The Clean Energy Race: How Do California’s Public Utilities Measure Up?

California’s local publicly owned utilities, which supply about a quarter of the elec-tricity used in the state, have made significant strides in investing in clean, renew-able energy since the state passed its first renewable energy purchase law in 2002. The Renewables Portfolio Standard (RPS) was enacted to help California transi-

tion away from polluting fossil fuels and invest in electricity generation from renewable sources such as the wind and sun, in order to improve air quality, reduce global warming pollution, and expand the state’s green economy. The original RPS set a goal for each California utility to obtain 20 percent of its electricity sales from renewable sources by 2010. In 2011, the law was strengthened to require all utilities to obtain 33 percent from renewables by 2020.

Not All Investments in Renewable Electricity Are Created Equal While a utility can take many approaches to procuring renewable energy, direct ownership and long-term contracts best support the development of new resources by providing finan-cial security to developers. These long-term investments also lock in stable electricity prices for customers and help put a utility on track to meet the 33 percent RPS. We evaluated the renewable energy investments made by California’s 10 largest publicly owned utilities. We then classified each utility into one of three categories: “sprinting ahead,” “on the right track, but must keep moving,” or “false start,” based on how much it has pro-moted the development of new sources of renewable energy, and whether it is on track to meet the 33 percent RPS.

L A D W P ’s R P s P R o g R A M

on the Right Track, but Must Keep Moving

LADWP exactly met the state’s RPS in 2010. How-ever, nearly a third of its investments were made under contracts of five years or less. That contract length is too short to support the development of new clean energy resources, or to help the nation’s largest publicly owned utility forge a long-range strategy for investing in renewables.

LADWP was one of four publicly owned utilities, out of the 10 we analyzed, to reach the state’s 20 percent RPS by 2010. Long-term investments in seven new wind facilities in the Pacific Northwest, Utah, Wyoming, and California provided the largest share of LADWP’s RPS mix—investments that directly support the development of new clean energy resources. However, nearly a third of LADWP’s 2010 RPS investments occurred under contracts of five years or less—and more than half of those were for 18 months or less. That means a sizeable portion of LADWP’s renewable energy in-vestments were too short-lived to promote the con-struction of new clean energy facilities. And unless renewed, those investments will not help LADWP meet future RPS requirements.

F A s T F A C T s• Customersserved:1.5million

• RPSrenewables in2003:1.6%

• RPSrenewablesin2010:20%

Los Angeles Department of Water and Power

★

Los Angeles

★

Independence

★

★

20%2010RPS

33%2020RPS

Existingrenewablesrepackagedundernewlong-termcontracts

Newrenewablesundernewlong-termcontracts,orutility-owned

LADWP’s 2010 RPs Investments

Short-termcontracts

Medium-termcontracts

Existingrenewablesunderexistinglong-termcontracts,orutility-owned

Los Angeles Department of Water and Power (LADWP)LADWPisthenation’slargestpubliclyownedutility,andCalifornia’sthird-largestelectricutility,servingLosAngelesandpartoftheOwensValley.LADWPwasfoundedin1902todeliverwatertoLA,andby1939alsoservedallofLA’selectricityneeds.LADWPexpandeditsserviceterritoryintotheOwensValleyduringthefirsthalfofthetwentiethcentury.

Photos:©Thinkstock/JanWachala(wind);©Thinkstock/DanielGrill(solar);©Flickr/KirkCrawford(sewagetreatment)

Renewable electricity is generated by capturing biogas at the Hyperion Sewage Treatment Plant.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Wind0.05% � 8.2%

Small hydro0.8% � 7.1%

Geothermal0.1% � 0.9%

Biogas0.6% � 3.7%

2003 2010

Nuclear12% � 11%

Natural gas26% � 25%

Large hydro8% � 4%

Coal51% � 41%

Non-RPS renewables1% � 0.1%

RPS renewables1.6% � 20%

0%

5%

10%

15%

20%

25%

2003 2010

LADWP’s RPS Renewables

2003 � 2010

2003 � 2010

Solar PV0.002% � 0.2%

LADWP’s Electricity Mix, 2003 and 2010

What’s Powering LADWP?In 2003, coal-fired electricity from the Intermountain Power Plant (IPP) in Utah and Navajo Station in Arizona supplied more than half of LADWP’s retail electricity sales. LADWP operates IPP, and has a contract for 45 percent of its output, which expires in 2027. LADWP has a 21 percent ownership share in Navajo, and has stated its intent to divest by 2015.

