January 1, 2009

Is a Green Future Realistic with an Economy in the Red?

Steven F. Greenwald and jeffrey P. Gray

California Governor Arnold Schwarzenegger recently signed an executive order expanding the state’s renewables portfolio standard (RPS) requirement to 33% by 2020. The executive order formalizes what has been generally assumed for some time: A 33% RPS requirement will be needed for California to achieve its ambitious greenhouse gas (GHG) emissions reduction goals.

The governor’s order, however, comes at a most difficult time. As the call to aggressively address climate change remains strong, the nation and the world community are mired in a recession and credit crisis that poses significant challenges to developing and financing the infrastructure necessary to meet GHG reduction objectives. In the long term, the "greening" of the nation’s generation fleet remains the right policy, but will the current economic exigencies cause the green dream to be again deferred?

In the long term, the "greening" of the nation’s generation fleet remains the right policy.

Huge Investments in New Infrastructure Will Be Needed

In an October status report on California’s RPS program, the California Public Utilities Commission (CPUC) estimated that seven new "major" transmission lines at a cost of $6.4 billion and 70,000 GWh of new renewable energy may be needed for the state to meet a 33% RPS goal. The CPUC report identified the major challenges to meeting a 33% RPS requirement. Access to credit and capital markets, which has now emerged as the industry’s No. 1 concern, did not even make the top five.

Twenty-eight states, in addition to California, have enacted some form of RPS mandates that require implementation over the next decade. Add to these current state RPS requirements the specter of a federal RPS requirement and broader climate change legislation, and the needed investments in new renewable generation and related transmission will likely cost in the hundreds of billions of dollars over the next 25 years.