Utility companies unsure of costs associated with renewable-energy mandate

Electricity providers have a new state mandate – get at least half of their power from renewable sources by 2030 – but they do not yet know the cost to customers.

Wind, solar and other sources will come into play as utilities carry out Senate Bill 350 in the Northern San Joaquin Valley and beyond. The measure, signed by Gov. Jerry Brown in October, builds on a previous mandate of 33 percent renewables by 2020.

Though the Merced Irrigation District provides power to more than 8,000 customers, it receives nearly all of its power from the Turlock Irrigation District, said Mike Jensen, a spokesman for MID. Turlock Irrigation District already gets about 25 percent of its power from renewables, thanks mainly to wind turbines in the Pacific Northwest. Pacific Gas and Electric Co. is around that figure for its much larger service area, including the central Sierra Nevada and parts of the Northern San Joaquin Valley outside the districts.

MID has contracts for energy from wind and small hydroelectric sources, which amount to about 1 percent of energy use, Jensen said.

The cost will depend on the going prices for renewable power, which generally have been higher than conventional sources such as natural gas and hydroelectric. Planners also have to figure in the growth in overall demand, including the possibility that many cars will run on electricity rather than gasoline as part of the same planet-saving campaign.

“As always, any associated cost to comply with a state mandate results in a direct ‘pass-through’ cost to MID ratepayers,” Jensen said.

Jensen described MID’s situation as “unique” because it is connected to and receives power from TID. Plus, because the district serves an economically disadvantaged community, it exercises a cost limitation option allowed under state regulations. Local legislators Anthony Cannella and Adam Gray also got legislation passed to help the district with its costs, Jensen said.

Backers say the law will reduce the carbon emissions from coal and petroleum that are contributing to global climate change. They see it as a worthwhile cost to ratepayers if it blunts heat waves, sea-level rises, habitat losses and other effects.

The law counts small hydroelectric plants as renewable, such as MID’s generator at McSwain Dam, but not big generators such as New Exchequer. It also does not include the nuclear portion of PG&E’s supply.

Jensen said MID is working with the California Energy Commission to review its options and ensure the district complies with the requirements.

Brian LaFollette, assistant general manager for power supply at TID, said the district will meet the 33 percent goal in 2017 with power purchased from a large solar plant under construction in Kern County. It already has solar, geothermal and small hydro to go along with the wind turbines it owns in the Columbia River Gorge.

The district will likely have to add new sources starting in 2021 or 2022, he said. It also faces a 2029 renewal of the land lease for the wind turbines.

LaFollette noted that the costs incurred to meet the 33 percent mandate have been blunted by the drop in prices for natural gas, the main fuel for power plants.

The new law maintains the 33 percent target for 2020 and adds steps of 40 percent renewables by 2024, 45 percent by 2027 and 50 percent by 2030.

PG&E was at 27 percent renewable at the end of last year and expects to be at about 30 percent once the 2015 numbers are all in, said Lynsey Paulo, corporate relations manager. It has solar, wind, geothermal, biomass and small hydro, with no source dominating.

Paulo said the costs to ratepayers for reaching 50 percent will have to include new transmission lines and backup sources.

“We’re still crunching the numbers, but we certainly know that the new goal and other factors could impact customer rates,” she said.

This story was originally published January 3, 2016 at 3:32 PM with the headline "Utility companies unsure of costs associated with renewable-energy mandate."