A coalition of industry trade groups that have long opposed California’s clean energy policies funded a report about a month ago that blamed California’s rising electricity rates on — you guessed it — California’s clean energy policies. Since the California Energy Commission just updated its electricity and natural gas demand forecast, which contains revised estimates for rate increases that are 15-20 percent lower than original predictions (see slide 3 of Tuesday’s presentation), I thought it was time for a blog on the subject of renewables and rates.
California’s commitment to renewable energy
California’s principal clean energy program, the Renewables Portfolio Standard (RPS), requires utilities in the state to deliver 33 percent of their retail electricity from clean, renewable sources by 2020. The RPS has created the largest renewable energy market in the country and has helped California reduce pollution associated with fossil-fueled generation.
Renewable energy is not the main driver of higher utility rates
There’s no debate that electricity prices are going up in California, but it would be misleading and inaccurate to blame rate hikes primarily on the state’s RPS. Electricity rates are rising for many reasons — the biggest being delayed upgrades to grid infrastructure that we just can’t put off any longer. Think of it this way: If you neglect to change the oil or perform routine maintenance on your car, it will operate less efficiently and eventually break down.
Renewable energy costs remain a relatively minor component of total utility costs in California, 11.3 percent in 2012. In addition, an analysis conducted by the Division of Ratepayer Advocates that was publicly reported in December 2012 estimates that the additional cost to reach the 33 percent RPS by 2020 will account for 5 to 9 percent of the increase in customer bills between now and 2020, amounting on average to an extra $5-$10 per month.
Renewable energy costs are declining
Renewable energy technologies are no different than computers or televisions in that their costs decline as markets mature and technologies improve. We have seen RPS contract costs decline significantly in the past five years. In 2012, the average price of an RPS contracts approved by the Public Utilities Commission was approximately 20 percent less than just the year before. Even the Wall Street Journal, not exactly a clean energy cheerleader in recent years, admits that renewable energy costs should not be the limiting factor on making new investments.
Natural gas is not the answer
Extracting fossil resources is carbon intensive, expensive, and disruptive to communities. Renewables, however, are a safe, unlimited, and reliable supply of resources. They do not make climate change worse and they do not expose ratepayers to volatile price swings common in natural gas markets. While the start-up costs for renewables are usually higher than the start-up costs of a natural gas plant, the fixed and steady price of renewables is valuable to utilities and consumers in the long run.
There are other impacts to consider as well: the electricity sector is the largest user of freshwater in the U.S. and water is becoming scarcer with climate change, particularly in California. We can’t afford to squander this precious commodity by using it to cool off fossil fuel plants. In general, renewables use significantly less water than their fossil–fueled or nuclear counterparts.
The bottom line is if we want to have a safe and reliable electricity grid, we have to pay for it. Fossil fuel interests have a financial stake in blaming our increasing electricity bills on renewable energy and purposefully ignoring other utility operating costs like deferred maintenance that are being passed on to consumers. Clean energy investments are a necessary and smart down payment on our future, and are not wreaking havoc on our electricity bills — even in the state with more investments than any other place in the country.
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