California brought new meaning to its "green" reputation this summer when renewables electricity generation hit an all-time high. Here are the top three ingredients in the state's recipe for renewables.
1. Regulation
It's no coincidence that our country's most regulated state is also the furthest ahead in ramping up renewables. Regulation can provide the push that local governments, companies, and consumers need to question the status quo.
An aggressive renewable portfolio standard, grants, and a greenhouse gas emissions cap-and-trade program have all helped propel this state's energy portfolio beyond traditional fuels. Combine these local efforts with extended production tax credits for wind and solar, and you're left with a strong foundation for a renewables ramp-up.
2. Neglected nuclear
There are two ways to increase renewables generation as a percentage of total generation: expand renewables and/or remove other energy sources. In California's case, the latter has also played a poignant role, and is a main reason renewables hit a record 26% of total generation on May 26.
Source: EIA.gov
Edison International's (EIX -1.39%) decision to retire its faulty Southern California nuclear plant left producers scrambling for alternative energies. The solutions aren't perfect, and power prices clocked in 12% higher than Northern California's for more than a year following the original announcement.
But even as the state frantically searched for a new source, higher prices paved the way for renewables to make their mark. Sempra Energy (SE) may be best known for its natural gas notions, but the utility stepped in last year to build 800 MW of transmission capacity to rocket solar, wind, and geothermal power through regional grids to where it's needed most.
Source: EIA.gov
Other urban areas are taking the hint and developing local power producers of their own. Duke Energy (DUK -1.33%) acquired a 4.5 MW San Francisco urban solar farm in August, a major addition for the utility's 100 MW national solar portfolio. Duke already owns a 21 MW project pushing power to Los Angeles, and even has a 50% stake in a 1 MW rooftop project with Integrys (NYSE: TEG).
With Cali cleared for rooftop solar projects, the Golden State will increasingly be on SolarCity's (SCTY.DL) radar as its new Paramount Solar acquisition puts it one step closer to its goal of a million rooftop installations over the next five years. SolarCity's website touts itself as "California's #1 solar installer" with over 7,200 additions to date.
3. The right place at the right time
Not every state is set up for renewables, and it should be noted that California has an "unfair" innate advantage when it comes to many alternative energies. Hydropower poured in over the spring, and a particularly windy season helped renewables generation soar. Sunny weather also makes it a perfect spot for solar farms, with NRG Energy looking to the sky for projects ranging in size from hospital rooftops to a 250 MW SunPower produced farm, the second largest in the nation.
Source: NRG
Ramping up renewables
California's renewables may have hit record highs, but its energy issues are far from solved. Without a windy summer, nuclear plant retirements could've spelled disaster for local power capacity and prices . But with a strong regulatory backbone, a green-friendly local environment, and an increasingly connected grid, California has emphatically embraced renewables as an important part of its recipe for success.
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