State Has Lost Global Lead in ‘Green’ Power

A quarter of a century ago, California stood at the vanguard in the development of alternative energy worldwide. With Gov. Jerry Brown lighting the way--and enduring no small measure of ridicule for doing so--the state took the lead in finding ways to coax electricity from the sun and wind, underground steam and agricultural waste.

Today, as the state struggles with the worst electricity crisis in its history, it is no longer the global leader in exploiting what loosely falls under the rubric of “green” energy.

Japan now generates more than 15 times as much electricity from solar energy as does California, despite having about half the usable sunlight. Germany produces more than triple the wind energy.

And although California remains the undisputed U.S. leader in alternative energy production, Texas, home of the American oil industry, is among several states threatening to supplant its leadership by mandating the rapid growth of renewable power generation over the next decade.

Not that renewable energy has become irrelevant in California.

The state, in its moment of crisis, is counting on alternative power--the most reliable and cheapest source of power--as never before. Without the megawatts these producers pump into the grid, the odds of blackouts would be even higher and the pressure to raise rates even greater.

Moreover, renewable energy producers now hold immense financial power over the fate of the state’s second-largest utility, Southern California Edison. At any time, they could drag Edison into Bankruptcy Court--and have threatened to do so--if it doesn’t pay them the $500 million it owes for past deliveries of electricity.

With their costs vastly surpassing their income, some producers have simply shut down, draining precious megawatts from the grid. A spokeswoman for the California Independent System Operator, which oversees the state’s power network, pegged the reduction in output by small producers Tuesday at 1,400 megawatts. About half that shortfall, she said, was due to payment problems.

The situation has grown so severe that today the Federal Energy Regulatory Commission is holding a hearing on whether to order the renewable power generators back on line.

Leaders in the alternative energy industry--which has grown from its techno-hippie roots to become the province of large, mainstream corporations--say they are optimistic that their future will be brighter. Eventually, they are certain, renewable energy sources will become mainstream; fossil fuels--oil, coal and natural gas--will become, once again, fossils.

And yet, for all that, here’s the harsh reality: For the past decade, alternative energy has played a shrinking role in the state’s overall electricity mix, and that is almost certain to accelerate as the state rebounds from its crisis the old-fashioned way, by building more power plants that convert fossil fuels into electricity.

Many in the utility industry argue that there is no choice. Most alternative energy sources remain too expensive or inconvenient to play a major role in the state’s power mix now, they say.

In fact, leaving aside hydroelectric power, which fluctuates widely during drought and flood cycles, the production of renewable energy in California actually declined slightly between 1990 and 1999. During the same period, the use of fossil fuels for electricity increased substantially.

With 13 new, conventional power plants licensed but not yet completed, it seems certain that renewable sources of energy will provide a still smaller percentage of the state’s power in the next few years.

Those who have championed alternative energy for the past three decades rue the opportunity that could be lost.

“This state and its ratepayers invested heavily in renewable energy technologies,” said Hal Harvey, president of the Energy Foundation, a nonprofit organization dedicated to encouraging sustainable energy.

“We paid a premium for that, but we succeeded in making these technologies five, six, 10 times cheaper than they were. . . . Ironically, this state paid for that revolution but is not taking advantage of it.”

If anyone needed a reminder of how far California has come in its development of alternative power--and the consequences of failing to keep up that investment--it came in March, when alternative energy generators began to close their plants after enduring months of missed payments by the financially strapped utility companies.

Although the state government had spent billions picking up the utilities’ tab for conventional power, it too had balked at paying the small alternative producers.

The result: the first deliberate statewide blackouts since World War II.

A Small Step Taken in 1976

On May 21, 1976, a small item appeared on the back pages of the Los Angeles Times.

“Homeowners and businesses can earn state tax credits of up to $1,000 for purchases of solar energy equipment under a bill signed by Gov. Brown,” it said. It went on to quote the governor as saying: “It was a small step, but it was an important step.”

He might have added that it would be little noted nor long remembered.

Yet that small step helped nurture a budding interest in alternative energy in California, whose native tinkerers were just then exploring ways of reducing their reliance on the traditional electricity grid, then powered primarily by oil, large hydroelectric plants and nuclear power.

Ross Burkhardt was typical. An electrician by training and a hippie by inclination, he was living in a tepee in the hills of Mendocino County in the late 1970s when he and many of his friends began looking for cleaner forms of power. Burkhardt was among those who had migrated to the rural counties north of San Francisco in the hope of living a simpler, more independent life--which meant, for a time, life without electricity.

Life without power turned out to be a bit of a drag. For one thing, it meant life without a stereo. Burkhardt and others began stringing wires to the batteries of their cars, trucks and vans to power their tunes and lights. That worked for a while, until people started getting up in the morning to find their car batteries stone dead.

In about 1978, Burkhardt had had enough. “I decided to make a windmill one day,” he recalled. He bought an old computer tape drive motor for $20 at a junk shop and turned it into a generator. He used a knife to carve a 42-inch-long 2-by-4 into a blade, then mounted the blade and motor on a pole. Then he hooked up the whole mess to a truck battery.

