California Brought 8.3 GW Of Renewable Energy Online In 2011; Costs Expected To Drop

Posted by NAW Staff on February 07, 2012 No Comments
Categories : New & Noteworthy

More than 8.3 GW of renewable energy – all of which was sourced from wind energy and solar power – capacity came online in California in 2011, the California Public Utilities Commission (CPUC) reports.

According to the CPUC's report, the state's three investor-owned utilities (IOUs) submitted 68 contracts representing 4.525 GW of renewable energy generation in 2011. During the same time period, the CPUC approved 44 contracts representing 2.461 GW of renewable energy generation.

The CPUC report presents historical data on cost trends since the implementation of the state's renewable portfolio standard (RPS) program. There was an increase in the cost of delivered renewable energy in 2008, which may be explained by two factors.

First, most of the energy came from renewable ‘qualifying facilities,’ whose energy payments fluctuate based on the cost of natural gas, which was very high in 2008. Second, 2008 was a low hydroelectric year, and as a result, low-cost hydroelectric generation did not factor into the average procurement costs to the same extent it did in other years.

In the beginning of the RPS program, utilities contracted with existing renewable energy facilities, allowing for lower costs, the CPUC explains. However, over the course of the RPS program, in order to meet the 20% and 33% targets, IOUs had to contract with new facilities, which require higher contract costs to recover the capital needed to develop a new facility.

The weighted average time-of-delivery adjusted costs of all contracts approved ranged from $0.054/kWh in 2003 to $0.133/kWh in 2011. The weighted average of all contracts approved in this time period was approximately $0.119/kWh. Most recently, bids from the 2011 RPS solicitation, not yet available for inclusion in the report, show significantly lower costs, which will be reflected in future IOU contracts.

Furthermore, contracts approved in 2011 represent contracts that began negotiations in 2009, and the renewable energy market has matured significantly since then – meaning that prices in future years will be even lower.

The overall picture is that the renewable market is robust and competitive, and has matured since the start of the RPS program. Based on the current 2011 RPS solicitation, costs are decreasing, making renewable energy more competitive with fossil fuels, the CPUC report adds.

California's RPS program was established in 2002 under S.B.1078 and was modified in 2006 under S.B.107. It requires IOUs, energy service providers and community choice aggregators operating in California to obtain 20% of their retail sales from renewable energy sources by 2010. In 2011, S.B.2 increased the renewable energy target to 33% by 2020 and required both retail sellers and publicly owned utilities to achieve a 33% RPS.

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