhaverecentlybeenrepowered,and7,758MWwere
replacedwithnew,efficientunits.By2020,dependingonthecase,between11and23percentof
naturalgasfiredgenerationinCaliforniaisfrompowerplantsassociatedwiththeOTCissue.
OnceCHPtargetsandOTCreplacementsweremade,onlyafewnewnaturalgasplantshadto
beaddedtomeetlocalcapacityandenergyneeds.ThosewereintheSacramentoMunicipal
UtilityDistrict,TurlockIrrigationDistrict,andImperialValleycontrolareas,whichhaveno
OTCandlimitednumbersoflargehostindustrialorcommercialfacilitiesfornewCHP.
Theamountofnaturalgasunitsaddeddidnotchangebetweenthebasecaseandthetwo
bookendcases.ThissuggeststhattheCHPadditionsandthoseusedforOTCpoliciesprovided
enoughgasflexibilitysothatmoreunitswerenotneededeveninthemoreintermittentwind
cases.ButthecapacityfactorsforgenericadditionsandOTCreplacementcombinedcycles,
whichstartoutatnormalbaseloadlevels,dropmuchlowerby2020inthetwobookendcases,
makingthelongruncosteffectivenessofthesecombinedcyclesquestionable.Thissuggests
thatthesamplecompliancepathusedinthisstudywasnotoptimalifthelargeamountofCHP
baseloadisadded.BaseloadenergyfrommusttakeCHPresourcesreducestheneedfor
energyfromcombinedcyclemerchantplants,thusshiftingthemintoaloadfollowingpattern
231
CaliforniaEnergyCommission,ImpactofAssemblyBill32ScopingPlanElectricityResourceGoalsonNew
NaturalGasFiredGeneration,June2009,CEC2002009011,availableat:
191
ofoperations,whichmaynotjustifytheincrementalcostofcombinedcycleversussimplecycle
combustionturbines.Thus,akeyfindingofthestudyisthatnoneofthesepoliciesshouldbe
assessedinisolation.Totesttheseconclusions,additionalmodelrunscouldbedonethatlower
theamountofmusttakeCHPandswitchsomeoftheOTCcombinedcyclestocombustion
turbines.
232
Forelectricitygeneration,theWesternElectricityCoordinatingCouncil(WECC)systemwide
amountofnaturalgasdiddecreaseby15percentinbothofthebookendcases.However,the
reductionswerenotdistributedevenly,withatleast70percentofthegasreductionsoccurring
outofstate.Instategasfiredgenerationdecreasedby10percentinthehighwindcaseand13
percentinthehighsolarcase.Incontrast,outofstategasfiredgenerationdropped21and20
percent,respectively.Thissuggeststhatoutofstatenaturalgasisthemarginalresourceand
thatinstategasisusedforlocalreliabilityorancillaryservices.
Thestudyalsofoundthataresourcemixwithahighproportionofwindrequiredmoreinstate
naturalgasgenerationthanthehighsolarcase.Inaddition,moreimpactswereseenin
SouthernCaliforniathaninNorthernCalifornia.Whilewindisdistributedacrossthestate,
solarresourcesarealmostcompletelyconcentratedinSouthernCalifornia.OTCunitsand
potentialCHPsitesarealsoconcentratedinthesouthernpartofthestate.Thisindicatesthat
theremaybemoresystemimpactsandpotentialsystemstressorsinthesoutherntransmission
grid.
Whilegasusedforservingretailloaddropped,totalgasuseincreased.AsTable11shows,
between2012and2020,totalnaturalgasconsumptionroseslightlyinallcases.Theincreasesin
thehighwindandhighsolarcasesweremoremodest,butstillincreasedaslargeamountsof
CHPfueledbynaturalgaswereaddedtothesystem.Thoseincreaseswerelessinthehighsolar
casethaninthehighwindcasewhencomparedtothereferencecase.
Table 11: California Use of Natural Gas in Power Plants
in Billion Cubic Feet Per Day (Bcf/d)
2012 2016 2020

2020 Change
From Case 1
Case 1 Reference Case RPS 2.36 2.57 2.88

Case 2 High Solar 2.34 2.45 2.52 -12%
Case 3 High Wind 2.34 2.48 2.60 -10%
Source: Energy Commission, Electricity Analysis Office
IncontrasttotheEnergyCommissionstaffstudy,arecentstudybyICFsuggestedthat33
percentrenewablescouldleadtoanincreaseof3,000MWofgasfiredcapacitybetween2009
232
SubsequenttotheJune29,2009,IEPRworkshop,technicalstaffoftheagenciesparticipatinginthe
CaliforniaIndependentSystemOperator33percentrenewableintegrationstudydevelopedandagreed
toassessacombinationofrenewabledevelopmentanddemandsidepolicyinitiativestobetter
understandtheinteractionsbetweenthesepolicies.
192
and2020,butanetdecreaseof11,000GWhsofinstategasfiredgeneration.Thedifferentresult
inthetwostudieswastheresultofdifferentmodelingassumptions;forexample,theEnergy
Commissionstudyincludedlocalreserveandareareliabilityrequirements,includingpublicly
ownedutilityreserverequirementsfornewgasfiredcapacityneededtomodernizetheOTC
fleet.Inaddition,theEnergyCommissionstudyincluded32,000GWhsofgasfiredCHP,
consistentwiththetargetintheARBsClimateChangeScopingPlan,whiletheICFstudydidnot
addanyCHP.Finally,ICFassumedthattotalnaturalgasuseintheWECCwouldriseoverthe
forecastperiodandthatCaliforniawouldimportmorepowergeneratedusingnaturalgas,but
thattheincreaseintotalinstateusewouldexceedanyincreaseinimports.
TheEnergyCommissionsstudyresultsindicatethatatleastthreeareasdeservefurther
researchbecauseoftheaffectofstudyassumptionsonthetypeofproxygenerationneededto
firmandbackupintermittentrenewables.First,alternativelevelsofCHPshouldbetested,
sincetheadditionofbaseloadpowerinstateandinSouthernCaliforniamaybedifficultto
achievewithexistingemissioncreditproblemsandthelackofamechanismtomakeithappen.
Second,alternativeassumptionsaboutcompliancewithOTCmitigationrequirementsshould
betestedbecausetheinteractionsofalltheClimateChangeScopingPlanprogramsleadto
unrealisticcapacityfactorsinthereplacementofOTCcombinedcyclesby2020.
Finally,thepossibilityofovergeneration,aconditionwhenmoregenerationisprovidedthan
thereisavailableload,willrequireadditionalanalysis.IntheJune29,2009,IEPRCommittee
workshoponrenewableintegratingissues,SCEreportedthataNexantstudysuggestsa
possibleovergenerationprobleminAprilandMayasthestatemovesto2020ifthereishigh
solarincidenceinthedesert,highgenerationofwind,andtheneedtospillwaterstoredin
damstomakeroomforsnowmelt.Inaddition,partiesattheJuly23,2009IEPRworkshopon
CHPissuesnotedtheriskofovergenerationwhenlargeamountsofbothrenewablesandCHP
areaddedtothesystemmix.
Role of Energy Storage
Totheextentthatnaturalgasremainsalowcostfuel,gasfiredgenerationcanhelpthe
electricitysystemabsorbthecostsoftransitioningtohigherlevelsofrenewableenergy.
However,lookingforward,someofthefirmingservicesprovidedbygasfiredgenerationwill
needtocomefromexistingandemergingenergystoragetechnologiesthatallowgenerators
andtransmissionoperatorstofillthegapbetweenthetimeofgeneration(offpeak)andthe
timeofneed(onpeak)forintermittentrenewableenergy.Energystoragesystemscanrespond
quicklyinlessthanasecondtotheneedsoftheelectricgridsystemwhencomparedto
conventionalgasfiredgeneration,whichtakesminutestotensofminutes,andpotentially
reducetheoverallamountofenergyneededtobalancethesystemneeds.Thefastresponseof
energystoragealsosuitsthevariabilityofrenewableenergysystemssuchaswind,andthis
combinationcanallowgridoperatorstouseincreasedlevelsofrenewableenergyandstill
maintaindesiredlevelsofreliabilityandcontrol.
Examplesofenergystoragetechnologiescommerciallyavailableandunderdevelopment
includeadvancedtechnologybatteries,flywheels,compressedairenergystorage,pumped
193
hydroelectricenergystorage,capacitors,andothers.Thesetechnologiescanprovidevalueat
eachlevelinCaliforniaselectricgridgeneration,transmissionanddistribution,andenduse
withstoragetechnologiesvaryingintypeandsizedependingonthelevelofserviceneeded.
Generationlevelenergystoragefocusesontheancillaryservicesmarket
233
andrenewable
integration,withgridfrequencyregulationbecominganareaofinterestofsubstantial
technologicaladvancementsoverthelastfewyears.Storageatthetransmissionand
distributionlevelfocusesonloadshifting,transmissioncongestionrelief,reliability,andcapital
deferral.Forendusers,storageatcommercialandindustrialfacilitiescanprovidepeakshaving,
electricitybackup,andincreasedreliability.
Energystoragecontinuestobeoneofthemorepromisingapplicationareastomakerenewable
generationavailablewhenneeded.Energystoragetechnologieswillallowbettermatchingof
renewablegenerationwithelectricityneedsaswellasaddressthesevererampingrates
observedwithwindandPV.Theuseofenergystoragetechnologiescanalsoreducethenumber
andamountofnaturalgasfiredpowerplantsthatwouldotherwisebeneededtoprovidethe
firmingcharacteristicsthesystemneedstooperatereliably.Energystoragesystemscanrespond
rapidlytotheneedsoftheelectricgrid,andEnergyCommissionresearchindicatesthatsmaller
amountsofenergystoragecansmoothlyandeffectivelyintegraterenewableenergywhen
comparedtotheamountofnaturalgasfiredpowerplantsrequiredtomeetthesameresponse
times.Californiashouldseizethisopportunityandencouragedeveloperstoinstallenergy
storagetosupportcommercialscalesolarandwindfarmsandreducetheneedfornewnatural
gasfiredplantsasanenergyfirmingsource.
Californiacanusestoragetosupportrenewablesinseveralapplications.Storagecanprovide
theancillaryservicesneededforintegratinglargeamountsofrenewablesintothesystemthat
wouldotherwisebeprovidedbyconventionalgeneratingresources.Also,thestatecanuse
gridconnectedutilityscaleenergystoragetoavoidcuttingbackonremotewindfarm
productioninresponsetotransmissionlimits.Anotherapplicationistouselargescaleenergy
storagetoshiftrenewableproductiontotimesofhighervalueanddemand,whichcanhelp
addressovergenerationbystoringexcessrenewableenergyandsendingitbacktothegrid
whenneeded.Finally,fastresponsestoragecanimproveelectricitysystemstabilityandreduce
stabilityandfrequencyresponseissuesthatmayoccurwithhighpenetrationsofrenewables.
ResearchcompletedbytheEnergyCommissionindicatestheseutilityscaleenergystorage
systemscanprovidethegridsystemavarietyofbenefits.Theenergystoragesystemscan
respondrapidlytogridsystemreliabilityissuesandimprovetheoveralloperationofthegrid.
Theycanalsoimprovethedispatchabilityandavailabilityofrenewablegenerationsystemsby
respondingtotheintermittentnatureofwindandsolarrenewablesystems.Additionally,
233
Ancillaryservicessupportthetransmissionofelectricityfromitsgenerationsitetothecustomer.
Servicescouldincludeloadregulation,spinningreserve,nonspinningreserve,replacementreserveand
voltagesupport.
194
energystoragesystemscanprovidethegridoperatorsancillaryservicessuchasfrequency
responseandspinningreserve.Gridoperatorsneedamixtureofmanytypesofgeneration,
demandmanagement,andenergystoragecapabilitiestoeffectivelymanagetheutilitygrid.
Whenproperlyintegrated,energystorageandautomateddemandresponsecanoffercritical
capabilitiescurrentlyprovidedbyconventionalnaturalgasgeneration.
Energystorageistypicallymeasuredasacombinationoftimeincrementsandcapacity(inkW
orMW)andcanrangefromafewminutesuptomanyhours.Batteriesandflywheelsystems
areexamplesofshortdurationstoragethatcancompensatewhenpassingcloudsblockthesun
andcausegenerationtodropsubstantiallyinlessthanaminuteandjumpbacktofull
generationafewminuteslater.
234
TheElectricPowerResearchInstitutereportsthatsodium
sulfurbatteriesandlithiumionbatteriescanprovidefrequencyregulationtomitigatethese
kindsoffluctuationsinPVgeneration.
235
Inaddition,theEnergyCommissionsPublicInterest
EnergyResearch(PIER)programhasdemonstratedthatshorttermenergystoragesystems
suchasflywheeltechnologycanprovidethiscapability.
TheU.S.DepartmentofEnergy(DOE)recentlyprovidedAmericanRecoveryand
ReinvestmentAct(ARRA)loanguaranteestoaPIERfrequencydemonstrationproject
company,permittingittoconstructa20MWfacility.Otherenergystorageprojectshavebeen
proposedtoDOEthat,ifawardedARRAfunding,couldresultintheconstructionofseveral
majorutilityscaleenergystorageprojectsinCaliforniaoverthenextfewyears.
Forlongerdurationstorageneeds,pumpedhydropoweruseslowcostoffpeakenergytopump
waterfromlowertohigherelevationreservoirs,andthewateristhenreleasedduringhigher
costpeaktimestogenerateelectricity.However,mostoftheexistingwaterinfrastructurethat
couldbeusedforthispurposemustcompetewithirrigation,floodcontrol,instreamflow
requirements,andotherdemandsplacedonthestateswatersystems.Developingdedicated
reservoirsforpumpedstorageisextremelydifficult.
236
Also,undercurrenttariffstructuresfor
energyservices,thereisinadequatesupportforpumpedhydropowersystemstocovercosts,
resultinginonlyalimitednumberofoperationalsystemsinCalifornia.Inaddition,pumped
234
Curtright,AimeeE.andJayApt,ProgressinPhotovoltaics:ResearchandApplications,16:241247,
Applications:TheCharacterofPowerOutputfromUtilityScalePhotovoltaicSystems,2008,available
at:[http://www.clubs.psu.edu/up/math/presentations/CurtrightApt08.pdf].Seealso,presentationby
DanRastler,EPRI,attheApril2,2009,IEPRworkshop,availableat:
02_workshop/presentations/0_3%20EPRI%20%20Energy%20Storage%20Overview%20
%20Dan%20Rastler.pdf].
235
TranscriptoftheApril2,2009,IEPRworkshop,EPRIpresentation,pp.2732,availableat:
[http://www.energy.ca.gov/2009_energypolicy/documents/20090402_workshop/200904
02_TRANSCRIPT.PDF].
236
ExamplesoftryingtocreatededicatedpumpedstoragereservoirsincludeLakeElsinorPumped
StorageandtheEagleCrestfacilities,bothinSouthernCalifornia.
195
hydropowerhasitsownsetofenvironmentalchallenges,whichmaylimititsusegoing
forward.
InIEPRworkshopsonenergystorageandsmartgrid,stakeholdersindicatedthatpayingfor
thesetechnologiesisasignificantbarriertoincreasingtheamountofutilityscaleenergystorage
inCalifornia.Inmanycases,energystoragesystemsprovideutilitygridservicesthatcannotbe
recoveredwithinexistingratesandtariffs.StakeholdersrecommendedthattheEnergy
Commission,CaliforniaISO,andtheCPUCconsidernewratesandtariffoptionstopermit
adequatereimbursementtotheenergystoragesystemforalltheservicesitprovidestothegrid.
Systemcosteffectivenessmodelscanbedevelopedtomoreaccuratelyreflectthetruevalue
energystoragesystemsprovidetotheutilitygridforrenewableintegration,systemreliability
improvements,andancillaryservicesmarkets.
Tohelpinthiseffort,thePIERprogramisdevelopingsystemperformancemodelsforseveral
energystoragetechnologiestohelpidentifymorerevenuesourcesforenergystoragesystems.
Becauseenergystorageisnotconsideredgeneration,transmission,orload,newinformationis
neededtoproperlyintegratethesetechnologiesintotheutilitygridsystem.Oncedeveloped
anddemonstrated,thesesystemperformancemodelscanbeusedtoassisttheCaliforniaISOin
integratingthemintotheancillaryserviceandotherpotentialmarketsoperatedunderthenew
MarketRedesignTechnologyUpgradegridmanagementsystem.Inaddition,thePIERprogram
isdevelopingsimilarmodelsfortheloadreductioncapabilitiesprovidedbyautomated
demandresponsesystems.
CaliforniaISOrecognizestheimportantroleofenergystorageinintegratingrenewablesinto
theelectricitysystem,andinSeptember2009,itreleasedanissuepaperaboutnongenerator
resources,includingenergystorageresources,participatinginancillaryservicesmarkets.
237
The
CaliforniaISOisalsodevelopinganenergystoragepilotprogramtoanalyzetheperformanceof
storagedevicesandidentifyandeliminatebarrierstoincreaseddeployment.
238
Thiswork
shouldbefurtherexpandedintimetoencourageinstallationofstorageinthe2015to2020time
frameasthestaterampsuptothe33percentlevelofrenewableenergy.
Role of Other Renewable Technologies
Baseloadrenewabletechnologiessuchasbiomass,biogas,andgeothermalalsowillplayan
importantroleinreducingthepotentialneedforgasfiredgenerationtofirmuprenewable
energy.
239
Geothermalfacilitiescurrentlyprovide42percentofCaliforniasrenewableenergy
andgenerallyoperateasbaseload;however,incombinationwithstorage,geothermalfacilities
canofferloadfollowingorpeakingservicesaswell.
237
CaliforniaIndependentSystemOperator,IssuePaperforParticipationofNonGeneratorResourcesin
CaliforniaIndependentSystemOperatorAncillaryServicesMarkets,September1,2009,availableat:
[http://www.caiso.com/241c/241cd4af47ca0.pdf].
238
CaliforniaIndependentSystemOperator,see[http://www.caiso.com/2337/2337f16064bc0.pdf].
239
Forexample,seecommentsbyICF,IEPA,andCovantaEnergyfromtheJune29,2009,IEPRworkshop,
transcript,pp.146,172,and190.
196
Biomassandbiogasprovideabout20percentofCaliforniasrenewableenergy,withsolidfuel
biomassprovidingthelargestshare.ExecutiveOrderS0606requiresmeeting20percentofthe
statesRPSwithbioenergyresources.Dependingontheavailabilityoffuel,biomassandbiogas
canprovidebaseload,loadfollowing,orpeakingenergyproducts.
240
Biopowercouldhelp
displacetheamountofnewgasfiredgenerationneededtointegratehigherlevelsofrenewable
energy,butbecausemanyoftheexistingbiomassgeneratorsareoperatingatafinancialloss
undertheircurrentcontracts,itisunclearwhetherprovidingloadfollowingorpeakingsupport
willbecosteffectiveforthesefacilities.
Role of Improved Production Forecasting for Renewables
Anothertoolusedbysystemoperatorstohelpintegraterenewablesintothesystemis
productionforecasting.Muchasloadforecastersusedataanalysistechniquestodevelopshort
termloadforecasts,systemoperatorsuseproductionforecastingtoolstoanticipatetheamount
ofrenewableenergythatwillbedeliveredfromvariousresources.Errorsinloadforecasting
reducetheabilityofsystemoperatorstoanticipatetheamountofenergyneededtomeet
demand.Iftheamountofdeliveredrenewablegenerationisdifferentthantheamount
forecasted,systemoperatorswillneedtoincreaseordecreasegenerationfromothersourcesof
energytomakeupthedifference,whichdecreasesthevalueofrenewablestothesystemand
increasescosts.
241
WorkattheEnergyCommissionandtheNationalRenewableEnergyLaboratoryhasledto
improvementsinthecharacterizationofwindareasforplanningpurposes.Inaddition,
forecastingdayaheadandhouraheadgenerationfromwindfacilitieshasimproved,duein
parttotheCaliforniaISOsParticipatingIntermittentResourceProgram.Arecentstudybythe
NorthAmericanElectricReliabilityCorporationsuggestedthatsystemoperatorsexpandtheir
useofwindforecastingandconductplantschedulingonintervalsshorterthanhourlyto
increasetheabilityoftheelectricitysystemtorespondtochangesingenerationfromwind
energyresources.
242
Buildingonthisprogress,furtherworkisneededtoimprovetheaccuracy
offiveminute,hourly,anddayaheadforecastsforelectricitydemandandsolarenergy.
240
Forsolidfuelbiomassfacilities,whichareuniqueamongrenewablesinhavingasignificantfraction
oftheirtotalcostofelectricityproductioninthecategoryofvariableoperatingcost(mostlyfuelcost),it
mightbepossibletodevelopfeedintariffcontractsthathaveelementsofloadfollowingthatwould
increasetheirvaluetotheutilityatlittleornocosttothebiomassgenerator.Writtencommentsby
GreenPowerInstitute,May28,2009,IEPRworkshop,pp.910,availableat:
28_workshop/comments/Green_Power_Institute_TN51936.PDF].
241
CaliforniaEnergyCommission,2008IEPRUpdate,p.21,availableat:
242
CenterforEnergyEfficiencyandRenewableTechnologies,June29,2009,IEPRworkshop,transcript
pp.165166.Forfurtherinformation,seeNorthAmericanElectricReliabilityCorporation,SpecialReport:
AccommodatingHighLevelsofVariableGeneration,April2009,availableat:
[http://www.nerc.com/files/IVGTF_Report_041609.pdf].
197
LessprogresshasbeenmadeinthedevelopmentofforecastingmodelsforPVandsolar
thermalelectricgeneration,whichstillresultinlargeerrors.Cloudcovercancausegeneration
fromPVsystemstodropby50percentinaminuteorless.
243
Moredataisneededtoimprove
forecastingofsolarenergygeneration,especiallydataonvariationonthescaleoffiveminute
intervalsandminutetominutegenerationfromlargescalePVfields.Theneedforadvancesin
thisareaisbecomingmoreurgentbecauseoftheincreasingnumberofutilityscalePVfields
underdevelopmentandthegrowinginterestinwholesaledistributedPVsystems.The
CaliforniaISOplanstoaddsolartoitsParticipatingIntermittentResourceProgramlaterthis
year.
244
Beyondtheneedsoftransmissionsystemoperatorsaddressedabove,realtimewebbasedwind
speedandsolarradiationdataandforecastswillbeneededmuchmorebroadlythroughoutthe
statesfuturesmartgridascommunityandbuildingbasedsystemsareoperatedtorespondto
pricingsignalsandlocalandbuildingdemand.Itisunlikelythatcurrentdeploymentof
anemometryandradiationsensorswillbeenoughtoadequatelysupporttheneedforaccurate
realtimelocalforecasts.PIERhasidentifiedandisdevelopingplanstoaddressthislongterm
need.
Role of Distributed Resources
Althoughimprovementsareunderwaytostreamlinesitingandpermittingfortransmissionand
renewableenergyfacilities,thereisariskthataresourcemixdependingheavilyonutilityscale
solarelectricprojectsinremoteareasmaybedelayedbeyond2020.Shiftingtoaresourcemix
includingbothlargescalecentralstationprojectsanddistributedgeneration(DG)wouldhelp
thestatemeetitsgoalof33percentofretailsalesfromrenewableenergyby2020andlaythe
foundationforachievingtheGovernorsExecutiveOrdergoalof80percentreductionin
greenhousegasemissionsfrom1990levelsby2050.
Distributedrenewableresourcesincludegroundmountedsolarprojectsupto20MWinsize;
distributedbiogascapacityfromwastewaterprocessing,landfillgas,animalmanuredigester
gas,andfoodprocessing;distributionscalesolidfuelbiomass;othercleanstandalone
technologies;anddistributionlevelCHPthatreducesGHGemissionsthroughthejoint
productionofelectricityandenergyneededtomeetindustrialandcommercialthermalloads.
Renewableprojectsthatinterconnecttothegridatthedistributionlevelcancomeonlinefaster
thanlargeprojects(greaterthan20MW)thatinterconnecttothetransmissionsystemdirectly.
243
ThispointwasraisedbySouthernCaliforniaEdisonattheJune29,2009,IEPRworkshop,transcript
p.54.CleanPowerResearch,QuantifyingPVPowerOutputVariability,ThomasE.HoffandRichardPerez,
May2,2009,availableat:
[http://www.cleanpower.com/research/capacityvaluation/QuantifyingPVPowerOutputVariability.pdf].
244
Formoreinformation,seetheCaliforniaIndependentSystemOperatorParticipatingIntermittent
ResourceProgramwebsiteat:[http://www.caiso.com/docs/2003/01/29/2003012914230517586.html],
includingCaliforniaIndependentSystemOperatorParticipatingIntermittentResourceProgramSolar
TelemetryRequirements,DraftVersion1.2,August2009,availableat:
[http://www.caiso.com/2403/2403c293428c0.pdf].
198
Typicallytheydonotrequirenewtransmissioninvestment,extensiveenvironmentalreviews,
oralengthypermittingprocess.
Recentstudiesindicatesubstantialtechnicalpotentialfordistributionlevelgenerationresources
locatedatornearload.A2007estimatefromtheEnergyCommissionsuggeststhatthereisroof
spaceforover60,000MWofPVcapacity,althoughthestudydidnotfactorinroofspacethatis
shadedorbeingusedforanotherpurpose.
245
TheCaliforniaRenewableEnergyTransmission
InitiativePhase1BFinalReport(RETIPhase1BReport)includedapreliminaryestimatesuggesting
thatasmuchas27,500MWof20MWgroundmountPVprojectscouldbelocatedat
substationsinCalifornia.
246
TheCaliforniaBiomassCollaborativeestimatesthatthereis
technicalpotentialforabout1,700MWofdistributedbiogascapacityinCaliforniafrom
wastewaterprocessing,landfillgas,animalmanuredigestergas,andfoodprocessing.
247
StudiesbytheCPUCandtheEnergyCommissionhaveincludedscenariosofhighpenetration
ofdistributedresources.TheCPUCEnergyDivisionPreliminary33PercentImplementation
Analysisincludedascenariowithabout14gigawatt(GW)ofPVsystemsunder20MWand
alsoincludedabout250MWofdistributedbiogascapacity.
248
EnergyCommissionstaffanalysis
includedascenariothatmetonefifthofthe33percentgoalwithbiopower,consistentwiththe
GovernorsExecutiveOrderS0606.Thisscenarioincludedabout8GWofdistributedsolar
andabout190MWofdistributedbiopower,althoughthisexcludesbiomassprojectsidentified
bytheRETIPhase1Breportashavingfueltosupportmorethan20MWofsolidfuelbiomass
capacity.
Simulationsandsystemanalysishaveshownthatasignificantamountofwholesaledistributed
renewableenergycouldbeintegratedintotheCaliforniadistributiongrid.Arecentanalysisby
E3fortheCPUCEnergyDivisionfoundthatapproximately69percentoftheCaliforniaIOU
substationscaninterconnectprojectsof10MWorsmaller.AnotherstudybyGeneralElectricon
theeffectofdistributedrenewableenergyonfeederlinesfoundthatlimitscouldrangefrom15
percentto50percentoffeedercapacitydependingonlocationanddistribution.Inaddition,
preliminarystaffanalysissuggeststhatabout10GWto11GWofwholesaledistributed
245
CaliforniaEnergyCommission,CaliforniaRooftopPhotovoltaic(PV)ResourceAssessmentandGrowth
PotentialbyCounty,September2007,CEC5002007048,availableat:
246
RETICoordinatingCommittee,RenewableEnergyTransmissionInitiativePhase1BFinalReport,pp.110,
623through625,January2009,RETI10002008003F,availableat:
[http://www.energy.ca.gov/2008publications/RETI10002008003/RETI10002008003F.PDF].
247
CaliforniaBiomassCollaborative,AnAssessmentofBiomassResourcesinCalifornia,2007,March2008,
availableat:
[http://biomass.ucdavis.edu/materials/reports%20and%20publications/2008/CBC_Biomass_Resources_20
07.pdf].
248
CaliforniaPublicUtilitiesCommission,33PercentRenewablesPortfolioStandard,ImplementationAnalysis,
PreliminaryResults,June2009,availableat:[http://www.cpuc.ca.gov/NR/rdonlyres/1865C207FEB543CF
99EBA212B78467F6/0/33PercentRPSImplementationAnalysisInterimReport.pdf].
199
renewableenergycouldbeconnectedatthedistributionlevel,atsubstations,orondistribution
feeders.
Sofar,thepotentialfordistributedresourcestocontributetotheRPSgoalsremainslargely
untapped.AsofJuly2009,therearemorethan560MWofPVandmorethan300MWof
biopowerinstalledinCaliforniaatthedistributionlevel(20MWorlessperproject).Whilemost
ofthecurrentlyinstalledPVisnoteligiblefortheRPS,muchofthebiopoweris.IOUshave
activeRPScontractsformorethan180MWofprojects20MWandsmaller;thisislessthan2
percentofIOURPScontracts.PubliclyownedutilitieshaveactiveRPScontractsforalmost150
MWofprojects20MWandsmaller;thisisabout14percentofpubliclyownedutilityRPS
contracts.
Althoughthereisclearlypotentialforaddinglargeamountsofdistributedrenewable
generationondistributionsystemsthroughoutthestate,doingsopresentssignificant
challenges.Currently,thestateselectricdistributionsystemsarenotdesignedtoeasily
accommodatelargequantitiesofrandomlyinstalleddistributedgenerationresourcesat
customersites.Accomplishingthisobjectiveefficientlyandcosteffectivelywillrequirethe
developmentofanewtransparentdistributionplanningframeworkthatallowsfortheactive
participationofallstakeholders.
Transportation Electrification
Partieshaveraisedtheissueoftheeffectincreasedelectrificationofthetransportationsystem
mayhaveonelectricitydemandandthereforetheamountofrenewableenergyneededtomeet
statewidetargets.Eventhoughthedemandforecastsadoptedinthis2009IEPRincludesome
limitedamountsofpluginhybridelectricvehiclesandelectricvehicleelectricityloads,atthis
timetheextentandpaceoftransportationandindustrialelectrificationishighlyspeculative.
Generallytheimpactsofasubstantialshiftintransportationenergyusagetowardelectricityare
viewedasbeyondthe10yeartimehorizonthattheelectricityindustryisaccustomedto.
Stretchingplanningandanalysiseffortsoutto20yearsandbeyondseemsnecessary,andinitial
effortstodosohavebegun;however,itislessclearhowtomakedecisionsabouttimeperiods
10to20yearsintothefuture.
Issues Affecting the Transmission and Distribution System
Asthepopulationgrowsandelectricitysupplyportfolioschange,newtransmissionfacilities
willbeneededtomaintainsystemreliabilityanddeliverelectricityincludingincreasing
amountsofrenewableenergytoconsumers.Conceptualplanningidentifiessuchpotential
transmissionfacilitiesfordetailedstudy.Powerflowmodelingandproductioncostsimulations
performedbytheCaliforniaISOandelectricutilitiesthendeterminewhichprojectsare
necessaryforreliabilityandmakeeconomicsenseandhowtheymustbeconfiguredelectrically.
Animplementationplanisdevelopedonlyaftersuchdetailedstudyandonlyafterlanduse
andenvironmentalimplicationshavebeenfullyconsideredforspecifictransmissionroutes.
The2009DraftStrategicTransmissionInvestmentPlanreleasedinSeptember2009providesa
detaileddiscussionofinitiatives,trends,anddriversaffectingCaliforniastransmissionsystem
200
andplanningefforts,whicharebrieflysummarizedhere.FirstamongtheseisRETI.InAugust
2009,RETIreleaseditsPhase2Aconceptualtransmissionplan.Phase3oftheprojectwillfocus
ondevelopingdetailedplansofserviceforhighprioritycomponentsofthestatewide
transmissionplan.
TheRETIconceptualtransmissionplanidentifiesadditionaltransmissioncapacitynecessaryto
accessanddeliverrenewableenergytomeetthestaterenewableenergygoalsin2020,and
evaluatestherelativeusefulnessofpotentiallinesforaccessingrenewableenergy.Theplan
identifiespotentialtransmissionnetworklinesforfurtherdetailedstudybytheCaliforniaISO
andelectricutilities.Finally,theplanbuildsinenvironmentalconsiderationsandhighlevel
screeningofconceptualtransmissionlinesandincorporatesawiderangeofstakeholder
perspectives.
ThesecondissueaffectingtransmissionplanningisGovernorSchwarzeneggersExecutive
OrderS1408,whichestablishedanRPStargetforCaliforniathatdirectsallretailsellersof
electricitytoserve33percentoftheirloadwithrenewableenergyby2020.
249
Theorderdirects
stategovernmentagenciestotakeallappropriateactionstoimplementthistargetinall
regulatoryproceedings,includingsiting,permitting,andprocurementforrenewableenergy
powerplantsandtransmissionlines.ActivitiestoimplementtheprovisionsoftheExecutive
OrderarebeingcloselycoordinatedwithRETIandwiththeBureauofLandManagements
DepartmentofEnergySolarProgrammaticEnvironmentalImpactStatement(SolarPEIS).
TheSolarPEISistheresultofrequirementsintheEnergyPolicyActof2005fortheSecretaryof
theInteriortoplanforinstallingatleast10,000MWofrenewablegenerationcapacityonpublic
landsinsixwesternstates.In2008,theBLMandtheU.S.DepartmentofEnergyannounced
theywerepreparingaSolarPEIStocoverdevelopmentoflargescale,gridconnectedsolar
electricfacilitiesinArizona,California,Colorado,Nevada,NewMexico,andUtah.TheEnergy
CommissionisacooperatingagencyfortheSolarPEIS.ThepurposeoftheSolarPEISisnotto
eliminatetheneedforsitespecificenvironmentalreview,butinsteadtoidentifybest
managementpracticesandenvironmentalmitigationstrategiesthatproposedprojectsshould
follow.TheSolarPEISwillalsoconsiderwhethernewtransmissioncorridorsareneededon
landmanagedbytheBureauofLandManagementtointerconnectsolarelectricfacilitiestothe
grid.
AnothereffortthatwillaffecttransmissionistheCPUCsproceedingtoconsiderissuesrelated
tothedevelopmentoftransmissioninfrastructuretoprovideaccesstorenewableenergy
resourcesforCalifornia.
250
InFebruary2009,theCPUCheldaprehearingconferenceandstaff
249
OfficeoftheGovernor,ExecutiveOrderS1408,November17,2008,availableat:
[http://gov.ca.gov/executiveorder/11072/].
250
CaliforniaPublicUtilitiesCommission,OrderInstitutingRulemakingontheCommissionsOwn
Motiontoactivelypromotethedevelopmentoftransmissioninfrastructuretoprovideaccessto
renewableenergyresourcesforCalifornia,March2008,availableat:
201
workshoptoconsiderwhethertheoutputofthestatewideRETIcouldbeusedtosupportcost
recoveryfortransmissionplanningandtheCPUCsstandardsfordeterminingneedwithinthe
transmissionpermittingprocess.Initscomments,theCaliforniaISOnotedthatcompetitive
renewableenergyzones(CREZs)havebeenidentifiedbyRETIandmayprovideabasisfor
certification.TheCaliforniaISOandotherpartiesalsoaddressed1)theuseofRETIresultsin
theCaliforniaISOlongtermtransmissionplanningprocess;2)whetherarebuttable
presumptionofneedshouldbeaffordedtorenewabletransmissionprojectsstudiedand
approvedbytheCaliforniaISO;and3)howprojectdevelopmentcostscanberecoveredby
projectproponents.TheCPUChasnotyetissuedaproposeddecisionorsubsequentnotice.
TheCaliforniaTransmissionPlanningGroup(CTPG),composedofelectricutilitiesandthe
CaliforniaISO,
251
isworkingtowardfindingtransmissionsolutionsformeetingCalifornias
environmental,reliability,economic,andotherpolicyobjectives.Thegroupplanstoproduceits
draft2009StudyPlaninDecember2009,withafinalreportexpectedinJanuary2010.
CaliforniastransmissioninfrastructureisanintrinsiccomponentofthehighvoltageWestern
Interconnection,makingthestatebothanessentialparticipantandapartnerinseveralregional
andfederalplanningandpermittinginitiativesthatwillalterthewaytransmissionplanning
andpermittingtakeplaceinthefuture.
Expectedprovisionofnewfederalfundingin2010forregionaltransmissionplanningwill
resultininterconnectionwide10yearand20yeartransmissionplansfortheWECC.These
plansmayidentifyprojectsand/orcorridorsthatareneeded,andthesewillbecomecandidates
forFederalEnergyRegulatoryCommission(FERC)ratemakingandpossiblyotherfederal
incentives.ItiscriticalthatCaliforniaengageindefiningwhattheseplansareandensuringthat
theyreflectCaliforniaspoliciesandassumptionsaccurately.Concernsinclude:
IfadvocatesoffederallegislationthatwouldestablishnewFERCauthorityforsitingand
costallocationsucceedinpassingabillin20092010,thepressuretositeanewinterstate
lineorlineswillincrease,withassociatedcontroversyoversitingprocessesandimpactson
environmentalresources,bothinandoutofstate.IfFERCmandatesacostallocation
method,CaliforniacouldberequiredtopayforprojectsnotconsistentwithRETI,RPS
goals,andcarbonreductionpolicies.
Inaddition,transmissionsystemupgradesandadditionsanywhereintheWestern
Interconnectionwillaffecttheoperationofexistinglines,includingthoseownedby
Californiautilitiesandprivatecompanies.ProactivelyparticipatinginWECCanalysesof
newlinesandpathratingsiscriticaltoensurecontinuedhighperformancelevelsofkey
pathssuchastheCaliforniaOregonIntertie.
251
TheCaliforniaIndependentSystemOperator,CaliforniaMunicipalUtilitiesAssociation,Imperial
IrrigationDistrict,CityofLosAngelesDepartmentofWaterandPower,PacificGasandElectric
Company,SouthernCaliforniaEdisonCompany,SanDiegoGas&ElectricCompany,andthe
TransmissionAgencyofNorthernCalifornia.
202
Withfederalfunding,westernsubregionaltransmissionplanninggroupsaretakingon
enhancedplanningroles,includingpreparationofanintegrated10yearsubregional
transmissionplan.SuccessfuldevelopmentandengagementoftheCTPGandparticipation
oftheCaliforniaISOareessentialtofindconsensusonprojectsandanalysesreflectiveof
Californiainterests.
GreatlyincreasedfederalfundingfortheWesternGovernorsAssociationWestern
RenewableEnergyZonePhase3and4projects(describedbelow)willcontinuetopromote
geographicallyconstrainedlowcarbonresourcesandlargescaletransmissiontomove
remoteresourcestodistantloads.IfCaliforniapolicypreferstoprocuremoreresources
locally,asreflectedinRETI,conflictamongstatesseekingtoexportandinstate
developmentinterestswillemerge.
Majorprojectdeveloperscontinuethetrendofpursuinglargetransmissionprojectsto
deliverpowertocoastalanddesertloadcenters.Significantresourcesarebeingspentto
evaluatefeasibilityandsitingfortheseprojects.Californianeedstobeinvolvedinthese
effortstoprovidefeedbacktoprojectdevelopersonwhethertheseprojectsareneededor
desirableforthestate.
Role of the California Smart Grid
TheEnergyCommissionsPIERprogramiscompletingresearch,development,and
demonstration(RD&D)effortstohelpbringtomarketnewandinnovativesolutionstothe
issuesfacingtheCaliforniatransmissionsystemandthechallengescausedbytheintegrationof
morerenewablesintotheutilitygridsystem.Inadditiontoresearchonenergystorage,
automateddemandresponse,distributedgeneration,CHP,andimprovedrenewable
technologies,thePIERprogramisleadingaveryaggressiveefforttoencouragethe
implementationoftheCaliforniasmartgridofthefuture,whichwillbedrivenbyexistingand
futureenergypoliciesbeingimplementedinCalifornia.Someofthecurrentkeypoliciesare:
A33percentRenewablesPortfolioStandardby2020.
ImplementingadvancedmeteringinfrastructurebytheIOUsforresidentialcustomers.
CurrentplansbytheCPUCincludetheinstallationbytheofmorethan12millionsmart
metersinthenexttwotofiveyears.
Implementationof100percentofthecosteffectiveenergyefficiencyby2016.
Demandresponseimplementationgoals.
AB32GHGemissionreductionsgoals.
Inadditiontothesespecificstatepolicies,othertechnologyimprovementsarerapidly
progressinginCalifornia,thenation,andtheworld.Someoftheseare:
Substantialincreaseinthenumberofelectricvehiclesandpluginhybridelectricvehicles
projectedoverthenextdecade.
CommercialgrowthofhomeareanetworktechnologiesinCaliforniaresidences.
Fieldimplementationofawiderangeoftwowaycommunicationstechnologies.
203
Automationofdemandresponse(ADR)andimplementationofacommonOpenADR
standardinCalifornia.
Fieldimplementationofhighspeedsynchrophasordatacollectionandreportingsystems.
Advancementsintheautomatedmanagementoftheutilitydistributionsystem.
Increasedemphasisontheneedfornewcybersecuritycapabilities.
TheCaliforniasmartgridwilltakeadvantageoftheseandmanymoretechnologiesand
capabilitiesasthesmartgridsystemisfullyimplementedoverthenextdecade.Thenational
smartgrideffortisbeingdrivenbytherequirementsintheEnergyIndependenceandSecurity
Actof2007andtheeffortsofDOEtoimplementanationalsmartgrid.Onekeydriverforthe
rapidexpansionofthesetechnologiesistheamountofARRAfundingforsmartgrid.DOEis
expectedtofundmorethan$4billioninsmartgridprojectsnationallyoverthenext12to14
months,representingmorethan10timesthenormalrateofinvestmentsthisareahasseenin
thepast.Californiacouldeasilyreceive$400to$600millioninsmartgridfundingfromDOE.
Becauseprojectsrequire50percentmatchfundingbytheutilitiesandcommercialcompanies
requestingthesefunds,Californiacouldhavemorethan$1billioninsmartgridprojectsover
thenextfewyears.ThisleveloffundinginCaliforniaandthehighlevelofnationalsmartgrid
projectfundingwillresultintheveryrapidgrowthofsmartgridtechnologiesandcapabilities.
TheimplementationofthesmartgridinCaliforniaisexpectedtoprovidenewopportunitiesto
meetcurrentandfutureenergypolicygoalssuchas:
Increasedutilitysystemdatareportingcapabilitiesbasedonsynchrophasortechnology,
advancedmeteringinfrastructure,distributionautomation,andnewhomeareanetwork
technologies.ThesesystemsareexpectedtoallowtheutilitiesandCaliforniaISOtomore
rapidlyrecognizeandanalyzesystemproblems,developpossiblesolutions,andrepairor
recovergridproblemareasmorequicklythanwiththecurrentgridsystem.Consumerscan
expectthesmartgridofthefuturetohavefewerfailuresandfaults,morerapidrecoveries
whenproblemsdooccur,andmoreefficientandcosteffectiveoperation.
Thesmartgridwillprovidenewmethodsandtechnologiestoimplementenergyefficiency
anddemandresponsecapabilitiesinthefuture.Thenewdatacollectioncapabilities,
increasedtwowaycommunication,smarterconsumers,andwiderangeofenergysavings
toolsandproductswillallowconsumerstomakemuchsmarterindividualenergy
managementdecisions.
Thesmartgridwillprovideexpandedabilitiestointegratehigherpenetrationsofrenewable
technologies.Themanagementofenergystorage,distributedgeneration,automated
demandresponse,distributionlevelrenewablesandothercapabilitieswillallowthegridto
acceptmuchhigheramountsofrenewableswhilemaintaininghighlevelsofreliabilityand
controllability.
Thesmartgridwillallowhighnumbersofelectricvehiclesandpluginhybridelectric
vehiclesontheroadsand,withsmartchargingsystems,permitthesevehiclestooperate
effectivelywithoutcausingmajordisruptionsontheutilitygrid.Someelectricorplugin
204
hybridvehiclescouldactuallybeusedasgridassetsandprovideancillaryservicesforgrid
operatorswhenparkedinfacilitieswherecommercialenergyserviceproviderscan
aggregatetheirloadsintoonesingleenergyresponsesystem.
ThesmartgridwillprovidebettertrackingofGHGemissionsandwillhelpCaliforniameet
futureemissiongoalsbyincreasingtheuseofrenewables,energyefficiency,andelectric
vehiclesandbyreducingthenumberofpowerplantsneededtosupportthegridbyusing
demandresponseandenergystorageasalternativesourcesofenergyforthegrid
management.
The2007IEPRdedicatedachaptertoCaliforniaselectricdistributionsystem.Theinformation
coveredandrecommendationsprovidedarestillrelevantandarenotrepeatedinthe2009IEPR.
Thesmartgridisexpectedtoprovidenewopportunitiestoaddresstheissuesfacingthe
distributionsystemandcanhelpwithareassuchasupgradingdistributionsystemreliability,
integratinghigherlevelsofdistributedgeneration,andallowingahigherpenetrationof
distributionlevelrenewablesontheCaliforniagridsystem.
SenateBill17(Padilla,Chapter327,Statutesof2009)requirestheIOUstodevelopandsubmita
smartgriddeploymentplantotheCPUCforapprovalbyJuly1,2011.TheEnergyCommission
willworkactivelywiththeCPUCandtheCaliforniaISOtohelpdevelopthesesmartgrid
deploymentrequirementsandensurethattheissuesandconcernsofstateutilities,both
publiclyandinvestorowned,areconsideredwhendevelopingthestatewiderequirements.

