A New Age of Practical Environmentalism for California; Why Not Combine Efficiency and Renewables into an Energy Portfolio?

PLYMOUTH, Wis. -- The following is a copy of a letter sent to California Governor Arnold Schwarzenegger by California-based Yale/Chase Materials Handling, Inc. and Wisconsin-based Orion Energy Systems.

Dear Governor Schwarzenegger:

In a recent article in the New York Times Magazine section, David Brooks - a columnist on the Op-Ed page of The New York Times, a senior editor at The Weekly Standard, a contributing editor at Newsweek and the Atlantic Monthly, and a commentator on "The Newshour with Jim Lehrer" - described the current state of energy policy and politics in the U.S. as follows: "Republicans currently stand for production, the cultivation of existing technologies, and a somewhat callous disregard for the environment. Democrats stand for conservation, the cultivation of environmentally sensitive but unrealistic technologies and a sometimes callous disregard for economic growth."

Frankly, we need to separate the discussion of energy policy from politics in such a way that it becomes either bipartisan or even non-partisan.

Without subscribing entirely to either stereotype offered by Mr. Brooks, it is worth observing the contradictions inherent in such energy policy discussions. In fact, there is a solution sandwiched in between the opposites of energy production and energy conservation, between existing technologies and unrealistic technologies, between callous disregard for the environment and callous disregard for economic development. The solution is combining energy efficiency and renewable energy into the same energy portfolio. In the case of California, this would allow you as governor to develop a wide range of energy source options without precluding the important issues related to California's environment and economic development.

As you have observed in your "Agenda to Bring California Back," California already has electric rates that are 61% higher than other western states for residential customers and over 100% higher for businesses. Furthermore, with more than 10,000 Megawatts (or, the equivalent of 20 500-Megawatt power plants) of capacity still on the drawing boards, California can certainly expect significant upward pressure on electric rates for all customers when these plants come on-line.

While your call for a Renewable Portfolio Standard of 20% by 2010 has an environmentally pleasant ring, it is worth noting that the current state of renewable technology cannot economically support the increase in the renewable energy sources necessary. However, a combined approach to California's Portfolio Standard could easily provide 20% of the state total energy supply. After all, California's use of a portfolio standard by definition implies a broad diversification of assets to ensure a balancing of risk and a maximization of reward.

First, we would like to define energy efficiency as "the quickest, cleanest and cheapest source of new energy," which means it should be accorded at least the same respect and consideration that Renewables receive today. In fact, the American Council for an Energy Efficient Economy (ACEEE) has done a study recently, entitled "The Technical, Economic and Achievable Potential for Energy Efficiency in the United States: A Meta-Analysis of Recent Studies," that shows as much as a 24% reduction of all electricity usage could be achieved in the U.S., which means that as much as one hundred thousand Megawatts of savings is possible.

The fact is California's utilities and state regulators need to be able to treat energy efficiency as a supply side option, with an allowable return on investment. California's "Energy Action Plan" says as much, when it says California should "provide utilities with demand response and energy efficiency investment rewards comparable to the return on investment in new power and transmission projects." If given a return on energy efficiency competitive to the one they are given now for energy supply and production, utilities will be able to justify to their shareowners their investments to reduce demand and make energy efficiency a growing part of their business platform.

During the worst of your energy problems in 2001, California has already proven that it could reduce demand by 5% within the first year of the crisis, with as much as a 10% reduction in overall electrical consumption possible for California over the next decade. New evidence is emerging that California could cost-effectively reduce its electricity needs by at least 5,900 MW - the equivalent of 12 large power plants - over the next decade.

It has been estimated that the net benefits to California would be $12 billion and the environmental benefit is significant. With California's leadership, one can imagine the economic and environmental benefits of Energy Efficiency nationally if we coordinate efforts throughout the U.S.

By motivating utilities, businesses and individuals to employ the positive economics of both Energy Efficiency and Renewables, California will have a 21st Century solution to the vexing problems involving energy, efficiency, economics and environmental issues. By doing so, California can achieve a practical environmentalism, which preserves California's quality of life while revitalizing its economic development.

Respectfully,

Roger Ketelsleger        Steve Heins
President, CEO           Director of Corporate Communication
Yale/Chase               Orion Energy Systems

About Yale/Chase and Orion Energy Systems

Yale/Chase Materials Handling, Inc., headquartered in City of Industry, Calif. with locations in Escondido, Santa Ana, and Fontana, Calif. and in Hawaii, is an industrial distribution, service and energy efficient lighting company. With annual growth of 20 percent over the last 12 years and more than 200 employees, Yale/Chase has annual sales in excess of $65 million.

Orion Energy Systems (www.oriones.com), in business since 1996, designs and manufacturers application specific lighting systems and controls for use in industrial, retail, commercial, institutional, agricultural and hospitality environments. Orion has helped its business customers; Kohler Company, Milwaukee Journal Sentinel, Pfizer, R.R. Donnelly, Pepsi-Cola of America, Stora Enso, Quad/Graphics, Charter Steel, Coachman, Oshkosh Truck, John Deere, Daimler Chrysler, Rockwell Automation, Caterpillar, UPS Logistics, Kohl's Department Stores, Federal Mogul, Kimberly Clark, Trane, and Toro, save over 50 Megawatts (MW) and 300 million kilowatt hours (kWh) over the last year. In the midst of a manufacturing recession, Orion's employment has gone from 18 to 85 employees in the last 24 months.

Roger Ketelsleger of Yale/Chase can be reached at 562-463-8000 and Steve Heins of Orion Energy Systems can be reached at 920-892-9340, ext. 226.