Renewable energy policy and electricity restructuring: a California case study

Abstract

Many countries are in the process of deregulating and restructuring their electric power industries. Although the introduction of retail competition may have negative impacts on the development of renewable energy, a number of countries are establishing new programs to support these clean energy technologies. In the United States, debate has centered on three primary renewables support mechanisms: (1) the renewables portfolio standard; (2) programs funded by an electricity distribution surcharge; and (3) voluntary renewable energy purchases by electricity customers via green power marketing. California provides a good case study of the design of renewables support programs within industry restructuring because policymakers considered all three of these options during the state’s restructuring proceedings. Moreover, many of the same policy options, design issues, and political conflicts that have arisen in California are likely to recur in other states and countries. Some of the most important lessons from the California experience include: (1) renewable energy and environmental advocates must clearly articulate the need and rationale for continued support of renewables; (2) cost containment and competitive neutrality concerns must be addressed head on; (3) combinations of policies are likely to be far more effective than any single renewables policy; and (4) the effectiveness of renewable energy policies developed during the restructuring process will be strongly linked to their duration and stability.