2009 Integrated Energy Policy
Transcript of 2009 Integrated Energy Policy
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CALIFORNIAENERGYCOMMISSION
2009 INTEGRATED ENERGY
POLICY REPORT
FINALCOMMISS
ION
REPORT
December 2009
CEC-100-2009-003-CMF
Arnold SchwarzeneggerGovernor
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Acknowledgments
This2009IntegratedEnergyPolicyReportwouldnothavebeenpossiblewithoutthesignificant
contributionsofthefollowingEnergyCommissionstaff:
MohsenAbrishami
BryanAlcorn
BobAldrich
EileenAllen
AlAlvarado
GraceAnderson
AnissBahreinian
KevinBarker
PanamaBartholomy
JimBartridge
SylviaBender
Libbie
Bessman
AvtarBining
KellyBirkinshaw
SteveBonta
LeonBrathwaite
GeraldBraun
MarthaBrook
DennyBrown
SusanBrown
BarbaraByron
BillChamberlain
KristyChew
SusannahChurchill
MarkCiminelli
BarbaraCrume
TedDang
PaulDeaver
AlbertDeLeon
RhettaDeMesa
JacquelineDockum
PamelaDoughman
DevorahEden
DaleEdwards
RyanEggers
MarlenaElliott
JosephFleshman
SerenaFong
JamesFore
StevenFosnaugh
GuidoFranco
NicholasFugate
MiguelGarciaCerrutti
AsishGautam
TerajaGolston
PedroGomez
TomGorin
AndreaGough
CathyGraber
Judy
Grau
MichaelGravely
CarolGreenwood
KarenGriffin
ValerieHall
NancyHassman
MarkHesters
JohnHingtgen
DavidHungerford
NickJanusch
MichaelJaske
RogerJohnson
BillJunker
HarrietKallemeyn
AdrienneKandel
ChrisKavalec
DonKazama
BrendanKeeler
LindaKelly
ThomKelly
RobertKennedy
KevinKidd
JoelKlein
DonKondoleon
KenKoyama
PramodKulkarni
LauraLawson
BryanLee
JeromeLee
KaeLewis
DavidLopez
HeatherLouie
JoeLoyer
MichaelLozano
StevenMac
JerryMagana
MignonMarks
LynnMarshall
Lana
McAllister
BobMcBride
CheMcFarlin
JimMcKinney
MadeleineMeade
DarylMetz
SarahMichael
DavidMichel
CharlesMizutani
NahidMovassagh
MarlaMueller
LarryMyer
ChuckNajarian
FaridehNamjou
BrianNeff
TerryOBrien
GaryOcchuizzo
JoeOHagan
GarryONeill
JacobOrenberg
JasonOrta
JimPage
JamiePatterson
BillPennington
PatPerez
BillPfanner
SarahPittiglio
PeterPuglia
RichardRatliffe
IvinRhyne
PaulRichins
CarolRobinson
RandyRoesser
IreneSalazar
RoySanders
SabrinaSavala
RobSchlichting
GordonSchremp
Don
Schultz
GlenSharp
ConsueloSichon
MichaelSmith
ArthurSoinski
TiffanySolorio
GeneStrecker
KateSullivan
AngelaTanghetti
RubenTavares
GabrielTaylor
LaurietenHope
MitchTian
ValentinoTiangco
ChrisTooker
ClaudiaUresti
DavidVidaver
MalachiWengGutierrez
KerryWillis
MichaelWilson
LanaWong
WilliamWood
JimWoodward
GeraldZipay
KateZocchetti
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Pleasecitethisreportasfollows:
CaliforniaEnergyCommission,2009IntegratedEnergyPolicyReport,FinalCommissionReport,
December2009,CEC1002009003CMF.
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Preface
The2009IntegratedEnergyPolicyReportwaspreparedinresponsetoSenateBill1389(Bowen,
Chapter568,Statutesof2002),whichrequiresthattheCaliforniaEnergyCommissionpreparea
biennialintegratedenergypolicyreportthatcontainsanintegratedassessmentofmajorenergy
trendsandissuesfacingthestateselectricity,naturalgas,andtransportationfuelsectorsand
providespolicyrecommendationstoconserveresources;protecttheenvironment;ensure
reliable,secure,anddiverseenergysupplies;enhancethestateseconomy;andprotectpublic
healthandsafety(PublicResourcesCode25301[a]).ThisreportfulfillstherequirementofSB
1389.
ThereportwasdevelopedunderthedirectionoftheEnergyCommissions2009Integrated
EnergyPolicyReportCommittee.AsinpreviousIntegratedEnergyPolicyReportproceedings,
theCommitteerecognizesthatclosecoordinationwithfederal,state,andlocalagenciesis
essentialtoadequatelyidentifyandaddresscriticalenergyinfrastructureneedsandrelated
environmentalchallenges.Inaddition,inputfromstateandlocalagenciesiscriticaltodeveloptheinformationandanalysesthattheseagenciesneedtocarryouttheirenergyrelatedduties.
This2009IntegratedEnergyPolicyReportreflectstheinputofawidevarietyofstakeholdersand
federal,state,andlocalagenciesthatparticipatedintheIntegratedEnergyPolicyReport
proceeding.TheinformationgainedfromworkshopsandstakeholdersalongwithEnergy
Commissionstaffanalysiswasusedtodeveloptherecommendationsinthisreport.The
Committeewouldliketothankparticipantsfortheirthoughtfulcontributionsoftimeand
expertisetotheprocess.
The2009IntegratedEnergyPolicyReportproposespolicyandprogramdirectiontoaddressthe
manychallengesfacingCaliforniasenergyfuturethatarediscussedthroughoutthebodyofthe
report.SpecificrecommendationsarepresentedinChapter4,buttheEnergyCommission
believesthatcertainpoliciesandprogramshavepriorityandevenurgencyifCaliforniaisgoing
toaddressitsdiversesetofenergygoals.TheExecutiveSummarythereforeidentifiesthose
actionsandpoliciesthattheEnergyCommissionconsiderstobeofhighestimportance.
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Table of Contents
Preface.......................................................................................................................................................... i
ExecutiveSummary.................................................................................................................................. 1
Introduction............................................................................................................................................
1
TheElectricitySector............................................................................................................................. 2
SupplyandDemand.......................................................................................................................... 2
EnergyEfficiencyandDemandResponse...................................................................................... 3Recommendations.........................................................................................................................................4
RenewableEnergy............................................................................................................................. 5Recommendations.........................................................................................................................................7
DistributedGenerationandCombinedHeatandPower............................................................. 8Recommendation...........................................................................................................................................8
NuclearPowerPlants........................................................................................................................ 9Recommendation.........................................................................................................................................10
TransmissionandDistribution........................................................................................................ 9Recommendations.......................................................................................................................................11
CoordinatedElectricitySystemPlanning..................................................................................... 11Recommendation.........................................................................................................................................11
AddressingProcurementintheHybridMarket......................................................................... 11
TheNaturalGasSector........................................................................................................................ 12Recommendations.......................................................................................................................................13
TheFuelsandTransportationSector................................................................................................ 14Recommendations.......................................................................................................................................15
TheLandUseandPlanningSector................................................................................................... 15Recommendations.......................................................................................................................................16
ThePotentialofCarbonCaptureandSequestration...................................................................... 16
AchievingEnergyGoals...................................................................................................................... 17
Chapter1:CaliforniasEnergyRelatedPoliciesandActivities..................................................... 19
AssemblyBill32Framework.............................................................................................................. 19
ElectricitySector................................................................................................................................... 20EnergyEfficiencyandDemandResponse...............................................................................................20
RenewableEnergy.......................................................................................................................................23
DistributedGeneration...............................................................................................................................27
NaturalGasandNuclearPowerPlants....................................................................................................29
TransmissionandDistribution..................................................................................................................32
NaturalGasSector............................................................................................................................... 33
TransportationSector.......................................................................................................................... 34
LandUseandPlanningSector........................................................................................................... 39
Chapter2:EnergyandCaliforniasCitizens...................................................................................... 41
ElectricitySector................................................................................................................................... 41
ElectricityTransmissionandDistribution.................................................................................... 42
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ElectricitySupply............................................................................................................................. 43NaturalGasFiredGeneration...................................................................................................................45
HydroelectricResources.............................................................................................................................46
NuclearGeneration.....................................................................................................................................47
RenewableResources..................................................................................................................................47
CombinedHeat
and
Power
........................................................................................................................
48
ResourceAdequacy.....................................................................................................................................49
ElectricityDemand.......................................................................................................................... 49ElectricityDemandForecast......................................................................................................................50
TheEffectofEconomicUncertaintiesontheDemandForecast...........................................................52
EnergyEfficiency............................................................................................................................. 53EnergyEfficiencyandtheDemandForecast...........................................................................................54
EnergyEfficiencyandtheEnvironment...................................................................................................58
EnergyEfficiencyandReliability..............................................................................................................61
EnergyEfficiencyandtheEconomy.........................................................................................................70
DemandResponse........................................................................................................................... 72
RenewableEnergy
...........................................................................................................................
75
RenewableEnergyandtheEnvironment.................................................................................................76
RenewableEnergyandReliability............................................................................................................85
RenewableEnergyandtheEconomy.......................................................................................................86
DistributedGenerationandCombinedHeatandPower........................................................... 95ExistingCombinedHeatandPowerinCalifornia..................................................................................96
CombinedHeatandPowerandtheEnvironment.................................................................................97
CombinedHeatandPowerandReliability...........................................................................................105
CombinedHeatandPowerandtheEconomy......................................................................................106
NaturalGasPowerPlants............................................................................................................. 107NaturalGasPlantsandtheEnvironment..............................................................................................107
Natural
Gas
Plants
and
Reliability
..........................................................................................................
