ROADMAP 2035: The Impact on California’s Legacy Industries

CAPITOL WEEKLY PODCAST: This Special Episode of the Capitol Weekly Podcast was recorded live at Capitol Weekly’s conference examining California’s climate goals: ROADMAP 2035: Cars, Carbon and Climate Change – How Do We Meet California’s Zero Emissions Goals? which was held in Sacramento at the California Endowment Conference Center on Thursday, May 25, 2023

This is Panel 3 – The Future vs. The Past: The Impact on California’s Legacy Industries.

Panelists: Christopher Benjamin, Pacific Gas & Electric; Jon Costantino, Tradesman Advisors; Mark Nechodom, Western States Petroleum Association; Laura Renger, California Electric Transportation Coalition

Moderated by Brian Joseph of Capitol Weekly

This transcript has been edited for clarity.

BRIAN JOSEPH: Thanks, Tim. I’m really excited for this panel, not only because it has such a sci-fi sounding title, The Future Vs. The Past, but also because we have such esteemed panelists here that have not only a wide variety and a wide array of perspectives on this issue, but also have a deep experience in the political world. And so they’re gonna have some really interesting perspectives today on what I think in many ways is the most grounded of the panels that we have today. As a consumer myself, I often wonder what’s gonna happen to my gas-guzzling Honda Civic once we move to zero emissions. So I’m very excited to have this discussion about the evolution of these industries.

I’m gonna do some brief introductions and we’ll get right into it. To my immediate left is Mr. Christopher Benjamin, he’s the Director of Corporate Sustainability at PG&E. To my next left is Ms. Laura Renger, she’s the Executive Director of the California Electric Transportation Coalition. Next, we have Mark Nechodom,who is the Senior Director of Upstream Strategy for the Western States Petroleum Association. And finally, batting cleanup is Jon Costantino, who is the founder of Tradesman Advisors, and he was also the original Climate Change Planning Manager for the Air Resources Board’s Office of Climate Change.

So as you can see, a lot of different perspectives, a lot of different views on this issue. To start, to give the audience a sense of where we’re all coming from, I want everybody on the panel here to just sort of play Nostradamus a little bit. What is the impact of our zero-emission goals gonna be on our “legacy industries”? And I think we are gonna see as each of our panelists talk, there’s gonna be some different definitions of what a legacy industry is and what those impacts could be. But I’ll let Mr. Benjamin start.

CHRISTOPHER BENJAMIN: Sure. Well, just good afternoon everybody, really appreciate the opportunity to participate on this panel. It’s just been a great day of I think really grounded, important conversations for our state and all of us who are working so hard to meet the state’s aggressive climate and clean energy goals. So I lead the sustainability team at PG&E, I’ve been with the company for about 16 years, and we’ve had, I think as a company, a long-standing support for California’s climate and clean energy goals. And also, I think I just wanna reinforce just the topic that has come up many times today around the urgency of addressing the climate challenge. We’ve endured a very unusual series of winter storms this year.

It’s becoming more common to have extreme heat events in the middle of the year, and of course, increased wildfire risk. And so I think it just brings more urgency and more focus to this overall conversation. And as a company, last year we set a series of longer-term climate goals including reaching a net zero energy system by 2040, actually five years ahead of California’s carbon-neutrality goal with a number of specific milestones and reduction targets before then.

And so we’re really focused on this topic, this energy transition, as well as doing it affordably, doing it equitably, I think a lot of the topics that have been discussed today. And accelerating EV adoption, meeting the state’s very aggressive goals and milestones is a really important priority for us. About one in seven, I think, of all EVs in the country are plugged in right now onto the PG&E grid. We’ve seen I think a lot of adoption so far in our service area, and just all projections lead to more and more of that.

“As somebody who’s been pretty much a regulatory attorney for 20 years at a utility, being on the future side of a sci-fi is probably the first time in my life that’s ever happened.” – Laura Renger

And so with our focus today, I think it really is in three areas. Those are… But looking into the future, I don’t… I see those continuing. So one area that’s a really important focus is just around our customer programs and the role that we can play there. We offer a number, like the other utilities in California, programs today to help accelerate EV charging and with a different… With sort of focusing on different objectives, whether that’s fleets or schools or parks or fast charging. We have a new program we’re gonna be launching soon called Empower EV, which is really around underserved communities and helping to provide not only raise awareness, but also rebates for the vehicles and the charging, just recognizing that that’s such an important area.

So I think we will continue to focus on our customers and provide the support that they need. The other area that we are really focused on that’s come up a couple times today that I think we’re still early stages of, but it’s really exciting, is around vehicle-to-grid integration and the role that all of these electric vehicles that will be proliferating throughout the state can play, really, as a resilience resource and sort of an extension of the grid. And we’ve got a number of pilot programs underway right now with different automakers and we’re learning a lot. And I think that’s something to keep an eye on and we’re very, very excited about.

And then the third area, of course, is preparing the grid for the electrification growth that we are seeing and anticipating. It goes without saying that’s an area where we’ve got a lot of work to do and we are laser focused on that and excited about helping to meet the state’s and our customers’ needs. And I think I’ll close there.

BJ: Sounds good. Ms. Renger.

LAURA RENGER: Okay. Thank you. So I’m Laura Renger with CalETC. For those of you that don’t know CalETC, we’ve been around for more than 25 years, promoting electric vehicles, clean technologies and transforming our transportation sector. We represent both the automakers and so we had the pleasure of hearing from my colleague, Mr. Douglas, this morning. So I’ll try not to be too repetitive. And we also represent the utilities and we represent the electrical EV supply equipment or the charging station providers. So we’ve got a number of folks in our coalition, which is great to have that cross section and I think today in thinking through the legacy industries, first of all, it’s just… As somebody who’s been pretty much a regulatory attorney for 20 years at a utility, being on the future side of a sci-fi is probably the first time in my life that’s ever happened.

