Overview

Resources and Consumption

California is rich in both conventional and renewable energy resources. It has large crude oil and substantial natural gas deposits in six geological basins, located in the Central Valley and along the Pacific coast. Most of those reserves are concentrated in the southern San Joaquin Basin. Seventeen of the Nation’s 100 largest oil fields are located in California, including the Belridge South oil field, the third largest oil field in the contiguous United States. In addition, Federal assessments indicate that large undiscovered deposits of recoverable oil and gas lie offshore in the federally administered Outer Continental Shelf (OCS), which in 2008 was reopened for potential oil and gas leasing. California’s renewable energy potential is extensive. The State’s hydroelectric power potential ranks second in the Nation behind Washington State, and substantial geothermal and wind power resources are found along the coastal mountain ranges and the eastern border with Nevada. High solar energy potential is found in southeastern California’s sunny deserts.

California is the most populous State in the Nation and its total energy demand is second only to Texas. Although California is a leader in the energy-intensive chemical, forest products, glass, and petroleum industries, the State has one of the lowest per capita energy consumption rates in the country. The California government’s energy-efficiency programs have contributed to the low per capita energy consumption. Driven by high demand from California’s many motorists, major airports, and military bases, the transportation sector is the State’s largest energy consumer. More motor vehicles are registered in California than any other State, and worker commute times are among the longest in the country.

Petroleum

California is one of the top producers of crude oil in the Nation, with output accounting for more than one-tenth of total U.S. production. Drilling operations are concentrated primarily in Kern County and the Los Angeles basin, although substantial production also takes place offshore in both State and Federal waters. Concerns regarding the cumulative impacts of offshore oil and gas development, combined with a number of major marine oil spills throughout the world in recent years, have led to a permanent moratorium on offshore oil and gas leasing in California waters. However, development on existing State leases is not affected and may still occur within offshore areas leased prior to the effective date of the moratorium. A moratorium on oil and gas leasing in Federal OCS waters expired in 2008.

A network of crude oil pipelines connects production areas to refining centers in the Los Angeles area, the San Francisco Bay area, and the Central Valley. California refiners also process large volumes of Alaskan and foreign crude oil received at ports in Los Angeles, Long Beach, and the Bay Area. Crude oil production in California and Alaska is in decline and California refineries have become increasingly dependent on foreign imports. Led by Saudi Arabia, Iraq, and Ecuador, foreign suppliers now provide more than two-fifths of the crude oil refined in California; however, California’s dependence on foreign oil remains less than the national average.

California ranks third in the United States in petroleum refining capacity and accounts for more than one-tenth of total U.S. capacity. California’s largest refineries are highly sophisticated and are capable of processing a wide variety of crude oil types and are designed to yield a high percentage of light products like motor gasoline. To meet strict Federal and State environmental regulations, California refineries are configured to produce cleaner fuels, including reformulated motor gasoline and low-sulfur diesel.

Most California motorists are required to use a special motor gasoline blend called California Clean Burning Gasoline (CA CBG). In the ozone non-attainment areas of Imperial County and the Los Angeles metropolitan area, motorists are required to use California Oxygenated Clean Burning Gasoline. There are five ethanol production plants in central and southern California, but most of California’s ethanol supply is transported by rail from corn-based producers in the Midwest. Some supply is also imported from abroad.

Due to the relative isolation and specific requirements of the California fuel market, California motorists are particularly vulnerable to short-term spikes in the price of motor gasoline. No pipelines connect California to other major U.S. refining centers, and California refineries often operate at near maximum capacity due to high demand for petroleum products. When an unplanned refinery outage occurs, replacement supplies must be brought in via marine tanker. Locating and transporting this replacement gasoline (which must conform to the State’s strict fuel requirements) can take from two to six weeks.