110
NuclearPowerPlants.................................................................................................................... 111NuclearPlantsandtheEnvironment......................................................................................................115
NuclearPlantsandReliability.................................................................................................................119
NuclearPlantsandtheEconomy............................................................................................................124
Transmission................................................................................................................................... 126TransmissionandtheEnvironment........................................................................................................126
TransmissionandReliability....................................................................................................................128
TransmissionandtheEconomy..............................................................................................................129
NaturalGasSector............................................................................................................................. 131
NaturalGasSupplies..................................................................................................................... 131
NaturalGas
Demand
.....................................................................................................................
136
NaturalGasandtheEnvironment..........................................................................................................138
NaturalGasandReliability......................................................................................................................141
NaturalGasandtheEconomy.................................................................................................................142
FuelsandTransportationSector...................................................................................................... 145
TransportationFuelsSupplyandDemand................................................................................ 146Demographics............................................................................................................................................146
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FuelSupplyandDemand.........................................................................................................................147
InfrastructureAdequacy..........................................................................................................................154
TransportationandtheEnvironment.....................................................................................................163
TransportationandReliability.................................................................................................................167
TransportationandtheEconomy............................................................................................................168
Chapter3:
Challenges
to
Achievement
of
aVision
for
Californias
Future
Electricity
System
.................................................................................................................................................................. 173
Introduction........................................................................................................................................ 173
IssuesAffectingthePowerPlantFleet............................................................................................ 174
EffectsofOnceThroughCoolingMitigationPolicies.............................................................. 174FactorsAffectingOnceThroughCoolingReplacementInfrastructure.............................................175
PlanningforOnceThroughCoolingReplacementInfrastructure.....................................................177
EmissionCreditsforPowerPlants.............................................................................................. 178ImpactsonPowerPlantsLicensedbytheEnergyCommission.........................................................179
ImpactsonSpecificUtilities.....................................................................................................................181
PreferredResource
Additions
......................................................................................................
184
UncommittedEnergyEfficiencyGoals...................................................................................................185
RenewablesPortfolioStandardGoals....................................................................................................187
RoleofNaturalGasPlants.......................................................................................................................189
RoleofEnergyStorage..............................................................................................................................192
RoleofOtherRenewableTechnologies..................................................................................................195
RoleofImprovedProductionForecastingforRenewables.................................................................196
RoleofDistributedResources...................................................................................................... 197
TransportationElectrification....................................................................................................... 199
IssuesAffectingtheTransmissionandDistributionSystem....................................................... 199
RoleoftheCaliforniaSmartGrid................................................................................................ 202
RoleofResearchandDevelopment............................................................................................. 204InvestmentinDesiredElectricityInfrastructure........................................................................... 206
ForwardEnergyorCapacityMarkets......................................................................................... 206
ForwardGenerationInvestmentbyPubliclyOwnedUtilities................................................ 207
InvestmentinTransmissionandDistribution........................................................................... 207
EndUseCustomerInvestments.................................................................................................. 208
IssueswithIntegratingStatePolicyGoalswithElectricityPlanningProcesses....................... 209
PlanningintheElectricitySector................................................................................................. 210
NeedforStatewideIntegratedElectricityandTransmissionPlanning................................. 214
APathTowardVision,BlueprintandInfrastructureAssessment......................................... 216
Developing
a
Blueprint
for
the
Future
Electricity
System
...................................................................
217
InfrastructureAssessment........................................................................................................................219
GenerationInfrastructureAssessment...................................................................................................220
TransmissionInfrastructureAssessment...............................................................................................221
IntegratedGeneration/TransmissionPlanning.....................................................................................223
Chapter4:Recommendations............................................................................................................. 225
Introduction........................................................................................................................................ 225
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RecommendationsfortheElectricitySector.................................................................................. 226
EnergyEfficiencyandDemandResponse.................................................................................. 226ZeroNetEnergyBuildings.......................................................................................................................226
BuildingandApplianceStandards.........................................................................................................227
EfficiencyinExistingBuildings...............................................................................................................227
PubliclyOwned
Utility
Energy
Efficiency
Programs
and
Reporting
.................................................
228
DemandResponse.....................................................................................................................................229
IncorporatingEfficiencyintheDemandForecast.................................................................................230
RenewableResources.................................................................................................................... 230RenewablesPortfolioStandardTargets.................................................................................................231
RenewableIntegration..............................................................................................................................231
MaintainingExistingRenewableFacilities............................................................................................233
SupportingNewRenewableFacilitiesandTransmission...................................................................233
ExpandingFeedInTariffs........................................................................................................................234
DistributedGeneration.................................................................................................................. 235
CombinedHeatandPower.......................................................................................................... 236
MeetingScoping
Plan
Targets
for
Combined
Heat
and
Power
..........................................................
236
RenewableCombinedHeatandPower..................................................................................................237
NuclearPlants................................................................................................................................ 238
Transmission................................................................................................................................... 240
CoordinatedElectricitySystemPlanning................................................................................... 241
RecommendationsfortheNaturalGasSector............................................................................... 242
RecommendationsfortheTransportationSector.......................................................................... 243
RecommendationsforLandUseandPlanning............................................................................. 245
RecommendationsforCarbonCaptureandSequestration......................................................... 246
Acronyms................................................................................................................................................ 249
Index........................................................................................................................................................
251
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List of Figures
FigureE1:CaliforniasGenerationMix(2008)..................................................................................... 2
FigureE2:ElectricityConsumptionbySector2008............................................................................. 3
Figure1:BulkTransmissionSysteminCalifornia.............................................................................. 43
Figure
2:
Californias
Generation
Mix
(2008)
.......................................................................................
44
Figure3:CaliforniaRenewableEnergyGenerationbyTechnology,2008...................................... 48
Figure4:ElectricityConsumptionbySector2008............................................................................... 50
Figure5:StatewideElectricityConsumption....................................................................................... 51
Figure6:ProjectedStatewideElectricityConsumption,CED2009AdoptedandAlternative
EconomicScenarios................................................................................................................................. 52
Figure7:ProjectedStatewidePeakDemand,CED2009AdoptedandAlternativeEconomic
Scenarios.................................................................................................................................................... 53
Figure8:ComparisonofCommittedUtilityProgramConsumptionImpactsforInvestorOwned
Utilities...................................................................................................................................................... 55
Figure9:ExistingCombinedHeatandPowerinCalifornia............................................................. 96
Figure10:BaseCaseCumulativeCHPMarketPenetrationbySizeCategory............................. 102
IncentiveCaseResults........................................................................................................................... 103
Figure11:IncentiveCasesCumulativeMarketPenetrationResults.............................................. 103
Figure12:GHGEmissionsSavingsbyScenariousingARBAvoidedCentralStationEmissions
Estimate................................................................................................................................................... 104
Figure13:U.S.DomesticNaturalGasProduction............................................................................ 132
Figure14:2007CaliforniaNaturalGasReceiptsbySource............................................................. 132
Figure15:NaturalGasResourceAreasandPipelines..................................................................... 134
Figure16:Lower48ShaleNaturalGasProduction.......................................................................... 136
Figure17:HenryHubSpotPrices19962008.................................................................................... 145
Figure18:CrudeOilSupplySourcesforCaliforniaRefineries....................................................... 148
Figure19:HistoricCaliforniaGasolineandDieselDemand........................................................... 149
Figure20:InitialCaliforniaGasolineDemandForecastNoRFS2Adjustment.......................151
Figure21:U.S.EthanolUseandRFSObligations19932022.......................................................... 152
Figure22:CaliforniaE85DemandForecast20102030.................................................................... 153
Figure23:RevisedLowDemandForecast20102030...................................................................... 154
Figure24:KinderMorganInterstatePipelineSystem...................................................................... 156
Figure25:CaliforniaFFVLowDemandForecast20102030.......................................................... 157
Figure26:CaliforniaE85DispenserForecast20102030.................................................................. 157
Figure27:NaturalGasVehicleCountsbySpecificCounties,October2008................................. 159
Figure28:
California
Transportation
Natural
Gas
Demand
Forecast
.............................................