Role of Research and Development
Oneexpectedchallengeforthesmartgridistoaddresstheinteractionofrapiddeploymentof
newtechnologieswhileensuringtheCaliforniasmartgridisinteroperablebothwithinthestate
andwithothernationalsystems.ThePIERprogramisactivelyworkingwithotherstate
agencies,industry,andtheacademiccommunitytoidentifykeystandards,protocols,and
referencedesignsthatwillhelpensurethatthesmartgridoperatessmoothly.Thesmartgrid
standardsbeingimplementednationallywillprovidesignificantguidanceinthisarea,butitis
expectedthatCaliforniamayleadthenationintheimplementationofasmartgridand
thereforewillneedtomakesomeinitialdecisionstoensurethestatehastheinteroperability
andcommonalityneededinthefuture.
AnotherareawhereadditionalRD&Deffortsareneededisrenewableenergysecure
communities.Communitybasedenergysystemsareattractinginvestment,policyattention,and
publicsupportnationallyandaroundtheworld,ascommunityleadersrespondtopublic
interestinclimatechange,sustainablegrowth,jobcreation,reducingenergyimports,and
managingtheeconomicimpactsoffossilfuelpriceescalationandvolatility.Californiais
providingleadershipinRD&Dtoidentifytechnicalsolutionscommunitiescanusetooptimize
theirenergysupplyandintegratebuildingandcommunityscaleenergysourceswithenergy
efficiencysolutionsandprogramsandsmartgridcapabilities.TheEnergyCommissionhelda
solicitationforrenewableenergysecurecommunitytechnicalintegrationprojectsresultingin50
proposals.TheDOEhasfollowedsuitwithitsownsolicitationonthistopic,andotherstates
205
andcountriesareexploringpolicymechanismsthatallowcommunitiestoactivelyparticipatein
thedevelopmentofthebestenergyinvestmentstrategyfortheirindividualcommunity.
Forutilityscalerenewables,additionalRD&Disneededonintegrationchallengeswithsolar
energy,sinceitnowappearsthatsolarwillplayalargerrolethanoriginallyassumedwhenthe
EnergyCommissioncompleteditsIntermittencyAnalysisProject.TheEnergyCommissions
PIERprogramshoulddefineandcompleteastudythatbuildsonpreviousutilityscale
renewableenergyintegrationstudies.
PIERhasadjustedtheemphasisofitsrenewableenergyRD&Dinvestmentstobetteraddress
technicalintegrationissuesandsolutionsrelatedtoRPSimplementationaswellastheneedfor
technicalsolutionsenablingcommunityandbuildingscalerenewableenergydeployment.In
addition,theEnergyCommissionisprovidingseedfundingtotheCaliforniaRenewable
EnergyCollaborationfordevelopmentofanintegratedrenewableenergysystemsprogram.
Whenfullyfunded,theprogramwillconductandcoordinatecuttingedgestudiesaddressing
themajortechnical,economic,andpolicyquestionsfacingthestateasitdeploysadditional
renewableenergysupplythroughoutitselectricityandenergyenduseinfrastructure.
Furtherresearchisalsoneededtounderstandwhatpartsofthedistributionsystemcanbest
toleraterenewablegenerationandwhatrolewholesalerenewabledistributedenergycanplay
inprovidinglocalreliability.Researchshouldalsofocusontheinteractionofenergypolicies
affectingthedistributiongrid,includingonsiterenewablegeneration,distributedenergy
storage,electrificationofvehicles,energyefficiency,demandresponse,andzeronetenergy
homesandbuildings.Forexample,distributionlinesmayneedtobereinforcedwith
technologythatcanmeetdemandwhenonsitedistributedrenewableenergyisnotgenerating
electricity.Atthesametime,upgrades,storage,orotherresourcesmaybeneededto
accommodatetwowayflowsfromintermittentrenewablepowerthatisnotdispatchableandis
placedwhereitisconvenienttothecustomer,butnottothegrid.
Researchshouldalsofocusonthetechnicalfeasibilityofaddinglargeamountsofwholesale
distributedrenewableenergytohelpthestatemeet33percentofretailsaleswithrenewable
energyby2020,includingreviewofthelogisticsofupgradingdistributiongridinfrastructureto
meetthistimeline.Betterunderstandingoftheamountofwholesaledistributedrenewable
energythatistechnicallyfeasibleby2020canhelpguidestudiesofmarketdesignssupporting
smartgridcommunities,suchasfeedintariffsforCHPandrenewableenergy.
Inaddition,integratingincreasedquantitiesofdistributedgenerationwillrequireCalifornias
energyagenciestoworktogethertodevelopacomprehensiveunderstandingoftheimportance
ofdistributionsystemupgradesnotjusttoassurereliabilitybutalsotosupportthecost
effectiveintegrationandinteroperabilityoflargeamountsofdistributedenergyforbothonsite
useandwholesaleexport.Utilitieswillneedtoassesswhereontheirsystemsdistributed
generation,bothforonsiteuseandforexporttothegrid,wouldbeofthegreatestvalueand
providethatinformationtotheenergyagencies.Thesestudiesshouldidentifywhich
operationalcharacteristicshavethehighestvalue;whattools,data,andcriteriaareusedto
206
selecttheselocations;andwhatobstaclesexisttodeployingspecifictypesofdistributed
generation.
Investment in Desired Electricity Infrastructure
ThehybridelectricitymarketestablishedthroughAB1890(Brulteetal.,Chapter854,Statutesof
1996)createdmultipleentitiesthatinvestinandoperatespecificfacilitiesthatarepartofthe
overallelectricityinfrastructureinCalifornia.Merchantgenerationhasastrongpositionin
California.IOUsandvariousformsofpubliclyownedutilitiescontinuetodominatethe
distributionandtransmissionelementsoftheelectricgrid,butevenherenicheparticipants
haveappeared.TheTransBayCablefromPittsburgtoSanFranciscoisagoodexampleofa
transmissioninvestmentmadebyapublicprivatepartnership.Thelargeandgrowingnumber
ofdistributedgenerationfacilitiessatisfyingenduserload,butexportingsomeoftheir
productiontothegrid,representsanalternativetypeofinvestor.Eachofthesecategoriesof
investormakesdecisionsaboutsecuringcapitalandconstructingfacilitiesusingdifferent
financialperspectives,accountingrules,taxliabilities,andriskmitigationpreferences.Explicit
legislationandregulatoryagencydecisionsmustguidetheseinvestorstomakedecisions
compatiblewiththevisionthatthestatehasfortheelectricitygrid.
Forward Energy or Capacity Markets
IntheCaliforniaISObalancingauthorityarea,theCaliforniaISOandtheCPUChave
establishedaoneyearaheadforwardcapacityrequirementforallloadservingentitiesunder
theirvariousjurisdictions.Byestablishingacapacityrequirementtosatisfyreliabilityneeds,a
distinctvalueforcapacitywillemergethatcoversasubstantialportionoftheinvestmentina
powerplant,andtheneedsforenergywillbesatisfiedthroughlessregulatedmarketdecisions.
ForseveralyearstheCPUChasbeeninvestigatingwhetherthisstructureisadequatetoprovide
signalstoacompetitiveindustrythatadditionalgenerationisneeded.Advocatesofbotha
centralcapacitymarketandabilateralforwardmarkethaveputforwardthemeritsoftheir
proposals.AttheJuly28,2009,IEPRworkshoponOTCissuesandincommentsfollowing,
severalgeneratorsurgedconsiderationoftheirforwardcapacitymarketconstructsubmittedto
theCPUC.Theyassertedthatthiswouldbethebestmechanismtosurfacereplacement
generationproposals.
OnNovember3,2009,theCPUCissuedaproposeddecisioninR.0512013thatendorsesa
multiyearforwardextensionofthecurrentbilateralcontractformofcapacityobligation.By
thismeans,theCPUChopestobothidentifyfutureelectricitysystemrequirementsandinduce
loadservingentitiestocontractwithexistingandnewgenerationtosatisfysuchobligations.In
addition,theproposeddecisionhighlightstheneedforastandardizedcapacityproductandan
electronicbulletinboardthatwouldfacilitatetradingofcapacityresourcesasloadmigration
amongloadservingentitiesshiftsresponsibilityforfutureobligations.Theproposeddecision
notesthattheexistingoneyearaheadresourceadequacyprocessmakesuseofthecapabilities
oftheEnergyCommissionandCaliforniaISOindevelopingtheplanningassumptionsand
suggeststhatcontinuationofsuchacoordinatedplanningprocesswouldutilizetheexpertiseof
207
theenergyagencies.TheEnergyCommissionsupportsthisapproachregardlessofthefinal
decisionandwillworkwithotheragenciestosupportaforwardcapacitymechanism.
Forward Generation Investment by Publicly Owned Utilities
TheEnergyCommissionisrequiredbyAB380(Nuez,Chapter367,Statutesof2005)to
overseetheresourceadequacyeffortsofallpubliclyownedutilitiesinCalifornia.The
legislaturehasauthorizedalimitedreviewandreportformofoversight,whichallowsthe
EnergyCommissiontocollectinformationfromtheseutilitiesandbienniallyreportresultsofits
reviewasanadjuncttotheIEPR.EnergyCommissionstaffcollectedsuchinformationduring
2009andpresenteditsresultsataworkshoponAugust6,2009.
252
Collectively,andalmostwithoutexception,publiclyownedutilitiesareresourceadequate
severalyearsintothefuture.Asintegratedutilitiesresponsibletooversightboards,thevarious
publiclyownedutilitieshaveincentivestoacquireresourcestocoverexpectedloads.As
discussedelsewhereinthisreportconcerningthevariouselementsofdemandsideorsupply
sideresourcechoice,publiclyownedutilitieshavetraditionallyemphasizedlowcostoptions.
Asaconsequence,theircollectiveexposuretooutofstatecoal,eitherthroughfractional
ownershipsharesorwhollyownedfacilities,isnowatoddswithstatepolicytoreduceGHG
emissions.Asstatepolicyemphasizingpreferredresourceadditionsbecomesmoredirectly
applicabletopubliclyownedutilities,ashiftinresourcemixisexpectedrequiringpublicly
ownedutilitiestocommittolongtermcontractsorinvestdirectlyinsuchresources.Thiswill
increasetotalinvestmentorcreditrequirements.
Investment in Transmission and Distribution
Utilitiesareexpectedtomakesizeableinvestmentsinadditionaltransmissioninfrastructure,
bothtofacilitateuseofremoterenewablesinsatisfyingloadconcentratedinurbancentersand
toupgradetransmissionfacilitieswithintheseurbancenterstoreducelocalcapacity
requirements.AttheJuly28,2009,IEPRworkshoponOTC,SCEstronglycautionedthatlong
leadtimetransmissioninvestmentscouldberenderednotusefulandthusnotrecoverableif
shortleadtimegenerationinvestmentssubstitutedfortransmissionatthelastmoment.
253
It
appearsthatSCEwantedtocommunicatethemessagethattheOTCreplacementinfrastructure
proposalmadejointlybytheenergyagenciestoSWRCBshouldbefollowedthroughfullyall
thewaytothefinalratemakingactionsbytheCPUC.
The2009StrategicTransmissionInvestmentPlanprovidesanindepthreviewofneartermand
longertermissuesassociatedwithtransmissionneededtoachieverenewabledevelopment.
However,asnotedinthischapter,therearestillmanyuncertaintiesaffectingthetransmission
neededtosupportthisrenewabledevelopment.Amongtheseare:
252
ThetranscriptandpresentationsfromtheAugust6,2009,IEPRworkshopareavailableat:
[http://www.energy.ca.gov/2009_energypolicy/documents/index.html#080609].
253
CommentbyPatArons,SouthernCaliforniaEdison,attheJuly28,2009,IEPRworkshop.
208
TheamountofrenewabledevelopmentthatwillberequiredtosatisfyanRPSformulaof33
percentofretailsalesby2020givenvariousdemandsidepolicypreferences.
Whether,andtowhatextent,outofstaterenewableswillbeeligibletocontributetoward
RPSgoals.
Whatmixofrenewableresourcetypes,especiallywindversussolar,islikelytoemerge
sincethetransmissionlinesandroutingarelargelydifferentamongvariousdevelopment
scenarios.
Fortunately,thetransmissionrevenuerequirementissuesassociatedwithFERCtreatmentof
transmissiontosupportstateenergypolicygoalsseemstohavebeenresolved.OnJanuary25,
2007,theCaliforniaISOfiledapetitionwithFERCforadeclaratoryorderseekingconceptual
approvalofanewfinancingmechanismtoaidtheconstructionofinterconnectionfacilitiesfor
locationconstrainedresources(primarilyremotelylocatedrenewables).OnApril19,2007,
FERCgrantedtheCaliforniaISOspetitionandacceptedthedesignconceptsproposedtherein,
thuspavingthewayfortheCaliforniaISOtofiletarifflanguageimplementingthisinitiative.
TheCaliforniaISOfiledatariffamendmentfortheLocationConstrainedResource
InterconnectiononOctober31,2007.FERCapprovedtheamendmentonDecember21,2007.
TherolloutofsmartmetersbyIOUsandsomepubliclyownedutilitiesandrelatedsmartgrid
technologieswillalsorequiresubstantialinvestments.
254
Whiletheinfrastructureitselfwillbe
deployedbyutilities(orcommercialentitiesunderlongruncontracttoutilities),oncethe
systemisinplaceendusecustomerswillneedtomakeinvestmentthemselvestomakefulluse
ofsomeofthenewcapabilities.
End-Use Customer Investments
Pursuingenergyefficiency,customersideofthemeterdistributedgeneration,anddemand
responseaspreferredresourcessubstitutingforconventionalgeneratingfacilitiesplaces
substantialinvestmentrequirementsonendusecustomers.Customersareaskedtomake
investmentsthatwillreduceexpectedenergypurchasecosts,hopefullysavingmoneyinthe
longrun.Theturmoilincreditmarketsstemmingfromthehousingcrisisof20082009andits
spilloverintothestockmarketandtighteningofallformsoflendingbodesillforexpectations
thatenduserscaneasilyprovidetheinvestmentcapitalrequired.Earlymonitoringdatafrom
2009IOUenergyefficiencyprogramssuggestthatIOUsarenotmakingtheenergysavings
goalsestablishedforthembytheCPUCandthatcustomersaresimplynotaswillingtomake
therequiredinvestmentdespitetheincentivesprovidedthroughIOUprogramsauthorizedby
theCPUC.
255
254
OnOctober27,2009,theU.S.DepartmentofEnergyannouncedthattheSacramentoMunicipalUtility
Districtwillbeawardedabout$135milliontoinstallasmartmeteringsystemforallendusecustomers.
255
IOUsprovidemonthlyandquarterlyreportstotheCPUCprovidingdataoncustomerinstallations.In
thereportsthroughJune2009,PacificGasandElectricwasinstallingonlyonehalfthemeasuresachieved
inthecomparableperiodof2008,whileSouthernCaliforniaEdisonandSanDiegoGas&Electricwere
209
Theenergyagenciesneedtocarefullyreviewpoliciesthatdependuponconsumerinvestments
anddeterminewhethernewformsofassistancearerequired,howthismightbeprovided,and
whatcoordinationamongotherstateandlocalinstitutionsisappropriate.Ifendusecustomers
cannotupholdexpectationsimplicitincurrentdemandsideprogramgoals,theneither
programsneedtoberedesignedtoincreaseincentivesorprogramgoalsneedtobescaledback
intheneartermorlongterm.
Issues with Integrating State Policy Goals with Electricity
Planning Processes
ThischapterhasoutlinedthenumerouschallengesthatCaliforniafacesinintegratingthemany
overlappingandoftenconflictingenergypolicygoalsrelatedtotheelectricitysector.Firstthere
istheoverarchinggoalofreducingGHGemissionsfromtheelectricitysector,through
strategiessuchasachievingallcosteffectiveenergyefficiencyanddemandresponsemeasures,
meetingthestatesRPSgoalsof33percentby2020,adding3,000MWofsolarthroughthe
CaliforniaSolarInitiativebytheendof2016,andincreasingCHPby4,000MW.Nextareother
environmentalgoalslikeretiringorrepoweringplantsthatuseOTCtoreducetheimpactsof
electricitygenerationonmarinelife,reducingtheimpactsofsitingsolarplantsintheCalifornia
desert,andimprovingairqualityinnonattainmentareasofthestatesuchasSouthern
California.OTCmitigationislikelytoreducetheamountofflexiblefossilresourcesavailableto
integraterenewables,sonewlyconstructedpowerplantswillbeneededtosupportsuch
integration.Butairqualityregulationsstronglypenalizenewpowerplantscomparedtothe
continuedoperationofexistingpowerplants,solicensingtheamountsofnewfossilgeneration
neededforrenewableintegrationwillbeextremelydifficultinsomeregionsofthestate.
Anotherpotentialareaofconflictistheneedfornewtransmissionlinestoaccessremote
renewableresourcesthatmayhavelanduse,environmental,visual,orcostimpacts.Finally,
thereisthelongstandingpolicytoreducethestatesdependenceonnaturalgasandnatural
gasimports,aswellastheEnergyCommissionsmandatetodevelopenergypoliciesthat
ensureelectricityreliability,sufficiency,affordability,andpublichealthandsafety.
IntheCaliforniaISObalancingauthorityarea,formalresourceadequacyrequirements
establishedbyboththeCPUCandCaliforniaISOprovideaframeworkforevaluating
reliability.However,theneedfordispatchablepowerplantsinspecificlocationstosupportthe
CaliforniaISOslocalreliabilityneedsremainsanalyticallyopaqueandthereis,asyet,no
mechanismtoensurethattheneededresourceswillbebuilt.Astherecentjointenergyagency
proposaltoSWRCBconcerningdevelopmentofOTCreplacementinfrastructuremakesclear,
alltheseentitiessupportreliabilitygoals,butconvertingthatcommonpolicysentimentinto
concreteactionstepsresultinginoperationalpowerplantsandtransmissionlinesremainsa
challenge.
matchingtheprioryearssuccesses.SeeCaliforniaEnergyDemand20102020AdoptedForecast,CEC200
2009012CMF,availableat:[http://www.energy.ca.gov/2009publications/CEC2002009012/CEC200
2009012CMF.PDF].
210
TheseGHGreduction,environmentalprotection,andreliabilitygoalsmustbeintegratedsothat
thestatecansetprioritiesandbetterunderstandtradeoffswhengoalsareindirectconflict.
Policymakersneedtounderstandtheinteractionsbetweengoalsandmakedecisionsthat
reconcileorprioritizethesegoals.Planningprocessesmustconsiderhowrealisticpolicygoals
andtheirtargetdatesareandwhethertheywillbeachievedinfullandonscheduleandifnot,
planaccordingly.Thiscouldleadtomoreresourcesthanareactuallyneeded,whichcouldbe
preferabletosupplyshortagesthatreducesystemreliabilityortoresortingtoexpensive
emergencyactionsinanattempttocatchup.
Atthesametime,energyagencyplanning,procurement,andpermittingdecisionsmust
considertechnological,financial,andenvironmentalconstraints.Ontheengineeringside,
dispatchablepowerplantsareneededtomeethourly,daily,andseasonalfluctuationsin
electricitydemandandsupplythatcanresultfromchangesinweather,hydroelectricornatural
gassupplies,variablerenewablegeneration,plannedoutagesformaintenance,orequipment
failure.Systemoperatorsalsohavetoaccountforadequateelectricityresourcesinspecificareas
ofthestate,knownasloadpockets,sothattransmissionlimitationsintoandoutofthoseareas
donotleadtooperationalproblemsorevenoutages.Also,transmissionandgenerationare
sometimescomplementary,suchaswhentransmissionadditionsareneededtoallowthe
developmentofremoterenewableresources,andsometimessubstitutes,aswhentransmission
upgradesallowtheretirementofcertainpowerplantsthatprovidelocalreliabilityfunctionsin
loadpockets.
Onthefinancialside,bothelectricutilitiesandprivatedevelopersmakedecisionsbasedon
reasonableexpectationsofprofits,whichwillaffecthowmuchinvestmentinnewinfrastructure
willbemadeatanyonetime.ItisalsoarealitythatallofCaliforniaspreferredresources
(energyefficiency,demandresponse,renewables,anddistributedgeneration)havecostsaswell
asbenefits,andthosecostsmustbetakenintoaccountwhenmakingdecisionsaboutpolicy
tradeoffs.Further,sincethestatesoverallindustrystructureisdependentuponprivateentities
respondingtostateenergyplanstomotivatetheirinvestments,thestateenergyagenciesneed
toprovideclearandconvincingmessagesaboutthetypeandtimingofinvestments.
Planning in the Electricity Sector
TherearenumerousagencieswithinCaliforniainvolvedinelectricityplanning.TheEnergy
Commission,CPUC,andCaliforniaISOeachconductelectricityplanningprocessesthat
providegeneralguidanceonpoliciesandspecificguidanceonalimitedrangeofelectricity
topicsuniquetotheresponsibilitiesofeachagency.Somedegreeofcoordinationalreadyexists,
butmorewillbenecessarygoingforward.Forexample,theEnergyCommissionforecasts
statewideelectricitydemandinitsbiennialIEPR,whiletheCPUCoverseesinvestorowned
utilityprocurementoftheresourcesneededtomeetthatdemand.TheCaliforniaISOanalyzes
andapprovesplansforthetransmissionneededtoreliablybringthoseresourcestocustomers
andusestheEnergyCommissiondemandforecastsinsuchanalyses.However,whileportions
oftheCaliforniaISOsanalysesrelyuponEnergyCommissionstudies,otherpartsarelesswell
coordinatedwithstateenergypolicygoals.Inaddition,publiclyownedutilitiesconducttheir
ownplanningandprocurementprocessestomeetresourceneedsintheirserviceterritories.
211
Overlayingtheseplanningprocesses,theARBidentifiesstrategiesforachievingemission
reductionsintheelectricitysectorneededtohelpthestatemeetitsGHGemissionreduction
goals.
Stateandregionalenvironmentalagencyprocessescanalsohaveamajoreffectontheelectricity
sector.Forexample,theSWRCBimplementsfederalCleanWaterActprovisionsrelatedtothe
useofoceanwaterinpowerplants,withtheauthoritytoapproveandsetconditionsforpermits
withoutwhichthoseplantscannotoperate.Withdrawingsuchpermitscanshutdownan
existingpowerplant,somethingthatnoneoftheenergyagencieshasauthoritytodo.Another
exampleistheSCAQMD,whichdetermineswhichpowerplantsgetaircredits.Asnoted
earlier,currentlegalissuessurroundingthosecreditshavecreatedatemporarymoratoriumon
powerplantlicensingintheLosAngelesBasin.
Onthetransmissionside,IOUsandpubliclyownedutilitiesplanfortheirownservice
territories.IOUssubmittheirplanningconsiderationstotheCaliforniaISOannualtransmission
planningprocess,whilepubliclyownedutilitiessubmittheirfuturetransmissionprioritiesto
theEnergyCommissionaspartofthedevelopmentoftheStrategicTransmissionInvestment
Plan.
TheCaliforniaISOsannualplanaddressesonlytheCaliforniaISOcontrolledgridandis
limitedtoelectricalsystemplanningrequirements,solanduseandenvironmental
considerationsarenotincluded.Theannualplancapturesa10yeartimehorizonanddoesnot
assessneedswellintothefutureforalongertermview.Theplanestablishestheneedfornew
transmissioninfrastructureproposalsforIOUswhointurnseekpermitsforthosefacilitiesat
theCPUC.
TheEnergyCommissionisinvolvedintransmissionthroughthedevelopmentandadoptionof
theStrategicTransmissionInvestmentPlanaspartoftherequirementsofthebiennialIEPRto
assessallaspectsofenergysupply,whichincludestransmission.Theplanidentifiesand
recommendsactionsneededtoimplementtransmissioninvestmentsneededforreliability,
congestionrelief,andfutureloadgrowth.Theplanalsodescribestransmissionchallengesand
providesrecommendationstoaddressthosechallengesandalsoidentifieshighpriority
transmissionprojectsthatarethenintegratedintotheCaliforniaISOsannualtransmission
plans.
Lastly,theinformalRETIprocessisinfluencingformaltransmissionplanning.TheRETIeffort
undertakenbystakeholdersobviouslybringstogetherrenewablegenerationdevelopmentwith
thetransmissionlinesneededtogathersuchpowerandmoveittoloadcenters.Theelectric
utilities,theCaliforniaISO,andtheEnergyCommissionhaveallcommittedtoconsiderRETI
resultsintheirtransmissionplanningprocesses.BecausetheRETIprocessonlyaddressesthe
interconnectionofrenewableenergy,itwillnotresultinacompleteanddetailedCalifornia
transmissionplanofservice.However,itisafirststeptowardadetailedstatewidetransmission
planbecauseitarticulatestherequirementsassociatedwithconnectingrenewableresourcesto
thetransmissionsystem,whichisthemostimportantanddifficultrequirementforfuture
transmissioninfrastructureinCalifornia.Moreimportantly,itbalanceselectricconsiderations
212
withlanduseandenvironmentalconsiderationsinastakeholderprocesstocreatebroad
supportfornewinfrastructureneeds.
Allofthesecomplementaryandoftenoverlappingelectricityandtransmissionplanning
processesareonlylooselycoordinatedamongthemanyagenciesinvolved.TheCPUCs
biennialLTPPproceedingusesinformationdevelopedintheEnergyCommissionsIEPRto
provideprocurementguidancetotheIOUs,andtheCPUCsEnergyDivisionstaffhasproposed
expandingthescopeoftheLTPPtoaddresssystemrequirementsratherthanjustIOU
bundledcustomerneeds.Ifacceptedasproposed,thisstrawproposalwouldbeimplemented
during20102011.TheCaliforniaISOconductsanannualtransmissionplanningprocessto
evaluatebothconceptualtransmissiondevelopmentsandspecificprojectproposals,andits
studyoflocalreliabilityisusedtodeterminelocalcapacityrequirementsforbothCPUC
jurisdictionalloadservingentitiesandthosepubliclyownedutilitiesgovernedbythe
CaliforniaISOsresourceadequacytariff.Thesekeyelementsguiderequirementsfor
transmissionownersandloadservingentitiestoday.
Publiclyownedutilitieshavetheirownprocessesthatareevenmorelooselyconnected.Despite
periodiceffortstocoordinatetheseprocesses,thedynamicsofindependentinstitutionsmean
thatonlypartialcoordinationhasbeensustainedthroughtime.
Therehavebeensomeeffortstointegratethevariousstatewideelectricityplanningprocesses.
SB1389(BowenandSher,Chapter568,Statutesof2002)completelyrevisedtheelectricityand
naturalgasplanningresponsibilitiesoftheEnergyCommission.ItestablishedthebiennialIEPR
anddirectedtheEnergyCommissiontoconsidertheinputofninenamedstateagenciesin
developingitsassessments.ItalsorequiresthesenineagenciestouseIEPRinformationand
analysesincarryingouttheirownenergyrelatedactivities.TheCPUCthenestablisheda
biennialLTPPprocessconductedinevennumberedyearstofollowimmediatelyuponthe
EnergyCommissionsIEPR.Inaprocessknownasintegratedplanningandprocurement
mechanism,theEnergyCommission,CPUC,andCaliforniaISOnegotiatedhowtheirrespective
planningandprocurementactivitieswoulddovetail.Byfall2004,detailedflowchartsand
narrativedescriptionsofprocessintegrationhadachievedsomedegreeofsuccess.However,
thisprocessterminatedbyspring2005withoutreachingaformalagreement.
Indecisionsin2004and2005,theCPUCdirectedthatthe2005IEPRdemandforecastbeusedas
thebasisforthe2006LTPPproceedingandthatthe2005IEPRpolicyrecommendationsbe
consideredintheforthcomingCPUCLTPPrulemaking.TheEnergyCommissionprovidedthe
CPUCwithaspecialtransmittalreportcontainingtheelectricitydemandforecast,netshort
results,andpolicyrecommendationsfromthe2005IEPR.DespiteoppositionfromIOUsand
delaysthatdeferredconclusionbeyondtheexpectedtimeframe,theCPUCissuedadecisionin
the2006LTPPrulemakingtousethe2005IEPRdemandforecastandacceptthespiritofthe
agingpowerplantretirementpolicyestablishedinthe2005IEPR.Thisprocesswasnotrepeated
forthe2007IEPRandthe2008LTPPproceedingbecausetheCPUCdecidedtodevotethe2008
LTPPproceedingtoreviewingandupgradingthemethodsusedinLTPPportfolioanalysesand
otherelementsoftheplanningprocessthatwouldthenbeusedinthe2010LTPPproceeding.
213
ThenextopportunityforcoordinationbetweentheEnergyCommissionsIEPRandtheCPUCs
LTPPproceedingisthe2009IEPRandthe2010LTPP.TheCPUChasclearlystateditsintention
tousethedemandforecastadoptedinthe2009IEPR.Further,theCPUChasdeterminedthatit
willusetheEnergyCommissionsanalysisoftheincrementalimpactsofuncommittedenergy
efficiencyprojectionsasthesourceofmodificationstotheEnergyCommissionsbaselineload
forecast.Theseadjustmentsresultfromcalculatingtheadditionalenergyefficiencypreviously
establishedwithintheCPUCenergyefficiencygoalsettingprocessthatshouldbeusedtoadjust
thebaselineforecast.The2009IEPRproceedinghasagreedtoprovidesuchaproducttothe
CPUCconsistentwiththeCPUCsrequiredschedule.
Althoughthediscussionsregardingcoordinationbetweenthethreeenergyagenciesbroke
downinspring2005,continuingdiscussionswiththeCaliforniaISOregardingcoordinated
planningresultedinproposalsthattheCaliforniaISOusetheEnergyCommissionslongterm
demandforecastasthebasisfortransmissionplanning.Sincethattime,theCaliforniaISOhas
usedtheIEPRdemandforecastasthebasisforitstransmissionplanningstudiesandrequires
participatingtransmissionownerstodothesame.However,EnergyCommissionstaffis
unawarewhethertheCaliforniaISOmodifiesthebaselinedemandforecaststoreflectpotential
decreasesinelectricitydemandasaresultofthegoalsintheARBsClimateChangeScopingPlan
forincreasedenergyefficiencyanduseofdistributedgenerationresources.TheCaliforniaISO
alsousesEnergyCommissionshorttermdemandforecastsindevelopingoneyearaheadlocal
resourceadequacyrequirements,whichtheCPUCreviewsandadoptseachyearaspartofits
resourceadequacyrequirements.
Statewidecollaborationwithregardtoformaltransmissionplanningdoesnotexistandremains
elusive.Inthefinalanalysis,transmissionplansdevelopedbyformaltransmissionplanning
organizationsinCaliforniaaredisjointedanduncoordinatedanddonotadequatelyaddress
futuretransmissioninfrastructurerequirementsonastatewidebasis.Thereisnosingle
transmissionplanningprocessthataddressesthestatescompletetransmissionsystemorgrid,
eventhoughallelementsarepartoftheoverallWesternInterconnection.Noneoftheexisting
transmissionplanningprocessesadequatelyconsiderstransmissionlineroutingandrelated
landuseandenvironmentalimplications,andexistingplanningprocessesdonotadequately
considerlongtermneedswellbeyondthe10yeartimehorizon.
GiventhechallengesfacingCaliforniaselectricitysysteminthenextdecade,thestaterequires
tightercoordinationamongenergyagenciestoaddressthesechallengesandavoidunnecessary
duplicationofeffortforboththeagenciesandthestakeholderstheyserve.Lackofthis
coordination,letalonefullintegration,meansthatsomeeffortsareduplicatedwhileothersare
inconsistentornotreceivingtheattentiontheydeserve.Forexample,numerousefforts
examiningvariousimplicationsof33percentby2020werepresentedatanEnergyCommission
IEPRworkshoponJune29,2009.However,themostfundamentalworktounderstandthe
amountsofflexible,dispatchableresourcestocomplementtheintermittencyofsome
renewablesisstillneeded.
214
Anotherexampleistheuseofalternativeplanningassumptionsinvariousforums,including
licensingproceedings,toevaluatespecificgenerationortransmissionprojects.Thereareknown
discrepanciesintheseassumptionscomparedtostatepolicygoals.AlthoughtheCaliforniaISO
considerstheEnergyCommissionadopteddemandforecastinitsannualtransmissionplanning
process,itdoesnotmodifytheloadforecasttoaccountfortheimpactsofthedemandside
resourcegoalsadoptedbythestateforincrementalenergyefficiency,demandresponse
reductionsatpeak,ordistributedgeneration.Omittingtheseimpactsleadstoconclusionsthat
electricitydemandwillbehigher,thusmakingmoreprojectscosteffective.Thisconservative
approachmaymakesensefromareliabilityfirstperspective,butifitextendsfromjust
analysistoactualprojectproposals,suchpracticesmayincreasethenumberofinterventionsin
transmissionlicensingproceedingsbecausesomepartiesmayfeelproposedtransmissionlines
wouldnotbeneededifthepreferreddemandsidepoliciesweretakenintoaccountinthe
analyses.
Finally,noenergyagencyissystematicallyexaminingthelongtermfuture.Electricitydemand
patternsmaybeverydifferent15to25yearsintothefuture,andpowerplantsthatwillbe
licensedandbuiltintheensuingyearswillstillbeviableandnotyetfullydepreciated.
Transmissionplanningbeyondthenormal10yearhorizonisneededtopreventshortterm
infrastructuredecisionsfrominterferingwithlongertermneedsorcreatingadditionallanduse
andenvironmentalconflicts.AchievingtheGHGemissionreductionscalledforinExecutive
OrderS2006for2050willinvolvemuchmorecomplextradeoffsbetweenfuelsandelectricity.
Electricitydemandmayincreaseasaresultofhigherpenetrationofelectricvehiclesor
increasedelectrificationofindustrialprocessestohelpthosesectorsmeettheirGHGemission
reductiongoals.Whileitistooearlytomakefirmcommitmentstopowerplantsonthebasisof
thisspeculativeelectrification,itisnottooearlytobeginidentifyinghowlargerelectricity
demandmightbemetbyexpandingthetransmissionsystemtoaccessmoresources,
establishingtransmissioncorridorstoassurethattransmissioncanbeexpandedinthefuture,
andevaluatingwhetherenergyparksoughttobeplannedinadvancetosupport
electrificationtotheextentitisneeded.Further,differencesindemandpatternsmayalterthe
currentmixofresources,relyingeithermoreorlessthantodayonpeakingresourcesthat
mightbesatisfiedbystoragetechnologies.Afuturewhichreliestoagreaterextentonelectricity
astheenergysourceforenduserequipment(homes,businesses,factories,andtransportation)
shouldmotivateallenergyagenciestoevaluatewhetherreliabilityrequirementsforelectricity
generation,transmission,anddistributionmustevolveaswell.

