Commentary by Edward Ring, Director of Water and Energy Policy at the California Policy Center
The premise of this newsletter is that abundant and affordable energy and water are prerequisites to solving every other challenge standing in the way of lowering California’s overall cost-of-living.
Not only because the cost for energy and water directly impacts the cost to build homes, or pay household utility bills, or engage in industrial production, transportation, agriculture, and everything else, but because if the regulatory environment that has created shortages and high prices for energy and water in California was reduced, it could come with regulatory relief in every other sector. For example, a broad restructuring and streamlining of CEQA and CESA enforcement would also help homebuilders, public utilities, manufacturers, and farmers – and everyone else – to get permits, expand, comply with mandates, and complete required reporting to the many agencies overseeing their operations.
With this as an underlying premise, our mission has been to provide numbers to help measure our progress or our folly. Our reporting on projects and policies examines how much will be produced, or how much will be saved, while adding one important additional bit of information. We strive to consistently view any specific project and policy as a numerator, as only one half of a defining fraction. How much energy a project will deliver must be evaluated against how much total energy we need. How much water a project will deliver must be evaluated against how much water we need.
So as we begin a new year, let’s recap how much energy and water Californians need per year. These are the denominators of our prosperity.
With respect to energy, we have to recognize two macro units of measurement. TBTUs, which stands for “trillion British Thermal Units,” and the somewhat more familiar GWh, which stands for gigawatt-hours. California’s annual raw energy inputs, including those used to generate electricity imported from other states, are roughly 7,500 TBTUs, which in electrical terms is roughly equal to 2.2 million GWh. California’s energy services that come out the other end are roughly 2,500 TBTUs, which in electrical terms is roughly 750,000 GWh. The rest is lost as “waste energy.” The fact that we still waste about two-thirds of our raw energy makes a compelling case for innovation to improve efficiency. This is one of the main arguments for electrification, because for most applications, definitely including EVs, electricity is more efficient than combustibles.
To elaborate just a bit on this endless topic, the California Energy Commission reported in-state electricity production at 216,181 GWh in 2024. California also imported 62,157 GWh from other states. Data from the U.S. Energy Information Administration (only current through 2022) indicates 52 percent of California’s energy inputs used to produce electricity were lost as waste heat – mostly due to the inefficiency of our aging fleet of natural gas powered generating plants which still generate 40 percent of the electricity produced in-state. These plants are inefficient because they are only allowed to operate as backup to solar and wind, and because no investment has gone into upgrades because the state is trying to eliminate them. With modern upgrades, natural gas powerplants could achieve efficiencies of up to 70 percent.
To summarize energy use, and these numbers are rounded for clarity:
Total energy inputs into California (including to generate imported electricity) is about 7,500 TBTUs, which is equal to 2.2 million GWh.
Estimated total energy inputs to generate annual electricity consumption in the state is 2,000 TBTUs, not quite 600,000 GWh, but the net amount of electricity generated was just under 280,000 GWh in 2024, approximately a 50 percent efficiency.
This leaves a remaining energy input of about 5,500 TBTUs, equal to 1.6 million GWh (but not converted into electricity). Only about 1,500 TBTUs, an efficiency of just under 30 percent, was realized as actual energy services. The rest was waste energy, mostly lost to heat and friction.
These 5,500 TBTUs of combustible fuel inputs were burned to deliver direct space heating and water heating, cooking, industrial processes, and more than half, nearly 3,000 TBTUs, were used for transportation. And of the estimated 3,000 TBTU input to power our vehicles and airplanes, only a bit more than 600 TBTUs, or 20 percent of inputs, were converted into engine horsepower and aircraft thrust.
When it comes to water, the macro unit of measurement is MAF, which is the abbreviation for million acre feet. Californians get anywhere between 100 and 300 MAF/year in rainfall, with the average a bit under 200 MAF/year. We divert between 7-8 MAF/year for cities, and around 30 MAF/year for farms. Diversions for the environment vary between 30-60 MAF depending on if it is a wet year or a dry year.
These denominators that define water use in California put a 2025 press release from Governor Newsom into a revealing context. It proclaimed a Water Board investment of $2 billion into water supply projects will “add about 2.9 billion gallons annually to the state’s water supplies.” That sounds like a lot, but it isn’t. 2.9 billion gallons is equal to 8,900 acre feet. Which is to say this investment of $2 billion contributed another two one-hundredths-of-one-percent to our 38 million acre foot annual statewide demand for water. Put another way, projects at this level of cost-effectiveness would require $225 billion to produce another million acre feet of water per year.
Denominators matter. When you see a project or policy that claims to increase our statewide supply of energy or water, carefully note how much energy or water it’s going to deliver, and compare that to how much energy or water we actually use.
There are proposals that have extraordinary potential to cost-effectively deliver more energy and water to Californians. We will cover them repeatedly as 2026 progresses, and welcome new ideas and news of new innovations. And there are proposals – perhaps Newsom’s $2 billion investment is one of them – that offer qualitative benefits that go beyond the quantity of water they’ll produce.
Quality matters. Sometimes we have to spend much more than the most practical option in order to provide access to all communities, and in order to protect the environment. That’s ok. But we should always evaluate and prioritize the most practical ways to produce as much energy and as much water as we possibly can.
We must expand the denominators. More energy. More water. Only with that mindset will we ensure resilience and sustainability in all things, and further our goals of equity and upward mobility, abundance, affordability, and prosperity.