ROADMAP 2035, Panel 3 – The Future vs. The Past: The Impact on California’s Legacy Industries. Panelists: Christopher Benjamin, Pacific Gas & Electric; Jon Costantino, Tradesman Advisors; Mark Nechodom, Western States Petroleum Association; Laura Renger, California Electric Transportation Coalition. Moderated by Brian Joseph of Capitol Weekly. Photo by Scott Duncan, Capitol Weekly

So that’s pretty exciting. [chuckle] I’ll jot that one down in my diary, but starting maybe with the utilities and what the impact will be on them, I think that the biggest change will be that in the future, if things go the way we hope it goes, the utilities will be the primary fuel provider. The electric utilities will be the primary fuel provider for transportation fuel. And in a lot of ways the utilities have been adapting to technology changes since the beginning of the companies… When they were founded. You think back to HD TVs or even before that, air conditioners, the utilities have had to adapt the way that they provide electricity for the technology and the way that the technology has changed and they’ve had to figure out how to come along with what the customers need.

And so I’m confident that we can do that for transportation fuel as well, but it is different. Like, there’s some challenges that we’ve talked about earlier in terms of when you plan for a building load, you know where the building’s gonna be. The building doesn’t usually move. When… That was a joke. The building shouldn’t move. [Laughter] …Although we’re in California.

Come on, guys. Come on. We’re the last panel. Let’s… We have to do a seventh-inning stretch or something. So we know how to plan for a stationary building and the load, more or less, not always. Sometimes there could be changes in industrial load and things like that. When you’re planning for trucks and buses and big vehicles, they go different places. And so you might not necessarily know exactly where the load’s coming.

The other challenge for medium and heavy duty from a utility perspective is that the fleet owners are new to this. So they don’t know what their use cases are gonna look like. We don’t really know. I’m saying we, from the perspective of the utility, don’t really know what the use case is gonna look like. We’re figuring it out together and that’s… It can be challenging. On the other hand, to your point about VGI and to the point that Commissioner Reynolds made, which was probably one of the best description of downward pressure on rates that I’ve ever heard, if you are not overbuilding the system and you’re charging at times when there’s excess capacity on the grid, that’s just an added benefit to utilisation.

And so unlike a building where… Or industrial uses that may be limited in when they can dispatch load or drop load, vehicles have this great ability to charge off-peak, not in every use case, but in a lot of use cases.

So you can charge off-peak, soak up excess capacity when there’s excess capacity on the grid, reduce rates because you’re spreading out the denominator. And so you’re getting more utilisation and you can do more load management and load shifting. When you get into vehicle-to-grid and adding capacity back to the system, it’s even better. So from the grid side, there’s challenges for sure, but there’s a lot of opportunities that are unique to being a transportation fuel supplier. And then I think as we talked about… And I’m not sure how much Steve got into this earlier, but the automakers are doing so much with regard to electric vehicles. We talked about it earlier. This is a global planning effort. This is not just for California. They’re planning these vehicles globally. That’s the trend. And where all the automakers are going. They are all in. There are literally now EV types, models in every single category of car that you could want.

“Oil and gas is no more a legacy than would be concrete, steel, fertilizer. Those are just three of the fundamental pillars of what essentially drives a global economy.” – Mark Nechodom

And what we need to do for them is to give them certainty. I think that’s one thing that we really need to focus on is that they’re in, they want to do electric vehicles, but then we need to make sure that they have milestones to hit and that we don’t change the lanes on it, we don’t change the requirements midstream, because they plan years and years in advance to make their models. And so, yeah, with that, I think that we talked a little bit about earlier one of the other things we really need to support on the costs, to bringing the cost of the cars down, and then support for charging for those that don’t have a dedicated parking space. Then maybe we’ll get into that a little bit more later.

BJ: Great. Excellent, thank you. Mr Nechodom.

MARK NECHODOM: Thanks. So, I’m Mark Nechodom, I’m with the Western States Petroleum Association. Cathy Reheis-Boyd does send her regrets. She really does enjoy this gathering and she got called away to a family matter. So yesterday afternoon, she asked me to make some stuff up, so we’ll see how I do. I’m a relatively new addition to the Western States Petroleum Association. I’m actually, what I can think of as a really fine example of the very long revolving door. I spent most of my career as a scientist a senior executive, a political appointee in the Obama administration, the Jerry Brown administration, Steve Bullock in Montana.

So I’m very, very familiar with what it’s like to have the regulatory role, but as well be part of the very aspirational planning, and then ask oneself how one becomes accountable for the outcomes of that planning. So my sympathy and sensitivity is with many of the people who’ve already served on these panels today, and in fact work with many of them because under Jerry Brown, I think there was, even for someone who was responsible for regulating oil and gas production in the state among other things, Jerry Brown always emphasized that our bottom line here is decarbonization.

So I’ve also spent as a scientist a good deal of time in that decarbonization conversation, about 25 years, and I think it’s tougher than most of us imagine. The scale and pace is just mind-boggling. So being with Western States Petroleum Association, it was really an opportunity to come back to Sacramento. I gave up a lovely house in Helena, Montana, to come back to Sacramento, and in some ways, get another shoulder push at the boulder here.

