By Mark Nelson and Michael Shellenberger
Between 2016 and 2017, California’s electricity prices rose three times more than they did in the rest of the United States, according to a new analysis by Environmental Progress.
The increases came despite 2017 having had the highest output of hydroelectricity — the state’s cheapest source of electricity — since 2011. Electricity prices in the rest of the United States outside California rose two percent, the same as the rate of inflation.
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.”
California’s 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. As a result, California today has a large amount of excess electricity generating capacity without being able to know if much of it will be available from day to day and week to week.
The rising cost of electricity in places with increasing penetration of intermittent renewables was predicted by German economist Lion Hirth. He found that the economic value of wind and solar must decline significantly as they become a larger part of the electricity supply. For example, the value of wind on the European grid drops 40 percent once it becomes 30 percent of electricity, Hirth finds, and the value of solar drops by half when it gets to just 15 percent.