Need for Statewide Integrated Electricity and Transmission Planning
Findingwaystocoordinateandstreamlinethecollectiveresponsibilitiesoftheenergyagencies
willbeessentialinmeetingthestatesimportantpoliciesandpolicygoals.
256
PublicResources
Code25302(e)suggeststhattheEnergyCommissionseekinputfromtheCPUCandthe
256
TheCaliforniaEnergyCommissionstaffpreparedanintegratedplanningpaperanddistributedit
amongvariousagenciesduringAugust2009.Feedbackfromtheseagencieshasbeenmixed.
215
CaliforniaISO,aswellasstakeholdersandotheragencies,intheEnergyCommissionsIEPR
proceedingsonfutureelectricityinfrastructureneedsandrequirementsandbyconsolidating
recommendationsonfutureneeds.
SB1389establishestheEnergyCommissionsIEPRastheforumforestablishingenergypolicy.
ItisexpectedthattheEnergyCommissionsforecastsandassessmentsaretobereliedonby
otheragencies,includingtheCPUC,incarryingouttheirenergyrelatedfunctions.Therehave
beeneffortstobetterlinkandcoordinatetheIEPRwiththeCPUCsLTTP.However,inrecent
years,thescopeoftheLTTPhasgrowninresponsetodirectlegislativemandatesandunderthe
CPUCsgeneralinterpretationthatminimizingratepayercostsrequiresittomakechoicesthat
balanceresourcepreferencegoalswithjustandreasonablerates.
257
Recently,theLegislaturealsogavetheEnergyCommissiongreaterauthorityoverpublicly
ownedutilitiestoensuretheyalsofollowthebroadresourcepolicypreferencesestablishedby
theEnergyCommissionandCPUCorrequiredbytheLegislature.Similarly,theEnergy
Commissionhasbeengrantedauthoritytodesignatetransmissioncorridorstosmooththeway
towardspecifictransmissionlineprojectsinthefuture,whichwouldpresumablybeevaluated,
approved,and,onceconstructed,operatedbytheCaliforniaISO.
TherecentproposeddecisioninCPUCR.0512013signalsapossibleclosetothelongstanding
issueofwhetherloadservingentityspecificforwardcapacityrequirementstosatisfyamulti
yearforwardresourceadequacyrequirementwillbesetastheyaretodayinabilateralcontract
mannerorthroughacentralizedcapacitymarketauction.Importantlyforcoordinated
planning,theproposeddecisionsuggeststhattheplanninganalysesthatwilldeterminenew
capacityrequirementsshouldcontinuetobeestablishedinacoordinatedmannerusingthe
capabilitiesandexpertiseoftheEnergyCommissionandtheCaliforniaISOasisthecasetoday
fortheyearaheadrequirements.TheEnergyCommissionsupportsthedevelopmentof
commonplanningassumptionsandresultsandhopesthefinaldecisionwillincludethese
provisions.
TheEnergyCommissionhaslongrequiredallloadservingentitieswithpeakloadsabove200
MWtosubmittheirdemandforecastandresourceplanstotheEnergyCommissionforreview.
ThisincludesIOUs,publiclyownedutilities,andCPUCjurisdictionalloadservingentities.The
CPUChassimilarrequirementsfortheIOUs.WhiletheCPUCsfocusonIOUsisimportant,it
doesnotcovereffortsbyitsownregulatedelectricserviceprovidersorpubliclyownedutilities
locatedinthetransmissionareasservedbySCEorPG&E.
258
Similarly,whiletheCaliforniaISO
257
ACaliforniaPublicUtilitiesCommissionEnergyDivisionstrawproposalforthe2010LTPPcycle,
releasedJuly1,2009,proposestoaddasystemplanelementalongsidedirectIOUbundledcustomer
procurementtoidentifyneededresourceadditions.Thestrawproposalexplainsthatundertakingthis
newscopewouldaddtothelengthandcomplexityoftheLTPPproceeding.
258
SenateBill695(Kehoe,Chapter337,Statutesof2009)authorizesanexpansionofretailchoiceandthus
mayonceagaincreatesplitsbetweentheinterestsofIOUbundledservicecustomersandthoseof
customersprovidedenergyservicesthroughanelectricserviceprovider.
216
isthelargestsystemoperatorandtransmissionplanningorganizationinthestate,therearefour
otherbalancingauthoritiesinCaliforniathatplaysimilarroles.Amongthese,LADWPisthe
mostimportantofthosewithautonomyfromtheCPUCasapubliclyownedutilityandfrom
theCaliforniaISOasanindependentoperatorofabalancingauthorityarea.Thisissuecannot
besolvedbytheCPUCandCaliforniaISOalone.LADWPisanimportantplayerindeveloping
itsownplanstousescarceairqualitycreditsthatneworrepoweredgeneratorswillneedinthe
overallLosAngelesBasinasthepowergeneratingfleetcomplieswiththeSWRCBsonce
throughcoolingmitigationpolicy.
Nowthatthejointagencyproposal
hasbeenacceptedbySWRCBstaffandincorporatedintothe
draftOTCmitigationpolicyissuedforformalpubliccomment,
259
theenergyagenciesneedto
confrontthedetailsofhowtheproposedanalyseswillbeaccomplishedinatimelymannerand
howexistingdecisionmakingprocesseswillbemodifiedtomaketoughchoices.Whilethe
proposalemphasizedthebroadstepsleadingtotheproducttheSWRCBneedsaschedulefor
OTCpowerplantreplacementitdidnotlayoutchangesneededinplanningprocessor
decisionmakingpracticestoachievethecollaborativeanalysesandbroaddecisionsabout
preferredoptions.RecentmodificationsmadebySWRCBtoitsproposedOTCmitigationpolicy
clarifytheongoingneedoftheenergyagenciestoreviewthepreliminaryscheduleprovidedto
SWRCBandtoupdateitperiodically.
260
Theenergyagenciesmustaligntheirprocessesinorder
tomakethebestandmostexpeditiousdecisionstodeterminewhichOTCpowerplantswillbe
repowered,retired,orretiredwiththecapacityreplacedremotelyand/orwithtransmission
systemupgrades.
A Path Toward Vision, Blueprint, and Infrastructure Assessment
Numerousdiscussionshavebeentakingplaceamongtheaffectedenergyandenvironmental
agenciestodevelopplanstoachievethenewelectricitysystem.TheARBAB32Climate
ChangeScopingPlanimplementation,SWRCBoncethroughcoolingpolicyimplementation,
SCAQMDaircreditallocationsamongscarcefacilities,andDesertRenewableEnergy
ConservationPlanareexamples.Eachstemsfromsomevisionofafutureelectricitysystemthat
issubstantiallydifferentfromtheonethatexiststoday.Unifyingthesedisparatevisionsand
thentranslatingthemintothelevelofdetailnecessarytocreateandsustainmultiyear
implementationplansisadauntingtask.
259
Jaske,MichaelR.(EnergyCommission),DennisC.Peters(CaliforniaIndependentSystemOperator),
andRobertL.Strauss(CPUC),ImplementationofOnceThroughCoolingMitigationThroughEnergy
InfrastructurePlanningandProcurement,CaliforniaEnergyCommission,July2009,CEC2002009013SD,
availableat:[http://www.energy.ca.gov/2009publications/CEC2002009013/CEC2002009013SD.PDF].
260
TheStateWaterResourcesControlBoardstaffissuedarevisedoncethroughcoolingmitigationpolicy
proposalonNovember23,2009.Manyofthechangesformalizedintheoncethroughcoolingpolicyitself
theimplicitunderstandingsthattheenergyagencieshadreceivedfromSWRCBstaffaboutthe
implementationofthepolicythroughtime.TheStateWaterResourcesControlBoardconductedapublic
workshoponthesechangesonDecember1,2009.
217
Discussionsamongagenciesandstakeholdersaboutdevelopingblueprintsforfutureresources
thatidentifydesiredquantitiesofspecificresourcetypesanddeterminingwhetheraspecific
projectmatchesthoseneedsrequirescommonterminologytoalloweffectivecommunication.
Potentialdefinitionsareofferedbelow:
Vision:Aviewofthefutureelectricitysystemincorporatingthepreferredpolicyelements
(renewablegeneration,demandsideinitiatives)andsupportinginfrastructure
(transmission,smartgrid,distributioncomponents)thatbothachieveGHGemission
reductiongoalsandassurereliabilitystandards.
Blueprint:Asemiquantitativeplan,guide,orframeworkthattranslatesthevisionby
juxtaposingtheresourcepolicypreferencesagainstreliabilitystandards,therebyresolving
conflicts,reflectingprioritiesamongpolicypreferenceswheretheyinteractorconflict,
indicatingwhichentitiesareguidedbytheplan,andestablishinghowagenciescoordinate
withoneanother.Ablueprintprovidesthebasisfordevelopingdetailedplans.Borrowing
fromarchitecture,theEnergyCommissionreferstothisspecifictranslationofthegeneral
visionasablueprint,theblueprintbeingthedetailedspecificationsacontractorwould
needtoexecuteamoregeneralarchitecturalrenderingorvision.
Infrastructureassessment:Aprocessofquantitativelyevaluatingthestatesblueprintusing
currentandexpectedelectricitydemand,newsupplyadditions,possibleretirementsof
existingpowerplants,operatingrequirements,andnecessarytransmissiontoguide
decisionsaboutthefutureenergysystemmixtodeterminethenecessaryattributesand
locationsofnecessarypowerplants,andinwhattimeframe.

