“As California goes, so goes the nation” is one way to describe how the Golden State often sets trends in pop culture and the larger culture. It also applies to the likelihood that new provisions in California’s scheme for regulating—and promoting—the development of renewable energy resources may be copied elsewhere.
Like many other states (Figure 1), California has imposed renewable portfolio standards (RPS) on its utilities to force them to become “greener.” Renewable electricity typically has two components: the power itself, measured in kilowatt-hours, and renewable energy credits (RECs), also known as green tags or tickets. One REC is earned for every MWh generated by a renewable energy plant. If a utility generates more than enough green power to meet its annual RPS requirement, it can sell its excess RECs on the open market at their going price. If it can’t (or doesn’t choose to) meet the mandate with its own production, the utility has to buy RECs earned by others. RECs represent the environmental benefits of generating power from renewable resources, as opposed to producing electricity by burning nonrenewable resources such as fossil fuels.
1. Crazy quilt. As of March 2008, 29 states and the District of Columbia had enacted some form of renewable portfolio standard. Each percentage represents the minimum share of a utility’s capacity powered by renewable resources. The utility may own that capacity or purchase it, and associated renewable energy certificates, from independent power producers. Source: DOE’s Database of State Incentives for Renewables & Efficiency
Two camps have different views of the best way to use RECs to meet environmental and resource planning goals. The more conservative camp believes that regulatory regimes should never allow RECs to be sold separately from the energy that generated them because such separation gives utilities that purchase RECs to meet their RPS a “license to pollute.” The other camp—the REC trading camp—feels that renewable energy development will benefit more if RECs and their associated energy are allowed to be sold separately. The REC trading camp continues to gain adherents as transmission resources are unable to keep pace with growth in renewable generation.
Firming and banking wind power
One of the services available to both camps is the ability to “firm” wind energy. Utilities that generate lots of wind power frequently offer buyers the option of smoothing out the delivered product by averaging its capacity on an hourly basis. A typical example is “hour-ahead firm” energy; if weather and wind forecasts indicate that a wind farm will generate 25 MW over the next hour, the utility guarantees that 25 MW will be delivered from its generation portfolio during that hour, regardless of the wind farm’s actual generation. Given wind’s inherent variability, which can cause operational and stability headaches, paying an extra $15/MWh for firm energy is attractive to some buyers.
A further service that may soon be offered to utility purchasers is the ability to “bank” wind energy. This concept envisions a utility storing the RECs associated with wind power production until a more advantageous time for the recipient, and then releasing them for sale along with new, not necessarily renewable, energy. Although this scheme would only work for those in the REC trading camp, it does provide a big benefit: delivery of “wind power” during peak-demand periods.
The impetus for this banking service is found in the newest (third) edition of the California Energy Commission’s Renewables Portfolio Standard (RPS) Eligibility Guidebook (download from www.energy.ca.gov/renewables/documents/index.html). In Section D of Part II, the guidebook states that “Electricity may be delivered into California at a different time than when the RPS-certified facility generated electricity. . . . Further, the electricity delivered into California may be generated at a different site than that of the RPS generated facility . . . out-of-state energy may be “firmed” or “shaped” within the calendar year.”
This language allows those in the REC trading camp to bank the renewable energy for delivery at some later time, and other sites to provide the energy that is ultimately delivered to the receiving utility. Presumably, these sites can deliver nonrenewable energy (“brown energy”), but it will be considered “green” as long as the RECs created by the renewable power production are credited exclusively to the delivered energy.
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