Energy Prices & California’s Economic Security

October 6, 2009
David Roland-Holst, UC Berkeley

Aggressive Renewable Portfolio Standard & Energy Efficiency Can Protect California from Higher Energy Prices & Promote Economic Growth

Using price forecasts from the U.S. Department of Energy’s Annual Energy Outlook (AEO), this study estimates that without diversifying California’s energy portfolio toward more renewable fuels and energy efficiency, the state risks a loss of over $80 billion in Gross State Product (GSP) and more than a half million jobs by 2020. Implementing 33 percent renewable energy, combined with 1 percent annual improvement in energy efficiency, on the other hand, shields the economy from higher energy prices and yields a growth dividend, increasing GSP by $20 billion and generating 112,000 jobs.

“The global financial crisis has hit hard in California, where unemployment, mortgage foreclosures and an unprecedented state budget deficit are among the highest in the nation. But the current decline in demand in global energy markets is temporary and risks lulling policymakers and the public into a state of denial about long-term fossil fuel price trends,” commented the report’s author, UC Berkeley professor David Roland-Holst. “Even using conservative official estimates, we find that California risks far greater economic peril by remaining heavily dependent upon fossil fuels. Energy efficiency and renewables offer a valuable hedge against the risks of higher energy prices.”

“There has been considerable public debate over the projected economic impacts of California’s first-in-the-nation climate policies,” said Next 10 founder F. Noel Perry. “To date, no one has modeled the economic impact of doing nothing to change our energy mix. Today’s report clearly reveals the economic risk inherent in overreliance on fossil fuels.”