Developing a Blueprint for the Future Electricity System
Numerouselementsdescribingthefutureelectricitysystemwereidentifiedasfarbackasthe
originalEnergyActionPlan.Mostoftheseoriginalpolicypreferenceshavebeenratified,along
withnewelements,intheARBClimateChangeScopingPlan.Whatremaintobeaddedtothese
arethereliabilityandsystemefficiencyobjectivesthatarecalledoutinstatelaw,decisionsof
theagencies,andfederalrequirements.Whileitisreasonablystraightforwardtoenumeratea
longlistofelementsdescribingavisionforthisfutureelectricitysystem,specifyingwhich
objectivesarepreferredanddeterminingthenumeroustangibleactionsneededtoaccomplish
themaremuchlessclear.
TheEnergyCommissionreferstothisspecifictranslationofthegeneralvisionasablueprint.
Increasingthespecificityfromthatappropriateforavisiontothatnecessaryforablueprint
requiresthatpolicyinteractionsberecognizedandresolved.Ambiguitiesunimportantin
statingageneralgoalmayhavetoberesolvedtoactuallyachievethegoal,andtheremaybe
preferencesofonepathoveranotheroncetheconsequencesofalternativeinterpretationsare
recognized.
Anexampleofinteractionsthatmustberesolvedisthespecificationofarenewable
developmentpathandtheamountofincrementalenergyefficiencythatwillbeachievedbya
218
specificyearwhilepursinganultimategoalofallcosteffectivepotential.First,anyincremental
energyefficiencyimpactsthatareachieveddiminishtheaggregateamountofrenewablesthat
mustbedevelopedtoachievea33percentRPSgoal.Figure33showedtheimplicationsof
alternativeassumptionsaboutincrementalenergyefficiencyandtheamountofnetshort
renewablesneededin2020.TherangeisactuallywiderthanFigure33revealswhenthefullset
ofdemandsidepolicyinitiativesareconsidered(additionalenergyefficiencyprograms,CHP,
anddistributedgeneration).
Second,thedevelopmentpatternofrenewablesiscrucialforidentifyingtheamountandtypeof
supplementalgeneratingfacilitiesandtransmissiondevelopment.Determiningwhether
renewableswillbeconcentratedinpreferredzonesorwidelydispersedwillimpact
infrastructureneeds.Additionally,adevelopmentpaththatemphasizesinstaterenewables
meansmoreinstatetransmissionandmorefirminggenerationtobelocatedinCaliforniathan
doesadevelopmentpaththathashigheramountsofrenewablesimportedfromtherestof
WECC,wherethelocalbalancingauthorityprovidesfirmingresources.
Numerousscientificandanalyticstudiesarenecessarytodevelopablueprintlevelof
specificity,someofwhicharealreadyunderway.Examplesinclude:
TheCaliforniaISOstudyofthegenerationrequirementstoachieve33percentrenewables
by2020.
TheinteragencyOTCstudytoascertaintheamountandtypeofbothflexiblegeneration
andtransmissionsystemupgradesneededtoreplaceexistingcapacityinamannerthat
assureslocalandsystemreliability,whilemaximizinguseoftheresourcesalready
committedtowardachievingAB32goals.
TheEnergyCommission/CPUCstudyoftheincrementalimpactsofenergyefficiency
initiativesdevelopedfortheCPUCinthe2008GoalsUpdateReportasthefoundationforIOU
goalsinD.0807047.
TheEnergyCommission,DepartmentofFishandGame,BureauofLandManagement,and
U.S.FishandWildlifeServiceDesertRenewableEnergyConservationPlan,currentlyin
development,asciencebasedconservationstrategytoidentifyandestablishareasfor
potentialrenewableenergydevelopmentandconservationintheColoradoandMojave
deserts.Theplansgoalistoreducethetimeanduncertaintyassociatedwithlicensingnew
renewableprojectsonbothstateandfederallands.
Whileeachoftheseeffortsisbeingpursuedonitsowntimelineandwithaspecializedteam,all
oftheeffortsmustbecoordinatedandreasonablyconsistentforthemtobeintegratedintothe
blueprintlater.Inaddition,sincethereismuchuncertaintyaboutthefuture,theemphasis
shouldbeonconductinganalysesofmultiple,plausiblefutures(includingfuturesinwhich33
percentRPSorotherpolicygoalsarenotreachedonastraightline),estimatingthe
magnitudeoftheresourceslikelytobeneededinthenext10years,anddefiningwhatcouldbe
219
builtwithoutregretoverfivetoeightyears.
261
Assumptionsaboutthedevelopmentofother
systemcomponents,aswellashabitatandlanduseconstraints,willbeessentialtothese
analyses.Suchanalyseswouldtranslateintostatewideplanningguidancedisaggregatedand
quantifiedtosomesetofdefinedareas,includingperhapstheISOcontrolarea,utilityservice
areas,planningareas,and/orlocalreliabilityareas.
Infrastructure Assessment
Assumingonehasacleartranslationofthevisionintoablueprint,onecandeterminespecific
elementstoachievethisblueprint.Again,theconsequencesofinteractingelementshavetobe
closelyintegrated.ItiswellunderstoodthattheCaliforniaISOs33percentrenewablestudy
willdeterminetheamountofflexiblecapacitythatprovideincrementing,decrementing,
ramping,andspinandnonspinreserveservices.Itisalsounderstoodthattheconsequencesof
theSWRCBsoncethroughcoolingmitigationpolicywillleadtothelossofsomeofthe
resourcesthatprovidetheseservices,suchasagingOTCpowerplants.Thus,thecombined
effectofthe33percentrenewablesgoalandanOTCmitigationrequirementthatleadsto
retirementsistheneedforalargeamountofflexibleresourcedevelopment,bothtoreplacethat
lostthroughOTCpowerplantretirementandtheadditionalamountneededtoaccommodate
renewabledevelopment.Finally,totheextentthatincrementalenergyefficiencypolicy
initiativescanbereliedupontoproducefirmsavings,fewerflexiblefossilresourceswillbe
needed.
Theresultinginfrastructureassessmentforflexible,dispatchablegenerationwouldbespelled
outinamounts,location,andspecificservicesrequired.Similarly,thereareconsiderable
differencesintransmissiondevelopmenttoachievedifferentwaysofsatisfyinglocalcapacity
requirements.Developingtransmissionsystemelementswithinsomeurbanloadcenterswould
diminishtheneedforlocalcapacityandincreasethelocationaloptionsforneededgeneration
development.Thiswouldlikelybebeneficialfrombothamarketpowerandapowerplant
permittingperspective.Asaresult,thereisinteractionbetweengenerationandtransmission
systeminfrastructurenotjustbecauseofalternativepathsofrenewabledevelopment,but
betweengenerationversustransmission.Resolutionoftheseuncertaintiesinthedevelopment
ofablueprintallowsthenextstagetofocusonthespecificfacilitiesorsetsoffacilitiesthatare
needed.Thislevelofdetailcanthenbecomethebasisfortrackingwhetherresourceadditions
areprogressingasnecessary,orwhethercorrectiveactionofsomesortmustbetakentoreturn
totheresourceadditionscalledoutintheinfrastructureassessment.
Theinfrastructureassessmentshouldbebroadinscope,yetdetailedenoughtoberelevantfor
alljurisdictionsinspecifyingthetypesandsizesofpowerplants.Forexample,alocalair
pollutioncontroldistrictevaluatinga49MWgeothermalplantbelowthe50MWsize
thresholdoftheEnergyCommissionslicensingjurisdictionmustrecognizethatthe
generationfromsuchaplantwoulddisplaceemissionsfromnaturalgasandcoalpowerplants
thathavemuchgreaterGHGemissionsperunitofproduction.Similarly,whilemajorcentral
261
Withoutregretmeanstheamountofpowerplantdevelopmentforeseentobenecessaryunderall
reasonablylikelysetsoffutureconditions.
220
stationsolarpowerplantproposalsthatusePVtechnologiesareoutsidetheEnergy
Commissionsjurisdiction,manyofthepermittingissuesthelocalagencymustconsiderarethe
sameasthoseconsideredbytheEnergyCommissionforasolarthermalpowerplant.The
statewideinfrastructureassessmentshouldbeusedtoguideeachagencysinfrastructure
approvalandlicensingresponsibilitiesandthusmaximizecoordinatedactiontoachievestate
energypolicygoals.
Generation Infrastructure Assessment
TheEnergyCommissionisthepermittingagencyforthermalpowerplantsgreaterthan50MW
insize.Althoughsomerenewablegeneratingtechnologiesarepermittedbylocalagencies,the
majorityofpowerplantcapacityadditionsarepermittedbytheEnergyCommission.
Intervenorsinrecentcaseshaveexplicitlyraisedneedissueseventhoughthelegalconstructof
thelicensingprocessdoesnotcalloutinfrastructureassessment.TheEnergyCommissionis
exploringgenerationinfrastructureassessmentissuesthroughanOrderInstituting
InvestigationconcerninghowtotreatGHGemissionsaspartoftheCEQAprocessforitspower
plantlicensingprocess.ThereportissuedbytheEnergyCommissionsSitingCommitteecalled
forseveralfollowupstudies,aswellasafurtherreviewinthe2009IEPRproceeding.
262
This
makestheEnergyCommissionspermittingprocessoneoftheprincipalclientsofageneration
infrastructureassessmentproduct.Fromthenarrowperspectiveofprovidingafoundationfor
possibleEnergyCommissiongenerationinfrastructuredeterminationsforlargerfossilpower
plants,thecriticalcomponentoftheinfrastructureassessmentisanalysisthatindicateswhat
fossilorotherresourceswouldbeneededunderdifferentfutures.
Acomprehensivecompilationofresourcepolicypreferenceswasaccomplishedthrougha
contractorreport,
263
whichsuggestedthatadispatchablegasplantcouldserveoneormoreof
fiveroles.Somerolesrequiredthatapowerplantbelocatedinspecificgeographicareas,such
asthelocalcapacityareasidentifiedbytheCaliforniaISOthroughitslocalcapacity
requirementsstudies.Otherrolesrequiredpowerplantsthatcouldprovidethesortsofservices
nowbeingstudiedbytheCaliforniaISOinits33percentrenewablesintegrationstudy,suchas
incrementing,decrementing,ramping,faststart,andrelatedservices.Plantspossessingsuch
capabilitiesareperceivedtobemoreusefulandnecessarytothefutureelectricitysystemthan
plantswithoutthesecharacteristics.
InseveralIEPRworkshops,itbecameclearthatsitingfossilpowerplantswillbeincreasingly
difficultinCalifornia,suggestingthatplantsthataresuccessfullypermittedshouldbetheones
withthecharacteristicsthataremostneeded.However,partiestotheseworkshopsraisedtwo
fundamentalquestions:
262
CaliforniaEnergyCommission,CommitteeGuidanceonFulfillingCaliforniaEnvironmentalQualityAct
ResponsibilitiesforGreenhouseGasImpactsinPowerPlantSitingApplication,March2009,CEC7002009004,
availableat:[http://www.valleyair.org/programs/CCAP/documents/CEC7002009004.pdf].
263
221
TowhatextentshouldtheEnergyCommissionlicensingprocesshelptoskewthelimited
numberofadditionalfossilpowerplantsthatcanbeconstructedtowardthosethatare
reallyneeded?
WhatistheappropriatesequencebetweenachievinganEnergyCommissionpermitanda
longtermcontractviaaprocurementprocessofaloadservingentity(ordecisionto
constructbyaloadservingentityitself)?
Thesequestionscouldnotberesolvedinthe2009IEPRproceeding,butareatthecoreof
decidinghowformallytheEnergyCommissionslicensingprocesswillincorporateaneed
conformanceelementinthefuture.Furthereffortisneededtomakeadecisionandtocrafta
legislativeproposalforthenextsessionoftheLegislature.
Transmission Infrastructure Assessment
Addressingtheneedfortransmissioninfrastructuretakesplaceintransmissiondevelopment,
mostlybetweentheCaliforniaISOandtheCPUCbutalsounderadhocarrangements
frequentlycreatedforspecificprojects.EventhoughtheCaliforniaISOreviewsspecific
transmissionprojectsproposedbytransmissionownersandotherentitiesanddetermines
whethertheyareneeded,largertransmissionprojectsrequiringaCEQAdeterminationfrom
theCPUCoftenencounterstrongoppositioninthepermittingprocess,andneedconformance
isfrequentlyafundamentalissue.Asanexample,opponentsoftheSunrisePowerlinkinSan
DiegoassertedthaturbanrooftopPVcouldsubstituteforthetransmissionlineandthepowerit
wouldimport.Intheirperspective,theproposedtransmissionlinewasnotneeded.Another
exampleoccurredwhenpubliclyownedutilitiesproposingatransmissionlinefromNorthern
CaliforniarenewabledevelopmentstoCentralCaliforniaencounteredresistancefromland
ownersalongtheroute,whocontestedthattheirlandshouldnotbeusedforatransmissionline
clearlyintendedtoserveothersthatalsodidnotprovidethelandownerwithanypolicyor
monetarybenefit.Fromtheopponentsperspective,theneedforthelinewasnotjustified.
The2009StrategicTransmissionInvestmentPlanproposesaconsolidatedstatewidetransmission
planthatcouldhelpresolvesomeoftheseconcerns.First,planningwouldbedividedintotwo
timeframes:ashortterm,10yearplanninghorizonandasecondtimeframethatlooksatthe
10to30yearhorizon.Intheshorttermplanningprocess,eachIOUwouldsubmititsplanning
perspectivetotheCaliforniaISO,andpubliclyownedutilitybalancingauthoritieswould
submitplannedprojectsofstatewidesignificancetotheCTPG.Projectswithoutstatewide
significancewouldgodirectlytopermittingbecausetheywouldnotaffectstatewideplanning.
Next,theCaliforniaISOwoulddevelopitsAnnualPlan,whichaddressestheCaliforniaISO
controlledgrid.
TheCTPGcouldthenworktodevelopasinglestatewidetransmissionplan,withtheIOUsand
thepubliclyownedutilitybalancingauthoritiesactinginafullycoordinatedmanner.To
adequatelyreflectstakeholderinterests,theplanmusthavebroadstakeholdersupportthrough
allphasesofplandevelopment,particularlywithregardtoRETI.Whileconsensusisnot
realisticonastatewidebasis,thegoalshouldbetoachievebroadenoughstakeholdersupport
thattransmissionpermittingwillbelesscontentiousandhaveagreaterlikelihoodofsuccess.
222
TheCTPGstatewideplancouldthenbesubmittedforevaluationtotheEnergyCommissions
StrategicTransmissionInvestmentPlanproceeding.Theobjectiveistoensurethatstate
interestsregardingstatepolicygoalsandobjectivesareevaluatedinapublicforum.Projects
conformingtostatepolicygoalsandobjectiveswouldbegivengreaterweightinthepermitting
process.TheStrategicTransmissionInvestmentPlanalsotargetstransmissionprojectsforthe
EnergyCommissionscorridordesignationprocess,andthisstepenvisionsrecommending
multipleprojectsidentifiedintheCTPGstatewideplanforsimultaneousdesignation,rather
thanapiecemealapproachofonecorridordesignationproceedingatatime.
Thefinalstepispermitting,whichisthemostcontroversialstageoftransmissiondevelopment
becauseithasthehighestlevelofanalysisandscrutiny.TheCPUChasjurisdictionoverIOU
transmissionlineprojects,andthepubliclyownedutilitybalancingauthoritieshavejurisdiction
overtransmissionlineprojectsproposedfortheirserviceterritories.Aspointedout,an
inadequatetransmissionplanningprocesscompromisesthepermittingprocessbecause
transmissionlineownersseekingpermitapprovalsfortheirprojectswilllikelyfailforlackof
supportandbecauseofactivestakeholderresistance.Thisstepassumesthatneedfornew
transmissionisultimatelydeterminedduringthepermittingprocess.However,thisprocess
envisionsthatanalysesinsupportofneeddeterminationarebeingcarriedoutduringeachof
theprecedingsteps.
AssumingtheCTPGstatewideplansecuresbroadstakeholdersupport,thispermittingstep
envisionsstakeholderssupportfortransmissionprojectpermitapplicationsthatareconsistent
withtheCTPGplan.Forprojectslargelyfacilitatingrenewabledevelopment,theRETI
stakeholdersunderstandthebenefitsofsuchaprojectandcanpresumablyberelieduponto
expresssupportforsuchprojects.Forothers,however,suchasupgradedtransmissionlines
facilitatingreducedrelianceuponOTCpowerplants,supportfromstakeholdersislessobvious
andwillhavetobemarshaled.
Forlongertermplanning,itisimpossibletoproducea30yearplanwiththesamelevelofdetail
asthe10yearCaliforniaISOAnnualTransmissionPlan.Instead,thelongtermplanwould
buildonthe10yearCaliforniaISOplanandCTPGstatewideplanandwouldconsidertheRETI
conceptualplanandWesternRenewableEnergyZoneinitiativeplanningoutput.TheEnergy
CommissionwouldprepareandvetthelongtermplanintheStrategicTransmission
InvestmentPlanproceeding,withthecooperationofelectricutilitiesandinterested
stakeholders.ThelongtermplanwouldfeedbackintosubsequentRETIconceptual
transmissionplanningcycles,whichthisplanningapproachassumeswouldbeundertaken
everytwoyears.TheobjectiveofsubsequentRETIcycleswouldbetoupdatetheconceptual
transmissionplancompletedtwoyearspreviously.Inaddition,likethe10yeartransmission
planningproposal,thelongtermplanwouldsignaltransmissioncorridorneedsfortheEnergy
Commissionscorridordesignationprogram.
Thistypeoffarreachingplanninghorizonwouldnotseekprecision,butitwouldofferavision
ofpossiblefuturetransmissionneedsforCaliforniasignificantlyintothefuture.Inaddition,it
wouldhelpensurethatshortertermplanningbytheCaliforniaISO,electricutilities,andthe
223
RETIcollaborativestakeholderprocessdonotprecludeorconflictwithlongerterm
transmissionoptionsforCaliforniabeyondthecustomary10yearplanninghorizon.
Integrated Generation/Transmission Planning
Fortoolong,thegenerationandtransmissionplanningprocesseshaveoperatedasparallel,not
integrated,mechanisms.AssessingtheoptionsforretirementofexistingOTCgenerationis
anotherareainwhichtradeoffsandcomplementaryrolesforgenerationandtransmissionhave
tobeassessed.PartofthejointproposaloftheEnergyCommission,theCPUC,andthe
CaliforniaISOtotheSWRCBisanagreementtoconductanalysesthatidentifytheoptionsfor
retiringeachOTCpowerplantandspecifyingthenecessaryreplacementinfrastructure.Both
therenewablegenerationandtheOTCreplacementtopicsillustratetheneedforandthe
beginningofeffortstobringgenerationandtransmissionanalysestogether.Thisisagoodfirst
step,butwhatisneedednowisamoreexplicitelectricityinfrastructureplanningprocesswhere
decisionsmakeuseofsuchanalyses.
Thecomplexityoftheissuesinvolvedindecidingwhatinfrastructureisneeded,coupledwith
thenumberofmovingpartswithintheelectricitysectorincludingdemandandsupplyside
optionsandgoals,callsforanew,moreintegratedplanningprocessinCalifornia.Thestakesof
makingisolatedchoicesthatmayprecludeothermoreelectricallyandeconomically
advantageouschoicesarehigh.Generation,transmission,smartgrid,andstoragetechnology
arerapidlyevolving.Thebeststrategiesformeetingenvironmentalgoalsincludingachieving
GHGreductionsandreducingOTCimpactsandairpollutionemissions,aswellasprotecting
biologicalandculturalresourcesarestilldeveloping.Inaddition,thetradeoffsinvolvedin
choicesaboutthepowerplants,transmissionlines,andotherapproachesnecessarytoimprove
ourelectricityinfrastructuretomeetourenvironmentalchallengesareonlynowbecoming
moreclear.Californiamustdevelopamorestreamlinedandintegratedprocessforexamining
optionsandmakingdecisionsonelectricityinfrastructureneededtomeetourfuturepolicy
goals.TheEnergyCommissionplanstoworkwiththeCPUC,CaliforniaISO,ARB,SWRCB,
andabroadsetofstakeholderstodevelopsuchaprocess.
224
225
Chapter 4: Recommendations
Introduction
Californiasenergysystemsmustconstantlyrespondtochangesinenergysupplyanddemand,
newpolicypriorities,andtechnologicaladvances.Althoughthecurrenteconomicdownturn
hasreducedprojectedenergydemandintheshortterm,demandisexpectedtoincreaseover
timeasthepopulationcontinuestogrowandtheeconomyrecovers.Energysystemplanning
mustbeflexibleenoughtorespondtochangesinenergymarkets,newtechnologies,evolving
policydirection,andeconomicfluctuations.
Atthesametime,Californianeedstomaintainreliableandcosteffectiveenergysupplieswhile
alsoincorporatingnewenvironmentalpoliciesandregulations.Policymakersconsiderthe
costsofprovidingcleanandreliableenergytobothenergyprovidersandconsumerswhilethey
balancetheshorttermcostsofdoingsoagainstthelongtermcostsandimpactsofcatastrophic
climatechange.
Theprimarypolicydriverforenergyinboththeshortandlongtermisthestatesgoalof
reducinggreenhousegas(GHG)emissions.Thestatehasidentifiedneartermstrategiesforits
2020goals,butmoreaggressivepoliciesandactionswillbeneededtomeetthelongertermgoal
ofreducingGHGemissionsto80percentbelow1990levelsby2050.Toachievethistargetwill
requirefundamentalchangesinthewayenergyisproducedandusedaswellasextensive
effortstodevelopnewtechnologiestomeetthechallengesthatlieahead.
AsCaliforniamovestowardlesscarbonintensiveenergysourcestomeetitsclimatechange
goals,thestateneedstoidentifyemergingtechnologiesthatcanhelpaddressthechallenges
facingthevariousenergysectors.Becauseofthelongleadtimesassociatedwithresearchand
developmentefforts,thestatemustbeginnowtoidentifythemostpromisingareasofresearch
anddevelopmentonwhichtofocusitseffortsandensurethatresearchanddevelopment
activitiesareusedtofurtherthestatesenergypolicygoals.Inaddition,thestateneedsto
continueitsresearchonhowclimatechangewillaffectthestatesenergyinfrastructureandits
abilitytoservethecitizensofCalifornia.
Chapters2and3discussedsomeofthemajorissuesfacingCaliforniastransportation,
electricity,andnaturalgassectors.ThischapteridentifiesrecommendationsthattheCalifornia
EnergyCommissionbelievesshouldbeimplementedimmediatelytoensurethatCalifornias
energysystemscontinuetomeettheneedsofitscitizens.
226
Recommendations for the Electricity Sector