All of us are doing incredible aspirational, powerful future-oriented, even science fiction-like work. And I crave that kind of work, I’ve always contributed to it, and here oddly enough with big oil, a chance to really move this transition.

Brian, I offered a friendly challenge to the title here being about legacy, and I think probably of all the industries that might be represented in this conversation, the oil and gas industry would be immediately assumed to be essentially like the pyramids or the dinosaurs, some legacy to be put into a museum. And I would really challenge that. Oil and gas is no more a legacy than would be concrete, steel, fertilizer. Those are just three of the fundamental pillars of what essentially drives a global economy.

“Californians drive 380 billion miles every year. That’s five-and-a-half round trips to the sun every day.” – Mark Nechodom

And I would say that oil and gas… Consider that oil and gas is essentially the management of carbon chains. We happen to get them out of the ground, we can get them in lots of other places as well, but what the real point is we have carbon chains that become important part of our energy portfolio, that I don’t think we’re going to walk away from all that easily. So I really urge us all not to get trapped into the binary choice between molecules and electrons.

I really urge us all to think carefully about all of the above, because as, and as the commissioner said during our keynote, I was at the same Stanford Energy Week, there is no doubt whatsoever that it will take everything we’ve got from every sector. So I would submit that the oil and gas industry being an incredible concentration of scientists, engineers, geologists, political scientists, an enormous amount of talent that can bring solutions to the right tables. And part of our fear, I’ll be very frank with you is here in California. Because of our enthusiasm and our aspirations that the oil and gas industry has been less and less able to sit productively at solution-oriented tables.

And I’m not whining, this is not me complaining so much as saying, given the amount of talent and given the attention, and given the billions of dollars that are being invested by our industry in low and no carbon fuels, it makes sense for us to be embraced, maybe not happily, but embraced as partners in this discussion, how do we get there? Because we’re not soon in 22 years about to say no to molecules and yes to electrons. I don’t think we’re gonna get there that way. I also think it’s important for us to keep in mind, and really this is… I wake up with this every day. It’s a little weird, I’m a nerd, but this triangle sits in my head in some form every day. Californians drive 380 billion miles every year. That’s five-and-a-half round trips to the sun every day. 380 billion miles.

That powers the fourth largest economy in the world measured by shared GDP. This is an enormous machine of creativity and culture and production, and that runs currently on fossil fuels. So this is harder and bigger than many people in the public imagine, and part of our job, and not just in my industry but all of us, is to educate the public on those basic facts. The basic facts of California spend about $74 billion every year out of pocket on gasoline alone. And that’s not diesel or jet fuel, just gasoline alone. So those are the kinds of things where when I ask myself, what does our industry do even while… Let me whine for a minute, even while getting beat up every day? But the fact is that our industry does meet an enormous demand with affordable, reliable and ever cleaner fuels all the time with a huge industry. So I’m gonna leave it at that, but I just thought I’d offer that as kind of a perspective in framing on the notion of legacy. Thanks.

ROADMAP 2035, Panel 3 – The Future vs. The Past: The Impact on California’s Legacy Industries. Panelists: Christopher Benjamin, Pacific Gas & Electric; Jon Costantino, Tradesman Advisors; Mark Nechodom, Western States Petroleum Association; Laura Renger, California Electric Transportation Coalition. Moderated by Brian Joseph of Capitol Weekly. Photo by Scott Duncan, Capitol Weekly

BJ: I’ll have some follow-up questions on that in a moment, but first, Mr. Costantino…

JON COSTANTINO: No, you’re fine. Happy to be here. Thanks Tim and Rich for the invite. For those of you who don’t know me, I’ve been around a while, and I represent a variety of companies. But as Kip Lipper said, these thoughts are my own and not attributed to anybody.

So let’s start with legacy versus future. Businesses are gonna do what makes money, and if you’re a Travel Plaza owner, you are gonna sell hydrogen or you’re gonna sell electricity to your trucks that are coming. So you’re not gonna give up your real estate and go pack away just ’cause you sell gas and diesel today. And if you’re a refiner, you have an obligation to your shareholders to continue in whatever capacity that you can. And we’ve had two refiners completely switch over their refineries today. Low carbon fuel standard is driving flex fuel vehicles, E85. There’s carbon capture happening at bio-refineries in the Midwest today. So the goal of the company is just this… Basically stay in business, and if the regulations are driving… The policy is driving a shift, they’re gonna be part of that mix.

I was sitting here thinking about the automobile, it’s on both sides of this equation. It’s the future and the present and the past. That’s the three sides to the same equation don’t know how that works. But I’ve seen companies that fought… I don’t wanna say fought, were not necessarily supportive of a change, but once the state made it clear this is the direction it was going, then the signal is, get on board or get left behind. And whether it’s hydrogen, bio-fuels, carbon capture, low carbon fuels, battery components, there are a lot of traditional legacy companies that are working on the future of low carbon technologies. And then you have what California has historically been is a bed of innovation.

And so that could be a legacy industry in California’s Silicon Valley and clean tech. Well, there is a number of companies that have really jumped on the scene for low carbon industrial heat, more efficient solar and steam, and a variety of things. So I guess I would say the evolution of each business is a continuum of where they are and where they’re going, but there is not… As Mark said, no one’s gonna shut the door just because the policy changed. They’re gonna ride with it, and I think consistency of policy is a key driver. If you think it’s gonna be there and that’s the market you’re gonna have to sell into, then those are the changes you’re gonna have to make.

