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Is California an Energy Leader?

Is California exercising energy policy leadership that other states (and nations) should follow? The Manhattan Institute's Max Schulz doesn't think so.

the state's energy leadership is a mirage. Decades of environmental policies have made it heavily dependent on other states for power; generated crippling costs; and left the state vulnerable to periodic electricity shortages. Its economic growth has occurred not because of, but despite, those policies. . . .

California's proud claim to have kept per-capita energy consumption flat while growing its economy is less impressive than it seems. The state has some of the highest energy prices in the country -- nearly twice the national average -- largely because of regulations and government mandates to use expensive renewable sources of power. As a result, heavy manufacturing and other energy-intensive industries have been fleeing the Golden State in droves.

The unreliable power grid is starting to rattle some Silicon Valley heavyweights. Intel CEO Craig Barrett, for instance, vowed in 2001 not to build a chip-making facility in California until power supplies became more reliable. This October, Intel opened a $3 billion factory near Phoenix for mass production of its new 45-nanometer microprocessors. Google has chosen to build the massive server farms that will fuel its expansion anywhere but in California.

And yet, despite a desperate need for more power, opposition to energy projects remains prevalent. State law prohibits the construction of new nuclear plants, and legislative efforts last summer to repeal it went nowhere. Last spring state regulators vetoed a proposal to build a liquefied natural gas terminal 14 miles off the Malibu coast.

Even renewable-energy projects meet resistance. Texas, of all places, is the nation's leader in wind-power generation. High costs, excessive regulation and environmentalist litigation have hampered California's efforts. Texas has just built lots of turbines. . . .

Californians may feel good about their environmental consciousness. But someone needs to build power plants and oil refineries to fuel their economy. Someone needs to manufacture the cars they drive, the airplanes they fly, the chemicals and resins and paints and plastics that make their lives comfortable.

Those things require energy, and lots of it.

John (mail):
Sure California needs energy. Its strategy is obviously to let everybody else make it, and make the stuff that requires energy, and then import it all. Result: more expensive stuff and the comforting illusion of a purer environment than the guys have next door.
5.3.2008 12:07pm
Stevve (mail):
A very good article, I would highly recommend "City Journal" - the Manhattan Institute's Quarterly publication-- http://www.city-journal.org/
5.3.2008 12:53pm
ZF (mail):
'Let them breathe cake!'
5.3.2008 12:54pm
Fub:
John wrote at 5.3.2008 11:07am:
Result: more expensive stuff and the comforting illusion of a purer environment than the guys have next door.
Literally next door. Some environmental purities are more equal than others.
5.3.2008 12:56pm
Smokey:
The central problem is the same problem that afflicts California across the board: gerrymandering.

State Senate and Assembly positions are decided at the primary, due to gerrymandering of the vote. The general election is just a pointless formality. The result is that the Democratic Party is anything but, and the radical Left wing of the Party has taken complete control. This is not a rant, this is a demonstrable fact.

The Republicans have only two votes over the minimum 1/3 necessary to keep Democrats from going hog wild on the budget, and now State Senate leader Don Perata has just mounted an attack on a Merced Republican, who has done nothing wrong; he simply opposes the current free-spending budget proposal. If Perata is successful, he will go after one more -- and we will effectively have a one-party state. [BTW, IANAR].

Gerrymandering the vote is the cause of this problem, and most of the state's problems stem from politicians gaming the system to their benefit, and to the economic detriment of the citizens.

I have no doubt that if Republicans were in the same catbird seat, they would do the same thing. The real question is: who represents the average, taxpaying citizen -- who must pay double the national average for electricity?

As it stands, the Democrats' view is that the hard-bitten taxpayers are mere sheep to be shorn, more and more every year. The only cuts to the budget are minor and purely cosmetic, done for public relations, and they are always accompanied by chest thumping pols telling us they have accomplished something, along with hand-wringing with plenty of crocodile tears over the out-of-favor special interest that has been thrown under the bus to get the budget passed -- and all the while, spending goes up inexorably, year after year after year, far beyond any increase in the population,

If districts were required, for instance, to be no more than twice as long in one side than the narrowest dimension, the people -- rather than the politicians -- would direct the state. Decisions would be made in a rational manner, benefitting the state's inhabitants.

As it stands now, the voters do not get to choose their politicians. The politicians choose their voters. It is a recipe for corruption.
5.3.2008 1:00pm
pireader (mail):
Max Schulz wrote--"[California's] economic growth has occurred not because of, but despite, those [environmental] policies"

That's blind unsupported ideological rubbish.

