Investing in Renewable Energy Resources

In 2010, Sempra Generation began delivering energy to PG&E customers from the largest photovoltaic solar power plant in the United States—the 48 MW Copper Mountain Solar facility in Boulder City, Nevada, located about an hour southeast of Las Vegas.

PG&E strongly supports California’s transition to a low-carbon future. As a cornerstone of our commitment, we are actively expanding renewable energy supplies for our customers—investing in a range of clean energy resources such as solar, wind, geothermal, biomass and small hydro.

We believe that by working collaboratively with regulators, environmental organizations 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 California’s ambitious renewable energy goals in a manner that adequately contains costs for our customers.

Progress Toward California’s Renewable Energy Targets

California’s Renewable Portfolio Standard (RPS) now requires California deliverers of electricity—investor-owned utilities, publicly-owned utilities, energy service providers and community choice aggregators—to meet 33 percent of their customers’ electric demand through eligible renewable resources by the end of 2020.

This ambitious target was signed into law by California’s Governor in 2011 and, while meeting the 33 percent target will be challenging, PG&E is fully committed—and well on our way—to meeting this new mandate. As a result of this new law, California investor-owned utilities, including PG&E, no longer have a 20 percent by 2010 RPS requirement, but instead must deliver an average of 20 percent renewables over the 2011 to 2013 period.

By the end of 2010, 15.9 percent of the electricity PG&E delivered to its customers came from RPS-eligible resources. That amount could climb to 17.7 percent if the CPUC approves several pending short-term contracts. The majority of this total came from contracts with third-party renewable energy companies, although PG&E continues to pursue opportunities to own renewable resources.

PG&E’s Policy Position on 33 Percent Renewable Energy

PG&E has been instrumental in the development of the state’s clean energy standards, supporting the original RPS legislation in 2002 and its acceleration in 2006. The company also supported Governor Schwarzenegger’s Executive Order tasking California’s Air Resources Board (ARB), via AB 32 authority, to implement the state’s policy of 33 percent renewable energy and ARB’s adoption of the 33 percent renewable electricity standard (RES) in September 2010.

PG&E is strongly committed to policies that support the general growth of renewable energy. We did not support the 2011 bill mandating 33 percent renewables because we believe the bill did not do enough to contain costs for our customers.

Implementation of the 33 percent renewable energy bill will require the CPUC to modify many of its decisions issued in connection with the 20 percent RPS program. The law’s key provisions that must be implemented by the CPUC include the interim milestones for compliance, the cost-containment mechanism, definitions for in- and out-of-state resources and new rules limiting the banking of any excess RPS procurement, among other requirements. PG&E will work constructively with the CPUC to implement the 33 percent RPS bill, and we will be actively involved in any future legislative efforts to improve it.

Ownership of Renewables

PG&E is actively pursuing opportunities to bring more renewables online for our customers as quickly and affordably as possible. We use a variety of approaches to do so—from competitive solicitations to negotiations with individual companies to developing and owning the renewables projects ourselves.

Photo of one of three PG&E-owned solar photovoltaic plants in Fresno County expected to come online in 2011.

In 2010, the CPUC approved PG&E’s proposal to develop and own up to 250 MW of new solar photovoltaic (PV) generation. The moderately sized projects will range from 1 to 20 MW and will be located near company substations to reduce the costs of interconnecting them to the electric grid. In addition, another 250 MW will be built and owned by independent developers, while we will buy their solar electricity.

The five-year construction program represents one of the largest undertakings of its kind in the country and is expected to create substantial “green jobs” work in the communities we serve.

PG&E launched the program with a 2 MW pilot plant, the Vaca-Dixon Solar Station. In addition, we began site preparation in 2010 on three PV plants in Fresno County that will produce a total of 50 MW of electricity, enough to power about 15,000 homes. We expect to have 40 MW online by October 2011, with the remaining 10 MW online by the end of 2011. We also began planning for the next 50 MW phase and expect to start construction on these three additional sites in Fresno County in the summer of 2011.