“One in 7 EVs in the country are plugged in to PG&E’s grid… So here in California is actually a glimpse into the future for other places in the country.” – Christopher Benjamin

BJ: I’m glad we did it this way because now I have a ton of questions for you. I hope you are all ready to be on the hot seat. The first place I wanted to start was the discussion about preparing the grid for being the primary fuel source for transportation in California. Forgive my own ignorance, but what does that actually mean?

What is gonna have to happen physically? What is actually going to have to change in California in order for the grid to be… The grid that we have now, what is gonna have to happen to it in order to be able to provide the power necessary to be the primary fuel source for transportation in California? Are we gonna need bigger facilities? Are we gonna need more lines? What specifically is going to need to change in this community, in this state in order for that to happen?

CB: No, it’s a great question, and I think it has come up, I think consistently throughout the day. And I like the way you framed it sort of around evolution, and I think that evolution is already underway. The sort of earlier version of the grid and how electricity was supplied, not only here in California but everywhere was you had sort of a one-way flow. You had sort of these large-scale, utility-scale sources of electricity, and then you had the customers on the other end. But one thing that has changed is it’s become much more decentralized with just a proliferation of distributed energy resources. So it’s become more complex on the customer side, with the customer is actually participating, so you have that two-way flow.

BJ: You’re referring to customers that have like solar panels. Is that what you’re talking about?

CB: Solar or battery storage, electric vehicles. So there’s much more customer involvement in the grid, so they…

BJ: They can provide their own energy back to the grid is what you’re saying?

CB: Exactly. So it’s become more of a proliferation of these distributed energy resources. So you have that two-way flow. You’ve got much more, much higher levels of renewable energy on the grid. Which of course the solar energy is generated when the sun is shining, the wind when it blows. So you need a lot more energy storage within the grid in order to balance those intermittent variable resources to provide reliable energy. Climate change is occurring. And so we are seeing various physical risks to the system. Whether that’s… And I talked about it earlier, extreme weather, wildfire risk.

And so there’s a real focus on making the grid more resilient to the different impacts of climate change. And we’re very fortunate here in the state of California to have so much climate science that’s available. There’s a great resource called Cal-Adapt, where the state of California has made just a wide variety of climate projections and information available to planners.

So you can actually do… Build that into planning of the grid, which we are certainly doing, as are the other utilities. There’s a need to as we transition to growth and electrification for more capacity for the grid. And that’s at all three levels. So it’s transmission capacity, bringing more electricity throughout the system, distribution capacity, substation capacity. So it’s sort of at the macro and the micro level. So it… And a need for more visibility into the grid, so more technologies and sensors so that you can see the flow. So it’s becoming more sophisticated and more intelligent. And I think that’s really critical because as Laura was mentioning, we’ve got pretty large projections for electrification growth in the state of California, but it’s not all gonna happen kind of in a straight line or in one place.

It’s gonna be happening in a more I’d say sort of incremental, so, way and so what it really, I think leads to is a more holistic and longer term planning horizon. So that we can actually do in… I think it’s been mentioned a couple of times today, this idea of better forecasting of where and when this is gonna materialize so that we can plan for it as early as possible. So that’s sort of… And it’s not the future, this is happening right now. As I mentioned, 1 in 7 EVs in the country are plugged in to PG&E’s grid. We’ve got a proliferation of rooftop solar. So here in California is actually a glimpse into the future for other places in the country.

BJ: So bottom line, basically when you talk about, improvements of the grid, you’re talking about more capacity being able to hold more energy, being able to move it back and forth more freely from the customers to the utilities themselves, and then also being able to see exactly where it is. Is that a fair way to put it?

CB: It’s that and one other thing that Laura mentioned, which I think is really important, is this time of day.

BJ: Yeah.

CB: When people are using the electricity because the electricity usage in the state is not flat.

BJ: Sure.

CB: During the day. So it peaks…

BJ: The peaks and valleys. Sure.

CB: So a real focus on what we would call load management or the idea of being able to incentivize people, through rates or other means, to use electricity to vary their electricity at those peak times a day and have more control of that. ‘Cause then you can actually… It minimizes the strain on the grid. And we’ve… Last couple summers we’ve experienced these extreme heat events, in California, and it’s been a… Just a renewed focus on the role of demand response. And we have many voluntary demand response programs, but bringing more certainty to that so that we can help meet those extreme conditions in a more sustainable way and in a way that delivers a better customer experience. So I think that that load management piece is a really exciting area of innovation, and there’s a lot of work underway to figure out how best to do that.

BJ: Ms. Renger, it sounded like you had something you wanted to add.

LR: No. I was just gonna talk about load management and demand response. It’s not a physical asset, but it’s a conceptual framework, I guess that acts as a physical asset.

BJ: It’s the planning tool. Is that what you’re talking about?

LR: No, it’s a real-time tool.

BJ: Okay.

LR: It’s a customer behavior tool that if we talk about V2G [Vehicle-to-grid], which is taking the capacity from the battery of a vehicle and giving it back to the grid, which is very exciting. You get 92%, 93% of the benefits from a planning perspective, from vehicle grid integration, which is just having your customer turn off the charging during peak periods because electricity is location specific.

BJ: Sure.