California is one of the world's most-desirable places to live. As a result, it attracts and retains extraordinary talent across a range of endeavors [biotech, film-making, software, venture capital, etc.] Very sensibly, the state and its citizenry have been willing to pay a little more for automobiles and electricity in order to protect that environment. They know that listening to people like Mr Schulz would amount to killing the golden goose.

And by the way, Mr Schulz' message is nothing new. As he notes, California has had stricter environmental standards for 40 years now. That whole time, Mr Schulz and his kind have whined that the regulations would undermine the state's economy. Yet California has kept right on attracting population, expanding its economy, and creating above-average incomes.

These people remind me of the old-time Marxists, forever telling us that capitalism will collapse any day now ...even as it keeps flourishing. Sensible people don't pay attention to the Marxists'ideological rants, and shouldn't pay attention to the Schulz's.
5.3.2008 1:19pm
Wahoowa:
"Liquefied natural gas"? Isn't that sort of like "substantive due process"?
5.3.2008 1:25pm
Dave D. (mail):
...Agriculture is California's cash crop and , in your list of " extraordinary talent ", you forgot the Mexican farm workers who make up the majority of attracted talent. Not many biotech etcetera's in that mix. As California's detractions grow and it's attributes receed it will eventually reach the tipover point where even the socially adept realize they're getting skinned. Then, they will jet off as they jetted in. And the not-so-beautiful people will get back their state in a basket.
5.3.2008 1:36pm
d:
agreed about gerrymandering, but it isn't just the democrats who excel at it. the republicans are just as guilty. the result is that both sides in the legislature are on the far extreme ends of the parties with very little moderate or centrist view point represented. the result has been a state that has thrived despite its political 'leaders.'

policies regarding energy, tax, infrastructure and many other functions of the government are in disarray in part due to the gerrymandering, but also to voter referendums and willingness to act to benefit short-term interests.
5.3.2008 2:07pm
Ben P (mail):

"Liquefied natural gas"? Isn't that sort of like "substantive due process"?


I'm not sure whether you're serious or not, but LNG is what you get when you cool natural gas, and is the common way of transporting natural gas as it's much less dangerous and easier to handle than compressed gas lines and cylinders.
5.3.2008 2:39pm
p. rich (mail) (www):
Where environmental activists rule, costs follow - and little else.
5.3.2008 2:57pm
Erick:

Max Schulz wrote--"[California's] economic growth has occurred not because of, but despite, those [environmental] policies"

That's blind unsupported ideological rubbish.

California is one of the world's most-desirable places to live. As a result, it attracts and retains extraordinary talent across a range of endeavors [biotech, film-making, software, venture capital, etc.] Very sensibly, the state and its citizenry have been willing to pay a little more for automobiles and electricity in order to protect that environment. They know that listening to people like Mr Schulz would amount to killing the golden goose.

I don't see how you refuted that at all. People aren't going to California because the environment is so clean (air quality in southern California is some of the worst in the country). It has great weather and lots of space, and it was able to gross immensely over the last 40 years by luring people out with the promise of lots of space and cheap beautiful land. That's still going to exist and will still be a draw (though the cheap factor is gone in much of the state). That's what's drawing people there, what kind of idiot moves to a state because they have higher mpg requirements or let electric cars (of dubious environmental value) drive in the carpool lanes?

Blind adherence to "environmentalism" is not good, especially not financially and often not even environmentally. California's ban on new nuclear plants is retarded. It increases both prices and pollution, even if they somehow pat themselves on their backs for shifting most of that pollution to other states.

These people remind me of the old-time Marxists, forever telling us that capitalism will collapse any day now ...even as it keeps flourishing. Sensible people don't pay attention to the Marxists'ideological rants, and shouldn't pay attention to the Schulz's

When was the last time California didn't have a budget deficit? How many other states screwed up their electricity system so badly they've doubled prices and still had to go through many months of rolling blackouts? There are actual objective facts to back up the point that California's economy is hurting and that strict regulatory and environmental policies are part of the problem. Yeah, there are a lot of people there, and it's got an agriculture industry that will be able to weather most anything, especially with the screwed up water pricing system (an area where California is certainly NOT environmentally friendly) and soaring food prices. People will still be determined to live there because of the nice weather and the beaches, but they're going to keep losing businesses who don't want to put up with that climate.
5.3.2008 2:58pm
kietharch (mail):
So do we really want low energy prices? encourage the consumption of energy? well then, lets build new roads and refineries and drill offshore and, while we're at it, build some new coal fired generating plants.

