NORTHEAST ASIA PEACE AND SECURITY NETWORK ***** SPECIAL REPORT ***** August 30, 2002 Below is a summary of a report prepared by Nautilus Associate Rebecca Ghanadan regarding future alternative energy scenarios for California. Developing a long-term energy policy framework requires systematic information that can clearly connect understandings of current choices, uncertainties, and driving forces to the range of possible pathways and outcomes for the future. Energy analysis methods which can integrate between long-term visioning and current choices are critically needed to bridge the chasm between immediate priorities and desired outcomes. The following summary seeks to inspire critical discussion about energy choices in a way that is accessible and interesting to a broad base of stake-holders and decision-makers and offer a starting point for considering alternative energy pathways for California. ------------------------------------------------ Choices Ahead: Three Alternative Energy Scenarios for California Rebecca Ghanadan, Nautilus Institute Blackouts and high energy prices in California, recently brought energy issues to the forefront of mainstream concern across the U.S. But while the visibility of energy crises can point out immediate inadequacies, it also implicates deeper needs for innovative and systematic approaches to energy analysis - both within California and in other domestic and international contexts. Developing a long-term energy policy framework requires systematic information that can clearly connect understandings of current choices, uncertainties, and driving forces to the range of possible pathways and outcomes for the future. Significantly, however, many energy analysis approaches offer narrow and highly specific information which is not very accessible to non-expert audiences and is poorly equipped to explore alternative outcomes. This disconnect between the type of information typically offered by energy analysis and the type of information that is needed to connect energy choices to their broader context and implications reinforces a fragmented approach to energy policy and planning. Energy analysis methods which can integrate between long-term visioning and current choices are critically needed to bridge the chasm between immediate priorities and desired outcomes. This project presents energy scenarios as a useful approach for visualizing and critically engaging with future possibilities. Developing a set of methods and energy scenarios for California, this project highlights scenario analysis as a systematic and exploratory way of thinking about energy from a long-term perspective. It aims to inspire critical discussion about energy choices in a way that is accessible and interesting to a broad base of stake-holders and decision-makers. This project offers a starting point for considering alternative energy pathways for California. Energy scenarios provide an opportunity to learn something about the greater context of current choices and priorities and inform our understandings of the future. In the process of developing scenarios and exploring their implications, certain features come to the forefront, relationships become more visible, and opportunities and challenges become more apparent. This project concludes by presenting a synopsis of some of the key implications and considerations which emerged from the scenario analysis. These idea serve as a both a summary of the scenario findings and a call for active and critical examination of the context and implications of future choices in California. Critical Issues: CALIFORNIA IS ON A FOSSIL FUEL PATHWAY. California is on a pathway of decreasing energy diversity and increasing fossil fuel dependence. Fossil fuels currently comprise more than 75% of primary energy demand. More vehicles, more driving activity, and more natural gas power plants are taking California down a pathway toward even greater reliance on fossil fuels. To incorporate energy diversity into the state's future pathway, California must actively pursue alternative fuels and energy efficiency activities. TRANSPORTATION IS THE MAJOR ENERGY CONSUMER AND POLLUTER IN THE STATE. Transportation accounts for 51% of energy consumption, claims responsibility state oil dependence, and is implicated in the state's most serious air quality and land use issues. Transportation activity and energy consumption is expected to grow substantially faster than either population or the economy in the future. Implementation of a progressive transportation policy framework on both the state and federal level is needed to provide the foundation for addressing the enormous challenge posed by transportation. CALIFORNIA'S POWER SECTOR IS BECOMING LESS DIVERSE. The state is entering a time where natural gas will dominate the power sector. Significant dependence on natural gas has serious implications for air quality, risk exposure, and balance of fuel and electricity trade. Given the magnitude of change this involves, the state needs to carefully consider and evaluate the costs and benefits associated with this pathway and actively consider alternatives which would increase diversity, such as demand side management and distributed generation. ALTERNATIVE PATHWAYS TO BUSINESS-AS-USUAL EXPECTATIONS ARE FEASIBLE AND LIKELY. California has a history of being a leader in energy innovation and policy. With a combination of public interest, industry cooperation, and policy leadership, California has enormous opportunities for pursuing cleaner energy pathways on both local and regional levels. With the pressures associated with continuing down a fossil fuel pathway ever increasing, alternative pathways will likely be viewed less "alternative" and more "necessary" in the future. Recognizing the value of alternatives now, captures numerous gains of earlier adoption. Coherent priorities and cooperative engagement are will develop a vision for the future - participatory planning activities provide a starting point for this cooperation. Priorities and Opportunities: VEHICLES, VEHICLES, VEHICLES: TRANSPORTATION ACTIVITIES HAVE THE HIGHEST RETURNS. Cars and trucks are the largest and most energy intensive technology that the average person owns - and California has almost enough cars as people. The sheer number of vehicles and magnitude of driving activity means that small changes have huge impacts. New policies, consumer preferences, or technologies which increase fuel economy or alternative fuel use are huge opportunities for reducing future energy consumption, decreasing pollution, and