California's power play: Is renewable energy enough?

Stephen del Cardayre hopes to help solve the Earth's most challenging problem by studying some of its tiniest inhabitants.
He and his colleagues at San Carlos clean-energy start-up LS9 are on the hunt for a microbe in plant bacteria that could become a renewable fuel for California's cars - the state's single largest source of the pollution that causes global warming.
But even del Cardayre, as passionate and committed as he is, working for a company fueled by millions of dollars in venture capital and at the epicenter of Silicon Valley's fast-growing clean-technology industry, offers a sober assessment of the state's ambitious goals to fight global warming.
"There is definitely not a silver bullet," del Cardayre said.
Nearly one year after California passed landmark legislation to cut carbon-dioxide emissions 25 percent in 13 years, the state already risks failure. Among the challenges:
» California's utilities, required by law to ensure that 20 percent of their power is renewable by 2010, are struggling to reach that target because there is not enough energy from solar, wind and other low-carbon sources - and no certainty that will change in three years.
» The federal government is blocking a key part of the state's plan to dramatically cut vehicle emissions.
» Despite the focus on new, carbon-free sources of energy, the
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state is still approving carbon-dioxide-spewing natural gas plants. And the most promising new energy sources are more expensive than natural gas and coal.
"There needs to be an energy revolution," said Dan Skopec, undersecretary for the California Environmental Protection Agency.
For decades, California has been a leader in energy innovation. About 11 percent of the state's power already comes from renewable sources - one of the highest levels in the nation. But that percentage has been stagnant for the past four years.
Perhaps most daunting is the scope of the challenges facing a state as big as California, with the world's eighth-largest economy.
To meet the state's emissions goals, every resident would have to make changes both big and small, from replacing light bulbs to cutting commutes. Fractious state agencies would have to cooperate in unprecedented ways. Dozens of new regulations would have to be passed. And businesses big and tiny would have to cooperate on energy-efficiency standards.
"The goals are hard," said Dorothy Rothrock, vice president of the California Manufacturers and Technology Association. "Now the question is whether we really can do it."
The plan: State sets benchmarks for carbon emissions
California's new law, AB 32, which took effect in January, sets a series of benchmarks for cutting carbon emissions starting in 2010, then 2020. The state also has separate goals for 2050.
Most experts say the 2010 goals should be relatively easy to meet, with already established changes such as a low-carbon fuel program passed in January. Even so, Assembly Speaker Fabian Nu`ñez, D-Los Angeles, who co-wrote AB 32, said last month that he is concerned the state could be turning too soon to market-based mechanisms that essentially would allow businesses to trade carbon credits. California should first focus on new regulations and better energy-efficiency standards, he said.
"As the world leader on climate change, we must do as much as possible," Nu`ñez wrote Gov. Arnold Schwarzenegger.
How California achieves the 2010 goals sets the stage for the next benchmark - which represents the biggest challenge. Under AB 32, known as the Global Warming Solutions Act, California seeks to cut its greenhouse-gas emissions 25 percent by 2020 - to the same level as 1990. That reduction would come even as California's population is projected to increase 47 percent over those 30 years.
Put another way, California produced 426 million metric tons of carbon dioxide in 1990, or more than 31,500 pounds for every person in the state. By 2020, the state needs to slash that to 21,400 pounds per person.
Schwarzenegger Chief of Staff Susan Kennedy said she believes the goals are "definitely a challenge" but the administration does not consider failure an option. Using market-based mechanisms will be necessary to reach the goal, she said.
To do that, California must tackle its residents' long-running love affair with the automobile. One key element is a law that requires automakers to cut the emissions from the cars they sell in California, which would save about 30 million metric tons of carbon, or about 17 percent of the state's 2020 goal. But this regulation faces strident federal and industry opposition.
The state's plan also calls for a broad swath of other changes including eliminating 6 million metric tons of carbon a year through waste management, and eliminating more than 30 million metric tons by selectively growing trees and cutting down others in state forests, possibly using the debris for biofuel.
The state plans to eliminate nearly 30 million metric tons by requiring energy-efficient products and buildings as well as changing manufacturing standards; and an additional 1 million metric tons by using less water, which reduces the amount of carbon expelled when transporting the water around the state.
The challenge: California's size complicates effort
California's leaders have few examples to follow. No other state has passed a plan like AB 32.
The state's sheer size also means its actions capture global attention.
"California is most certainly being watched not just in the West and D.C. but around the world," said Josh Bushinsky, Western policy coordinator for the Pew Center on Global Climate Change.
If California moves too slowly, a report by the Climate Action Team predicts the state would face diminished drinking water supplies, rising sea levels, and more droughts, forest fires and withering hot days.
"The longer that business as usual goes on, the more difficult challenge it becomes," said Chuck Shulock, manager of the greenhouse-gas reduction program for the Air Resources Board, which is charged with making sure the state reaches its carbon-cutting goals. "It's a question of sort of turning a very large ship."
A very large ship. One state report estimates that if California were a nation, it would be the 16th-largest carbon-dioxide emitter in the world - producing more carbon than Australia, Saudi Arabia or Spain.
Gold rush: Investors finding energy opportunities
During a recent tour of LS9, del Cardayre moves quickly and speaks quickly - and wants to act quickly. Even the bacteria are being asked to work quickly, he said.
"We're speeding up the evolution and looking for which one is the right one," del Cardayre said. He couldn't say how long it would take to create his plant fuel and get it to the pump. It could be five years - or 15.
