California's Energy Colonialism

"When you look at the globe, California is a little spot on that globe," Gov. Arnold Schwarzenegger said recently at Yale University's Climate Change Conference. "But when it comes to our power of influence, it is the equivalent of a whole continent."

Perhaps. As an exercise of this influence, Mr. Schwarzenegger has attempted to push climate-change policy forward, signing the Global Warming Solutions Act. It commits the state to reducing greenhouse-gas emissions to 1990 levels�roughly 25% below today's�and all but eliminating them by 2050.

"California has the ideas of Athens and the power of Sparta," he said in his state of the state address last year. "Not only can we lead California into the future; we can show the nation and the world how to get there."

His words are in keeping with the state's self-perception. Politicians, business titans, academics and environmental activists proudly point to four decades of environmentally conscious public policy�while maintaining a dynamic economy, arguably the eighth-largest on the planet, with a gross state product of more than $1.6 trillion.

In truth, the state's energy leadership is a mirage. Decades of environmental policies have made it heavily dependent on other states for power; generated crippling costs; and left the state vulnerable to periodic electricity shortages. Its economic growth has occurred not because of, but despite, those policies.

Since the early 1970s, California has instituted new efficiency standards for appliances and the construction of new buildings. It mandated aggressive conservation programs and required a certain percentage of the state's electricity to come from renewable sources like wind and solar, which it has subsidized. It implemented far-reaching regulations on emissions from car tailpipes and from stationary sources like factories. And it has moved to shut down the state's nuclear facilities.

For a time, it worked. Since the mid-1970s, California's economy has grown while per-capita energy consumption stayed flat�an astounding fact, considering that such consumption has increased by roughly 50% elsewhere in the country over the same period.

But consider the story of the Rancho Seco Nuclear Generating Station. Opened in 1975, it was capable of generating over 900 megawatts (MW) of electricity, enough to power upward of 900,000 homes. Fourteen years after powering up, the nuclear reactor shut down, thanks to fierce antinuclear opposition. Eventually, the facility was converted to solar power, and today generates a measly four MW of electricity. After millions of dollars in subsidies and other support, the entire state has less than 250 MW of solar capacity.

Rancho Seco helps explain California's energy crisis in 2000 and 2001, when numerous rolling blackouts and power outages caused billions of dollars in damages. The degree to which rapacious power-company executives and traders were responsible for the shortages remains open to debate. Not open to debate is that California had insufficient power to meet demand, with a frayed and overloaded infrastructure for moving electrons.

California's flat per-capita energy consumption has not saved it from blackouts, either, since its population had been soaring. From 1979 to 1999, the number of residents jumped from about 23 million people to 33 million. Today, the figure is closer to 38 million, and it could top 45 million by 2020.

The blunt secret is this: California now imports lots of energy from neighboring states to make up for having too few power plants. Up to 20% of the state's power comes from coal-burning plants in Nevada, New Mexico, Utah, Colorado and Montana. Another significant portion comes from large-scale hydropower in Oregon, Washington State and the Hoover Dam near Las Vegas.

"California practices a sort of energy colonialism," says James Lucier of Capital Alpha Partners, a Washington, D.C.-area investment group. "They leave those states to deal with the resulting pollution."

California's proud claim to have kept per-capita energy consumption flat while growing its economy is less impressive than it seems. The state has some of the highest energy prices in the country�nearly twice the national average�largely because of regulations and government mandates to use expensive renewable sources of power. As a result, heavy manufacturing and other energy-intensive industries have been fleeing the Golden State in droves.

The unreliable power grid is starting to rattle some Silicon Valley heavyweights. Intel CEO Craig Barrett, for instance, vowed in 2001 not to build a chip-making facility in California until power supplies became more reliable. This October, Intel opened a $3 billion factory near Phoenix for mass production of its new 45-nanometer microprocessors. Google has chosen to build the massive server farms that will fuel its expansion anywhere but in California.

And yet, despite a desperate need for more power, opposition to energy projects remains prevalent. State law prohibits the construction of new nuclear plants, and legislative efforts last summer to repeal it went nowhere. Last spring state regulators vetoed a proposal to build a liquefied natural gas terminal 14 miles off the Malibu coast.

Even renewable-energy projects meet resistance. Texas, of all places, is the nation's leader in wind-power generation. High costs, excessive regulation and environmentalist litigation have hampered California's efforts. Texas has just built lots of turbines.

None of this has stopped leaders from setting wildly unrealistic goals for safeguarding the environment, from electric cars to wind-energy production. The latest goal is to drastically reduce greenhouse-gas emissions.

The details of how the Global Warming Solutions Act is actually implemented don't have to be revealed until next January. Even the California Energy Commission hints that the targets might be unreachable. But they'll certainly cost a lot to find out. Analysis from the Electric Power Research Institute pegs the Act's cost to the California economy at anywhere from $100 billion to $511 billion.

Californians may feel good about their environmental consciousness. But someone needs to build power plants and oil refineries to fuel their economy. Someone needs to manufacture the cars they drive, the airplanes they fly, the chemicals and resins and paints and plastics that make their lives comfortable.

Those things require energy, and lots of it. All the wisdom of Athens and all the power of Sparta won't change that fact.