Why renewable advocates oppose Prop 7

Posted by Adam Browning  

12:00 AM Oct 17, 2008

Proposition 7 (pdf) is a California ballot initiative that would dramatically increase the state’s renewable energy requirement, to 50% renewables by 2025. Yet most environmental groups and almost all renewable energy companies and trade associations oppose it. Why?

The problem is not with the goal. We urgently need to increase our usage of renewable energy to 50%--and more. The problem is that the initiative is unlikely to deliver the desired result. Most of the opposition comes from a belief that Proposition 7 is so flawed that it will make the task of growing renewable energy markets harder, not easier.

Different groups have found many elements of the initiative problematic. You can read CalSEIA’s analysis here, Union of Concerned Scientists here, and NRDC’s here. (The Solar Alliance, American Wind Energy Association, and the Large Scale Solar Association all also oppose).

The element that we would like to focus on is the market that Prop 7 would establish. Renewable technologies work great—but bringing them to scale is a question of market design and for that reason, we believe this issue is paramount. In our view, Prop 7’s market design is unworkable, and a recipe for disaster.

Here’s why. Under the current process for the Renewable Portfolio Standard (RPS), the California Public Utilities Commission calculates a benchmark that is designed to represent the cost of the fossil fuel alternative (this is known as the known as the Market Price Referent, or MPR, and it is calculated as the 20 year levelized cost of energy of a combined cycle gas turbine, plus some adders). Prop 7 absolves utilities from having to contract at prices 10% above the MPR. While many renewable resources can meet this standard (as long as gas prices remain high), to get to 50% we are going to need a wide range of resources, including some technologies that will initially need extra price support in order to commercialize.

Secondly—and here’s the real crux of the problem—Prop 7 also requires utilities to accept ‘all bilateral offers for electricity’ offered at or below the MPR if a utility does not have enough renewable electricity procured and delivered in a given year. The effect of this ‘must-take’ provision is twofold. First, renewable generators will have no incentive to sell electricity below the MPR. Think about it. If you could produce wind electricity for 9 cents/kWh, why would you sell it at that price if you knew that the utilities had to buy it at 13 cents/kWh? Prop 7 effectively guarantees that renewables will always be priced at the cost of natural gas. The great advantage of renewables is that they provide a hedge against volatility in fossil fuel prices, and the great hope of renewables is that they have the potential of being cheaper than fossil fuels. Google.org’s motto is ‘renewable energy cheaper than coal', not 'renewables locked into the same volatility as natural gas.' Doesn't have quite the same zing, does it?

Further, one of the limitations of many renewable resources is that they are intermittent and non-dispatchable. Solar generates when the sun shines and wind produces when the wind blows. Under this must-take provision, not only is there no market incentive to develop storage technologies, but the utilities’ challenge of efficiently managing procurement to match generation with load will be significantly compromised. In effect, utilities could be forced to accept massive amounts of night-time wind—at inflated prices—when the grid needs it least, at the expense of contracting for wind or solar resources that match peak demand.

Getting to 50% is an enormously difficult proposition, and will not only require commercializing new renewable technologies, but also require utilities to radically revise their non-renewable generating portfolio to best complement the limitations of intermittent and non-dispatchable resources. It will be hard enough to do this under any scenario. While utilities can absorb a certain level of unscheduled resources, to manage a grid effectively and efficiently at 50%, utilities will have to have significant input on time and place of delivery (via a competitive RFP solicitation process), and the ‘must-take’ provision has the potential to make the whole process unworkable. Prop 7 undermines the ‘least cost best fit process,’ and effectively eviscerates the possibility of rational planning.

If you want to go more in-depth on these issues, read this analysis by Tom Beach of Crossborder Energy.

Over the past year, Vote Solar has had innumerable discussions with energy experts, both in the environmental and renewable industry community, to analyze the impacts of the proposition. This was not a conclusion we came to lightly, and there is no one more depressed about the results than we. We’ve spent the last 6 years working our tails off on a shoestring budget, and the prospect of a well-funded, game-changing ballot initiative is hugely alluring. The fact that that the initiative is so flawed is, frankly, a tragedy of Shakespearean proportions.

We have also had numerous discussions about these concerns with campaign proponents over the past year, but to no avail. We find the campaign’s counterarguments unconvincing (as does the entire renewable energy industry), and our requests that they change course were not accepted.

If the initiative were to pass, can’t some of the more problematic elements be changed later, at the legislature? Unfortunately, the ballot contains a provision that would require any changes to be approved by a 2/3 super-majority in both branches of the legislature. Since any legislative effort would need the votes of the most radical elements in the legislature to meet the 2/3 requirement, those people would be in a position to make demands, and they would have to be accomodated. In effect, Prop 7 would put the future of energy policy in California in the hands of the most extreme members in the legislature. Think about this year’s budget process for a sense of how that might work.

