Abstract
This study estimates the fiscal, energy, and environmental tradeoffs involved in supplying California’s future energy needs. An integrated framework is developed whereby an econometric forecasting system of California energy demand is coupled with engineering-economic models of energy supply, and economic impacts are estimated using input-output models of the California economy. A baseline scenario in which California relies on imported electricity to meet future demand is then compared against various energy supply development scenarios over the forecast horizon (2012–2035). The results indicate that if California implements its renewable portfolio standard (RPS), there will be a substantial net cost in terms of value added, employment, and state tax revenues because the economic benefits of building capacity are outweighed by higher energy prices. Although carbon emissions fall, the cost per ton of avoided emissions is well above market prices. Building out natural gas fired generation capacity also leads to losses compared to the baseline, although the impacts are relatively minor. Meanwhile, a strategy of replacing imported crude oil and natural gas with domestic production using indigenous resources increases gross state product, employment, and tax revenues, with minimal impact on carbon emissions. This option could, therefore, help mitigate the costs of California meeting its RPS commitment.
Highlights
More than twenty-five states have adopted renewable energy portfolio standards in the belief that wind, solar, and other renewable forms of energy will create jobs, reduce greenhouse gas emissions, and reduce reliance on imported energy
The results suggest that the renewable portfolio standard (RPS) leads to significantly higher electricity rates and that these costs outweigh the benefits of building and operating the renewable energy plants under the RPS
If electricity imports beyond 2008 levels are required during the forecast period, this study assumes that these imports are produced entirely by new natural gas capacity built outside California
Summary
More than twenty-five states have adopted renewable energy portfolio standards in the belief that wind, solar, and other renewable forms of energy will create jobs, reduce greenhouse gas emissions, and reduce reliance on imported energy. With its significant biofuels industry and rapidly developing offshore oil industry, illustrates that producing renewable energy need not preclude the possibility of expanding oil and natural gas production Could developing both renewable and fossil fuel energy serve the best interests of society to ensure economic growth, job creation, fiscal balance, and environmental quality? The objective of this study is to estimate the economic, energy, and environmental impacts of the two alternative electricity generation options (renewable or natural gas development) and the option of expanded production of domestic fossil fuel resources. The oil and gas production scenario might be compared with other policies designed to raise tax revenues, such as increasing personal or corporate income rates and real estate taxes, which deserve separate study To consider these energy supply pathways, this study uses a two stage integrated modeling framework.
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