When planning for the solar plants, we worked proactively with natural resource agencies to avoid impacts to sensitive species. This included siting the plants on previously disturbed land, conducting biological studies of the property and constructing fences around the perimeter that provide a small gap at the bottom for the endangered San Joaquin kit fox and other sensitive species to pass through.

As we work toward our goal of 250 MW of new utility-owned solar power, we are also leveraging the expertise of diverse suppliers.

Additionally, in early 2011, PG&E issued its first formal request for offers for projects totaling 50 MW, a step toward the five-year goal of procuring 250 MW from solar power developers.

In March 2011, the CPUC denied PG&E’s application to acquire ownership of the Manzana Wind Project in Kern County. In its decision, the CPUC cited its concern that project costs were too high compared to other renewable projects in the competitive market. Despite this setback, PG&E will continue to explore possibilities for owning renewable energy resources.

Aggressive Contracting for Renewable Energy

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 1,950 MW of renewable energy supplies. In total, PG&E has contracted for more than 8,900 MW since 2002, although contract failures to date reduce this amount to 8,200 MW.

Renewable Portfolio Standard—Contracts Signed in 20101

Project (Name) Counterparty Location (City) Location (State) Technology MW GWh/Year
Kiara Biomass KiaraSolar Anderson California Biomass 5 39
Bottle Rock2 Bottle Rock Geothermal Cobb California Geothermal 12 125
Coyote Canyon Terra-Gen Geothermal Dixie Valley Nevada Geothermal 26 441
Sunshine Landfill DTE Sylmar California Landfill Gas 10 70
Potrero Hills Landfill DTE Suisun City California Landfill Gas 3 21
El Dorado Irrigation District El Dorado Irrigation District Pollock Pines California Small Hydro 21 58
Three Forks Water Norman Ross Burgess Zenia California Small Hydro 2 8
Desert Sunlight First Solar Desert Center California Solar Photovoltaic 300 619
Alpine Solar3 NRG Lancaster California Solar Photovoltaic 66 145
Mesquite Sempra Tonopah Arizona Solar Photovoltaic 150 231
White River Solar Project Solutions Alpaugh California Solar Photovoltaic 20 33
Alpaugh North Solar Project Solutions Alpaugh California Solar Photovoltaic 20 33
Atwell Island Solar Project Solutions Alpaugh California Solar Photovoltaic 20 33
Corcoran Solar Project Solutions Corcoran California Solar Photovoltaic 20 33
Alpaugh Solar Solar Project Solutions Alpaugh California Solar Photovoltaic 50 84
North Star Summit/REC Mendota California Solar Photovoltaic 60 119
High Plains Ranch III SunPower California Valley California Solar Photovoltaic 40 112
Hay Canyon4 Barclays Morro Oregon Wind 100 250
Nine Canyon4 Barclays Kennewick Washington Wind 32 33
Coram Brodie Coram CA Development Tehachapi California Wind 102 286
Shiloh III enXco Rio Vista California Wind 100 346
Halkirk Greengate Stettler Alberta Wind 150 484
Blackspring Ridge IA Greengate Lethbridge Alberta Wind 150 445
Blackspring Ridge IB Greengate Lethbridge Alberta Wind 150 445
Vasco Winds NextEra Altamont Pass Wind Resource Area California Wind 78 211
Montezuma Winds5 NextEra Birds Landing California Wind 37 129
Montezuma II NextEra Birds Landing California Wind 78 201
White Creek II4 Shell Energy Goldendale Washington Wind 65 171
White Creek III4 Shell Energy Goldendale Washington Wind 25 66
Harvest Wind I4 Shell Energy Roosevelt Washington Wind 28 73
Harvest Wind II4 Shell Energy Roosevelt Washington Wind 30 40
Total 1,950 5,384

1 This chart does not include terminated, expired or CPUC-rejected contracts. It also does not include small renewable generator contracts of up to 1.5 MW or Renewable Energy Credits.

