Green energy mix promises big savings and greater stability for California

New report provides economic data on power supply diversification

provided by the Sierra Club

ith more than 95% of California's current contracts for future energy production committed to natural gas, a new report released by the Union of Concerned Scientists (UCS) underscores the dangers of becoming over reliant on that fossil fuel. Powering Ahead, a comprehensive economic analysis, shows a diversified electricity mix, including 20% renewable energy, could save California consumers up to $1.8 billion and provide greater economic stability for the state.

    The report, available online at www, analyzes the economic impacts of the so-called “Renewable Portfolio Standard” (RPS) in California, a market based mechanism adopted by 12 other states that gradually increases the portion of electricity produced from renewable sources. UCS concludes that diversifying California's power portfolio with 20% renewable energy will help protect consumers from problems that have plagued California over the past six months, including price hikes, blackouts, and air emission increases.

    “California has experienced first hand the dangers of a market dominated by volatile fossil fuels,” said report author Deborah Donovan, UCS senior analyst. “Now we have the hard numbers to prove renewable energy is beneficial for California's economic health. Just as you diversify your stock portfolio, diversifying the state's power plan with California's abundant, cost-effective renewable resources will reduce price volatility and make the state less dependent on fossil fuel and electricity imports.”

    Other states with RPS laws include Arizona, Connecticut, Iowa, Maine, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, Pennsylvania, Texas, and Wisconsin.

    The most successful RPS to date is Texas, the heart of the nation's fossil fuel industry. Texas' requirements for new renewables have been set high enough to trigger market growth which will enable it to meet its renewables target several years ahead of schedule.

    In California, natural gas prices have been extremely volatile, with price spikes 10-20 times the historical average last year. On the other hand, the cost of renewable energies has been declining steadily. Wind power at three cents per kilowatt hour, for example, is now cheaper than electricity generated using natural gas. In California, however, the Department of Water Resources, which buys power for the state, uses a formula that eliminates wind power. This creates a significant market disincentive for new wind investment.

    “Price fluctuations, combined with the fact that renewable energy producers have not been appropriately paid for environmental benefits, have reduced the incentive to invest in renewable projects, “ said Richard Norgaard, Professor of Energy and Resources at UC Berkeley. “The beauty of the RPS is that it creates a long-term market for renewable generators. This allows new projects to be financed cost-effectively, escaping the boom bust cycles that this industry has historically experienced, and bringing the price down.”

    If California adopts a renewable portfolio standard of 20% by the year 2010, the UCS report finds:

  • Consumers could see cumulative savings of up to $1.8 billion on their electricity bills.
  • The amount of natural gas saved will be as much as would be burned in 15 or more new natural gas plants in a year.
  • Reduction in natural gas consumption will likely drive down natural gas prices.
  • Carbon dioxide emissions would be reduced by an estimated 24 million metric tons per year by 2010 - the equivalent of taking 3.7 million cars ff the road.

    Other highlights of the report:

  • A California RPS will stimulate investment in new renewable energy, creating jobs and income in rural areas as well as in the high tech and manufacturing sectors.
  • The RPS would reduce air pollution, most notably nitrogen oxides (NOx), a component of smog.

    Eric Wesselman, Regional Representative, Sierra Club; 827 Broadway, Suite 310, Oakland, CA 94607; 510-622-0290 x240.