increasing energy diversity. INDIVIDUAL AND COMMUNITY ACTIVITIES CAN AND DO MAKE A DIFFERENCE. The scenarios Split Public and Golden State show that consumer preferences, household energy use, and community activities can have as much of an impact on reducing energy consumption and increasing energy diversity as state energy policies. Use of solar water heaters, residential home and commercial solar electricity generation, energy efficiency, and fuel efficient and/or alternative fuel vehicle choices are some important ways that individuals and communities can and do make a huge difference in California's energy pathway. Community leadership may become one of the most critical driving forces for change in the future. IMPORTS PLAY AN IMPORTANT ROLE IN THE STATE. Energy imports will have a major influence on the availability and composition of fuels serving California's energy demand. With likely increases in dependence on oil and natural gas, the cost and availability of imports from other states and countries will become a highly critical uncertainty in California's energy future. With significant capacity additions expected in California, the role of electricity imports is also uncertain. Consideration of California's interdependence with other states and countries will be critical for the future. A COMBINED BOTTOM-UP AND TOP-DOWN APPROACH IS THE MOST EFFECTIVE. The scenario analysis showed the greatest decreases in consumption and increases in energy diversity were achieved from combining both state and national policy with individual and community activities. The level of individual responsibility toward energy will be an important factor in the state's pathway. California has vast opportunities for encouraging and facilitating a combination of distributed and centralized energy activities. Policy Implications: TRANSPORTATION POLICY IS GOOD POLICY FOR ENERGY AND SECURITY. The magnitude, impacts, and risks of transportation activities and oil consumption provide hearty justification for comprehensive transportation policy. In particular, immediate federal transportation policy is needed to increase fuel economy standards for passenger and freight vehicles, support existing alternative vehicle technologies, and develop Hydrogen fueled vehicles and infrastructure. Avoiding the immediate significance of providing comprehensive transportation policy framework for the future is irresponsible and shortsighted. The scenarios demonstrate that significant and immediate alternative transportation activities are needed to achieve decreases in transportation oil-dependence. Early action is imperative. A failure to act passes on the responsibility for innovation and leadership to other countries and future generations who will certainly take on the challenge. A STATE RENEWABLE ENERGY PLAN CAN PROVIDE A ROADMAP FOR THE FUTURE. In order for California to be a leader in renewable energy, the state needs to articulate its commitment to renewable energy and elaborate the key ways that it will encourage these activities. The state has the opportunity to develop a long-term vision and plan for renewable energy with participation of the public, industry, and other stakeholders. A state renewable energy plan would provide policy makers and planners with a framework and vision for considering potential policies such as a renewable portfolio standard, tax incentives, and long-term contracts as well as necessary activities such as standardization of interconnections, and utility cooperation. CLIMATE CHANGE POLICY NEEDS TO CONSIDER IN-STATE GENERATION AND IMPORTS. State-level climate change activities and future mitigation policies need to include not only in-state generation but also imports. In Particular, California should not forget the coal it uses on its energy or emissions balance sheets. California imports a significant fraction of its electricity, and a large component of these imports comes from fixed-coal imports of investor-owned out-of-state coal facilities . It is imperative that all sources of generation serving California demand be included in climate change policy. Only by including these sources, will accurate benefits and trade-offs of different climate change mitigation strategies be assessed and implemented. CALIFORNIA IS NOT AN ISLAND AND NEEDS TO INITIATE REGIONAL COOPERATION AND PLANNING. Imports and exports of energy and fuels mean that California does not operate autonomously. Recently, the Energy Crisis demonstrated the important role of interlinkages with other locations. California needs to take the lead in facilitating joint-cooperative and planning efforts within the region. LONG-TERM VISIONING AND COOPERATION STARTS NOW. California has the opportunity to be empowered by what it has learned over the last fifty years on its energy pathway. A critical lesson from the past is that vision and leadership have inspired many of the energy activities that the state is most proud of. In order for a new vision to emerge, it is necessary for the public, industry, government, and other critical stake holders to engage with the future. The state can show leadership in this area by facilitating active discussion, participation, and consideration of alternatives for the future. Essential to this mandate will be for the state to re-establish authority and management for collecting comprehensive energy data. Since deregulation, the mechanisms and responsibilities for collection have become unclear. Now is the time for the state to reorganize its energy planning activities, take charge of information gathering, and incorporate new ideas into its planning and forecasting purview. Scenarios involving participatory methodologies and energy systems modeling are one such opportunity. In closing, this project demonstrates the potential for "clean" alternative energy pathways which improve energy diversity. In exploring different ways that the future may unfold and ways that California's energy system may respond to these changes, the aim is to open the door to other possibilities. These scenarios do not predict what the future will be or even what it should be like. Rather they serve as pointers for priorities and opportunities for the future. They show that alternatives are plausible and, in many ways, likely. The objective of this project is to inspire discussion and critical engagement with the intersecting choices and conditions which create California's future. The methods, tools, and examples provide a framework for beginning this discussion and an opportunity for creative engagement with the future.