Southern California Edison faces a daunting challenge in meeting state deadlines for getting its power from alternative energy sources. So much so that the utility admits it probably won’t meet the first one.
State utilities must get 20 percent of their power from renewable sources by the end of next year – a mandate that’s the most ambitious by far in the nation. SCE said it will likely fall short, although it will be above the average of other utilities statewide.
What’s more, Southern California Edison, the utility subsidiary of Rosemead-based Edison International, along with the rest of the state’s utilities, was hit last week with a new mandate from Gov. Arnold Schwarzenegger: an executive order requiring the state’s utilities to draw 33 percent of their power from renewable sources by 2020.
Utilities caught a bit of break. Schwarzenegger said he would veto even tougher legislation that would have required the bulk of the renewable resource power to be produced in the state. That means SCE will be able to import wind power from Oregon, Washington and Idaho to help meet the goal.
Even so, both mandates will still be tough to meet.
“There are so many moving parts to this: transmission uncertainty, the viability of renewable power developers and access to capital, just to name some,” said Mike Marelli, director of renewable contracts for SCE.
Failure to make a good-faith effort to meet the 2010 deadline could result in fines as high as $25 million per year. For 2020, the penalties will be determined by the California Air Resources Board.
The biggest challenge has been trying to find sites for and then building transmission lines to connect the remote renewable power plants to SCE’s customer base. Transmission lines can take a decade to plan and build – years longer if there’s opposition.
The state Public Utilities Commission has concluded that SCE would need to build 11 transmission lines to carry all the renewable power it needs to meet the 33 percent mandate. Yet only one – a $2 billion line from the Tehachapi mountain range to SCE facilities in the Santa Clarita area – has been approved to date, and construction hasn’t begun.
But there have been other challenges, too. Locally based renewable energy projects that don’t need new transmission lines – such as rooftop solar panel installations – remain far more expensive than traditional natural gas-powered generating stations.
And since last year’s economic meltdown, financing for many third-party providers of renewable power projects – especially wind and solar – has dried up, meaning there are fewer viable projects that SCE can line up for contracts.
In other words, providing the renewable energy to meet the 20 percent mandate that was passed in 2006 hasn’t come easy.
“It’s now much more difficult than we expected,” Marelli said.
Borrowing against future
All of this has translated into slower progress than expected. By the end of 2008, SCE drew nearly 13 billion kilowatt hours, or 16 percent, of its power portfolio from renewable resources. That was well above the statewide average of 13 percent for all utilities combined. The utility will not project what percentage it will have at deadline, but it likely will fall short.
“We’ll get to 20 percent as soon as we can,” said Marc Ulrich, vice president of renewable and alternative power for SCE.
Nearly two-thirds of its renewable portfolio comes from long-standing geothermal projects in far-flung locations, such as the Imperial and Napa valleys, and Mammoth Lakes. About 21 percent is from wind projects, and the rest from solar, biomass and hydropower.
To meet the mandate – on paper at least – Marelli said the utility will likely have to book power in 2010 that is contracted to be delivered in 2011 or 2012. That, in effect, will be like borrowing against future generation and will create a deficit of renewable power that will have to be repaid. The advance booking is allowed under the 2006 law in the case of utilities that make a good-faith effort to meet the requirement. As a result, it’s unlikely that SCE or other utilities will face any fines or penalties for missing the 2010 deadline.
“Of course, that power generation has to show up,” Marelli said. “It also means we have to find even more power in the future to fill what we’ve borrowed against.”
The fastest-growing part of SCE’s renewable portfolio is wind power. Edison has been signing wind contracts in the Tehachapi area north of Los Angeles and hopes to have up to 4,100 megawatts under contract by the time the transmission line is completed. (A megawatt of energy can power up to 750 typical single-family homes.)
SCE also has signed wind power contracts in other states, including a 900-megawatt project in north-central Oregon and smaller projects, in Idaho and Washington.
The utility has also been pursuing large-scale solar power projects, including a power purchase agreement signed last year with Phoenix-based Stirling Energy Systems. The agreement calls for up to 850 megawatts from a huge proposed solar generation facility with up to 35,000 sun-collecting mirrored dishes near Barstow.
But projects like Stirling’s still face technology hurdles. Donald Aitken, a renewable energy consultant in Laredo, Texas, said the heat engines in such projects aren’t reliable and the mirrors aren’t cost-efficient.
“They have a long way to go,” Aitken said.
One of SCE’s current pushes is installing solar panels atop Inland Empire warehouses and sending that power to the grid.
In December 2008, SCE completed the first of what it hopes will be 150 large-scale solar roof projects: contracting with third parties to cover a 600,000-square-foot warehouse in Fontana with photovoltaic solar panels, which would generate about 2 megawatts of electricity. Next up is installation of solar panels on a 458,000-square-foot industrial building in Chino.
Unlike the state’s Million Solar Roof program – in which residents put solar panels on their roof to generate power for their homes and put excess power back on the grid – these commercial solar roof projects put all the power generated on the grid. Edison hopes to generate 250 megawatts from its solar roof projects.
But one critic said the cost of installing the solar panels is still way too high to compete on price with natural gas-fired generating plants.
“Edison laid out numbers that made the program seem attractive pricewise, but the industry viewed those numbers as extremely aggressive and unrealistic,” said Severin Borenstein, director of the University of California Energy Institute.
Borenstein said that if SCE could not meet price targets for these solar installations, it could push up ratepayer bills. He acknowledged that the price of solar panels has dropped significantly, but noted that installation costs are still very high.
Ulrich, Edison vice president, said pricing was an issue that will change over time.
But Ulrich’s response also points to a potential flashpoint in SCE’s quest to meet renewable power mandates. The deployment of new technologies and up-front capital expenditures must all be financed, with much of that coming from ratepayers.
“In the end, this all comes down to how much it will push up bills,” Borenstein said. “If it costs a lot more, there will be some resistance to it.”
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