So what is the alternative? The short answer is that advocates are working furiously to put the infrastructure in place for massive growth in renewable energy. As we discussed in our last newsletter, we are working on establishing a new market mechanism for solar delivered at the distribution level. Meanwhile, the great challenge of the day is developing transmission to link the best renewable resource areas to population centers, and do so in a way that maximizes the conservation values that we all share. The Renewable Energy Transmission Initiative is a coordinated regional effort to do just that, and is laying the groundwork for bringing utility-scale solar (and other renewables) to scale. Finally, in 2009 there will be a tremendous legislative push for a reformed 33% RPS. And if those efforts are not successful, there’s always 2010 (Note to any billionaires in the audience: if the ballot initiative simply said: ‘RPS target is 50%, relevant agencies, figure it out’, it would have received a very different response. Let's talk.)

Renewables are the answer. But to deliver on their promise, they need a market that values value, incentivizes cost reductions, and allows for a well-planned portfolio and well-managed grid. Prop 7 fails on all these points.

Add a comment

Prop 7 Opposition

Ted — 04:28 PM Oct 18, 2008

We at All Valley Solar also oppose Prop 7. After 32 years in the solar business, we need good legislation, not bad.

Ted Bavin

Prop Seven pros & cons ...

Hector — 10:14 AM Oct 18, 2008

I doesn't matter to me (I've been on solar power for 30 years) how long you squabble over details ... it is your life, fortune and future that hangs in the balance, Delay, for whatever reason, makes the power grid a 'winner' and you (and your children) a 'loser' ... I've been listening to this or that excuse since the Carter administration ... just do it!

No on Prop 7

seddy — 09:21 PM Oct 17, 2008

I fully agree that we need to light a fire under all state entities to get renewables procurement off the ground in CA.

Prop 7 is not the way to do it.

While its sentiment is inspired, its mechanics are deeply flawed. Prop 7's passage would stall if not ground entirely, the state's renewable market for many, many years.

Let's direct our efforts to the support and passage of a 33% RPS mandate, and lay the groundwork for even longer-term and well-conceived renewable energy gains.

Please vote no on Prop 7. Thank you.

christina — 03:54 PM Oct 17, 2008

I had a chance to sit down with Dr. Donald Atkien, who is an original pioneer of sorts in the solar world and a supporter of Prop 7. I was a no on prop 7 until I talked with him one on one, and he explained to me that prop 7 was created to (not in his words) light a fire under the pot to boil the water.

And that prop 7 would basically piggy back on AB 32 except turn up the heat on the utilities. In my opinion it would make more sense to support prop 7 which places the responsibility with the PG&Es of the world as opposed to placing the responsibility of 11 Board Of Supervisors. 7 of which will be brand spanking new to the position. We all know what hell it was to get the SIP program passed at the board.

Ownership of Prop 7

Billy — 03:42 PM Oct 17, 2008

Who do we contact with the state regarding concerns over this proposition? It sounds like their yay's have more funding for ads than us nay's.

Can we get backing ($) from the utilities to oppose this measure?

some line item changes

greg — 03:37 PM Oct 17, 2008

Can the powers that be line item change? for the intended use of the bill? w/o 2/3 vote? I am sure Pero could do it.

SES opposes prop 7

Billy — 03:35 PM Oct 17, 2008

We here at Solar Electrical Systems, like CALseia, also oppose prop 7. The limitations for eligible solar projects counted toward the utility RPS procurement requirements is a big hindrance and must be better defined.

Like CALseia says: "If Proposition 7 is enacted, the renewable energy industry will be forced to spend time and money to change these definitions when it has few resources to support such an effort and it will have no certainty regarding the outcome."

Thank you all for your time and support.

~Billy B
solarelectricalsystems.com

Dan — 03:22 PM Oct 17, 2008

From our perspective, Prop. 7 is not forward action. It's a loophole-ridden measure that could delay long-term efforts to get more renewables in the ground.
However, we all should be actively supporting the effort in the Legislature to win passage of an aggressive 33% RPS bill that includes smart reforms to the existing statute.

Sandy — 03:14 PM Oct 17, 2008

Thank you for spelling it out as objectively as you did. I am still torn as to how to vote because I want forward-action and feel that Prop 7 can get renewables into motion. The utility companies are big proponents because they want to turn a blind eye to their massive green-house gas emissions and do not want to share the spoils of selling energy.