California Gov. Jerry Brown has embarked on an ambitious climate-change agenda that he hopes will propel other states to take action on reducing carbon emissions. As the governor continues to move his climate-change agenda forward, it will be important for him to work alongside the business community to develop a plan that will be focused on reducing the overall cost of electricity for businesses and consumers.
The California Chamber of Commerce firmly believes that a regional energy market – the coordination of electricity systems in the West – would reduce costs and is the most efficient, effective way to meet the region’s growing demand for affordable, reliable and sustainable energy. A regional energy market has the potential to reduce energy costs in all participating states by integrating a diverse portfolio of resources on one coordinated grid. By adopting legislation that would enable Western states to join California in the creation of a regional market, Brown could reduce the cost of electricity in multiple states while consequently achieving his goals for renewable energy.
The business community has a keen interest in such legislation because running a business is a difficult and expensive venture. The cost of energy for a business can be paramount. But when it comes to the biggest energy users – the industrial, manufacturing, technology and agriculture sectors, just to name a few – that venture becomes even more expensive because of the high cost of energy. The amount of money spent on electric bills by businesses in these industries is significant – more than $400 billion a year. With the L.A. area being the largest manufacturing center in the country, and Long Beach and Santa Ana part of the territory that would be covered by a regional grid, the impact of high energy costs hits businesses particularly close to home.
Ultimately, we are all impacted when the cost to pay those expensive electricity bills is passed on to the consumer. The price we pay for food, groceries and many basic household items increases when the businesses that provide them are forced to pay more for energy. A regional energy market in the West would reduce those costs by providing the grid with access to a broader array of resources across a larger economy of scale to secure the lowest possible price for energy. This is basic economics – by increasing supply to meet demand, all states participating in a regional energy market can deliver and receive power more efficiently and affordably.
A regional energy market would also increase the reliability of power delivery. Losses in power are devastating to a business. Electrical interruptions, power outages and momentary blips cost businesses unrecoverable amounts of money and impact critical systems like refrigeration, heating, ventilating, air conditioning and other mechanical services that grind to a halt.
In fact, according to an Energy Department study, the cost to maintain effective power delivery ranges from $150 billion to $400 billion a year. A regional grid would increase reliability by providing operators with a better system that integrates diverse sources of renewable energy throughout the Western region.
For example, when the sun is shining in California and producing an overgeneration of solar energy within the state, that energy can be exported cheaply to other states. Likewise, when the wind is blowing in abundance in the Northwest and creating a surplus of energy there, that energy can be imported to meet demand in California.
That is why the driving force for energy policy must be maintaining an affordable, reliable and efficient energy system. The more Western states can work together to create a system to meet regional demands, the better it will be for businesses and consumers in all states. In fact, regional transmission systems that facilitate the sharing of energy among states already exists in other parts of the United States and Canada. The West should be no different.
Brown told chamber and business leaders in May that he supports the concept of an enhanced grid that is not confined to just California. As the governor works to advance his climate-change agenda, we encourage him to explore the creation of a regional energy market. This approach would help the governor achieve his climate-change goal for renewable energy. It would also drive down the cost of energy for the region’s businesses and consumers while creating economic incentives for other Western states to participate in the market.
Allan Zaremberg is president of the California Chamber of Commerce.
