Beyond federal and state efforts, California’s tech titans have upped the ante with momentous new investments that promise to revolutionize electricity production.

For years, solar power has been touted by advocates as a major future source of “alternative energy.” Most recently, fresh off promising Californians a measure of federal drought relief, U.S. Interior Secretary Sally Jewell debuted Desert Sunlight. It’s a new 4,000-acre solar energy “farm” in the hot and dry outer reaches of of Riverside County and one of the largest such projects in the world.

But as the Los Angeles Times reported, the farm “opens at time of uncertainty for future utility-scale solar development in California, which has been slowing in recent years as federal assistance begins to disappear and investor interest fades.”

Meanwhile, Silicon Valley has turned its attention to solar power. Despite the prospect of a 20 percent drop in federal investment tax credits, tech entrepreneurs have taken steps to scale solar power use in a way that promises almost immediate results.

First Solar

USA Today reported First Solar received nearly $1.5 billion in federal loan guarantees to build out Desert Sunlight. But now priorities are shifting.

According to Market Watch, First Solar just inked a huge new deal to supply power to tech behemoth Apple Inc.:

“Apple committed $848 million for clean energy from First Solar’s California Flats Solar Project in Monterey County, Calif. Apple will receive electricity from 130 megawatts (MW)AC of the solar project under a 25-year power purchase agreement (PPA), the largest agreement in the industry to provide clean energy to a commercial end user.”

Although Apple CEO Tim Cook heartened environmentalists by casting the decision as a blow against climate change, it was ultimately driven by a simple imperative: making a good business bet.

“By 2016,” Mother Jones noted, “solar is projected to be as cheap or cheaper than electricity from the conventional grid in every state except three.”

In a substantial irony, Silicon Valley observers pointed out solar power has benefited greatly from rising costs for traditional energy, which California’s emissions law drives upward. As the Silicon Valley Business Journal observed:

“Chris Shea, who heads up the Silicon Valley territory for Livermore-based installer Solar Universe, a SolarCity competitor, said the industry has had a tailwind thanks to rising rates for conventional power. ‘Going green is a secondary benefit of the whole thing,’ he said. ‘Ultimately, it’s, “How do I get my cost of living down?” We’ve seen, since we started, almost a doubling of electrical cost that PG&E charges even to their lowest tier,’ said Shea, who employs about 20 out of his Santa Clara office.”

Solving the storage problem

SolarCity, one of the most important players in the industry, also recently figured into a massive new technological twist on alternative energy. Although state and federal regulators had pushed Americans to buy zero-emission cars, the technology faced a simple problem: battery life often didn’t measure up to what drivers’ hopes.

Now developments in car batteries are spreading to other areas of life that use batteries.

Tesla Motors CEO Elon Musk has partnered with SolarCity with an eye toward revolutionizing storage capacity — a challenge to the landscape dominated by public utilities. SolarCity, run by Musk’s cousin Lyndon Rive, has begun to install Tesla batteries.

And The Verge reported Musk and Rive have gone public with their big plans to scale stored solar energy well beyond cars:

“Musk and Rive mentioned that every SolarCity unit would come with battery storage within five to ten years, and that the systems would supply power at a lower cost than natural gas. Those batteries will come from the [Tesla] gigafactory, currently being built in Nevada. Once the factory comes online, the strong demand for energy storage will allow it to immediately ramp up production and achieve economies of scale. Tesla CTO JB Straubel (who has said that he “might love batteries more than cars”) says that the market for stationary batteries “can scale faster than automotive” and that a full 30 percent of the gigafactory will be dedicated to them.”

California officials, The Verge pointed out, have set out a policy goal of 1.3 gigawatts of storage by 2020.

The way things are turning out, it may be the private sector, not government-subsidized projects, that charges the electric future.

While the president called for cooperation between government and industry to increase the security of online systems, Tim Cook, leading tech speakers, called for industry to address the problem.

The texts of the speeches are not yet available online. But Stanford News reported Obama said, “This has to be a shared mission. Government cannot do this alone. But the private sector cannot do it alone, either.”

The president also brought up a controversial topic that has brought opposition from Silicon Valley titans, most of whom supported him during his election campaigns: government abuse of its snooping powers. It was on his watch that Edward Snowden, currently in exile in Russia, revealed the National Security Agency spies on most digital communications.