159
Figure29:FullElectricVehicleCountsbySpecificCounties,October2008................................. 161
Figure30:CaliforniaTransportationElectricityHighDemandForecast................................. 162
Figure31:LifeCycleAnalysisCarbonIntensityValuesforGasolineandSubstitutes...............164
Figure32:PowerPlantsAffectedbyAirCreditLimitationsinSouthCoastAirBasin...............180
Figure33:ComparisonofRecentScenariosforIncrementalandExistingRenewableEnergy
(33percentby2020)............................................................................................................................... 188
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List of TablesTable1:2008TotalSystemGeneration................................................................................................. 45
Table2:RPSDeliveryandLocationRequirementsinOtherWesternStates.................................. 80
Table3:TotalCHPTechnicalPotentialin2009byMarketSector.................................................. 100
Table4:TotalCHPTechnicalPotentialGrowthbetween2009and2029byMarketSector.......100
Table5:ComparisonofStudyResultsGHGSavingstoARBgoals............................................... 105
Table6:StatewideEndUserNaturalGasConsumption................................................................. 137
Table7:SummaryofCaliforniaOnRoadLightDutyVehicles...................................................... 168
Table8:SCECapacityImpactedbySCAQMDRule......................................................................... 182
Table9:StaffPlanningAssumptionsandReserveMarginResultsforSouthernCaliforniaUsing
HighRetirements................................................................................................................................... 183
Table10:StaffPlanningAssumptionsandReserveMarginResultsforSouthernCalifornia
UsingSWRCBOTCRetirements......................................................................................................... 183
Table11:CaliforniaUseofNaturalGasinPowerPlants................................................................. 191
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Abstract
The2009IntegratedEnergyPolicyReportevaluatesoverallsupplyanddemandtrendsfor
electricity,naturalgas,andtransportationfuelsinCalifornia,aswellasissuesassociatedwith
energyinfrastructure,efficiency,reliability,andcost.Thereportdescribesthevariousenergy
policiessignificantlyaffectingCaliforniasenergysectorsandoutstandingissuesthatwillneedtobeaddressedineachsectortomaintainreliable,affordable,andenvironmentallybenign
sourcesofenergyforthestatescitizens.Thereportfocusesonissuessurroundingthe
integrationofincreasedlevelsofrenewableenergyinboththeelectricityandtransportation
fuelsectorsandmakesrecommendationsonfutureactionsthestateshouldpursue.
Key Words
AssemblyBill32,greenhousegasemissions,loadingorder,transmission,resourceadequacy,
energyefficiency,demandresponse,RenewablesPortfolioStandard,RenewableEnergy
TransmissionInitiative,renewableenergy,demandforecast,distributedgeneration,combined
heatandpower,nuclear,oncethroughcooling,emissioncredits,transportation,naturalgas.
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Executive Summary
Introduction
As
California
pursues
its
goal
to
address
climate
change
by
reducing
greenhouse
gas
emissions,
thedrivingforceforthestatesenergypoliciescontinuestobemaintainingareliable,efficient,
andaffordableenergysystemthatminimizestheenvironmentalimpactsofenergyproduction
anduse.Althoughtheeconomicdownturnhasreducedenergydemandintheshortterm,
demandisexpectedtogrowovertimeastheeconomyrecovers.Itisessentialthatthestates
energysectorsbeflexibleenoughtorespondtofuturefluctuationsintheeconomyandthatthe
statecontinuetodevelopandadoptthegreentechnologiesthatarecriticalforlongterm
reliabilityandeconomicgrowth.
AssemblyBill32(Nez,Chapter488,Statutesof2006),theGlobalWarmingSolutionsActof
2006,establishedthegoalofreducinggreenhousegasemissionsto1990levelsby2020,and
servesas
the
comprehensive
framework
for
addressing
climate
change.
However,
many
of
the
policiesinplacepriortopassageofAB32arealsovaluedfortheirroleinmeetingthestates
climatechangegoals.Oneofthesepoliciesistheloadingorderforelectricityresources,which
callsformeetingnewelectricityneedsfirstwithenergyefficiencyanddemandresponse;
second,withnewgenerationfromrenewableenergyanddistributedgenerationresources;and
third,withcleanfossilfueledgenerationandtransmissioninfrastructureimprovements.A
secondimportantpolicyinplacepriortothepassageofAB32istheRenewablesPortfolio
Standard,establishedin2002,whichcurrentlyrequiresretailsellersofelectricitytoprocure20
percentoftheirretailsalesfromrenewableresourcesby2010.
Morerecently,GovernorSchwarzeneggerissuedExecutiveOrdersin2008and2009that
establishedtheRenewableEnergyActionTeamtodevelopaplanforrenewabledevelopmentinsensitivedeserthabitat,acceleratedtheRenewablesPortfolioStandardrequirementto33
percentby2020,anddirectedtheAirResourcesBoardtoadoptregulationsbyJuly31,2010,to
meetthatrequirement.
Whilereducinggreenhousegasemissionsisofparamountconcern,itisnottheonly
environmentalissuefacingCaliforniaselectricitysector.TheStateWaterResourcesControl
Boardhasissuedadraftpolicytophaseouttheuseofoncethroughcoolinginthestates19
coastalpowerplantstoreduceimpactsonmarinelifefromthepumpingprocessandthe
dischargeofheatedwater.AnotherissueisthelackofemissioncreditsintheSouthCoastAir
QualityManagementDistrictthatmakesitdifficulttoobtainthenecessarypermitstobuild
reliablereplacementpowerbeforeaging,lessefficientpowerplantscanberetiredor
repowered.
Thetransportationandbuildingsectorsareprimarycontributorstogreenhousegasemissions
inCalifornia.GovernorSchwarzeneggersExecutiveOrderS0107establishedalowcarbon
fuelstandardfortransportationfuelssoldinCaliforniathatwillreducethecarbonintensityof
Californiaspassengervehiclefuelsbyatleast10percentby2020.Inaddition,theAlternative
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andRenewableFuelandVehicleTechnologyProgramcreatedbyAB118(Nez,Chapter750,
Statutesof2007)isworkingtodevelopanddeployalternativeandrenewablefuelsand
advancedtransportationtechnologiestohelpmeetthestatesclimatechangepolicies.Further,
thefederalgovernmentinJune2009,grantedCaliforniasrequestforawaiverthatallows
Californiatoenactstricterairpollutionstandardsformotorvehiclesthanthoseofthefederal
government.Thestandards(AB1493,Pavley,Chapter200,Statutesof2002)areexpectedtoreducegreenhousegasemissionsfromCaliforniapassengervehiclesbyabout22percentin
2012,andabout30percentin2016,whileimprovingfuelefficiencyandreducingmotorists
costs.
ThisExecutiveSummaryfocusesonthepolicyrecommendationsthattheEnergyCommission
believesshouldbethestatestopprioritiesformeetingthegoalofprovidingreliable,efficient,
andcosteffectiveenergysuppliesforitscitizens.Additionalrecommendationsforspecific
actionsneededinthevariousenergysectorsareprovidedinChapter4.
The Electricity Sector
Supply and Demand
FigureE1showsCaliforniaselectricitygenerationsupplymixin2008.Instategenerating
facilitiesaccountedforabout68percentoftotalgeneration,withtheremainingelectricity
comingfromoutofstateimports.
Figure E-1: Californias Generation Mix (2008)
Source: California Energy Commission
Sincederegulation
in
1998,
the
Energy
Commission
has
licensed
more
than
60
power
plants:
44
projectsrepresenting15,220megawattsareonline,6projectstotaling1,578megawattsare
underconstruction,and12projectstotaling6,415megawattsareonholdbutavailablefor
construction.Inaddition,theEnergyCommissionhasahistorichighlevelofmorethan30
proposedprojectsunderreview,totalingmorethan12,000megawatts,manyofwhicharelarge
scalesolarthermalpowerplantsthatpresentnewandchallengingenvironmentalimpactsthat
mustbeconsidered.
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Onthedemandside,Californiansconsumed285,574gigawatthoursofelectricityin2008,
primarilyinthecommercial,residential,andindustrialsectors(FigureE2).TheEnergy
Commissionstaffforecastoffutureelectricitydemandshowsthatconsumptionwillgrowby
1.2percentperyearfrom20102018,withpeakdemandgrowinganaverageof1.3percent
annuallyoverthesameperiod.Thecurrentforecastismarkedlylowerthantheforecastinthe
2007IntegratedEnergyPolicyReport,primarilybecauseoflowerexpectedeconomicgrowthinboththenearandlongtermaswellasincreasedexpectationsofsavingsfromenergyefficiency.
Figure E-2: Electric ity Consumption by Sector 2008
Source: California Energy Commission
Becauseofeconomicuncertaintiessurroundingthecurrentrecessionandthetimingofpotential
recovery,theIntegratedEnergyPolicyReport(IEPR)Committeedirectedstafftolookinitsforecastatalternativescenariosofeconomicanddemographicgrowthandtheirimpactson
electricitydemand.Staffanalyzedbothoptimisticandpessimisticscenariosandfoundonly
smalldifferencesinprojectedelectricitydemand.Annualgrowthratesfrom20102020for
electricityconsumptionandpeakdemandwouldincreasefrom1.2percentand1.3percent,
respectively,to1.3percentand1.4percentintheoptimisticcaseandfallto1.1percenteach
underthepessimisticscenario.
Energy Efficiency and Demand Response
Energyefficiencyisazeroemissionstrategytoreducegreenhousegasemissionsinthe
electricitysector.Energyefficiencyandconservationprogramsalsoreduceenergycosts,which
makesbusinessesmorecompetitiveandallowsconsumerstosavemoney.Inaddition,energy
efficiencyreducesthecostofmeetingpeakdemandduringperiodsofhightemperaturesand
highprices.Byreducingthedemandforelectricity,energyefficiencyprogramsalsoplaya
majorroleinincreasingreliabilityoftheelectricitysystembyreducingstressonexistingpower
plantsandthetransmissionsystemandreducingthedemandfornewpowerplantsand
transmissioninfrastructure.
