Gary Hardke’s piece (“Vast renewable energy sources at California’s doorstep,” Capitol, Weekly, Sept. 18) is off-the-mark in citing renewable energy development barriers as the reason that California’s renewable energy production has declined over the past several years.
The problem is more basic than author Gary Hardke suggests.
There is no direct way for California’s investor-owned utilities (IOUs) to make money in the development of major renewable energy projects given their lack of eligibility for federal renewable energy investment tax credits and accelerated depreciation.
As a result, the IOUs have erected barriers to entry for renewable energy projects, even the California Energy Commission now advocates scraping the current IOU renewable energy system.
There is one indirect way that remotely located utility-scale renewable energy projects can increase IOU revenue substantially – by serving as the justification for new transmission lines. The primary mechanism available to an IOU to increase its revenue stream is the construction of new infrastructure in the form of power plants, transmission lines, and meters. Transmission projects are typically the most lucrative projects an IOU can build, with a guaranteed rate of return to the IOU in the range of 11 to 12 percent. The cost of IOU transmission projects are borne collectively by all California IOU ratepayers.
A major complicating factor in the border region when discussing renewable energy is Sempra Energy. Sempra is a major developer of liquefied natural gas (LNG) import infrastructure, natural gas pipelines, and natural gas power plant(s) in Baja California, and also owns San Diego Gas & Electric (SDG&E) and Southern California Gas Company. The major transmission project proposed for the border region is SDG&E’s 1,000 MW Sunrise Powerlink. SDG&E is emphatic that the line will be built to move remote renewable energy in Imperial County to San Diego.
However, the proposed 1,000 MW line will begin at an existing 500 kV substation that receives powerflows from 1,900 MW of combined-cycle capacity owned by Sempra Energy. The direct benefit that Sempra Energy will receive via enhanced market for its combined-cycle plants if the transmission line is built has generated substantial controversy, and called into question whether significant amounts of renewable energy will actually flow over the line.
There is concern in the border region that the rising clamor to access renewable energy resources in Baja California is little more than a cynical bait-and-switch. This concern was accentuated by an August 2008 California Energy Commission report titled “Current Status, Plans, and Constraints Related to Expansion of Natural Gas-Fired Power Plants, Pipelines and Bulk Electric Transmission in the California/Mexico Border Region.” The report’s conclusion states, “At present there is insufficient electric transmission on either side of the border to export as much as 1,000 MW of new electric generation from Baja California that could be fueled by Phase1 of the (Sempra) LNG expansion,” and follows by stating that construction of SDG&E’s Sunrise Powerlink would mitigate this constraint.
Illogically, despite the accurate statement in the body of the Sept. 18th opinion piece that the Baja wind resource area is already served by transmission lines on both sides of the border, the author concludes that California must solve its current transmission planning and permitting dilemma to access the Baja renewable energy resource area. The resource area is served by nearly 3,000 MW of transmission capacity. A tremendous amount of Baja wind energy can be moved to Southern California now with very little upgrading to the existing border transmission network.
There are three faulty framework concepts behind the drumbeat for construction of a new generation of transmission lines to reach remote renewable energy locations in the Southern California desert and Baja California: 1) renewable energy is far more cost-effective in remote desert locations than in coastal load centers, 2) demand for electricity is rapidly increasing, therefore ever increasing amounts of renewable energy will be required to keep pace and meet ambitious renewable energy targets, and 3) existing transmission capacity is limited and fully committed with existing imports (primarily fossil and nuclear power) for the foreseeable future. The first two of these concepts are obsolete. The third was never true to begin with.
The thin-film PV cost revolution is turning conventional thinking about renewable energy economics on its head. This revolution has been fully underway for the last twelve months. Large commercial polycrystalline silicon PV systems installed in Southern California in 2007 had an average installed cost of approximately $6.50/watt. SCE applied to the CPUC in March 2008 to build a 250 to 500 MW urban PV project at an estimated installed cost of $3.50/watt based in thin-film PV technology. SCE also indicated in its application that there are several times the 250 to 500 MW of PV described in the CPUC application under the control of the warehouse owners it is working with. SCE paints a picture in its application of a straightforward process to add up to 2,000 MW of urban point-of-use PV to the grid.