When it comes to renewable energy, the state of California hasn’t been messing around, and a recent announcement [PDF] from the California Public Utilities Commission (CPUC) further confirms the role of the Golden State in the burgeoning market for state-mandated renewables. As of January 13th, the CPUC approved the use of tradeable renewable energy credits for compliance with the state’s Renewables Portfolio Standard (RPS) program, which requires the state’s investor-owned utilities to obtain 20% of their retail sales from renewable energy sources by the end of 2010.
The upshot being–if utilities aren’t taking the initiative to invest in renewable generation now, they’ll soon being paying for the privilege of buying credits from utilities that are.
These credits can be obtained through power purchase agreements with other companies, but it would appear that the CPUC would like to see its big utility companies–including Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric–develop their own power sources, which is why it is mandating that credits obtained through power purchase agreements comprise no more than 25% of these utilities’ annual procurement targets for the RPS through 2013. As of December 31, 2013, this temporary limit on the use of tradable renewable energy credits for RPS compliance will end, giving companies more flexibility in meeting rising renewable energy requirements.
The CPUC allows utilities to resell these credits apart from the energy associated with them, providing companies with additional flexibility and liquidity in the renewable market, reducing “stranded cost risk” while creating new revenue streams for customer-side renewable facilities. In addition, over time, “as a more transparent and robust forward price curve develops,” the CPUC envisions that a market for renewable energy credits may one day help to facilitate the financing of new renewable energy projects.