TechPulse 360

California’s second great global warming experiment began earlier this week when Governor Arnold Schwarzenegger signed an order requiring 33 percent of the state’s electricity to come from renewable sources by 2020.

Most observers believe the plan is a well-intentioned attempt to reduce the greenhouse gases beginning to disrupt the Earth’s climate. But can the goal be met? There are many reasons to say no.

With the stroke of a pen, Gov. Schwarzenegger committed California to a energy transformation that will require unusual political will

Perhaps the greatest reason for skepticism is that the state’s first renewables target of 20 percent by 2010 looks unlikely to be met. San Diego Gas and Electric, the laggard of the state’s utilities, only gets about 10 percent of its juice from renewables one year away from the deadline.

Even if the ambitious 33 percent mark is achieved, it won’t be without pain. First, it will require piles of money for new plants, transmission lines and energy storage facilities – an area of the modern energy infrastructure where technology is still at an infant stage. The state also will need to become much more aggressive at siting plants over local objections, a process requiring a strength of will not typical of Sacramento.

Finally, consumers will have to become comfortable with paying higher prices. After all, there are reasons why renewable power – solar, wind and geothermal – isn’t finding its way into the market as quickly as California would like. Those reasons boil down to cost.

It is true “this target cannot be hit without some drastic action,” says Eric Corey Freed, principal at green building designer organicARCHITECT. “A fierce political will would need to be sent down from up high in Sacramento.”

Experts say solar and wind power are likely to be the two biggest beneficiaries of the state’s initiative – an effort that reminds some of the nation’s rush to increase manufacturing in advance of World War II. It is hard to know how big a factor geothermal will play. A final source of clean power – hydro electric – is already widely used in California and won’t be easily expanded.

Geothermal may play a role, but wind and solar are expected to be more widely deployed

The impact on consumer prices is perhaps the greatest unknown. Some estimates show about $6 billion will be needed for new transmission lines and improvements to existing facilities. But that will be a drop in the bucket compared with the cost of building new plants and striking long-term power contracts. Schwarzenegger’s order allows power to be bought from out of state. So some infrastructure may not be needed.

The costs could be moderated if a majority of the numerous solar and wind plants proposals before the state are quickly approved – and if they are built near population areas to eliminate the need for long transmission lines.

“Given project time lines from 2 to 12 years, this means the level of development activity will have to increase dramatically in the very short term,” says Abe Yokell, a principal at RockPort Capital.

But based on past experience, this seems hard to fathom. Some observers estimate that obtaining approvals for new wind plants could take ten years.

Yokell calculates that given the relative maturity of wind power, it will make up the largest share of the renewable power generation. Photovoltaic and solar-thermal technologies will account for relatively smaller portions, he says.

Others disagree. Danny Kennedy, co-founder of Sungevity, a Berkeley based installer of solar panels, believes solar will make up the lion’s share. But he disputes the conventional wisdom that most will come from big utility-scale solar thermal farms out in the desert. Permitting issues and transmission costs could get in the way.

Because of its maturity, wind energy could be the big beneficiary, says VC Abe Yokell

“The normal estimate is (photo voltaic panels) will be about half the solar-thermal total, but that ratio may end up being very different,” he says. When people consider the transmission costs, “the cheapest, easiest place to build and interconnect a solar power plant is over their head (i.e.: their roof!).”

Of course, installing overhead panels is Sungevity’s business. It does seems clear that solar farms will shoulder a substantial share of the burden, especially with some of the large farms under consideration.

California’s grand experiment is a welcome sign that some public policy goals are well worth stretching to reach. But don’t be surprised if the dollars and cents – especially as utilities rush to sign long-term power contracts that they don’t take the time to properly review – will be greater than first projected.