1. California Energy Commission California’s Economic and Demographic Outlook Electricity and Natural Gas Model Inputs and Assumptions IEPR Lead Commissioner Workshop February 26, 2015 Nancy Tran Demand Analysis Office Energy Assessments Division Nancy.Tran@energy.ca.gov / 916-654-3848 1

2. California Energy Commission Purpose  Provide an overview of California’s economy and demographics  Provide economic and demographic background that is considered in the demand forecast  Summarize comments received from experts on the post-recession landscape  Describe major uncertainties over the next 10 years 2

3. California Energy Commission Agenda  The Recession  Demographics  The Economy  California’s Regions  Uncertainties  Conclusion 3

4. California Energy Commission Electricity Consumption and Economy 4 Source: Moody’s Analytics, CA Energy Commission Clear relationship between energy use and economic upswings and downturns

5. California Energy Commission Key Economic Drivers Used in the Forecast: 5  Population  Number of Homes  Personal Income  Dollar Output by Sector  Employment by Sector  Unemployment Rate  Average Household Size

6. California Energy Commission During the Recession, California experienced: 6  Downturns in nearly all major industries within the state  Job loss: one million+ California residents lost their jobs  A housing market bust

7. California Energy Commission 7 California’s annual employment growth has returned to pre-recession levels

8. California Energy Commission 8 The Great Recession: Unemployment Rate California’s unemployment rate reached 12.4% in 2010

9. California Energy Commission 9 Housing is starting to rebound

10. California Energy Commission 10 Slow down in California’s population growth – only 0.9% growth last year Source: CA Dept of Finance

11. California Energy Commission 11 Source: DOF, PPIC NOTE: Population as of July each year CA Population Projection California’s population growth is expected to increase an annual average of 1% over the next 25 years, lower than the historic trend

12. California Energy Commission 12 Two aspects of population growth are birth rates and migration The following are growth drivers related to birth rates and migration:  Number of women of child bearing ages  State of job market  Wage and salary opportunities  Housing prices  Death rates (minor)

13. California Energy Commission Migration in California  California consists of immigrants from 60 different countries  In 2013, net migration added 92,000 people  California is a leading destination for foreign immigration into the U.S.A.  California continues to have low domestic migration  California’s inland areas experienced faster population growth rates than coastal areas  Population growth: 5.7% to 5.9% for coastal regions and 15.3% to 16.4% inland regions 13

14. California Energy Commission 14 Different Housing Preferences for Baby Boomers vs. Millennials

15. California Energy Commission 15 Construction is a Key Short-Term Growth Driver in CA  Increased residential and non-residential construction to fuel short-term growth (1-3 years) via employment and contributions in gross state product

16. California Energy Commission 16 Additional short-term economic drivers include:  Lower mortgage and foreclosure rates  Lower oil and gasoline prices  Income growth from technology industries  Government recovery

17. California Energy Commission 17 CA’s Mid- and Long-Term Growth  Mid-term growth (3-5 years) expected in the housing and technology sectors  Gross State Product growth at 3%+ annually  Recent economic forecasts are more pessimistic about long term growth compared to last year due to a “scarring effect”  Long-term growth (5-10 years) expected to keep pace with the nation in CA’s high-tech industry and with infrastructure improvements  Gross State Product growth at 2%+ annually

18. California Energy Commission California Regions Los Angeles Region Sacramento Region San Diego Region San Francisco Region 18

19. California Energy Commission Los Angeles Region  Unemployment rate is currently 7.9 percent, down from 13.0 percent in 2010 (EDD)  Growth in trade and films  Software, application development, internet services, and biotechnology are components of LA’s success  Housing sector draws international investors  More multi-family units to be built (UCLA Anderson Forecast)  Potential shipping changes: Panama Canal 19

20. California Energy Commission Sacramento Region  Unemployment rate is currently 6.9 percent, down from 12.6 percent in 2010 (EDD)  Growth in demand for healthcare, agriculture, manufacturing jobs, and business industrial space  Geographical location attracts Central Valley food producers and San Francisco’s high-tech businesses  Impact of the drought  Kern County oil industry 20

21. California Energy Commission San Diego Region  Unemployment rate is currently 5.8 percent, down from 10.4 percent in 2010 (EDD)  Growth in biotechnology, defense, and manufacturing  Homebuilding rebound short of expectations  Attracting entrepreneurs to clean technology with renewable energy focus  850+ companies with clean tech employment = 10% of total green jobs in CA 21

22. California Energy Commission San Francisco Region  Unemployment rate is currently 4.2 percent, down from 9.1 percent in 2010 (EDD)  Technology sector is the main driver to success – tech firms can integrate their products into the business infrastructure in all industries  Housing prices and rental growth will continue to increase  Growth in nonresidential units is seen with new local startup companies 22

23. California Energy Commission 23 Forecast Uncertainties  Drought  Gasoline and oil prices  Impact of Baby Boomers and Millennials  Length and severity of scarring effects caused by the recession  Migration patterns

24. California Energy Commission 24 Conclusions  California is recovering from the Great Recession at a faster pace than most states  Growth in high-tech can be seen throughout California  Population continues to grow, but at a slower pace  “Traditional” electricity usage likely to grow at slower pace in the next 10 years  Degree of electrification (electric vehicles, ports, trains, etc.) will determine whether electricity usage overall slows down

25. California Energy Commission Questions and Comments? Contact Information nancy.tran@energy.ca.gov 25