New Concept for Local Governments to Partner with Utilities and Participate in the Cap-and-Trade Market

The Cap-and-Trade market has added a new dynamic to California’s greenhouse gas regulations. Utilities are faced with finding cost-effective ways to comply with their emissions reductions requirements. Energy efficiency at the local government level presents a large opportunity for saving energy that is currently not incentivized by the Cap-and-Trade system.

The coalescence of these three related factors presents an interesting nexus for solutions. The emissions reductions resulting from saved energy can be valued against the cost of compliance to utilities, which is projected to increase over time.

In response to this nexus of opportunity, the Alliance has released Exploring Utility and Local Government Partnerships to Fund Energy Efficiency Projects for Compliance with AB 32, a whitepaper that outlines a new concept that would enable local governments to participate in the Cap-and-Trade market. Under the presented framework, local governments could partner with their load-serving utilities to move cost-effective energy efficiency projects forward. The concept presented follows this basic framework:

  • Local governments receive upfront capital from their load-serving utility.
  • These local governments undertake projects with measureable energy savings.
  • These energy savings result in reduced greenhouse gas emissions for the utility, helping them meet their compliance obligation under AB 32.

This possible fit between the utilities’ needs for compliance and local government opportunities for energy efficiency needs to be explored for cost-effectiveness. Local governments require additional funding mechanisms for expansive energy efficiency projects. Utilities are some of the largest entities covered under Cap-and-Trade regulations, leading to large compliance obligations. Energy efficiency is also known to be the most cost-effective way to balance supply and demand for electricity. The key to this new concept is that the funding comes from the utility’s compliance budget. Therefore, it is in addition to existing energy efficiency incentive programming. There are challenges to the framework. Thus, the Alliance addresses each of them individually in the whitepaper. The paper also includes recommendations for implementing this new framework for harnessing potential greenhouse gas emissions reductions.

Key study conclusions include:

  • There is an anticipated shortfall of compliance instruments (allowances and offset credits) occurring as early as 2016.
  • Alternate cost-effective means of compliance will be needed, and this mechanism could greatly benefit both utilities and local governments.
  • Working locally to permanently reduce emissions is a win-win opportunity for local governments and utilities.
  • There is widespread support among key stakeholders and industry subject matter experts to test this concept.

The study also summarizes key stakeholder feedback gathered as a part of concept exploration. Download the full report for more details.

Lillian Kawasaki Remembered as Leader in Water and Environmental Fields

On July 18, the water and environmental industries lost one of its leaders. The California Sustainability Alliance (Alliance) joins the many others mourning the loss of Lillian Kawasaki, who passed away on that day.

Ms. Kawasaki was a founding member of the Alliance’s Advisory Committee and offered invaluable advice on the organization’s start and early development. We will miss her wisdom and support, and will strive to keep her commitment to the environment and sustainability alive in the Alliance’s work.

Craig McDonald, Managing Director for Navigant Consulting and Project Director of the Alliance summed up Ms. Kawasaki’s influence: “Lillian’s insight, leadership, and vast knowledge of the water energy landscape was essential in shaping the Alliance’s great work in these fields.”

Highlights of Ms. Kawasaki career include launching the City of Los Angeles’ Environmental Affairs Department, heading the city Community Development Department and serving as assistant general manager of environmental affairs and economic development for the Los Angeles Department of Water and Power. Additionally, she was a member of numerous state and federal water policy committees during the course of her career, serving on the board of the Water Replenishment District (WRD) of Southern California and such professional organizations as the Association of Women in Water, Energy and Environment.

For more on Ms. Kawasaki’s remarkable life and commitment to public service and the environment, see her obituary in the Los Angeles Times.

LA Business Council Sustainability Summit, Part Four: Renewables and Feed-in Tariffs

In sunny Southern California, no discussion of sustainability would be complete without mention of solar power.  At the recent Los Angeles Business Council 2010 Sustainability Summit, which the Alliance attended as a Cooperating Organization, a full panel was devoted to renewable energy, both solar and wind.

The panel opened with a talk on feed-in tariffs (FiTs), which are guaranteed rates for excess on-site renewable power generation to be sold back to the grid (equivalent to allowing a utility customer’s electric meter to run negative and produce income for the customer). The presentation was given by J. R. DeShazo, Professor of Public Policy and Director of the UCLA Luskin Center for Innovation. As an author of Designing an Effective Feed-in Tariff for Greater Los Angeles, a study recently conducted in partnership with the LA Business Council, DeShazo was able to give an in-depth review of the FiT value proposition and of important variables impacting program success.

Los Angeles has aggressive renewable generation goals, aiming for 20% renewable power this year and 40% by 2020. Mayor Antonio Villaraigosa has also set a goal of eliminating coal from the generation mix by 2020. However, achieving these goals will be a challenge. Today, only 14% of the city’s generation mix is from renewable sources, falling significantly short of the 20% renewable portfolio standard (RPS) target. To help close the gap, DeShazo’s study recommends implementing a carefully designed FiT, focusing on large multifamily, commercial, and institutional buildings with plenty of roof space available for solar. The study found that such a program would contribute approximately 3% to the city’s RPS. Beyond this contribution, a well-designed feed-in tariff has several significant benefits :

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LABC Sustainability Summit Part 3: Villaraigosa’s Keynote

The California Sustainability Alliance recently attended the Los Angeles Business Council 2010 Sustainability Summit as a cooperating organization – here’s part three in our series on what we learned there. The event was brimming with impressive speakers and panelists, including Los Angeles Mayor Antonio Villaraigosa, who expressed pride in his perfect attendance record at this 3rd annual event.

The mayor began by expressing his perspective on the sustainability value proposition, which he believes contributes not just to the environment but also to jobs and the overall economy. He then took a quick dive into the financial crisis currently facing the city of Los Angeles, which has tried to raise electricity rates in order to maintain solvency. He explained that he believes rates need to go up not just to keep the city solvent, but also to enable action on important policy goals. In particular, the city is heavily reliant on coal for its power generation. While this choice helps to keep rates down, Villaraigosa expressed his conviction that the city must change its generation mix to incorporate more low-carbon sources such as natural gas and renewables.

Villaraigosa spent the remainder of his keynote addressing one of his passions – improving public transit in Los Angeles. He focused on Measure R, which was approved by LA County voters in 2008 with an overwhelming two-thirds majority. The measure provides $40 billion in funding over the next 30 years for numerous transportation projects, including several related to sustainability, such as:

  • Doubling the size of the rail system in Los Angeles County
  • Building a “subway to the sea”
  • Establishing bikeways and pedestrian improvements
  • Maintaining low fares for public transit while expanding service
  • Carpool lanes

Measure R is an unprecedented investment in public transit; and to make it even more impressive, Villaraigosa has championed accelerating the timeline from thirty years to ten. While completing the numerous projects in Measure R will be a challenge – it requires cooperation amongst all 88 cities in Los Angeles County – the initiative will be a true game-changer, vastly improving both environmental sustainability and quality of life for Los Angelenos. Measure R is also expected to create 166,000 jobs and save 10 million gallons of gasoline annually, contributing to economic growth and energy independence. Emphasizing the diverse benefits of this project, Villaraigosa called on business, academia, and health professionals to work together in support the initiative, concluding, “The time to act is now.”

As a former Angeleno, I can’t wait to see my hometown finally build a more sustainable transit system. For those of you currently living in Los Angeles County, tell us – how is implementation of Measure R affecting your daily life? What do you think the County’s transit priorities ought to be?