Natural Gas

California natural gas production typically accounts for less than 2 percent of total U.S. production and satisfies less than one-fifth of State demand. Production takes place in basins located in northern and southern California, as well as offshore in the Pacific Ocean. As with crude oil production, California natural gas production is in decline. However, State supply has remained relatively stable due to increases in net receipts from pipelines that supply California with natural gas produced in the Rocky Mountains, the Southwest, and western Canada. California markets are served by two key natural gas trading centers – the Golden Gate Center in northern California and the California Energy Hub in southern California – and the State has a dozen natural gas storage facilities that help stabilize supply. In part to help meet California’s demand for natural gas, an offshore LNG import terminal in southern California has been proposed to the Maritime Administration and the U.S. Coast Guard. If approved, this terminal could import up to 1.4 billion cubic feet of natural gas per day. Two additional potential southern Californian LNG import facility sites have been identified by project sponsors.

Coal, Electricity, and Renewables

Natural gas-fired power plants typically account for about one-half of State electricity generation. California is one of the largest hydroelectric power producers in the United States, and with adequate rainfall, hydroelectric power typically accounts for close to one-fifth of State electricity generation. California’s two nuclear power plants account for about 17 percent of total generation. Due to strict emission laws, only a few small coal-fired power plants operate in California.

California leads the Nation in electricity generation from nonhydroelectric renewable energy sources. California generates electricity using wind, geothermal, solar, fuel wood, and municipal solid waste/landfill gas resources. California is the top producer of geothermal energy in the Nation with over 2,500 megawatts of capacity. A facility known as “The Geysers,” located in the Mayacamas Mountains north of San Francisco, is the largest complex of geothermal power plants in the world, with more than 700 megawatts of installed capacity. California is also a leading producer of wind energy and holds nearly 10 percent of the Nation’s capacity. The world’s largest solar power facility operates in California’s Mojave Desert. Two new solar power plants have been proposed for central California, and would cover 12.5 square miles and generate as much as 800 megawatts of power. Both plants still require numerous permits, but if approved, they would generate more than 12 times as much electricity as the Mojave Desert plant. To further boost renewable energy use, California’s Energy Action Plan includes incentives that encourage Californians to install solar power systems on their rooftops.

Due to high electricity demand, California imports more electricity than any other State. States in the Pacific Northwest deliver power to California markets primarily from hydroelectric sources, while States in the Desert Southwest deliver power primarily from coal-fired sources. Hydroelectric power comes to California primarily through the Western USA interconnection, which runs from northern Oregon to southern California. The system, also known as the Pacific Intertie, is the largest single electricity transmission program in the United States. Although the Pacific Intertie was originally designed to transmit electricity south during California’s peak summer demand season, flow is sometimes reversed overnight and has occasionally been reversed during periods of reduced hydroelectric generation in the Northwest. California restricts the use of coal-fired generation within its boundaries. However, the Los Angeles Department of Water and Power (LADWP) operates the coal-fired Intermountain power plant in Utah, which delivers almost all of its output to LADWP and other California municipal utilities. A recent California law forbids utilities from entering into long-term contracts with conventional coal-fired power producers. Intermountain’s existing contracts with southern California cities are set to expire in 2027.

In 2000 and 2001, California suffered an energy crisis characterized by electricity price instability and four major blackouts and caused by a supply and demand imbalance. Multiple factors contributed to this imbalance, including: a heavy dependence on out-of-State electricity providers, drought conditions in the northwest that reduced hydroelectric power generation, a rupture on a major natural gas pipeline supplying California power plants, strong economic growth leading to increased electricity demand in western States, an increase in unplanned power plant outages, and unusually high temperatures that increased electricity demand for air-conditioning and other cooling uses. Following the energy crisis, the California State government created an Energy Action Plan designed to eliminate outages and excessive price spikes. To achieve these goals, the plan calls for optimizing energy conservation, building sufficient new generation facilities, upgrading and expanding the electricity transmission and distribution infrastructure, and ensuring that generation facilities can quickly come online when needed.

In 2006, California amended its renewable portfolio standard to require investor-owned utilities, electric service providers, small and multi-jurisdictional utilities, and community choice aggregators to provide at least 20 percent of retail sales from renewable sources by the end of 2010 and 33 percent by the end of 2020. California has also adopted other policies to promote energy efficiency and renewable energy, including energy standards for public buildings, power source disclosure requirements for utilities, and net metering.