Page 271 - Solar Power in Building Design The Engineer's Complete Design Resource

CALIFORNIA ASSEMBLY BILL 32 241

power represent a small percentage of state local electric power. The state of California
therefore imports a significant amount of its electric energy from outside energy
providers. Much of this outside electric energy is produced by coal- and gas-fired tur-
bines, hydroelectric power, and nuclear power–generating stations.
By mandating reduction of greenhouse gas production, California will within the
near future abstain from the purchase and import of electric energy from sources that
use coal-based electric turbines. Most significantly all coal-based electric power-
generating stations within California will be mandated to use less polluting natural gas
turbines.
With reference to Figure 8.7, the cost of electric energy production historically has
been going up at an accelerated rate. As indicated in the figure, the average annual cost
of electric energy in California has escalated at an average of 4.18 percent. However,
because of the enactment of AB 32 and other factors, it is expected that in the near
future the rate of electric energy cost will increase at a higher rate.
Factors that affect the electric energy cost escalation in California, and soon will
affect that of other states, are as follows:

■ The cost of natural gas has recently gone up by 13 percent.
■ Natural gas production has decreased over the last decade.
■ No new natural gas refineries have been built in the United States.
■ Within 3 years all electric power–generating utility companies in the state of
California using coal-fired turbines must be converted to natural gas.
■ The demand for natural gas within the near future will cause the prices to increase
by 20 to 25 percent, which will inevitably be passed on to the consumer.
■ At present only 5 percent of electric power produced in California is generated by
the use of natural gas; this percentage within the near future is expected to increase
to 50 to 60 percent.
■ By year 2012 Hoover Dam, which presently provides inexpensive hydroelectric
power to the states of California, Arizona, and Nevada, will most likely be priva-
tized, which will inevitably result in a significant increase in the cost of electric
energy.
■ Since the cost of natural gas electric energy production is higher than that of hydro-
electric power, due to market forces, the cost of electric power will most likely be
equalized to a higher level.

In addition to the preceding, risk factors that may also have an effect on energy
cost escalation include geopolitical unrest in the Middle East and Venezuela, inter-
national terrorism, and an accelerated demand for fossil fuels by Asian countries
such as India and China that have achieved a gross national product (GNP) of
8 percent and over. It is therefore not unreasonable to predict that for the foresee-
able future the annual cost increase in electric power would range between 6 to
8 percent.
In view of the preceding energy cost escalation, at present the initial capital invest-
ment required by solar power programs appears to be fully justified.