“Grappling with how the government protects the American people from adverse events while making sure the government itself is not abusing its capabilities is hard,” Obama said. “The cyber world is the wild, wild west. To some degree, we’re asked to be the sheriff.”

But he asked, “What safeguards do we have against the government intruding on our own privacies?”

‘Best protection’

Taking the podium right before Obama, Cook spoke of cooperating with government. “Safeguarding the world of digitized personal information is an enormous task,” Cook said. “And no single company or organization can accomplish it on its own. That is why we’re committed to engaging productively with the White House and Congress and putting the results of these conversations into action.”

However, according to the San Jose Mercury News, Cook also said, “People have entrusted us with their most personal and precious information. We owe them nothing less than the best protection that we can possibly provide.”

That was a reference to Apple automatically encrypting all data on its devices, despite being denounced by Obama’s FBI. Apple’s action was followed by Google on its Android devices.

As the Mercury News reported, “In his speech, Cook emphasized the importance of protecting consumer privacy and took a veiled shot at critics in the administration and law enforcement who have complained that Apple’s encryption practices have made it difficult for them to pursue criminals and other bad actors. Cook argued that his company and others have an obligation to protect customer data.”

Cybersecurity Executive Order

As part of his actions in this area, yesterday Obama signed Executive Order 13636, “Improving Critical Infrastructure Cybersecurity.” According to the White House’s website:

“The Executive Order is designed to increase the level of core capabilities for our critical infrastructure to manage cyber risk. It does this by focusing on three key areas: (1) information sharing, (2) privacy, and (3) the adoption of cybersecurity practices.

“The EO tasked the National Institute for Standards and Technology (NIST) to work with the private sector to identify existing voluntary consensus standards and industry best practices and build them into a Cybersecurity Framework. The Administration recognizes that there are private-sector cyber leaders who are already implementing strong cybersecurity controls, policies, procedures and innovations and asked these companies to help us shape best practices across critical infrastructure. The President then directed DHS [Department of Homeland Security] to establish a voluntary program to promote the adoption of the Framework.”

However, given Silicon Valley’s leeriness toward government actions, as expressed by Cook, time will tell how much cooperation there will be on this program.

This is emphasized by a new development: Apple is building a giant new “command center” not in California, but Arizona. Reported CNBC:

That’s a harbinger for the rest of the state, Esmael Adibi told CalWatchdog.com; he’s the director of the A. Gary Anderson Center for Economic Research at Chapman University. “The economic growth is in that area,” he said. “This is the growth of social media at Apple, Facebook, Google, Yahoo and other companies. It’s design and research in Northern California.”

But not even Northern California can contain all the tech. The Playa Vista area of Los Angeles also is burgeoning with new developments.

The Los Angeles Times reported that in January, “Yahoo Inc. is moving its Santa Monica operations to Playa Vista, joining the droves of major tech companies that have opened offices in the booming Westside neighborhood.

“The Sunnyvale, Calif., Internet company signed a long-term lease for about 130,000 square feet at the new Collective campus in Playa Vista. The move will bring at least 400 jobs from its current location, with space to accommodate growth.”

And Google Inc. “has spent nearly $120 million on 12 vacant acres next to a historic hangar where aviator Howard Hughes built his famous ‘Spruce Goose’ airplane in the Playa Vista neighborhood near Marina del Rey.

“Google is also expected to lease the Hughes hangar built in 1943. The 319,000-square-foot building … could be home to as many as 6,000 well-paid, highly educated workers.”

Manufacturing

Adibi said this is a major difference from the high-tech economy of decades past, which centered on manufacturing. But that sector has declined as aerospace jobs have moved to other states. And as Apple and other companies moved manufacturing mostly overseas.

Apple ended its California manufacturing when it closed its Fremont plant in 1993. Now most Apple devices read, “Designed by Apple in California. Assembled in China.”

Adibi said California’s factory employment dropped to 334,000 in 2014 from 664,000 in 1990. Most factory jobs are for the middle-class workers of the type who built the state, especially Los Angeles and its surrounding communities. Jobs include skilled work, such as for engineers; accountants and managers; and unskilled work for those on the assembly lines.

