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Regulatory Round-up: Senate Bill 350 – GHG reduction target ranges for LSEs and POUs

August 1, 2018 by Abhilasha Fullonton

A quick refresherSenate Bill 350 which is the Clean Energy and Pollution Reduction Act works in tandem with the state’s Scoping Plan to support California’s 2030 GHG reduction of 40% below 1990. It specifically targets optimization of energy sector through two ways – 1) procurement of 50% of energy from renewable energy sources b) double state’s energy efficiency in electricity and natural gas – both by 2030. Both IOU (Investor Owned Utilities) and POUs (Publicly Owned Utilities) producing more than 700 GWh/yr are mandated to participate in this program. Any progress in GHG goals will be tracked through reports produced by said entities called Integrated Resource Plans (IRPs). IRPs help ARB, CEC, CAISO and CPUC – state agencies that work together on this bill – to follow measures each utility takes to achieve the aforementioned goal.

Current status – The IRP reviews are set to start in 2019 however before that, CEC and CPUC in collaboration with ARB are in the process of setting targets electricity sector should base their IRPs on. The staff report that accompanied the presentation mentions that CPUC assessed three scenarios based on “capacity-expansion model” called RESOLVE. CPUC has outlined the three scenarios which are point GHG planning target instead of a target. After analysis, CPUC concluded that 42 MMTCO2e of GHG reductions by 2030 is best suited for California’s electricity sector. It strikes a balance between additional efforts that need to be taken on top of existing actions while providing some leniency for the energy sector to transition from natural gas. It follows the quintessential cap-and-trade formula of being cost-effective while achieving much needed GHG reductions. All scenarios considered a baseline assumption of 50% RPS along with achieving 1.5x more energy efficiency.

The CPUC target falls within the range of what the 2030 Scoping Plan suggests i.e. 30-53 MMTCO2e. However, ARB proposes to stick with the range instead of a point target reduction because it considers “uncertainty of electricity load and supply in 2030”.  The reasoning behind basing IRPs on range target allows different LSEs and POUs based in different parts of the state to mold their GHG reduction pathway on their best-case scenario. A singular focused target like 42 MMTCO2e does not take into account the geographical, load and demand differences as well as the size of LSEs and POUs. ARB target casts a wider net for any EDUs to design their own cost-effective pathway while adhering to SB 350 mandates.

The next steps – The staff is going to set GHG targets for each individual POUs and LSEs. This will be based off of 2021-2030 Allowance Allocation to EDUs which includes the projected emissions of each utility. Those will allow the staff to consider how much emissions reductions is achievable for each entity i.e. allotting proportionate amount of GHG reductions based on emissions. Since there is high uncertainty in load forecasting especially in the long-term entities expected to use latest available load projections in their IRPs.

 

Analyst contact: Abhilasha Fullonton (abhilasha.fullonton@californiacarbon.info

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