On September 23, 2010, the California Air Resources Board (CARB) unanimously adopted the “Renewable Electricity Standard” (RES) to require most retail sellers of electricity to procure 33 percent of their electricity from eligible renewable resources by 2020. Established in Executive Order S-21-09, the RES is an independent requirement from California’s existing Renewables Portfolio Standard (RPS), which imposes a 20 percent renewable energy procurement requirement by 2010.
Both the RPS and RES apply to large and small investor-owned utilities (PG&E, SCE and SDG&E), electric service providers and community choice aggregators. However, the RES applies to a broader range of regulated entities than the RPS, most notably, publicly-owned utilities, such as LADWP and SMUD.
According to the California Public Utilities Commission (CPUC), the “magnitude of the infrastructure that California will have to plan, permit, procure, develop and integrate in the next ten years is immense and unprecedented,” potentially requiring $115 billion in new infrastructure investment and at least seven major new transmission lines. However, a CARB Staff Report explained that the RES’s enhanced flexibility compared to the RPS — including eliminating delivery requirements for out-of-state renewable resources and allowing an unlimited use of “unbundled” or “tradable” renewable energy credits (TRECs) — is expected to reduce costs and facilitate compliance.
The RES was designed to maximize compatibility with the RPS and relies on many of the same compliance mechanisms. For example, the RES allows the same pool of renewable technologies (e.g., solar, wind, biomass, etc.) and uses the REC-based Western Renewable Energy Generation Information System (WREGIS) to track compliance. However, the RES is intended to broaden the scope of California’s renewable energy requirements and increase the flexibility of procuring electricity from out-of-state renewable resources by eliminating delivery requirements, allowing an unlimited use TRECs for compliance purposes, offering a more flexible certification process, and applying to publicly-owned utilities.
California’s renewable energy policy remains a rapidly evolving area of law and regulation. The RES raises California’s renewable energy mandate to 33 percent by 2020, one of the most aggressive standards in the United States. The RES represents a significant new regulatory requirement for California’s retail sellers of electricity and will have important ramifications on energy markets throughout the western states.
For more information see Latham’s Client Alert on this topic.