NEW ENERGY WILL GROW CALIF

Study: Clean energy will stimulate Calif. economy
Jason Dearen, June 10, 2009 (AP via San Jose Mercury News)
and
Clean Energy Grows Economy Faster Than Traditional Sources; New Report Unveiled at State Public Utilities Commission Forum
June 10, 2009 (Next 10)

SUMMARY
Energy Pathways for the California Economy, by David Roland-Holst and Friedrich Kahrl, University of California, Berkeley, Professors of Economics, reports that California’s commitment to New Energy and Energy Efficiency is the state's best way out of its current budget crisis.

Due to the worldwide economic downturn and a state legislature in gridlock, the California budget deficit has become enormous, in the many billions of dollars. But the state has over the last few years made a public policy commitment to a New Energy economy, new Energy Efficiency measures and a sharp reduction in greenhouse gas emissions (GhGs). The UC economists’ report indicates the predicted loss of economic productivity and jobs by the state due to the deficit will be offset by the powerful revenue and job creation payoff of its policy commitment.

Among California’s most important policy moves was Governor Arnold Schwarzenegger’s 2005 Executive Order #S-3-05, requiring a 30% cut in GhGs by 2020 and an 80% reduction from 1990 levels by 2050. This was followed in 2006 by the Global Warming Solutions Act (AB 32), which mandates by law the emissions reductions required in the Executive Order. It was the first such U.S. law. To implement the policy mandate, the California Air Resources Board (CARB) adopted in 2008 the AB 32 Climate Change Scoping Plan, a roadmap to the realization of the emissions reduction goals.

California has also legislated in 2002 one of the most ambitious Renewable Electricity Standards (RESs) in the country, requiring its regulated utilities to obtain 20% of their power from New Energy sources by 2010 and 33% by 2020.

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According to the UC study, moving away from business-as-usual (BAU) energy supply and demand horizons toward the large-scale deployment of New Energy and enhanced Energy Efficiency measures in pursuit of the mandated emissions reductions and New Energy capacity will drive California’s economy and place the state among the 21st Century’s innovation and growth leaders.

There are several reasons a New Energy economy can be so much more productive than BAU. New Energy power generation is significantly more job-intensive than the traditional, emissions-intensive (Old Energy) supply chain. New Energy also keeps more of the energy-generation revenue benefits local, in the state’s economy. It significantly reduces the state’s vulnerability to global energy market fluctuations caused by the vagaries of natural disasters and weather, by wars and international hostilities and by local terrorist disruptions at foreign energy-supply producing and transporting nexuses.

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The UC study is the most extensive application to date of the 3-years-in-development Berkeley Energy and Resources (BEAR) statewide economic model. Built on independent research by the University of California at Berkeley’s Center for Energy,
Resources, and Economic Sustainability (CERES), the BEAR model is considered the most detailed and comprehensive forecasting tool of its kind.

The study considered 5 forecasted scenarios with progressively ambitious transitions to New Energy and Energy Efficiency. Among the variables were 3 RESs of 20%, 33% and 50%, and 2 Energy Efficiency Resource Standards (EERSs) of 1% per year and 1.5% per year. The basic finding was that the faster the state makes the transition, the faster the state’s economy grows and the faster it creates jobs.

In the most ambitious scenario, the state is obtaining 50% of its power from New Energy in 2050 and increases its Energy Efficiency 1.5% per year. The result is half a million new full time-equivalent (FTE) jobs with a $100+ billion cumulative payroll.

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COMMENTARY
The key findings in the UC study:
(1) Sustaining the status quo demand and supply horizons in electricity and transportation would mean ever greater dependence on out-of-state and foreign fuel sources, leaving California vulnerable to fuel price volatility.
(2) The faster California moves to more household and business Energy Efficiency and use of New Energy, the faster the state’s economy grows and creates new jobs.
(3) New Energy is more job intensive than Old Energy because it keeps benefits in the state and decreases reliance on uncertainties outside the state.

Demand Horizons:
(1) California’s Energy Efficiency is standard-setting. While the state's economy grew rapidly over the last 3-to-4 decades, its energy consumption did not increase. At the same time, U.S. energy consumption increased 60%. In 2006, the state saved $40 billion in heating and $30 billion in air conditioning expenses through straightforward, universally obtainable Energy Efficiencies.
(2) Factors now threatening to double California electricity demand by 2050: (a) population boom; (b) growth in the more energy-demanding inland regions of the state; (c) increasing home size; (d) increasing use of air conditioning.
(3) Transportation is the most energy-consuming sector in the state. California has the most registered motor vehicles, 28 million, of any state. Its commute times for workers are among the longest. 2/3 of its imported oil and 58% of all energy costs go to transportation. With the favorable policies, oil prices and consumer trends, California’s use of transport fuel could fall 25% by 2050 – but with the wrong supports, it could double.

