π California shows decline and degrowth is a choice, not destiny
There were two stories from The New York York Times over the past couple of days that really caught my attention and made me really want to write about them for this Faster, Please! issue. But which one? How to choose? It was a minor conundrum until I realized the two pieces represent different aspects of the same story, a tale of government and voters choosing pursuit of Down Wing scarcity over Up Wing abundance.
A summary of the articles: In βShrinking California Still Dreams, but More Modestly,β Los Angeles Bureau Chief Corina Knoll reports that California, a state thatβs been a massive cultural, economic, and political force for 170 years, is facing a population stagnation over the next four decades. The Golden State has unexpectedly lost more people than it gained in each of the last three years, shrinking to fewer than 39 million people in 2023 and reversing its long trend of growth and expansion. Knoll writes that the stateβs once-bright allure as a place of endless economic opportunity and upward social mobility has faded in the shadow of a housing crisis, a widening economic divide, and the COVID-19 pandemic.
Knoll points out that βthe median sale price of a single-family home hovers around $830,000 and homeless encampments proliferateβ and concludes that the βpromise of easy living in Mediterranean weather has faded.β
The other NYT piece is βThe Race to Unlock a Vast Source of Clean Energy Beneath Our Feet,β in which reporter Brad Plumer explores the huge potential of geothermal energy. The US Energy Department estimates the so-called βsun beneath our feetβ could power the entire country five times over. But geothermal only produces 0.4 percent of Americaβs electricity currently, and so the DOE has launched a major push to develop technologies to harvest more of that thermal potential. Until recently, geothermal energy has been limited by the scarcity of natural hot water reservoirs underground. But new drilling techniques developed by the oil and gas industry could enable geothermal companies to tap hot, dry rocks almost anywhere on the planet. Numerous start-ups are using different methods to create artificial geothermal reservoirs.
βThereβs a virtually unlimited resource down there if we can get at it,β says Tim Latimer, co-founder and chief executive of Fervo Energy, a start-up that uses fracking techniques β drilling down into solid rock, injecting water at high pressure through one well, fracturing the rock to let the water pass through, and then collecting the heated water through another well β that US Geological Survey estimates could provide more than 500 gigawatts of electric capacity in the United States.
Limiting energy means limiting growth
On its own, each NYT piece tells an interesting story. But when theyβre read in tandem, a much deeper narrative is revealed.
The following bits from each of them form the connective tissue. In βShrinking California,β reporter Knoll offers a telling bit of degrowth philosophy:
America has always had a frontier mentality, but perhaps that should be reimagined, said Chris Tilly, a professor of urban planning and sociology at the University of California, Los Angeles. βMaybe itβs time for us to grow up and realize we live in a world of limits,β he said. βThat could be a level of maturity. If California is in a position to lead the country and come to terms with its limitations on growth, that could be a way California could still be in the lead. Which could be an interesting twist.β
But is that βworld of limitsβ and are those 'βlimitations on growthβ simple facts of reality β or at they the result of intentional choices? I, along with many others, have written about how the stateβs housing shortage is a result of NIMBY policies that reduce housing affordability and thus erode or even eliminate the wage gains from workers moving to high-income, high-productivity regions such as the Bay Area.
Housing isnβt the only self-imposed limit, of course. So is energy. California has for years shut down nuclear reactors and rejected proposed new ones such that only the Diablo Canyon plant north of Santa Barbara remains. (A California judge last weekΒ rejectedΒ a lawsuit from environmentalists seeking to block the stateβs largest utility from extending the plantβs operating life.) These decisions mean a state where electricity demand has been risingΒ somehowΒ lacks a sufficient and reliable in-state supply. Oh, and by the way, in 2018 the state assembly voted to produce 60 percent of electricity from renewables by 2030 and produce all the state's electricity without fossil fuels or nuclear by 2045.
