California can achieve economy-wide carbon neutrality by 2045 if it swiftly changes how it currently plans, executes and funds the energy transition, according to a new report.
California has made significant progress in its goal of economy-wide carbon neutrality by 2045, reducing emissions by 20% economy-wide. To meet the 2045 goal, however, the state needs to scale-up clean energy technologies and remove the constraints that are limiting the pace of infrastructure development. This includes tripling the build rate of grid-scale solar and wind; increasing by up to four times annually the number of new electric transmission projects; increasing by up to 10 times annually the number of distribution projects; tripling the renewable natural gas (RNG) supply; and scaling up hydrogen production 24 times by 2045, the study states.
Challenges
The study by Boston Consulting Group, “Unlocking California’s Climate Ambition,” points out that while today’s electric sector planning processes have been sufficient in an era with stable demand, they are increasingly challenged to adapt to the more rapid and uncertain infrastructure developments needed to support statewide decarbonization. This is particularly challenging given the lack of certainty or framework for making grid readiness investments to meet load growth that is outpacing state forecasts.
“This uncertainty can contribute to interconnection delays and extended energization timelines that threaten the pace of the transition,” the study states.
There are also challenges to deploying clean fuels (e.g., RNG and hydrogen) as well as carbon management. These areas lack long-term infrastructure plans, despite their critical role in decarbonizing hard-to-abate sectors and in providing resiliency and reliability to the energy sector, according to the study.
Lengthy and complex permitting processes also present a challenge and are hampering the timely deployment of all forms of clean energy and grid infrastructure.
The energy transition will nearly double the state’s electricity demand by 2045. If California does not address its challenges to accelerate the buildout of clean energy generation, transmission, and distribution resources, maintaining system reliability will become much more difficult as demand grows faster than supply and grid capacity can keep up, the study authors warn.
The transition should result in reduced household energy costs for electrified customers, driven by savings from electrification and other fuel switching to more efficient technologies, specifically electric vehicles. In the near term, however, rising electric bills driven in part by California legislative mandated programs financed through utility bills disproportionately burden low-income households. Such mandates include climate resilience (wildfire prevention), clean energy (Renewables Portfolio Standard) and Public Purpose Programs (low-income discount and energy efficiency programs). Mandates also cause some customers to bear more of the costs to operate and maintain the grid through cross subsidies like net energy metering which shifts billions of dollars in costs from solar to non-solar customers.
Additional delays in infrastructure deployment and a lack of new and innovative funding sources could further increase the cost of the energy transition and the subsequent burden on customers, the study said.
Solutions
The study presented the following three solutions to the challenges it identified:
- Planning: California should develop an integrated statewide plan that spans the energy value chain and leverages existing planning processes to deliver on the transition.
- Enablers: Eliminate permitting, investment, and procurement bottlenecks to accelerate clean infrastructure deployment.
- Streamline siting and permitting via scalable environmental permitting approaches.
- Develop an alternative framework for cost recovery on grid investments made by utilities to prepare for anticipated load growth or resource development.
- Support procuring clean firm resources in areas where there is insufficient capacity or if Load-Serving Entities (LSEs) are unable to procure these resources, such as by extending central procurement mechanisms.
- Funding: Leverage new sources to equitably fund the clean energy transition.
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- Utilize new sources of funding to take costs off customer bills to make rates more affordable and flexible for the needed investments.
- Leverage alternative rate structures and other policy tools to protect against near term rate impacts and ensure costs are equitably distributed.
To read the report, click here.
