Schwarzenegger said the order signed at a field of solar panels will reduce California's dependence on fossil fuels and help clean its air while creating a reliable power supply for a state with 38 million people.
It also will ensure that California remains a pioneer in clean energy by harnessing wind, solar, biomass and other renewable resources, he said.
"This is really a great day today because we are creating major action to create more green jobs and more green energy," Schwarzenegger said while signing the order in the Sacramento suburb of Rancho Cordova.
The order came three days after state lawmakers passed legislation mandating the same goal but in a way the governor's office said was too restrictive.
Schwarzenegger said he will veto the Democratic bills in part because they would limit how much wind, solar and geothermal energy utilities could import from other states.
He called the provision protectionism and argued it would violate the U.S. Constitution's commerce clause by restricting the sale of energy across state lines. His office also said the bills would impose too many regulatory hurdles.
Hawaii has a 40 percent renewable energy requirement but has given its utilities until 2030 to meet the standard. California utilities will have to generate 33 percent of their power from renewable sources a decade sooner.
Democrats criticized the executive order, telling Schwarzenegger in a letter Tuesday that it may not have the force of law.
"Such a proclamation will only cause confusion and uncertainty to California's energy markets, jeopardizing California's role as the world leader in renewable energy development and green jobs," Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Sen. Joe Simitian, D-Palo Alto, said in the letter.
Schwarzenegger defended his executive order as the only solution because lawmakers had presented flawed legislation.
Under the executive order, state agencies that oversee utilities can begin writing regulations immediately to carry out the goal. California Air Resources Board Chairwoman Mary Nichols told reporters Monday her panel would develop a rule by next summer, in the middle of Schwarzenegger's final year in office.
The air board must adopt the regulations by July 31 of next year.
"I think any new governor is likely to want to continue that program," Nichols said.
Democrats, consumer advocates and environmental groups had sought limits on the amount of renewable power that could be imported from other states. They want utilities to build renewable plants in California, which they estimated could lead to as many as 200,000 new jobs.
"We think the governor is making a big mistake by vetoing the bills," said Robert Balgenorth, president of the State Building and Construction Trades Council of California. "Right now tens of thousands of construction workers are unemployed here in California."
The legislation would have allowed utilities to import renewable energy generated outside California as long as the power came from a plant that connects to California's electricity grid.
Yakout Mansour, president and chief executive officer of the California Independent System Operator, which manages the state's power grid, said the Democratic bills would reduce utilities' ability to exchange renewable power with other states in the West.
For example, California already imports hydroelectric power from the Northwest and exports solar power to Nevada when it's needed most.
"The restrictions on the way the electricity for renewables is set to be delivered are just unreasonable and produces ways of actually making it even more difficult to deliver to California," Mansour said.
The legislation also would lead to increased fossil fuel production in California by requiring more gas-fired power plants to make up for renewable power when the wind isn't blowing or the sun isn't shining - defeating a key goal of reducing greenhouse gases, Mansour said.
California already has one of the nation's most aggressive standards mandating use of renewable energy. Investor-owned utilities are required to generate at least 20 percent of their power from renewable sources by next year, but few are expected to meet that goal.
Utilities also will have difficulty complying with the standard in Schwarzenegger's executive order, primarily because the system for transmitting electricity from where it's produced to where it's needed is insufficient, said Nancy Ryan, a deputy executive director for policy at the California Public Utilities Commission.
A commission report says California would need about $115 billion in upgrades over 10 years to its transmission grid if utilities hope to meet the renewable energy standard. The language in the Democratic bills would have made the goal impossible to meet, Ryan said.