Cutting oil use by 50 percent difficult but doable, experts say

Source: By David R. Baker, San Francisco Chronic;le • Posted: Thursday, January 8, 2015

But by one measure, we may be halfway there.

Similarly, Brown’s call for California to get half of its electricity from the sun, the wind and other renewable sources by the year 2030 seems daunting, except that we’re already at 25 percent. The state is widely expected to hit 33 percent by 2020, if not sooner.

Many experts consider the ambitious climate and energy goals spelled out by Brown in his inauguration speech Monday to be difficult but doable. Those goals would accelerate changes already under way in California’s economy, hastening the state’s move away from fossil fuels and toward lower-carbon sources of energy.

“It’s eminently achievable,” said Simon Mui, director of California vehicles and fuel research at the Natural Resources Defense Council. “We’re already doing a lot of it, we know how to do it, and we basically need to be doing more of the same.”

As with any big economic shift, some industries will benefit, while others lose out.

Brown’s renewable energy target could trigger another boom in the construction of large solar power plants and wind farms within the state. Slashing oil use would boost biofuel producers nationwide — who already count California as one of their prime markets — as well as makers of electric cars and fuel cell vehicles.

The oil industry may view Brown’s goals differently.

California is the nation’s third-largest oil-producing state, and the industry still enjoys considerable clout in Sacramento. But oil companies and their allies spent much of 2014 trying to roll back or modify some of the state’s existing rules to cut oil use and fight climate change, arguing that those rules would send gasoline prices skyrocketing. Instead of listening to them, Brown doubled down, calling for even tougher climate rules.

Oil industry cautious

The oil industry’s main lobbying group in Sacramento, the Western States Petroleum Association, reacted with caution to Brown’s speech, saying it would work with the governor to develop “solutions that will sustain today’s energy and economic realities while protecting both our environment and future energy needs.” And industry experts note that even if gasoline demand tumbles within California, the state’s refineries can compensate by ramping up exports to Mexico, South America and Asia.

“The refining industry is starting to make its bread and butter on exports, so it’s not just how much product they can sell in California,” said Amy Myers Jaffe, executive director of energy and sustainability at the UC Davis Graduate School of Management.

Brown used his speech to sketch out a far-reaching vision of how California would generate, deliver and use energy in the future.

He called for solar panels on more rooftops, and the development of electrical “microgrids” that can keep energy flowing for specific towns, facilities or buildings even when the larger grid fails. He envisioned greater use of big batteries and other large-scale energy-storage systems. He called for a smarter and more flexible power grid capable of handling the highly variable output from solar plants and wind farms.

Perhaps no industry had greater reason to cheer his speech than the companies that build large solar power plants.

Their business within California has been driven by government mandates. Current state law forces California utilities to get one third of their electricity from renewable sources by the end of 2020. That requirement triggered a wave of solar plant construction in the Southern California desert, which peaked in the last two years.

But once it became clear that enough plants were under development to meet the 33 percent standard, interest in building more plunged. No one wanted to sink money into another round of billion-dollar plants until they knew whether California would raise the standard and, if so, by how much.

As a result, many of those companies started looking elsewhere for business. Oakland’s BrightSource Energy, whose massive Ivanpah solar plant opened last year in the Mojave Desert, has been pursuing projects in China and Israel, said Joseph Desmond, the company’s senior vice president for marketing and government affairs. Now that may change.

“A lot of our focus has shifted internationally,” he said. “This certainly opens the door for us to explore more of these opportunities here.”

Could drive cost down

By prompting more construction, Brown’s new goal could help drive down the cost of large-scale solar power. Tom Werner, CEO of SunPower Corp. in San Jose, said utility-size solar installations can already compete directly with fossil fuel generation in California, although solar plants still need a federal tax credit to do so. Take away the credit, he said, and they would reach price parity in two or three years.

“A 50 percent renewable target — it’s huge,” said Werner, who praised Brown’s goals. “It’s a very bold, very comprehensive vision.”

So far, the drive to increase California’s renewable power usage hasn’t had a big impact on consumers. Pacific Gas and Electric Co. estimates that the requirement to use more renewable power is raising electricity costs 1 percent to 2 percent each year.

While California has made significant strides in boosting renewable power use, it has put only a dent in gasoline dependence.

Gasoline sales peaked in the state in 2005, and then started a slow slide that ended last year when the surging economy finally pushed sales higher again. Still, they remain about 8 percent below the peak, according to the California State Board of Equalization, which tracks fuel sales through tax receipts.

The state has pushed hard to encourage sales of electric cars, offering drivers a $2,500 rebate. As a result, more than 100,000 electric vehicles drive California’s roads, more than in any other state or country. But that’s still a small fraction of all vehicles in a state of 38 million people.

And yet, if California implements all of its existing policies regarding vehicles and fuels — not counting any of Brown’s proposed targets — the state’s oil use should fall more than 20 percent by 2030, according to the California Air Resources Board. Mui, at the Natural Resources Defense Council, estimates the drop at 25 percent.

Some of the cuts will come from a policy called the “low carbon fuel standard,” which forces oil companies to cut the “carbon intensity” of the fuels they sell in the state, in part by blending in advanced biofuels. The steadily improving mileage of modern cars also will play a big part, Mui said.

“It’s a wonderful thing because automakers have always argued that you’re going to reduce people’s choices” with tight mileage requirements, he said. “But instead what we’re seeing is tremendous innovation in the auto industry.”

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