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Becauseofthestatesenergyefficiencystandardsandefficiencyandconservationprograms,
Californiasenergyuseperpersonhasremainedstableformorethan30yearswhilethe
nationalaveragehassteadilyincreased.However,stabilizingpercapitaelectricityusewillnot
beenoughtomeetthecarbonreductiongoalsofAB32.Tomeetthosegoals,thestatemust
increaseitseffortstoachieveallcosteffectiveenergyefficiency.Manyoftheseeffortswillbe
carriedoutbytheinvestorownedutilitiesandthepubliclyownedutilities,bothofwhicharegovernedbylegislativeandregulatorymandatestoidentifyanddevelopenergyefficiency
potentialandtosetannualsavingsgoals.TheEnergyCommissionthenusesthesegoalsasthe
basisfordevelopingitsstatewideenergyefficiencygoals.
Strategiestoachieveallcosteffectiveenergyefficiencyandgreenhousegasemissionsreduction
goalsincludepromotingthedevelopmentofzeronetenergybuildings,increasedbuildingand
appliancestandards,andbetterenforcementofthosestandards.
Azeronetenergybuildingmergeshighlyenergyefficientbuildingconstruction,stateoftheart
appliancesandlightingsystems,andhighperformancewindowstoreduceabuildingsload
andpeak
requirements
and
can
include
on
site
solar
water
heating
and
renewable
energy,
such
assolarphotovoltaic,tomeetremainingenergyneeds.Theresultisagridconnectedbuilding
thatdrawsenergyfrom,andfeedssurplusenergyto,thegrid.Makingzeronetenergy
buildingsarealityby2020forresidencesand2030forcommercialbuildingswillrequire
ongoingcollaborationamongtheEnergyCommission,theCaliforniaPublicUtilities
Commission,andtheAirResourcesBoard;coordinationwithlocalgovernmentsthathavethe
authorityoverlandusedevelopmentandplanning;andcollaborationwiththebuilding
industry.
Californiasbuildingandappliancestandardsprovideasignificantshareofenergysavings
fromreducedenergydemand.The2008BuildingEfficiencyStandardswilltakeeffecton
January1,2010,andwillrequire,onaverage,a15percentincreaseinenergyefficiencysavingscomparedwiththe2005BuildingEfficiencyStandards.The2009ApplianceEfficiency
RegulationsbecameeffectivestatewideonAugust9,2009,and,asrequiredbyAB1109
(Huffman,Chapter534,Statutesof2007),setnewefficiencystandardsforgeneralpurpose
lightingofaphased50percentincreaseinefficiencyforresidentialgeneralservicelightingby
2018.ThefirstphasetakeseffectJanuary1,2010.
Anotherissueassociatedwithenergyefficiencyishowtoincorporatetheexpectedenergy
savingsfrommeetingthestateslongtermenergyefficiencygoalsintotheEnergy
Commissionselectricityandnaturalgasdemandforecast.Notallofthespecificeffortsand
programstoachievethosegoalsareinplace,sinceutilityprogramsandeffortsareonly
approvedbytheCaliforniaPublicUtilitiesCommissioninthreeyearcycles.However,itis
importanttounderstandtheimpactsoftheseexpectedincrementalsavingsaspartofthe
EnergyCommissionsdemandforecastingefforts.
Recommendations
TheEnergyCommissionidentifiedthefollowingefficiencyrelatedrecommendationsasthe
highestpriorityactionsCalifornianeedstotaketoreachitsenergyefficiencygoals:
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TheEnergyCommissionwilladoptandenforcebuildingandappliancestandardsthatput
Californiaonthepathtozeronetenergyresidentialbuildingsby2020andzeronetenergy
commercialbuildingsby2030.
TheEnergyCommissionandtheCaliforniaPublicUtilitiesCommissionshouldwork
togethertodevelopandimplementaudit,labeling,andretrofitprogramsforexisting
buildingsthatachieveallcosteffectiveenergyefficiencymeasures,maximizethebenefitof
existingutilityprograms,andexpandtheuseofmunicipalandutilityonbillfinancing
opportunities.
TheEnergyCommissionwillusethe2009adoptedforecastasastartingpointtoestimate
theincrementalimpactsfromfutureefficiencyprogramsandstandardsthatarereasonably
expectedtooccur,butforwhichprogramdesignsandfundingarenotyetcommitted.Staff
isplanningtouseandpossiblymodifyItronsforecastingmodel,SESAT,forthisnew
purpose,withItronprovidingtrainingforthemodelinearly2010.TheEnergyCommission,
incooperationwiththeCaliforniaPublicUtilitiesCommission,theinvestorownedutilities,
andthepubliclyownedutilities,willdevotesufficientresourcestodevelopinhouse
capabilitytodifferentiatethesefutureenergyefficiencysavingsfromenergyefficiency
savingsthatarealreadyaccountedforinthedemandforecast.
Renewable Energy
Renewableenergyisthefirstsupplysideresourceintheloadingorderandakeystrategyfor
achievinggreenhousegasemissionreductionsfromtheelectricitysector.Increasingtheamount
ofrenewableenergyinCaliforniaselectricitymixalsoreducestherisksandcostsassociated
withpotentiallyhighandvolatilenaturalgaspriceswhilealsoreducingthestatesdependence
onimportednaturalgasusedtogenerateelectricity.Renewableresourcesalsoprovideother
benefitssuchaseconomicdevelopmentandnewemploymentopportunitiesbenefitsthat
havebecomeincreasinglyimportantgiventhecurrentrecession.
ChallengeswithincreasingtheamountofrenewableresourcesinCaliforniaselectricitymixare
plentiful.Theyincludethedifficultyofintegratinglargeamountsofrenewableenergyintothe
electricitysystem;uncertaintyonthetimelineformeetingRenewablesPortfolioStandards
goals;environmentalconcernswiththedevelopmentofrenewablefacilitiesandassociated
transmission;difficultyinsecuringprojectfinancing;delaysandduplicationinsitingprocesses;
timeandexpenseofnewtransmissiondevelopment;thecostofrenewableenergyina
fluctuatingenergymarket;andmaintainingthestatesexistingbaselineofrenewablefacilities.
TheRenewablesPortfolioStandardrequiresretailsellers(definedasinvestorownedutilities,
electricservice
providers,
and
community
choice
aggregators)
to
increase
renewable
energy
as
a
percentageoftheirretailsalesto20percentby2010.Statelawalsorequirespubliclyowned
utilitiestoimplementthestandardbutgivesthemflexibilityindevelopingspecifictargetsand
timelines.InNovember2008,GovernorSchwarzeneggerraisedCaliforniasrenewableenergy
goalsto33percentby2020inhisExecutiveOrderS1408,andinSeptember2009,Executive
OrderS2109directedtheAirResourcesBoardtodevelopregulationsbyJuly31,2010,fora33
percentRenewableEnergyStandard.
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InJuly2009,theCaliforniaPublicUtilitiesCommissionreportedthatthethreeinvestorowned
utilitiesweresupplyingapproximately13percentoftheiraggregatedtotalsalesfromeligible
renewableresourcesasof2008,farbelowthe20percentrequiredby2010.Publiclyowned
utilitiesareshowingsomeprogressinrenewableenergyprocurementwithexpectationsforthe
15largestpubliclyownedutilitiesof12.4percentofRenewablesPortfolioStandardeligible
renewableretailsalesby2011,butthisprogressstillfallsfarshortoftherenewabletarget.
Notallrenewablegeneratorsprovidetheoperatingcharacteristicsthatthesystemneedsto
maintainlocalareareliability,andintegratingcertainrenewabletechnologiescanmakeitmore
difficulttooperatethesystemreliably.Whilegeothermalandbiomassresourcescanprovide
baseloadpower,resourceslikewind,hydro,andsolarareintermittentandnotalwaysavailable
tomeetsystemneedsduringpeakhours.Intermittentresourcescanalsodropofforpickup
suddenly,requiringquickactionbysystemoperatorstocompensateforthesuddenchanges.
Significantenergystoragewillberequiredtointegratefuturelevelsofrenewables,thus
allowingbettermatchingofrenewablegenerationwithelectricityneeds.Thesetechnologiescan
alsoreducethenumberofnaturalgasfiredpowerplantsthatwouldotherwisebeneededto
providethecharacteristicsthesystemneedstooperatereliably.However,manystoragetechnologiesarestillintheresearchanddevelopmentstage,arerelativelyexpensive,andneed
furtherrefinementanddemonstration.
GovernorSchwarzeneggersExecutiveOrderS0606furtherrequiresthestatetomeet20
percentoftheRenewablesPortfolioStandardwithbiopower.However,newbiomassfacilities
continuetofacebarrierstodevelopment.Thereissignificantpotentialforrenewablegeneration
fueledbybiomethanefromthestatesdairies,butthehighcostofemissionscontrolsinterferes
withdairiesabilitytoobtainairpermits.Newsolidfuelbiomassfacilitiesalsofacechallenges
inobtainingairpermits,aswellastheaddedchallengeintheSouthCoastAirQuality
ManagementDistrictofobtainingpermitstoemitparticulatematter.Existingbiomassfacilities,
whichprovideasignificantportionofthestatesbaseloadrenewablecapacity,alsoface
challengesfromtheexpirationattheendof2011oftheRenewableEnergyProgram,which
providesproductionincentivesthatenablethemtokeepoperating.
Whilerenewableenergyprovidesobviousenvironmentalbenefitsbyreducinggreenhousegas
emissionsandcriteriapollutantsassociatedwithelectricitygeneration,theinfrastructure
requiredtoaddlargeamountsofrenewableresourcescanhavenegativeenvironmentaleffects.
EffortsliketheRenewableEnergyTransmissionInitiativeareworkingtofacilitatetheearly
identificationandresolutionortoavoidlanduseandenvironmentalconstraintstopromote
timelydevelopmentofCaliforniasrenewablegenerationresourcesandassociatedtransmission
lines.