LS9, which received $5 million in funding from prominent venture capital firms Khosla Ventures and Flagship Ventures, is one of dozens of start-ups in Silicon Valley that are part of an alternative-energy gold rush.
Venture capitalists started investing in Silicon Valley's low-carbon or clean technologies like solar and biofuels about two years ago, according to industry research firm Cleantech Group. Seth Fearey, chief operating officer for Joint Venture: Silicon Valley Network, an economic development group, recently counted more than 60 companies with local offices in the industry. He's sure he missed some.
Conferences, symposiums and networking events for clean technologies in the valley happen weekly - sometimes daily - as those with ideas try to meet those with money. All the activity is enough to bring back memories of the dot-com boom and make investors nervous, said Michael Horwitz, senior research analyst with Pacific Growth Equities.
"There is a bit of this `Let's throw money at the problem and see what happens,'" Horwitz said.
California leads the nation in clean-technology investments with $730 million in the past two years, with more than 60 percent of that spent in Silicon Valley.
And if solutions aren't found quickly?
"That just means that we have to spend more money," Horwitz said. "In some ways, these companies will benefit more from these ambitious goals. It's perverse."
Richard Swanson, founder and chief technology officer of San Jose-based SunPower, the biggest U.S. solar manufacturer, warns that building renewable-energy projects takes patience. He spent nearly two decades developing solar cells before his company's product hit the market and became a global brand.
"One of the things people find when they get into this space - especially from the dot-com sector - is the energy field moves much slower because of the infrastructure," Swanson said.
High costs: Renewable energy is more expensive
SunPower, the fastest-growing company in Silicon Valley last year by sales, plans to lower the price of its panels by 50 percent in the next five years. Even as the solar market explodes, the energy source is still limited to those who can pay premium prices.
That price gap will be a continuing challenge with alternative energy.
Including construction costs, solar energy is expected to cost 13.7 cents per kilowatt-hour in 2020 - more than twice as much as natural gas at 5.6 cents per kilowatt hour, according to the federal Energy Information Administration.
Indeed, when including the cost to build the plants, all renewable-energy sources cost more than traditional energy sources like natural gas and coal.
That's a problem LS9's del Cardayre is determined to overcome. The company hopes to sell its biofuel at a competitive price.
"It simply won't succeed unless you can make this product cost-competitive," del Cardayre said. "Acceptance will be directly proportional to cost."
But first, the renewable energy has to be available as an option.
California Energy Commission member John Geesman has been warning about the availability of renewable energy for months, saying there might not be enough available for the utilities to meet a law that requires them to provide 20 percent of the power they sell from renewable sources by 2010.
The problem is twofold, he said. First, California lacks the power lines needed to transport the energy produced by the sun, wind or other renewable sources to the state's electricity grid that powers homes and businesses. Second, most of the venture money is going to technologies that will take years, even decades, to develop.
"We have some extreme institutional problems in planning," Geesman said.
At the Electric Power Research Institute, whose members include power companies and government organizations, environment sector director Michael Miller recently estimated that billions of dollars will be needed to improve alternative-energy options and build out the state's electricity grid.
Only vehicle emissions contribute more carbon dioxide to the atmosphere than the utilities. If the utilities fail to meet their goals for using renewable energy, it will be harder for the state to reach its carbon-cutting goals, he said.
State leaders believe the utility companies' contribution is so great that the California Public Utilities Commission is considering a way to require that utilities provide 33 percent of their power from renewable energy by 2020.
Fossil fuels: State moving ahead with natural gas plants
When Angela Johnson-Meszaros, co-chair of one of the two advisory committees for the climate-change law, considers the state's time frame, a wry tone enters her voice. She wants to be supportive.
But as director of policy and general counsel for the California Environmental Rights Alliance, Johnson-Meszaros has watched the state's energy market enough to be skeptical. After all, she said, California is still building carbon-generating natural gas plants.
"We are making, I think, some very bad choices right now," she said. "Fossil-fuel power plants have a 30-year life. For every megawatt we provide using fossil fuel, that's one megawatt we won't site using renewable energy."
Of the seven new plant applications the California Energy Commission has approved for construction within the next two years, six are fossil-fuel-based natural gas plants and one is a geothermal plant that uses the Earth's core heat to produce steam energy. An additional 14 power plants are under review and could be built by the end of 2010. All of those would use natural gas.
Even though most of the new plants will produce less carbon dioxide than the old ones they replace, Johnson-Meszaros says that's not good enough. If California wants to drastically reduce carbon, it should be approving carbon-free plants, she said.
"How can you let this kind of contradictory policy behavior exist?" Johnson-Meszaros asked.
The contradictions exist because of the need to replace old plants and to provide energy for new residents, utility executives said.
Even California's most established renewable energies - wind and solar - don't provide the kind of dependable energy needed for daily life, said Tom King, chief executive of Pacific Gas & Electric. People like to know that when they flip a switch, a light comes on, he said.
PG&E - which supported AB 32 and touts itself as a green energy company - gets 13 percent of its energy mix from wind, solar, biomass and other renewable-energy sources. It has contracts to add more at a steady clip.
But ask King about reaching the state's goals and he pauses. It takes a moment for him to concede that his company still needs big power plants. So King poses a question: If we take our reliance off carbon-emitting natural gas and coal, what is the clean answer?
"We're not confident that without something as large-scale as a nuclear facility that we can completely meet the objectives," King said. "Nuclear has an opportunity to play a big part."