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Preface

      

Preface
(The complete study will be released 11:30 AM Wednesday - November 9, 2011)
Read Overviews of the two reports in Powering California
Powering California: The Energy Supply and Demand Landscape Overview
Download the complete Powering California Study


Energy is the currency of the world. For decades, energy supply and demand have shaped the world politically and economically. The significant increase in oil prices over the past few years has dramatically demonstrated the impact of energy costs on consumers as well as on every sector of our economy. More recently, the September 2011 blackout of large portions of southern California caused by mistake at a transmission office in Arizona demonstrates the hazards caused by the fact that an increasing proportion of California’s electricity is imported from outside the state.

And not just electricity: more of the crude oil that powers California is coming from sources outside the United States as well. The California Energy Commission reported in 2010 that oil imported into California from other nations increased by 86% over the last quarter century—from 40 million barrels per year to approximately 280 million barrels per year in 2009. One key reason: California’s within-state oil production during the same time period has dropped by more than half, from 425 million barrels per year in 1985 to approximately 200 million barrels per year in 2009. In addition to its obvious impact on California’s energy security and energy prices, imported oil also means less revenue and fewer jobs for Californians. 

The California energy picture is hardly all negative, however. Even though California is just one of 50 U.S. states, the actions by the state’s executive and legislative branches of government dealing with energy, conservation, and improvement of air quality have vaulted the state into a worldwide leadership role. The conservation efforts undertaken in California, in particular, have been extremely effective in reducing energy consumption. On a national level, Professor Joseph Kalt, a Harvard University economist, observes that the United States would require 75% more energy than it now has available to meet the country’s energy demand if the nation had not undertaken the conservation policies initiated primarily in California during the 1970s.  

The Wrong Energy Debate
 

All of this is encouraging. And yet, as challenging as energy issues have been since the oil crisis of the late 1970s, they are bound to be even more contentious—and of greater consequence—in the future. For in California as elsewhere, the availability and price of energy affects every aspect of daily life for families and businesses alike. Put simply, modern life cannot function without adequate energy. And if that energy is unavailable or too costly, the resulting higher prices filter through the system down to consumers in the form not just of more expensive gasoline and higher electric bills, but of more costly food, household products, and health care as well. 

Unfortunately, while there is periodic recognition of this relationship, the public debate over energy increasingly has been framed by other concerns over the past decade—primarily, environmental protection and climate change. Make no mistake: these are extremely important issues for public discussion. As the Deepwater Horizon oil spill in the Gulf of Mexico during April to June of 2010 clearly demonstrated, energy production, badly managed, can cause grave environmental damage. And the pollution that results from energy use is of essential—and ongoing—concern as well.  

This perspective has led a number of organizations to spend millions of dollars and years of work preparing studies aimed at constructing a more environmentally friendly energy future. Invariably, these studies cast traditional fossil-fuel-based energy in a highly negative light and so craft a future built heavily if not primarily upon renewable resources and alternative energy sources. Although well-intentioned (for the most part), such studies tend to paint the future in terms of possibilities rather than realities or even likelihood. For it is indeed possible that a largely renewable energy portfolio can be developed. But as policymakers and interested observers, our interest should go beyond what is theoretically possible to what is realistically achievable—what, in fact, is most likely to come about. As the brewing Solyndra scandal demonstrates, even the best intentions in the world combined with billions of dollars do not necessarily equate to a workable and sustainable energy solution.  

And so, for the past decade or so, the public debate on energy has essentially been the wrong debate. The issue isn’t whether we should strive to use more environmentally friendly energy sources. Of course we should. We should be undertaking aggressive research and development to make every reasonable alternative source more realistic and more affordable. And the issue isn’t whether these more environmentally friendly energy sources are a good thing. Of course they are. A solar-powered economy, a hydrogen-powered economy, a nuclear fusion-powered economy: all of these, without dispute, would be energy utopias. That isn’t the question. Nor is the question one of whether, in theory, we could realize these dreams. The real questions are: To what extent can we achieve these energy dreams in practice, what will it cost, and in what time frame? 
 
