n his State of The State address on January 5, 2015, Jerry Brown, California's four-time elected governor, unveiled a bold energy plan with three major goals for Californians to accomplish within the next 15 years:

• Increase electricity derived from renewable sources from the current one-third to 50%
  
• Reduce the petroleum use in cars and trucks by up to 50%
  
• Double the efficiency of existing buildings and make heating fuels cleaner.

When politicians talk, industry usually listens. So, when Jerry Brown, a dedicated environmentalist, declared his visionary plans for California, it seemed to promise significant business opportunities for power electronics companies in California. According to an article by Todd S. Purdum in The New York Times, Week in Review, on September 21, 2003, there is a "Golden Rule of California" - As California Goes, So Goes the Country. Without getting into the statistical details, one can easily see that California leads the nation in technology and in its related ecosystem development - take a look at The Silicon Valley. So assessing Jerry Brown's energy plan is a worthwhile effort from the power electronics industry standpoint.

Renewable Energy
California currently uses about 20% of its energy from renewable sources including hydroelectric, geothermal, biomass, wind and solar energy. Increasing the usage to 50% within next 15 years will require a significant investment in renewable energy sources - primarily from solar energy. The California Public Utilities Commission’s latest Renewable Portfolio Standard Quarterly Report projects a significant increase in the future use of solar PV (photovoltaic) in its renewable energy mix, while other renewable energy generating systems such as hydro, biomass and others are expected to remain relatively stable, marginally increasing or declining as a percent of the total. This does not imply a new opportunity, but rather a much expanded one, as California is already well on its way of meeting its 2020 renewable energy goal of 30% which was set in 2009.

But if such a rosy business scenario for solar industry was already established in 2009, why have the leading suppliers’ fortunes declined in last four years? The largest solar PV inverter manufacturer has been SMA Solar Technology AG, based in Germany. Over the last four years, its sales have declined by more than 50%; from its peak of €1932 million in 2010 to €933 million in 2013. A further significant decline is expected in 2014 based on extrapolation of the last 9-month sales for the entire year*. Some of this decline may be due to the "deterioration of subsidies" in its target market, which is mainly in Germany. But its decline cannot be attributed to subsidies alone, since they took effect in 2013 and sales declined in 2011 and 2012 as well. Moreover, over the last four years, the sales declines have not been insignificant nor marginal, but substantial and significant. It seems SMA's decline was also due to its product mix, mostly high end, and target market participation, which is mainly in Europe.

The future growth in solar PV is expected to be in the US and China, and mainly in relatively inexpensive smaller inverter and micro inverter products. California may play a significant role in the development and expansion of this changing market and product mix. Its own homegrown company, Enphase Energy, a leading manufacturer of micro inverters, has grown significantly - a whopping 44% in the first nine months of 2014*, while many other companies, primarily manufacturers of central inverters have declined. In its latest annual report Enphase Energy stated that 85% of its sales was in the US and it is fair to assume that the significant part of this business was in California. From general observations and empirical data one can see, that there is a boom going on in the solar business in California, which will likely set the next trend in solar inverters.

Electric/Hybrid Cars
The second goal stated by Jerry Brown was a 50% reduction of petroleum use by 2030. This can be achieved either by having fuel efficient cars, which use less gasoline, or by switching the transportation mode to gas electric hybrid or all electric cars, which use very little or no petroleum. Data suggests that California leads the rest of the US in sales of hybrid cars such as the Toyota Prius and in sales of electric cars such as Tesla. Though there are many other types of hybrid and electric cars in the market, these two are the most popular in California. Tesla's location in Fremont, which is in Silicon Valley, does not hurt. Driving a Tesla is in "vogue", despite its higher price tag or perhaps because of it – many consider it very prestigious to drive a Tesla in the Silicon Valley. Realistically, since hybrid/electric cars constitute less than 1% of the total product mix in California, to achieve a "50% petroleum reduction" goal offers a significant market potential for the increased use of hybrid and/or electric cars, which use power electronics systems extensively.

But wider acceptance of electric or even gas/electric hybrid cars may be in jeopardy due to the higher price of these cars and recent reduction in the price for gasoline. A number of industry sources state that many consumers are moving back to gas guzzling SUVs due to lower gas prices. Will California's guidelines or mandatory requirement change the buying habits of consumers? California has been in such a position before when it passed a zero emission vehicle (ZEV) law in 1990, stating that by 1998, 2% of its vehicles will have zero emissions. California, to its embarrassment, did not meet that goal. Will it meet the new goal this time? Many believe that technology and social attitudes have changed significantly over last 25 years and the likelihood of meeting this challenge is higher. Time will tell.

Double the Efficiency of Existing Buildings
The third goal stated by Jerry Brown was a doubling of the efficiency of existing buildings. This is an esoteric proposal in terms of its meaning and means of achievement. There is a Net Zero Energy (NZE) building proposition and various public and private entities are trying to figure out as how to achieve it economically. The business opportunities for the power electronics industry in meeting this goal is not yet clear.

Besides these three energy goals stated by Jerry Brown in his State of The State address, there are many other prospective and emerging markets in California that offer new and expanded opportunities for the power electronics industry. These include smart grid, smart homes and new transportation including a Bullet train – one of Jerry Brown's pet projects. Though California will be never able to match the power electronics opportunities in rail transportation in Europe and Asia, some new budding market may still sow the seeds. But the overall success of this project remains dubious.

California leaders have made many announcements before with too much ambition and too much pizzazz. Some have been successful, while others have languished on the drawing boards. The State of California and California companies are always dreaming about the "next big thing" - and many times power electronics industries have benefitted from these big ambitions. Is California dreaming again?

Provided by Mohan Mankikar, President, Micro-Tech Consultants

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