It was six years ago this summer that the great California energy crisis began. The state hadn't built enough power plants to meet demand. Rogue energy traders swooped in, prices soared, and the state's largest utility went bankrupt.
The crisis branded the nation's most populated state as a energy-industry basket case. "What's the difference between California and the Titanic?" recently convicted former Enron CEO Jeffrey Skilling once joked. "The Titanic went down with the lights on."
Now, as temperatures creep up in much of the country and the peak air-conditioning season begins, it's worth noting that from an energy perspective, there's much good happening in California. More than 30 new power plants have come online in the past six years, generating 12,000 megawatts. The California Energy Commission estimates that it will have generation reserves of more than 20% this August, nearly three times what's required should power usage spike.
The better story, though, lies on the demand side of the equation, or what the state's fitness-focused governor might call portion control. Since California began aggressively pursuing energy efficiency in the mid-1970s, the state's per-capita electricity usage has remained flat at around 6,500 kilowatt-hours per person. In the rest of the country, consumption has risen from 8,000 to 12,000 kilowatt-hours in the same time frame. In terms of carbon emissions, that's the equivalent of keeping 12 million cars off the road.
UTILITIES ON BOARD. How does California do it? Here's one way: The state requires that fluorescent bulbs be used in new construction or major remodels in many rooms of the house. Fluorescent lights are more than four times more efficient than incandescents, so if you're remodeling a kitchen, laundry, or bathroom in the Golden State, you have no choice. The standards are part of a massive set of statewide building codes called Title 24 that was passed in 1978. They get toughened every couple of years or so, and consumers get used to them. "They kind of accept it and move on," says Santa Monica architect Aleks Istanbullu.
California has also succeeded by getting utilities involved in conservation. The state's big electric distributors shell out hundreds of millions of dollars every year in rebates to consumers who install more energy-efficient air conditioners, refrigerators, and heating systems. The rebates, budgeted at $2 billion between now and 2008, are intended to save $5 billion in power purchases. "Before we invest in traditional pipes and wires, we have to implement these programs," says Anne Shen Smith, senior vice-president for customer relations at San Diego Gas & Electric. "It's the equivalent of avoiding three new power plants."
Utilities are also required to get more of their power from renewable sources, such as wind, solar, biomass, and geothermal. In 2002, California instituted one of the most extensive renewable programs in the country, requiring 20% of power from such sources by 2010, up from 10% today. The utilities are also being allowed to earn their regulated rate of return on new "smart meters" that collect customer-usage information in real time, allowing the energy providers to recommend ways for them to cut costs. "California's unique," says Greg Ander, chief architect for Southern California Edison. "Utilities have gotten very aggressive since the meltdown."
WHITE-ROOF INITIATIVE. Politicians have gotten into the game, too. Governor Arnold Schwarzenegger, who is campaigning for reelection in November, has jumped on the green bandwagon, earmarking $2.8 billion over 10 years to put small solar systems in place. His "Million Solar Roofs" program, started in January, provides cash to homeowners who choose to install such systems.
The state has other initiatives in the works. California Energy Commissioner Arthur H. Rosenfeld, who has been called the father of energy conservation in the state, says his office is now working on regulations that would require all new roofs in the state to be white, because they absorb less heat and cut air-conditioning bills. "The pharaohs and the Greeks have known this for 5,000 years," he says. Regulations presently call for flat roofs to be white. The state is working with roofing manufacturers who have created pigments that mimic the energy-saving nature of white so that the regulations can be extended to sloped roofs and tiles by 2008.
It may seem goofy, but what happens in California usually doesn't stay there. In the mid-1970s, California was a leader in pushing for more efficient appliances. Similar federal standards came into effect in 1992. The result is that even as the average size of refrigerators has increased, the power they use has fallen 75%, to roughly 400 kilowatt-hours per year. It's funny how fast things can turn around. It's not California that's sinking anymore.
Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau
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