Clean Energy Procurement Mechanism Enacted

State procurement seen as key to helping offshore wind developments.

Governor Gavin Newsom signed into law AB 1373, which authorizes the state Department of Water Resources (DWR) to serve as a central procurement entity to procure diverse and clean energy resources until 2035. The procurement function is intended to help the state meet its renewable and zero-carbon energy resources and reliability goals.

The plan looks to benefit capital-intensive projects with long lead-times such as offshore wind, geothermal power plants in the Imperial Valley, and long-duration storage in San Diego County. (See Newsom Releases Clean Energy Transition Plan.)

Supporters of central procurement see it as critical to offshore wind, which is facing challenges to profitability from inflation, supply chain bottlenecks, and increasing financing costs. Offshore wind developers have not moved projects forward since the offshore lease auction in December 2022 and are waiting for California legislators to develop a procurement plan.

The bill defines “eligible energy resources” as a new resource procured by DWR that meets all of the following requirements:

• The resource directly supports attainment of the state’s goal to achieve 100 percent zero-carbon and renewable energy resources by 2045, without increasing reliance on the state’s dependence on any fossil fuel based resources.

• The CPUC determines the resource to not be under contract at sufficient levels as shown in the load serving entity’s most recent individual integrated resource plan (IRP) submitted to and reviewed by the CPUC to achieve SB 100 goals.

• The resource has a construction and development lead time of at least five years.

• The resource does not generate electricity using fossil fuels or fuels derived from fossil fuels.

• The resource does not use combustion to generate electricity (except ancillary and necessary to facility geothermal electricity generation).

The bill also authorizes a pumped hydroelectric facility to qualify as an eligible energy resource if it does not exceed 500 megawatts (MW) and has been directly appropriated funding by the state before January 1, 2023.

Reliability and Resource Integration

The bill requires that the portfolio of resources identified by the CPUC, as part of the IRP process, ensures a reliable electricity supply that also provides optimal integration of resource diversity in a cost-effective manner. It requires the CPUC to use the portfolio to establish procurement requirements to achieve SB 100 goals, in addition to the state’s GHG reduction goals.

Funds for Offshore Wind Workforce

The law also provides other benefits for offshore wind developers. It would authorize the CEC to allocate funds to the Voluntary Offshore Wind and Coastal Resources Protection Program for workforce development grants. The legislation also requires that at least $6 million from the General Fund is available for the 2024-25 fiscal year to support comprehensive, regional baseline environmental monitoring and research into the impacts of prospective offshore wind energy development.

Offshore Permitting

The law would also state the intent of the legislature to appropriate additional resources for offshore wind permitting as required in SB 122. That law, a budget trailer bill, expresses the intent of the legislature that the administration conduct an assessment of offshore wind energy permitting and related resource needs across applicable state entities.

Accelerated Transmission Permitting

In addition to the central procurement of clean energy, the bill also accelerates permitting for electric transmission projects and strengthens the strategic reliability reserve to help prevent its misuse of the new Strategic Reliability Reserve. The agreement follows the recently signed infrastructure streamlining package that aims to accelerate construction timelines on the projects necessary to achieving the state’s clean energy goals. (see Newsom Signs CEQA Reform Bill into Law.)