Local natural gas plants provided 20 per-cent of LADWP’s retail electricity in 2003. The Palo Verde nuclear plant in Arizona, which LADWP jointly owns with other utili-ties, supplied 10 percent. Hydropower from the Hoover dam on the Arizona–Nevada bor-der and LADWP’s Castaic pump storage plant supplied another 5 percent of retail sales. In 2003, RPS-eligible renewables accounted for 1.6 percent of the utility’s retail sales. Electri-

city for the remaining 15 percent of sales came from “unspecified” electricity market purchases, which are purchases from other utilities, power traders, or the electricity spot market contain-ing a mix of resources. In 2010, LADWP sold about one-fifth of its contracted coal-fired electricity to other utilities, and reduced its “unspecified” pur-chases to 5 percent of electricity sales. Low water levels also reduced the electricity available

Union of Concerned S cientists • July 2012

©LosA

ngelesDep

artmentofW

aterandPower

LADWP’s Pine Tree wind project generates 120 MW of renewable electricity in Kern County, California.

from large hydropower facilities. This decline was counterbalanced by renewable energy procurement that exactly met the state’s 2010 RPS goal. LADWP’s Renewables LADWP increased its RPS renewable energy investments from 1.6 to 20 percent of retail electricity sales from 2003 to 2010. Long-term contracts with seven new wind proj- ects accounted for the largest portion of LADWP’s 2010 RPS mix: 41 percent. All but one of these facilities are located outside California. In 2010, LADWP obtained nearly a third of its RPS mix through contracts of five years or less. These contracts supplied small hydro-power from Canada, biogas from undisclosed locations across the United States, and geo-thermal energy from Mexico. More than half of these contracts were for 18 months or less.

Small hydropower facilities that LADWP built decades ago contributed another 25 per-cent of the utility’s 2010 RPS mix. Long-term contracts for biogas energy from an existing in-state wastewater treatment plant and land-fills contributed slightly more than 3 percent of LADWP’s 2010 RPS mix. Solar photovol-taics (PV) contributed less than 1 percent of that mix.

Looking Ahead to 33 Percent The 33 percent RPS law requires each utility to procure 20 percent of its retail electricity sales from renewables by 2013, 25 percent by 2016, and 33 percent by 2020. Each utility must also make “reasonable progress” on renew-able energy investments between those deadlines. If the state is to transition to a clean, safe, and sustainable electricity system, utilities must meet these standards in a way that prepares them to move well beyond the 33 percent RPS.

Given its size and purchasing power, LADWP will play an important role in California’s transition to a clean electricity grid. The utility accounts for roughly 10 per-cent of all retail electricity sales in the state. LADWP also holds a major financial stake in two coal plants with some of the highest global warming emissions in the country: Navajo and IPP.1 The utility also owns transmission lines that extend into areas of Utah and Arizona rich with renewable resources. These lines, which today primarily transmit coal- and nuclear-based electricity, will play a critical role in bringing more clean energy online and into California. LADWP’s service area is also home to some of the largest solar PV resources in the country.2 Yet a recent study by the Los Angeles Business Council Institute reported that the utility generates less than one-sixth the amount of solar energy per customer

Union of Concerned S cientists • July 2012

wind307GWh

Pine TreeKernCountyNew utility-owned renewables

Biogas102 GWh

scattergoodHyperion Sewage Treatment PlantLosAngelesCountyExisting utility-owned renewables