Californianeedstoincreaseitseffortstoachieveallcosteffectiveenergyefficiencyinthestate
tomeettheGHGemissionreductionrequirementsinCalifornialawandtherecommended
actionsintheCaliforniaAirResourcesBoards(ARBs)ClimateChangeScopingPlan.Strategies
toachievetheseGHGreductionsincludezeronetenergynewbuildings,increasedbuildingand
appliancestandardsalongwithbetterenforcementofthosestandards,andincreasedefficiency
ofthestatesexistingbuildingstock.Withtheprospectofexpandingpopulationgrowthin
drier,hotterinlandareasandtheresultingincreaseinairconditioningloads,Californiamust
continueitseffortstoreducepeakelectricitydemandtoreducetheneedforexpensiveand
higheremissionpeakingpowerplants.Inaddition,theEnergyCommissionneedstocontinue
itseffortstoaccuratelyreflectenergyefficiencyimpactsinitselectricitydemandforecast.
Zero Net Energy Buildings
ToachievethegoalthatallnewresidentialconstructioninCaliforniabezeronetenergyby2020
andallnewnonresidentialconstructionbezeronetenergyby2030,theEnergyCommission
recommendsthatbyDecember2010,itestablishastatewidetaskforcethatincludesstate
agencies,localgovernments,utilities,industry,enforcementbodies,andtechnicalexpertsto
addressanddeveloprecommendationsonissuessuchas:
Thedefinitionofzeroenergyforexample,zeronetenergy,zeropeakenergy,andzeronet
carbon.
Whetherprogresstowardthegoalshouldbemeasuredbyindividualhomeor
nonresidentialbuilding,byneighborhood,bycommunity,orbyclimatezone.
Theoptimallevelofenergyefficiencyneededbeforeinstallingonsiterenewableresources
andhowtoincorporatethatintobuildingcodes.
Themostimportantaspectsofresidentialandnonresidentialdesignandconstruction
techniquesthatneedattentioninenforcementeffortsandcodeupgradestostayonthezero
netpath.
Lessonslearnedfromnationalefficiencycodeprogramsandappliancestandards.
Theroleoflanduseplanningandneighborhooddesignandtheneedforcontinuing
dialoguewithlocalgovernments.
Theroleofreachstandards,greenbuildingcodes,andothervoluntaryprograms.
Waystobetterintegrateandcompensatedistributedgenerationthroughzeronetenergy
buildings,neighborhoods,andotherdevelopments.
Potentialpilotprogramdesignandimplementation.
227
Becausethegoalofzeronetenergybuildingswillinvolvenotjustefficiencybutalsobuilding
basedenergysupply,theEnergyCommissionsstandardsforbuildingenergyefficiencyshould
beexpandedtoaddressbuildingscalerenewableenergysolutions.
Building and Appliance Standards
Toimprovethecontributionofthestatesbuildingandappliancestandardstostatewideenergy
efficiencygoals,theEnergyCommissionwill:
AdoptandenforcebuildingandappliancestandardsthatputCaliforniaonthepathtozero
netenergyresidentialbuildingsby2020andzeronetenergycommercialbuildingsby2030.
Increasetheenergyefficiencyachievementsofthebuildingstandardsbyanaverageof15
percentineachcycleofthestandardsinordertoachievezeronetenergyby2020for
residentialand2030fornonresidentialconstruction.
Expandthescopeofbuildingstandardstoincludeprocessloads,laboratories,refrigeration
systems,andhighenergyusingcommercialbuildingtypes.
Continuetoadoptappliancestandardsforconsumerelectronics,generallighting,irrigation
controls,andrefrigerationsystems.
WorktowardmeetingtheGovernorscommitmenttoachieve90percentcompliancewith
thebuildingandappliancestandardsby2017,byimprovingenforcementandcompliance
withbuildingstandards.TheEnergyCommissionwillworkwithbuildingdepartmentsand
providethemwiththeeducationandtoolsneededtoincreasetheircomplianceratesand
willexpandworkonappliancestandardsthroughpartneringwiththestatesattorney
generalandmunicipalofficesofthedistrictattorney.
ExpandcollaborationwiththeContractorsStateLicensingBoardtotakeactionto
investigateanddisciplineunlawfulactivitybylicensedandunlicensedcontractorsthat
resultsinnoncompliancewiththebuildingenergyefficiencystandards.
Efficiency in Existing Buildings
TotakeadvantageofthesignificantpotentialforenergyefficiencysavingsfromCalifornias
existingresidentialandcommercialbuildings,theEnergyCommissionrecommendsthe
following:
Thestateshouldrequirehomeenergyratingsandenergyefficiencyretrofitsatpointofsale,
remodel,orrefinancingasoneapproachinapackageofstrategiestosignificantlyimprove
energyefficiencyintheexistingbuildingstock.EnergyCommissionstaffwilldevelopthe
necessaryinfrastructuretoensurethatsuchanapproachissuccessful,withthegoalof
developingincentivesby2013thatincludefundingforhomeenergyratingsandmaximum
levelsofrequiredexpendituresforretrofitstoavoiddissuadinghomeownersfromsellingor
makingimprovementstotheirhomes.Additionalstrategieswillalsobeexploredand
closelycoordinatedwiththecurrentutilityprograms,stimulusfundprograms,andthe
upcomingproceedingdirectedbyAB758(Skinner,Chapter470,Statutesof2009)toensure
acomprehensiveandcoordinatedapproachthatcapturesallcosteffectiveenergyefficiency
inexistingbuildings.
228
Legislation,utilityincentives,andlocalordinancesshouldrequirequalityinstallationand
maintenanceofheating,ventilation,andairconditioningequipment,employingqualified
techniciansandthirdpartyverification,andprovidingpublicinformationregardingthe
benefitsachievedthroughqualityinstallationandhowtoengagecontractorswhoprovide
qualityinstallations.
TheEnergyCommissionandtheCaliforniaPublicUtilitiesCommission(CPUC)willwork
togethertodevelopandimplementaudit,labeling,andretrofitprogramsforexisting
buildingsthatachieveallcosteffectiveenergyefficiencymeasures,maximizethebenefitof
existingutilityprograms,andexpandtheuseofmunicipalandutilityonbillfinancing
opportunities.
ForratingnonresidentialbuildingsaspartofAB1103(Saldaa,Chapter533,Statutesof
2007)performancedisclosurerequirements,theEnergyCommissionwilldevelopa
CaliforniaEnergyPerformanceTooltoprovideaperformanceratingforenergyusageby
buildingsizeandtype;anassetratingforthebuildingshell,heating/ventilation/air
conditioning,boilers,andotherequipment;andacarbonratingforrenewableenergy
generationonsitethatoffsetselectricityornaturalgasuseby2012.TheEuropeanUnions
EnergyPerformanceofBuildingsDirectivewillbeconsideredasamodel.
BecausetheenergyperformancedisclosurerequirementsunderAB1103applyonlyto
entirebuildings,theEnergyCommissionwilldevelopregulationsby2012toaddresshow
toobtainmeaningfulbuildingperformancedatafortenantleasedspaces.
Tocaptureallcosteffectiveenergysavingsinexistingbuildings,theCPUCwillencourage
theenergyandwaterutilitiestotransformthemarketfromneartermsavingstosustained
longtermstrategiesandactivitiesthroughperformancebasedincentives,comprehensive
packagesofenergysavingstrategies,anddecouplingofearningsfromenergyandwater
sales.
TheEnergyCommissionsPublicInterestEnergyResearchprogramwilltargetandsupport
researcheffortsinnewandemergingenergyefficiencytechnologiesandtechniquesaswell
asbuildingmaintenanceandcommissioning.
Publicly Owned Utility Energy Efficiency Programs and Reporting
Toensurethatpubliclyownedutilitiesaremakingprogresstowardachievingthestatewide
goalof100percentcosteffectiveenergyefficiencysavings,theEnergyCommission
recommendsthefollowing:
Publiclyownedutilitiesshouldapplyintegratedresourceplanningtocomparedemand
sideresourceswithsupplysideresourcesusingcosteffectivenessmetrics.Thisapproach
shouldresultinincreasedfundingforenergyefficiencyfromutilitysourcesbeyondthe
publicgoodscharge(thatis,procurement)andshouldincreasefutureenergysavings
enoughtoreachadoptedtargets.
Todemonstratethiscommitment,thepubliclyownedutilitiesshouldprovideadditional
informationintheirMarch15,2010annualreporttotheEnergyCommissionontheroleof
229
energyefficiencyintheirintegratedresourceplanningandthedetailsofhowincreased
fundingwillhelptomeetadoptedenergyefficiencytargets.
Eachpubliclyownedutilityshouldcontinuetocompleteevaluation,measurement,and
verificationstudiestoshowthatenergysavingshavebeenrealized;shouldfundthese
studiesconsistentwiththeirimportanceasasignificantresource;andshouldreporton
evaluation,measurementandverificationplans,studies,andresultsintheirnextannualAB
2021(Levine,Chapter734,Statutesof2006)submittaltotheEnergyCommissiondueMarch
15,2010.
Toprovideconfidencethatpubliclyownedutilitiesareachievingtheirenergyefficiency
targetswithbonafideprogramsavings,publiclyownedutilitiesshouldincreasethe
transparencyofinformationonenergyefficiencyactivities,expenditures,savings
estimations,andcosteffectivenesscalculations.Inaddition,theyshouldprovidetothe
EnergyCommissionstaffthedatausedtocreatetheirannualstatusreports.TheEnergy
Commissionwillworktowarddevelopingprotocolsforthepubliclyownedutilitiesto
provideinformationthatexplains1)yeartoyeardifferencesinbudgetandsavings
accomplishmentsand2)methodologiesandassumptionsforestimatingandverifying
annualsavings,aswellasfordeterminingfeasibleAB2021potentialandtargets.Energy
Commissionstaffwilldevelopadraftoutlineofspecificdatarequirementsforcommentby
publiclyownedutilitiesandotherpartiesbylateJanuary2010.
EnergyCommissionstaffwillestablishaworkinggroupthatincorporatesappropriate
partiestodiscusssuccessfulenergyefficiencyportfolioandresourceplanningapproaches
andtoprovideacollaborativeforumthatidentifiesnotonlyexistingbarriers,butalso
solutionsforovercomingthemostsignificantbarriersthatpubliclyownedutilitiesface
whenattemptingtocaptureallcosteffectiveenergyefficiency.
Demand Response
Tohelpthestatemeetitsgoalofreducingpeakdemandby5percentthroughdemandresponse
measures,theEnergyCommissionrecommendsthefollowing:
Allutilities,includingpubliclyownedutilities,shouldinstallmeterscapableofrecording
hourlyconsumptionandshouldpublishtheirtimevaryingelectricratesinanactionable
andopensourceformat.Statusreportsontheprogressofmeterinstallationshouldbe
includedinthe2011IEPR.
Allcustomerswithadvancedmetersshouldhavenocostaccesstonearrealtime
informationabouttheirenergyuseinaformatthatisbothmeaningfulandeasyto
understand.
Allutilitypricesignalsshoulduseopensource,nonproprietaryformats.
TheEnergyCommissionwillcontinueeffortstoadoptastatewideloadmanagement
standardrequiringallutilitiesinthestatetoadoptdefaultbutoptionaltimevaryingpricing
forcustomersthathaveadvancedmeters.Indevelopingloadmanagementstandards,the
230
EnergyCommissionwillcontinuecollaborationwiththeCPUC,theCaliforniaIndependent
SystemOperator(ISO),andpubliclyownedutilities.
TheEnergyCommissionsPublicInterestEnergyResearchprogramwillcontinuetopursue
researchanddevelopmentthatsupportsloadmanagementstandards.
Incorporating Efficiency in the Demand Forecast
Tointegrateefficiencyintofuturedemandforecasts,theEnergyCommissionrecommendsthe
following:
EnergyCommissionstaffwillactivelyparticipateinCPUCsevaluation,monitoring,and
verificationactivitiesfortheinvestorownedutilities,aswellassimilaractivitiesforthe
publiclyownedutilities,togetinsightintodeterminationsofprogramsavingsandpotential
forfuturesavings,whicharecloselyrelatedtoEnergyCommissiondemandforecast
responsibilities.
TheEnergyCommissionwillusethe2009adoptedforecastasastartingpointtoestimate
theincrementalimpactsfromfutureefficiencyprogramsandstandardsthatarereasonably
expectedtooccur,butforwhichprogramdesignsandfundingarenotyetcommitted.Staff
isplanningtouseandpossiblymodifyItronsforecastingmodel,SESAT,forthisnew
purpose,withItrontoprovidetrainingforthemodelinearly2010.TheEnergy
Commission,incooperationwiththeCPUC,theinvestorownedutilities,andthepublicly
ownedutilities,willdevotesufficientresourcestodevelopinhousecapabilityto
differentiatethesefutureenergyefficiencysavingsfromenergyefficiencysavingsthatare
alreadyaccountedforinthedemandforecast.
EnergyCommissionstaffwillworkcloselywithCPUCstaffinestablishingfeasible
statewideenergyefficiencygoalsaspartoftheperiodicAB2021requirements,aswellas
otherforums.
Renewable Resources
Producingelectricityfromrenewableresourcesprovidesanumberofsignificantbenefitsto
Californiasenvironmentandeconomy,includingimprovedlocalairqualityandpublichealth,
reducedglobalwarmingemissions,adiversifiedstateenergysupply,improvedenergy
security,enhancedeconomicdevelopment,andcreationofgreenjobs.Californiahasandcan
accesssomeofthebestrenewableresourceareasintheworld.Statepolicymakersshould
continuetoleadthenationandtheworldincreatingpoliciesthatmaximizethecosteffective
developmentofrenewableenergygeneration.
IncreasingtheportionofCaliforniaselectricitythatcomesfromrenewablepowerwillbe
essentialtoachievingstatewideGHGemissionreductionsfromtheelectricitysector.However,
thestatehasencounteredsignificantroadblocksinitsefforttomeetthe20percentby2020
RenewablesPortfolioStandard(RPS)goalthatcontinuestopresentchallengestoachieving33
percentrenewables.Majorissuesassociatedwithmeetingthelargertargetincludedifficultyin
securingfinancing,delaysandduplicationinsitingprocesses,timeandexpenseofnew
transmissiondevelopment,thecostofrenewableenergyinahighlyfluctuatingenergymarket,
231
integrationoflargeamountsofrenewableresourcesintotheelectricitygrid,andchallengesin
maintainingthestatesexistingrenewablefacilities.
InSeptember2009,afterunsuccessfulnegotiationsonlegislationthatwouldhavecodifiedthe
33percentrenewabletarget,GovernorSchwarzeneggerissuedExecutiveOrderS2109,which
directstheARBtoactasleadagencyundertheauthorityofAB32(Nez,Chapter488,
Statutesof2006)inimplementingapolicyconsistentwiththeachievementofa33percent
RenewableEnergyStandard.TheARBisdirectedtoadoptthepolicybyJuly2010,andwill
workcloselywiththeCPUCandtheEnergyCommissiontodrafttheregulations.
Renewables Portfolio Standard Targets
TosupporteffortstoachieveRenewablesPortfolioStandardgoals,theEnergyCommission
Thestateshouldpursuecodificationofthe33percentrenewabletarget,drawingupon
effortsthatareunderwaytoimplementExecutiveOrderS2109andtoacceleratethe
permittingofrenewableenergyinfrastructureandfacilitiesinCalifornia.
TheEnergyCommission,theARB,theCPUC,andtheCaliforniaISOmustcontinuetowork
togethertoimplementa33percentrenewableelectricitypolicythatappliestoallload
servingentitiesandretailproviders.TheEnergyCommissionencouragestheARBtokeep
themarketforrenewableenergyinCaliforniastablebyensuringthatthe33percentpolicy
issimilarinrulesandstructuretothe20percentRPS.Inaddition,theARBeffortshoulduse
theanalysesandfindingsfromthe2009IEPRasthestartingpointindeveloping
regulations.
Becauseoftheimportanceofachievingthestates33percentRPSgoals,theEnergy
Commissionrecommends,asithasinpastIEPRs,thattheCPUCensurethatinvestor
ownedutilitiesmeetRPStargetsandthatitconsidertheimpositionofstrongpenaltiesfor
noncompliance.
Renewable Integration
TofacilitateintegratingrenewableenergyintoCaliforniaselectricitysystemwhilemaintaining
reliability,theEnergyCommissionrecommendsthatthefollowingactionsbecompletedbythe
endof2011:
Toavoidoverbuildingnewgasfiredpowerplantsintheneartermthatwillnotbeneeded
inthelongerterm,theEnergyCommissionwillworkwiththeCPUC,theCaliforniaISO,
theARB,utilities,andotherstakeholderstocoordinateimplementationofenergyefficiency,
combinedheatandpower,renewableenergy,andoncethroughcoolingrequirements.
TheEnergyCommissionwillconductfurtheranalysistoidentifysolutionstointegrate
increasinglevelsofenergyefficiency,smartgridinfrastructure,andrenewableenergywhile
avoidinginfrequentconditionsofsurplusorovergenerationinwhichmoreelectricityis
beinggeneratedthanthereisloadtoconsumeit.Potentialsolutionsincludebetter
coordinationofthetimingofresourceadditionsandthemixofresourcesaddedto
efficientlymeetcustomerneedsandmaintainsystemreliability.Inaddition,therewillbe
232
effortstodeterminewhatnew,moreflexible,andefficientnaturalgastechnologiesbestfit
intoanelectricitygridintransition.TheEnergyCommissionwillcompleteaninitialstudy
ofthesurplusgenerationissuetoidentifyspecificresourceanddataneedsaspartofthe
2010IntegratedEnergyPolicyReportUpdate,withtheindepthanalysisaspartofthe2011
IntegratedEnergyPolicyReport.
Achieving33percentrenewableenergywillchangetheresourcesneededtomaintain
electricitysystemreliability,includinglocalramprates,inertia,andothertransmission
relatedancillaryservicefunctions.Toprepareforthesechanges,theEnergyCommission
willcontinuetoshareinputassumptionsandanalysisfrompreviousEnergyCommission
studieswiththeCaliforniaISOtoinformitsongoingworktounderstandoperational
impactsoflargeamountsofintermittentrenewableresources.
TheEnergyCommissionsPublicInterestEnergyResearchprogramwilldeveloptoolsto
forecastoperationalperformanceofsolarenergygenerationfacilities.Thetoolswillbe
designedtoexaminewhetherforecastingerrorsinloadmagnifyerrorsinforecastingwind
andsolarenergyproduction,aswellasthebenefitsthatpowerplantbasedstoragecan
providetoreduceerrorsinforecastingsolarenergyproduction.Aspartofthiseffort,the
programwilldevelopapubliclyavailabledatasetthatprojectdeveloperscanuseto
estimateelectricitythatcanbeproducedinCaliforniafromrooftop,communityscale,and
utilityscalephotovoltaicsystemsandsolarthermalelectricsystemswithandwithout
storage.
Energystorageisakeystrategyforaccommodatingtheintermittentnatureofsome
renewables.However,aseparatetarifforincentiveisneededtocreatemarketincentivesto
encouragethedevelopmentoflargeenergystorageprojects.TheEnergyCommissionwill
coordinatewiththeCaliforniaISOandwithFederalEnergyRegulatoryCommission,as
wellasutilitiesandotherinterestedparties,todeterminehowbesttoincentivizestorage,
includingdeterminingwhetherstoragecanbeallowedtoparticipateintheancillary
servicesmarket.
TheEnergyCommissionwillcontinuetoresearchstoragetechnologiestoreducecostand
determinethebestplacementandsizingofnewfacilitiestomaximizeelectricsystemvalue.
Tosupporttheintegrationofrenewables,Californianeedstoimplementasmartgrid.Todo
so,standardsmustbeadoptedtoensurethatthesmartgridprovidesanopenarchitecture
thatallowsaccesstoawidevarietyoftechnologies.TheEnergyCommissionrecommends
thefollowing:
o TheEnergyCommissionwillworkwiththeCPUCtodeveloparegulatoryframework
foradoptingNationalInstituteofStandardsandTechnology(NIST)SmartGrid
interoperabilityandcybersecuritystandardsconsistentwithFederalEnergyRegulatory
Commissionrulingstoensurenationalandinternationalcompatibility.
o TheEnergyCommission,theCPUC,andtheCaliforniaISOshouldparticipateinthe
NISTSmartGridInteroperabilityPaneltoensurethatCaliforniasmartgridactivitiesare
sharednationallyandthatCaliforniacanlearnfromsmartgridactivitiesinotherstates.
233
Inaddition,thereshouldbecontinuedcoordinationwithNISTonsmartgridstandards
suchasOpenAutomatedDemandResponse.
o TheEnergyCommissionwillcontinuetocoordinatewiththeCPUC,theCaliforniaISO,
utilities,andstakeholderstodevelopsmartgridplans,consistentwiththerequirements
inSB17(Padilla,Chapter327,Statutesof2009),asdescribedinChapter1.
o TheEnergyCommissionwillcontinuePublicInterestEnergyResearchprogram
researchontechnologiesthatmitigateorresolveintermittencyofrenewableresources,
aswellasresearchonbidirectionalpowerflowsandpowerqualityissuesresultingfrom
increaseduseofrenewableresources.
Maintaining Existing Renewable Facilities