That should ameliorate the situation for what? ten years or so. Then we will know we really have to do something and we'll build nuclear. That should
solve Mr. Schulz's problem.
5.3.2008 4:19pm
Wahoowa:
Ben P:

It of course ruins the joke to explain it, but here goes: I understand what liquefied natural gas is. But the thing is, once it's cooled to a liquid, it's no longer a gas. Much like substantive due process--how can "process" have any "substance" to it at all? I know these are both perfectly acceptable terms, but they are on some level oxymorons as well.
5.3.2008 5:29pm
Warmongering Lunatic:
Please, please keep it up, California. Texas wants your businesses! Everybody move to Austin!
5.3.2008 6:02pm
picpoule:
"California is one of the world's most-desirable places to live." Are you kidding? Have you have smoked too much of that Eureka Gold lately? It may have been as you say years ago, but it has very little to recommend it today. Except for the coast, California is an overcrowded, smog-pit, expensive, hellhole desert -- run and dominated by incompetent nuts.
5.3.2008 6:07pm
Nessuno:
I find it difficult to believe that anyone who actually lives here in California would compliment that state's energy policies.

I lived through a year of blackouts before they ever made national news, and another year of them before Grey Davis was recalled. Even now you cannot count on having electricity all day during the summer. It is very much like living in the third world that way.

A commenter said "California is one of the world's most-desirable places to live." Sure, geographically and weather-wise, but I'm looking for the fastest path out of here now. The budget deficit is to the point of critical, and the taxes are already close to the highest in the nation, ensuring future burdens on income and businesses are on the horizon. And the legislature is fixated on regulating every aspect of my life, from my house's thermometer to grocery bags.

From the LA Times on the future of the state's workforce, how does this bode for the future of California?
Immigrants -- legal and illegal -- already constitute almost half of the workers in Los Angeles County and are expected to account for nearly all of the growth in the nation's working-age population by 2025 because native-born Americans are having fewer children. But the study, based largely on U.S. Census data, noted that 60% of the county's immigrant workers struggle with English and one-third lack high school diplomas.


Beautiful. So, 17% of the workforce in LA county don't have high school diplomas, 30% can barely speak English, and it is only going to get worse. And this is LA COUNTY, not the city itself-- 10 Million people, more than 42 states.
5.3.2008 8:27pm
Elliot123 (mail):
So, La Raza triumphs while Lorrie David moves to Martha's Vineyard?
5.3.2008 9:48pm
A. Zarkov (mail):
"Except for the coast, California is an overcrowded, smog-pit, expensive, hellhole desert -- run and dominated by incompetent nuts."

You've got that right. As a long time resident of CA I have personally witnessed the decline in the quality of life here. I don't see why anyone would want to live in the Central Valley. In the summer it's broiling hot, and in the winter it's fairly cold. And it's polluted and ugly all the time. Of course there are many pleasant places, Santa Barbara, Carmel, La Jolla, Marin County to name a few. But who can afford to live in any of these nice spots? The median price of a home in Marin county exceeds $1 million. It's a surreal experience to walk into a virtual shack and find the listing price is something like $900k! And it doesn't sell. The owner will keep it on the market at that price for years. They are nuts.
5.3.2008 10:08pm
A. Zarkov (mail):
California has serious problems that have been building for decades. According to UCLA economist Christoper Thornberg, outside of real estate and aligned industries CA has never recovered from the 1991 recession. Real estate, real-estate-related financial services, construction and home improvement took up the slack leaving CA dangerously dependent on this fragile industry. Now real estate is in free fall throughout the state, especially in the south. While prices in some areas like SF and southern Marin have held up, eventually they too will crumble (but not as much) as the alt-A and prime mortgages go into default.

The governor seems to live in the gamma quadrant. First he declares a state of fiscal emergency, and then he submits new, expensive medical insurance program. This clearly demonstrates how out of contact with reality he is. He also wants to continue to provide medical service to illegal aliens. One illegal alien has gotten three liver transplants at a cost of over $1 million to CA taxpayers. And now she needs a fourth. Anyone care to justify that to me?

I suspect the free fall in housing will do in CA government as the tax base is eroding. How is the legislature going to close the $20 billion budget deficit? More borrowing? Higher taxes? A cut in services? If CA raises taxes much more I will move out. I sold my house at the peak and now rent. But I guess the politicians think I and others won't go. Schmucks.
5.3.2008 10:18pm
pireader (mail):
Evidently, Mr Schulz isn't the only one whose mind is clogged with fact-free ideology. Let's look at just the stuff that makes no sense at all:

(1) "Agriculture is California's cash crop and, in your list of 'extraordinary talent', you forgot the Mexican farm workers who make up the majority of attracted talent."