Also,
Governor
Schwarzeneggers
Executive
Order
S
14
08
establishes
a
process
to
conservenaturalresourceswhileexpeditingthepermittingofrenewableenergypowerplants
andtransmissionlines.TheExecutiveOrderestablishedtheRenewableEnergyActionTeam,
comprisedoftheEnergyCommission,theCaliforniaDepartmentofFishandGame,thefederal
BureauofLandManagement,andtheU.S.FishandWildlifeService,toidentifyandestablish
areasforpotentialrenewableenergydevelopmentandconservationintheColoradoand
Mojavedesertstohelpreducethetimeanduncertaintyassociatedwithlicensingnew
renewableprojectsonbothstateandfederallands.AspartofimplementingtheExecutive
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Order,theagenciesaredevelopingtheDesertRenewableEnergyConservationPlan,aroad
mapforrenewableenergyprojectdevelopmentthatwilladvancestateandfederalconservation
goalswhilefacilitatingthetimelypermittingofrenewableenergyprojectsindesertregionsof
thestate.
Recommendations
TheEnergyCommissionidentifiedthefollowingrecommendationsforrenewableenergyasthe
highestpriorityactionsCalifornianeedstotake:
TheEnergyCommission,theAirResourcesBoard,theCaliforniaPublicUtilities
Commission,andtheCaliforniaIndependentSystemOperatormustcontinuetowork
togethertoimplementa33percentrenewableelectricitypolicythatappliestoallload
servingentitiesandretailproviders.
Toreduceregulatoryuncertaintyformarketparticipantsandensurealongtermandstable
renewableenergypolicyframeworkforCalifornia,thestateshouldpursuelegislationto
codifythe33percentrenewabletargetthatwasidentifiedinGovernorSchwarzeneggers
ExecutiveOrdersS1408andS2109.
TheEnergyCommissionwillworkwiththeCaliforniaPublicUtilitiesCommission,the
CaliforniaIndependentSystemOperator,thefederalBureauofLandManagement,the
CaliforniaDepartmentofFishandGame,andotheragenciestoimplementspecific
measurestoacceleratepermittingofnewrenewablegenerationandthetransmission
facilitiesneededtoservethatgeneration.Thesemeasuresincludetheeliminationof
duplication,shortenedpermittingtimelines,andplanningprocessessuchastheRenewable
EnergyTransmissionInitiativeandtheDesertRenewableEnergyConservationPlanthat
balancecleanenergydevelopmentandconservation.
TomeettheGovernorstargetof20percentofthestatesrenewableenergygoalsfrom
biomassresourcesthatwasidentifiedinExecutiveOrderS0606,theEnergyCommission
willfacilitateandcoordinateprogramswithotherstateandlocalagenciestoaddress
barrierstotheexpansionofbiopower,includingregulatoryhurdlesandprojectfinancing.
TheEnergyCommissionwillalsoencourageadditionalresearchanddevelopmenttoreduce
costsforbiomassconversion,biopowertechnologies,andenvironmentalcontrols.
TheEnergyCommissionwillconductfurtheranalysistoidentifysolutionstointegrate
increasinglevelsofenergyefficiency,smartgridinfrastructure,andrenewableenergywhile
avoidinginfrequentconditionsofsurplusgeneration,orovergeneration,inwhichmore
electricityisbeinggeneratedthanthereisloadtoconsumeit.Potentialsolutionsinclude
bettercoordinationofthetimingofresourceadditionsandthemixofresourcesaddedto
meetcustomerneedsefficientlyandmaintainsystemreliability,aswellasadditional
research,development,anddemonstrationofexistingandemergingstoragetechnologies.
Inaddition,therewillbeeffortstodeterminewhatnew,moreflexible,andefficientnatural
gastechnologiesbestfitintoanelectricitygridintransition.TheEnergyCommissionwill
completeaninitialstudyofthesurplusgenerationissuetoidentifyspecificresourceand
dataneedsaspartofthe2010IntegratedEnergyPolicyReportUpdate,withanindepth
analysisforthcominginthe2011IntegratedEnergyPolicyReport.
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Distributed Generation and Combined Heat and Power
Distributedgenerationresourcesaregridconnectedorstandaloneelectricalgenerationor
storagesystemsconnectedtothedistributionlevelofthetransmissionanddistributiongridand
locatedatorverynearthelocationwheretheenergyisused.Thebenefitsofdistributed
generationgofarbeyondelectricitygeneration.Becausethegenerationislocatednearthe
locationwhereitisneeded,distributedgenerationreducestheneedtobuildnewtransmission
anddistributioninfrastructureandalsoreduceslossesatpeakdeliverytimes.Customerscan
usedistributedgenerationtechnologiestomeetpeakneedsortoprovideenergyindependence
andprotectagainstoutagesandbrownouts.
Californiaispromotingdistributedgenerationtechnologiesthroughseveralprogramsthat
supportdistributedgenerationonthecustomersideofthemeter,suchastheCaliforniaSolar
Initiative,whichincludestheNewSolarHomesPartnership,theCaliforniaPublicUtilities
CommissionsSelfGenerationIncentiveProgram,andtheEnergyCommissionsEmerging
RenewableFacilitiesProgram.Largescaledistributedgenerationsuchascombinedheatand
power,
also
referred
to
as
cogeneration,
is
an
efficient
and
cost
effective
form
of
distributed
generation.TheClimateChangeScopingPlanhasatargetofadding4,000megawattsofcombined
heatandpowercapacitytodisplace30,000gigawatthoursofdemand,thusreducing
greenhousegasemissionsby6.7millionmetrictonsofcarbonby2020.
DespiteconsistentemphasisinpastIntegratedEnergyPolicyReportsontheneedtoaddress
barrierstothedevelopmentofcombinedheatandpowerfacilities,insufficientprogresshas
beenmade.Inanefforttopushforward,theEnergyCommissiondevelopedanewstudyof
marketpotentialforcombinedheatandpowerfacilitiesthatincludesfacilitiessmallerthan20
megawattsinsizethatdonottypicallyhaveexcesspowertoexporttothegrid.Thestudy
examinedmarketpenetrationoverthenext20yearsforabasecase(statusquo)andfour
alternativecases
that
included
various
stimulus
and
incentive
measures.
The
base
case
showed
about3,000megawattsofcombinedheatandpowermarketpenetration,includingboth
generationcapacityandavoidedelectricairconditioning.(Thestudyincludedalternative
incentivescenarios,oneofwhichmadeavailableanadditional497megawattsofcombinedheat
andpowerforadditiontothebasecaseintheeventofthepassageofSB412[Kehoe,Chapter
182,Statutesof2009].ThebillbecamelawinOctober.)Implementationofallofthestimulus
effortsandincentivesusedinthealternativecaseswouldmorethandoublemarketpenetration
overthenext20yearstoabout6,500megawatts,exceedingtheAirResourcesBoards4,000
megawatttargetforcapacityadditions.
Recommendation
TheEnergyCommissionidentifiedthefollowingrecommendationasthehighestpriorityaction
Californianeedstotaketosupportcombinedheatandpowerdevelopmentinthestate:
TheEnergyCommissionwillworkwiththeAirResourcesBoardinthedevelopmentof
combinedheatandpowertomeetthestategoalsforemissionreductionsfromthis
technology.Actionsincludemandatestoremovemarketbarrierstothedevelopmentof
combinedheatandpowerfacilitiesandtheprovisionofanalyticalsupportonefficiency
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requirementsandothertechnicalspecificationssothatcombinedheatandpowerismore
widelyviewedandadoptedasanenergyefficiencymeasure.
Nuclear Power Plants
Aspartofthe2008IntegratedEnergyPolicyReportUpdate,theEnergyCommissiondevelopedAn
AssessmentofCaliforniasNuclearPowerPlants:AB1632Report,asdirectedbyAB1632(Blakeslee,
Chapter722,Statutesof2006).Thereportaddressedseismicandplantagingvulnerabilitiesof
CaliforniasinstatenuclearplantsPacificGasandElectricCompanysDiabloCanyonPower
PlantandSouthernCaliforniaEdisonsSanOnofreNuclearGeneratingStationincluding
reliabilityconcernsaswellasconcernsoversafetyculture,plantperformance,andmanagement
issuesatSanOnofre.TheAB1632ReportalsorecommendedadditionalstudiesthatPacificGas
andElectricCompanyandSouthernCaliforniaEdisonshouldundertakeaspartoftheirlicense
renewalfeasibilitystudiesfortheCaliforniaPublicUtilitiesCommissionanddirectedthe
utilitiestoprovideastatusreportontheireffortstowardimplementingtherecommendationsin
theAB1632Reportinthe2009IntegratedEnergyPolicyReport.
Majorpolicydecisionsthatwillbemadeinthenextseveralyearswillshapethenextthree
decadesofnuclearenergypolicyinCalifornia.Anoverarchingissuewiththestatesnuclear
facilitiesisplantlicenserenewal.TheNuclearRegulatoryCommissionoperatinglicensesfor
SanOnofreUnits2and3aresettoexpirein2022,andforDiabloCanyonUnits1and2,in2024
and2025,respectively.PacificGasandElectricannouncedonNovember24,2009,itsintention
tofilealicenserenewalapplicationforDiabloCanyon,andSouthernCaliforniaEdisonplansto
fileforlicenserenewalforSanOnofreinlate2012.
