The role of energy conservation and natural gas prices in the costs of achieving California's renewable energy goals

Abstract

This paper develops an econometric forecasting system of energy demand coupled with engineering–economic models of energy supply. The framework is used to quantify the energy and environmental impacts of renewable and natural gas based electricity power generation in California, considering the role of on-going energy conservation efforts and incorporating different natural gas price scenarios over the forecast horizon (2011–2035). The results indicate that, relative to a business-as-usual scenario of continuing to rely on imported electricity to meet future demand, California's renewable portfolio standard (RPS) of 33% renewables by 2020 will increase electricity rates by over 10%. However, the RPS will also provide substantial annual savings in carbon dioxide emissions, equal to 40millionmetrictons in 2020. Continuing non-price induced energy conservation at the historical rate will only result in a marginal reduction in electricity rates, although lower electricity use means that substantial savings are nonetheless achieved in electricity expenditures. In addition, continuing trend energy conservation leads to substantial savings in carbon dioxide emissions. Like the RPS, developing domestic natural gas generation also leads to rate increases and reductions in carbon dioxide emissions (relative to the baseline). However, these impacts are minor compared to the RPS scenario.