TohelpmaintainCaliforniasbaselineofexistingrenewablefacilities,theEnergyCommission
TheGovernorsBioenergyActionPlanshouldbeupdatedtoaddresscontinuingbarriersto
thedevelopmentanddeploymentofbioenergy.Thesebarriersincludeairquality
permitting,expiringincentiveprograms,andlackofprivateprojectfinancing.TheBioenergy
ActionPlanshouldalsobeexpandedtoidentifyissuesandpotentialsolutionsrelatedto
biogasinjectionandgascleanup.
TheEnergyCommissionwillexploreoptionstoensurethatexistingbiomassfacilities
continuetooperate,includingcontinuationoftheExistingRenewableFacilitiesProgram,
subsidizingbiomassfeedstocks,ordevelopingafeedintariffforexistingbiomassfacilities.
Supporting New Renewable Facilities and Transmission
Tofacilitatepermittingofnewrenewablefacilitiesandsecuringthenecessarytransmission
corridorsandlinestoaccessthosefacilities,theEnergyCommissionrecommendsthefollowing:
TheEnergyCommissionwillworkwiththeCPUC,theCaliforniaISO,theBureauofLand
Management,theDepartmentofFishandGame,andotheragenciestoimplementspecific
measurestoacceleratepermittingofnewrenewablegenerationandthetransmission
facilitiesneededtoservethatgeneration,includingmeasurestoeliminateduplication,
shortenpermittingtimelines,andcompleteplanningprocessestobalancecleanenergy
developmentandconservationsuchastheRenewableEnergyTransmissionInitiativeand
theDesertRenewableEnergyConservationPlan.
EnergyCommissionstaffwillactivelyparticipateintheCPUCInvestigationand
RulemakingonTransmissionforRenewableResourcesandcollaboratewiththeCPUCand
otheragenciestoeliminateduplicativetransmissionneedsdeterminationandpermitting
processes.
EnergyCommissionstaffwillcontinuetoparticipateintheRenewableEnergyAction
Teamseffortstostreamlineandexpeditethepermittingprocessesforrenewableenergy
projects,whileconservingendangeredspeciesandnaturalcommunitiesattheecosystem
234
scaleintheMojaveandColoradoDesertregionsthroughtheDesertRenewableEnergy
ConservationPlan.TheEnergyCommissionstaffwillensurethatthegenerationfindingsin
theDesertRenewableEnergyConservationPlanareconsideredinCaliforniaISOand
CPUCtransmissionprocesses.
TheEnergyCommission,CaliforniaISO,andtheCaliforniaTransmissionPlanningGroup
willprioritizetransmissionplanningandpermittingeffortsforrenewablegenerationand
worktoovercomebarriersandfindsolutionsthatwouldaidtheirdevelopment.
TomeettheGovernorstargetof20percentofthestatesrenewableenergygoalsfrom
biomassresources,theEnergyCommissionwillfacilitateandcoordinateprogramswith
otherstateandlocalagenciestoaddressbarrierstoexpandingbiopower,including
regulatoryhurdlesandprojectfinancing.TheEnergyCommissionwillalsoencourage
additionalresearchanddevelopmenttoreducecostsforbiomassconversion,biopower
technologies,andenvironmentalcontrols.
Toleveragefundingmechanismsforprojectsthatsimultaneouslyusebiopowerand
biofuels,theEnergyCommissionsPublicInterestEnergyResearchRenewableBased
EnergySecureCommunitiesprogramwillprovidegrantsfocusingonprojectsthat
capitalizeonthesynergiesofcolocatingelectricitygenerationfrombiomasswiththe
productionofbiofuelforuseinthetransportationsector.
LocalairpollutiondistrictsshouldbeencouragedtobecomeinvolvedintheInteragency
BiomassWorkingGroupsincetheyhavekeyregulatoryauthorityoverbiomassprojects.
Furtheringthedialoguebetweenairdistricts,thestatesenergyagencies,theGovernor,and
theLegislaturecanresultininnovativesolutionstomitigateairpollutionwhileenabling
Californiatomeetitsbiomass/biogasenergygoals.
EnergyCommissionstaffwillconductearlyoutreachtolocalgovernmentsandotherland
useagenciestoinformthemoftheplanninginitiativesthatareunderwaytofacilitatethe
developmentofrenewablegenerationandtoencouragetheirtimelyparticipationin
planningforanddesignatingtransmissioncorridorstohelpmeetthestatesenergypolicy
objectives.
Expanding Feed-In Tariffs
Tofacilitatelowercostdevelopmentofrenewableresources,theEnergyCommission
recommendsthefollowingactionstoexpandtheuseoffeedintariffsinCalifornia:
TohelpmeetthegoaloftheRPSandexpandtheamountofrenewableenergylocatednear
load,theCPUCshouldrequiretheinvestorownedutilitiestooffersimplifiedand
standardizedcontractssetatreasonablepricesforrenewableenergyprojects20MWorless
insize.ThecontractsshouldbedesignedtohelpsmallbusinessesparticipateintheRPS,
reducethetransactioncostsoftheRPScontractingprocesses,andprovidegradually
declining,publiclyavailable,technologyspecific(orproductspecific)pricesignalsto
stimulatecompetitionamongmanufacturerstolowerthecostofrenewableenergy.
Tohelpreducetheenvironmentalimpactsofachieving33percentrenewableelectricityby
2020,theLegislatureshouldconsiderrequiringutilitiesortheCaliforniaISOtooffer
235
technologyspecific(orproductspecific)feedintariffsdesignedtoeffectivelyspur
developmentandintegrationofrenewableenergyprojects20MWandsmallerinlow
impactcompetitiverenewableenergyzonesandalongrenewablerichtransmission
corridors.Thesegeographicallyspecificfeedintariffsshouldbeofferedforlimitedtime
periodstobestcoordinatethedevelopmentofrenewableenergywiththetimingofnew
transmissiondevelopment.
Californiashouldsupportclarificationoffederallawtoensurethatstatescanimplement
costbasedfeedintariffsforresourcesthathelpreducehealthandenvironmentalimpactsof
electricitygeneration,includingGHGemissions.
Distributed Generation
The2007IEPRidentifiedtheneedtoexpandandupgradeCaliforniasdistributionsystemto
preparefortheresourcemixneededtoreachGHGemissionreductiongoals.Withstatepolicies
thatrelyincreasinglyonpreferredresources,thedistributionsystemmustbeabletointegrate
andefficientlyusedistributedresources.Withpotentiallybillionsofdollarsbeingspenton
distributionsystemupgrades,thestateneedstoensurethatthoseupgradeswillfacilitate
meetingthegoalsforincreasedrenewableresources.
Tosupportthegoalofintegratingincreasedquantitiesofbothrenewableandnonrenewable
distributedgenerationintothegrid,theEnergyCommissionrecommends:
TheEnergyCommissionandtheCPUCshouldopenajointproceedingtodevelopa
comprehensiveunderstandingoftheimportanceofdistributionsystemupgrades,notonly
toassurereliability,butalsotosupportthecosteffectiveintegrationandinteroperabilityof
largeamountsofdistributedenergyforbothonsiteuseandwholesaleexport.The
proceedingshouldfocusonthefollowing:
o Requiringutilitiestoprovideanassessmentoftheareasorlocationsontheirsystemsin
whichdistributedgenerationforbothonsiteuseand/orexportwouldbeofgreatest
value.Thestudiesshouldreportonoperationalcharacteristicsthatwouldhavegreatest
value;tools,dataandcriteriausedtoselecttheselocations;andobstaclestodeploying
specifictypesofdistributedgenerationintheseareas(forexample,highdensity
residentialareas).
o Reviewingandrequiringtheuseofdistributionsystemoperationalmodelsand
economic/capitalinvestmentmodelsinutilityratecases.
o Requiringutilitiestousethesetoolstodemonstratethatinvestmentsinadvancedgrid
technologieswillsupportgridmodernizationgoals,includingfromastandpointofcost
effectiveness.
o ImplementingandvalidatingopenInternationalElectrotechnicalCommission(IEC)
communicationstandardsfordistributedenergyresourcesbeforeproprietarysolutions
becomeestablished.AlthoughthesestandardsarenotrequiredintheUnitedStates,they
arebeingimplementedinEuropewheremostcountriesaremandatedtouseIEC
standards.CaliforniacanleverageEuropeaneffortstodevelopandimplementthese
236
standardsandensurethatthestatebenefitsfromthewidespreaduseofcommunication
standards.Onceimplementedforphotovoltaic,thesamecommunicationstandardscan
beusedforotherrenewablesystems,suchaswind,fuelcells,andbiomass,aswellasfor
distributionautomationequipment.
Becausenetmeteringisanessentialtoolformakingrenewabledistributedgenerationa
costeffectivechoiceforcustomersandformaximizingthedevelopmentofinstate
renewablegenerationthatrequiresnotransmissionupgrades,theLegislatureshould
requireutilitiestoincreasetheirnetenergymeteringcapto5percenttoallowreasonable
growthandsupportforthedeploymentofrenewablegenerationinCalifornia.TheCPUCis
requiredtoreporttotheLegislatureandtheGovernorbyJanuary1,2010,onthecostsand
benefitsofnetenergymetering.Oncethatreporthasbeencompletedandreviewed,
increasingthecapbeyond5percentcanbeevaluated.
Combined Heat and Power
Combinedheatandpower(CHP)providesbenefitstothesystemthroughmoreefficientuseof
naturalgasfuel,whichalsoresultsindecreasedGHGemissions.Thebarrierstoincreased
penetrationofCHPtechnologieshavebeenidentifiedrepeatedlyinpastIEPRs,butlittle
progresshasbeenmade.
Meeting Scoping Plan Targets for Combined Heat and Power
Basedona2005CHPmarketforecast,theARBinitsClimateChangeScopingPlansetatargetof
6.7millionmetrictonsofcarbondioxide(CO2)emissionsreductionfromCHPby2020.Thiswas
translatedinto30,000gigawatthoursand4,000MWofnewCHP.Thenewmarketforecast
doneforthe2009IEPRfoundthat5,500MWofnewCHPcouldbeinstalledby2020witha
combinationofincentives,includingexportsalesforCHPsystemslargerthan20MW.This
capacityrepresents6.0millionmetrictonsofCO2emissionreductions,about90percentofthe
targetedreduction.Inaddition,thefutureofexistingqualifyingfacilitycontractsforCHP
(representingabout6,000MWofexistingCHP)isinquestion.Also,recessionhasalteredthe
economiclandscapenaturalgaspricesarelow,andeconomicgrowthestimatesarereduced.
Consequentlytheprospectforattainingsystemefficiencies,gridstability,andGHGreduction
seemstobeinjeopardyunlessacombinationofremedialpoliciesandprogramsare
implementedwithurgentpriority.
ThedevelopmentofnewCHPcanleadtoareductionincarbondioxideequivalentemissionsof
4millionmetrictonsperyearby2020.Torealizethesereductions,theEnergyCommission
TheEnergyCommissionwillworkwiththeARBandtheCPUCinthedevelopmentofCHP
tomeetthestategoalsforemissionreductionsfromthesetechnologies.Actionsinclude
mandatestoremovemarketbarrierstothedevelopmentofCHPfacilitiesandprovisionof
analyticalsupportonefficiencyrequirementsandothertechnicalspecificationssothatCHP
ismorewidelyviewedandadoptedasanenergyefficiencymeasure.
237
TheEnergyCommissionwillworkwiththeCPUCandtheARBtoestablishminimum
efficiencystandards,GHGemissioncriteria,andmonitoringandreportingmechanisms.
ElectricutilitiesshoulddevelopprogramsandsolicitprojectstopromoteCHPasastrategy
toreplaceboilers,increaseenergyefficiency,andreduceemissions.Programsshould
includeamixofmechanismssuchasenergyaudits,anelectricityexportsalestariff,anda
payasyousavepilotprogramfornonprofitorganizations.Utilityownershipisacceptable
whereitdoesnotcrowdoutprivateinvestment.
EligibilityforCHPsystemswithageneratingcapacityof5MWorlessthatmeetminimum
performance,monitoring,andreportingstandardsshouldbereinstitutedintheSelf
GenerationIncentiveProgram.Theamountoftheincentiveshouldbebasedonefficiency
andGHGreductionmetricsratherthantechnologyandfueltypes.
Californiahospitals,correctionalfacilities,andmilitarybasesthatsupportessentialhealth,
safety,andsecurityfunctionsshouldbetargetedforCHPdevelopment.TheEnergy
CommissionandCPUCshouldestablishinformationandincentiveprogramstosupport
andencouragethesecriticalfacilitiestoinstallCHPasawaytoensurethattheiressential
servicescontinuetooperatereliably,evenifamajordisruptionoflocalorregionalpower
occurs.
Renewable Combined Heat and Power
CHPsystemsinstalledatwastewatertreatmentfacilitiesusebiogasfromsludgeandprovide
multiplebenefits.Besidesreducingonsiteenergyneeds,theyreducemethanegeneratedbythe
facility.SuchCHPsystemsalsohelptomeetRPSgoals.Yettheneartermpotentialofthese
CHPsystemsremainsunfulfilledduetoconflictingregulatoryrequirementsforairemissions.
CodigestionoforganicmaterialatwastewatertreatmentplantscanhelptomitigatetheGHG
emissionsemanatingfromCaliforniasmultipleorganicwastestreams.Inaddition,codigesting
multiplebiodegradablewastestreamssuchasmunicipalwastesludge,foodprocessorwaste,
restaurantleftovers,anddairymanurecanaddasmuchas450MWtotheCHPpotentialin
California.
TheEnergyCommissionrecommendsthat:
Energyandenvironmentalregulatoryagenciesshouldcollaboratetoresolveconflicting
regulationsthatresultintheflaringofbiogasesthatcouldbeusedproductivelyfor
distributedgenerationandCHPoperations.Newapproachestobalancecriteriapollutant
emissionreductionsagainstenergyefficiencyimprovementsandgasreductionsfrom
electricitygenerationshouldbedeveloped.
TheEnergyCommission,theCPUC,andutilitiesshoulddevelopfinancingprogramsto
fundtheneartermpotentialofCHPsystemsthatusebiogasatwastewaterfacilities.
Financingoptionsshouldinclude,butnotbelimitedto,grants,loans,orincentivesfor
developingandexpandingbiowastedigesterinfrastructure,generation,andemission
controlequipment.
238
TheEnergyCommissionwillcommitresearchdollarstodevelopawebbaseddatabaseto
providelocation,volume,quality,andseasonalityofbiodegradablewastesuitableforco
digestionatwastewatertreatmentplants.Thiscouldbedoneincollaborationwithindustry
associations.ThedatabasewillincludewastefromCaliforniasagriculture,foodprocessing,
anddairyindustries.
TheEnergyCommissionwillassesstheeconomicandenvironmentalbenefitsofGHG
reductionandgridstabilityfromcodigestingCaliforniasbiodegradablewastefromthe
dairy,agriculture,andrestaurantindustriesatwastewatertreatmentplants.This
assessmentwillincludethebenefitsbothtothestateandtotheindividualindustry
contributingtothewaste.
TheEnergyCommission,theARB,andtheCaliforniaCarbonReductionReserve(formerly
CarbonReductionRegistry)mustdevelopmethodologiesbothforattainingandmonitoring
GHGreductionsandlowcostprotocolsforverificationofsuchreductionsfor
biodegradablematerialswhoseeligibilityforGHGreductioncreditsisnotyetestablished.
Nuclear Plants
Inlightofcurrentpolicyandconsiderationsregardingnuclearplants,theEnergyCommission
Tohelpensureplantreliabilityandminimizecosts,PacificGasandElectricCompany
(PG&E)andSouthernCaliforniaEdison(SCE)shouldcompleteandreportinatimely
manneronallofthestudiesrecommendedintheAB1632Report,includingthosethatthe
CPUCidentifiedforcompletionaspartoflicenserenewalreview.Theutilitiesshouldmake
theirfindingsavailableforconsiderationbytheEnergyCommissionandtotheCPUCand
theU.S.NuclearRegulatoryCommission(NRC)duringtheirreviewsoftheutilitieslicense
renewalapplications.TheutilitiesshouldnotfilelicenserenewalapplicationswiththeNRC
withoutpriorapprovalfromtheCPUC.Thesestudiesshouldinclude:
o Reportingonthefindingsfromupdatedseismicandtsunamihazardstudies,including
resultsof3Dseismicimagingstudies,andassessingthelongtermseismicvulnerability
andreliabilityoftheplants.
o SummarizingtheimplicationsforDiabloCanyonPowerPlantandSanOnofreNuclear
GeneratingStation(SONGS)oflessonslearnedfromtheresponseoftheKashiwazaki
Kariwanuclearplanttothe2007earthquake.
o Reassessingwhetherplansandaccessroadssurroundingtheplants,followingamajor
seismiceventand/orplantemergency,areadequateforemergencyresponsetoprotect
thepublic,workers,andplantassetsandfortimelyevacuationfollowingsuchanevent.
o Studyingthelocaleconomicimpactofshuttingdowntheplantsascomparedto
alternativeusesfortheplantsites.
o Reportingonplansandcostsforstoringanddisposingoflowlevelwasteandspentfuel
through20yearlicenseextensionsandplantdecommissioningusingcurrentand
projectedmarketprices.
239
o Quantifyingthereliability,economic,andenvironmentalimpactsofreplacementpower
options.
o AssessingtheoptionsandcostsforcomplyingwiththeproposedStateWaterResources
ControlBoardoncethroughcoolingpolicy.Thesestudiesshouldbeincludedinthe
costbenefitassessmentoftheplantslicenserenewalfeasibilitystudies.
o ReportingoneffortstoimprovethesafetycultureatSONGSandontheNRCs
evaluationoftheseeffortsandtheplantsoverallperformance(SCEonly).
ThisrecommendationisconsistentwiththeCPUCsGeneralRateCaseDecision0703
044regardingthestatesimportantroleindecidingwhethertopursuelicenserenewal.
TheGeneralRateCasedecisionrequiredPG&Etoincorporatethefindingsand
recommendationsoftheEnergyCommissionsAB1632ReportassessmentinPG&Es
licenserenewalfeasibilitystudyandtosubmitthestudytotheCPUCnolaterthanJune
30,2011,alongwithanapplicationonwhethertopursuelicenserenewalforDiablo
Canyon.LettersonJune25,2009,fromthepresidentoftheCPUCtoPG&EandSCE
reiteratedtherequirementsthateachutilitycompletetheAB1632Reports
recommendedstudies,includingtheseismic/tsunamihazardandvulnerabilitystudies,
andreportonthefindingsandtheimplicationsofthestudiesforthelongtermseismic
vulnerabilityandreliabilityoftheplants.ThesestudiesarenecessarytoallowtheCPUC
toproperlyundertakeitsobligationstoensureplantandgridreliabilityintheeventthat
eitherDiabloCanyonorSONGShasaprolongedorpermanentoutageandforthe
CPUCtoreachadecisiononwhethertopursuelicenserenewal.
TheCPUCshouldassesstheneedtoestablishaSONGSIndependentSafetyCommittee
patternedaftertheDiabloCanyonIndependentSafetyCommittee.
TheEnergyCommissionwillcontinuetomonitortheNRCandtheInstituteofNuclear
PowerOperationsreviewsofDiabloCanyonandSONGS,andinparticularmonitorplant
performanceandsafetycultureatSONGS.
TheEnergyCommissionwillcontinuetomonitorthefederalnuclearwastemanagement
programandrepresentCaliforniaintheYuccaMountainlicensingproceedingtoensure
thatCaliforniasinterestsareprotectedregardingpotentialgroundwaterandspentfuel
transportationimpactsinCalifornia.
TheEnergyCommissionwillcontinuetoparticipateinU.S.DepartmentofEnergyand
regionalplanningactivitiesfornuclearwastetransportation.
TheEnergyCommission,CPUC,andtheCaliforniaISOshouldassessthereliability
implicationsandimpactsfromimplementingCaliforniasproposedoncethroughcooling
policyandregulationsforCaliforniasoperatingnuclearplants.
Tosupportthestateslongtermenergyplanning,SCEandPG&Eshouldreport,aspartof
the2010IEPRUpdate,whatnewgenerationand/ortransmissionfacilitieswouldbeneeded
tomaintainvoltagesupportandsystemandlocalreliabilityintheeventofalongterm
240
outageatDiabloCanyon,SONGS,orPaloVerdeNuclearGeneratingStation.Theutilities
shoulddevelopcontingencyplanstomaintainreliabilityandgridstabilityintheeventofan
extendedshutdownatSONGS,DiabloCanyon,orPaloVerde.
TheEnergyCommissionwillcontinuetoupdateinformationonthecomprehensive
economicandenvironmentalimpactsofnuclearenergygenerationcomparedwith
alternatives.Theseeconomicandenvironmentalassessmentswillconsidercradleto
grave,orlifecycleimpacts,includingimpactsfromuraniummining;reactorconstruction;
fuelfabrication;reactoroperation,maintenanceandrepair;reactorcomponentreplacement;
spentfuelstorage,transportanddisposal;anddecommissioning.
TheSONGSSeismicAdvisoryBoardshouldincludegreaterrepresentationfrom
independentseismicexperts,suchasuniversityorgovernmentscientistsand/orengineers
withnocurrentorprioremploymentwiththeplantownersortheirconsultants.
TheDiabloCanyonIndependentSafetyCommitteeshouldevaluatereactorpressurevessel
integrityatDiabloCanyonovera20yearlicenseextensionandrecommendmitigation
plans,ifneeded.Thisreviewshouldconsiderthereactorvesselsurveillancereportsfor
DiabloCanyoninthecontextofanychangestothepredictedseismichazardatthesite.
Transmission
The2009StrategicTransmissionInvestmentPlandescribestheimmediateactionsthatCalifornia
musttaketoplan,permit,construct,operate,andmaintainacosteffective,reliableelectric
transmissionsystemthatiscapableofrespondingtoimportantpolicychallengessuchas
achievingsignificantGHGreductionandRPSgoals.Theplanmakesanumberof
recommendationsintendedtoensurethatthecriticallinkbetweentransmissionplanningand
transmissionpermittingismadesothatneededprojectsareplannedfor,havecorridorsset
asideasnecessary,andarepermittedinatimelyandeffectivemannerthatmaximizesexisting
infrastructureandrightsofway,minimizeslanduseandenvironmentalimpacts,andconsiders
technologicaladvances.
TheEnergyCommissionsupportsthemanyrecommendationsadoptedinthe2009Strategic
TransmissionInvestmentPlanandhighlightsthefollowingrecommendations:
TheEnergyCommissionstaffwillworkwiththeCaliforniaISOandtherecentlyformed
CaliforniaTransmissionPlanningGroupinaconcertedefforttoestablisha10year
statewidetransmissionplanningprocessthatusestheEnergyCommissionsStrategicPlan
proceedingtovettheCaliforniaTransmissionPlanningGroupplandescribedinChapter4
ofthe2009StrategicTransmissionInvestmentPlan,withemphasisonbroadstakeholder
participation.
TheEnergyCommissionstaffwillworkwiththeCaliforniaISO,theCPUC,investorowned
utilities,andpubliclyownedutilitiestodevelopacoordinatedstatewidetransmissionplan
usingconsistentstatewidepolicyandplanningassumptions.
241
TheEnergyCommissionstaffwillcontinuetoparticipateintheRenewableEnergyAction
Teamseffortstostreamlineandexpeditethepermittingprocessesforrenewableenergy
projects,whileconservingendangeredspeciesandnaturalcommunitiesattheecosystem
scaleintheMojaveandColoradoDesertregionsthroughtheDesertRenewableEnergy
ConservationPlan.TheEnergyCommissionstaffwillensurethatthegenerationfindingsin
theDesertRenewableEnergyConservationPlanareconsideredinCaliforniaISOand
CPUCtransmissionprocesses.
TheEnergyCommission,CaliforniaISO,andtheCaliforniaTransmissionPlanningGroup
willprioritizetransmissionplanningandpermittingeffortsforrenewablegeneration,as
outlinedinChapter6ofthe2009StrategicTransmissionInvestmentPlan,andworkon
overcomingbarriersandfindingsolutionsthatwouldaidtheirdevelopment.
TheEnergyCommissionwillcontinuesupportforongoingactivitiesrelatedtothe
RenewableEnergyTransmissionInitiative(RETI),includingtheCoordinatingCommittee,
StakeholderSteeringCommittee,andworkinggroups,byprovidingappropriatepersonnel
andcontractresources.
TheEnergyCommissionstaffwillcontinuetocoordinatewiththeRETIstakeholdersgroup
toincorporateRETIsnewinformationinapplyingthemethoddescribedinChapter6ofthe
2009StrategicTransmissionInvestmentPlantoreachconsensusontheappropriate
transmissionlinesegmentsthatshouldbeconsideredforcorridordesignationtopromote
renewableenergydevelopment.
TheEnergyCommissionwillcontinuetoparticipateintheWesternRenewableEnergyZone
processtoensureconsistencywithRETIresultsforbothpreferredrenewabledevelopment
areasandenvironmentallysensitiveareasthatshouldbeavoided.
Coordinated Electricity System Planning
Californiafaceschallengesinimplementingstatepolicygoalstodecreasetheuseofonce
throughcoolinginpowerplantsandretireagingpowerplants,giventheneedtomaintain
systemreliabilityandthelimitationsonemissionscreditsforreplacementplantsinthesouthern
partofthestate.Atthesametime,thestateneedstobettercoordinateitselectricitypolicy,
planning,andprocurementeffortstoeliminateduplicationandtoensurethatplannersand
policymakersunderstandtheinteractionsandconflictsthatmayexistamongstateenergy
policygoals.
Californiahasnumerousagenciesthatareinvolvedinelectricityplanning.Whilethereissome
degreeofcoordinationamongvariousagenciesandprocesses,thestateneedstofindbetter
waystocoordinateandstreamlinethecollectiveresponsibilitiesofthoseagenciestobeableto
achievethestatesGHGemissionreduction,environmentalprotection,andreliabilitygoals
whilereducingduplicativeorcontradictoryprocesses.TheEnergyCommissionrecommends
thefollowing:
TheEnergyCommissionwillworkwiththeCPUCandCaliforniaISO,alongwithother
agenciesandinterestedstakeholders,todevelopacommonvisionfortheelectricitysystem
toguideinfrastructureplanninganddevelopment.Suchcoordinatedplanscanbeusedto
242
guideeachagencysowninfrastructureapprovalandlicensingresponsibilitiesandthus
maximizecoordinatedactiontoachievestateenergypolicygoals.
TheEnergyCommissionwillcontinueitsongoingeffortstoimprovethequalityand
transparencyofitsdemandforecasts,whicharenowusedattheCPUCandCaliforniaISO
forelectricitysystemplanning.TheEnergyCommissionsDemandAnalysisOfficeis
engagedinanintensivereviewandevaluationofcurrentmodelingmethods.Thisprocess
placeshighpriorityonassessingwhethercurrentmodelingtoolsareeffectivelymatchedto
thepurposestheyareintendedtoserve.Oncetheexistingmodelreviewstagetoidentify
processimprovementshasbeencompleted,activestepstoincorporatemodelmodifications
ormodelreplacementswillbeinitiatedinthe2011IEPRcycleafterthesechangesarefully
testedandreviewed.
TheEnergyCommissionwillcontinuetoworkwiththeCPUC,theCaliforniaISO,andthe
StateWaterResourcesControlBoardtoimplementthejointenergyagencyproposalthat
establishesascheduleforcomplyingwithoncethroughcoolingmitigationwhile
addressingelectricsystemreliabilityconcerns.
TheEnergyCommissionwillconductanalysistodeterminetheamountofaircredits
neededintheSouthCoastairshedandworkcooperativelywiththeSouthCoastAir
QualityManagementDistrict,theARB,andotherappropriateagenciestodesignnew
methodstoallocatescarceaircreditstoproposedpowerplantsthatbestmeetsystemand
localneeds.
Throughapublicprocesswithinterestedstakeholders,theEnergyCommissionwilldefinea
courseofactionthatincorporatesintegratedplanningresultsintothedecisionmaking
processforthepowerplantsitlicenses.
TheEnergyCommissionwillfocusitsforecasting,planning,IEPR,andStrategic
TransmissionInvestmentPlanprocessesonconductingthestatewideintegratedplanning
thatisclearlynowrequired.EffortswillbecoordinatedwiththoseoftheCPUCand
CaliforniaISOtoreduceduplication.
TheEnergyCommissionsCostofGenerationmodelwillbeusedwhereapplicableasa
transparenttoolforupcomingintegratedresourceplanningstudies.Areasonablerangeof
inputswillbeusedtogeneratearangeofpotentiallevelizedcostestimatesforthe2011
IEPR.
Recommendations for the Natural Gas Sector
Newtechnologiesandresourcefinds,suchasshalegas,haveincreasedtheavailabilityof
naturalgasinNorthAmerica.Naturalgasisthecleanestofthefossilfuelsandwillcontinueto
playaroleinGHGreductionsintheelectricitysector.However,therearepotential
environmentalimpactsassociatedwithexplorationanddevelopmentofshalegasasan
additionalsourceofnaturalgassupplies.Plentifulsuppliesofnaturalgaswillmoderateprices
andmakenaturalgasanattractiveoptionthroughouttheWestastheelectricityindustrystarts
243
tobuildalesscarbonintensiveinfrastructure.BecauseCaliforniaisattheendofthegassupply
pipelines,demandfornaturalgasupstreamofCaliforniacouldincreasecompetitionand
pricesandreduceavailablesuppliesforCalifornia.
TheEnergyCommissionrecommendsthefollowing:
TheEnergyCommissionwillcontinuetomonitorthepotentialenvironmentalimpacts
associatedwithshalegasextraction,includingcarbonfootprint,volumeofwateruseand
riskofgroundwatercontamination,andpotentialchemicalleakage.Specifically,theEnergy
Commissionstaffwillcoordinateandexchangeinformationwithenergyagenciesinstates
withshalegasdevelopment,suchasNewYork,Texas,andothermidcontinentstates,and
willreportnewfindingsintheIntegratedEnergyPolicyReportandotherEnergyCommission
forums.
Californiashouldworkcloselywithwesternstatestoensuredevelopmentofanaturalgas
transmissionandstoragesystemthathassufficientcapacityandalternativesupplyroutesto
overcomeanydisruptioninthesystem,suchasaweatherrelatedlinefreezes,pipeline
breaks,andsoon.Thestateshouldsupportconstructionofsufficientpipelinecapacityto
Californiatoensureadequatesupplyatareasonableprice.
Recommendations for the Fuels and Transportation Sector

