so this is not some stuff 20 years out in the future. we are talking about things that actually can help manufacturers in their factories produce, for example, advanced steels, alloys, lightweight materials, all sorts of things that could help our competitive edge. manufacturing also supports through the does, there's additional manufacturing. this is specifically tied to we're leaving this hearing or the go to a debate focusing on the clean renewables. along with a visiting scholar of the american enterprise institute. we'll provide recent research to

renewable energy. it's just getting underway. >> how hearty we all are dealing with the treacherous washington winter we're having. i'm ken green. i'm a resident scholar here. i work on energy and environment policy. and i'm sort of your host for the afternoon. the name of our program today, which i take full responsibility for is clean, green, and renewable, what could go wrong? given my last name is green, you could ask my mother that question and she'd give you a somewhat different answer, but i'm sure she'd find drawbacks to the whole green equation as we make here today. we have four great speakers. our two panelists have both written monographs recently on renewable energy. tim from the university of wyoming has written a paper called "balancing fiscal energy and environmental concerns."

it's a very good read and very informative about renewable energy and the future of california. and ben zyker who is a visiting scholar here at aei wrote a monograph "electricity generation, economic analysis and outlook." and those are going to be the primary focus of discussion today. we have two discussants with us. kate gordon with the center for american progress. i will read their bios as they -- before they speak as they speak. we will start with tim considine. tim is the school of energy resources professor of energy economics at the university of wyoming. and director of the center for energy economics and public policy. before he joined uw in august

2008, he was a professor at penn state for 22 years. before that, he was an economist, he had a real job. he was an economist with bank of america forecasting energy prices and interest rates. he also served at the u.s. congressional budget office where he was the lead analyst on studies of the natural gas market deregulation from 1981 to 1983. so with no further adieu, i will turn this over to tim. tim, you have 15, 20 minutes, please, have at it. >> good afternoon, everyone. good afternoon, everyone. as you can see on the slide, i'm going to ask several key questions. we address these in a study. first i want to give you an overview of california's energy position. and then we developed some reasonable scenarios for future energy use, conservation and supply in california. and we look at a baseline

scenario and three alternatives to that scenario. and point out the economic and environmental pros and cons of these alternatives. and then reach some quick conclusions. okay. california's energy supply. california historically has been a fairly major producer of energy, primarily oil and gas. back in 1970, it produced about 62% of its total energy requirements. in 2009, california imported 67% of its energy needs. even today, california remains a very significant oil and gas producer and as we point out in the study has considerable reserves that could increase future production. also, as many of you know, california is perhaps the leader in the world in renewable energy production.

of this amount, about half is hydroelectric power, 26% is biomass, and smaller proportions for wind and solar. the next slide gives a -- gives you a picture of energy consumption trends by fuel in california from 1970 to the present. and the red bars on the bottom represent natural gas consumption, the green is petroleum. so you can see that even though california is a large producer of renewable energy, it still consumes very significant amounts of petroleum and natural gas. the blue bars on the very top are net electricity imports. and, in fact, california's the largest importer of electricity in the united states.

the next side looks at electricity efficiency in california versus the united states. the red line is per capita electricity use in california. from 1960 to 2009. and as you can see, the line has essentially shown no trend over the past 30 years. in contrast to a rising use of electricity per capita in the rest of the united states, in between those two lines is a plot of california electricity rates relative to the rest of the nation. and they've been rising over time that peak in 2000 is associated with the california electricity crisis. the next slide takes a further look into these electricity intensities or the amount of electricity we consume by

looking at consumption efficiency by sector. and here is something quite, i find very interesting, the blue line indicates a very sharp decline in industrial electricity use per unit of manufacturing and industrial output. and this is associated with the rising high-tech sector in california. it's more energy efficient. in contrast, the green line actually indicates electricity intensity or the amount of electricity consumed per household is increasing in the household sector in california. a lot of this is associated with the use of plasma tvs, computers and alike, and the bottom line is commercial electricity is. so that's sort of the general, the take away. you look at california, you

characterize their energy sector, big importer of electricity, significant producer, and consumer of oil and natural gas. and a growing renewable sector. so what do we do in the study? we look at three energy supply options and evaluate them. we look at full implementation of the california renewable energy resources act. this essentially forces the share of renewables in the electricity generation mix upward over time.ernave to this of building power plants that produce electricity from sun and wind resources, you produce that electricity from natural gas. and that's the second scenario we look at. and then we look at a scenario of developing oil and gas resources that exist within the state. i mention in the paper we have

estimates in there of the amount of oil that -- and natural gas in california is quite conservative. it's about 10 billion barrels of oil in the ground in california that could be produced. and then we compare these scenarios on the following by comparing the following metrics. we look at the level and composition of energy consumption, greenhouse gas emissions, employment, value added, and tax revenues. our framework is basically we estimate a forecasting model of energy demand in california. and so we actually the next slide gives you an overview of that. you can see the three rectangles in the center on the orange box is household demand for fuel. so we have models describing how consumers adjust the prices,

income, and also most importantly efficiency trends in the market. appliances and standards are changing over time to encourage energy efficiency. we also look on the other side in the business side of the economy. we look at the demand for fuels in the service sector or the commercial sector, and the industrial sector that includes manufacturing, mines, and agriculture.