Re-Framing the Energy Debate
 

The goal of the Powering California study is to re-frame the public energy debate into one that is, at once, more realistic and more constructive. Our purpose is to define an energy future that is not only more environmentally friendly, but one that is both technologically feasible and economically affordable. For only if all three criteria are satisfied can the proposed future be achieved. 

We do not take that entire journey in this initial pair of reports, but we set off down that road. In so doing, we gird ourselves in the same way that any wise traveler does: by collecting and employing an accurate map of the landscape that we propose to travel. We resist indulging in “best cases” or mere possibilities but, in the spirit of that famous L.A. cop Joe Friday, we desire simply, “just the facts.” And those facts are of three types: 

·        How much energy will California need in the near- and mid-term future?

·        How much energy will be supplied (produced and imported) in California under the most realistic scenarios?

·        And what will it cost? 

Another related but important question turns on the economics of the energy sector. Specifically: could the accelerated development of California’s indigenous energy supplies speed the growth of California’s economy, add jobs to our state, and enhance state tax revenues? Such questions are particularly important as California struggles to emerge from one of its most difficult fiscal crises in memory. Answers to these and other vital questions will illuminate our understanding in these key areas. But more than that, they also will help us to make more informed, more intelligent, and—ultimately—more beneficial public policy decisions for our people, for our businesses, and for our state. 

Powering California Content 

The first section of Powering California principle author is Dr. Timothy Considine who has conducted similar research for the World Bank and the State Israel plus another study for The Communications Institute with Arizona State University. This has been a major research undertaking by Dr. Considine and his colleagues at the Center on Energy Economics and Public Policy at the University of Wyoming..

The second section of Powering California is a synthesis of major research done by other respected academic research centers plus data from the United States Department of Energy that provide valuable insights and further substantiate the findings of Dr. Considine.

 The following are summaries of the two sections:

 (1)      Powering California: Balancing Fiscal, Energy, and Environmental Concerns. This second report is an in-depth, original study that examines California energy supply and demand picture from now through 2025. It evaluates various options to meet future demand while accommodating environmental concerns. This study was based upon a similar research study in Arizona called Powering Arizona. As a result, the current study was made possible, in part, through the support of Thomas R. Brown Foundations that created the economic model upon which this study is based.

 (2)      Powering California: The Energy Supply and Demand Landscape. This study synthesizes the outstanding research and analysis currently available from leading academic, research, and government organizations that have studied the energy past and future of both California and the United States as a whole. Among the research reviewed were:

·        United States Energy Information Administration’s Annual Energy Outlook.

·        California Energy Commission’s California Energy Demand Forecast.

·        California’s Energy Future by the California Council on Science and Technology.

·        California Energy Demand Scenario Projections to 2050 (University of California Davis).

·        Meeting California’s Long-Term Greenhouse Gas Reduction Goals produced by Energy and Environmental Economics, Inc. (E Three).

·        California’s Uncertain Oil Future by the Los Angeles Economic and Development Commission.

·        Prudent Development: Realizing the Potential of North America’s Abundant Natural Gas and Oil Resources, by the National Petroleum Council. 

We believe that Powering California provides an unprecedented look at California’s energy past and future. But it does so in a way that is not only mindful of, but oriented toward, the economic costs and benefits of the respective energy paths. It is also focuses on the vital important to continue to protect and enhance the environment and the need for continued technological program in energy development. It is therefore hoped that this report will serve to both enlighten and broaden the minds of those whose responsibilities include shaping the policies that govern California’s energy future, and to create policies that are not only beneficial, but technologically and economically achievable as well. 

 

Jack H. Knott, Ph.D.                                                       John E. Cox, Jr.

Chairman of the Board of Trustees                                  President
The Communications Institute                                         The Communications Institute
Dean, School of Policy, Planning, and
Development
University of Southern California