Depending on one’s point of view, the statement that President Obama’s Clean Power Plan could make the U.S. power matrix look more like California’s could be tinged with a sense of pride or derision. Without a doubt, the state of California has led the nation in clean energy targets – both setting and achieving them. However, with the Plan requiring all states to step up their renewable energy contribution, could California lose out?
It is easy to forget that California gets over 30 percent of its power from out of state, including 25 percent of its renewable energy. California’s electricity imports come from a wide array of sources, with wind accounting for the largest portion hailing from the Pacific Northwest and solar contributing the most from the nearby Southwest (which includes the Baja California interconnection).
While the Clean Power Plan has no shortage of critics, one interesting concern is that it could incentivize neighboring states to hold onto renewable power in order to meet new federal mandates, leaving California to increase in-state generation or look elsewhere. The silver lining could be more opportunities for generators in Mexico, in particular Baja California. Related: Oil Markets Coming To Grips With Prices Remaining “Lower for Longer”
In terms of cross-border energy opportunities for Mexico, California has recently looked like a saturated market. California gets 25 percent of its power from renewable sources and is on track to meet its 33 percent renewable power target by 2020. Most of which is already accounted for. But with the Clean Power Plan coming hot on the heels of the emboldened Governor Jerry Brown’s new goal of 50 percent renewable power by 2030, California may need to diversify its suppliers, including cross-border sources.
Of course, the Clean Power Plan does not take effect until 2022, plenty of time for increasing renewable generation in California itself. California has almost doubled its in-state renewable generation since 2010. Wind generation has more than doubled over this time but the real driver has been solar generation, which rose from just 908 GWh in 2010 to over 10,500 GWh in 2014.
As innovation drives cheaper and more efficient renewable power, as well as more effective storage, there’s every reason to believe that renewable energy will only become more affordable for residential and industrial use in California and elsewhere. Related: Official: The U.S. Oil Export Ban Is (Sort Of) Over
Still, utility-scale renewable power projects in California have seen their share of detractors. Social and environmental opposition could delay new projects from coming online.
As Mexico’s energy reforms bring new private investment into its power market, generators in Baja California and other border states could stand to benefit.
Baja California is rich in solar and wind resources. Yet, isolated from Mexico’s national grid, generators have looked north to the California market. The Energía Sierra Juarez wind project, operated by Sempra’s Mexican subsidiary IEnova, will have an eventual capacity of 1200 MW. The first phase - with a capacity of 155 MW - will soon be sending power to San Diego. Related: A Key Tool For Energy Investors
But why stop there? Cross-border connections also exist between Mexico, Arizona and Texas. At the moment, the interconnection has a very limited capacity and has been reserved largely for emergency use.
A failure to capitalize on opportunities for cross-border clean energy trade would be a loss for both the U.S. and Mexico. The United States and Canada have the largest integrated energy market in the world, increasing efficiency and renewable energy deployment on both sides of the border. The U.S. and Mexico have a long way to go but increasing renewable power exchanges would be a good place to start.
By Alexis Arthur for Oilprice.com
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