Investing in Renewable Energy Resources

California's Renewable Portfolio Standard (RPS) requires each investor-owned utility to meet 20 percent of its customers' electric demand through eligible renewable resources by the end of 2010.

Raising the bar further, Governor Schwarzenegger signed an executive order in 2009 to increase the state's renewable energy standard to 33 percent by 2020—by far the most ambitious target in the nation.

In 2009, 14.4 percent of the electricity PG&E delivered to its customers came from RPS-eligible resources. PG&E has signed nearly 50 contracts for the development of new renewable generating facilities that, once developed, can help PG&E increase its deliveries of renewable energy to more than 20 percent of its future energy needs. However, many of the renewables projects under contract to PG&E must still be permitted, built and connected to the grid before they can deliver electricity to our customers.

PG&E is fully committed to meeting the challenging 20 percent by 2010 RPS goal and is pursuing every means available to increase its eligible renewable resource procurement. However, should sufficient supply not be available to meet the target in 2010, flexible compliance provisions allow PG&E to "earmark" or tag deliveries from contracts that will achieve operation during the following three years back to 2010 to make up any shortfall.

Meeting the 33 percent target will be challenging as well. We believe that, by working collaboratively with regulators, environmental organizations, government agencies and other stakeholders, we can develop a policy framework, encourage technology development, increase access to financing and take other important steps that will allow us to achieve this goal in a manner that adequately contains costs for customers.

PG&E will continue to actively pursue additional eligible renewable resources through general solicitations, bilateral negotiations and potential utility ownership.

PG&E proposed two major renewable energy projects last year that we would own—our first direct investment in renewable generation in over a decade.

The CPUC approved PG&E's new solar PV program, which, once complete, will generate up to 500 MW of clean energy, enough to meet the needs of about 150,000 homes. The program will include up to 250 MW of PG&E-owned solar PV generation and an additional 250 MW to be built and owned by independent developers. One of the largest undertakings of its kind in the country, the five-year program is expected to deliver more than 1,000 GWh of electricity annually once fully operational—approximately 1.3 percent of PG&E's annual electric demand. We expect our first PV solar projects to be operational in 2011.

PG&E also announced a contract with Iberdrola Renewables, Inc. for the Manzana Wind Project, a major wind farm to be built in the Tehachapi Mountains of Southern California. After Iberdrola Renewables builds the project, PG&E will purchase and operate the wind farm. With a power capacity of up to 246 MW, it would be the first wind project owned by PG&E and would be located on about 7,000 acres in wind-rich Eastern Kern County. If approved by the CPUC, the project could begin producing power by December 2011.

Last year, PG&E completed a 2 MW solar photovoltaic (PV) pilot project—the Vaca-Dixon Solar Station, named after the electrical substation it abuts in Solano County.

Now a reliable source of clean, renewable power, it is the first in a long line of PV projects that PG&E expects to develop under a new 500 MW solar program approved by the CPUC.

With 9,672 modules covering 14 acres, the solar pilot project is helping PG&E gain valuable insight into building and owning PV plants.

Last year, PG&E continued to aggressively add renewable electric power resources to its supply through contracts with third-party developers for new and existing resources. These contracts represent more than 4,160 MW of additional future renewable energy supplies. In total, PG&E has contracted for nearly 7,000 MW since 2002. (Review a map of projects under contract since 2002.)

Renewable Portfolio Standard—Contracts Signed in 2009¹

¹ This chart includes both short-term contracts with existing renewable generation facilities and long-term contracts for new renewable supplies. It does not include contracts that were terminated, canceled or not approved by the CPUC. It also does not include small renewable generator contracts of up to 1.5 MW.

² Bridging agreement.

³ Excludes two-year extension for 9 MW.

⁴ New contract represents 50 MW incremental plus aggregation of 2006 and 2008 contracts.

⁵ New contract with existing resources.

⁶ Represents seven individual BrightSource Energy contracts.

⁷ Includes two individual contracts from 2009 to 2012.

¹ This chart does not include contracts that were terminated, canceled or not approved by the CPUC.
It also does not include small renewable generator contracts of up to 1.5 MW.

The new renewable energy agreements PG&E signed last year include some of the largest-ever commitments for utility-scale solar energy:

PG&E continues to pursue the use of new and emerging renewable energy technologies, such as wave energy through our WaveConnect program.

Central Coast WaveConnect Project (Click image to enlarge)

Humboldt WaveConnect Project (Click image to enlarge) Last year, PG&E applied for a preliminary permit from the Federal Energy Regulatory Commission (FERC) for the Central Coast WaveConnect project located off the coast of Santa Barbara County. PG&E's goal is to study the feasibility of siting a wave energy facility at this location, working in coordination with the Vandenberg Air Force Base. The project would connect to the existing electric grid at the base, eliminating the need for additional onshore infrastructure and minimizing the potential impact to nearby areas.

PG&E's small-scale demonstration pilot project off the coast of Humboldt County, the Humboldt WaveConnect project, is currently seeking a license to site what would be one of the first wave energy facilities in the United States. This facility aims to answer questions about the feasibility and promise of wave energy as a viable renewable energy resource. PG&E will apply the experience gained with this project to the potentially larger Central Coast WaveConnect project in Santa Barbara County.

For both projects, PG&E is working closely with a wide range of community and other stakeholders such as fishermen, ocean protection advocates, port officials, surfers and bird watchers to share information and actively seek feedback. PG&E established a stakeholder working group for the Humboldt project and is conducting a similar collaborative effort for the project in Santa Barbara County.

PG&E and other stakeholders must overcome difficult challenges to bring new renewable energy projects online. Developing new renewable energy facilities involves many challenging issues, including permitting, siting, financing, technology and environmental concerns. New transmission lines, often in remote locations, are also needed to accommodate new and anticipated renewable energy development. Additionally, tight credit markets and substantially reduced capital availability are presenting significant challenges to those seeking to increase the availability of renewables to meet future electricity needs.

PG&E continues to work with regulators, environmental organizations, government agencies and other stakeholders to support timely construction of transmission lines and permitting of proposed project sites.

Examples last year included:

1. Actively participating in the Renewable Energy Transmission Initiative (RETI), a stakeholder-driven process that produced detailed environmental and renewable resource information that will help shape renewable energy planning and development.
2. Helping to create the California Transmission Planning Group, a new group formed to create a state-wide electric transmission plan for the California Independent System Operator by the end of 2010, building upon the RETI recommendations.
3. Testifying before the U.S. Congress on PG&E's experience and the unique challenges for utilities with siting, planning, transmission and related issues. (Review testimony by Steven Malnight, Vice President of Renewable Energy, on May 11, 2009 and by Steven Kline, Chief Sustainability Officer and Vice President for Corporate Environmental and Federal Affairs, on September 24, 2009.)
4. Working collaboratively with environmental groups, renewables developers and other stakeholders to develop sound policies through the California Desert Solar Working Group, an informal and diverse group working to protect ecosystems, landscapes and species while supporting the timely development of solar energy resources in the California desert. (Review a video on our work with this group.)