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Supply Horizons:
(1) California produces 1/10 of U.S. crude oil, mostly in Kern County and the Los
Angeles area, but overall production is declining. No new on-land reserves have been found in 2 decades. California is the 3rd biggest petroleum refiner in the U.S. with a 2+ million barrels per day capacity, growing since 2000 at 0.5%. With declining in-state production and declining Alaskan supply, California’s refineries are increasingly dependent on Saudi and Ecuadorian oil. The reliance on imported sources in combination with high demand make the state’s gas prices higher than the national average and especially vulnerable to spikes.
(2) California has minimized its use of coal. It has few coal burning power plants and stringent regulations on emissions. This helps the power generation sector meet the state’s air quality standards but limits fuel supply options.
(3) California has substantial natural gas reserves in the Central Valley and along the Pacific Coast but it supplies less than 2% of U.S. production and meets less than 20% of state demand. It gets much of its gas from Rocky Mountain reserves but in recent years has been in competition with rising demand in Washington and Oregon for a dwindling regional supply. Despite its New Energy and hydroelectric sources, California is primarily dependent on natural gas for electricity generation. This will, in the BAU scenario, make it more vulnerable to rising power prices.

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(4) California imports more electricity than any other state, in the forms of (a) hydroelectric power from the Pacific Northwest and coal and natural gas power from the Southwest. With increasing demand and decreasing fossil fuel production, natural gas prices have continuously gone up, especially since 2000. They are expected to continue to do so.

Demand & Supply Horizon Core Findings:
(1) The transition to New Energy and Energy Efficiency is a form of "expenditure shifting," away from energies and practices that drain the state and toward local, job-intensive goods and services. Across 100 economic activities, expenditure shifting a dollar spent for Old Energy transforms it into a dollar earned by 10-to-100 workers in a New Energy economy.

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Renewable & Energy Efficiency Core Findings:
(1) New Energy generation is more job intensive and less price volatile than Old Energy.
(2) The 5 scenarios show conclusively that the sooner and greater the shift to New Energy and Energy Efficiency, the more and greater the revenues and jobs.
(3) New Energy and Energy Efficiency creates more jobs in the new sectors than are lost in the old sectors in every scenario.
(4) Through 2050, the New Energy economy would increase California’s employment to about half the size of the state’s biotech sector and simultaneously create up to twice as many jobs in upstream and downstream activity.
(5) When New Energy becomes the primary new generation strategy, job growth will be in energy, in electronics, and in machinery.
(6) Depending on the intensity of the transition to the New Energy economy, direct job creation would be 10,000-to-40,000 full time-equivalent (FTE) jobs, with total “green jobs” upstream and downstream at 14,000-to-57,000 net (factoring in job losses from the transition). Gross new jobs, direct and indirect, would be 22,000-to-87,000.

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(7) New Energy alone counts for a limited portion of the job creation. Energy Efficiency increases statewide job benefits almost ten times. The new jobs come in a wide spectrum of upstream and downstream activities, most particularly in construction and services.
(8) The New Energy economy generates 2-to-3 times as many new payrolls as it displaces.
(9) New Energy creates higher wage jobs with a "new technology" appeal.
(10 The New Energy economy produces significant indirect income throughout supply chains, increasing payrolls in construction, manufacturing and services.
(11) The new jobs, especially those in marketing, installation and maintenance, cannot be outsourced. They have a long-term impact on the larger market as it incorporates the new technologies.
(12) Energy Efficiency creates household savings that translate, through expenditure shifting, into more income growth for consumer sectors and the diverse, state economy (food, services, etc.).

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QUOTES
- David Roland-Holst, study author/Professor of Economics, University of California, Berkeley: "It's an irresistible opportunity for the next breakout in technology…California will deliver a market, mandating a standard which will compel energy users to adopt technology in the same way fuel efficiency standards forced people to buy new cars."
- From the report’s conclusion: “Our economic assessment strongly supports the notion that a new California energy agenda, emphasizing efficiency, renewables, and infrastructure, can be a potent catalyst for economic growth in both the short- and long-term. We find that dramatically increasing energy efficiency and renewable energy’s share of electricity generation can be a powerful source of job creation, and that this employment is diverse and attractive in terms of average skill content and wages.”

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- From the report’s conclusion: “It is clear from this research that “green job” creation goes far beyond “green collar jobs”. That is, green job creation is much more widespread than direct employment in green technology sectors. This fact is often ignored in the enthusiasm surrounding green/clean energy…”
- From the report’s conclusion: Although direct employment in such new energy technologies may be significant, it is not the primary source of job creation…Indirect employment benefits from these innovation trends are much greater, more diverse and income-equitable, and in-state job retention is much higher. In addition, most of these jobs are in the services bedrock of the state’s labor force and cannot be outsourced…”
- From the report’s conclusion: “As California looks to a future of dramatically increasing
energy demand, dwindling traditional energy supplies, and greater fuel price volatility, it is clear from this analysis that pursuing an aggressive schedule of renewable fuel and energy efficiency deployment now is the most prudent economic course of action if we are to avert even greater financial crises in the future.”
- From the report: “Simply put, a dollar saved on traditional energy is a dollar earned by 10-100 times as many new workers.”