By contrast, the new tech jobs largely are for the “digerati,” the high-IQ, well paid workforce of the information economy.

New economy

The changeover to the new economy, which Apple’s phenomenal recent growth underscores, brings up the worm in the apple, as it were: the worry economists have over income inequality, which is something politicians are taking up.

The New York Times reported today on President Obama’s new budget proposal, a 10-year plan that “stabilizes the federal deficit but does not seek balance, instead focusing on policies to address income inequality as he adds nearly $6 trillion to the debt.”

A U.S. Census Bureau report found that, from 2012 to 2013, California was one of 15 states to see income inequality increase.

And a new study by the Economic Policy Institute found income growth in California from 1979 to 2012 rose 190 percent for the top 1 percent of income earners — but declined 6 percent for everybody else.

Such inequalities inevitably bring calls for higher taxes on the wealthy. But taxes for higher-income earners in California already have risen, with the top state income tax rate currently set at 13.3 percent, compared to 9.3 percent as recently as 2004 — a 43 percent increase.

California’s economic future is bifurcated by its gleaming high-tech companies climbing to ever-higher success — as the rest of the economy struggles and falls behind.

But a glance to the future — and behind the numbers — shows the state economy faces numerous question marks. Among the 50 states on the new data from the Bureau of Labor Statistics, California now is second-worst, behind only Mississippi at 7.2 percent. “Better than Mississippi!” would not make a great slogan.

Since the Great Recession, Nevada and Rhode Island have suffered unemployment even worse than California’s. But for December, both posted 6.8 percent jobless rates.

Not to mention the rate of California’s top competitor: Texas at 4.6 percent.

There also are some worrisome details about California. “Most of the December 0.2 percentage-point drop was from more people leaving the group that is ‘actively seeking work,'” Richard Rider told CalWatchdog.com; he’s the chairman of San Diego Taxfighters. “We can see this in the fact that during this rather dramatic drop, only 700 net new jobs were created in a state of over 38,800,000 people.”

He added that today more people than in the past are working part-time, “yet we count anyone working as little as 1 hour a week as ’employed.'”

He pointed to a new report from Advisor Perspectives, a publication for investment advisors. Looking at national numbers provided by the BLS, it found:

“The Labor Department has been collecting this since 1968, a time when only 13.5 percent of U.S. employees were part-timers. That number peaked at 20.1 percent in January 2010. The latest data point, approaching five years later, is only modestly lower at 18.7 percent last month. If the pre-recession percentage is a recovery target, we still have a long way to go.”

Competition

Again looking to the future, California is facing increasing competition for businesses and jobs from other states. Writing yesterday in the Wall Street Journal, Heritage Foundation Chief Economist Stephen Moore looked at the trend for tax cutting:

“as many as 20 Republican governors are moving forward with their own pro-growth tax-relief initiatives. This is on top of the 14 states, including Florida, Michigan, Ohio and Wisconsin, whose 2014 tax cuts will take effect this year.”

So that’s 34 states cutting taxes — even as California continues under the the $7 billion tax increase of Proposition 30, which voters passed in 2012. It boosted the state’s top income tax rate to 13.3 percent, the highest of any state.

Even depressed Mississippi is getting into the act. Reported Mississippi Public Broadcasting on Jan. 22, “Governor Phil Bryant is calling for a tax cut for thousands Mississippi families. Bryant addressed a joint session of the Mississippi Legislature last night for his state of the state address.”

Rider, who has been analyzing California tax policy for decades, gave his perspective. “States are cutting taxes because they understand economic competition,” he said. “The evidence is overwhelming that lower taxes and more reasonable regulation results in more jobs and a more prosperous state. California leadership is still in denial of this Economics 101 reality.”

He also pointed to a fact sheet he compiled of state per-capita GDP numbers. California’s nominal number in 2012 was 18th highest of the 50 states and D.C., at $46,029 per capita.

But when cost-of-living is taken into account, it dropped to 39th, at $36,215.

Blue-state tax cuts

Moore points out that even Blue States are getting into the tax-cutting act: “In Illinois, Maryland and Massachusetts — three blue states that elected Republican governors in November — tax rates are likely to fall to provide juice and jobs for local economies.”