2 Incremental to 2006 contract.

3 Replaces 2009 contract.

4 Indicates short-term contracts pending CPUC approval. Should the CPUC approve these contracts, PG&E’s 2010 RPS deliveries will equal 17.7%.

5 Replaces 2008 contract.

enewable Portfolio Standard—Contracts Signed 2002-2010

1 This chart does not include terminated, expired or CPUC-rejected contracts. It also does not include small renewable generator contracts of up to 1.5 MW.

Working Collaboratively to Address Challenges

Despite the efforts made to date, PG&E and others continue to face significant challenges expanding supplies of renewable energy. For example, the third-party developers, from which California utilities source most of their renewable energy, continue to face difficulties bringing new projects online. This includes challenges with obtaining project financing from capital markets still recovering from the economic crisis, shepherding these new sites through transmission studies and interconnection reviews and securing the permits necessary to develop new renewable generation facilities.

Wave Energy

Studying the potential of ocean wave energy is important to the transition to a low-carbon economy and the ongoing development of sustainable, renewable energy sources.

Starting in 2007, PG&E began exploring the potential use of wave energy off of the California coast. Working with a wide range of community stakeholders such as fishermen, ocean protection advocates, wave energy companies, local government and port officials, surfers and bird watchers, we examined the feasibility and promise of wave energy.

After encountering significant challenges, however, we suspended our permitting efforts for two small-scale demonstration pilot projects—the Humboldt WaveConnect Project off the coast of Humboldt County and the Central Coast WaveConnect Project off the coast of Santa Barbara County.

PG&E concluded that it would be infeasible for the company to pursue a FERC license for wave energy facilities at this time, although the valuable lessons learned through the WaveConnect projects will help to better inform regulators, power providers and local communities seeking to understand and address the complex issues raised by this promising technology. Challenges include a new and evolving regulatory and permitting process, the state of technology maturity and the potentially high costs to resolve these issues.

PG&E will continue to seek out cost-effective renewable resources for our customers across California, including wave energy development as the industry matures. We will also share the lessons learned from our experience to benefit the emerging wave energy industry.

PG&E continues to work with environmental organizations, state and federal government agencies and other stakeholders to plan a long-term, comprehensive approach to siting renewables to help ensure that projects are located in areas most suitable for development.

For example, last year, we actively participated on the Stakeholder Committee of the Desert Renewable Energy Conservation Plan (DRECP). When complete, the plan will provide renewables projects with long-term permits to operate in compliance with the state and federal Endangered Species Acts while directing development away from the most sensitive desert habitats. It encompasses development of solar thermal, utility-scale solar PV, wind and other forms of renewable energy and associated infrastructure such as transmission lines necessary for renewable energy development within the Mojave and Colorado desert regions.

We also continue to work collaboratively with environmental groups, renewable energy developers and other stakeholders to develop sound policies through the California Desert Renewable Energy 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. Last year, together with this group, we submitted recommendations to the U.S. Department of Interior for improving and streamlining the Bureau of Land Management’s processing of solar energy applications in a way that avoids or minimizes harm to California’s natural environment.

We also actively participated in the California Transmission Planning Group, a group formed to create a state-wide electric transmission plan for the California Independent System Operator to address both renewable and conventional generation. This effort builds on the recommendations of the Renewable Energy Transmission Initiative, a stakeholder-driven process that produced detailed environmental and renewable resource information that will help shape renewable energy planning and development.

Investing in Customer Solar

In 2010, PG&E Corporation made several key shareholder-funded investments in rooftop solar installations. The investments, made with subsidiaries of SolarCity Corporation and SunRun Inc., will provide up to $300 million in tax equity project financing to support more than 55 MW of commercial and residential rooftop solar installations.

The investments will help us learn more about solar PV technology and the evolving market for distributed generation. Although the transactions are expected to have a limited impact on PG&E’s earnings and cash flow, this is another way in which PG&E is helping to bring additional clean, low-carbon energy sources online.


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