Stateandfederalpoliciesencouragethedevelopmentanduseofrenewableandalternative
fuelstoreduceCaliforniasdependenceonpetroleumimports,promotesustainability,and
reduceGHGemissions.TheGovernorsExecutiveOrderS0606establishedcleartargetsfor
increaseduseandinstateproductionofbiofuels.Californiaandthefederalgovernmentalso
havepoliciestoimprovevehicleefficienciesandtoreducevehiclemilestraveledineffortsto
achievethe2050GHGreductiontargets.Untilnewvehicletechnologiesandfuelsare
commercialized,however,petroleumwillcontinuetobetheprimaryfuelsourceforCalifornias
vehicles.Thestatewillneedtoenhanceandexpanditsexistingpetroleuminfrastructure,
particularlyatinstatemarineports,aswellasitsalternativefuelinfrastructure.
SincetheEnergyCommissionpublishedthe2007IEPR,additionalactionshavebeentakento
encouragealternativeandrenewablefuels.TheLowCarbonFuelStandardhasbeenputin
placetolowerthecarboncontentoftransportationfuelsoverthenext10years.Thefederal
governmenthasgrantedawaiverallowingCaliforniatosetemissionslevelsunderthestates
PassengerMotorVehicleGreenhouseGasEmissionStandardsandissettingconsiderably
highernationalfueleconomystandardsbasedonCaliforniasregulations.Thestatehascreated
theAlternativeandRenewableFuelandVehicleTechnologyProgram,acomprehensive
fundingprogramtostimulatethedevelopmentanddeploymentofinnovative,lowcarbonfuels
andadvancedvehicletechnologies.
244
Withtheseandotherdirectives,theEnergyCommissionbelievesthatCaliforniaiswell
positionedtodevelopasystemofsustainable,clean,andalternativetransportationfuels.The
stateshouldcontinueonitspresentcourseofactionbyprovidingresponsibleagencieswiththe
timeandfundingtoimplementtheseprograms.Enactmentofcomplementaryfederal
transportationfuelandvehicletechnologyprogramsandfinancialincentiveswouldaccelerate
innovationsinlowcarbonfuelsandadvancedvehicletechnologies.
Inaddition,theEnergyCommissionrecommends:
Tomaintainenergysecurity,stateandlocalagenciesneedtoensurethatthereisadequate
infrastructureforthedeliveryoftransportationfuels.Thestateshouldmodernizeand
upgradetheexistinginfrastructuretoaccommodatealternativeandrenewablefuelsand
vehicletechnologiesastheyaredevelopedandtoaddresspetroleuminfrastructureneedsto
preservepastinvestmentsandtoexpandthroughputcapacityinthestate.
TheEnergyCommissionwillcollaboratewithpartneragenciesandstakeholderstodevelop
policychangestoaddressregulatoryhurdlesandpriceuncertaintyforalternativefuels,
particularlybiofuels,inCalifornia.
Californiashouldsupportthedevelopmentofalternativeandrenewablefuelsthatcan
provideimmediateGHGemissionreductionbenefitsandabridgetotheintroductionof
fuelsthatwillresultindeeperGHGemissionreductionsinthefuture.
Transportationenergyefficiencyshouldbepursuedthroughincreasedfederalvehiclefuel
economystandardsandmoresustainablelandusepractices,inconjunctionwithlocal
governments.
ThestatesBioenergyInteragencyWorkingGroupshouldcontinuetocoordinatetheefforts
ofstategovernmentinordertomaximizetheuseofCaliforniasabundantwastestream,
includingagriculturalwaste,municipalsolidwaste,andforestwaste,toproduceenergyfor
transportationusesinasustainablemanner.Theworkinggroupshouldexamine
appropriateforestthinningandfireriskreductionstrategiesthathavethepotentialtocreate
largevolumesofwoodybiomasswastematerialsthatcanbeusedasafeedstockfor
transportationfuels,butthatalsoensurethesustainabilityofCaliforniasprivateandpublic
landsforests.
TheBioenergyInteragencyWorkingGroupshouldinvestigateanddevelopeconomic
methodsforthesustainableharvestandtransportofwoodybiomassmaterials.
TheBioenergyInteragencyWorkingGroupshouldexaminelocalpermitandenforcement
activitiestohelpensurethatbiofuelinfrastructureisinstalledinamannertomeetgrowing
demandforrenewablefuels.TheWorkingGroupshouldexaminethefeasibilityof
requiringthatnewbuildingcodestandardsforallgasolineanddieselrelatedequipment
(undergroundstoragetanks,dispensers,associatedpiping,andsoon)beE85andB20
compatibleforconstructionofanynewretailstationsorreplacementofanygasolineand
dieselrelatedequipmentbeginningJanuary1,2011.
245
Recommendations for Land Use and Planning

Landuseplanningandinvestmentdecisionsaremadeatthelocalgovernmentlevel.
Communitydesigndecisionsimpacttransportationchoices,energyconsumption,andGHG
emissions.The2006IEPRUpdatestatedthatthesinglelargestopportunitytohelpCalifornia
meetitsstatewideenergyandclimatechangegoalsresideswithsmartgrowth.The2007IEPR
furthernotedthattoreduceGHGemissions,Californiamustbeginreversingthecurrent
2percentannualgrowthrateofvehiclemilestraveled.
TheEnergyCommissionisoneofmanystateagenciesworkingproactivelywithlocaland
regionalgovernmentstofostersustainablelanduseplanningandinvestmentdecisions.
CaltranscoordinatesregionalandstateplanningthroughitsRegionalBlueprintPlanning
Program.SB375(Steinberg,Chapter728,Statutesof2008)requirestheARBtosetregional
emissionsgoalsbyworkingwithmetropolitanplanningorganizations.SB732(Steinberg,
Chapter729,Statutesof2008)recognizedtheneedforstateagenciestoworkmoreclosely
togetheronlanduseissueswhenitcreatedtheStrategicGrowthCouncil,acabinetlevel
decisionmakingbodycomposedofagencysecretariesfromBusiness,Transportationand
Housing;CaliforniaHealthandHumanServices;theCaliforniaEnvironmentalProtection
Agency;andtheCaliforniaNaturalResourcesAgency,alongwiththedirectorofthe
GovernorsOfficeofPlanningandResearch.
Inaddition,SB732authorizedtheStrategicGrowthCounciltoprovide$90millionin
Proposition84fundstolocalandregionalgovernmentsforplanninggrantsandplanning
incentivestoencouragethedevelopmentofregionalandlocallanduseplansthataredesigned
topromotewaterconservation,reduceautomobileuseandfuelconsumption,encourage
greaterinfillandcompactdevelopment,protectnaturalresourcesandagriculturallands,and
revitalizeurbanandcommunitycenters.
Thesestatepoliciesrequirestateagenciestocoordinatemorecloselyandtoprovidebond
fundingtohelplocalgovernmentsachievethebenefitsofcoordinatedlanduseplanningand
sustainableeconomicdevelopment.Stategovernmentmustactivelyengagewithlocal
governmentstobetterunderstandtheproblemstheyfacebeforeadoptingnewstatepolicies.
Thisincludestakingintoaccountandaddressingthefiscalconstraintslocalgovernmentsfacein
thesechallengingeconomictimes.
TheEnergyCommissionmakesthefollowingrecommendationsrelatedtolanduseplanning
anddecisions:
ToreduceenergyuseandsupportthetransportationGHGreductiongoals,stateagenciesin
collaborationwiththeStrategicGrowthCouncilandlocalandregionalgovernmentswill
continuetoconductresearch,developanalyticaltools,assembleeasytousedataand
provideassistancetolocalandregionalgovernmentofficialstohelpthemmakeinformed
decisionsaboutenergyopportunitiesandundertakesustainablelandusepractices,while
recognizingthedifferentneedsofruralandurbanregions.TheStrategicGrowthCouncilis
uniquelypositionedtocoordinatethemanyissues,programs,andactivitiesofitsmembers
246
andthoseofotherstateagenciessuchastheEnergyCommission,CaliforniaDepartmentof
Transportation,andtheARB.Theseissuesincludeenergyefficiency,renewableenergy
development,andenergysupply.
Locallanduseplannersshouldhaveaccesstoeasytousetoolstohelpthemmakeinformed
decisionsaboutenergyconcernsandGHGreductions.Tothatend,theEnergyCommission
willreviseandmarketeditionsofitsEnergyAwarePlanningGuideanditsEnergyAware
EnergyFacilitiesPlanningGuide,documentsthatdetailtheimportanceofenergyinlocal
planningprocessesandexplainenergyinfrastructurelicensingprocesses.TheEnergy
Commissionwillalsohelpmarketanddistributeenergytoolscreatedinpartnershipwith
theSanDiegoAssociationofGovernments.TheseincludetheSustainableRegionProgram
ActionPlanandToolkit,aguidetodevelopingenergymanagementplansandimplementing
costsavingenergymeasures;theAlternativeTransportationFuelsandVehiclesProgramStudy,
areportshowinglocalgovernmentsandregionalstakeholdershowtheSanDiegoregion
planstoincreasepenetrationofalternativefuelvehiclesandinfrastructure;theRegional
EnergyStrategy2030Update,whichincludesahowtoguideforcreatingamodelregional
energyplan;andtheRegionalClimateActionPlan,ahowtoguideforamodelregional
climateplan.
Thestateshouldrecognizethatruralandurbanregionsdifferandensurethatnew
sustainability,GHG,andenergyrequirementsreflectthesedifferences.
TheStrategicGrowthCouncilshouldresearchandrecommendacomprehensiveandstable
fundingsourcetosupportfurthereffortsbylocalandregionalgovernmentstoprepareand
implementlandusepoliciesandinvestmentsconsistentwiththerequirementsofAB32that
contributesignificantlytoachievingthestates2050GHGreductiontarget.
Recommendations for Carbon Capture and Sequestration

CaliforniawillneedinnovativestrategiestoaddressGHGemissionsassociatedwithenergy
productionanduse.Onesuchstrategyiscarboncaptureandstorage,alsoknownascarbon
captureandsequestration.The2007IEPRfocusedongeologicsequestrationstrategiesforthe
longtermmanagementofcarbondioxide,buttherehavebeenencouragingtechnology
advancementsandinvestmentssincethen.Technologydevelopersandpolicymakerswhoare
examiningcarboncaptureandsequestrationapplicationshaveexpandedfromaninitialfocus
oncoalandpetroleumcoketonaturalgasandrefinerygas,thepredominantfossilfuelsusedin
Californiapowerplantsandindustrialfacilities.
Theexpectationthatmorenewwesternpowerplantsmayrelyonnaturalgashasexpandedthe
emphasisonCO2captureandstorageresearch,development,anddemonstrationstoinclude
naturalgascombinedcycleplants.Similarly,CaliforniasLowCarbonFuelStandardcouldlead
toapplicationofCO2captureandstorageinconjunctionwithnaturalorrefinerygasfired
furnaces/heaters,boilers,andsteam/powercogenerationunits.Timelyresolutionofissues
surroundingcarboncaptureandsequestrationprojectsisimportantbecauseseveralCalifornia
projectproposalshavebeenawardedsupportfundingfromtheU.S.DepartmentofEnergy,
247
withfundingandassociatedjobscreationdependentonprojectsbeingabletoproceed
expeditiously.
TheEnergyCommissionrecommendsthefollowing:
Asamechanismforachievingstateenergyandenvironmentalobjectives,theEnergy
Commissionwillcontinuetosupportandconductcarboncaptureandsequestration
researchtodemonstratetechnologyperformanceandfacilitateinteragencycoordinationto
developthetechnicaldataandanalyticalcapabilitiesnecessaryforestablishingalegaland
regulatoryframeworkforthistechnologyinCalifornia.
TheLegislatureshouldestablishthenecessarylegalstructuretoenableefficientmeansof
siteaccessforcarboncapturesequestrationprojectssimilartolegislationinotherstatesthat
hasbeenestablishedtoclarifyordefineownershiprightsfortheporespacewithingeologic
formationsthatcouldstoreCO2onalongtermbasisasaGHGmitigationmeasure.The
Legislatureshouldalsoadoptlimitedtermmeasurestoaddresslegalambiguitiesorbarriers
thatcouldhinderearlycarboncaptureandsequestrationprojects.
248
249
Acronyms
AB AssemblyBill
ARB CaliforniaAirResourcesBoard
ARRA AmericanRecoveryandReinvestmentActof2009
Bcf/d billioncubicfeetperday
BDT/y bonedrytonsperyear
BLM BureauofLandManagement
Cal/EPA CaliforniaEnvironmentalProtectionAgency
CaliforniaISO CaliforniaIndependentSystemOperator
Caltrans CaliforniaDepartmentofTransportation
CCS carboncaptureandsequestration
CED CaliforniaEnergyDemand
CEQA CaliforniaEnvironmentalQualityAct
CHP combinedheatandpower
CNG compressednaturalgas
CO carbonmonoxide
CO2 carbondioxide
CPCN CertificateofPublicConvenienceandNecessity
CPUC CaliforniaPublicUtilitiesCommission
CREZ CompetitiveRenewableEnergyZone
CTPG CaliforniaTransmissionPlanningGroup
DOE (UnitedStates)DepartmentofEnergy
DOF DepartmentofFinance
DRECP DesertRenewableEnergyConservationPlan
EISA EnergyIndependenceandSecurityActof2007
EPBD EnergyPerformanceofBuildingsDirective
EU EuropeanUnion
EV electricvehicle
FERC FederalEnergyRegulatoryCommission
FEV fullelectricvehicle
FFV flexfuelvehicle
GHG greenhousegas
GSP grossstateproduct
GW gigawatt
GWh gigawatthour
HVAC heating,ventilation,andairconditioning
HERS HomeEnergyRatingSystem
IEC InternationalElectrotechnicalCommission
IEPR IntegratedEnergyPolicyReport
250
INPO InstituteforNuclearPowerOperations
IOUs investorownedutilities
ISFSI independentspentfuelstorageinstallations
kWh kilowatthour
LADWP LosAngelesDepartmentofWaterandPower
LCFS LowCarbonFuelStandard
LIEE lowincomeenergyefficiency
LNG liquefiednaturalgas
LTTP LongTermProcurementPlan
Mcf thousandcubicfeet
MMcf/d millioncubicfeetperday
MSW municipalsolidwaste
MW megawatt
NOx nitrogenoxide
NRC NuclearRegulatoryCommission
OpenADR OpenAutomatedDemandResponse
OTC oncethroughcooling
PG&E PacificGasandElectricCompany
PHEV pluginhybridelectricvehicle
PIER PublicInterestEnergyResearch
PM particulatematter
PURPA PublicUtilityRegulatoryPoliciesActof1978
PV photovoltaic
RD&D research,development,anddemonstration
REAT RenewableEnergyActionTeam
REC renewableenergycredit
RETI RenewableEnergyTransmissionInitiative
RFS RenewableFuelStandard
RPS RenewablesPortfolioStandard
SB SenateBill
SCAQMD SouthCoastAirQualityManagementDistrict
SCE SouthernCaliforniaEdisonCompany
SDG&E SanDiegoGas&ElectricCompany
SMUD SacramentoMunicipalUtilityDistrict
SoCalGas SouthernCaliforniaGasCompany
SolarPEIS SolarProgrammaticEnvironmentalImpactStatement
SONGS SanOnofreNuclearGeneratingStation
SWRCB StateWaterResourcesControlBoard
U.S.EPA UnitedStatesEnvironmentalProtectionAgency
WECC WesternElectricityCoordinatingCouncil
WGA WesternGovernorsAssociation