If Mississippi cuts taxes and unemployment drops fast, California could be left holding the bag of the worst unemployment rate among the states.

Rider believes things will change in California only after a crisis. “Meaningful reform will come only out of necessity, not from some change of heart,” he said. “It will take years before we reach that point — we are not in a collapse — just a stately decline.”

One of California’s best Assemblyman of recent years was Chuck DeVore, R-Irvine. He especially was good on the state budget.

Term-limited, he left office, then left California. As with so many others who splilt, the Golden State became the Pyrite State: too expensive, too high-tax, too regulated, too absurd.

He just wrote about his experiences in National Review. Some excerpts:

“I moved to Texas late last year, joining the 2 million Californians who have packed up for greener pastures in the past ten years, with Texas the most common destination.

“In his State-of-the-State address this January, California governor Jerry Brown said, ‘Contrary to those declinists who sing of Texas and bemoan our woes, California is still the land of dreams. . . . It’s the place where Apple . . . and countless other creative companies all began.’

“Fast forward to March: Apple announced it was building a $304 million campus in Austin with plans to hire 3,600 people to staff it, more than doubling its Texas workforce. 

“California may be dreaming, but Texas is working.”

This is typical of Silicon Valley. If you’re a hotshot, pimply, on-your-way-to-billionaire twentysomething who looks 14, like Facebook founder Mark Zuckerberg, then Californy is the place you want to be, so you load up the Prius and move to Silicon Valley. That’s where all the other gearheads congregate. High taxes? Who cares. Let your accountant figure out how to avoid them.

But you put your server farms, your manufacturing, and as much of everything else elsewhere — in Texas, North Carolina, or China.

Chuck:

“California’s elected officials are particularly adept at dreaming up ways to spend other people’s money. While the state struggles with interminable deficits caused by years of reckless spending, the argument in Sacramento isn’t over how to reduce government; rather, it’s over how much to raise taxes and on whom….

“Meanwhile, lawmakers in Texas are grappling with a fiscal question of an entirely different sort: whether or not to spend some of the $6 billion set aside in the state’s rainy-day fund.”

Rainy day fund? Declinists!

Union Power

Chuck:

“California’s government-employee unions routinely spend tens of millions of dollars at election time to maintain their hold on power. In Texas, the government unions are weak and don’t have collective bargaining, leaving trial attorneys as the main source of funding for Lone Star Democrats.”

Yeah, but, aside from Silicion Valley billionaires, government workers are the only ones who can afford to live in California.

Chuck:

“California’s habit of raising taxes to fund a burgeoning regulatory state isn’t without impact on its economy. Californians fork over about 10.6 percent of their income to state and local governments, above the U.S. average of 9.8 percent. Texans pay 7.9 percent. This affects the bottom line of both consumers and businesses.”

Let’s add it up: Texans pay 7.9 percent to state and local government. Californians pay 10.6 percent. That’s 2.7 percentage points more. Now, 2.7/7.9*100 = 34.

So, Californians are paying 34 percent more than Texans for state and local government.

True, but the weather in California is at least 100 percent better than in Texas. So, it comes down to this: if your job is destroyed by California’s high taxes — not to mention the tens of thousands of absurd regulations — you can a) stay here and go on California’s generous welfare dole, spending your copious leisure hours surfing; or b) move to Texas and get a job.

Chuck:

“While California seeks more ways to tax success, it excels at subsidizing poverty. The percentage of households receiving public assistance in California was 3.7 percent in 2009, double Texas’s rate of 1.8 percent. Almost one-third of all Americans on welfare reside in California.”

There are positives to living in California beside the weather. If you’re a government worker, it’s paradise. And the state Legislature is made up of people just like you.

Chuck:

“only 18 percent of the Democrats who control both houses of California’s full-time legislature worked in business or medicine before being elected. The remainder drew paychecks from government, worked as community organizers, or were attorneys.

“In Texas, with its part-time legislature, 75 percent of the Republicans who control both houses earn a living in business, farming, or medicine, with 19 percent being attorneys in private practice. Texas Democrats are more than twice as likely as their California counterparts to claim private-sector experience outside the field of law.”

California’s motto should be changed to: Of the government, by the government, for the government.

March 15, 2012