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California Environmental Protection Agency Air Resources Board Proposed Regulation for a California Renewable Electricity Standard Staff Report: Initial Statement of Reasons June 2010 State of California California Environmental Protection Agency AIR RESOURCES BOARD Stationary Source Division STAFF REPORT: INITIAL STATEMENT OF REASONS PROPOSED REGULATION FOR A CALIFORNIA RENEWABLE ELECTRICITY STANDARD Public Hearing to Consider the Proposed Regulation to Implement the Renewable Electricity Standard Date of Release: June 3, 2010 Scheduled for Consideration: July 22-23, 2010 Location: California Air Resources Board Byron Sher Auditorium 1001 I Street Sacramento, California 95814 This report has been reviewed by the staff of the Air Resources Board and approved for publication. Approval does not signify that the contents necessarily reflect the views and policies of the Air Resources Board, nor does mention of trade names or commercial products constitute endorsement or recommendation for use . i This Page Left Intentionally Blank ii Acknowledgments This report was prepared with the assistance and support from many individuals within the Air Resources Board; not only the principal contributors. In addition, staff would like to acknowledge the assistance and cooperation that we have received from many individuals and organizations. Finally, staff would like to acknowledge the significant contributions from the California Energy Commission, California Public Utilities Commission, and California Independent System Operator who have provided assistance throughout the rulemaking process. Air Resources Board Stationary Source Division Principal Contributors Grant Chin Keith Roderick Gary Collord Mike Scheible Joseph Fischer Win Setiawan Chris Gallenstein Mark Sippola Stephanie Kato Mark Siroky Luis Leyva Todd Suckow Camille McCallion Marcelle Surovik Andrew Mrowka Lea Yamashita Tom Pomales Lynn Yeung Special Thanks To: Office of Legal Affairs Research Division Diana Jeschke Corey Bock George Poppic Reza Mahdavi Janet Schlosser Guihua Wang Planning and Technical Support Division Enforcement Division Larry Hunsaker Judy Lewis Chris Nguyen Kitty Oliver California Energy Commission California Public Utilities Kevin Barker Commission Pam Doughman Amy Baker Angela Gould Paul Douglas Karen Griffin Sara Kamins Michael Nyberg Dina Mackin Heather Raitt Scott Murtishaw Jim Woodward Kristin Ralf-Douglas Kate Zocchetti Steve Roscow iii Acknowledgments (Continued) California Independent System Energy and Environmental Operator Economics Udi Helman Arne Olsen Phil Pettingill Doug Allen Nick Schlag University of California, Berkeley Ascent Environmental Peter Berck Sydney Coatsworth Amanda Olekszulin Amber Giffin Reviewed by : Robert D. Fletcher, Deputy Executive Officer Richard Corey, Chief, Stationary Source Division Michael Tollstrup, Chief, Project Assessment Branch Barbara Fry, Chief, Measures Assessment Branch Tony Andreoni, Chief, Research and Economic Studies Branch David Mehl, Manager, Energy Section Terrel Ferreira, Manager, Greenhouse Gas Measures Section Jim Nyarady, Manager, Strategy Evaluation Section Fereidun Feizollahi, Manager, Economic Studies Section Kitty Howard, Manager, Regulatory Assistance Section iv TABLE OF CONTENTS Page Number EXECUTIVE SUMMARY........................................................................................... ES-1 I. INTRODUCTION................................................................................................ I-1 A. Greenhouse Gases and Climate Change................................................ I-1 B. Legislative and Policy Directives Relating to Renewable Energy ............ I-2 C. Public Process for Development of the RES............................................ I-5 II. STATUTORY REQUIREMENTS....................................................................... II-1 III. OVERVIEW OF THE CALIFORNIA ELECTRICITY SECTOR.......................... III-1 A. Electricity Transmission and Oversight.................................................. III-1 B. Power Generation in California.............................................................. III-2 C. California’s Primary Energy Entities....................................................... III-9 D. Air Resources Board’s Role in the Electricity Sector ........................... III-10 E. Federal Agency Involvement in Electricity Activities ............................ III-11 IV. OTHER RENEWABLE ENERGY ACTIVITIES.................................................IV-1 A. California Renewables Portfolio Standard ….........................................IV-1 B. Out-of-State Renewable Programs .......................................................IV-5 C. Federal Renewable Portfolio Standard .................................................IV-8 D. Energy Agency Activities for 33 Percent Renewables Portfolio Standard..................................................................................IV-8 E. Electricity Transmission Activities..........................................................IV-9 F. Scoping Plan Measures ......................................................................IV-10 G. Renewable Energy Incentive Programs ..............................................IV-13 V. TECHNOLOGY ASSESSMENT........................................................................V-1 A. Description of Renewable Resources.....................................................V-1 B. Renewable Generation Development.....................................................V-8 C. Potential Renewable Resources to Satisfy the Proposed 33 Percent RES....................................................................V-15 D. Transmission and Grid Operation Considerations for Integrating Renewable Generation .........................................................................V-30 VI. RENEWABLE ENERGY CREDITS (RECs)......................................................VI-1 A. Description of RECs...............................................................................VI-1 B. CPUC’s Decision on Tradable RECs (TRECs) ......................................VI-5 v VII. REGULATORY DESIGN ASSESSMENT........................................................VII-1 A. Comparison of the RPS Program to the Proposed RES ......................VII-1 B. Primary Areas Where the Proposed RES Diverges from the RPS Program .........................................................................VII-2 VIII. SUMMARY AND RATIONALE FOR THE PROPOSED REGULATION .........VIII-1 A. Overview of the Proposed Regulation..................................................VIII-1 B. Purpose...............................................................................................VIII-1 C. Applicability..........................................................................................VIII-2 D. Partial Exemption.................................................................................VIII-2 E. Definitions............................................................................................VIII-3 F. Renewable Electricity Standard Obligations .......................................VIII-5 G. Renewable Electricity Standard Requirements....................................VIII-7 H. Banking and Trading of RECs .............................................................VIII-8 I. Monitoring, Verification, and Compliance.............................................VIII-9 J. Certification of Eligible Renewable Energy Resources........................VIII-9 K. Interagency Cooperation......................................................................VIII-9 L. Enforcement .....................................................................................VIII-10 M. Confidential Information.....................................................................VIII-10 N. Regulation Review.............................................................................VIII-10 O. Severability........................................................................................VIII-11 P. Rational for the Proposed Regulation................................................VIII-11 IX. ENVIRONMENTAL IMPACTS..........................................................................IX-1 A. Summary of the Environmental Analysis...............................................IX-2 B. GHG Emission Benefits from Renewable Generation ...........................IX-4 C. Air Quality Impacts.................................................................................IX-5 D. Public Health Impacts..........................................................................IX-21 E. Impacted Communities........................................................................IX-22 F. Other Environmental Impacts..............................................................IX-29 X. ECONOMIC IMPACTS......................................................................................X-1 A. Summary of the Economic Impacts........................................................X-1 B. Legal Requirements................................................................................X-2 C. Cost Estimation.......................................................................................X-2 D. Cost-Effectiveness..................................................................................X-7 E. Impact on Residential Electricity Bills......................................................X-7 F. Impact on Small Business.....................................................................X-11
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