The California Air Resources Board (CARB) recently estimated that approximately 25% of the state’s greenhouse gas emissions come from electricity generation. In response, the California legislature established a wide variety of programs to reduce electricity consumption, to implement emission performance standards (SB 1368), and to increase the use of renewable electricity sources, such as solar and wind power (SB 1078 and SB 107). The California legislature also directed CARB to adopt rules and regulations to reduce all sources of greenhouse gas emissions in the state to 1990 levels by the year 2020 (an estimated 30% reduction in greenhouse gas emissions from business-as-usual estimates). Despite these significant steps to address global climate change, one group thinks California can do more.

Earlier this month, proponents of a renewable energy initiative submitted 735,000 signatures to qualify for the November ballot. The initiative, entitled the Solar and Clean Energy Act of 2008, would require that all utilities in California achieve 40% renewable electricity by 2020, and 50% by 2025. By comparison, current law requires that retail sellers, including investor owned utilities (IOUs), increase their share of renewable electricity by 1% per year so that, by the close of 2010, 20% of retail sales are generated from renewable energy sources (pending legislation would increase this standard to 33% by 2020). Notably, as of 2006, California’s IOUs generated only about 13% of their electricity from renewable sources.

The proposed initiative, in addition to increasing the renewable portfolio standard, would expand the scope of California renewable electricity requirements. For example, current law exempts municipal electric utilities - such as the Los Angeles Department of Water and Power and the Sacramento Municipal Utility District - from complying with state-imposed renewable portfolio standards. This exemption would no longer apply. Under the proposed initiative, municipal utilities would need to comply with the same 50% standard. While municipal utilities currently estimate that 12% of their electricity is generated from renewable sources, this figure shrinks to about 7% if the state definition of renewable resources is applied (which does not include large hydroelectric facilities). Needless to say, substantial investments in renewable energy sources would need to be made to achieve the initiative’s goals.

To encourage the development of these energy sources, the initiative requires electric utilities to offer renewable energy procurement contracts of no less than 20 years, with certain exceptions, and further requires utilities to accept all offers for renewable energy that are at or below the market price of electricity (unless the utility has already procured sufficient renewable energy resources to meet its annual target). In addition, the initiative alters the cost recovery formula to allow utilities to recover through rates their cost for renewable energy contracts that are up to 10% above the market price for electricity.

Although the initiative’s proponents estimate that 75% of Californians support their proposal, there are a number of dissenters, including environmental groups such as NRDC. These groups claim that the initiative, while well-intentioned, would actually harm the development of renewable energy in California. The debate looks to heat up as the November election approaches.

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