Photo Credit: Shutterstock.com/Vova Shevchuk
Energy—whether electricity or fuel—has been the foundation of economic growth since the dawn of the Industrial Revolution. But how we generate and use energy is fundamentally changing. Several factors are pushing this change, most significant among them the increasing awareness of the role that traditional fossil energy sources have played in accelerating climate change. In addition, geopolitical instability and competition—and the physical impacts of climate change on large energy systems—all are making global energy supply chains increasingly vulnerable, and energy prices increasingly volatile.
These factors all contribute to the need for a transition in our energy systems away from dependence on a few centralized sources (primarily coal and oil) toward more diversified, localized, and resilient energy sources. California is at the leading edge of this transition. The state faces crucial legislative and regulatory decisions that will shape the state’s future environmental and economic landscape.
What’s clear about California’s energy transition is this: it is just as important to understand where we are now as it is to set goals for where we want to be in the future. Ultimately decisions about our energy economy require a common foundation of information about the state’s electricity and fuel infrastructure, systems, and supply chains. The need for a common foundation of knowledge led CA FWD to gather energy experts and state leaders at the UC Student and Policy Center in April in Sacramento for “Energy 101: Setting a Baseline for Legislative Action.” This timely forum, co-hosted with UC ITS, UC Davis ITS, and UC Berkeley Energy Institute at Haas, was timed to provide a baseline of information for legislative staff working through numerous energy-related bills as part of the 2025 legislative session.
The event included panels on both electricity and fuel, with experts providing a grounding in the basic infrastructure and markets in both areas before discussants dived into key issues around tradeoffs and tough decisions facing California policymakers.
On the electricity panel, the audience learned that California’s electricity system reflects one of the most ambitious clean energy commitments in the world—but also about the practical constraints that limit operations and innovation. The California Independent System Operator (CAISO) oversees what opening speaker CEO Elliot Mainzer described as “a village governed by a very progressive legislative framework” aimed at decarbonizing the world’s 4th largest economy by 2045. Yet beneath this ambitious vision lies a practical reality—California “has been and will continue to be dependent on its neighbors for electricity trade for affordability and reliability.” CAISO’s response includes proposals for $13 billion in new transmission projects and a forward-looking 20-year transmission plan, reflecting the scale of infrastructure needed to support our clean energy goals.
The panel built on this pragmatic theme, starting with UC Berkeley’s Severin Borenstein, who dispelled common misconceptions about California’s high electricity rates. Contrary to popular belief, he noted, renewable energy isn’t the primary cost driver. Instead, “What is actually driving California rates up are costs that are not associated with delivering additional electricity to existing customers”—primarily wildfire mitigation efforts, grid hardening, and various subsidy programs.
The challenges extend beyond consumer costs to system resilience, where Lawrence Livermore National Laboratory’s JP Watson drew an important contrast between everyday reliability and true resilience against catastrophic events like wildfires and heat waves. Watson’s practical advice resonated clearly when he shared that it’s far more important to invest in resilience proactively than reactively, as reactive measures typically cost “a magnitude more” than addressing vulnerabilities early. His insights highlight how climate change itself will shift the productivity of today’s renewable energy sites, something CA FWD is profoundly aware of in the climate resilience work that goes hand in hand with our work on energy transition.
Behind these technical challenges lies a profound human story. California’s energy sector employs approximately one million workers—six percent of the state’s labor market and about 11 percent of all energy jobs nationwide. As the Public Policy Institute of California’s Daniel Payares-Montoya noted, these jobs offer remarkable economic opportunity, with average wages of $45 per hour compared to $26 in other sectors, despite 75 percent of energy workers lacking bachelor’s degrees. Yet the transition threatens approximately 100,000 fossil fuel workers and their communities, particularly in regions like Kern County and Contra Costa. The uncertainty is palpable—as Payares-Montoya acknowledged, “Right now, in terms of jobs, it’s very hard to predict what’s going to happen.”
Speaking of fossil fuels, California’s current fuel landscape adds further complexity to the transition. The state’s oil production has declined steadily for decades while dependency on imports has grown, with approximately 60 percent now coming from foreign sources. Former California Geologic Energy Management (CalGEM) Chief Deputy Bill Bartling opened the fuels discussion with a presentation illustrating how this import dependence creates vulnerability, given the lack of cross-border pipelines (so no domestic fuel import opportunity) and critical transportation chokepoints at the Strait of Hormuz and Panama Canal threatening supply security in foreign imports.
This vulnerability manifests in California’s gasoline market dynamics. Since 2015, the state has shifted from being a net exporter to being “structurally net short”—producing less than it consumes. When combined with a highly concentrated refinery sector (five refiners control 100 percent of in-state production), this creates the conditions for price volatility, according to Stanford Institute for Economic Policy Research’s Ryan Cummings. The California Energy Commission’s (CEC) Division of Petroleum Market Oversight’s Varsha Sarveshwar confirmed this disconnect, noting that “retail price movements are not necessarily tracking crude oil prices in the way that they do in the rest of the country” demonstrated in fall 2023 when California prices surged 74 cents per gallon, despite crude oil rising just 4 cents per gallon. The disconnect between what Californians pay at the pump and what they see other state consumers paying has led to many years of discussion and debate about the “mystery gasoline surcharge”—something still being examined by the CEC today.
So what is the path forward toward less volatility and more security? In his panel comments, UC Davis Institute of Transportation Studies’ Colin Murphy leaned in on the question of the role of alternative fuels. He noted that while sustainably-produced biofuels offer substantial carbon reduction benefits over traditional fossil fuels, supply limitations prevent them from fully replacing petroleum. Murphy’s assessment was clear-eyed: “There is no way to make the math work out and hit any of our targets without biofuels,” while also emphasizing that “electrifying as much as you possibly can is a common feature of every scenario that gets us in the ballpark to carbon neutrality.”
In his closing remarks, California Energy Commission Vice Chair Siva Gunda brought the technical discussions back down to the lived reality of everyday Californians. Drawing from his recent experiences touring the state, he shared his conversations with tribal nations, Kern County workers concerned about their livelihoods, and environmentally burdened communities living at the fence line of polluting infrastructure. Gunda captured the fundamental challenge ahead: “The moment calls for togetherness. If we can’t do it together, it will be harder than doing it alone… We need to think about this economy as our economy. Think about the policies as our policies, think about the trade-offs as our trade-offs.”
CA FWD is committed to driving a sustainable energy transition across California’s regions. Through events like this, a followup event on local economic impacts planned for late summer, and our flagship California Economic Summit in October, we are working to chart a path toward a more sustainable, resilient, and inclusive economy across every region of the state.
To watch a full recording of the Energy 101 event discussion, click here.