TheNuclearRegulatoryCommissionlicenserenewalapplicationprocessdetermineswhethera
plantmeets
its
renewal
criteria,
but
not
whether
the
plant
should
continue
to
operate.
The
NuclearRegulatoryCommissionspecificallystatesthatithasnoroleintheenergyplanning
decisionsofStateregulatorsandutilityofficialsastowhetheraparticularnuclearpowerplant
shouldcontinuetooperate.Itislefttostateregulatoryagenciestodeterminewhetheritisin
thebestinterestofratepayersandcosteffectivetocontinueoperationoftheirstatesnuclear
plants.
AlthoughtheCaliforniaPublicUtilitiesCommissiondoesnotapproveordisapprovelicense
applicationsfiledwiththeNuclearRegulatoryCommission,bothPacificGasandElectricand
SouthernCaliforniaEdisonmustobtaintheCaliforniaPublicUtilitiesCommissionsapproval
topursuelicenserenewalbeforereceivingCaliforniaratepayerfundingtocoverthecostsofthe
NuclearRegulatoryCommissionlicenserenewalprocess.TheutilitiessubmissionoflicenserenewalfeasibilityassessmentstotheCaliforniaPublicUtilitiesCommissioninitiatesthe
CaliforniaPublicUtilitiesCommissionslicenserenewalreviewproceedings.TheCalifornia
PublicUtilitiesCommissionproceedingswillnotonlyconsiderenergyplanningissuesand
whethercontinuedoperationofthenuclearpowerplantsisintheratepayersbestinterest,but
willalsoconsidermattersofstatejurisdictionsuchastheeconomic,reliability,and
environmentalimplicationsofrelicensing.
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TheCaliforniaPublicUtilitiesCommissionsGeneralRateCaseDecision0703044required
PacificGasandElectrictoincorporatetheEnergyCommissionsAB1632assessmentfindings
andrecommendationsinitslicenserenewalfeasibilitystudyandtosubmitthestudytothe
CaliforniaPublicUtilitiesCommissionnolaterthanJune30,2011,alongwithanapplicationon
whethertopursuelicenserenewalforDiabloCanyon.LettersonJune25,2009,fromthe
presidentoftheCaliforniaPublicUtilitiesCommissiontoPacificGasandElectricandSouthernCaliforniaEdisonreiteratedtherequirementforeachutilitytocompletetheAB1632Reports
recommendedstudies,includingtheseismic/tsunamihazardandvulnerabilitystudies,and
reportonthefindingsandtheimplicationsofthestudiesforthelongtermseismicvulnerability
andreliabilityoftheplants.ThesestudiesarenecessarytoallowtheCaliforniaPublicUtilities
Commissiontoproperlyundertakeitsobligationstoensureplantandgridreliabilityinthe
eventthateitherDiabloCanyonorSanOnofrehasaprolongedorpermanentoutageandfor
theCaliforniaPublicUtilitiesCommissiontoreachadecisiononwhethertheutilitiesshould
pursuelicenserenewal.However,theutilitiesreportstodateindicatetheyarenotonschedule
tocompletetheseactivitiesintimeforCaliforniaPublicUtilitiesCommissionconsideration.In
addition,both
utilities
have
Pacific
Gas
and
Electric
has
indicated
objections
to
providing
some
ofthestudiesand/orrequirementsindicatedbytheAB1632ReportandtheCaliforniaPublic
UtilitiesCommissionGeneralRateCaseDecision.
TheEnergyCommissionbelievesthatthecomprehensiveness,completeness,andtimeliness
withwhichbothutilitiesprovidethestudiesidentifiedintheAB1632Reportwillbeacritical
partoftheCaliforniaPublicUtilitiesCommissionandNuclearRegulatoryCommissionreviews
oftheutilitieslicenserenewalapplications.
Recommendation
TheEnergyCommissionidentifiedthefollowingrecommendationasthehighestpriorityaction
Californianeeds
to
take
to
help
ensure
nuclear
plant
reliability
and
to
minimize
costly
outages:
PacificGasandElectricCompanyandSouthernCaliforniaEdisonshouldcompleteallofthe
studiesrecommendedintheAssemblyBill1632Report,shouldmaketheirfindingsavailable
forconsiderationbytheEnergyCommission,andshouldmaketheirfindingsavailableto
theCaliforniaPublicUtilitiesCommissionandtheU.S.NuclearRegulatoryCommission
duringtheirreviewsoftheutilities licenserenewalapplications.
Transmission and Distribut ion
Thestatestransmissionanddistributionsystemisanothercriticalcomponentoftheelectricity
sectorforservingCaliforniasgrowingpopulationandintegratingrenewableenergy.The2009
StrategicTransmissionInvestmentPlandescribestheimmediateactionsthatCaliforniamusttaketoplan,permit,construct,operate,andmaintainacosteffective,reliableelectrictransmission
systemthatiscapableofrespondingtoimportantpolicychallengessuchasachieving
significantgreenhousegasreductionandRenewablesPortfolioStandardgoals.Theplanmakes
anumberofrecommendationsintendedtomakethecriticallinkbetweentransmission
planningandpermittingsothatneededprojectsareplannedfor,havecorridorssetasideas
necessary,andarepermittedinatimelyandeffectivemannerthatmaximizesexisting
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infrastructureandrightsofway,minimizeslanduseandenvironmentalimpacts,andconsiders
technologicaladvances.
Recommendations
TheEnergyCommissionsupportsthemanyrecommendationsmadeinthe2009Strategic
TransmissionInvestment
Plan
and
highlights
the
following
recommendations:
TheEnergyCommissionstaffwillworkwiththerecentlyformedCaliforniaTransmission
PlanningGroupandtheCaliforniaIndependentSystemOperatorinaconcertedeffortto
establisha10yearstatewidetransmissionplanningprocessthatusestheEnergy
CommissionsStrategicPlanproceedingtovettheCaliforniaTransmissionPlanningGroup
plandescribedinChapter4ofthe2009StrategicTransmissionInvestmentPlan,withemphasis
onbroadstakeholderparticipation.
TheEnergyCommissionstaffwillworkwiththeCaliforniaIndependentSystemOperator,
theCaliforniaPublicUtilitiesCommission,investorownedutilities,andpubliclyowned
utilitiestodevelopacoordinatedstatewidetransmissionplanusingconsistentstatewide
policyandplanningassumptions.
Coordinated Electricity System Planning
Californiahasnumerousagenciesthatareinvolvedinelectricityplanning.Whilethereissome
degreeofcoordinationamongvariousagenciesandprocesses,thestateneedstofindbetter
waystocoordinateandstreamlinethecollectiveresponsibilitiesofthoseagenciestoachievethe
statesgreenhousegasemissionreduction,environmentalprotection,andreliabilitygoalswhile
reducingduplicativeorcontradictoryprocesses.Californianeedstobettercoordinateits
electricitypolicy,planning,andprocurementeffortstoeliminateduplicationandtoensurethat
plannersandpolicymakersunderstandtheinteractionsandconflictsthatmayexistamong
stateenergypolicygoals.
Recommendation
TheEnergyCommissionidentifiedthefollowingrecommendationasthehighestpriorityaction
neededforthestatetoidentifyresourceneedsoverboththeshortandlongterm:
TheEnergyCommissionwillworkwiththeCaliforniaPublicUtilitiesCommissionand
CaliforniaIndependentSystemOperator,alongwithotheragenciesandinterested
stakeholders,todevelopacommonvisionfortheelectricitysystemtoguideinfrastructure
planninganddevelopment.Suchcoordinatedplanscanbeusedtoguideeachagencysown
infrastructureapprovalandlicensingresponsibilitiesandthusmaximizecoordinatedaction
toachieve
state
energy
policy
goals.
Address ing Procurement in the Hybrid Market
AttheOctober14,2009,IntegratedEnergyPolicyReportCommitteeHearingonthedraftIEPR,
theIEPRCommitteesolicitedcommentsfrompartiesonhowthestateshouldaddressthe
currenthybridelectricprocurementmarket(amarketsplitbetweenutilityownedgeneration
andcontractedthirdpartygeneration)andimprovetheinvestorownedutilityprocurement
processforelectricgeneration.Theseissuesarecriticaltostateenergypolicybutdidnotreceive
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sufficientanalysisthroughoutthe2009IEPRprocess.TheIndependentEnergyProducers
Associationsubmittedcommentsexpressingsupportforanexaminationofthehyridmarket
structuretodetermineifitisfunctioningproperlyandachievingitsoriginalgoalofprovidinga
levelplayingfieldforutilityownedandindependentpowergeneration.Inaddition,the
WesternPowerTradingForumsubmittedcommentsexpressingconcernsthatutility
dominationofinfrastructureinvestmentispotentiallydetrimentaltocompetitivewholesaleandretailmarketsandthereforepotentiallydetrimentaltotechnologicalinnovation.TheForum
assertsthattheexistinghybridmarketstructurerequiresratepayerstobearthefinancialand
operationalrisksassociatedwithnewinvestmentandignoresthemarketscapabilitiesto
activelymanageandhedgethoserisks,anditbelievesthatimprovingcompetitionatthe
wholesaleandretaillevelswouldcreatedownwardpressureonprices.
