How Consumers and the Environment
Can All Benefit
From California's New Electricity Choices
When competition arrives in California's electricity market this spring, consumers for the first time will be able to choose the source of the electricity they use. While price alone could be the deciding factor for some people, the choices that many others are expected to make can have a remarkable effect on California's quality of life.
"By choosing their electricity supplier wisely, Californians can help ensure cleaner air, reduce carbon dioxide emissions, create new jobs and make our state a world leader and exporter of renewable energy technologies," said California Energy Commission Chairman William J. Keese. "Environmentally conscious consumers have already embraced the idea of recycling. Once they are given the option, we hope that, in a similar way, they will seek out energy from sources that are renewable."
Renewable energy -- sometimes referred to as "green" power -- is electricity generated using fuel resources that don't run out, or are quickly renewed through natural processes. This includes electricity derived from wind, solar, geothermal, biomass and small hydroelectric sources. While all methods of electricity affect the environment, renewable electricity is among the cleanest, with the least overall environmental impacts.
Long before electricity industry deregulation became a hot topic, California's electricity mix included "green" power. In the 1970's, state government began to encourage wind power and other renewable sources of electricity as a way to protect the electricity supply from price fluctuations of the world's oil and gas markets, and to lessen our state's dependence on foreign fuels. The increased expense of generating electricity from renewable sources was simply averaged into the cost of producing power from cheaper sources like natural gas.
Today, approximately 10 percent of California's electricity comes from renewable sources. As legislators outlined the new rules of a competitive market, they made sure that renewable power was not cast aside when energy producers rushed to woo consumers with lower electricity prices. In the law establishing deregulation, they allocated $75.6 million to be spent over four years on a rebate program to help consumers afford renewable power. An additional $54 million was earmarked to assist homeowners and small businesses to purchase equipment to produce their own renewable energy -- in a sense, helping to build small, "green" power plants across the state.
Cutting the Cost With Consumer Rebates
"The legislature realized that, in the short term, price may be the deciding factor some people use in choosing an energy producer," Keese said. "Legislators also knew that 'green' power might not be seen as the cheapest alternative, especially if all of its environmental and societal benefits are not factored into its cost. That's why they established the $75 million program of rebates for consumers who choose renewable energy. By supporting renewable power choices, their plan encourages innovation and cost effectiveness over a longer term."
To help make the price of renewable power competitive, customers in the PG&E, SCE and SDG&E distribution areas who sign up for "green" power will receive rebates -- officially called "consumer credits" -- of as much as one-and-a-half cents per kilowatt hour. The rebates will automatically appear on their power bill and will reduce the price they pay for using "cleaner" electricity.
To be eligible for the consumer credits, renewable electricity must be produced within California by a supplier registered by the Energy Commission. The cent-and-a-half rebate may decline as the market grows for "green" power. For at least the first year, payments have a ceiling of $1,000 per year per customer, a ceiling probably reached only by large commercial users. A list of approved "green" power suppliers should be available from the Energy Commission this spring.
To insure that consumers are receiving the "green" power they have chosen, the Energy Commission is also developing a "power content label" for electricity that will look much like the "nutrition label" currently seen on food products. By law, all energy suppliers must disclose the sources of the electricity they are selling in a uniform format that allows consumers to compare the variety of electricity products offered. This consumer protection label, at the very minimum, must describe what sources comprise the statewide power mix. Those specifically marketing renewable power must disclose the methods used to generate it and must be able to verify their information.
The Buy-Down Program
The legislature also set aside $54 million to help install what are called "emerging renewable technologies" in the service area of the state's three independently owned utilities. Four types of "green" power generation are included in the plan -- small wind turbines of less than 10 kilowatts, fuel cells that convert renewable fuels such as methane gas into electricity, and solar projects, both photovoltaic and solar thermal. Few areas of the state, however, are windy enough to dependably generate electricity by wind power. Fuel cell technology requires a resource like a landfill or sewage treatment plant to furnish a supply of renewable methane; and solar thermal technology, which converts sunlight into heat to power an electrical generator, only comes in sizes suitable for large industrial or commercial customers. Of the four technologies, the one most likely to benefit the average consumer is the installation of photovoltaic systems.
Photovoltaic cells -- also called PVs -- directly convert sunlight to electricity. Small PV panels run pocket calculators or power remote telephones located along the freeway. Larger ones, however, can easily power a home or small business. The federal government already has set the goal of installing larger panels of solar cells on one million roofs across the United States by the year 2010. "California's program, scheduled to begin in March, 1998, will speed those efforts to add clean, reliable, widely distributed sources of electricity," said Keese.
Known as the California Emerging Renewables Buy-down Program, the plan will initially pay fifty percent of the system cost -- or three dollars a watt, which ever is cheaper -- for the installation of equipment to feed electricity into the power grid. Today's PV systems typically cost from six dollars to twelve dollars per watt, a price that is expected to drop as the market increases. As prices decline, buy-down payments, which are expected to continue for four years, will drop to a dollar a watt, or 30 percent of the system's cost.
To receive the buy-down, PV systems must be large enough to offset some or all of the electricity used by the consumer. The entire generating system must have a full, five-year guarantee and be installed by an appropriately licensed contractor.
Most importantly, the system must be connected to local power lines. Remote, self-contained systems that are not connected do not qualify.
Once the system is installed and the building permit is signed off, the Energy Commission will rebate a portion of the purchase price either to the retailer or the buyer. Any approved retailer, energy service company or homeowner can reserve a buy-down payment by submitting a simple, one-page form to the Commission.
Reasons for the buy-down program are simple. By dropping the price of these emerging technologies, the program helps to place mini-power plants in cities across California, right where the power is needed and consumed. In the case of rooftop PVs installed on homes or small businesses, the electricity generated during the day that isn't used on the premises would be fed back into the electrical grid through the power lines connected to the building. At night when PVs can't produce energy, PV owners would receive electricity from those same lines. In a sense, the existing power grid serves as a storage battery for the electricity the PVs have produced, and energy bills can be substantially reduced or eliminated.
"In addition, California gets a number of small, dependable, scattered power plants -- what is called 'distributed generation,'" said Keese. "The energy produced is clean and non-polluting."
The buy-down program will have global ramifications as well, as lower prices encourage the burgeoning market for new, California-based energy technologies. "For decades, California has been the nation's leading energy innovator," Keese said. "While this buy-down program is encouraging the use of renewable technology in our state, it is also helping to create improved products that will be sold world-wide. Renewable technology can bring electricity to developing countries cleanly and cheaply, without adding to the production of greenhouse gas emissions that contribute to global warming."
Already 30 percent of all PVs sold in the world are produced in California, and increased demand can only strengthen the industry. "The price of photovoltaics has dropped substantially since they were invented 40 years ago," said Keese. "In 1970, electricity from PVs cost $5 a kilowatt hour. Today it is less than $.25 a kilowatt hour, thanks to lower manufacturing costs and better technology."
Technological improvements in the wind turbine industry also have dropped the cost of producing wind energy nearly four-fold since 1980. A business that began in California, wind power is now the fastest growing of all energy technologies around the world.
"The entire world will be watching our state as we begin our new, competitive electricity market this March. For the first time, Californians can make energy choices based on their own, personal environmental and quality of life concerns. These Energy Commission programs make that choice easier -- and the results may change the world."
For more information about programs eligibility or guidelines, contact the California Energy Commission's Call Center at 1-800-555-7794 or visit the Web site at
www.energy.ca.gov/renewables # # #
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