Eureka! When the wind blew, the windmill turned, generating electricity that was fed into the battery. He was creating enough power to keep his tepee lighted and his stereo cranking, and he wasn’t damming any rivers or splitting any atoms or polluting the air. And there was a bonus, Burkhardt said: “It was all free!”

Burkhardt would later move into a somewhat more permanent home and take advantage of Brown-era tax credits to buy solar panels that he is still using. Others were doing the same thing and creating ever more sophisticated technology to maintain life off the electrical grid.

And the state itself was investing heavily in alternative energy. In Brown’s first term, California allocated $23.7 million to demonstrate the efficiency of solar, wind, geothermal, cogeneration and small hydroelectric generation. By 1980, renewable and alternative sources made up 5% of the state’s electricity generation.

At the same time, the federal government, still reeling from the Arab oil embargo, was developing its own alternative energy policies. A federal law passed in 1978 required utilities to buy energy from any qualified alternative producer.

How much to pay for alternative energy has always been an issue. Because the “fuel”--the sun, wind, geothermal springs--is essentially free, most or all the expense is in upfront equipment purchases, which can vary based on the method of financing.

“You’re basically prepaying your utility bill for 25 years,” said Kevin Best, director of sales and marketing for RealEnergy, a company that develops electricity generation plants--renewable and conventional--for large real estate developments.

The 1978 law got around the problem by declaring that utilities wouldn’t pay for alternative energy based on the actual cost, but based on the utility’s avoided cost--in other words, the money the utility would have spent had it bought the energy from conventional sources.

In 1980, Ronald Reagan was elected president. In 1982, George Deukmejian was elected governor of California. Their Republican administrations were considerably less enamored of alternative energy than those of their Democratic predecessors.

About the same time, the price of oil and natural gas began to drop. Interest in energy alternatives sank with it. Natural gas was not only much cleaner than coal, it was practically cheaper than air. Why mess with alternatives?

“All of those energy concerns just dropped off the radar screens,” said Richard Worthington, a professor of politics at Pomona College who follows energy policy.

9% Comes From ‘Green’ Sources

Twenty years later, California has nevertheless made major strides in developing alternative energy. The state now obtains about 9% of its power from “green” sources, not counting the 15% that comes from hydroelectric plants. Taken together, they account for about one-quarter of the state’s power.

Yet advocates of renewable power say California could have done much more. In a state blessed with abundant sun, wind and geothermal resources, they say, the current crisis could have been avoided altogether with smart green development.

The Japanese, Germans and Danes, among others, have vastly increased their use of renewable energy by heavily subsidizing solar and wind energy production, and by taxing fossil fuel plants on the theory that the pollution they emit carries a cost to society.

Americans tend to view such policies as heavy-handed--even antithetical to a free market economy. But some also argue that there has been a bias within the utility industry against small, clean energy systems.

“I think engineers like to build big, complicated power plants,” said Angelina Galiteva, director of strategic planning for the Los Angeles Department of Water and Power.

It’s also true that even as the prices of alternative forms of electricity dropped, they remained well above the cost of burning natural gas.

Until last year.

In January 2000, wholesale electricity was averaging about 3 cents a kilowatt-hour. By January 2001, soaring natural gas costs had sent those prices up to more than 30 cents a kilowatt-hour.

There is general agreement that wind power now costs about 5 cents a kilowatt-hour--and will continue to drop. Estimates of geothermal costs range from less than 5 cents to 7 to 10 cents a kilowatt-hour. Biomass--the burning of wood chips, agricultural waste and the like--is probably about 8 to 10 cents a kilowatt-hour, and solar thermal energy--which uses mirrors to concentrate the sun’s heat to drive turbines--costs 10 to 15 cents.

Even the most expensive form of renewable energy, that produced by rooftop panels of photovoltaic solar cells, has suddenly become competitive. Estimates of the cost of photovoltaic energy range the widest--from as high as 30 cents or more per kilowatt-hour to 10 cents or less after available state and local subsidies.

But only in the worst-case scenario--someone buys the Cadillac of solar systems, takes out a high-interest loan and mounts the panels in a fogbound district of San Francisco--does solar energy exceed the current price of off-the-grid, gas-fired electricity.

Most energy experts expect that to change. Natural gas prices, they say, can’t stay at their current levels. Still, most renewable producers say the future looks rosy--if they can survive their months of nonpayment by the utilities. The price of solar and wind energy, in particular, is dropping every year, and could remain competitive even if natural gas prices do fall.

Galiteva, among others, sees solar energy as a future mainstay. The DWP has been aggressively promoting solar power, offering to heavily subsidize the cost of residential solar units and generating its own solar electricity from collectors throughout the city.

“It’s the technology of the future,” Galiteva said. “I like to think we’re sitting on the cusp of a revolution and we just don’t know it yet.”