Wrong on all counts. Americans from other states account for about half of total in-migration to California. And of the rest (the foreign born), only a bit under half (4 million) are from Mexico.

Agriculture only accounts for about 1% of California's GDP. And agriculture only has about 350,000 workers in total, so it can't be the main draw for those 4 million Mexicans.

(2)"[T]he Democratic Party is anything but, and the radical Left wing of the Party has taken complete control"

Very unlikely. The state's governor is a Republican; and has been for 20 of the past 25 years. And those governors have mostly supported the policies you're decrying. So it can't just be radical Democrats;and it can't just be gerrymandering,since governors are elected state-wide. How about--these policies are popular with the voters?

(3) "People aren't going to California because the environment is so clean (air quality in southern California is some of the worst in the country)."

That's precisely my point. Southern California has a natural problem with air quality, due to its topography. It's bad enough as-is. If the state hadn't imposed strict air-quality standards,it would be much worse, making the state less attractive.

(4) "California's ban on new nuclear plants is retarded."

Ugly word; and badly applied. Actually, California has only banned new nuclear power plants until the Federal government [which, by law, owns the problem] comes up with a way to dispose of high-level plant waste. The Feds were supposed to start taking delivery on waste in 1998; but they're now forecasting 2018 or later. Considering how slowly they're moving, California's position seems fairly reasonable.

(5)"California's economy is hurting and that strict regulatory and environmental policies are part of the problem ... [T]hey're going to keep losing businesses who don't want to put up with that climate."

"Please, please keep it up, California. Texas wants your businesses! Everybody move to Austin!"

The long-run reality is that California keeps on growing and adding jobs faster than the US as a whole. So whatever businesses are leaving must be more than offset by others that find the state attractive. Belief to the contrary isjust blind ideology.

(6) "'California is one of the world's most-desirable places to live.' Are you kidding?... It may have been as you say years ago, but it has very little to recommend it today."

Isn't the usual mark of a "desirable neighborhood" that people will pay a premium to live there? Well, California real estate prices are generally the highest in the US (12 of the 15 highest-price cities). So the current residents, and the half-million who move there each year,must view the state as extremely desirable. And it's hardly just a bubble ... California real estate has commanded a premium for decades.
5.4.2008 1:08am
TruthInAdvertising:
"How many other states screwed up their electricity system so badly they've doubled prices and still had to go through many months of rolling blackouts?"

Here I thought deregulation and Enron had something to do with all that. Who knew.
5.4.2008 2:33am
A. Zarkov (mail):
"Isn't the usual mark of a "desirable neighborhood" that people will pay a premium to live there?"

Most California residents are renters, I think the figure is 67%. CA real estate is very expensive for a variety of reasons such as high construction costs and fees. A City can charge you as much $50,000 to for a new sewer hookup. That's why people by "scrapers." Do you think Stockton is a desirable place to live? Property is expensive there too.

"Americans from other states account for about half of total in-migration to California. And of the rest (the foreign born), only a bit under half (4 million) are from Mexico."

Where do these figures come from? Do they include out migration as well? How do you count the number of illegal Mexicans coming into CA?
5.4.2008 2:41am
pireader (mail):
For A Zarkov —

"Most California residents are renters, I think the figure is 67%."

Not so. According to the US Census, California's homeownership rate is 60.2%, so renters are just below 40%

Do you think Stockton is a desirable place to live? Property is expensive there too.

I think Stockton is only 85 miles from San Francisco and 80 miles from Silicon Valley, two of the world's most-preferred locations (for somewhat different reasons). So people view Stockton as a pretty good second choice, and consequently bid up property there.

"Where do these figures come from? Do they include out migration as well? How do you count the number of illegal Mexicans coming into CA?"

The data are from the US Census and the state. They are net, accounting for both in- and out-migration. The Census tries to count illegal immigrants ... hard to say how well they do at it.


PS--I've repeatedly tried submitting this comment with the appropriate URL references embedded, but the @#$%&*/$ software keeps refusing them. Sorry.
5.4.2008 11:21am
CWuestefeld (mail) (www):
@pireader - I'm no expert on California politics, but responding just to the face of your comments:
Very unlikely. The state's governor is a Republican; and has been for 20 of the past 25 years. And those governors have mostly supported the policies you're decrying. So it can't just be radical Democrats;and it can't just be gerrymandering,since governors are elected state-wide. How about--these policies are popular with the voters?


In principle, the fact that the district-level elections are skewed the opposite direction from state-level elections would tend to support the gerrymandering theory.


