Climate Investments Payoff for the San Joaquin Valley

This past January, a report released by Next 10, highlighted the economic impacts of the Renewable Portfolio Standard (RPS), Cap-and-Trade and Greenhouse Gas Reduction Fund (GGRF) investments, and energy efficiency programs in the San Joaquin Valley. The report finds that these climate investments are in fact benefitting San Joaquin Valley rather than being a detriment to the ‘Valley’ economy. We review the key findings of the report below.

Renewable Portfolio Standard

The RPS standard sets a minimum target for renewable energy procurement from all retailers of electricity in the state. On paper, we have already met our 33 percent 2020 target and should easily reach 50 percent by 2030. The Valley has certainly supported the achievement of these RPS goals. According to the report, the Valley maintains 24 percent and 54 percent of the state’s total solar and wind generation, respectively.

The renewable energy projects not only support the transition to zero carbon energy generation but also resulted in $11.6 billion in total economic benefit and created about 88,000 jobs in the Valley, from 2002 when the RPS program began, through 2015. The report notes that many of the jobs in renewable generation construction are career path focused that include living wage agreements and apprenticeships to support a skilled trade career path.

The Valley is certainly poised to prosper from continued investments in renewable energy. If SB 100 becomes law, the 50 percent RPS target would be accelerated to 2025 and a new 100 percent target would be established for 2045. Given the optimal climate and geography for wind and solar generation, the Valley is in prime position to benefit under a new mandate.

Although the Valley is ready for more growth in renewable generation, the report does point to several factors that could influence the trajectory of this growth. The biggest and most complicated factor may be the expansion of the California ISO into a regional authority, where renewable resources in the Valley would be competing in a larger market. As long as state policy continues to support in-state procurement of renewable resources, the Valley would see continued benefit and could be in a position to export excess generation to other states.

Energy Efficiency

Energy efficiency investments had a significant impact on the Valley’s economy as well, allowing businesses to invest their savings in other areas such as their workforce and saving residential customers on their utility bills. Additionally, direct install programs and the supply chain needed to support those efforts provided another source of economic growth.

The report estimated that efficiency programs have created roughly 17,400 jobs between 2006 and 2015. Since 2010, the estimated net economic benefit to the Valley totaled almost $1.2 billion. Furthermore, in an analysis of cost-effectiveness by region, the authors found that energy efficiency expenditures in the Valley are more cost-effective than average.

Surprisingly, the report found that 2015 residential electricity and gas sales in the Valley accounted for 10.3 percent of total energy sales while they only received 8 percent of the energy efficiency program expenditures for that year. On the other hand, a very high penetration of the Energy Savings Assistance program, a program that provides energy efficiency services to low-income customers, was believed to help mitigate the shortfall.

Since the Valley has a significant portion of disadvantaged communities, is consuming more energy per capita, and has above average cost-effectiveness for measures, there is a clear need for continued investment in energy efficiency in the region. The report notes that the doubling of current levels of energy efficiency by 2030 would also support continued energy efficiency investments in the region, as additional or expanded energy efficiency programs would be needed to reach the ambitious goal.

Cap-and-Trade

The report explains that the Cap-and-Trade program has both positive and negative consequences for the economy in the Valley. For example, the Cap and Trade carbon market is disadvantageous for carbon-intensive industries such as fossil fuel extraction. On the other hand, it will be supportive for low-carbon industry such as solar installation.

In addition to establishing an auction market for GHG, the program also injects the proceeds of the auctions back into state and local programs, such as high-speed rail, affordable housing, and solar installations, for example. The authors’ economic modeling found measured both the negative and positive impacts of the market regulation on the economy and the benefits of the auction proceeds programs (though little has been dispersed at this point). Although the net economic impacts were small in comparison to the size of the Valley’s economy, the impacts were markedly positive.

According to the report, from 2013 through 2015, the Cap-and-Trade program was estimated to have had $200 million in net economic benefit, which includes almost $5 million in state and local tax revenue. The program also had a net positive impact on jobs, creating 1,600 new jobs for the Valley. The author’s projected impact of the yet-to-be-released funds was estimated to be nearly $1.5 billion and potentially creating 10,500 new jobs.

Given the uncertainty surrounding the continuation of the Cap-and-Trade program as we know it, the authors portray a scenario where CARB defaults to direct regulation of emissions. Under such a system, they would expect the consumer costs would increase and business would flow out of the state and region. On the other hand, the authors believe that the extension of cap and trade would continue to have net positive impacts on the region. However, they do caution that the benefits could vary significantly. The factors that appear to be most influential include the price and quantity of emissions allowances sold, the amount of GGRF funds spent in the Valley, and the number of allowances utilities will ultimately auction off.

Conclusion

Overall, the three programs above were estimated to have a combined $13.4 billion net positive impact on the Valley economy. Although there is inherent uncertainty in predicting the future impacts of these programs, the Valley is nonetheless positioned to further capitalize on continued climate investments.

Aside from the author’s recommendation urging policy leaders to continue their support for these programs, they called for additional programs to help facilitate workforce transition to more promising low-carbon industries. As many now know, the Valley is home to a significant portion of the state’s disadvantaged and low-income communities. As such, targeted workforce training in these communities, providing quality career track jobs, would not only supply the workers needed for the growing ‘green’ economy but would support state and local efforts to remove barriers to inequality in the Valley.