ROADMAP 2035, Panel 3 – The Future vs. The Past: The Impact on California’s Legacy Industries. Panelists: Christopher Benjamin, Pacific Gas & Electric; Jon Costantino, Tradesman Advisors; Mark Nechodom, Western States Petroleum Association; Laura Renger, California Electric Transportation Coalition. Moderated by Brian Joseph of Capitol Weekly. Photo by Scott Duncan, Capitol Weekly

LR: So if I live in a certain area where our peak is… The time now is 4:00 to 9:00 in southern California, but really the peak is about 6:00 to 7:30. So if we can get our customers just to turn off anything they don’t absolutely need during that period of time, that’s just as valuable as giving it back to the grid. It’s not like you get to keep the electricity if you don’t use it. You don’t get to squirrel it away like cookies, once it’s gone, it’s used, it’s used. So demand response is inexpensive and relatively speaking, and it has so many benefits for…

BJ: Is there an education component to that as well, I imagine?

LR: Yes. That’s a really good point. And actually somebody, I mean, your company talked about that with me a while ago. We do need to do a lot of education and I think the state and the CISO has done a really good job with the flex alerts and but we do, I think, need to do a little bit more. And what is tricky in that regard is that you also don’t want to scare people. So people in their head, customers think, “oh, I’m gonna have to turn off my charging well then I shouldn’t get an electric vehicle.” And that could scare them.

I’ve owned an electric vehicle since 2014 and it never has impacted my charging, because once you get educated and you know your car and you know where to charge, or if you’re lucky enough to have charging at home, you can just work around it. And it has very minimal impact, but it takes some time. And we talked about that earlier about sort of the uptime to get educated on your own vehicle and your own charging and where the chargers are, etcetera. And so I think that’s what scares people a little bit.

BJ: It almost sounds like when you get a new cell phone and you have to sort of get used to.

LR: Exactly.

BJ: Oh, I have to charge it now versus, a day from now.

LR: Well, for a lot of us, it is like a cell phone and your app for your charging is on your phone and you hit the button or you have it automatically scheduled to stop charging during your utilities peak period.

JC: So, can I weigh in?

BJ: I was just… I you had that glint in your eye, so please.

JC: So, my focus has over the last two years has been on what’s called the Advanced Clean Fleet Rule, which is a medium and heavy duty zero emission vehicle mandate, as opposed to the advanced clean cars, which is light duty. And time of use rates are gonna impact all the UPS and FedEx trucks that come back at 6 o’clock and need to be ready in the morning. It’s gonna be a lot different than if I drive and park at work and come home, I can turn it on at midnight or it’s all automated. So the heavy duty sector is gonna look a lot different than the personal use sector. And I’ve known for a long time that if I turn my dishwasher on at peak hours, it’s gonna cost me an extra nickel.

“I remember under the Brown administration… rolling extremely productive farmland out of production in order to replace it with solar panels… counties would lose that revenue source and not replace it because solar doesn’t pay local taxes. And I can tell you that there were some very tense conversations about that.” -Mark Nechodom

Well, that may or may not matter, but if it’s an extra dollar then I’m thinking about it. So I think that time of use and customer behavior is really gonna impact folks on the medium and heavy duty side more. The original question was, how’s it gonna look different? Well, I think every location that’s gonna have a charging station or a hydrogen station that doesn’t have one now every depot, every plumber’s yard, every… They have to get that has to get built up. You have to find a place that’s not in an easement, that’s not in a driveway that’s not next to the loading dock. That’s not right.

So all that planning, you may need additional substations. You may need… It seems like the total megawatts is gonna be handled, but it’s where are you at in the port? Where are you at in an airport? Where are you at it… Those are the where the real rubber, it meets the road. And I live in a rural part of Northern California, and reliability is a concern, because trees fall on wires and so grid hardening is a… I know PG&E is working on that. So but those are just some of the things that popped into my head when you asked the question.

MN: So I’m happy that the panel has so far responded on the demand side and the… Bringing the technology into the 21st century. And I think that’s completely appropriate. What we have not yet talked about is where has the generation come from?

BJ: That’s where I was just gonna ask you, sir.

MN: Well then I will give a very poor answer. What the really impressive thing about California, and I’m really very impressed by this, is in the last 21, 22 years, we in 2001 had about 55 gigawatts of installed capacity in the state. Most of it is base load power. That is firm power. You can basically ramp up or ramp down in 10 to 20 minutes because most of the natural gas or coal. We have now added, we’re up to about 83 gigawatts of installed capacity. Most of that increase is intermittent power, solar and wind primarily. And as we all know, the duck curve, the demand during the day is not concomitant with the amount that we’re generating from those intermittent sources.

So when we imagine increasing the generating capacity to about three times its current capacity to meet the electrification of the transportation sector, I start imagining solar panels and wind farms from here to Utah because at six acres per megawatt installed current solar efficiency, that’s a lot of land.

And I remember under the Brown administration having the sole authority as the director of the Department of Conservation for basically rolling extremely productive farmland out of production in order to replace it with solar panels. And I had to remove those by act of the director from the Williamson Act, and counties would lose that revenue source and not replace it because solar doesn’t pay local taxes. And I can tell you that there were some very tense conversations about that. That’s a micro, micro or nano level policy level struggle that we’re all going to have as we figure out where are we gonna generate all this stuff.

BJ: You suggested earlier, in your opening statement that oil and gas should not be looked at as an ancient or a pyramid like, I think as you put it form of energy. So how is oil and gas in a zero emissions world going to be a player in generating capacity? How can oil and gas do that?

MN: Yeah. So I’ll avoid the technology and all the nerdiness around that. But here’s the basic equation. Currently in the Scoping Plan to get to 2045 with net zero emissions, the scoping plan anticipates about a hundred megatons per year of carbon sequestration. And in fact, the bottom line for the scoping plan, and most of our energy planning is we cannot get there without carbon capture and storage of some kind, or carbon engineered carbon removal of some kind. Currently it’s anticipated that the big… What would the accountants call it? The kind of the account reconciler is Direct Air Capture.

