Will California Meet its Renewable Portfolio Standard?

California has adopted one of the most aggressive Renewable Portfolio Standard (RPS) programs in the United States, but is likely to fall short of its goal. The state's investor-owned utilities, energy service providers, and community choice aggregators are obligated to source 20 percent of the power they purchase from qualified renewable resources by 2010. The primary reasons for the shortfall are its large size relative to the project pipeline and constrained transmission between resource areas and load centers. This situation presents risks for electricity suppliers even as it creates attractive opportunities for renewable energy developers and their suppliers.

* The cost of RPS compliance will rise sharply as natural gas prices fall and competition for resources and equipment drives renewable costs upward.
* The response to the shortfall will be some combination of flexible compliance mechanisms and penalties.
* Consumers will pay as the gap between cost of renewable generation and gas-fired generation will widen-testing California's resolve in pursuing its renewable energy policies in the coming decade.

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