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Executive Summary

As the new home of CALPIRG's environmental work, Environment California can be contacted with any questions regarding this report. 

In the current crisis mode of California energy policy decision making, state officials have been in a rush to build as many natural gas power plants as they can. While this will secure adequate supplies of electricity in the near term, the state has already approved more than enough of these plants and should now turn to developing renewable energy sources to satisfy future demand and retire old power plants.

The goals of long-term energy policy should be to secure reliable electricity sources at stable prices produced with tolerable impacts. The best options for all of these goals are wind, solar, and geothermal energy.

The state could reasonably expect to generate a quarter of its electricity from these sources by 2010, given appropriate incentives. 8,300 megawatts (MW) of new renewable energy capacity added to 4,100 MW current capacity would generate 75,000 gigawatthours per year (GWh/yr) of electricity out of a total projected demand of 296,000 GWh/yr.

• There is 10,000 MW of wind potential in the state. 4,200 MW of this could come online by 2010. Combined with current capacity, this would make up 14% of total supply.

• There is 4,000 MW of untapped geothermal potential in the state. 2,500 MW could be expected by 2010. Geothermal energy would then constitute 10% of total supply.

• Solar potential is tremendous, but will come online more slowly. California could produce 600 MW from photovoltaics and 1,000 MW from solar thermal power plants by 2010 – 1.5% of total supply, including current capacity.

Diversifying the state’s energy sources would increase the overall reliability of electricity supply.

• Over-reliance on fossil fuels is among the biggest reasons for the current energy crisis. Spikes in fuel costs have caused utility bankruptcy and unstable supplies.

• Developing renewable resources would allow California to become electricity independent rather than relying on imports from other states.

• The historic average downtime for natural gas plants is higher than for wind, solar, and geothermal energy.

• Solar power is particularly valuable for its quality of reaching maximum output at times of peak demand.

• Ignoring renewable energy opportunities and deepening our reliance on fossil fuels would invite more price spikes and supply shortages.

Domestic reserves of natural gas are relatively small, and overseas supplies will be unstable and expensive.

Many potential renewable energy projects are cheaper than natural gas power plants.

• Wind power offers the most potential at the lowest cost. By 2010, turbines with a combined average output of 2,600 MW could be operational at less cost than other energy resources. At an added cost of 0.1- 2 cents per kilowatt-hour (¢/kWh), an additional 1,600 MW of average capacity could be developed.

• The best geothermal plants produce power for one-third the generating cost of natural gas plants.

• Solar power is cost-competitive in the long term and will lead to a sustainable and affordable energy future.

• If we were able to accurately measure and account for the externalized costs of burning fossil fuels – costs of health damage, crop damage, global warming, and other effects – the competitive advantage of renewable energy would be even clearer. Conservative estimates put the externalized costs of California’s current natural gas power plants at $1.9 billion per year.

• Developing sustainable, in-state resources will keep the financial benefits of resource development in the state economy.

Most of these projects could be brought online more quickly than gas plants.

• It normally takes three years to construct a 300 MW natural gas plant. To produce the same amount of capacity from renewable sources would take 1.5 years for wind and two years for geothermal.

• Contractors can solarize a building in less than a week, though it would take four years to implement a 300 MW solar project.

Fossil fuels are a limited resource. Nuclear waste is a massive problem with no good solution. Clearly we cannot continue to rely on these sources forever. Deepening our reliance on them would result in escalating environmental costs and wasted time and effort.

The question is not whether to develop renewable energy. The only question is when. California should begin now to take advantage of good opportunities to build the sustainable energy future.

Policy Needs

The California state government should set an enforceable minimum of 20% of electricity production from wind, solar, and geothermal energy by 2010. This would create economies of scale, spur innovation, and establish markets and technologies.

Renewable energy industries would be able to springboard off this boost to achieve higher levels of energy production thereafter with less assistance. Once this 20% floor is set, the state has many other options to assure that companies can meet the minimum amount and then develop well beyond that minimum.

• California should enter into long-term contracts with renewable energy producers.The biggest barrier to developing renewable energy resources is that most of the total cost is upfront, with high construction costs followed by very low operating costs.

• Renewable energy producers are in effect financing thirty years of power all at once, and the high investment is therefore a large risk due to uncertain future markets. To ease this hurdle, the state can enter into long-term contracts with renewable energy producers, guaranteeing a set price for much of the lifetime of the renewable plant. In the current crisis, the first round of long-term contracts went to established projects to stabilize prices. The next round should go to renewable projects only.

• Tax equity needs to be established between renewable energy producers and traditional energy suppliers. Since renewable generators are using more expensive equipment, they currently pay higher taxes on those assets. There are several policy options available to level the playing field, including taxing energy producers on output rather than assets, giving a specific tax rate reduction to renewable energy producers, and taxing conventional fuels for their negative environmental consequences.

• Interconnection procedures should be standardized. People wanting to install solar panels or small wind systems currently have to negotiate complicated procedures to connect to the grid. The Public Utilities Commission should standardize these procedures and order the utilities to streamline the process. The capability to generate power independent of centralized power plants should be encouraged as an advantage rather than limited by unnecessary obstacles.

• California should subsidize the development of renewable energy. New energy technologies need financial assistance in order to compete with mature technologies. The state must not miss out on opportunities that need a development boost but will be beneficial in the long run.

This financial assistance must remain stable for 10 to 20 years so that a clear, stable, and predictable return on investments will attract private capital. Renewable power generators should receive assistance in making their technologies market-ready, and electricity consumers should receive financial incentives to install renewable energy equipment.