By Hallie Kennan, Michael O’Boyle, Chris Busch, and Sonia Aggarwal
California’s global leadership in innovative energy technologies and policies is nothing new; in fact, it predates widespread awareness about climate change.
But as innovative and progressive as current policies are, California is still short of the pace necessary to meet its target of reducing greenhouse gas emissions 80 percent below 1990 levels by 2050. Fortunately, a new policy blueprint could help the state achieve its clean energy and climate leadership potential.
Low-carbon leadership creates economic gains
Low-carbon leadership has not only paid dividends for California’s environment and citizens, but it has also transformed and strengthened the state’s economy.
In the 1970s, California began implementing energy efficiency standards for buildings and appliances. The state accelerated its efforts in 2002 with an ambitious 20 percent renewable portfolio standard (RPS) for electricity sales, and then again in 2006 with the passage of AB 32, the California Global Warming Solutions Act.
Today, more solar has been installed in California than in the next nine states combined, California is home to nearly half the nation’s electric vehicles, and the RPS is now up to 33 percent by 2020. And business is booming; California-based corporations have outperformed their counterparts in other states since 2011.
California plans a clean energy future
California’s policymakers are stepping up to the task by setting the next phase of energy policies to maintain the state’s leadership for decades to come. In January, Governor Brown announced a set of climate goals for 2030:
- Generate 50 percent of all electricity sales from renewable sources
- Double energy efficiency in existing buildings
- Halve fossil fuel use by cars and trucks
These targets are achievable and California’s energy policy community is in high gear, helping design the policies needed to achieve these important goals. Our firm, Energy Innovation, has contributed a set of recommendations to keep the state on track toward deep carbon reductions by 2030 and beyond.
Our recommendations line up with the governor’s three major goals to decarbonize the electricity supply, ramp up energy efficiency, and meet transportation needs with 50 percent less petroleum.
1. Decarbonize electricity supply
California can further decarbonize its electricity supply and reduce its energy consumption, all while keeping bills low and the lights on.
Raising the RPS to 50 percent has gotten a fair amount of attention, but singling out renewable energy tends to isolate renewables from overall system planning, which can drive up costs. As renewables become California’s primary source of electricity, the system should be optimized around low-carbon electricity, not operated in spite of it.
Setting a carbon standard for 2030—measured in either emissions intensity or total emissions—more directly aligns electric utility incentives with California’s decarbonization goals. This standard would tie some portion of electric utility revenue to carbon emissions, shifting the risks and potential rewards of success to the actors who most directly control California’s electricity supply.
A carbon standard also supports the Governor’s target of 50 percent of electricity generation from renewable energy sources, but leaves room for innovation by electric utilities to ensure a low-cost, low-carbon electricity system.
But a carbon standard alone does not ensure affordable, reliable, and clean electricity in California. More regional coordination among utilities ensures the cheapest renewable energy will meet customer demand and provide export markets for California’s world-leading clean energy companies.
Also, setting a renewable energy target (or “backbone”) would provide the consistent renewable energy development investment signals that have created unprecedented cost reductions. This concept fits well with a strong carbon standard, as it is very likely infeasible to reach reduction targets with any less than 50 percent renewables, so the renewable energy backbone still provides headroom for utility innovation.
2. Reform and accelerate energy efficiency programs
Decarbonization can also be addressed by reducing energy waste where most of California’s electricity is used: existing building stock. Many of California’s existing efficiency programs have been successful and should be continued and strengthened, including its world-class Title 24 building codes and the law requiring utilities to pursue all cost-effective energy efficiency opportunities, as well as federal and state appliance standards.
California’s primary energy efficiency program, the Efficiency Savings and Performance Incentive, has required utilities and the state’s Public Utilities Commission to develop savings estimates for individual projects. But this process has proved complex, contentious, and time-intensive. Because the cost of demonstrating compliance is so high and the rewards so uncertain, California’s electric utilities lack incentive to find innovative methods for reducing their customers’ energy use.
Providing utilities with consumption standards, such as a kilowatt-hour per capita standard for electricity or a therms per capita standard for natural gas, could reward utilities that find more efficient ways to provide customers with electricity while simplifying the regulatory process.
These policies would provide utilities financial incentives commensurate with the public policy outcome California wants: system-wide energy savings. Instituting penalties and incentives for utilities based on their performance, and ramping up the stringency of these standards over time, are effective ways to help California reach its energy efficiency goals in 2030.
3. Reduce fossil fuel consumption in the transportation sector
California’s transportation sector is the largest contributor to the state’s greenhouse gas emissions – unlike the rest of the United States, where the electricity sector is the largest source of emissions. The reason for this is that California’s electricity supply is already relatively clean, and a history of sprawl means Californians do a lot driving.
Vehicle electrification is a particularly promising option for cleaning up the state’s transportation sector. California’s current mandate calls for 1.5 million zero emissions vehicles on its roads by 2025. The state should extend the Zero Emission Vehicle requirement to 2030, and ensure the necessary infrastructure is in place. Without dramatically accelerating vehicle electrification, California is likely to miss its 2050 decarbonization goals. Vehicle electrification should excite electric utilities because they’ll enjoy a larger slice of California’s energy pie.
A model for California and the world?
California is already a world leader in clean energy, but it needs new and more integrated policies for 2030 to incentivize and support the transition to a low-carbon economy. If recent trends are any indication, these kinds of policies will create new economic opportunities and solidify California’s position as a hub for innovation and job creation in low-carbon technologies. If managed well, this transition will be a win-win for Californians and the planet.