Are California’s Energy Dreams Coming True?

California is an outstanding example of what is possible when we dream big. We envision a new world where renewable energy is abundant. 

But California clearly demonstrates the limitations of such efforts, namely that renewable energy alone cannot meet all of our energy needs in the short to medium term. 

We still rely on other energy sources, particularly hydrocarbons, to keep energy costs as low as possible in order to maintain and ensure a steady supply of energy.

1. Explaining Californians’ preference for LNG and renewables.

LNG and PNG are being sent to California. They provide much needed fuel for the economy. An economy like California has enormous energy needs that seem almost insatiable. California has seen substantial economic growth over the past 50 years, having grown its economy at breakneck speed. Growth has accelerated partly because California has attracted talent from all over the United States and the world. Finally, California is one of the most prosperous and successful economies in the United States. California requires a steady supply of energy sources from a variety of energy sources. As the share of renewable energy grows, natural gas can provide environmentally friendly energy and support the continued growth of renewable energy. 

Part of the reason California has such high energy demand has to do with geography. The distances are vast. Transporting goods from one place to another takes huge amounts of energy. This means that California has to add economic value to other U.S. states to make it worth their while to send goods to California. And while it is true that California has been a major energy player, the shale revolution has meant that other U.S. states, such as Texas have often played a more significant role in hydrocarbon production

California is separated from the rest of the United States by mountains to the east and the Pacific Ocean to the west. To the west, this openness enriches California’s economy. It is California’s economic footprint in the wider world and openness to new ideas and spaces that makes California a major player in global trade with all these distant nations. At the same time, the mountainous Rockies may limit connectivity with the rest of the United States. Although significant progress has been made in the past to connect the various parts of the U.S., the mountains increase the cost of transferring goods from the rest of the U.S. to California’s economic hubs along the Pacific coast. Conversely, it is also very expensive to transport goods from California to the rest of the United States. This is especially true when it comes to transporting goods from California to the East Coast of the United States.

This fosters a degree of self-reliance in economic matters. This has led to the notion that California is setting new trends. And this may explain California’s drive and ambition to advance the renewable energy revolution. In doing so, California joins New York making the transition to renewable energy a reality. California is looking for alternative ways to reduce this vulnerability because it is cut off from the rest of the United States by the mountains to the east. In a sense, technology serves as a bartering tool to reduce this vulnerability. 

This may have been a factor in making California a leader in so many fields, technology, including IT and renewable energy. The incentives to invest in new technologies were much greater in California than almost anywhere else, including the United States. The openness of the global economy has fueled California’s economic growth, as it is located both inside the United States and facing west, opening up to East Asian economies. 

If we look more closely at California’s geopolitical vulnerabilities, we see that trade with East Asia outpaces trade with Europe. This supports the argument that California’s success has to do with the Pacific, because California is wide open to the Pacific. This is also reflected in the economic numbers, as trade with East Asia is increasing. The distance to East Asia is much less than that to Europe. This further contributes to California’s sense of self-reliance, as California is free to choose with whom it trades and to produce new technologies that can be used in many far-flung places.

2. The strategic importance of renewable energy generation.

California is also unique in that it relies exclusively on renewable energy. This leads to a certain confidence that this is the way of the future. Spending is focused on one area rather than spread across a variety of domains. This is a real advantage if the goal is to become a world leader in a particular area, such as renewable energy. It allows California to drive its own energy transition faster than other countries and accelerate the pace of change. The same solutions California has been trying can be maximized, expanded, scaled, and commercialized and spread across the planet. Over time, California will refine its understanding of renewable energy processes, industrial manufacturing, and innovation, which will help California drive down costs in areas such as solar and wind energy production. 

3. Renewable energy production has been richly rewarded in California. 

California has created several incentives for renewable energy producers. This has helped California maximize its potential renewable energy performance and energy output. Because California started allocating funds to the renewable energy revolution early on, its citizens are the primary beneficiaries and can receive decent gains from the renewable energy transition.  The real issue facing California is whether it is able to provide basic energy security to its population. This could come in the form of LNG. Natural gas could further diversify California’s energy supply.

Energy policy in California differs markedly from other parts of the United States, which have focused more heavily on hydrocarbon fuels. Tight oil and tight gas have contributed to a resurgence in fossil fuel exploration and exploitation in the Midwest and Texas. It seems unlikely that there will be a similar effect with respect to shale on hydrocarbon exploration in California. 

Many thanks for the shared interest in the energy world!

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