251
Index
AmericanRecoveryandReinvestmentActof2009,22,36,
37,73,81,82,109,166,171,194,203
ARRA.SeeAmericanRecoveryandReinvestmentActof
2009
AssessmentofCaliforniasNuclearPowerPlants
AB1632Report,9,31,111,113,114,115,117,118,
119,120,123,238
AssessmentofCaliforniasNuclearPowerPlants:AB1632
Report,9
B20,146,158,244
forecastofdemandfor,146
BigBoldEnergyEfficiencyStrategies.SeeCaliforniaPublic
UtilitiesCommission
Biodiesel
"fairshare",154
averageblendingconcentration,154
blendingcredit,152
consumptiontrends,150
exports,152
productioncapacity,152
RenewableFuelStandardand,150
supplyoutlook,152
BioenergyActionPlan,23,25,35,163,233
Biomass,6,23,25,26,45,48,49,77,78,82,83,84,85,91,
165,167,168,187,195,196,197,198,233,234,235,
244
Biomethane,6,36,82,166,171
CaliforniaPublicUtilitiesCommission
BigBoldEnergyEfficiencyStrategies,20,59,72,186
LongTermEnergyEfficiencyStrategicPlan,20
LongTermProcurementPlanprocess,53,59,174,178,
186,211,212,214,215
CaliforniaSolarInitiative,8,27,28,61,64,87,95,209
CaliforniaTransmissionPlanningGroup,127,128,129,
130,201,221,222
Capandtrade,110
Carbondioxide
captureandstorageresearch,246
capturesystems,108
CostofGenerationmodeland,89
definitionofcosteffectiveenergyefficiencyand,71
EmissionsPerformanceStandardand,31
externalityvalueinefficiencyprogramsand,71
injection,109
paymentsforcombinedheatandpower,102,103
reductiongoalsforcombinedheatandpower,27,97,
236
reductionpotentialfromnewcombinedheatand
power,103,236
reductionsfromenergyefficiency,54
savingsfromindustrialefficiency,68
sequestrationandCEQA,110
sequestrationandenhancedoilrecovery,110
sequestrationof,16,108,109,246
sequestration,ARRAfundingfor,167
sequestration,costof,109
sequestration,liabilityissues,109
sequestration,offshore,110
sequestration,porespacerightsand,109
vehicleemissionstandardsand,15
Cellulosicethanol,150
CHP.SeeCombinedheatandpower
CleanWaterAct(1972),30,210
ClimateActionTeamBiennialReporttotheGovernorand
Legislature,19
ClimateChangeScopingPlan,8,19,20,27,29,33,50,54,
57,58,59,60,76,88,97,98,109,175,185,190,192,
213,231,236
CNG.SeeCompressednaturalgas
CO
2
.Seecarbondioxide
Combinedheatandpower
"musttake"resources,190
breakdownbysector,96
breakdownbysize,fuel,andtechnology,96
ClimateChangeScopingPlangoals,8,97
CO2paymentsand,102
contributiontostateelectricitysupply,49
economiccompetitiveness,106
effectoftargetsonlocalcapacityandenergyneeds,
190
effectoftargetsonnewgasunitsneededtosupport
intermittentrenewables,190
effectoftargetsonrenewablenetshort,187
effectonnaturalgasconsumption,191
effectonrenewablegoals,88
efficiencyrequirements,97
feedintariffsand,205
greenhousegasemissionreductionsand,97,103,104,
185
installedcapacity,95
loadingorderand,95
marketpenetrationanalysisresults,101
marketpotential,100,101
overgenerationand,192
potential,98,100
powerexportand,102
reliabilityand,105
renewable,97
roleinintegratingrenewables,197
SelfGenerationIncentiveProgramand,102
technicalpotential,98
technicalpotentialbymarketsector,99
technicalpotentialinLADWPservicearea,99
technicalpotentialinPG&Eservicearea,99
technicalpotentialinSCEservicearea,99
tranmissionand,98
wastewatertreatmentfacilitiesand,96,97,236
wateruseand,97
252
Competitiverenewableenergyzones,25,127,129,200
Compressednaturalgas,37,42,141,146
registeredlightdutyvehicles,158
vehiclerefuelingoptions,158
vehicles,158
vehiclesingovernmentfleets,158
vehicles,buses,158
CostaAzulLNGTerminal,134
CREZ.SeeCompetitiverenewableenergyzones
Crudeoil
importforecast,148
importinfrastructure,155
imports,148
offshoreproductionpotential,148
refineries,147
refinerycapacityand,147
supplysourcesforCaliforniarefineries,148
Crudeoilproduction
declinein,147
CSI.SeeCaliforniaSolarInitiative
CTPG.SeeCaliforniaTransmissionPlanningGroup
Demandforecast
annualgrowthrates,electricity,3
demographictrends,3
electricityconsumption,3
electricityintransportationsectorand,161
peakdemand,3
transportation,146
Demographictrends
electricitydemandforecastand,3,52
transportationfueldemandforecastand,14,146,147
DepartmentofFinance,146
DesertRenewableEnergyConservationPlan,7,23,25,81,
82,233
DiabloCanyonNuclearPowerPlant,9,10,29,48,111,
112,113,114,117,118,119,120,123,125,238,239,
240
Diesel
historicdemand,149
reductioninaveragedailysales2009,150
Dieselfuel
importsof,149
DOF.SeeDepartmentofFinance
DRECP.SeeDesertRenewableEnergyConservationPlan
E10,153
E15,153
E85,37,153,156,157,158,244
demandforecast,153
forecastofdemandfor,146
Efficiency
"BigBoldEnergyEfficiencyStrategies",20,59,72,186
2008BuildingEfficiencyStandards,4
2009ApplianceEfficiencyRegulations,4
AB2021and,20,21,69,186,229,230
AchievingCostEffectiveEnergyEfficiencyforCalifornia
SecondAnnualAB2021ProgressReport,21
committed,52
contributiontoreducingpercapitaelectricityuse,4
demandforecastand,3,52
demandforecast,incrementalsavingsto,5,230
goals,4
importancetoelectricitysector,3
loadingorderand,1
progressbyinvestorownedutilities,21
progressbypubliclyownedutilities,21
PublicInterestEnergyResearchprogramand,21
transportationfuels,2
uncommitted,52
zeronetenergy,4,5,20,57,59,60,62,72,186,205,
226,227
ElPasonaturalgaspipeline,132
ElectricVehicleCounts
FEVsbyCaliforniacounty,161
Electricvehicles
batterycostandperformanceissues,170
FEVs,160,165,170
FEVsbyCaliforniacounty,160
forecastforSCEservicearea,160
infrastructurebarriersto,160
marketbarriersto,170
neighborhood,160
PHEVs,160,170
pluginhybrids,161
rechargingstations,161
Electricity
demandforecast,3,51,52
demandforecast,consumption,52
demandforecast,demographicscenarios,53
demandforecast,directaccessand,53
demandforecast,economicscenarios,53
demandforecast,incrementalsavingsto,58,59
demandforecast,LongTermProcurementPlanand,58
demandforecast,methodsanddatasources,136
demandforecast,models,56,57
demandforecast,peak,54
demandforecast,peakdemand,52
demandforecast,utilityprogrammeasurepenetration
in,58
transportationapplications,146
EnergyActionPlan,19,23,95,177,184,185,217
EnergyAwarePlanningGuide,72
Ethanol,37,151
AlternativeandRenewableFuelsandVehicle
TechnologyProgramInvestmentPlanand,36
blendwall,153
Brazil,152
demand,153
demandfor,151
E85,146
importsof,152
Midwest,152
oversupply,151
productioncapacityinCalifornia,38
productioncapacityinU.S.,151
productioneconomics,37
RenewableFuelStandardand,35,150
253
transportationfueldemandforecastand,150
FederalEnergyRegulatoryCommission,130,131,201,208
landpurchasecostrecoveryand,131
Order890,129
transmissionandcostallocationauthority,201
transmissionsitingandcostallocationauthority,130
FERC.SeeFederalEnergyRegulatoryCommission
FFCA.Seefullfuelcycleassessment
Fullfuelcycleassessment,163,164,166
GasTransmissionNorthwestpipeline,132
Gasoline
annualconsumptionforecast,150
historicdemand,149
imports,forecastof,149
reductioninaveragedailysales2009,150
GeologicCarbonSequestrationStrategiesforCalifornia:
ReporttotheLegislature,108
Geothermal,6,45,48,83,84,85,187,195,219
GHGemissions.Seegreenhousegasemissions
greenbuildingstandards,60,64
Greenhousegasemissions
benefitcredits,171
benefitsofcodigestionofwaste,97
biodieseland,165
CaliforniaEnvironmentalQualityActand,39,219
carboncaptureandsequestrationand,108
cellulosicethanoland,165
coalplants,219
coalplantsand,50,207
combinedheatandpowerand,8,27,49,97,236
cornbasedethanoland,164
distributedresourcesand,197
distributionsystemand,235
efficiencyand,3,54,55,59,226
efficiency,avoidedemissionsand,72
electricitysectorand,173,185,210
fullelectricvehiclesand,165
fullfuelcycleanalysisand,163
hybridvehiclesand,37
hydrogenfueland,166
indirect,163
industrialsectorand,68
landuseplanningand,15,38
loadingorderand,19
localgovernmentsand,72
manufactureofnewvehiclesand,166
methaneand,138
naturalgasand,138
naturalgasplantsand,47,107,110,178,219
naturalgasvehiclesand,165
nuclearplantsand,48,111,115
oilandgasextractionand,29
Pavleyregulationsand,36
propanefueland,166
PublicInterestEnergyResearchProgramand,38
reductiongoal,1,18,214,225
renewableenergyand,6,75,230
savingsfromcombinedheatandpower,104
SelfGenerationIncentiveProgramand,28,102
SenateBill375and,36
shalegasand,137
sugarcanebasedethanoland,165
sustainabilityand,171
tracking,203
transportationsectorand,1,13,14,34,37,38,145,
214,243
wastewatertreatmentplantsand,237
zeronetenergybuildingsand,59
grossstateproduct,147
GSP.Seegrossstateproduct
Hydrogenvehicles,162
refuelingstations,163
Jetfuel
demandtrendsfor,150
importsof,149
Landuse
RenewableEnergyTransmissionInitiativeand,6
StrategicTransmissionInvestmentPlanand,10
transportationefficiencyand,15
LCFS.SeeLowCarbonFuelStandard
Legislation
AssemblyBill1007(2005),14,35,146,170
AssemblyBill109(2008),35
AssemblyBill1103(2007),67,228
AssemblyBill1109(2007),4,56,63
AssemblyBill118(2007),2,14,35,36,37,146,170
AssemblyBill1318(2009),29,176,177,181,184
AssemblyBill1493(2002),2,14,34,36,146
AssemblyBill1613(2007),27,95,97,102
AssemblyBill1632(2006),9,10,29,31,111,114,115,
118,121,125
AssemblyBill2021(2006),20,21,58,69,186,229,230
AssemblyBill32(2006),ix,1,14,18,19,20,23,34,45,
46,76,98,108,109,110,146,175,177,178,190,
218,230
AssemblyBill380(2005),50,206
SenateBill1(2006),27,86
SenateBill1059(2006),31,125,127
SenateBill107(2006),23
SenateBill1078(2002),23,24
SenateBill1368(2006),29,31
SenateBill1389(2002),i,212,214
SenateBill1565(2004),31,32,125
SenateBill375(2008),15,36,39,40
SenateBill412(2009),28,102
SenateBill695(2009),53,74,215
SenateBill827(2009),30,176,177,181,184
254
Liquefiednaturalgas
facilities,134
LNG.Seeliquefiednaturalgas,SeeLiquefiednaturalgas
Loadingorder,ix,1,5,19,23,42,54,75,95,126,140
LowCarbonFuelStandard,19,35,146,152,154,155,163,
164,167,170,250
LTPP.SeeCaliforniaPublicUtilitiesCommissionLongTerm
ProcurementPlanprocess
Metropolitanplanningorganizations,15,36,39,40
MoodysEconomy.com,146
Naturalgas
Californiaproductionof,131
Californiareceiptsbysource,132
contributiontoCalifornia'senergyrequirements,131
corecustomers,135
cyclingcapabilities,SoCalGas,134
demandforecast,52
demandforecast,models,57
demandoutlook,135
distributionbyutilitycompanies,133
effectondemandfromrenewablegeneration,137
efficiencyand,136
electricitygenerationand,135,137
forecastofenduserdemand,136
formations,134
interstatepipelinesystem,132,133
liquefiednaturalgassupplies,134
mapofresourceareasandpipelines,133
noncorecustomers,135
outofstatedeliveryof,132
outofstateimportsof,131
projectedannualgrowthinconsumption,136
residentialsectoruseof,135
shaleformations,137
shalegasasnewsupplyof,134
shalegasproductioninLower48,135
storage,134
supplyoutlook,131
supplysources,131
transportationfuelforecast,159
U.S.productionof,131,132
unconventionalreservesof,131
vehiclefuelingstations,158
winterpeakdemandtrends,136
NewSolarHomesPartnership,8,27,61,62,64,87,95
NSHP.SeeNewSolarHomesPartnership
Nuclear
seismicvulnerabilitystudies,10
tsunamihazardstudies,10
Nuclearplants
safetycultureand,112,114,121,122,123,239
Offshoreoilproduction,148
OuterContinentalShelf,148
drillingmoratoriumand,148
PacificEthanolInc.,37
Petroleum,147
Petroleuminfrastructure,154,155
Photovoltaic,22,26,49,84,85,89,91,137,173,175,232
PIER,202,205,SeePublicInterestEnergyResearch
Program
Pier400,Berth408,155
Pluginhybridelectricvehicles,161
Population
growthforecast,146
Populationgrowthprojections,146
PublicInterestEnergyResearchProgram,204
automateddemandresponse,195
climatechange,84
efficiency,21,61
energystorage,194,195
landuseplanning,40
loadmanagementstandardsand,229
renewableenergy,26,234
renewableintegrationand,205
smartgrid,21,202,204
solarforecastingtoolsand,232
transmission,130
TransmissionResearchProgram,26,32
transportation,38,158
vehicletechnologies,160
windforecastingand,197
PublicUtilityRegulatoryPoliciesActof1978,48
PURPA.SeePublicUtilityRegulatoryPoliciesActof1978
QuestarsSouthernTrailsnaturalgaspipeline,132
Recommendations
buildingandappliancestandards,227
carboncaptureandsequestration,16,246
combinedheatandpower,8,236
coordinatedelectricitysystemplanning,242
demandresponse,229
distributedgeneration,235
efficiencyinexistingbuildings,227
efficiencyinthedemandforecast,230
electricityresourceplanning,11
energyefficiency,4,226
existingrenewablefacilities,233
landuseandplanning,16,245
naturalgassector,13,242
newrenewablefacilitiesandtransmission,233
nuclear,10,238
publiclyownedutilityefficiencyprograms,228
renewablecombinedheatandpower,237
renewableelectricityresources,7
renewablefeedintariffs,234
renewableintegration,231
RenewablesPortfolioStandardtargets,231
transmission,11,240
transportationsector,14,243
zeronetenergybuildings,226
RECs.SeeRenewableenergycredits,SeeRenewable
energycredits
Refinerycreep,147
forecastof,147
RegionalTransportationPlans,39
Renewable energy certificates,79
Renewableenergycredits,24,79,80
255
RenewableEnergyProgram,23,24,26,87
RenewableEnergyTransmissionInitiative,ix,6,7,23,24,
25,81,89,92,126,127,128,129,130,188,198,199,
200,201,202,211,221,222,233
RenewableFuelStandard,vii,35,36,146,150,151,152,
153,155,156,250
RenewablesPortfolioStandard,1,18,75,202
AirResourcesBoardand,76
bioenergyand,196,199
CaliforniaISOstudieson,26
certificationofeligiblefacilities,24
challengestomeeting,230
climatechangegoalsand,33
combinedheatandpowerand,237
contractedcapacity,24,76
contractedcapacityonline,24,76
contractsunderreview,24,76
contributiontogreenhousegasemissionreductions,76
costsofimplementation,89
CPUCstudyon33percentrenewablesand,88
deliveryrequirements,80
deliveryrequirementsinotherstates,79
distributedresourcesand,198
efficiencyand,62,185,217
electricserviceprovidersand,24
eligibilitycriteria,77
enablinglegislation,23
EnergyActionPlanand,23
energyneededtomeet33percenttarget,76,187,207
ExecutiveOrderS0606and,23,82,196
ExecutiveOrderS1408and,23,200
ExecutiveOrderS2109and,23
expansionofeligibletechnologies,77
feedintariffsand,25,26,92
Governor'sExecutiveOrdersand,1
implementationof,24
integrationchallenges,187
IntegrationofRenewableResourcesProgramand,26
investorownedutilitycontractsand,24
largehydroelectricfacilitiesand,83
multijurisdictionalutilitiesand,24
municipalsolidwasteand,77
naturalgasplantsand,47
naturalgaspowerplantsand,107
numberofapprovedcontracts,24,76
outofstatefacilitiesand,78,207
photovoltaicsand,199
potentialimpactsonnaturalgasuse,190
programsinotherstates,79
publicgoodschargefundingand,90
PublicInterestEnergyResearchProgramand,205
publiclyownedutilitiesand,24,75,199
recommendations,231
renewableenergycreditsand,80
RenewableEnergyProgramand,87
requirements,75
SB107and,23
smallhydroelectricfacilitiesand,83
strategytoachievegreenhousegasemission
reductions,209
targets,5
trackingandverification,87
tradablerenewableenergycreditsand,80
transmissionand,10,24,32,126,127,130,201,240
unbundledrenewableenergycreditsand,80
utilityprogresstoward,24
verificationofprocurement,24
WesternRenewableEnergyGenerationInformation
Systemand,87
Resourceadequacy,50,177,187,206,209,212,213,215
RETI.SeeRenewableEnergyTransmissionInitiative
RFS2.SeeRenewableFuelStandard
RPS.SeeRenewablesPortfolioStandard
RTPs.SeeRegionalTransportationPlans
SanOnofreNuclearGeneratingStation,9,10,29,31,48,
111,112,113,114,117,118,119,120,121,122,123,
238,239,240
SCAQMD.SeeSouthCoastAirQualityManagement
District
SelfGenerationIncentiveProgram,101,102,103,106,237
SESAT,58
SGIP.SeeSelfGenerationIncentiveProgram
Smartgrid
AmericanRecoveryandReinvestmentActand,22
contributiontowardstateenergypolicygoals,203
demandresponsecapabilityand,75
deploymentplan,32,204
distributionsystemand,204
energyefficiencyand,203
energystorageand,195
federalfundingforCalifornia,203
funding(AmericanRecoveryandReinvestmentActof
2009),203
greenhousegasemissiontrackingand,203
interoperabilityand,204
investmentsneededin,208
nationaleffort,203
PublicInterestEnergyResearchProgramand,21,202
renewableforecastingand,197
renewableintegrationand,26
researchanddevelopment,204
roleinintegratingrenewables,202,203
transportationelectrificationand,203
SoCalGas.SeeSouthernCaliforniaGasCompany
SONGS.SeeSanOnofreNuclearGeneratingStation
SouthCoastAirQualityManagementDistrict,77
AB1318and,29,177
airpermittingissuesin,176
biomassplantsand,82
CaliforniaEnvironmentalQualityActand,179
effectofcriteriapollutantlimitsonnewnaturalgas
plants,189
ElSegundopowerplantand,181
emissionreductioncreditsand,1,107,178,216,242
LosAngelesDepartmentofWaterandPowerand,184
powerplantsimpactsbyaircreditrestrictions,179
256
priorityreserverule,176,178
priorityreserverule,courtchallengeto,179,181,184
priorityreserverule,effectonreliability,179
publiclyownedutilitiesand,184
Rule1309.1and,178
SB827and,30,177,181
SouthernCaliforniaEdisonand,182
WalnutCreekEnergyCenterand,181
SouthernCaliforniaGasCompany,133,134,135
StateAlternativeFuelsPlan,163
StrategicTransmissionInvestmentPlan,31,211,221,222,
242
2007,126,130
2009,10,11,32,78,126,127,128,129,199,207,221,
240
Title24BuildingEfficiencyStandards,60,61,64,65,71,
227
Transportation
aviationsector,147
biodiesel,150
biodieselblendingcredit,152
biodieseldemand,150
biodieselexports,152
biodieselproduction,152
biodieselsupplyoutlook,152
cellulosicethanol,150
compressednaturalgasfueland,37
consumptiontrends,149
crudeoilimportforecastand,148
demandforecast,146
demandforecast,demographictrendsand,146
dieselimportforecast,149
E10,153
E15,153
E85,153
electricvehicles,160
electricityforecastand,161
ethanol,150
ethanolblendwall,153
ethanolconsumptiontrends,150
ethanoldemand,151
ethanoldemand,153
ethanolimports,152
freightsector,147
fueldemandforecast,14,146,147
fueldemandforecast,gasoline,151
fueldemandforecast,modelsusedin,146
fuels,crudeoilimportsand,148
fuels,crudeoilproductionand,147
fullfuelcycleassessment,163
gasolineimportforecast,149
growthintraveldemand,147
hydrogenvehicles,162
impactofrecessionon,147
infrastructureadequacy,154
jetfuelforecast,149
LowCarbonFuelStandard,19,35,146,152
naturalgasdemandand,159
naturalgasfuelingstations,158
petroleuminfrastructure,154,155
renewablefuelfeedstocks,150
RenewableFuelStandardrequirements,151
supplyforecast,146
TransportationEnergyForecastsandAnalysesforthe
2009IntegratedEnergyPolicyReport,147
TransportationEnergyForecastsandAnalysesforthe2009
IntegratedEnergyPolicyReport,147
Transwesternnaturalgaspipeline,132
UnitedStatesEnvironmentalProtectionAgency,30,36,
37,110,151,152,153,181
WESTCARB,109
WesternGovernorsAssociation,130,201
WGA.SeeWesternGovernors'Association
Wind,6,26,28,45,48,83,84,85,86,89,91,137,187,
189,190,191,192,193,196,197,207,232,235
YuccaMountain,115,116,117,239

2009 Integrated Energy Policy

Caricato da

Informazioni sul documento

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

2009 Integrated Energy Policy

Caricato da

Copyright:

Formati disponibili

CALIFORNIA

Source: California Energy Commission

Source: California Energy Commission

Nuclear Power Plants

Chapter 1: Californias Energy-Related Policies and

Natural Gas and Nuclear Power Plants

Land Use and Planning Sector

Source: California Energy Commission, 2009.

Source: California Energy Commission

Figure 3: California Renewable Energy Generation by Technology, 2008

Source: California Energy Commission

Source: California Energy Commission

Figure 6: Projected Statewide Electricity Consumption, CED 2009 Adopted

Source: ICF International

Source: ICF CHP Market Model

Source: ICF CHP Market Model

Source: ICF CHP Market Model

Nuclear Plants and the Environment

Nuclear Plants and the Economy

Transmission and the Environment

Natural Gas Sector

Source: EIA AEO 2009 Early Release.

Figure 14: 2007 California Natural Gas Receipts by Source

Source: 2008 California Gas Report

Natural Gas and the Environment

Source: Natural Gas Intelligence data

Fuels and Transportation Sector

Fuel Supply and Demand

Source: California Energy Commission staff-adjusted Board of Equalization sales data

Source: California Energy Commission

Source: California Energy Commission

Chapter 3: Challenges to Achievement of a Vision for

Issues Affecting the Power Plant Fleet

Effects of Once-Through Cooling Mitigation Policies

Figure 32: Power Plants Affected by Air Credit Limitations

Source: California Energy Commission

Table 8: SCE Capacity Impacted by SCAQMD Rule

Table 10: Staff Planning Assumptions and Reserve Margin Results

Renewables Portfolio Standard Goals

Source: California Energy Commission

2012 2016 2020

Recommendations for the Electricity Sector

Maintaining Existing Renewable Facilities

Recommendations for the Fuels and Transportation Sector

Recommendations for Land Use and Planning

Recommendations for Carbon Capture and Sequestration

Potrebbero piacerti anche