SACRAMENTO, Calif.—A generation ago, this city’s economic future was closely tied to a single source of electric power—an expensive, balky nuclear power plant owned by the Sacramento Municipal Utility District.

In 1988, though, voters here directed SMUD, as it’s known, to shut down the pricey plant, called Rancho Seco, and pursue more affordable alternatives. Two decades later the utility generates almost 40 percent of its electricity from wind, geothermal, water, biomass, and other renewable sources of energy.

The consequences for SMUD, its customers, and its namesake city have been profound: SMUD now provides its 600,000 ratepayers with some of the lowest-priced electricity in the West. Switching to renewable electricity has proved to be a competitive advantage in the Sacramento region, which has been one of the state’s strong job generators. The city—the state’s capital—is now among the cleanest, greenest, and most energy efficient in America.

Do the actions Sacramento and SMUD took to "go green" offer lessons for the Michigan Legislature? You bet: Lansing is deadlocked over requiring utilities in the state to sell more green energy, boost their customers’ energy efficiency, and plan more carefully for meeting future demand—precisely the steps SMUD and other California utilities are taking.

In fact, the difference between Sacramento and Lansing is stark. In Sacramento, utility executives and city leaders reacted smartly to long-term trends in energy costs, environmental conditions, population growth, and job forecasts. They collaborated with each other and the State of California to pursue an economic path powered by clean energy.

In Lansing, however, lawmakers and utilities are digging in and stoutly defending existing technologies and business models—even as the state leads the nation in bad economic news.

Progress in Sacramento
In Sacramento, going green takes many forms. Some generate new energy; others reduce the demand for it.

For example, instead of building several big plants that burn increasingly expensive fuels, SMUD effectively funded lots of little ones that don’t burn anything. The utility provided hundreds of its customers with rooftop photovoltaic equipment to generate electricity, and lets them sell what they do not use back to the company.

SMUD is planning to expand what is already one of the state’s largest wind farms and working with local dairies to generate electricity from farm wastes.

To cut demand, SMUD teams up with builders to construct "energy smart" homes. This spring SMUD signed its tenth agreement with a homebuilder, in this case Woodside Homes. Woodside will construct 1,487 solar powered, ultra-energy-efficient houses; SMUD will subsidizes the cost of the solar and efficiency equipment, which save homeowners as much as 60 percent on their utilities.

Sacramento, with a metro region of nearly 2 million people, took its own steps, building and then expanded a light-rail system that daily carries 50,000 passengers between downtown and the suburbs. The city also modernized its zoning to encourage construction of energy efficient, walkable, mixed-use neighborhoods.

The strategy works: Sacramento has experienced steady job, income, and population growth and has the second-highest number of industry-certified energy-efficient office buildings in the country, exceeded only by Chicago, according to the U.S. Green Building Council.

Underlying all of this is clean, reasonably priced power. Not one kilowatt that SMUD produces is generated from coal, an energy source whose California future disappeared when the state enacted the most aggressive renewable energy, energy efficiency, and climate-change laws in the U.S.A.

"We feel renewable energy is a golden opportunity for us, this city, and the state," said Jon Bertolino, SMUD’s superintendent of renewable generation. "It could be the next computer industry. We’re jumping into it, and the more we do, the better off we’ll be in the long run."

Stalemate in Michigan
Given Sacramento’s—and California’s—notable success with green power and energy efficiency, Michigan lawmakers’ inaction on those issues seems hard to understand.

Michigan is in dire straights, after all. It is just one of two states losing population, according to the U.S. Census Bureau. Last month, according the federal Bureau of Labor Statistics, it still had the highest unemployment rate in the nation—8.5 percent. It is among the national leaders in the number of educated young adults who are leaving the state to seek work elsewhere.

And it produces 61 percent of its energy from coal, 25 percent from nuclear plants, 10 percent from natural gas, and 3 percent from renewable energy—mostly from dams.

An outside observer might conclude that such numbers make mandates for more jobs-rich clean energy from utilities—"renewable portfolio standards"—an easy issue.

Quite the opposite: Lansing’s lawmakers are at an impasse on RPS, as well as on energy efficiency standards and requirements that utilities prove they need new coal or nuclear plant before they build them. With twenty-six states already having RPS standards on their books, and many others offering energy efficiency incentives or mandating power-planning standards, the state continues to fall further behind.