That’s on the very, very beginning of the slope of development for technology and efficiency. So what I really appreciated about the earliest panel, the first panel was let’s stop talking about specific technologies and targets and let’s start talking about decarbonization and what’s competitive in the space about the lowest carbon megajoule that you can deliver efficiently and affordably. And oil and gas currently, and for the last century has been… And I’m not declaring victory, this is not biased in any way it’s simply a physical fact, is that crude oil is the highest concentration of usable energy per cubic metre per megajoule delivered. It is the densest form of energy that we’ve managed to master in any scale.

“I think our friends at some of the ENGOs that we work with could refute that gas is the most cost-effective unit of energy for all populations when we look at the impacts to public health from the emissions.” – Laura Renger

Now, can we replace that with other technologies that do not have carbon chains at their very beginning? I don’t know. But I do know that carbon chains, crude oil, whatever you wanna call it are an essential part of that equation at this point.

And as almost all of our panelists have said, the competitive replacement of that seems to be what the real problem is. ‘Cause I don’t hear us saying, “Let’s claw back a $3.2 trillion economy in California.” I don’t hear us saying that, maybe we really want that to happen. So I’m concerned that the eagerness to get rid of oil and gas, because it is easily demonized, and I can readily admit that many of our members of our industry have contributed to the negative view. I think that was softly put. That I think we’re too eager to say, let’s shut down production, and that somehow leads magically to climate mitigation. And that’s just not true.

California produces out of the ground between 25% and 27% of what we consume, and the rush to shut down production in California where California produced is under the strictest environmental controls anywhere in the world. I know I regulated it, and shift it to where?

Currently it’s Saudi Arabia, Ecuador, Venezuela, I mean, it’s offshore and we do not yet have the port capacity or terminal capacity to replace current multiple hundreds of thousands of barrels per day of consumption in California with imports or refined product. There’s our worry, is that somehow we may have our Diablo Canyon moment in the fuels market, and by the time that happens, many of our producers, our refiners will have said, “It’s not worth $800 million to do a turnaround on that refinery.”

I’m not predicting. I’m not… I can’t do that as a member of WSPA, but I can say that investor calls are really chilling moments every quarter for many of our members. Because investors are saying, “I wouldn’t put 800 million into that.” And so what’s been imagined in the scoping plan and other documents as this kind of gradual decline curve to 2045, is actually a series of really bumpy cascades in which each one of those drops there is likely to be things like price spikes on fuel.

There’s likely to be hedging and risk mitigation strategies that are extremely expensive. So we’re not looking at this kind of science fiction Star Trek version of smooth transition. We’re looking at the kinds of things that historically in the last two centuries have led to massive war and disruption. Again, I’m not being dire and predictive, I’m simply saying, “Well, I’m a student of history and it’s like, it’s kind of been rough when we’ve done these things before.” So I would just caution all of us to think very carefully about the unintended consequences of so readily and eagerly going after oil and gas as if it can be sort of taken out of the picture and we can move on. And it concerns me.

BJ: To summarize your point, Mr. Nechodom, you’re saying that oil and gas are still at this moment the most efficient and most cost-effective fuel source. Is that…

MN: Under current technologies and being the son of a nuclear engineer, I think nuclear has great promise. But my father suffered the same thing under the nuclear industry as the oil and gas industry is going through right now.

BJ: So my guess is, is that the other panelists have a thought on that or have some responses to that.

LR: They’re gonna take into account the health impacts, the cost of days away from work, from the childhood cancer rates, the… We haven’t really had, I don’t think too many ENGOs on the panel today, but I think our friends at some of the ENGOs that we work with could refute that gas is the most cost-effective unit of energy for all populations when we look at the impacts to public health from the emissions.

MN: Let me be clear, Laura. I’m talking as a student of the laws of thermodynamics. I’m not talking about public health impacts, environmental…

LR: Well, but you made a cost argument.

MN: And I have made a cost argument and I’m not being an advocate for oil and gas. What I’m simply saying is, we have found in the last century and a half that the highest density fuel that is manageable, distributable, and usable by end use has been fossil fuel. I would love to see us not have that be true in a century from now. What I’m saying is the transition is not going to be as quick or as smooth as many of us would like to imagine.

BJ: Does anyone on the panel have an idea of how to make it more smooth and more quick? Or is what Mr. Nechodom talking about in your view not a concern?

JC: I would say the policies of the state are already shifting the cost arguments around the low carbon fuel standard. If you’re an oil and gas product, you have an additional cost burden. And if you have a, if you’re a low carbon fuel, including electricity, you get a credit. So you get a, there’s a subsidy, and so that flips the cost argument on its head a little bit. And as the regulation gets more stringent, the cost to produce biofuels and EVs is cheaper. And the cost to sell the market petroleum products gets more expensive.

And so that’s already happening now. We, the laws of economics dictate that at some point, if we shut down enough demand, you’re not gonna need every refiner that’s currently operating. And so I would not disagree with Mark that these things don’t happen in an orderly fashion. Somebody’s gonna make a decision in a boardroom somewhere, and that will be felt by every consumer. Now the economy will not collapse and it won’t be dire that way, but it’s certainly more jaggedy than smooth in the next 25 years.