and in the core of the model is a set of engineering economic relations that determine how electricity is produced, what fuels are used, their efficiency, and most importantly, what is the cost of

delivering or generating power within the state. and this determines electricity prices. notice also in the model, we have little puffs, little clouds, and that represents our tracking of carbon emissions through the entire system. we also do an economic impact analysis. this fellow pictured on the right won a nobel award for and the companies that are supplying goods and services to the plant spend their wages and induce another round of spending. so we use these models to estimate these -- this chain of spending that occurs from constructing plant equipment. be it renewable or fossil fuels. to get this up and running, you need a baseline, a best guess of what can happen in the future. and our forecast runs from 2012 to 2035. we make two assumptions on economic growth, low and high, the high is actually a historic average in california. the low is taking data from the recent past. we make assumptions, the rates of growth, these are real growth rates, so we're assuming in our study that oil prices increase

in real terms, 4% per year. pictured on the right the generation we use from the energy information administration. and the blue line at the top is fossil fuel generation and you can see what projects out to the year 2020 as essentially flat capacity. or generating electricity in california and increase in the outyears. also in the purple line, we have renewable energy going up. now, under the california rps standard, we have 33% of retail sales coming from renewable sources by 2020. and the law essentially ends at 2020 and we extended it out to 2035 by assuming that amount

goes up to 40%. pictured on the right are the projected costs we use from eia for the cost of renewables. and notice the two blue lines are costs for solar technology. the bottom one, solar thermal and the upper one solar. and those costs are expected to decline. steadily over the forecast horizon. we also use eia's projection of cost for generating electricity from natural gas. there's a sharp decline. gas prices now at ten-year lows. and in the eia forecast, they project gas prices going up. these scenarios are very

sensitive to the price of gas. the first two are essentially about electric power. we can build electric power and supply it with renewable sources or we could use natural gas. the third scenario's different. and that is producing oil and gas within california. and there is a project that could easily be started by developing oil in the santa barbara basin. and as many of you are aware, in 1968, there was an oil spill in the santa barbara channel. it was actually a rig that got out of control. and this ushered in an era where i think it was president nixon who instituted a ban on offshore oil development. and that ban has been in place since that time. there's still a lot of oil in the santa barbara channel. in fact, i was out there a

couple of years ago walking on the beach. i would recommend wearing shoes if you walk on the beach because there's a lot of tar balls on the sand and i'm not sure that's from the old spill. there's a lot of oil out there. and what's interesting. here pictured on the right is a production profile of what production could look like from a project. you can see the area under that curve is 1.5 billion barrels. that's only about a tenth of the amount of oil in california. and that's what we look at in this study. there's been a number of recent technological advances. that are sort of extensions of this idea of horizontal drilling where you can drill down and then drill down horizontally through laterally through a resource deposit. there's another variation of this called slant drilling where you essentially can drill for offshore oil on land. and you can go out 7 to 8 miles

offshore by putting a pad on land. this minimizes a lot of the environmental impacts and risks. okay. now let's take a look at our model shows as some scenarios. here pictured are three lines on the left. the top line is oil consumption. the middle line is electricity use. the vertical line indicates the look ahead. the forward forecast. and we have -- pardon me, i'm fighting a cold. the basic story here is both electricity and oil use go up. in the forecast. depending on what you you assume for growth.

and the second important point is rising usofay and this is even with relatively high gas prices in there. there's already a lot of inertia for a lot of reasons. now, to meet -- so the first scenario alternative scenario to this baseline that we look at is the rps standard. and to meet the rps standard, you have to build a lot of solar plants. so we devise, we figure it out how long it takes to build, how many megawatts we need to bring online to hit that target of 33% in 2020. here's the answer we came up with. the bars indicate -- well, the blue bars are under construction in the low-growth scenario, the greenish bars are under construction in the high-growth scenario. and that is the amount of

megawatts in construction in any given year. notice in the first 3 to 5 years, you got a big buildout. a lot of construction activity. then it ramps down then picks up again to hit that 40% target in 2035. the red and blue lines are the, is the installed capacity for renewable power production in the state. and you can see it builds up. there's a big tranche that comes in in 2016 when the plants are constructed. okay. now, we used a model -- it's an input/output model. it's based on the analysis. done -- it's completed by the national renewable energy lab. it's called jedi. and we use jedi to estimate the employment and output gains associated with this buildout of solar. and here you can see there's a

big bump in employment. so the claim that renewable energy creates jobs, it's true. you do create jobs by investing a lot of money to build a plant. but once you stop building, the employment gains drop down considerably. why is that? well, renewable plants are like a lot plants, you don't need many people to operate these plants. you just need some maintenance and this is reflected in the estimates which we use. now, the next chart -- looks at the economics of the situation, another dimension of this. and that is once you build these plants, you have to pay for them.

