CPUC Authorizes Procurement of 10.6 GW of Clean Energy Resources Under AB 1373

The California Public Utilities Commission (CPUC) issued a decision on August 22, 2024, authorizing the Department of Water Resources (DWR) to procure up to 10.6 gigawatts (GW) of clean energy resources, including up to 7.6 GW of floating offshore wind—in total representing close to 20% of California’s current in-state generation capacity.

This Legal Update summarizes the key points of the decision and its implications for the energy industry in California.

Background

The decision implements Assembly Bill (AB) 1373, which was passed in 2023 to address the need for long lead-time (LLT) resources that can help achieve the state’s greenhouse gas (GHG) reduction goals for 2045 and beyond.

Key Points of the Decision

Four Types of LLT Resources

The decision identifies four types of LLT resources that DWR may procure through centralized solicitations: offshore wind, geothermal, multi-day long-duration energy storage, and long-duration energy storage with at least a 12-hour discharge period. Maximum quantities and timelines for each resource type are shown here:

Procurement Process

DWR will have the flexibility to procure between zero and the upper limits of the authorized capacities depending on the quality, cost, and risk of the bids received. The decision also allows for additional rounds of solicitations for resources that are not fully contracted in earlier rounds. The CPUC will review the bids and contracts proposed by DWR and has the authority to approve or reject them, including based on the reasonableness of proposed contract costs. DWR will then re-sell the procured capacity and energy to serve in-state demand.

The decision establishes principles for allocating the costs and benefits of the centralized procurement across all load-serving entities (LSEs) under CPUC jurisdiction. The allocation is based on forecast annual energy load for offshore wind and geothermal and forecast 12-month coincident peak load for long-duration energy storage.

The decision also states that publicly owned utilities can request DWR to procure LLT resources on their behalf and that centralized procurement is distinct from and complementary to the current integrated resource planning (IRP) requirements for LSEs.

Implications for the Energy Industry in California

The decision is a substantial step in advancing California’s clean energy transition. The decision also poses challenges and opportunities for the energy industry in the state.

Challenges

The procurement process and outcomes will depend on many factors, such as the availability of power production sites and of transmission and interconnection capacity, market conditions, technology development, CPUC determinations on the reasonableness of costs and cost-recovery mechanisms, the availability of competing and potentially lower-cost renewable resources from out of state, and stakeholder input.

Opportunities

The decision invites interested parties to participate in the procurement group that DWR will convene, which will include representatives from the CPUC, the California Independent System Operator, the California Energy Commission, LSEs, and other stakeholders.

The decision also indicates that the CPUC will reevaluate the need for additional LLT resources in every IRP cycle and that the proceeding remains open for further actions.