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California’s Push for Renewable Energy Will Raise Prices

By   /   January 31, 2013  /   Comments Off

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A new report released by the Pacific Research Institute finds that California’s 33 percent renewable portfolio standard (RPS) will trigger a substantial rise in energy costs for the state by 2020. The report, written by Pacific Research Institute Senior Fellow Benjamin Zycher, estimates that the mandate will cost California approximately $5 billion in 2020.

  • Set to take effect in 2020, the RPS mandate requires California electric utilities to obtain 33 percent of their power supplies from renewable wind, solar and geothermal sources.
  • Of the estimated $5 billion cost of the mandate, $1 billion will be incurred during transmission, $500 million will be incurred as backup and $3.5 billion will be incurred when generating the power through nonhydroelectric renewable resources.
  • Zycher predicts that the overall cost of the mandate will increase with consumption and that it equates to an implicit tax of 27 percent.

The increased costs of providing power will be borne by the consumer, either directly through higher energy bills or indirectly as higher energy bills are passed on to the end consumer. Zycher predicts that consumer costs will rise by 13 percent in 2020 due to the 33 percent RPS mandate.

  • California retail rates are already 93 percent to 131 percent higher than those in the Pacific Northwest and 70 percent higher than those in the Mountain region.
  • Compared with the United States, which includes the high cost energy markets of Alaska and Hawaii, California energy costs are 53 percent higher.
  • California produced only 12 percent of its energy from renewable sources in 2010.

Forcing high cost energy into the market through central planning skirts free market economic principles. The need for a renewable portfolio standard cannot be substantiated by consumer demand and will force capital and manpower to be wasted pursuing this mandate. California will not be able to compete with its neighbors if continues to mandate its 33 percent RPS standard.

Source: Benjamin Zycher, “CA’s 33 Percent Renewable Portfolio Standard Will Raise Power Rates by 13 Percent,” Pacific Research Institute, January 22, 2013.

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