Jerry Brown ran for governor promising to revive the economy through an aggressive expansion of California’s green-energy industry — but that agenda could prove costly to consumers.
Brown wants the state to make major new investments in solar and wind power: building large-scale power plants that run on renewable resources and placing solar panels on parking-lot roofs, school buildings and along the banks of state highways. Although advocates of renewable energy tout the long-term savings of going green, billions of dollars would be required to reach the governor-elect’s green-energy goals.
Nobody knows if the program would produce the “more than half a million green jobs” Brown promised during the campaign, but many experts agree that it could lead to sharply higher utility rates.
How much higher is unclear, because the eventual cost of Brown’s plan would depend in part on the mix of wind, solar and other renewable energy used. Other factors may lower that estimate, said Brown spokesman Sterling Clifford. It depends on “what kind of cost savings can be realized through reducing the regulatory hurdles, it depends on how quickly we can ramp up job creation…. All of this is somewhat speculative at the moment.”
But state regulators have already crunched some numbers associated with the linchpin of Brown’s plan: to generate one-third of the state’s power from renewable sources by 2020. That could require rate hikes of as much as 14.5%, in addition to billions of dollars in private investment, according to an analysis by the state’s Public Utilities Commission.
Staff at the commission, which regulates Pacific Gas & Electric, Southern California Edison, San Diego Gas & Electric and a handful of smaller utilities and sets rates for most Californians, estimates the cost of the plan at roughly $60 billion over the next decade. That is more than state taxpayers will spend on the University of California and California State University systems combined over the same period.
Clifford said the PUC analysis is not complete.
“One of the things that estimate does not take into account is the thinning of the regulatory thicket when it comes to renewable energy,” he said. “We want to simplify the process by which renewable projects can be approved.”
Although Brown has embraced the same goal as Gov. Arnold Schwarzenegger on renewable energy — to have one-third of the state’s electricity come from renewable sources by 2020 — his approach is radically different. Unlike Schwarzenegger, Brown wants the bulk of this new green power to come from sources in California. That would require billions of dollars to build new solar and wind power plants and to connect them to the state’s power grid.
Schwarzenegger’s plan opted for more power produced outside California, which he says is cheaper. That angered labor unions eager for power-plant construction jobs as well as environmentalists who say there’s no way to prove that electricity generated outside California comes from renewable energy plants.
Consumer advocates and Democrats say the Schwarzenegger administration underestimates the cost of out-of-state power and that generating electricity within California would be more reliable and better for the state’s economy.
During the gubernatorial campaign, Brown called for developing 20,000 megawatts of new, renewable energy in California. Each megawatt of power would be enough to serve up to 1,000 Southern California homes. Brown said this new green power would be at the heart of his plan to create hundreds of thousands of jobs in the state.
But he has not said how he would pay for new power plants, although he appears ready to act quickly. He and his staff have been meeting with key stakeholders in the renewable energy debate — labor leaders, consumer advocates and utility representatives — since the Nov. 2 election.
Clifford said the jobs plan is a priority for the incoming administration but promised that Brown would be “methodical” in setting its course.
“We want to do it, but that means doing it right — studying potential effects of legislation and regulation, figuring out which rules can be streamlined and which can’t, ensuring an effective oversight process that allows for reasonable progress on construction projects,” said Clifford.
More clues about Brown’s plans may emerge from the three appointments that he will have the right to make to the Public Utilities Commission during his first year in office.
State Sen. Alex Padilla (D-Pacoima), chairman of the Senate Utilities Committee, says regulators could help bring down the costs associated with in-state power. For example, he said a Brown-appointed PUC might be more consumer-friendly — more aggressive in overseeing power contracts between producers and utilities that would be likely to pass new costs on to ratepayers.
“I would imagine it will be significantly different under Gov. Brown,” Padilla predicted. “As forward-thinking as he’s been on energy policy, he’s also been frugal.”
Clifford said consumer protection “is going to be a priority when it comes to looking at appointments to the Public Utilities Commission.”
Meanwhile, a coalition of business groups that has fought Schwarzenegger’s renewable energy proposal also opposes Brown’s. “There is a lot of pure cost anxiety on our side,” said Dorothy Rothrock, vice president of the California Manufacturers & Technology Assn.
Schwarzenegger vetoed a 2009 bill that would have required utilities to buy a third of their electricity from renewable sources in the next decade, saying the measure relied too heavily on creating expensive new power sources within California. In his veto message, he cited the “negative impact it would have had on California’s energy markets and ratepayers.”
Supporters of that bill are hoping Brown will sign one that calls for more green power from California.
“We totally support Jerry Brown’s initiative … but you simply can’t get there without” in-state renewable energy, said Scott Wetch, a lobbyist for the International Brotherhood of Electrical Workers, which supported Brown’s campaign for governor.