Energy October 2009

The California Experiment

Busted budgets, failing schools, overcrowded prisons, gridlocked government—California no longer beckons as America’s promised land. Except, that is, in one area: creating a new energy economy. But is its path one the rest of the nation can follow?

For all of the changes required, Nichols is confident the state is on course to launch its cap-and-trade system one year early (in 2011) and to meet its 2020 carbon-reduction goals. Still, California’s experience highlights several obstacles the country may face in any transition toward a lower-carbon economy. Foremost among these, ironically, may be the environmental challenges of producing more renewable power. Large-scale solar arrays consume substantial amounts of land. As plans move forward for new facilities in the Mojave Desert and elsewhere, environmentalists are uneasily monitoring the potential impact on sensitive habitats. Even more daunting are the extended permitting and regulatory processes for building the transmission lines required to carry wind and solar power to population centers.

“Transmission is the biggest constraint,” says Michael R.Peevey, who is the president of the California Public Utilities Commission. Typically, he says, it takes eight to 10 years to plan, permit, and build a high-voltage transmission line. The commission has projected that California will need to build five such lines to meet its 2020 renewable-power goals. The likelihood that that will happen is even lower than the likelihood that Los Angeles will ban Botox.

Another challenge is the precarious financial condition of some of the start-up alternative-energy companies that the California utilities are relying upon to deliver wind and solar power. Even before the credit crunch, skeptics questioned whether the new energy companies possessed the financial, engineering, and logistical capacity to fulfill their agreements with state utilities to build huge generation plants. The difficulty in obtaining credit will likely make it harder for some suppliers to reach the size required to deliver their technologies at an industrial scale. Some analysts think many of the alternative-energy start-ups may instead need to license their technology to the utilities, which can more easily raise the money to build generating facilities themselves. But while more direct ownership by the utilities (or, for that matter, oil companies) might speed the deployment of alternative energy, it would also raise concerns about concentrating control over the next century’s energy supplies in the same behemoths that dominated the fossil-fuel era.

Other technological challenges also loom—from upgrading the electricity grid so it can handle the intermittent nature of solar and wind power, to developing the battery capacity required to make electric cars more than a niche competitor. But the greatest unknown may be whether the state’s energy agenda will eventually provoke a backlash among voters. To meet the greenhouse-gas reduction targets, the state may need to consider measures that average families might consider too intrusive, like imposing fees on the owners of cars that emit the most carbon dioxide. Energy prices are another wild card. If household utility bills noticeably rise, the political calculus might change, particularly if the economy remains weak.

Yet, for now, the key to energy politics in California is that the state has transcended the assumption, common in many other regions, that sustainability requires scarcity. The California perspective reflects the fusion of the state’s long-time environmental ethos with the techno-optimism of Silicon Valley. “We look at this as an economic opportunity,” says Doug Henton, an economic consultant to Next 10 and the chairman and CEO of Collaborative Economics. “What’s been holding back other states and [the nation] is this fear that we’re going to lose more than we gain.”

Clearly, some structural advantages have encouraged that attitude in California. It is easier for California to shift toward renewable sources of electricity, for instance, because it never relied as much as most states on low-cost coal (even including its imports of coal-generated power from neighboring states); it also has an unusually favorable climate for generating solar energy.

“This isn’t something you can design as an exact blueprint, a cookie cutter that is applicable everywhere,” says Mary D. Nichols. But in moving toward a low-carbon future, California has its own unique challenges, starting with its excessive reliance on cars. On balance, the state’s energy successes have been shaped less by the state’s underlying circumstances than by the public policies California has pursued.

The big lessons of the California energy experience—rely on efficiency first, use regulation to create markets, use markets to create constituencies, attack the problem from all angles—might be implemented in different ways, but their basic principles can be applied everywhere. California’s experience says the evolution to a lower-carbon, more energy-efficient economy is possible and compatible with economic growth, but that the change requires endurance, consistency, and flexibility. Schwarzenegger captures the point with a characteristically personal metaphor:

“The key thing with everything is not to concentrate so much on the process but to concentrate on the goal. When I said I am going to be Mr. Universe, and I was 15 years old in Austria, I had no idea how to train and how to get there. But I had the fire in the belly, and I had the will to say that I will be the world champion even though it was not an Austrian sport, and no one had ever done it in Austria … The will was there. So the same is here. We have the will to get there by 2020 …and therefore we are going to … make decisions based on getting there.”

No one exemplifies that spirit of persistence more than Art Rosenfeld. He has been around long enough that as a graduate student he studied under Enrico Fermi. The wall of Rosenfeld’s office is covered with awards that stretch back decades. Yet, at 83, he has a new passion. Rosenfeld is crusading to replace dark roofs, which trap most of the sun’s heat, with white or “cool” roofs that are far more reflective, and thus save energy by keeping the building below cool. California has accepted his logic by requiring all newly constructed commercial buildings with flat roofs to use white. In 2010, Energy Commission rules will encourage new homes and remodeling projects in the state’s five hottest regions to use “cool color” roof surfaces in green, brown, or other shades that reflect more heat than dark roofs.

Rosenfeld finds those rules a little disappointing, because the cool-color roofs reduce energy use by only about one-third as much as white roofs, but he understands the need to ease homeowners into a new approach. And even those requirements could yield substantial reductions. Rosenfeld has calculated that a global conversion, over the next 20 years, to white flat roofs and cool-color sloped roofs as far north as Chicago and as far south as Buenos Aires would reduce carbon emissions by an amount equivalent to taking about one-half of the world’s passenger cars off the roads. Rosenfeld is content to start small but, as always, he’s thinking big. To him, after all, it seems an eminently reasonable proposition that one American state can prompt the entire country, if not the world, to save massive amounts of energy and combat climate change, by reconsidering a central pillar of how buildings have been designed for centuries. Based on California’s experience over the past 35 years, I wouldn’t bet against him.

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Ronald Brownstein is the political director for Atlantic Media Company. More

Ronald Brownstein, a two-time finalist for the Pulitzer Prize for his coverage of presidential campaigns, is Atlantic Media's editorial director for strategic partnerships, in charge of long-term editorial strategy. He also writes a weekly column and regularly contributes other pieces for the National Journal, contributes to Quartz, and The Atlantic, and coordinates political coverage and activities across publications produced by Atlantic Media.

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