To achieve net-zero emissions by 2045, the sheer volume of new clean energy projects that must be planned, permitted, built and commissioned in only 23 years is unprecedented. AB 205 – a 2022 budget trailer bill passed by the Legislature and signed by the Governor – establishes a number of landmark siting and permitting reforms to reduce lead times and incentivize an increase in clean energy deployment.
In this blog post, we review AB 205 and provide context for California’s net-zero challenge. We summarize the key provisions, central to which is granting the California Energy Commission exclusive authority to permit eligible clean energy projects in lieu of other state, local, regional and (where applicable) federal permits. We then consider possible policies to build on AB 205, including the potential for state-led planning, siting and financing to more rapidly execute core, no-regrets transmission infrastructure.
Overall, the reforms contained in AB 205 are an important start to reimaging environmental review and approval as a process that enables – rather than inhibits – clean energy project development in California.
This blog post is the second of a three-part series that reviews key outcomes from California’s 2022 legislative session on climate and clean energy. In part one, we summarized the state’s historic $39 billion climate budget. In the third and final instalment of the series (next week), we review the carbon capture and storage provisions contained in SB 905.
***
One of the biggest obstacles to California meeting it’s net-zero emissions goal by 2045 is the number of clean energy projects that must be built to transition away from fossil fuels. The Air Resources Board estimates that the state must build 2-3 times more solar and 6-7 times more batteries every year than has ever been delivered, right through until 2045. In addition, it must develop – from scratch – a carbon management industry capable of capturing, transporting, and storing underground over 100 million tonnes of CO2 per year. All of this is to say nothing of the tens of billions of dollars needed to adapt the state’s water system, urban centers, and forests to withstand a climate-affected 21st century.
Simply put: California needs to build – both fast and at scale. Unfortunately, the state currently has some of the longest clean energy project lead times in the country. A recent collaboration between Princeton scientists and Worley engineers estimates that utility-scale solar projects take five-times longer to develop in California (10-years) compared to fast states (2-years), and 6-years longer than the country average (Fig. 1). Transmission takes 5-years longer than average.
Overall, it is impossible to match up any scenario where California achieves a goal of net-zero emissions by 2045 with current project lead times. Reforms that shorten lead times, therefore, are needed.
New permitting reforms
To address this problem, the Governor and Legislature this year agreed on the most far reaching reform of clean energy permitting in state history, AB 205, which grants the California Energy Commission (CEC) exclusive authority to permit eligible clean energy projects in lieu of all other local, state, regional, and (where applicable) federal permits. In addition, it provides a streamlined judicial review process which could feasibly cut years off of project lead times while also reducing uncertainty. Importantly, AB 205 is also sensitive to maintaining strong environmental and labor protections, and includes requirements for community benefit agreements with local governments and community groups.
In Table 1, we summarize the main elements of the new law, including eligible projects, certification process, revised environmental review timelines, and more. A more detailed and standalone summary of AB 205 can be found here.
Future policy opportunities
Without doubt, AB 205 constitutes a significant step forward on the issue of permitting reform in California. Nevertheless, it is unlikely to be sufficient to catalyze the speed and scale of technology deployment needed to achieve economy-wide net-zero emissions by 2045 or sooner. We outline remaining issues and contemplate potential policies that build on AB 205.
A transmission problem
One of the most pressing issues that could stall California’s net-zero transition is a lack of transmission infrastructure. It is crucial to note: that even under the most favorable permitting regime, a risk-taking energy developer will still not build a project without access to affordable transmission. Similarly, transmission developers must be confident in there being a sufficient amount of generation before executing their own investment decision, often having to coordinate multiple separate projects.
The state can address this problem by direct intervention to help plan, site, and finance certain core transmission lines that risk-taking commercial developers would otherwise not yet take on. This strategic approach would serve to rapidly crowd-in private investment in new solar, wind, and geothermal energy generation – thereby keeping California on-track to achieve its ambitious net-zero target.
CAISO’s 20-Year Transmission Outlook is an effort to identify essential transmission corridors (Fig. 2). [1] With an identified set of projects, the state can drive rapid execution with supportive policies related to right-of-ways, financing, and similar. SB 1032 (Becker)in its original form would have created a new clean energy infrastructure authority to address this issue, although more targeted measures may be appropriate.
Figure 2: This figure from CAISO’s 20-Year Transmission Outlook shows essential transmission to meet SB 100 (i.e., 100% zero-carbon retail electricity by 2045), including for North Coast offshore wind, Central Valley solar, and Salton Sea geothermal.
Other possible reforms
Other options to reasonably build on AB 205 include expanding the set of eligible projects as well as reviewing and eliminating any remaining redundancies in the project review process. In the case of the former, the 2022 Draft Scoping Plan shows a significant need for carbon dioxide removal and clean hydrogen to achieve the state’s climate goals, both of which are currently ineligible from streamlined permitting under AB 205. In the case of the latter, some analysts view the Certificate of Public Convenience and Necessity (CPCN) required from the California Public Utilities Commission (CPUC) to build transmission as a possibly redundant process that can add multiple months to project lead times.
For further analysis of chicken-or-egg problems in energy transitions, see this recent op-ed published in The Hill. For a deeper look at how to improve energy policy by incorporating private developer decision-making, see this publication.
Conclusion
Despite the important progress made to date, California is still in the early phases of its energy transition, with emissions having fallen only about 13% since AB 32 was passed in 2006. [2] The policy foundation the state has laid creates the potential for more rapid cuts in future years. But our current emissions reduction trajectory (i.e., about 1% decline per year, with 23 years remaining) places us significantly short of net-zero emissions by 2045. And, it is only going to get harder to squeeze emissions out of the economy.
In this context, AB 205 is an important step in the right direction. But additional policy changes will be needed to spur the kind of rapid and deep decarbonization that is required to achieve California’s ambitious climate goals. To this end, state-led action to deploy core transmission infrastructure should be a priority going into next year’s legislative session.
For more information, please contact Sam Uden sam@csgcalifornia.com or Amanda DeMarco amanda@csgcalifornia.com. The authors are grateful to Chris Greig (Princeton University) and Alex Breckel (Clean Air Task Force) for helpful conversations that informed parts of this blog post.
[1] Note that this CAISO analysis supports electricity sector decarbonization to meet SB 100 goals only. Meanwhile, the 2022 Scoping Plan anticipates substantial direct air capture and green hydrogen to support non-electricity sector decarbonization, both of which require large amounts of renewable energy also.
[2] Per CARB data, in 2006 California emitted 480 MtCO2e and in 2019 (latest available) 418 MtCO2e. The percentage change can be calculated as: (418-480)/480 = -12.5%. This is the basis of our assumption of a 1% decline rate each year.