Recommendation
TheEnergyCommissionsupportsthefollowingrecommendation:
TheEnergyCommissionbelievestheseissuesdeserveafullervetting,includingan
assessmentof
alternative
market
models
that
would
better
serve
the
goal
of
reduced
cost
to
customers.TheEnergyCommissionwillinvitetheCaliforniaPublicUtilitiesCommissionto
participateinamorecompleteevaluationoftheexistinghybridmarketstructureaspartof
the2010IntegratedEnergyPolicyReportUpdatetoidentifypossiblemarketenhancementsand
changestoutilityprocurementpracticesthatwouldfacilitatethereemergenceofmerchant
investment.
The Natural Gas Sector
Naturalgasisthecleanestofthefossilfuelsusedinthestateandwillcontinuetobea
significantenergysourcefortheforeseeablefuture.Maintainingareliablenaturalgasdelivery
andstorageinfrastructureisthereforeimportanttosupportthereceiptanddeliveryofadequate
supplytoCaliforniasmillionsofnaturalgasconsumersandkeeppriceslowfortheresidential,
commercial,industrial,andelectricgenerationsectors.AnexpandingCalifornianaturalgas
infrastructurealsowillallowfortheefficientdeliverytoCaliforniaofincreasingdomesticshale
gasproductionandliquefiednaturalgasimports.
Recenttechnologicaladvancementsinexploration,drilling,andhydraulicfracturinghave
transformedshaleformationsfrommarginalnaturalgasproducerstosubstantialand
expandingcontributorstothenaturalgasportfolio.Recoverableshalereserveestimatesrange
ashighas842trillioncubicfeet,a37yearsupplyattodaysconsumptionrates.Whilenatural
gasproductionfromshaleformationshassignificantlyincreaseddomesticproduction,thereis
ongoinginvestigationofpotentialenvironmentalconcernsrelatedtoshalegasdevelopment,
includingcarbonemissionsandpossiblegroundwatercontamination.
Asrecentlyastwoyearsago,domesticnaturalgasproductionandimportstoCaliforniawere
onthedecline,andliquefiednaturalgaswasseenasasourcetobetterservethenaturalgas
needsofCalifornia.Therecentdevelopmentofnaturalgasshaleformationshascontributedto
increaseddomesticproductionofnaturalgas,andliquefiednaturalgasdoesnotseemtobea
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priorityfuelforCaliforniaatthistime.Ifprivateinvestorsarewillingtoinvestinliquefied
naturalgasfacilitieswithoutcommittingtaxpayerorratepayerfunds,however,liquefied
naturalgasshouldbeconsideredaviableoption.TheEnergyCommissiondoesnotoppose
developmentofliquefiednaturalgasfacilitiesaslongasliquefiednaturalgasdevelopmentis
consistentwiththestatesinterestsinbalancingenvironmentalprotection,publicsafety,and
localcommunityconcernstoensureprotectionofthestatespopulationandcoastalenvironment.
Whilethereiswidespreadagreementthatthephysicalmarketfactorsofsupplyanddemand
areprimarycontributorstonaturalgaspricesandvolatility,therealsoisgrowinginterestand
concernabouttheinfluencefinancialmarketfactors,particularlycommodityspeculation,have
onnaturalgaspricesandvolatility.Thegrowthinspeculativecommoditytradingfrom
nontraditionalparticipants,suchaspensionfunds,universityendowments,hedgefunds,and
indexportfolios,haschangedthefuturesmarket.Unliketraditionalparticipantslikeutilities
andrefinerswhousedthemarkettohedgeagainstvolatileenergycosts,thesenewparticipants
usethemarketasanopportunityforprofit.Significantdisagreementexistsabouttheinfluence
speculativetradinghasonthenaturalgasmarket,prices,andvolatility.
Finally,pasteffortstoforecastnaturalgaspriceshavebeenhighlyinaccuratecomparedto
actualprices,evenwhenpricevolatilitywaslargelydominatedbytraditional,physicalmarket
factors.Additionally,astheUnitedStatescontinuesmovingtowardacarbonconstrained
existence,futuregreenhousegaspolicieswillfurthercomplicatetheseefforts,likelyrendering
futurenaturalgaspriceforecastsevenlessaccurateandmoreuncertain.Theuncertainty
associatedwithpredictingmajorinputvariablesandtheresultingnaturalgaspriceforecasts
bringintoquestionthevalueofproducingdatespecific,singlepointnaturalgaspriceforecasts.
Recommendations
TheEnergyCommissionidentifiedthefollowingrecommendationsasthehighestprioritiesfor
thestatesnaturalgassector:
Californiashouldworkcloselywithwesternstatestoensuredevelopmentofanaturalgas
transmissionandstoragesystemthathassufficientcapacityandalternativesupplyroutesto
overcomeanydisruptioninthesystem,suchasweatherrelatedlinefreezesandpipeline
breaks.ThestateshouldsupportconstructionofsufficientpipelinecapacitytoCaliforniato
ensureadequatesupplyatareasonableprice.
TheEnergyCommissionwillcontinuetomonitorthepotentialenvironmentalimpacts
associatedwithshalegasextraction,includingcarbonfootprint,volumeofwateruseand
riskofgroundwatercontamination,airpollution,andpotentialchemicalleakage.
Specifically,theEnergyCommissionstaffwillcoordinateandexchangeinformationwith
energyagenciesinstateswithshalegasdevelopment,suchasNewYork,Texas,andother
midcontinentstates,andwillreportnewfindingsintheIntegratedEnergyPolicyReport
andotherEnergyCommissionforums.
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The Fuels and Transportation Sector
Stateandfederalpoliciesencouragethedevelopmentanduseofrenewableandalternative
fuelstoreduceCaliforniasdependenceonpetroleumimports,promotesustainability,andcut
greenhousegasemissions.GovernorSchwarzeneggersExecutiveOrderS0606established
cleartargetsforincreaseduseandinstateproductionofbiofuels.Californiaandthefederalgovernmentalsohavepoliciestoimprovevehicleefficienciesandtoreducevehiclemiles
traveledineffortstoachieve2050greenhousegasreductiontargetsof80percentbelow1990
levelsasdirectedintheGovernorsExecutiveOrderS305.Untilnewvehicletechnologiesand
fuelsarecommercialized,petroleumwillcontinuetobetheprimaryfuelsourceforCalifornias
vehicles,andthestatemustenhanceandexpandtheexistingpetroleuminfrastructure,
particularlyatinstatemarineports,whileatthesametimeworkingtodevelopanalternative
fuelinfrastructure.
Thefuelsandtransportationenergysectorisresponsibleforproducingthegreatestvolumeof
greenhousegasemissionsnearly40percentofCaliforniastotal.AB32doesnotdirectly
addressgreenhousegasemissionsreductioninthetransportationsector.Instead,reductionsare
addressedthroughCaliforniasLowCarbonFuelStandard,AB1493(Pavley,Chapter200,
Statutesof2002),AB1007(Pavley,Chapter371,Statutesof2005),andAB118,theAlternative
andRenewableFuelandVehicleTechnologyProgram.Thepoliciesandstandardsresulting
fromthesemandateswillultimatelychangevehicleandfueltechnologiesinCaliforniaand
acceleratethemarketforlowcarbonfuelswellbeyondthecurrentlevelofdemand.
Thecurrentrecessionhashadasignificantimpactonthestatestransportationsector.
Californiasaveragedailygasolinesalesforthefirstfourmonthsof2009were2.1percentlower
thanthesameperiodin2008,continuingareductionindemandobservedsince2004.Daily
dieselfuel
sales
for
the
first
three
months
of
2009
were
7.7
percent
lower
than
the
same
period
in2008,continuingadecliningtrendsince2007.Jobgrowthandindustrialproduction
driversofairtravelarealsodeclining,causingtheaviationsectortoexperienceadropinair
traffic.Recentdemandtrendsforjetfuel,whichsawan8.9percentdeclinein2008,aresimilar
todieselfuelandreflecttheimpactoftheeconomicdownturnandhigherfuelprices.
TheinitialyearsintheEnergyCommissionstransportationfueldemandforecastshowa
recoveryfromtherecession.Becausetheeconomicanddemographicprojectionsusedinthese
forecastsindicateareturntoeconomicandpopulationgrowth,fueldemandinthelightduty,
medium andheavydutyvehiclesandaviationsectorstendstoresumehistoricalgrowth
patterns.However,themixoffueltypesisprojectedtochangesignificantlyasthestate
transitionsfrom
gasoline
and
diesel
to
alternative
and
renewable
fuels.
Californianeedssufficientfuelinfrastructuretoensurereliablesuppliesoftransportationfuels
foritscitizens.Relianceonforeignoilimportsincreasinglyputsthestatesfuelsupplyatrisk,
notonlybecauseofsecurityandreliabilityconcerns,butalsobecausethemarineportsarenot
expandingtomeetexpectedgrowthindemand.Alternativeandrenewablefuelscouldfacethe
sameconstraintsattheportsshouldthestatebegintorelyonimportsofthosefuelstomeet
stateandfederalrenewablefuelstandards.Infact,renewableandalternativefuelsfaceeven
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moreseriousinfrastructureissues,asmuchoftheinfrastructurethatwillsoonbeneededisnot
eveninplace.Bothpetroleumandrenewablefuelsfaceinfrastructurechallengesfromthe
wholesaleanddistributionlevelallthewaythroughtotheenduser.
