Utilities Must Transform Electricity Infrastructure to Achieve Carbon Emission Reduction Targets

Share with our readers the mission, focus, and audience of the Center for Energy Efficiency and Renewable Technology (CEERT).

We are a hybrid non-governmental organization that draws from the non-profit, public interest, and environmental communities, as well as private sector technology developers. Our focus is on expanding markets and investment in energy efficiency, clean distributed generation, and renewable technologies. We focus on regulatory policy at the California Public Utilities Commission, the city of Los Angeles, and the Los Angeles Department of Water and Power and on working in collaboration with our colleagues on legislation and implementation of state policy, such as: AB 32, renewable portfolio standards, and transmission planning.

What are the current challenges for California in the conservation and renewables marketplace? How are your clients at CEERT approaching these issues?

The challenge for all of us in California, and for the state's leadership, is to turn our rhetoric, goals, and promises into reality. Now that we have set bold targets, the focus needs to shift to turning those dreams into reality and executing on a variety of fronts.

The task before us is to transform California's electric energy infrastructure in a way that will reduce global warming emissions by a significant amount by the year 2020. To get to that goal by 2020, we have to begin now. There are a number of decisions that have to be made. Specifically, making sure that there is adequate transmission available to hook up renewable resources with the grid.

We need to expand the transport system to bring solar resources, but also wind and geothermal, from where they are located, which tends to be within 100-150 miles (as opposed to other parts of the country or the world, where the renewable regions are pretty far from where the people need the energy).

We still have to get the energy to the load centers. We also have to coordinate the scale of the construction and the planning so that we can accommodate these resources without destroying wildlife habitat or ruining wilderness areas that need to be protected, doing so in a fashion that will make bankers willing to lend developers hundreds of millions of dollars to bring these projects on line.

If we're going to get to those goals by 2020, we have to begin today. Our task is a combination of education, advocacy, facilitation, building bridges, getting people to work together that don't always like working together, and ultimately trying to inspire and encourage leadership. I bet we'll get this all done in a fashion that will cause California to be a magnet for billions and billions of dollars in new investment.

What's happening to the coal-fired plants that LADWP has depended on for decades? What intervention strategies make sense, especially in light of the recent U.S. Department of Energy decision to rescind financial support for FutureGen?

Beginning with former Mayor Hahn, the Los Angeles Department of Water and Power stepped back from its huge reliance on coal. Mayor Hahn began that process by writing a letter in 2004 to the owners of the Intermountain Power Project, stating that Los Angeles would no longer be a participant in planning to build the third unit of that coal plant complex. A state law by Senator Perata from 2006 basically closed the door for new long-term commitments to coal. And with the decision last week by EPA on the mercury rule, the prospects for new coal in the West have been greatly diminished.

On the other hand, LADWP and the cities of Anaheim, Burbank, Glendale, and Pasadena are all holding a significant amount of coal in their portfolios. Mayor Villaraigosa has made a very clear commitment to meeting an aggressive schedule of renewable development for the city, beginning with the project he just announced last week up near Mojave, the Pine Tree Project, which is going to be on line next year and will probably be followed by another large project. They are buying and building a significant amount of new renewables and expanding their transmission system to get the power to the load center.

They are also probably in private discussions with financial advisors, investment bankers, and others about how to get the most money for their coal assets. These legal and financial arrangements are delicate and require some care in unwinding. For example, LADWP's former partners have sued the city, arguing that they went back on an agreement to build more units.

We hope to help the department and the other utilities build and rapidly develop new renewable projects and related transmission that the city can own and operate or control and operate. There are tax advantages for doing joint ventures with other parties, because the city is not eligible as a publicly-owned entity to access some federal tax credits. The mayor and the new leadership at the department are deeply committed to moving LADWP in a new direction. Our goal is to push them harder but also to help them where we can.

If the state were to impose the cap-and-trade system this year, what is the likely result, given that the coal assets of the portfolios of munis in the south could lead to an immense transfer of wealth from the south to the north?

That's one of the possible outcomes, although it's not an outcome that I think is likely. The problem from the department is that, if you allocate the emissions based on a historical ownership share, you probably disadvantage the cleaner utilities that have less coal. But if you require them to buy the credits through an auction, you'll have disproportionate impacts on the department and the ratepayers of the city of Los Angeles.

First of all, I'm not convinced that a California-only cap-and-trade system is likely to be imposed. There is a process underway called the Western Climate Initiative that is establishing a regional set of goals that might lead to a regional cap-and-trade with neighboring states. The big problem with a California-only cap-and-trade system is that most of the coal that is in California's portfolio is not located within California. So there are legal questions about what can be done to impose those requirements on out-of-state facilities.

One of the possibilities might, as everyone in Sacramento seems to love, involve market mechanisms. Market mechanisms are just one way of achieving a particular result, and if those market mechanisms have disproportionate equity impacts, there's no reason to necessarily use them.

If the department is going to avoid being penalized and disadvantaged, it's going to have to come up with its own plan for reducing its statewide greenhouse gas contribution in a fashion that's enforceable and would allow them to take the money that they would otherwise have to spend on buying credits in a cap-and-trade system, using that money to green the L.A. department system.

