California Faces Home-Made, Alternative Energy Conundrum
Sacramento’s fractious legislature passed a law this spring, upping the goal from 20 percent renewable energy by 2020.

Currently, 37 states and District of Columbia have legislated renewable energy goals, resulting in a doubling of installed renewable energy in the last six years. Most have 10-20 percent targets for the same 2020 timeframe.

But none has set the bar as high as California. The state’s “big three” investor-owned utilities — Pacific Gas and Electric , Edison International’sSouthern California Edison, and Sempra’s San Diego Gas and Electric — will need to hit this goal or face fines.

Southern California Edison and San Diego Gas & Electric have publicly said they favor the bill, Pacific Gas and Electric has publicly questioned the cost to consumers of the new, aggressive target.

At the moment, the “big three” are using renewables for 18-percent of their needs; once all municipal utilities are factored in, the state-wide rate is about 15 percent.

Klein says the three utilities have enough signed contracts with renewable energy developers to reach that goal by 2020, but many of the plants necessary to achieve that may never get built.

Industry watchers say the two biggest hurdles to getting all those plants built are financing and permitting.

On financing, while many project developers rush to sign agreements with utilities to show their bankers that they have a multi-year revenue stream, like any big project there can be delays in generating those revenues.

Those delays will likely doom many new renewable energy plants, says Sam Enoka, president of California-based renewable energy services firm, Viasyn Inc.

“Most failures are because the myriad problems developers face to get their project built will extend the time frame—and the associated carrying costs—to a point beyond which they’ve financed for,” he says.

“Investment returns get driven down to the point where developers may just walk away from a project,” he adds.

While the agreements between developer and utility can prevent some of these defaults, “many projects inevitably will fail to reach” their startup date, he says.