Electricity Prices in California Rose 5x More Than Rest of the USA

Between 2011 and 2017, California’s electricity prices rose five times faster than they did nationally. Today, Californians pay 60 percent more, on average, than the rest of the nation, for residential, commercial, and industrial electricity.

California's high penetration of intermittent renewables such as solar and wind are likely a key factor in higher prices. Economists agree that “the dominant policy driver in the electricity sector [in California] has unquestionably been a focus on developing renewable sources of electricity generation.”

High levels of renewable energy penetration make electricity expensive around the world, not just in California. As Germany deployed high levels of renewables over the last 10 years it saw its electricity prices rise 34 percent. Today, German electricity costs twice as much as that in neighboring France.

California’s Renewable Portfolio Standard Increases Electricity Costs

California’s renewable portfolio standard (RPS) increases electricity costs in part by requiring the purchase of renewables even when they cannot be relied on to power the grid, requiring undiminished capacity from the combination of natural gas, hydro, and nuclear power.

RPS, also referred to as renewable electricity standards (RES), are policies designed to increase the use of renewable energy sources for electricity generation. These policies require or encourage electricity suppliers to provide their customers with a stated minimum share of electricity from eligible renewable resources. Although national RPS or other clean energy policies have been proposed, no federal RPS or similar policy is currently in place. However, most states have enacted their own RPS programs.

As a result, California today has a large amount of excess electricity generating capacity (the ‘Duck Curve’) without being able to know if much of it will be available from day to day and week to week.

As Wind and Solar Capacity Climbs, Returns of Usable Power Diminish

As wind and solar capacity climbs, the returns of usable power diminish because of increasing curtailment during surges that the grid cannot absorb. More and more intermittent capacity has to be pushed onto the grid to get less and less additional renewable electricity. The dynamic of soaring overcapacity and falling prices is the inevitable result of the fundamental inability of intermittent wind and solar generators to efficiently match supply to demand.

The burden of higher cost electricity and benefits of renewable energy subsidies fall unevenly on Californians. Between 2007 and 2014, the highest-income 40 percent of California households received three times more in solar subsidies—valued between $10,000 and $20,000 per household—as the lowest-income 40 percent. California households with over $100,000 in annual income benefitted from energy efficiency subsidies at twice the rate of households whose income was under $50,000.

Most recently, PG&E requested a rate increase in its General Rate Case application (A18-12-009) for 2020, 2021 and 2022. Under their proposal, base rates would increase by $1,058 million or 12.4% for 2020 with subsequent increase of $454 million and $486 million for 2021 and 2022.

Article by Mark Nelson and Michael Shellenberger published in Environmental Progress on February 12, 2018.

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