Sector Overview

The U.S. environmental industry is an important contributor to the U.S. economy and more specifically to California’s.

The broad U.S. environmental industry accounted for total revenues of over $264 billion in 2005. Four segments of this industry (hazardous waste management, remediation & industrial services, environmental consulting and ground water resources) in California alone, accounted for well over 40,000 jobs (in 2003), comprising more than 1,800 firms, with annual sales estimated at over $4 billion - not counting the “public” sector (universities, colleges, research centres and various scientists, engineers and government officials) which added another 1,400 jobs in over 200 establishments.

In 2006, the 20 largest environmental firms in Los Angeles County employed nearly 3,000 workers dedicated to environmental services.

Market and Sector Challenges (Strengths and Weaknesses)

California has been and remains a leader in both the science of climate change and in identifying solutions. The State has been at the forefront of efforts to address numerous environmental issues and problems such as reducing heat-trapping emissions, improving water quality control, hazardous waste management, resolving other climate challenges and is known to have some of the most ambitious environmental protection programs in place, passing precedent-setting policies. The State policymakers are the leading drivers for generating business opportunities. Innovations and technological advancements will be required to meet aggressive emission reduction policies and monitoring policy developments will be the key to identifying opportunities. These clear, credible and long-term political signals should enable local and foreign companies to develop or buy the new technologies that will result in cleaner and more efficient environmental-friendly operations and impacts.

The continued California march towards adopting “green & sustainable” products and technologies and the favourable State legislation aimed at protecting the environment and using the latest and most innovative solutions favour the making but also the import of various types of environmental products and services.

Among California’s most pressing environmental concerns are the following: (a) drought, (b) impaired water quality, (c) releases of toxic and hazardous wastes and (d) the loss of marine resources. While Canada may not be able to supply hardware and/or services to respond to all of these concerns Canadian businesses can respond to many of the niche markets that exist.

The Canadian environmental industry offers a multitude of capabilities and strong export potential but the following industry segments should be viewed as having the biggest potential in this market, based on a basic need/demand analysis: waste and wastewater treatment technologies, specialized air pollution control systems, liquid and solid waste handling systems and monitoring and measurement instrumentation.

Some of the main environmental market drivers and barriers to be expected while dealing in this market are the following:

• The cleanup of U.S. Government facilities
• The San Pedro Bay Ports Clean Air Action Plan
• The North American Free Trade Agreement (NAFTA)
• The Resource Conservation and Recovery Act (RCRA)
• The Comprehensive Environmental Response, Compensation and Liability Act
• The Clean Air Act (CAA)
• The Federal Water Pollution Control Act
• The California Environmental Quality Act

Based on Canadian expertise and on the more promising segments (waste management, wastewater treatment, water management and generating industry) and because these segments are heavily dominated by the public sector in the U.S. some of the main interlocutors will be:

• The South Coast Air Quality Management District (SCAQMD)
• The California Environmental Protection Agency (CalEPA)
• The California Air Resource Board (CARB)
• The City of Los Angeles Department of Water and Power (LADWP) and other municipalities
• The Port of Los Angeles (POLA)
• The Port of Long Beach (POLB)
• Regulated industries (chemical companies, petroleum companies)
• Various utilities and generating industries

Sub-Sector Identification

Alternative energy:

The following paragraphs will focus on two of the largest Los Angeles Region utility providers and buyers of energy and highlight their plans and opportunities they offer in the area of alternative energy. A third important stakeholder is profiled as well: the San Pedro Bay Ports.

The Los Angeles Region Utilities
In 2002, the California State Legislature approved Senate Bill 1078 requiring investor owned utilities (such as PG&E, SCE, SDG&E) to develop a Renewable Energy Portfolio Standard (RPS) providing 20% of their energy from renewable resources by 2017. SB 1078 does not force municipally owned utilities to comply with the 20% standard but does force them to develop a RPS. Since then, the State has adopted a RPS of 20% by 2010.

The Los Angeles Region is one of the largest consumers of energy. Utilities and energy suppliers are struggling with increased regulations, population growth and demand for alternative energy. However, they are reacting with business opportunities that Canadian companies can benefit from. The Los Angeles Region (six counties: Los Angeles, Orange, Riverside, San Bernardino, Santa Barbara, and Ventura) is largely served by two organizations: Los Angeles Department of Water and Power (LADWP) and Edison International. Over recent years and in the foreseeable future, LADWP and Edison International will continue to issue significant RFPs and RFOs and increase their investments in the generation of alternative energy and related technologies.

