Will California’s Energy Policy Become the World’s Energy Policy?

Published: Mon 12 Jan 2015
A blog entry by Christine Hertzog

Contributed by:

Christine Hertzog
Managing Director
Smart Grid Library

Christine Hertzog's Blog

California recently was ranked by the World Bank as number eight in world economies, ahead of Russia and Italy and just behind Brazil. Jerry Brown, re-elected as governor, delivered an inaugural address that included an energy policy in the form of three energy objectives for 2030. Given this state’s ability to make markets through its imposing economic and innovation strengths, here are my projections about what this energy policy will mean for California, electric utilities, Smart Grid vendors, and the world.

Energy objective 1: Increase electricity from renewable sources to 50%.

The state was well on its way to achieving the 2020 objective of integrating a 33% mix of renewables into its electricity sources. This new goal puts increased emphasis on energy storage to firm up even more intermittent renewables, so the state market will markedly expand for both utility-scale and distributed renewable generation and storage solutions. Distributed generation, particularly in the form of rooftop solar, will also be required to meet this objective. California utilities will seek regulatory approval to rent customer rooftops and operate solar generation assets on an aggregated scale, as long as these assets count towards their expected renewable investments. Vendors with distributed grid operations management solutions have a bright future in the state.

Energy objective 2: Reduce petroleum use in transportation by 50%. Don’t bank on a focus on technologies that improve miles per gallon in internal combustion engines. California’s strong support for carbon cap and trade markets and climate change initiatives put the emphasis on clean alternative fuels. Hydrogen technologies and fuel cell cars could be part of this strategy. However, the regulated electric utilities have a new leverage point to build EV programs and create new opportunities to explore transactive energy scenarios that firm intermittent renewables. PG&E recently announced a pilot program with BMW.   Municipalities will also look at greenhouse gas reduction goals through systemic transportation transformations. Community Choice Aggregation (CCA) initiatives and municipal utilities will adopt EVs for their flexibility in smart charging.

Energy objective 3: Double the efficiency of existing buildings and make heating fuels cleaner. California enacts new building energy efficiency standards every three years that typically apply to new buildings. It’s noteworthy that this energy objective highlighted existing building stock. Building energy efficiency retrofits have multiple benefits – local jobs in communities, and accrued savings from reduced energy bills for residential and business consumers. Since California is one of eleven states that decoupled both electricity and natural gas, regulated utilities won’t see negative impacts on their bottom lines. Expect innovations in programs that encourage energy efficiency retrofits for multi-family and rental properties and more PACE-like programs that focus on energy efficiency rather than generation. With regards, to cleaner heating fuels, most California homes use natural gas, which emits those bad greenhouse gases. However, look for most policy and investment activity in commercial buildings, which can benefit from combined heat and power (CHP) and even more energy-efficient combined cycle heat and power (CCHP) technologies to heat building spaces. The solutions here are much more mature than they are for residential, although this 2030 objective offers significant impetus to future Department of Energy Funding Opportunity Announcements.

The leader of the eighth largest world economy said, “How we achieve these goals and at what pace will take great thought and imagination mixed with pragmatic caution. It will require enormous innovation, research and investment. And we will need active collaboration at every stage with our scientists, engineers, entrepreneurs, businesses and officials at all levels.” The good news is that California has all the ingredients to make it happen, and what happens in California does not stay there.

Christine Hertzog
Smart Grid Library