February 13, 2007 - From the February, 2007 issue

L.A. DWP Makes Progress Towards Renewable Energy Goals

Upon entering office, Mayor Villaraigosa pledged to bring DWP into the green age. In less than two years, and without taxing the city's general fund, DWP has implemented a plan to reduce L.A.'s dependence on dirty, nonrenewable energy. With the goal of generating 20 percent of its power from renewable sources by 2010, DWP has been investing in new technologies and forming partnerships across the West to bring green power to L.A.'s homes and businesses. DWP Commissioner David Nahai elaborated on DWP's progress and goals at a recent L.A. Business Council event.


David Nahai

One of the emails that went out in preparation for this (LABC) program talked about "David Nahai's vision" for 20 percent by 2010. While I would like to take credit for this, the truth is that this is Mayor Villaraigosa's vision and his policy, which I support wholeheartedly.

I believe that this is the signature environmental policy of the Villaraigosa administration. For our commission, it's a privilege to be a part of it and to play a role in the effectuation of this policy because this shift by the DWP towards renewable energy is a history-making move.

For us, this is not an objective or a goal; it's an irreversible commitment. We've set ourselves on an inexorable path toward its realization. This policy commands an immense amount of time and focus, energy and planning at the department. We spend a great deal of time exploring opportunities, studying developments, mapping strategies.

Today I'm going to pose and answer five questions: What is DWP's current power profile? Why is it advisable to pursue this path of diversification? How are we going to get there? What's it going to cost? How do we plan to absorb that cost?

Without a doubt, the largest single source of L.A.'s energy comes from the filthiest of fuels: coal. Nearly 50 percent comes from coal, 29 percent from natural gas, 9 percent from nuclear, about 7 percent from large hydro, and the rest from renewable resources. Last year, we doubled our renewable resources. That is the basic profile, and it gives us an emissions footprint that is not enviable. It means that we have to do more than other utilities in order to reduce our greenhouse gas emissions. We've made a lot of progress recently, and we're possibly the first utility to register with the Climate Registry and state exactly what our emissions are, but we have a long way to go.

Why is it advisable to do this? Apart from the obvious environmental advantages-reduction of greenhouse gases, lessening dependence on fossil fuels, and setting an example-there are clear economic imperatives. In 2005, just the vacillations in the natural gas market had a significant adverse financial impact on DWP. So diversification is an economic necessity.

When we look at capacity, the heat wave of last summer started to push us towards our limits, so we have to augment our capacity, and why not do that by the addition of renewable resources? In addition, we're going to have to do it anyway. Consider the flurry of legislation that occurred last year, with SB 1, AB 32, 1368, and the measures that are being debated in Washington, D.C., and it becomes clear that, at some point, this is going to be imposed on us, so we might as well plan for it, get ahead of the curve, and also do the right thing.

I also believe that Los Angeles can exercise business leadership here. We should try to be the incubator and the center for the renewable technology industry. We should foster an environment where innovation and creativity can flourish, and if we can do that we will reap tremendous benefits. We'll manage to create, right here, an exportable commodity that will be in great demand in places such as China and India, and other places, as they start to grapple with the side effects of economic expansion. Those are some reasons why I think it's beneficial and necessary for us to pursue a course of vigorous diversification.

How are we going to get there? The tentacles of DWP's transmission network reach up into the Pacific Northwest, Utah, Arizona, Nevada-we have something like 3,600 miles of high-voltage transmission lines, about 7,000 miles of distribution lines, and more thousands of miles of underground lines. And what this means is that by identifying renewable resources that can be linked to our transmission network, we are able to save a great deal of money and time and to promote efficiency because we have so much transmission capacity in place. I heard the other day that DWP owns something like 28 percent of the transmission lines in the state. That's remarkably disproportionate to the amount of energy that we use in this city. But it gives us a true head-start in fulfilling our renewables commitments.

What are we doing in order to attain to our objective? Two days ago a new RFP was let by the department for 2200 gigawatt-hours (that will amount to about $176 million per year), and it's an invitation to the renewables world to propose and bid on renewable projects for DWP to be accomplished by 2010.

We will, of course, give preference to projects that can link to our transmission lines, that will be located on DWP land, and that will enable DWP to own the asset, if not immediately then under an option, consistent with DWP's traditional philosophy of owning and operating its own assets.

Another RFP was done by the Southern California Public Power Authority and a number of projects have come in from that. Our Pine Tree project in the Tehachapis is proceeding, and that will gives us 110 megawatts of wind power. There have been some delays in that project, but I think we're over the worst of them. There are four trash-to-energy projects under review that could generate 100 megawatts in the next few years. There is a geothermal project near the Salton Sea for 100 megawatts that's being studied. There is 125 megawatts of concentrated solar on DWP land.

A myriad of possibilities are being considered. And we fully recognize that in order to get to 20 percent by 2010, given the nature of this market in which negotiations fail or contracts are terminated, we have to cast a much wider net. That's why the RPS projects that are either secured, planned, or under study actually amount to something like 40 percent. So, we are aware that we have to aim for a much larger target in order to satisfy the 20 percent goal.

