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21St Century Infrastructure Initiative 2 1 STCENTURY KeepingCaliforniaConnected,Powered,andCompetitive INFRASTRUCTURE KeepingCaliforniaConnected,Powered,andCompetitive 1010111001111110 2015 2025 2035 2045 2055 2065 1111100001011110111101011000110101000111110 0011000110110101 1011111100010000 100001111001101100110110110100111001 0111010001011110 1101111100101010 11011111001010101010101111010110000101111011110100110001101101011011111100010000100101011001101101000111010101111010110 0001011110111101 0011000110110101 1011111100010000 1000011110011011 0111010001011110 1101111100101010 1010101111010110 0001011110111101 0011000110110101 1011111100010000 10000111100110110 01110100010111101010 11011111001010101100 10101011110101101111 00010111101111011111 00110001101101011110 1011111100010000011 10000111100110111111 01110100010111101111 11011111001010100110 10101011110101100110 00010111101111011000 00110001101101010100 10111111000100000110 10000111100110110011 11100 0110 11110 ACKNOWLEDGMENTS This report was prepared by the Bay Area Council Economic Institute for the Bay Area Council’s 21st Century Infrastructure Initiative. The Bay Area Council 21st Century Infrastructure Initiative is supported by a Task Force of industry leaders listed on the inside back cover of this report. Sean Randolph (Senior Director) oversaw the development of the study. Tracey Grose (Vice President) directed the analysis and completion of the report. Jeff Bellisario (Senior Research Associate), Alex Foard (Research Associate), Saori Hamidi (Research Associate), Carolyn Garrett (Intern), and Alex Hartzell (Intern) contributed to the data analysis, qualitative research, and overall narrative of the report. Consulting contributors Matt Chwierut and Brinda Dalal (President, Dhoopa Ventures LLC) played key roles in the research and narrative development. Bay Area Council staff members Michael Cunningham, Adrian Covert, and Amel Zahid provided valuable input throughout the research process. The Bay Area Council Economic Institute would also like to thank Olaf Groth, a Bay Area Council Economic Institute Research Council member, for his guidance and support. THEBAYAREACOUNCILECONOMICINSTITUTE Bay Area Council Economic Institute is a partnership of business with labor, government, higher education, and philanthropy that works to support the economic vitality and competitiveness of the Bay Area and California. The Association of Bay Area Governments (ABAG) is a founder and key institutional partner. The Economic Institute also supports and manages the Bay Area Science and Innovation Consortium (BASIC), a partnership of Northern California’s leading scientific research universities and federal and private research laboratories. Through its economic and policy research and its many partnerships, the Economic Institute addresses key issues impacting the competitiveness, economic development, and quality of life of the region and the state, including infrastructure, globalization, science and innovation, energy, and governance. A public-private Board of Trustees oversees the development of its products and initiatives. table of contents Foreword 3 Executive Summary 4 Communications & Energy in the 21st Century 8 Communications Infrastructure: Expanding Quality and Capacity 12 The Infrastructure of 21st Century Communications 13 New and Emerging Trends Driving Increased Network Demand 15 Benefits of 21st Century Communications Infrastructure 17 Where California Stands Today 19 Communications Policy Considerations 22 Recommendations 23 • Plan for Networks 23 • Expedite Local Permitting Processes 23 • Reassess Governance Model 23 • Create an Advanced Networks Task Force 24 Energy Infrastructure: Balancing Environmental Needs and Consumer Demands 26 The Infrastructure of 21st Century Energy 27 Drivers of Change in the Electricity Grid 29 Benefits of 21st Century Energy Infrastructure 32 Where California Stands Today 33 21st Century Energy Infrastructure Policy Considerations 36 Recommendations 38 • Future Regulatory Structure: Ratemaking Connected to Achievement of Policy Goals 38 • Leverage Storage Technologies and Electric Vehicle Charging as Grid Supporters 39 • Future Market Structure: Utilities as Distribution System Operators 39 • Enable Energy Data to be Used in New Ways 39 Methodology 42 Appendix: Expert Contributions 42 Endnotes 43 1 foreword When it comes to investing in the future, in the last 50 years California has done many things right. It built a great university system, the world’s best highway network, and a water system that has served a rapidly expanding population well. Private companies have developed telecommunications systems that are among the most advanced in the US, and we lead the nation in the development and deployment of renewable and energy efficiency technologies. This infrastructure has enabled our economic leadership, both domestically and globally. The world is changing rapidly, however, and to sustain this leadership California must continue to invest. It must also innovate in ways that adopt and leverage advanced technologies—which are often created here. This is particularly the case in the connected fields of communications and energy. Connectivity is now an essential component of everyday life for both individuals and businesses, and with the pace of technological change accelerating, this dependence will only grow. As it does, devices will proliferate, machines will connect to each other, and new businesses and business models will emerge. All of this will entail vast amounts of data. While California is relatively well positioned today in terms of communications infrastructure—at least in the United States—it lags many of its global competitors. And it is unprepared for the tsunami of applications that is approaching. This wave will come not just from mobile communications and the Internet of Things, but also from our energy systems. New capacity and technology will be required to monitor and manage energy use, and to move energy through the grid in multiple directions as centralized, conventional generation is augmented by generation from both large and small renewable sources. Electrical vehicle charging and other smart grid applications will accelerate this process, and with it the need for flexibility, security, and reliability in the state’s power grid. This is another change that California must anticipate and adapt to quickly. California’s regulatory structure for dealing with these challenges was designed in the mid-20th century, when many of today’s technologies and economic drivers were unheard of, and deliberative processes could take years. But today’s technologies are advancing with blinding speed and their implications are being felt immediately, with rapid adoption by both businesses and consumers. Other nations are moving quickly to embrace this new paradigm by adapting their regulatory processes to enable the development of advanced infrastructure for both communications and energy. California also needs to embrace a dynamic vision of the future, and accelerate and adapt its policies and processes. California’s ability to do this will impact the competitiveness of its businesses and the quality of life of its citizens. The results can be transformative, but only if California invests now in the technology and infrastructure that will lead it into the 21st century. Sean Randolph Bay Area Council Economic Institute, Senior Director 3 executive summary Recent advances in energy and communications technologies have outpaced anything the human race has seen since either the invention of the telegraph or the discovery of alternating current. Many of these advances have enabled technologies that were once the realm of science fiction—driverless cars, implanted medical devices, and vast supplies of renewable energy. Today, these and related technologies are shaping up to be as important to California’s prosperity in the 21st century as roads and waterways were in the 20th. However, the pace of innovation is increasingly pushing up against the physical constraints of California’s legacy energy and communications infrastructure. Without upgrading to 21st century infrastructure, California will not keep up with the level of competition and the rate of change in today’s global economy. 4 investment in 21st century infrastructure investment in communications will enable new technologies that will infrastructure is necessary to maintain improve the lives of californians. california’s global competitiveness. Advanced communications networks with greater bandwidth The demands on communications networks are growing for mobile and internet communications can support a range of and changing rapidly. As more facets of the economy rely public benefits including entrepreneurship, education, public on the internet and mobile communications—including safety, healthcare, and civic engagement. Californians will payment systems, entertainment, transportation, and the benefit from advanced communications through: power grid—internet usage is rapidly growing. Consumers are driving the need for faster networks with more ubiquitous Improved delivery of public services and broader civic coverage, as today’s internet is transmitting growing volumes engagement. of data that support the exchange of business data, personal communications, interactive learning, high-definition video, and Improved access to healthcare through video conferencing, advanced industrial processes. remote sensors, and diagnostic tools, reducing hospital and physician visits and saving costs. Monthly internet
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