It is not as if the state officials are unaware of the problem. Two years ago, for example, the Michigan Energy Office assessed efforts to recruit renewable energy developers.

"The overall story of renewables in Michigan is one of lost opportunities," said the report’s authors. "Both short-term price pressures and longer-term utility strategies based upon traditional fossil fuels created disincentives for investment in renewable energy production in general."

Since then, not much has changed. DTE did announce its intent to invest $4 billion in renewable projects recently, but the utility said the plan was contingent on market and political conditions—specifically, protection from competition from other power suppliers, no matter how innovative or cheap their services are. So far, the state hosts just 35 large-scale wind turbines—32 of them in a single wind farm that opened this spring in the Thumb area. General Motors has invested in a new cellulosic ethanol plant in the Upper Peninsula, but that does nothing to bring green electricity to Michigan.

In short, compared to what’s occurring in the renewable sector in California, Michigan’s program is feeble.

California Leads the Way
Of course, the Golden State is hardly trouble free. Joblessness just ticked up to 7.3 percent; the state faces a $17 billion budget deficit that Republican Governor Arnold Schwarzenegger wants to close with a 1-cent rise in the state sales tax. Global climate change, say scientists, is reducing snowfall in the Sierras and rain in other areas. California is enduring the most devastating fire season in its history, one of its worst droughts, and reservoirs are much lower than normal.

But California is doing better economically than Michigan, and one reason is its burgeoning renewable energy sector—the fastest-growing industrial sector in the country. That sector is thriving here because the state is changing how it produces and uses energy.

Echoing SMUD’s efforts, one side of California’s statewide green coin is energy efficiency: Since the 1970s, the state has championed both efficiency and conservation. Its per capita consumption of energy, about 7,100 kilowatt/hours per year, has not changed since 1977, according to the California Energy Commission. During that same time, per capita consumption nationally shot up to 12,000 kilowatt-hours per year.

Meanwhile, Governor Schwarzenegger, elected in 2003 and re-elected in 2006, has accelerated the state’s push to develop clean energy. He issued an executive order calling on local governments to lower their carbon emissions 80 percent below 1990 levels by 2050.

To get there, he’s leading the implementation of a first-of-its-kind statute in the United States, the Global Warming Solutions Act of 2006. The legislation requires California to cut greenhouse gas emissions to 1990 levels by no later than 2020.

Another statute requires California utilities to generate 20 percent of their energy from renewable sources by 2010. The governor is relentlessly calling for more than that: He wants 33 percent of the state’s power to come from renewables just ten years later, in 2020. Mr. Schwarzenegger also directed that 1 million photovoltaic systems be installed on California roofs by 2018, enough to generate 3,000 megawatts.

A New Culture
The momentum that governments, utilities, and Mr. Schwarzenegger have generated for developing cleaner energy and reducing greenhouse gases permeates every sector of California’s economy and culture.

The most popular vehicle in the state is the high-mileage Toyota Prius hybrid. A ballot measure in November asks voters to approve a $10 billion investment to begin building a state-spanning, 700-mile, high-speed rail system. Among the federal government’s list of top industrial buyers of clean energy are California-based Intel Corporation, (whose purchase of 1.3 billion kilowatt hours per year leads the country), Wells Fargo & Company, and Cisco Systems.

But the most important targets of California’s clean air, climate change, and clean energy statutes are the state’s utilities, which, like SMUD, are changing how they generate energy. (See Page 2) The state makes 12 percent of its electricity from renewable sources.

SMUD committed several years ago to produce 23 percent of its energy from renewable resources by 2011, the most far-reaching target of any of the state’s utilities. Mr. Bertolino, the superintendent of renewable generation, said the company will meet its goal.

"We’ve got a couple of hurdles, like everybody else, but we’ll get there," he said.

When told of Michigan’s continuing inability to enact policies to spur green power development, Mr. Bertolino said there were other things the state could do immediately.

"Any state can always pursue energy efficiency," he suggested in an email, "which is often more cost-effective than generation alternatives, and is an even better route to economic development and jobs because the implementation is much more distributed and local. It’s not sexy, but it’s really good stuff."