Rising Electricity Prices Are Coming

By Matthew Kandrach

California continues to lead the nation in mandating the deployment of wind and solar power. Unfortunately, that translates into rising electricity costs that are now poised to climb higher. It’s a development that should concern families in every state.

Since 2011, electricity prices in California have jumped 30 percent—the most expensive in the western United States. And there’s no sign that this steady increase will ease.

While California’s renewable energy targets are particularly aggressive, they’re not the outlier one might imagine. Twenty-nine states and the District of Columbia have renewable energy mandates for ever-increasing amounts of wind and solar power. These mandates tend to be expensive.

A recent analysis from the University of Chicago found that mandates drive up electricity prices. After seven years, consumers in these states paid $125 billion more for electricity than they otherwise would.

While the cost of solar arrays and wind turbines has fallen, the expense of integrating them onto the grid is rising. A higher percentage of these weather-dependent sources of electricity means more expense to balance out their peaks and valleys.

In California, for example, the state’s solar generation can produce far too much power in the middle of the day, forcing ratepayers to pay when other states absorb it. And when that solar generation fades in the evening, or fails during bad weather, ratepayers must pay top dollar to import electricity from neighboring states. This selling low and buying high is the opposite of sound economics.

Wind generation poses similar problems. A think-tank led by President Obama’s former Energy Secretary, Ernest Moniz, found that California went 90 days with little or no wind power in 2017. That included multiple gaps when wind generation wasn’t available for several days. This dependence on variable electricity is monumentally challenging. And batteries are hardly a cure-all since the best grid-scale batteries provide just four to six hours of backup—hardly enough to handle days or weeks when solar and wind power are unavailable.

Defenders of California’s renewable-first policy say that the state’s average residential electricity bills are relatively low. But that has little to do with the merits of the policy and everything to do with a temperate climate—where Californians simply use less energy.

Move California’s electricity prices to other states—where consumers frequently run air conditioning and heat pumps—and the same electricity rates would be devastating. And yet, California’s energy approach is being replicated across the country, with little understanding of the potential consequences.

The U.S. Energy Information Administration recently reported that 78 utilities proposed electricity rate increases last year, the highest number since 1983. If anyone believes that moving from reliable, baseload power to weather-dependent, renewable sources of electricity wouldn’t come with rising costs, that bubble is about to burst.

Public utility commissioners and policymakers need to think very carefully about passing the costs of these mandates onto consumers. Trading reliable, affordable power for less reliable, more costly alternatives deserves serious scrutiny.

Matthew Kandrach is the president of Consumer Action for a Strong Economy (CASE), a free-market oriented consumer advocacy organization.