Biogas43 GWh

PV SOLAR35 GWh

LADWP systemLosAngelesCountyNew & existing utility-owned renewables

In-STATe (35%)

Local LandfillsLos Angeles County• BradleyLandfill Existing renewables repackaged under new long-term contract• ToyonCanyonLandfill Short-term contract• LopezCanyonLandfill Existing utility-owned renewables

SmALL HydRO1,112 GWh

LADWP systemLosAngeles,Mono,andInyoCountiesExisting utility-owned renewables

OUT-Of-STATe (65%)

wind1,569 GWh

Biogas640 GWh

Atmos & shell Injected Landfill GasUndisclosedlocationsMedium-term contracts

SmALL HydRO509 GWh

PowerExUndisclosedlocationsinCanadaShort-term contract

Various• MilfordI,Utah• WindyPointII,Washington• WillowCreek,Oregon• PPMPebbleSprings,Oregon• PPMWyoming,Wyoming New renewables under

new long-term contracts

Biogas52 GWh

PowerEx Injected Landfill GasUndisclosedlocationsShort-term contracts

GeOTHeRmAL197 GWh

CFEMexicoShort-term contract

sources of LADWP’s RPs Renewables, 2010

Union of Concerned S cientists • July 2012

1 U.S. Environmental Protection Agency. Emissions and Generation Resource Integrated Database. Data for 2007. Online at http://www.epa.gov/cleanenergy/energy-resources/egrid/index.html.

2 National Renewable Energy Laboratory. Golden, CO. Online at http://www.nrel.gov/gis/images/map_pv_national_lo-res.jpg.

generated by Southern California Edison, its neighbor utility.3 Since 2010, LADWP has made new in-vestments in renewable energy equivalent to 3.2 percent of its retail electricity sales. About one-third of this additional electricity comes from the expansion of the Milford wind project in Utah. The remaining two-thirds occurred through a long-term purchase of out-of-state biogas from Shell Energy, from undisclosed locations across the country. LADWP has also upgraded the capacity of its transmission line from Utah, so it can now transmit more electricity from renewable energy facilities in the West. And the utility has built a new transmission substation that can carry renewable energy from the Mojave Desert and Tehachapi mountain range. In 2011, LADWP also launched a pilot prog-ram to install small-scale solar PV on homes

and businesses in its district. The utility ini-tially capped the program at 10 megawatts (MW), but will eventually scale it up to 150 MW. However, a third of LADWP’s 2010 RPS contracts are so short that they provide little value beyond enabling the utility to meet the 20 percent RPS on paper. These contracts will expire by 2015, which will force the utility to renegotiate contracts or find new resources to not only maintain its current investment lev-els but also increase those investments to meet the 33 percent RPS. As the 2020 deadline approaches, LADWP may have less bargain-ing power to lock in new sources of renewable energy at cost-effective prices. LADWP should focus on making long-term commitments that promote new renewable resources and ensure a stable RPS compliance strategy for the utility and its customers.

Tracking Future ProgressIn 2012, LADWP will issue an Integrated Resources Plan, a 20-year blueprint for how it will provide electricity services while ful-filling clean energy requirements, including investments in energy efficiency and renew-able energy. The utility’s governing board will approve this plan and make it available to the public. Any changes to that plan trigger a 10-day public notice that must be posted on the website of the California Energy Com-mission (CEC): http://www.energy.ca.gov/ portfolio/ rps_pou_reports.html. The CEC also maintains a database of contracts executed to meet the RPS, available on the same website. More information on LADWP’s renewable energy programs is also available at http://www.ladwp.com.

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©Flickr/Linda

LADWP’s own small hydropower facilities contributed 25 percent of its 2010 RPS mix.

3 LABC Institute. 2011. Empowering LA’s solar workforce. Online at http://labcinstitute.org/Files/LABC_Solar_Workforce_Study_2011.pdf.