There is a chance that a compliance strategy requiring the department to meet specific emission reduction and renewables targets could be developed as an alternative to a cap-and-trade system. That might end up having unfair and unequal economic impacts on the people of Los Angeles.

What do you think the elements of that alternative proposal might be?

Speaking for myself, I think that the department has historically had very poor performance on its energy efficiency efforts. It has only recently begun deploying a significant amount of renewable resources. Those are going to have to be ramped up and made part of the compliance strategy, as well as a phased reduction-an orderly transition-away from coal. That could be done in a manner similar to the state air quality implementation plan. Instead of being forced into a cap-and-trade system that may or may not ever happen, the department could agree to abide by an alternative strategy by which it will bind itself to achievement of a phased, steady, and enforceable reduction in greenhouse gas emissions that will get to the level of emission reduction that was supposed to be achieved by the cap and trade, but in a fashion that would allow the city of Los Angeles to have more flexibility and more control than would be achieved under a cap-and-trade system.

LADWP has incredible assets in the renewable area in the Mojave, the Tehachapis, and the Salton Sea, and transmission is one of the challenges that the Center has taken. How can LADWP maximize its assets?

First of all, it's going to have to recognize that the days of complete and total independence and a balkanized grid are over. I'll just take the Green Path North as an example. This is the line that they need to bring up from Imperial to get the geothermal resources from the Salton Sea into Los Angeles. There's also significant solar potential in Imperial, as well, and maybe a little wind, also. But the department's traditional posture has been they will not connect to the ISO grid or the Edison system, because they don't want to be burdened with the extra cost, and because they really want, and have always wanted, to be completely independent.

The problem in the case of Green Path North is that once you get to Palm Springs, the only way up to Los Angeles that doesn't involve sharing some of the lines of Southern California Edison is to go through the Morongo Basin in the desert in San Bernardino County. That is going to be very, very expensive and difficult. There is very strong local government and political opposition. There are a lot of desert enviros who are strongly opposed to that approach. San Bernardino County had adopted a resolution.

My hope is that despite the difficulties and the sovereignty and control issues, which are real and important, LADWP can develop an alternative path to move power from Imperial that might involve some sharing of part of some lines with Southern California Edison. Otherwise, I think you're going to have a long and painful fight over building transmission lines across desert wilderness.

On the other hand, I think there are going to have to be fair negotiations between Edison and DWP and the ISO. This is going to require a level of diplomacy that, fortunately, I think, the new leadership at the department is capable of. Whether or not they'll be successful will depend on good will and creativity from all of the parties. But getting power up from Imperial and getting projects underway with geothermal developers in Imperial really requires that they figure out an answer to that problem.

The Owens Rinaldi Line, which brings power down from the Owens Valley, can be expanded. The department is planning to expand that line, which would enable them to bring a significant amount of wind and solar down from the western Mojave and the Tehachapi wind resource area in Kern County.

Let's talk about legislation as a driver of change in the marketplace for renewables. The solar initiative in California has not worked as promised, and a new energy bill just passed at the federal level. What can state and federal initiatives do to encourage renewables in California?

I think it's a little early to say that the California Solar Initiative failed. It is a difficult proposition to provide enough money for solar incentives while at the same time encouraging the industry to cut costs. I think the problem with the solar initiative has been bureaucratic delays and some unnecessary confusion. I'm hopeful that we can still turn that into something that will be successful.

At the federal level, I think it's really appalling how poorly Congress has performed in this area. There is nothing for renewable energy anywhere in the new energy bill, except for ethanol. The provisions that would have required a renewable portfolio standard were dropped. The provisions that would have extended some vital tax credits were dropped. I might point out that Senator McCain was the deciding vote on the tax package for the renewable tax credits. Twice he failed to vote for those measures. The federal government has done virtually nothing to help support California's renewable energy potential.

The top priorities for the renewable energy industry are the continuation of the federal production tax credit for wind, geothermal, and biomass and the extension of the investment tax credit for residential, solar, and large-scale solar plants. The investment tax credit is, in particular, the critical link for many of the projects proposed in the desert using concentrating solar. There was an effort to put an extension in the stimulus package that was recently proposed by the Senate, but those provisions again did not have sufficient votes. We're really at the point where the federal government needs to step up and do something to help, because we're carrying the financial load at the moment.

More important than anything, I think, is for us to signal to these technologies that if the federal government doesn't support them, the state of California is willing to.

You were a speaker at the GreenXchange Global Marketplace Conference, where you addressed business and manufacturing leaders on where these markets were going. Are you bullish on the renewable markets of California?

I am bullish because I don't think we have any other place we can go for the energy supply we need, and because I think that, at some point, the governor is going to step up and intervene. There was a meeting last week in the governor's office that I attended with the environmental community, and from every indication, he is preparing to spend some time and energy focusing on this. Frankly, leadership is what we need right now, and it must come from the governor and the Legislature. The whole world is watching and waiting for us to step forward.

If you come back to the GreenXchange Xpo in October, what will highlight your remarks?

That California ISO, PUC, and municipal utilities have agreed on a highway plan for building new transmission to renewable resource zones-that's there's an agreed-upon plan and it's being implemented. And second, that the utilities have announced multi-year, multi-hundred-megawatt procurements so that the resources needed to meet the state's goal will be in place-if not all on line by 2010, at least underway, so they will be achieved by 2013.