APPENDIX A

January 16, 1979
DES-R-02

--DRAFT-

DISTRIBUTED ENERGY SYSTEMS IN CALIFORNIA'S FUTURE
ISSUES IN TRANSITION

prepared by:

Paul P. Craig

University of California
Davis, California

and

Mark D. Levine

Lawrence Berkeley Laboratory

University of California

Berkeley, California

First Interim Report on Distributed Energy Systems in California's Future

Key Observations of the Present Analysis

A Renewable Energy Outcome in 2025
Costs of Renewable Energy Systems

The Integration of Renewable Electricity Generating
Options with the Electric Grid . .

Refrigerators:

ECONOMICS OF A TRANSITION TO ENERGY CONSERVATION
the Economics of Life Cycle Costing
Energy Conservation and Home Heating in California
Energy Demand Growth and the 2025 "Outcome"

i

Summary of Electricity Sources for the Renewable "Outcome"

60

CHAPTER V

THE TRANSITION PROCESS: INSTITUTIONAL AND PUBLIC POLICY ISSUES
Recent Energy Policy Initiatives in California

Prospects for an Accelerated Transition in California to
Energy Conservation and Renewable Energy Systems
Life Cycle Costing . .

Accelerated Commercialization of Renewable Energy Systems.
Availability and Price of Fossil and Nuclear Resources

APPENDIX

DISTRIBUTED ENERGY SYSTEMS IN CALIFORNIA'S FUTURE:

EXECUTIVE SUMMARY

ISSUES IN TRANSITION

The Distributed Energy Systems study was undertaken to explore issues surrounding a potential shift of an advanced industrial state (California) to primary reliance on indigenous renewable energy forms. Such a transition appears to be both technically and economically feasible; by 2025 California could sustain a growing economy while cutting back on use of fossil fuels to less than 40 percent of today's use, primarily to provide fuel for transportation and high temperature heat. The keys to a predominately renewable energy future are:

a) finding ways to encourage cost effective conservation (in
order to limit total demand for energy while still permitting
economic growth), and

b) providing incentives for the accelerated development of
renewable energy systems.

The study drew no firm conclusions

as to how renewables might fare in competition with non-renewable based energy systems in the absence of new policy initiatives to encourage them.

Objectives and Assumptions

The overall objective of the analysis has been to assess the role that distributed, renewable energy systems might play in a California future in which a plausible set of public policies, consumer attitudes, and external events favor the implementation and use of these systems. A basic assump

tion of the study is that growth in the California economy and population continues over the next four to five decades.

Renewable indigenous energy resources offer major promise for contributing to U.S. and global energy needs in the post-oil and gas era. Yet little work has been done to examine how such systems might actually be implemented. During the past two years a study group at the University of California has been exploring the prospects for meeting California's energy

To

needs using distributed energy systems largely reliant on renewable sources. The study objective was to learn how large a role relatively small scale systems based on biomass, wind, solar energy for heating and cooling, photovoltaic, and similar systems might play in a highly technological and growing society in one region of the Nation. accomplish this objective, renewable energy systems are favored over nonrenewable systems where the renewables are determined to be in an economically competitive range. A single area (California) was chosen for emphasis to gain insights difficult to capture on a nationwide basis.

As with all planning studies, the initial assumptions are important. Population was assumed to grow (from 20 million in 1975 to 38 million in 2025) and economic growth to continue, though at a declining rate over time, from $169 billion in 1975 to $520 billion in 2025). Future energy prices were assumed to be known, with delivered energy prices increasing by a factor or two or four by 2025 in the two cases considered. Modest technological advances were assumed, but no major breakthroughs were included for more efficient technologies for meeting demand or for energy supply technologies (except for photovoltaic systems). One key institutional assumption was also made--that both supply and demand investment decisions would be made in an economically rational way, taking into account full lifetime costs, and apportioning investment between supply expansion and demand moderation in a manner so as to reduce total economic costs.

The Long Term

Two long term renewable energy futures were constructed for California, corresponding to a doubling and quadrupling of energy prices by 2025. For the case with a quadrupling of energy prices, energy demand slightly less than current California demand was estimated for 2025 under conditions in which cost effective energy conservation measures are implemented within the State. Two thirds of this demand can be met by distributed renewable energy sources at costs consistent with the projected replacement costs of conventional energy systems, ranges of cost projections for renewable systems, and a plausible dynamics of introduction of new energy technologies. In the long term, renewable energy systems in California appear to be capable