California’s bet on green energy is paying off, with clean technology companies creating more jobs and investing more money than competitors in any other state.
As Governor Jerry Brown pushes the nation’s largest state to wean itself from fossil fuels, that policy also is rewarding investors. Shares of California companies in the NYSE Bloomberg Americas Clean Energy Index are expected to climb 96 percent in the next 12 months, compared with the 47 percent forecast for all U.S. members, according to analyst recommendations compiled by Bloomberg.
California, which is poised to become the world’s seventh-largest economy, is setting the pace for U.S. energy policy, with Brown recently announcing the nation’s highest renewable-power targets and most ambitious electric-vehicle goals. The Democratic governor said the technology industry is responding to his challenge.
“California energy policies are a road to real innovation that will drive business investment and development, in California and throughout the rest of the country,” Brown said in a recent interview in his Oakland office.
California has little access to oil pipelines and its crude oil reserves are dwindling. The combination of its climate-change science culture and rejection of carbon fuels has resulted in a booming clean-technology industry.
The 26 California companies in the Clean Energy Index, including Elon Musk’s electric carmaker Tesla Motors and rooftop solar giant SolarCity, have added employees at a median annual rate of 9.5 percent for the past two years. That’s more than quadruple the 2.3 percent for the 115 U.S.-based companies in the index.
The California companies spent an average of $141 million on research and development in the past year, or 26 percent of their sales, compared with an $85 million average, or 10 percent of sales, for the entire index. Clean technology comprises wind and solar power, energy conservation and efficiency, power storage and electric vehicles.
The state’s advanced-energy industry has more than 431,000 workers, the most in the nation, according to a December report by the trade group Advanced Energy Economy.
Brown, 76, was sworn in last month to an unprecedented fourth term. Since he first became governor in 1975, he has been a proponent of clean-energy policies. Starting in the 1970s, he helped rewrite regulations to reward power companies for saving energy and codified that a third of the state’s electricity come from renewable sources. He’s called for 1.5 million zero- emission cars on state roads in the next decade.
“California has had a head start,” said Doug Henton, chief executive officer of Collaborative Economics, a San Mateo-based green-economy research company. “It started in the 1970s and it has been going strong ever since. It’s created demand in the private sector to invest.”
Since 2006, investors have put more than $27 billion in venture capital and other financing into California clean technology companies, according to 2014 report by Next 10, a public policy advocacy group.
“We are proving that we can move far reaching very progressive climate change goals by decarbonizing the economy while at the same time growing the economy,” said California Senate President Pro Tem Kevin De Leon, a Democrat.
The state’s green energy push has raised concerns from the oil and natural gas industry, manufacturers and some Republicans, who warn the policies will raise energy prices and drive business to less-expensive regions. For example, Toyota Motor decided last year to move about 2,000 jobs from its U.S. sales base in Torrance to a new North American headquarters in suburban Dallas.
While California has some of the lowest per-capita total energy consumption in the country, it has some of the most expensive power rates because of its reliance on high-cost sources including renewables and gas. Manufacturers paid an average of 11.93 cents per kilowatt-hour in November, according to the U.S. Energy Information Administration. That was 79 percent higher than the national average of 6.67 cents.
“We already have electricity rates that are 50 percent higher than our neighboring states, so at what point does being on the leading edge of environmental reforms impact our ability to create jobs for our middle class?” said California Senate Republican leader Bob Huff.
In his Jan. 5 inauguration speech, Brown said he wants to cut petroleum use in cars and trucks by as much as half and to get 50 percent of the state’s electricity from renewable sources by 2030.
