California’s new feed-in tariff (FIT) is creating a burgeoning market for green energy investments, but the policy has sparked a fierce battle over state authority to dictate wholesale power...
California's Green Wall
A new law dampens coal-by-wire prospects.
A new bill signed into law by California Gov. Arnold Schwarzenegger last September, and which went into effect in January 2007, essentially prohibits California utilities from signing long-term contracts for power, including those from out of state, unless they emit less than 1,000 pounds of CO 2/MWh of electricity produced.
While the law does not specifically bar coal-fired generation, the limit is set low enough to rule out all coal-power plants. A modern, highly efficient natural gas-fired plant barely would qualify.
For many years, California has had it good. The state gets roughly 20 percent of its electrical energy from out-of-state coal without the environmental degradation associated with coal-burning power plants. This unwritten and unacknowledged policy, sometimes referred to as coal-by-wire, has served it well—offering cheap power without local pollution. But all good things eventually come to an end, and so it seems for the undeclared coal-by-wire policy.
The new law is part of a comprehensive effort to reduce greenhouse-gas emissions in California from all sources—power plants, cars, industry, and agriculture. Another measure requires all distribution entities in California to meet 20 percent of their generation from renewable resources by 2010, a deadline that was pushed forward by the governor.
These measures, plus the new carbon-cap law signed by the governor last year and going into effect by 2012, have sent utilities—large and small, private as well as municipal or city-owned—into a frenzy as they scramble to find alternatives to coal to meet their future demand. Roughly 10 percent of California’s greenhouse gases may be attributed to electricity generation from coal-fired plants outside the state; there are none within its borders. The carbon cap requires greenhouse-gas emissions to be cut to their 1990 levels by 2020, roughly 25 percent below where they otherwise would be.
For example, Southern California Edison Co. (SCE), a unit of Edison International, recently announced an agreement to buy 1,500 MW of wind-generated power from Alta Windpower Development LLC, owned by Australian Allco Finance Group Ltd. It will be the largest known contract for wind if it comes to fruition over the next decade.
Capping Greenhouse Gases
In late August 2006, California passed Assembly Bill 32—the California Global Warming Solutions Act of 2006. This legislation has received national attention and professes to establish a statewide greenhouse-gas (GHG) emissions limit to be achieved by 2020, and which would be equivalent to emissions levels in 1990. The devilish details of how this all will be done have been delegated to the State Air Resource Board, with various rules and requirements to be established over the next several years. A first step is to determine what GHG levels will exist in 2020 and to determine who has the rights to emit at these levels in 2020. Those without sufficient rights will need either to reduce their emissions