how do you pay for them? what's the effect on the economy? well, it's sort of like a tax increase and that's the way we model it. other scholars have done this before. and there's a well-known set of studies that have shown that higher energy prices reduce consumer discretionary income and it has multiplied negative effect on the economy. so you have for renewable energy, the short-term stimulus from construction, but it's followed by a long-term drag as the economy struggles to pay for these costs. we see here these high energy costs reduce employment and value added in the long run. in contrast, developing oil and gas has a different profile. it's essentially -- and this is why we don't need to subsidize

oil and gas. it's already profitable. and here you can see there's a build-up of just like the build-up of renewable capacity. a build-up as the field is being developed and constructed. all the infrastructure being put in place. then there's a decline over time as production wanes, but this becomes a big revenue earner for the state of california. here's the summary of our main findings and you can see for oil and gas, we get an average 20,000 per year over the next 20 some odd years in contrast the standard ends up in a net drain of jobs. also state tax revenues are much higher under the oil and gas scenario. royalty income becomes very significant earner earning over

$20 billion in present discounted terms over the -- over the life of the project. what did we find in our study? there are trade offs. you get some real gains for renewable portfolio standards. you do get a bump in short-term unemployment. but as you pay for additional costs, it is a drag on the economy and it can reduce employment. also, you get very significant reductions in greenhouse gas emissions. that's a plus. but then when you look at the cost per ton of emission avoided, it's very high. early on, it's about $160 per ton. and it gives you an idea of the going rate for carbon pollution emission permits in the european emission -- in the european union right now. i think it's in the range, it's

fluctuated a lot between $10 and $20 per ton. so we're talking about orders of magnitude, higher costs for reducing carbon emissions. those costs go down over time with lower costs and so on, but they're still $50, $60 per ton. is it worth it? that's something society needs to decide. natural gas, our scenario here. i think if we re-ran it with the natural gas prices, you would actually have a positive. it would make sense to replace imports of electricity into california with home-generated power using natural gas. and for oil and gas development, if we think of this in terms of just replacing imports, there's some real positive aspects to

consider. first, you have much higher state tax revenues, you have some employment gains, you have increases in value added, and you do -- and you're essentially replacing the consumption of petroleum products that you would have imported with home-produced energy. and so what does this imply for energy policy? i think we need to look at energy in economic terms. what can generate value? what can be both profitable and good for the environment? and also at the state level as many states are struggling fiscally, why -- what -- what are the fiscal impacts? what are the state revenue impacts? and states that are currently experiencing rising levels of drilling for unconventional oil

and gas like pennsylvania, west virginia, ohio, north dakota, louisiana, texas. all of those states have seen rising tax revenues and lower unemployment levels in recent years. so it's something to consider in our discussion of how far do we go with renewable portfolio standards? are they the best option? and i think there's a real good case to be made that the subsidies and public expendit e expenditures that are devoted to renewables can be best spent for r & d to lower their costs in the future. and pushing them on to the marketplace before their time may be counter productive. and my findings indicate provide some evidence to support that argument. thank you. >> great. >> that was very good, and you stayed on time, which is nice. i'm going to turn the discussion

over to my colleague who is less likely to keep us on time. but i will be ruthless in waving my fingers at him if he strays beyond his allotted segment. ben's a visiting scholar at aei at the research institute. he's also an associate in the intelligence community associations program of the office of economic analysis, bureau of intelligence, and research u.s. department of state. he has other prestigious credentials listed in his bio that are listed in the package, i will let you read that on your own. and if we can cue up ben's presentation, he will commence. >> thank you. >> amazing how quick these

computers are these days. ben, the floor is yours. >> thanks, ken, and thank you for all your time today. that is the title of the talk as well as the monograph that ken showed you a few minutes ago. there we go. anyway, the talk is based upon that monograph, which is summarized in three energy and outlook columns that are available on the aei website that you can look at later today if you choose to do so. what i'll talk about today are the three inherent problems afflicting solar power. why is it that renewable power has so small a market share. about 3 1/2 or more 3.6% of the market in 2010? i'll talk a bit about the five central rationales usually cited in favor of policy support for renewable power. i'll talk briefly about the implications of some recent developments in the natural gas

market. i'm not going to talk today about a number of ancillary issues that i discuss in the monograph with one exception i do want to spend a couple of minutes on the interest of future generations because i think the public discussion on that has been rather bored. with respect to the problems that affect renewable electricity, they can be summarized or categorized as three. there's the unconcentrated energy content of sunlight and wind flows. second, there's the sighting problem. where do you put these plants and the associated problem of higher transmission costs? and then there's the unreliability problem which i'll talk about in a few minutes. so, first, the unconcentrated energy content. the energy content of air flows and sunlight is unconcentrated, unlike the case