ROADMAP 2035, Panel 3 – The Future vs. The Past: The Impact on California’s Legacy Industries. Panelists: Christopher Benjamin, Pacific Gas & Electric; Jon Costantino, Tradesman Advisors; Mark Nechodom, Western States Petroleum Association; Laura Renger, California Electric Transportation Coalition. Moderated by Brian Joseph of Capitol Weekly. Photo by Scott Duncan, Capitol Weekly

BJ: And please…

LR: Too, in terms of the just transition, I do think that that is something that is as a state we need to really look at. Not for the oil companies profits, but for the workers. They do employ a number of our Californians with good paying jobs, and we’ve got to figure out a ways… Scott talked about earlier… to transition in a fair way that we still have family sustaining wages. And a lot of the jobs in the new energy economy will provide that type of family sustaining wage and training and ability to be more inclusive. But we have a long way to go to get there. So I agree with you on that point. I think it is important that we focus our efforts on workforce transition and development.

CB: Another thing I’d add to that is it’s the transition that we’re embarking on is complex. And what we’re talking about is transforming our energy system, as we know it, at scale quickly in order to stave off the worst potential impacts of climate change. So the stakes are, high on doing this and getting it right, but it’s new and it’s different. And we’re gonna learn a lot, I think, along the way. I do think that and this has been, I think a consistent theme during today’s discussion is we’re needing needed to change the way that we plan the energy system and do it much more holistically and collaboratively and in a more nimble manner. And I think there are some really encouraging signposts along those lines.

One is just the I think the state’s level of maturity with the planning around, the scoping plan, the way that various agencies have acknowledged the need and are working. We’ve heard about that today. Different agencies working together to line up their planning timeframes and horizons, but also locally, I spent the day yesterday in Napa at the first ever Napa Climate Summit. And there there’s a lot of really innovative projects happening in that region related to energy. And so the idea was, “Well, let’s get everybody in the same room along with the utilities, along with the local officials and have more visibility into holistically, how do these plans add up? What are the changes that are gonna be needed? What are the expectations for the utility?”

“For most people, 80% of charging will happen not in a public space. So for convenience store owners, that’s gonna be a problem.” – Laura Renger

And I think that the more that we do that, where it’s sort of more proactively thinking regionally about the changes that are happening and that are coming so that we can plan for it, it’ll allow for a smoother transition. So and there was a comment earlier, just even with regard to how we planned the grid from that sort of just in time to the longer term planning horizon. And I think that you’re seeing that happen. And I think that’s really, really important. And I do think it’s helpful that California has clear milestones to hit because it gives those benchmarks and those bogeys, if you will, to aim for. And and so the the policy signals being so clear in the state is I think a really helpful thing relative to maybe some other parts of the country.

BJ: I have like 10 more questions listed here, but I’m seeing we’re getting out of time, so let’s let’s open it up to questions, from the audience.

TF: Okay. I don’t know if there’s…. we do have an audience question here.

AUDIENCE MEMBER: Hi. I just wanted to bring up the discussion of saying that investors are not willing to pay for this right now. If that is the case, and it’s a purely economic question of whether we’re gonna invest in clean energy, how can we create a valuation of the health of future generations, and how can we incorporate that value into an economic number to create change? Because it seems like that is something that needs to happen for this transition. And so I’m just wondering if anyone has any comments on that.

CB: I would just say there is strong interest, and you can’t think of the investors as sort of one kind of monolithic group, in clean energy. And there’s just been growing interest. I think growing recognition among investors about climate risk and the need to transition our energy system to reduce the climate risk. There’s a lot of focus on improved disclosure from companies about the climate risks they face, the transition plans, the goals, the targets. There’s a proposed rule from the US Securities and Exchange Commission, that has some pretty specific proposals in terms of disclosure so that investors have better information about companies transition plans and the risks that they’re facing.

But I think that there’s a huge opportunity here to invest in a cleaner energy future. There’s tremendous risk and challenge and I think that’s all it’s really important to focus on that. But I do think, there is opportunity here for innovation and different ways of managing our energy system. And we certainly see just a lot of interest in that transition and the future and what we are doing to plan for that.

LR Better answer than I could’ve given, so, thank you.

BJ: Do we you have any other questions from the audience.

“If the infrastructure does go through that bumpy, clunky cascading step function decline, we could be looking at anywhere between $10 and $15 a gallon for just gasoline” – Mark Nechodom

TF: I do have another question. So we’ve alluded to this that California’s oil and gas industry is tremendous. It is a huge part of our economy, and we’ve talked about how that would impact things on the big picture. I’m wondering more on the small picture, what is gonna happen to the thousands and thousands of gas stations, people that are trucking oil and gas around in their vehicles. I mean, not people that are using it, but people actually delivering it to the gas stations. That’s a huge industry. And is there anything being planned for the transition as we step away from that? I mean, this is only 12 years away. I’m just wondering if anyone is looking at that aspect of this.

LR: I don’t have an answer to that in particular, but I do think one thing to add to that question is that when we look at predictions for future charging, we predict that for most people, 80% of charging will happen not in a public space. So for convenience store owners, that’s gonna be a problem. That’s a huge portion of their business that if those trends materialize, they won’t have people stopping to get Cokes. And it’ll have to just, you will just do like what EV drivers do where you go to the 7-Eleven just to get a Coke, not to get, not because you’re there for gas.

JC: I know we’re running out of time. So real quickly, you mentioned 12 years. 12 years is the sales mandate for all these things, but we’re gonna have liquid fuels, whether they’re fossil or biofuels in internal combustion engines for several decades, in significant quantities.