Actually, California has only banned new nuclear power plants until the Federal government [which, by law, owns the problem] comes up with a way to dispose of high-level plant waste. The Feds were supposed to start taking delivery on waste in 1998; but they're now forecasting 2018 or later. Considering how slowly they're moving, California's position seems fairly reasonable.


@TruthInAdvertising:

"How many other states screwed up their electricity system so badly they've doubled prices and still had to go through many months of rolling blackouts?"

Here I thought deregulation and Enron had something to do with all that. Who knew.



Deregulation did have something to do with it, but not in the way this implies. The problem was not deregulation per se, but that only one side of the transaction was deregulated, leaving the other tied in bureaucracy and regulation. The electricity suppliers were stuck between a rock and a hard place due to CA's half-assed approach.
5.4.2008 2:00pm
CWuestefeld (mail) (www):
(amendment to above, I forgot to address pireader's 2nd point)
Regarding CA's stance on nukes, and blaming it on the federal government -- it sounds very much like "Do you see how they MAKE me beat you? I don't want to be abusive, but you give me no choice!"
5.4.2008 2:03pm
A. Zarkov (mail):
"Not so. According to the US Census, California's homeownership rate is 60.2%, so renters are just below 40%"

Quite right, I switched renters and owners. But if you look at the census data, you will see that California has the lowest ownership rate in the country except for New York (55%). Note for 2006 the national average was 68.8% while California was 60.2%. Now look at the historical census housing data and you will see that before 1970 the California home ownership rate was very close to the national average. California housing got more expensive after 1970 and the in migrants got poorer.

"So people view Stockton as a pretty good second choice, and consequently bid up property there."

According to Google maps the one-way driving time from Stockton to Sunnyvale is almost 2 hours in traffic. That puts Stockton at the fringe of commute distance from Silicon Valley. That's desirable?

I'll get back on migration.
5.4.2008 3:19pm
picpoule:
Stockton is crap. It's not as bad as Port-Au-Prince, to even hint at it being an alluring spot makes me giggle -- lots.
5.4.2008 4:13pm
pireader (mail):
To CWuestefeld --

[t]he fact that the district-level elections are skewed the opposite direction from state-level elections would tend to support the gerrymandering theory.

My point was that Democratic radicalism and gerrymandering, even if true, don't explain California's policies, since those same policies have been supported by Republican governors.

Regarding CA's stance on nukes, and blaming it on the federal government

I didn't blaming anybody. I just said that California's policy on nuclear waste seems fairly reasonable (rather than "retarded", as another commenter put it).

To A Zarkov --

California housing got more expensive after 1970 and the in migrants got poorer.

Since 1970, the state's population has increased from 20 million to 37 million. A lot of people moved here ...and keep on moving here. It seems unlikely that they'd keep coming in such numbers (500,000 a year) if it made them poorer.

"That puts Stockton at the fringe of commute distance from Silicon Valley. That's desirable?"

Well, the average house in Stockton still sells for more than the average US house,so somebody regards it as desirable,even if you don't.
5.4.2008 9:05pm
A. Zarkov (mail):
"Since 1970, the state's population has increased from 20 million to 37 million. A lot of people moved here ...and keep on moving here. It seems unlikely that they'd keep coming in such numbers (500,000 a year) if it made them poorer."Un

I didn't say migrating to CA makes you poorer. I said the migrants themselves are poorer to begin with. The question remains as to where the new entrants to California are coming from, Mexico or the US?

"Well, the average house in Stockton still sells for more than the average US house, so somebody regards it as desirable,even if you don't."


Houses aren't selling in Stockton. The housing market there as in the rest of the Central Valley is rapidly deflating. CA like Florida and Nevada had the biggest run up in prices because of the real estate bubble which is now unwinding. By your reasoning Nevada too must be very desirable.

My question still stands: what's desirable about Stockton? The weather? The schools? The high crime? The air quality? The scenery? The miserably long commutes into the Bay area? The cost of energy? BTW with $4 gasoline the residents who do commute will find they can't afford to anymore. It would not surprise me to see Stockton's population shrink in the next few years.
Among the hardest hit states were Nevada, Florida and, in particular, California, where Stockton led the nation with a foreclosure rate that was 6.6 times the national average, Irvine, Calif.-based RealtyTrac Inc. said.
If it's so wonderful there why are the residents abandoning their houses? Marin county is both expensive and desirable and does not have a high foreclosure rate. The weather, air, scenery, commute in Marin are wonderful. I don't know about the schools.
5.4.2008 10:34pm
A. Zarkov (mail):
Here is a set of blog posts about Stockton from people who know the place.

Note everyone how they manage to avoid what really makes the place undesirable. The crime and gangs seem to just happen like the weather.
5.4.2008 11:01pm