The NYT piece on geothermal energy highlights how all this is working out for Californians:
States like California are increasingly desperate for clean energy sources that can run at all hours. While wind and solar power are growing fast, they rely on fossil fuels like natural gas for backup when the sun sets and wind fades. Finding a replacement for gas is an acute climate challenge, and geothermal is one of the few plausible options. β¦ California is struggling with electricity shortfalls and recently had to extend the life of three old, polluting gas plants. Regulators have ordered utilities to add 1,000 megawatts of electricity from clean sources that can run at all hours to backstop fluctuating wind and solar supplies. One electricity provider, Clean Power Alliance, agreed to buy 33 megawatts from Fervoβs Utah plant. βIf we can find it, we have a pretty big appetite for geothermal,β said Ted Bardacke, Clean Power Allianceβs chief executive. βWeβre adding more solar every year for daytime and have a huge build-out of batteries to shift power to the evening. But what do we do at night? Thatβs where geothermal can really help out.β
Unfortunately, California has become the default example of a place that pleases environmental activists by making it hard to build everything from housing to high-speed rail to all manner of clean energy projects. Thatβs a choice, and one that frustrates Gavin Newsom, the governor of California. βThis is ridiculous,β he told NY columnist Ezra Kelin recently. βThese guys write reports and they protest. But we need to build. You canβt be serious about climate and the environment without reforming permitting and procurement in this state.β
To stick with geothermal, California isnβt the only place where better policy could make a big difference. In a recentΒ 5QQ chatΒ with me, Aidan Mackenzie, infrastructure fellow at the Institute for Progress, pointed out that the Energy Policy Act passed by Congress in 2005 granted exemptions from the National Environmental Policy Act to oil and gas drilling, but those same exemptions have not been extended to geothermal energy. As he sees it, that lack of regulatory help creates an imbalance where geothermal projects face far more regulatory hurdles and longer review processes than oil and gas. (Mackenzie explains that geothermal must go through multiple stages of permitting and environmental reviews that can take seven to ten years total.) Ideally, comprehensive regulatory reform would shorten review processes for all energy projects. But absent that, extending the oil and gas carve-outs to geothermal could help level the playing field and allow the industry to grow more rapidly with less uncertainty, according to Mackenzie.
And as he concluded:
NEPA is especially burdensome for geothermal, because federal lands contain a significant share of geothermal assets.Β But there are other regulatory problems. The Bureau of Land Management lacks staff capacity at field offices to approve geothermal projects in a timely manner. Transmission lines are also vital for moving geothermal energy to market. Reforming the siting, permitting and cost-allocation of large, interregional transmission lines would help reduce uncertainty for geothermal development.
Waking up from the California Dream
California has been blessed with some amazing natural assets, including the Pacific Ocean and lots of temperate sunny days β the latter of which helped draw the film industry to Southern California β along with plenty of arable land. Another blessing: lots of luck. There was no master plan at either the state or federal level to transform the apricot orchards of Northern Californiaβs Santa Clara Valley into the worldβs most innovative and productive technology hub.
What today is known as Silicon Valley is the miraculous product of a slew of unpredictable and serendipitous historical, cultural, social, and economic factors. There was the presence of a great center of higher learning, Stanford University (founded by a railroad tycoon as a memorial to his son who died young). And at Stanford, Frederick Terman, an engineering professor and administrator, encouraged his students to start their own companies, helping create a network of academic-industry collaboration. Then there was the Cold War and Space Race, which provided federal funding for defense and aerospace projects, along with stimulating innovation and demand for electronics and semiconductors. Finally, a culture of risk-taking, creativity, and collaboration emerged among the entrepreneurs, engineers, and investors who shaped Silicon Valley enabled by factors such as the counterculture movement, the venture capital industry, the immigration of skilled workers, and a highly competitive business environment.
Indeed, its pluses are still so powerful that a bunch of wealthy Silicon Valley entrepreneurs and investors are funding an effort to build their own city in northern California. (In the LinkedIn bio of one of the leaders is the phrase βCalifornia forever.β) Yet all those blessings and all that luck hasn't been enough to offset bad governance that persists thanks to a degrowth attitude.
More of the same would hardly be an βinteresting twist,β as the NYT quotes the sociologist in favor of limiting growth. What would be instead? Imagine if California were to fully regain its optimistic national leadership, embrace pro-abundance policy, and help lead America to a more prosperous future. That would be a wonderful surprise.