Three Pacific Northwest states have adopted renewable portfolio standards, but it may be that our neighbor to the south, California, will end up having the biggest impact on the region. California's renewable energy policies are some of the most aggressive in the nation, and the state has worked for many years to develop its own renewable resources. It's now reached the point where California utilities have to look outside the state to satisfy their renewable portfolio goals.
Renewable energy credits (RECs) enable utilities to purchase the environmental benefits of renewable energy wherever it's generated. Most of California's utilities would like to use RECs as much as possible because it expands their market and could also eliminate some of the transmission costs to deliver the power from outside the state.
"We're already seeing 'the California effect,'" says Jeff King, senior resource analyst at the Council. "Roughly 50 percent of the wind power that was developed in 2008 and 2009 in the Northwest was either owned by California utilities or is contracted to them, and credits in excess of Northwest needs are being sold to California utilities from projects owned by, or contracted to, Northwest utilities."
It's a trend that's expected to continue into the future, says King, where we'll see California taking an increasing proportion of the Northwest's renewable resource generation to meet it's own RPS targets. But what happens to the electricity if it doesn't go with the REC? There's concern that it could end up in the Northwest power market, depressing power prices.
"In almost every one of these issues," says King, "there's a positive side and a negative side." Low power prices help Northwest utilities that need to purchase energy, but the same low prices reduces revenue for utilities with a good supply of resources to sell.
An increase in renewable energy development in the region is a good thing from the perspective of renewable resource developers, and for landowners who lease their land to wind power developers. It also benefits counties, usually in rural areas where a lot of wind farms are sited, by expanding their property tax base and increasing their property tax revenue.
On the other hand, notes King, we're already seeing controversies arise from the aesthetic and environmental impacts from expanded resource and transmission development in the region.
For the consumer, a lot will depend on the business practices and philosophy of the consumer's utility. Northwest utilities that are fairly aggressive in developing renewables on their own and selling RECs to California are able to generate revenue that may reduce electricity costs. It also puts them in a good position when it comes time to meet their own targets. For utilities that wait until they have to purchase renewable energy, they may find themselves in a situation where competition from California for those resources has driven up prices.
Since wind generation is the leading renewable now and the forseeable future, there's also the question of who pays the cost to integrate it into the power system. Its intermittent nature means it needs flexible back-up resources to keep the system in balance. The point of concern is to make sure that the entity that needs these services pays for it. This includes allocating carbon impacts.
"It's a complicated combination of policy and technical issues that we don't fully understand," says King, who will be working on an assessment of all these issues for the next several months. Stay tuned.