Recommendations
TheEnergy
Commission
identified
the
following
recommendations
as
the
highest
priorities
for
thefuelsandtransportationsector:
WiththeadventofnewCaliforniaprogramssuchastheAlternativeandRenewableFuel
andVehicleTechnologyProgram(acomprehensiveinvestmentprogramtostimulatethe
developmentanddeploymentoflowcarbonfuelsandadvancedvehicletechnologies),the
LowCarbonFuelStandard,andafederalwaiverallowingCaliforniatosetitsowncarbon
dioxidemotorvehicleemissionstandards,Californiaiswellpositionedtodevelopasystem
ofsustainable,clean,alternativetransportationfuels.Thestateshouldcontinueonits
presentcourseofactionbyprovidingresponsibleagencieswiththetimeandfundingto
implementtheseprograms.
TheEnergyCommissionwillcollaboratewithpartneragenciesandstakeholderstodeveloppolicychangestoaddressregulatoryhurdlesandpriceuncertaintyforalternativefuels,
particularlybiofuels,inCalifornia.
Tomaintainenergysecurity,stateandlocalagenciesneedtoensurethatthereisadequate
infrastructureforthedeliveryoftransportationfuels.Thestateshouldmodernizeand
upgradetheexistinginfrastructuretoaccommodatealternativeandrenewablefuelsand
vehicletechnologiesastheyaredevelopedandtoaddresspetroleuminfrastructureneedsto
preservepastinvestmentsandtoexpandthroughputcapacityinthestate.
TheEnergyCommissionbelievesthattransportationenergyefficiencyshouldbepursued
throughincreasedfederalvehiclefueleconomystandardsandmoresustainablelanduse
practicesinconjunctionwithlocalgovernments.
The Land Use and Planning Sector
Althoughlandusedecisionsaremadeonthelocallevel,theyoftenhavestatewideimplications
bydirectlyinfluencingconsumertransportationchoices,energyconsumption,andgreenhouse
gasemissions.The2006IntegratedEnergyPolicyReportUpdatestatedthatthesinglelargest
opportunitytohelpCaliforniameetitsstatewideenergyandclimatechangegoalsresideswith
smartgrowthdevelopmentthatrevitalizescentralcitiesandoldersuburbs,supportsand
enhancespublictransit,promoteswalkingandbicycling,andpreservesopenspacesand
agriculturallands.The2007IntegratedEnergyPolicyReportfurthernotedthattoreduce
greenhousegasemissions,Californiamustbeginreversingthecurrent2percentannualgrowth
rateofvehiclemilestraveled.
TheEnergyCommissionisoneofseveralstateagencieshelpinglocalandregionalgovernments
makesustainablelandusedecisions.TheCaliforniaDepartmentofTransportationcoordinates
localandstateplanningthroughitsRegionalBlueprintPlanningProgram.SenateBill375
(Steinberg,Chapter728,Statutesof2008)requirestheAirResourcesBoardtosetregional
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emissionsgoalsbyworkingwithmetropolitanplanningorganizations.SB732(Steinberg,
Chapter729,Statutesof2008),recognizingtheneedforstateagenciestoworkmoreclosely
togetheronthisissue,createdtheStrategicGrowthCouncil,acabinetlevelcommittee
composedofagencysecretariesfromBusiness,TransportationandHousing;CaliforniaHealth
andHumanServices;theCaliforniaEnvironmentalProtectionAgency;andtheCalifornia
NaturalResourcesAgency,alongwiththedirectoroftheGovernorsOfficeofPlanningandResearch.
Thesestateagenciesneedtocoordinatemorecloselytohelplocalgovernmentsachievethe
benefitsofsustainablelanduseplanning.Beforeadoptingnewstatepolicies,stategovernment
mustimproveitsoutreachtolocalgovernmentstobetterunderstandtheproblemstheyface.
Thisincludestakingintoaccountandaddressingthefiscalrealitieslocalgovernmentsconfront
indifficulteconomictimes.
Recommendations
TheEnergyCommissionmakesthefollowingrecommendationrelatedtolanduseplanning
anddecisions:
Toreduceenergyuseandsupportthetransportationgreenhousegasemissionreduction
goalsofSB375,stateagenciesincollaborationwiththeStrategicGrowthCouncilandlocal
andregionalgovernmentswillcontinuetoconductresearch,developanalyticaltools,
assembleeasytousedata,andprovideassistancetolocalandregionalgovernmentofficials
tohelpthemmakeinformeddecisionsaboutenergyopportunitiesandundertake
sustainablelandusepractices,whilerecognizingthedifferentneedsofruralandurban
regions.
The Potential of Carbon Capture and Sequestration
Californiawillneedinnovativestrategiestoaddressgreenhousegasemissionsassociatedwith
energyproductionanduse.Onesuchstrategyiscarboncaptureandstorage,alsoknownas
carboncaptureandsequestration.The2007IEPRfocusedongeologicsequestrationstrategies
forthelongtermmanagementofcarbondioxide,buttherehavebeenencouragingtechnology
advancementsandinvestmentssincethen.Technologydevelopersandpolicymakerswhoare
examiningcarboncaptureandsequestrationapplicationshaveexpandedfromaninitialfocus
oncoalandpetroleumcoketonaturalgasandrefinerygas,thepredominantfossilfuelsusedin
Californiapowerplantsandindustrialfacilities.
Recommendation
TheEnergyCommissionmakesthefollowingrecommendationrelatedtocarboncaptureand
sequestration:
TheEnergyCommissionrecommendsthat,asamechanismforachievingstateenergyand
environmentalobjectives,itcontinuetosupportandconductcarboncaptureand
sequestrationresearchtodemonstratetechnologyperformanceandfacilitateinteragency
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coordinationtodevelopthetechnicaldataandanalyticalcapabilitiesnecessaryfor
establishingalegalandregulatoryframeworkforthistechnologyinCalifornia.
Achieving Energy Goals
Californianeedsreliable,affordable,andcleansuppliesofenergytoserveitscitizensand
maintainastrongeconomy.Thestateselectricity,naturalgas,andtransportationsectorsmust
continuouslyrespondtochangesinsupplyanddemand,newpoliciesandtechnologiesand
theirassociatedchallenges,andincreasingenvironmentalregulation.Californiamustbolsterits
currentenergyfoundationwithanaggressiveandwiderangingagendathatwillcontinueto
reduceenergydemand,promotedevelopmentofrenewableenergyresources,ensure
developmentofcleanerfossilresources,giveconsumersmoreenergychoices,andbuildthe
necessaryinfrastructuretoprotectthestatefromfuturesupplydisruptionsandhighprices.
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Chapter 1: Californias Energy-Related Policies andActivities
In2006,theLegislaturepassedandGovernorSchwarzeneggersignedAssemblyBill32(Nez,
Chapter488,Statutesof2006),theGlobalWarmingSolutionsActof2006,whichestablishedthegoalofreducinggreenhousegas(GHG)emissionsto1990levelsby2020.AB32wasthefirst
lawofitskindtoaddressclimatechangebyimplementingregulatorymarketmechanismsto
achieverealandmeasurableGHGreductiontargets.AB32isthedrivingforceforCalifornias
energypolicyandprograms,andthestatemustintegratemanyexistingpoliciesandlegislation
intoasymbioticwholeunderAB32sbroadumbrella.
Atthesametime,itisimportanttorecognizethatAB32isoneofmanypoliciesthatguide
energydevelopment,production,anduseinCalifornia.Manypoliciesandprogramsin
existencepriortopassageofAB32helpedthestatemakesteadyprogresstowardmore
responsiblestewardshipoftheplanetanditsresources.Thesearediscussedlaterinthechapter
andincludethegoalofachievingallcosteffectiveenergyefficiency,theRenewablesPortfolioStandard,theCaliforniaSolarInitiative,thepowerplantEmissionPerformanceStandard,and
regulationstoreduceGHGemissionsfrommotorvehicles.Whilemanyoftheenergypoliciesin
place arecomplementary,therecanalsobeoverlaporconflictamongthosepoliciesbecause
theyareoftendesignedtoaddressdifferentproblems.
Inadditiontothechallengeofintegratingnewandexistingpolicies,laws,andregulations,
therearechallengesincoordinatingthevariousagenciesthatimplementthosepolicies.The
EnergyCommission,theCaliforniaPublicUtilitiesCommission,CaliforniaIndependentSystem
Operator,theCaliforniaAirResourcesBoard,CaliforniaEnvironmentalProtectionAgency,and
theStateWaterResourcesControlBoardallhaveveryspecificmissions,jurisdictions,and
expertise.Workingcollaborativelyisachallengingandongoinggoal,asagenciesstriveto
integratepoliciestoestablishprioritiesandtransformbroadlyframedobjectivesintoconcrete,
efficient,andcoordinatedprogramsandactions.
Thischapterprovidesbackgroundonandabriefstatusofcurrentpoliciesandprogramsthat
affectCaliforniasthreemajorenergysectorselectricity,transportation,andnaturalgas as
wellasthosethataffectlanduseandplanning.Thepurposeistoprovidedecisionmakerswith
thecontextforthemoredetaileddiscussionsinsubsequentchaptersofthevariouspolicyefforts
underwayandthechallengesassociatedwithmeetingCaliforniasenergypolicygoals.The
descriptionoftheenergypolicylandscapemayalsohelpdecisionmakersseehowpolicies
overlapor
complement
each
other,
as
well
as
where
gaps
may
exist
that
require
additional
actiontoensureaclean,efficient,andaffordableenergyfutureforCalifornia.
Assembly Bill 32 Framework
AB32legislationchargedtheCaliforniaAirResourcesBoard(ARB)wit