Tips to Understand California’s Energy Economy

Last month, for the uninitiated, we devoted a newsletter to the topic “Tips to Understand Our Convoluted Yet Obligatory Units of Water.” It attempted to summarize some essential facts and relevant units for anyone who wants to monitor state water policy. Now it’s time for those of us who fancy ourselves members of the energy cognoscenti to return the favor. As should become evident, it’s even more convoluted. So here we go.

California’s raw energy inputs total about 7,200 TBTUs per year. “TBTU” stands for “trillion British Thermal Units.” Invented nearly two centuries ago by engineers who wanted a standard unit of energy to measure the power of steam locomotives, the BTU is defined as the amount of energy needed to heat one pound of water by one degree Fahrenheit. In 2024, by comparison, the whole U.S. consumed 87,000 TBTUs, and the whole world consumed 561,000 TBTUs.

The other essential energy terrain is based on measurements of electricity, expressed at the macro scale by gigawatt-hours (GWH) and terawatt-hours (TWH). California consumed 281 terawatt-hours of electricity (281,000 gigawatt-hours) in 2023, compared to 4,634 TWH for the whole U.S. and 31,256 TWH for the whole world. Note California’s share of U.S. TBTU consumption is 8.3 percent, but we Californians only represent 6.1 percent of the total U.S. TWH consumption. In both cases, our per capita consumption is lower than our 11.5 percent share of the U.S. population. That is mostly attributed to our good weather, although “some credit California’s strict energy efficiency standards.”

An energy flow chart from Lawrence Livermore Laboratory, updated through 2022, provides one of the most cogent glimpses available into the journey energy takes from its raw form into its final end-use. There are two main takeaways from this chart. First, the fact that they estimate only 36 percent, barely one-third of those 7,200 TBTUs of raw energy input, is realized in the form of energy services, for example: interior space heating and cooling, water treatment and pumping, industrial processes, light, computations, communications, and horsepower. The rest, 4,600 TBTUs per year, are lost in the process of refining, electric power generation, transmission, mechanical losses to heat and friction, electricity losses in the process of battery charges and discharges, and so on.

The second big takeaway from viewing California’s energy flow chart is the mix of raw energy inputs. The most up-to-date information we have is from 2023, which shows that 30 percent of California’s incoming fuel was natural gas, 50 percent was petroleum, and the other 20 percent came from a combination of nuclear, hydroelectric, biomass, geothermal, solar, and wind.

Which brings us to one of the most challenging areas to grasp: the relationship of electrical production to overall energy use. The reason this matters so much is because the State of California wishes to electrify the state’s entire transportation and residential sectors. According to the LLNL energy flowchart for California, transportation consumed 2,913 TBTUs of energy in 2022, and 2,301 of those were lost in the process of oil refining, distribution, and the relatively low efficiency of the internal combustion engine.

This fact, that 79 percent of California’s raw petroleum input devoted to transportation is lost before it is converted into motion, illustrates the potential of electrification. Modern EVs convert about 80 percent of their electrical input into horsepower, even after taking into account the charge/discharge efficiency of the onboard battery and the efficiency of the electric motor. But the solution is not to subsidize EVs, nor to drive California’s oil industry into terminal decline. If the state weren’t bent on destroying California’s refineries, they could make investments in improving their efficiency.

Similarly, if the state weren’t attempting to outlaw the sale of new gasoline powered cars, we might preserve the possibility for advanced hybrid technologies to compete even as EV technology continues its rapid progress. We face the same dilemma with natural gas power generation: modern natural gas powerplants are on track to achieve efficiencies in excess of 70 percent, twice what most of California’s aging fleet of natural gas powerplants can deliver. If they weren’t being regulated into oblivion, they could be retrofit.

Here’s the equation that connects units of electrical energy (GWH and TWH) with units of thermal energy (TBTUs). The equivalent of 1,000 TBTUs is 293 terawatt-hours. This means that California’s 7,200 TBTUs per year of raw energy inputs, if expressed as electricity, would equal 2,100 terawatt-hours.

And here’s the trillion dollar question. How much room for gains in efficiency are there, if today only 36 percent of California’s raw energy consumption is realized in the form of end user energy services? Imagine if the state’s current end user energy consumption of 2,600 TBTUs per year were completely electrified. That would be 762 terawatt-hours. Now suppose these 762 TWH of usable electricity were converted from raw energy inputs in processes that were two-thirds efficient instead of one-third efficient. That would mean that we would only need 3,900 TBTUs (equivalent to 1,154 TWH) of raw fuel input to realize the goal of a super-efficient, all-electric economy in California. Theoretically, therefore, electrification could reduce California’s required raw energy input by nearly half without sacrificing any end user energy services.

But where is the line between theory and fantasy? Is over 1,000 TWH per year of electricity generation feasible, when today California’s in-state electricity production is only 215 TWH, with only 19 percent of that coming from solar and 6 percent coming from wind? California’s official stated goal for electricity production by 2045 is “only” 500 TWH. These are tough numbers to hit with pure renewables in less than 20 years. Equally daunting is the prospect of cost-effectively rolling out electrification to every sector of the economy. What Governor Newsom and the state legislature is coming to terms with right now is how much of a future role they shall restore for conventional sources of energy.

We can still lead the world, but we would be best served in that aspiration by doing things the rest of the world will enthusiastically emulate. That would suggest competition, not subsidies, and open technologies, not restrictions and mandates, might best deliver the abundance and affordability that we all profess to care about so much.

Edward Ring is the Director of Water and Energy Policy at the California Policy Center, which he co-founded in 2013. Ring is the author of Fixing California: Abundance, Pragmatism, Optimism (2021) and The Abundance Choice: Our Fight for More Water in California (2022).