The Cost of Renewable Energy in California


As previously mentioned, many jurisdictions have mandated that electric utilities purchase some minimum percentage of their generation from renewable sources. In California, the minimum procurement was 20% by the end of 2010 and will be 33% by the end of 2020.

The California Public Utilities Commission has now attempted to estimate the cost to the utilities (and to the ratepayers) of the renewable mandate.

In a report released last week, The Division of Ratepayer Advocates, an independent division of the CPUC, has compared the the cost of generation from clean sources to a reference market price based on natural gas generation. It found that 59% of renewable contacts were at prices in excess of the reference price. The average clean contract price exceeded the reference price by approximately 15%.

Utilities are required by the CPUC to keep track of the amount by which the cost of renewable projects exceeds the reference price. The report found that the excess cost for renewables for three major utilities exceeded $6 billion (seven times the amount forecast by the CPUC).

The Division of Ratepayer Advocates recommends that the CPUC set an upper limit on the contract price for renewables (to be kept confidential), and that renewable contracts receive more scrutiny. They note that of 184 contracts submitted to the CPUC for approval, only two were rejected.

Further information on the report here.

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