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California Renewables Push
Could Drive Up Prices in Oregon

by Ted Sickinger
The Oregonian, September 14, 2009

California's push to supersize its renewable energy standards could drive electricity rates higher for Northwest consumers, strain the West's transmission and hydroelectric systems, and create a host of thorny policy issues.

The California Assembly passed a pair of bills Friday to create the nation's most aggressive renewable energy mandate. It would require utilities to meet one-third of customers' needs with green energy such as wind, solar and geothermal by 2020.

Gov. Arnold Schwarzenegger has threatened to veto the bills because they limit how much renewable power utilities can import from neighboring states, a limit he believes will restrict electricity supplies and drive up prices. Schwarzenegger hopes to issue an executive order this week establishing the 33 percent standard without any import limits.

Either way, California's outsized energy demand, coupled with any enlarged renewables standard, would drive major new demand in the Northwest.

"This is an important and sensitive issue for the entire West," said Elliot Mainzer, head of strategic planning at the Bonneville Power Administration.

California's existing renewables standard, passed in 2002, requires 20 percent renewables by 2010. Utilities there currently get about 13 percent of their power from renewables, well below that target. Oregon standards require utilities to meet 25 percent of demand with renewables by 2025, and Washington mandates 15 percent by 2020.

"Basic supply and demand"

California's proposed increase from 20 to 33 percent means that the state's utilities would have to acquire an additional 19,000 megawatts of renewable energy by 2020. That's more than twice the electricity generated by the existing federal system in the Northwest, which includes 31 dams and a nuclear plant.

Even if only 30 percent of that power can come from out of state -- a limit in the Assembly's bills -- the resulting 5,700 megawatts is about double the amount of the wind capacity now existing in the Northwest.

"The long and short of is that it will drive up the cost of renewable energy and renewable energy credits in the Pacific Northwest and accelerate the development of renewable energy up here," said Angus Duncan, president of the Bonneville Environmental Foundation, which sells renewable energy certificates to individuals and corporations.

"You can say it's good or bad, but it's basic supply and demand."

Renewable energy certificates are tradable commodities that are generated with each unit of renewable energy produced. Selling the credits subsidizes wind producers, making their expensive output more competitive. And it allows buyers, including businesses and consumers, to offset the carbon output of their energy consumption through their investments in renewable energy.

Utilities have become big certificate buyers to support their green power programs. Portland General Electric says it is seeing rising prices for the certificates, which could make it more expensive for consumers to go green. If California's new energy standard passes, the utility says it will ask state regulators for more flexibility to buy certificates from outside the region, which are often cheaper. The utility also is interested in cashing in on California's demand by selling larger blocks of the credits that it generates with its own wind farm.

Physical barriers

While the flow of the certificates has political and financial limits, the flow of renewable electrons is hitting physical barriers.

As it stands, the transmission intertie to California is heavily congested at peak times, the BPA's Mainzer said, leaving the agency with little flexibility to increase the delivery of renewable power to California. Power line expansion is one option, but it raises a host of economic and regional equity issues, not least who pays. In the meantime, congestion could have unintended consequences.

Under California's energy bills, the state's utilities can satisfy a portion of the mandates with renewable energy credits imported from other states without taking delivery of the underlying power.

But when it's windy in the Northwest, big blocks of electricity could flow onto the grid with no contracted customer. In extreme events, that can force operators to pay customers to take the electricity.

The Columbia River Gorge is home to most of the Northwest's wind farms, with thousands of turbines stretching from Sherman County east to the border. Most are plugged into the BPA's transmission network, which carries power throughout the region.

That growing concentration is straining the flexibility of the federal hydro system. As wind power ebbs and flows, operators need to toggle hydroelectric turbines up and down to send a smooth flow of power onto the grid. Maintaining adequate reserves and steady flows for fish passage is becoming more of a challenge.

From a policy standpoint, it also is unclear how much of the BPA's integration resources should be used to shape power headed for California.

Wind power advocates have opposed any limits on renewable power imports to California. The limits were included in the California Assembly's to satisfy labor and consumer advocates who want the generation projects and resulting jobs in that state.

Wind advocates worry that such balkanization of the renewables market will lead to inefficient development. Supply diversity and flexible transmission, they say, is a good thing when it comes to intermittent sources. The wind may be blowing in California and Wyoming when Oregon is calm, or vice versa.

"We share wheat and timber and lots of other crops we have in the Northwest," said Rachel Shimshak, director of the Renewable Northwest Project. "Why should renewables be any different?"

California's plan

What happened: California lawmakers passed bills requiring utilities to serve 33 percent of their electricity demand from renewable sources by 2020. The governor may veto the bills but plans to issue an executive order that would set a similar standard.

What it means: Higher demand for renewables in the Northwest, more pressure on already stressed hydro and transmission systems to integrate and send the power around the West.

Ted Sickinger
California Renewables Push Could Drive Up Prices in Oregon
The Oregonian, September 14, 2009

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