Los Angeles Department of Water and Power (LADWP)
LADWP is the largest municipal utility in the U.S. and services approximately 1.9 million electrical connections. Their 05-06 budget was $3.16 billion and they sold 22.8 million megawatt hours of power. LADWP’s sources of power are: 52% coal, 26% natural gas, 11% electric, 6% large hydroelectric and 5% renewables. Commercial customers used 58% of the power generated while residential used 31% and industrial 10%.

LADWP defines its renewable sources as small hydro, solar, wind, geothermal, biomass and waste. LADWP has set a Renewable Portfolio Standard goal of acquiring 20% of its power from renewable sources by 2010. This goal is largely based on City of Los Angeles Mayor Antonio Villaraigosa’s, “Green LA: An Action Plan to Lead the Nation,” which sets the goal of using 35% renewable energy by 2020.

Currently LADWP utilizes a number of alternative energy sources and most of the current supply comes from small hydro. However, supplies also come from biomass and waste, geothermal, solar and wind. According to LADWP’s Master Project list it has 2,526 MWs of renewable energy projects in development from sources such as wind, biomass, solar, geothermal, wind and waste to energy.

LADWP will continue to add renewable energy projects to its portfolio and Canadian companies are encouraged to engage as some are already doing. In March 2007, LADWP signed a Power Purchase Agreement with British Columbia-based Powerex to secure 50 megawatts of renewable hydroelectric power. Also in 2007, Terralog Technologies USA Inc., a U.S. subsidiary of Calgary-based Terralog Technologies Inc., has been contracted by the City of Los Angeles to convert biosolid waste into 3.5 megawatts of electricity.

Edison International
Edison International is one of the largest electric power generators and distributors in the U.S. It is the parent company of Southern California Edison (SCE) which is an investor-owned utility providing service to more than 13 million people within a 50,000 square-mile area. Their area includes central, coastal and Southern California (excluding the City of Los Angeles). SCE generates approximately 14,000 megawatts of energy and holds combined assets totalling around $25 billion.

SCE also has a RPS goal of utilizing 20% renewable energy supplies in its energy portfolio. Currently 16 - 17% of its portfolio comes from renewable sources. SCE’s current portfolio contains (in megawatts): 1,021 wind, 892 geothermal, 354 solar, 223 small hydro and 221 from biomass. SCE is also expected to go well beyond the 20% goal. Signed contracts in ’06 and ’07 will also contribute an additional 2,114 MWs of energy to their portfolio. SCE does have interests in hydrogen generation and carbon capture and is working very closely with BP on the development of their 400 - 450 MW hydrogen power plant.

The San Pedro Bay Ports (of Long Beach and Los Angeles)
The San Pedro Bay Ports comprises a huge regional and national economic engine. The Los Angeles Customs District accounts for approximately $300 billion in annual trade (in 2006). More than 40% of all containerized trade in the nation flows through the San Pedro Bay Ports. The economic benefits of the Ports are felt nationwide but the environmental impacts of that trade are more locally concentrated: emissions from ships, trucks and trains in the vicinity of the Ports and major transportation corridors.

The 2006-2011 San Pedro Bay Ports Clean Air Action Plan is designed to develop mitigation measures and incentive programs necessary to reduce air emissions, pollution and health risks while allowing port development to continue.

The following segments are of interest to Canadian environmental firms:

• 1993-2003 trucks “retrofitting” with NOx and emission reduction technologies,
• construction of shore power stations (cold ironing technologies),
• “clean” locomotives (alternative fuelled locomotives, hybrid, electric, multi-engine generator),
• design, construction, supply and operation of alternative fuel infrastructure for Heavy-Duty Diesel Vehicles (e.g. CNG or LNG)

Excerpts from: Environment and Renewable/Alternative Energy Sector Profile - Los Angeles, CA, USA, November 2007, Canadian Trade Commisisoner Service.

Canadian Consulate General in Los Angeles
Email: maurice.bernier@international.gc.ca
Email: chris.major@international.gc.ca
Internet: http://geo.international.gc.ca/can-am/los_angeles/menu-en.asp