As the oil industry spent millions to block legislation to combat climate change, Jeff Martin recalled 15th-century mariners and headed on a different tack.
Martin, the chief executive officer of San Diego Gas & Electric, endorsed Senate Bill 350, the legislation that initially tried to compel a 50 percent reduction in petroleum use. The bill also required that utilities get 50 percent of their electricity from the sun, wind and other renewable sources by 2030. Martin said his utility will meet that goal, no problem.
Before he explained his position, Martin provided a quick tutorial on Magellan, da Gama, Columbus and the other explorers who set off in search of new trade routes. They didn’t sail off the ends of the Earth and discovered new worlds.
“We’re in a new age,” Martin told me. “We think every map we’ve used is wrong.”
Without a doubt, oil industry lobbyists and consultants won when Senate President Pro Tem Kevin de León cut the oil sections from his SB 350. But the final version of SB 350 that awaits Gov. Jerry Brown’s signature still is significant, especially for the future of the utilities.
The bill will enshrine in law California’s lofty new goal: “Reducing emissions of greenhouse gases to 40 percent below 1990 levels by 2030 and to 80 percent below 1990 levels by 2050 will require widespread transportation electrification.”
Martin’s company endorsed the legislation three weeks before its passage. The other two major privately owned utilities, Southern California Edison and PG&E, followed San Diego Gas & Electric’s lead.
They all agree to procure half their electricity from renewable sources within 15 years. They also got plenty in return. Specifically, they will be obligated to provide electricity for a million-plus more electric vehicles that will be on the road in the coming decade.
The legislation approved on the final night of the legislative session grew by more than 20 pages to 65 pages. Much of that new verbiage enhances the status of SDG&E, Edison and Pacific Gas & Electric Co. It may even cement their future.
In the Assembly, big business-backed Democrats, who had fought the bill when the oil industry opposed it, ended up voting for the measure. Whether they realized it or not, the final bill still targets the oil companies by forcing competition with the utilities.
To electrify the transportation system, the utilities must provide electrons to tens of thousands of new charging stations at homes, apartments, businesses and malls.
When it was introduced at the start of the year, SB 350 did not mention the notion of transportation electrification. In the final version, the words transportation electrification are repeated no fewer than 17 times.
“We believe clean fuel is an opportunity,” Martin said.
Other utility executives see it the same way. Now, fewer than 2 percent of the cars on the road are electric. In 15 years, as many as a fourth of the vehicles will be zero-emission vehicles, most of them propelled by electricity.
“What’s very powerful is that there is a role for the utilities to play in transportation electrification,” said Aaron Johnson, a PG&E vice president. “It is a growth opportunity.”
In the Los Angeles area, Ron Nichols, Southern California Edison’s vice president for regulatory affairs, estimates that there will be 30,000 charging stations at apartments, parking lots, businesses and other locations within three to five years, and 100,000 in seven to 10 years.
“It certainly puts some competition to the use of petroleum for transportation,” Nichols said. “There is no question about that. That is intentional by the Legislature.”
In its wisdom, the California Public Utilities Commission once barred the utilities from getting directly involved in transportation electrification. That began changing last year when the commission asked the utilities to submit proposals. With the likely signature of SB 350, the PUC and the utilities regulated by the commission must get involved.
It couldn’t come at a better time for utilities. They’ve been losing market share to rooftop solar, fuel cell technology and other sources of small-scale generation. Some experts say utilities’ business model is crumbling. Others say the utilities are in a death spiral. Electrifying the transportation system offers them a future source of revenue, and could help consume excess electricity generated by solar arrays and wind turbines.
Martin pointed to additional clean-fuel opportunities including electrifying freight delivery, ports and shipping. In other words, we’ll be getting back to the future by relying on the elements, not unlike the mariners 600 years ago.
The oil industry fights California over clean-fuel standards and has managed to maintain its market share, unlike many other industries, the utilities included, that have faced deregulation, challenges by upstarts and disruption.
“Opportunity comes in different shapes and sizes,” Martin said. “Disruption is part of the life-force.”
The oil industry won its battle against de León and his legislation. Who would think of PG&E, SCE and SDG&E as upstarts and disrupters. But if SB 350 works as envisioned, the oil industry will face a new challenge, maybe even an existential one. Let the competition begin.
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