Nov 21, 2013, 8:53 PM ETPanel, Fireside Chat, Conference Presentation

Lunch Discussion: Investing in California's Future

Global Renewable Leadership: China is the world's largest producer of electricity from renewable sources in absolute terms, capable of building in one year what takes the U.S. three to four years.
Percentage Leadership: Iceland leads globally for the percentage of electricity derived from renewables, generating nearly 100% of its power via geothermal sources.
U.S. Capacity Growth: In 2012, wind power was the largest source of new generating capacity in the United States for the first time.
Scale Comparisons: U.S. wind farms produce electricity equivalent to:
- 47% of Mexico's total electricity consumption.
- 26% of France's total electricity consumption.
- 62% of Australia's total electricity consumption.
- 64% of Turkey's total electricity consumption.
Hidden Costs of Fossil Fuels: Estimates suggest the true cost of gasoline is $12–$14 per gallon when factoring in military expenses (e.g., $8 trillion spent in the Persian Gulf since 1976) and environmental pollution, which are currently untagged.

Surplus Projections: California projected a $10 billion surplus by 2018, though panelists warn this is volatile due to reliance on capital gains taxes.
Municipal Market Distress: Recent bankruptcies in San Bernardino and Stockton have caused a "shell-shocked" retail investor base and increased risk premiums, making municipal debt pricing unattractive compared to below-investment-grade securities.
Unfunded Liabilities: Significant risks exist regarding "Other Post-Employment Benefits" (OPEB), specifically lifetime healthcare promises for retirees, which are often unrecorded on municipal balance sheets and may exceed pension liabilities.
Fiscal Policy Proposals: Panelists suggested a "Build America Bond" style federal subsidy to broaden the municipal investor base and reduce borrowing costs for infrastructure.
Talent Retention Challenges: Companies report increasing difficulty retaining engineers and designers due to:
- Underfunded public education systems (California ranked 47th in per-pupil spending).
- Lack of affordable housing and long commutes.
- Competition from Austin, Texas; Madison, Wisconsin; and Albany, New York.

Immigration Reliance: Over 50% of engineers and scientists in Silicon Valley were not born in the U.S., and the majority of U.S. patents are issued to non-natives.
Visa Pathways: Lyndon Rive (SolarCity) obtained permanent residency via the "Exceptional Ability" visa category, originally designed for professional athletes (he is a member of the U.S. National Underwater Hockey Team).
Diversity Shifts: Over the last 12 years, California's population shifted dramatically:
- 40% increase in Asian ancestry.
- 33% increase in Latin American ancestry.
- 6% decrease in European ancestry.
Entrepreneurial Culture: Panelists emphasized California's unique DNA of embracing high-risk innovation, contrasting it with more rigid regulatory environments in Europe and South Africa.

Central Valley Labor Gap: Agricultural companies face severe shortages of middle management, necessitating $30,000–$50,000 annual salaries but requiring three months of intensive post-hire training.
Career Tech Initiative: A public-private partnership (involving California's agricultural giants) is launching career technical education tracks for 8th–12th graders to prepare students for modern ag-tech roles, promising Associate of Arts degrees upon graduation.
Preschool ROI: A dollar invested in a 5-year-old's preschool education yields five times the return of investment at age 22; failing to attend preschool results in students being five years behind by graduation.
Healthcare Integration: Companies are establishing on-site clinics to provide free preventative care and triage for employees, aiming to reduce long-term health costs and improve workforce wellness.

Solar Cost Viability: Solar costs are projected to continue declining due to:
- Reduction in "soft costs" (permitting/interconnection friction).
- Decreasing financing costs and increasing retail energy prices.
- The impending expiration of the 30% federal tax credit (scheduled to drop to 10%).
Permitting Reform: Lyndon Rive highlighted that while oil derricks often require no permits in some jurisdictions, solar installations face excessive regulatory friction, creating a "hidden incentive" for fossil fuels.
Global Competition: Detroit's decline serves as a warning to California; competitors are no longer just domestic (Boston, NY) but international, specifically China, which has embraced free markets and capitalism.
Investment Philosophy: Panelists urged a shift from reactive philanthropy (writing checks) to active engagement, leveraging business skills to solve systemic issues like education and healthcare access.