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Climate Change Mitigation Policy and Energy Markets: Cooperation and
Competition in Integrating Renewables into Deregulated Markets
Noah Dormady
&
Elena Maggioni
Forging Closer Ties: Transatlantic Relations, Climate and Energy
Berlin, November 29 – December 5, 2009
Agenda
• Theoretical Context
• California’s Energy Markets
• Case of Los Angeles Department of Water and Power (LADWP) – Green Path North (GPN)
• California’s Policy Response
• Implications and Conclusions
Theoretical Context
• Scale Economies Determine Appropriate Organizational Form
(Joskow & Schmalensee 1983; Joskow 1998; Williamson 1975, 1982, 1985; Wilson 1998)
• Regulation, Political Economy, and Industrial Organization
(Krueger 1976; Peltzman 1976; Stigler 1968, 1971)
• Environmental Regulation and Competition(Hahn 1984; Helland & Matsuno 2003; Heyes 2009; Misiolek & Elder 1989; Salop & Scheffman 1983; Sartzetakis 1997; Von der Fehr 1993)
• Deliberative Democracy as a Method for Solving Complex Policy Problems
(Dryzek 2000; Friedman 1989; Hajer 2003)
California MarketBilateral Contracting & Generator Bidding
Several Markets
Long-term Markets
Short-Term Markets
(Day-ahead, Hour-ahead, Spot)
Locational Marginal Pricing (LMPs)
Financial Transmission Rights (FTRs/CRRs)
• RPS and Investors Owned Utilities– 33% by 2020
Table 1 - Timeline for Electricity from...
Renewables Portfolio Standards in California
2002: S.B. 1078: 20% by 2017
2003: Energy Action Plan accelerates: 20% in 2010
2006: 20% by 2010 deadline into law
2008: AB 32 anticipates RPS at 33% by 2020
2009: Executive Order: 33% renewables by 2020
RPS: Investors Owned Utilities
Major California Municipal Renewable Portfolio StandardsCity of Anaheim Public Utilities 20% by 2015
City of Los Angeles Department of Water and Power
35% by 2020
City of Palo Alto Municipal Utilities 33% by 2015
City of Riverside Public Utilities 20% by 2020
City of Sacramento Municipal Utilities 33% by 2020
City of Santa Clara (Silicon Valley Power) 31% by 2010Source: CEC 2008
RPS: Publicly Owned Utilities
Green Path North
• LADWP needs to increase its renewable portfolio and wants to:– Tap into geothermal resources in the
Southeastern part of California– Build its own power lines
• It is encountering strong opposition from local communities
Market Available Transmission Capacity
Market Available Transmission Capacity (Import)
0
5
10
15
20
25
30
35
40
45
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31
October 2009
Pe
rce
nt
Da
ily C
ap
ac
ity
Victorville
Path 15
Palo Verde
Also physical capacity constraints
ATC=TTC-OTC-TRM-ETComm-CBM-AS
Collaborative Efforts to Break the Impasse
• Renewable Energy Action Team: streamline cross-agency approval process
• RETI - Renewable Energy Transmission Initiative: plan areas and corridors for renewables
• California Transmission Planning Group: crossectoral integrated transmission plan
Conclusions
• Disconnect between energy markets and renewables policy
• Small institutions and municipalities may be disadvantaged by:
• Market Complexity• Quasi-competitive Markets• Available Physical Capacity
• Uncertain success of current institutions• Firms are asked to cooperate to form the
very markets on which they compete
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