But I mean, but significantly declining quality quantities. I mean, 12 years, it’ll have to be a 100%. And how much longer will fossil fuel powered cars continue to be driven? And I think that’s the other thing is if you don’t have an easy to find fuel source, that’s gonna add to the decline in the fossil fuel. So that’s my question is what happens to all of this infrastructure that currently exists that in ostensibly 20-25 years will be of relatively little value?

LR: Oh, Well…

BJ: You’re dying to answer, go ahead.

MN: I’m not dying to answer, in fact I’m dying not to answer. There are 36 million cars in California. Twelve years from now, if the average retention cycle is eight years per car, that is those who don’t nurse everything out of their car for 22 years, which is the other horizon. Actually, a lot of people and a lot more people are going to be wanting to squeeze every mile they can out of their internal combustion engine. And that means that if the infrastructure does go through that bumpy, clunky cascading step function decline, we could be looking at anywhere between $10 and $15 a gallon for just gasoline alone. And we’ve done actually some of this based on some public, data and International Energy Agency calculations and EIA calculations, these are sort of standard risk hedging factors that are common in the industry.

And we have already had panels talk about the dis-equality in the system. Power always distributes unequally and lack of power always distributes unequally and that kind of bumpiness can be mitigated to a degree. But keep in mind also that a $1.28 for every gallon of gas that’s purchased in the state goes to programs like the Greenhouse Gas Reduction Fund to incentive program for EV purchases. So there’s a whole bunch of stuff in the current economy of liquid fuel transportation that will radically shift and again, not shift smoothly.

ROADMAP 2035, Panel 3 – The Future vs. The Past: The Impact on California’s Legacy Industries. Panelists: Christopher Benjamin, Pacific Gas & Electric; Jon Costantino, Tradesman Advisors; Mark Nechodom, Western States Petroleum Association; Laura Renger, California Electric Transportation Coalition. Moderated by Brian Joseph of Capitol Weekly. Photo by Scott Duncan, Capitol Weekly

BJ: We’ve got a couple more minutes here. I, wanted to sort of highlight a theme that’s been running through not only this conversation, but every conversation that we’ve had today. And that’s the tension between economics and, for lack of a better term, the ethics of protecting our environment. And my sense is this whole issue, zero carbon emissions, the future, all of that comes down to that balance. You know, how do we balance between people’s jobs, their livelihood, our exploding economy and doing the right ethical thing for the planet and for our future generations?

And I’m just wondering to close if, if each of you might sort of talk about how you weigh those two huge values and where you come down on that and how do you balance those two things? If that makes sense. I know that’s kind of airy fairy kind of way of putting it, but if there’s a way you can, kind of…

CB: What you’re talking about is sustainability and the way that’s how we… That we focus on something we call the triple bottom line, which is how we frame sustainability. And it’s people, planet, and California’s prosperity, which is really that sort of that economic health and economic vitality. And one word I think that you’ve heard come up a lot today is just this balance, just finding the right balance because we need to save the planet, but we have to do it affordably, and we have to really think about the people aspect of this. The workforce aspects, the equity implications, the just transition and how we do it, and it’s not easy. But that is really the…

Somebody earlier talked about a Rubik’s cube. That is the Rubik’s cube that we’re trying to solve, is the right balance between those three elements, and that is… That’s a sustainable future. And I think we’ve got policy signals, as I mentioned. How we do this is gonna be… We’ll make some mistakes, we’ll try different things. But the more that we are collaborating across industry sectors and realising how much we are all connected and reliant on one another, I think, that’s really our key to our shared success is everybody kind of understanding the really important role, and I mean everybody, and sort of meeting and their commitments, and that includes us certainly, as well.

LR: Right, I just think we need to expand… Not expand, but be more honest about what are we really comparing in terms of the paradigm. We’re not… Yes, there are certain costs that are more easily quantifiable to have this be the tension, but when you look at the health impacts, when you look at the impacts of climate change, the cost of climate change, all of the migration that will happen, the displacement… All the horrors that are going to come, they’re gonna have real significant economic impacts.

We’ve already seen it with wild fires. We’ll see more of that. It’s not a fair comparison. And I think on the plus side, the cost of electric vehicles just keep going down, the batteries get better and better, the technology gets better, the grid gets cleaner. So I think what we need to focus on is making sure that this transition transition’s is done equitably and that we’re putting our state funding and our public funding into those communities that need the most help.

MN: I hear your question, Brian, as really an intergenerational equity question. And intergenerational equity has always been part of the human experience. And for most of our, at least, known history it’s been a cultural dynamic where unmeasured things are deeply meaningful to our behavior. In the last couple of centuries that’s shifted from a cultural calculation to an economic calculation, and we’re doing fairly poorly at completing the equation.

My sense is that with climate change and the environmental movement of for the last 50 years, we are starting to move back to cultural calculation, where meaningful change in behavior is done, not because it’s in your own interest, but in somebody else’s interest. And I hold out a great deal of hope in and that even though I’m a technocrat from a cultural and philosophical point of view, I hope very much that we begin to put more on the weight of the foot of cultural calculation.

JC: And I’ll just wrap up by saying that if you transition between now and 2050, it seems easy. If you say, “We gotta do it in a week,” it’s much more harder, it’s much more expensive. And California has put out some pretty robust near-term goals. Some of these decisions people have to make putting utilities and fleets are literally in the next six months. They’re making decisions that will impact everybody. So the longer we wait the more expensive it gets. The longer the transition period the easier it is, but you We can’t wait. You We gotta start. So I think the word was ‘balance,’ and I’ll just leave it there that… It’s a tight rope people were we’re walking.

BJ: I think I’d like it if you all join me in thanking our panelists here for a really robust discussion.

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