Governor Newsom and Legislature reach landmark agreement on Clean Energy Central Procurement
This blog was co-authored with Alex Breckel, Director of Clean Energy Infrastructure Deployment at Clean Air Task Force.
Last week the Administration and Legislature reached an agreement on a new package of clean energy policies, key to which is the proposed authorization for the Department of Water Resources to centrally procure "diverse clean energy resources". The authority would include oversight from the California Public Utilities Commission. If passed, it would constitute a major step towards California's climate goals.
Diverse clean energy resources is defined broadly to include resources that have lead times longer than five years, do not use combustion to generate electricity, are not fossil fuels, and are not contracted at sufficient levels by load-serving entities. Previously, we highlighted how high project development risk impairs the delivery of resources in this category, such as offshore wind, geothermal and long-duration storage. By providing a demand backstop, central procurement can give investors more confidence to allocate risk-capital towards these projects.
Many resources still face transmission constraints
The central procurement mechanism is likely to initiate major new offshore wind and geothermal developments, but only to a point. This is because these resources still depend on new high-voltage transmission lines to carry the electricity they generate to urban areas (Fig. 1). Establishing these lines is key to incentivize true multi-gigawatt scale development.
Figure 1. This map highlights the new and expanded high-voltage transmission lines needed to achieve California's climate goals, including for North and Central Coast offshore wind, Central Valley solar, Salton Sea geothermal as well as out-of-state onshore wind from Wyoming/Idaho and New Mexico. These infrastructure investments are estimated to cost tens of billions of dollars.
While the transmission permitting reforms passed in the Governor's Infrastructure Package in June as well as those contained in current pieces of legislation are important, they are just one piece of the puzzle. Initiating discussions on how to plan, site and finance these multi-billion dollar projects remains. The CPUC Public Advocates Office identified public financing as one option that could minimize ratepayer impacts and support more rapid transmission deployment.
For more information on transmission, please contact Sam Uden (sam@csgcalifornia.com) and Alex Breckel (abreckel@catf.us).