What about the costs? I asked our staff to let me know what the average increase in rates is going to be for a medium-sized business. In this calculation, we have to look at the increment of what the renewables program is going to cost over what the same energy would have cost at "brown power" prices. It comes out to an increase, but it's an increase of about 1.3 percent per year over five years. So, that's an addition of about 6.5 percent, which I found pleasant, to be honest. It is within our reach-I'm not saying that is a negligible raise, but it's not going to be devastating either.

When we think of the benefits that we're going to reap, we must conclude that it is something well worth doing. We always ask about the cost of any reform, and it's a legitimate question, but it's an incomplete question, because cost is just one part of the equation.

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The real question should be, is this an investment worth making? And isn't that how we make our decisions every day? When we buy a house, what school we send our kids to, what kind of car we drive-yes, we look at the cost, but we also look at whether it is an investment worth making. And the renewables program at DWP is without a doubt an investment worth making.

LABC panelist questions:

Besides renewables, what can DWP do to help the city reduce its energy consumption by 20 percent as well during the same time frame so that we're dealing with both sides of the equation?

The time is right to move forward aggressively along a number of fronts, and I think that the people of Los Angeles want to exercise environmental stewardship and are willing to make certain sacrifices in order to get there. I was asked to talk today about renewables, and that's what I've concentrated on.

But there are many other things that are happening at DWP. There are conservation programs that are based on rebate rates, but there's also a green buildings initiatives that is starting to gather momentum. This initiative was started by the mayor; it's been simmering at the staff level, but it's going to be elevated to the commission level. For the first time, we're going to have a meeting of various commissions, like Public Works, Building and Safety, CRA, Planning, Parks and Recreation, and all of these commissioners are going to get in one room and talk about green buildings, and LEED standards and modified LEED standards that would be applicable to L.A.'s circumstances, and to elevate and invigorate the discussion.

Are you doing anything to incentivize renewable resources within the city, either by businesses or homeowners, i.e. to put solar on their roofs or other activities?

Solar is a part of it. SB 1 requires a program in Los Angeles for solar rooftops. I think our solar program previously has not been as vibrant as one would have wished, but it's getting rejuvenated now. We estimate that by 2010 as much as 13 percent of the RPS component may be solar, not just from rooftops but from solar troughs or concentrated solar. The breakdown is estimated at 38 percent wind, 13 percent solar, 10 percent hydro, 21 percent geothermal, and maybe 10 or 12 percent biomass. This is what we think the picture will look like with respect to the 20 percent by 2010. We're determined to get to 20 percent by 2010, but I don't think that's going to be the end of the story.

What are the DWP's long-term plans for assuring water supply for L.A.?

Roughly 50 to 60 percent of our water comes from the Owens Valley. The rest comes from the Colorado River and from the State Water Project through contracts with the Metropolitan Water District, and 10–15 percent comes from indigenous groundwater supplies.

That last element is a critical one, because it's appalling that we have so contaminated our aquifers that we can now claim only 10– 15 percent of our water from our own groundwater supplies. Our water supply from the Owens Valley and State Water Project and Colorado River are constantly in demand by others....

In the long term we have to do a lot of thinking about conservation. And we've done a very good job. During the last 20 years or so our population has grown by about 750,000 yet our water use has not risen that much. That is a testament to the fact that water conservation can work. But we have to accelerate the remediation of our groundwater, enforce pollution laws and adhere strictly to a "polluter-pays" tenet.

With respect to reclamation, when you think that we treat our wastewater to a very high degree and then just dump it into the ocean, that is a colossal waste. We need to find a way of reclaiming and reusing that water. I'm not saying that we would drink it right away, but we can use it for irrigation, for golf courses, for all kinds of things rather than dumping it into the ocean.

2010 isn't very far away. Isn't three years and 20 percent a stretch?

It's quick. We have accelerated it from 2017 to 2010. On the other hand, if you were seeing it from my vantage point, which is having weekly meetings on the progress of the program and seeing how Pine Tree is progressing and looking at the time frame of the 2200 gigawatt RFP that just went out that will generate proposals in a very expedited time frame and other factors, you would feel a certain degree of confidence.

Remember, we don't need to build all of them. If we had to build and operate and build transmission for all of these facilities, it would not be possible. But, to a certain extent, we can purchase power or facilities that are operated by others. In many cases, we may get an option to buy, because we don't have a tax burden. But there are tax advantages from renewables, and therefore we can craft a framework in which the owner-operator will continue to own so that they can derive the tax advantages, which will then be passed to us in the pricing structure....

In terms of the growing pains and the assimilation of renewables, I don't know yet. I do know that we get obstacles put in our way-every now and then a regulation will be suggested in Sacramento that ironically and inadvertently would have the effect of delaying the 20 percent by 2010 deadline-but we deal with them.

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