Politics & Policy

California Dreamin’

Why is Jerry Brown so eager to increase electricity rates when his state’s economy is in the dumps?

California leads the nation in a number of ignominious categories. Its budget deficit of $26 billion is nearly twice as large as that of the next state (Texas).

It ranks second in unemployment at 12 percent, behind only Nevada. Unemployment is so pervasive that six of the 14 metropolitan areas in the U.S. with the highest rates of unemployment are in California.

Given those facts, why are California’s leaders hell-bent on making the state’s electricity costs — already among the nation’s highest — go even higher?

Last month, the state’s new governor, Jerry Brown, signed his first major piece of legislation: a bill that requires the state’s utilities to get 33 percent of their electricity from renewable sources by 2020. Before signing the bill, Brown claimed that the measure “is about California leading the country.” But the governor’s political rhetoric ignores the higher costs that the mandate will place on California’s residents and entrepreneurs.

California’s residential-electricity rates, at $0.144 per kilowatt-hour, are 30 percent higher than the national average. Only ten other states have higher rates. Residents of Oregon, Washington, and Utah pay 40 percent less for their electricity than do Californians.

California lawmakers passed the renewables mandate, and Brown signed it, despite the havoc that similar policies are already wreaking on the Los Angeles Department of Water and Power, the country’s largest municipal utility. In 2009, the LADWP told the Los Angeles City Council that its headlong pursuit of electricity from renewable sources could raise the city’s electric rates by as much as 50 percent by 2014.

Last June, the utility’s interim general manager, Austin Beutner, announced plans to sell some of the utility’s most valuable assets in order to raise money to fund the push for renewables. Among those assets: the utility’s headquarters building, which would then be leased back from the prospective new owner. “Do you want to own a building, or do you want to have renewable energy?” Beutner asked. “You pick. I don’t care. If you like the building better, that’s fine. You can’t have both.”

The LADWP once had an even loftier goal than the one the mandate now forces upon it: to derive 40 percent of its electricity from renewables by 2020. Just five months ago, the city’s mayor lowered the target to 33 percent for a simple reason: cost. The Los Angeles Times reported that even the 33 percent goal — the one now mandated throughout the state — could “result in electricity rate hikes of 5 to 8 percent in each of the next five years.”

California lawmakers passed the mandate despite data from the Energy Information Administration showing that conventional forms of electricity generation are far cheaper than renewables. Over the next five years or so, gas-fired electricity — which provides more than half of California’s electricity — will cost about $63 per megawatt-hour. By comparison, onshore wind-generated electricity is expected to cost almost 50 percent more. Offshore wind turbines will produce electricity costing nearly four times as much, and solar-thermal-generated electricity will cost nearly five times as much.

Analysts in other countries have come to similar conclusions. A 2009 study from the University of Stuttgart found that cutting carbon-dioxide emissions with photovoltaic solar cells will cost about 18 times as much as using natural-gas-fired generators, and that using wind energy will cost about 2.5 times as much. The same study found that nuclear was the most cost-effective option, costing about one-hundredth as much as photovoltaics.

Residents of other states who want to dismiss the California renewable mandate as another example of the Golden State’s nuttiness should be wary. More than two dozen states, as well as the District of Columbia, now mandate that certain percentages of electricity be derived from renewable sources.The combined electricity sales in those states accounts for more than half of U.S. electricity use. Another five states have set unenforceable goals for the adoption of renewable energy. Pres. Barack Obama is now pushing a plan that would require 80 percent of electricity to come from “clean” sources by 2035. And the wind-energy industry, along with various environmental groups, is lobbying Congress for a national mandate on renewable electricity.

Promoters of these mandates seldom, if ever, discuss how the requirements will increase electricity costs. Instead, they routinely claim that the mandates will create “green” jobs. Brown did exactly that while signing the renewable mandate at a solar-panel factory in Milpitas. The law will create “tens of thousands of new jobs,” he said, while also “improving local air quality, promoting energy independence, and reducing greenhouse-gas emissions.”

While talking about benefits, politicos seldom, if ever, mention what the renewable mandates will mean to ratepayers. Though it is worth noting that in 2008, Obama, as a candidate, told the San Francisco Chronicle’s editorial board that “under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.”

Here’s a proposal: Rather than repeat shibboleths about jobs, energy independence, and the like, politicos should begin every discussion about energy with a pledge to make it as cheap, abundant, and reliable as possible.

Of course, we can hardly expect that from Brown, who delights in being called “Governor Moonbeam,” but it sure would be refreshing to hear it from politicians who inhabit the real world.

— Robert Bryce is a senior fellow at the Manhattan Institute. His latest book, Power Hungry: The Myths of “Green” Energy and the Real Fuels of the Future, is now out in paperback.


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