A Free-Market Energy Blog

California Energy Policy: Southeastern States Beware

By Lance Brown -- July 24, 2013

“Two recently approved solar power plants in California ranged from $100 to $200 per megawatt hour, compared to the $16 consumers will pay for natural gas generation. That’s six to twelve times the cost of gas–and for an intermittent supply that must be backed by natural gas to even be usable.” 

As states across the nation ponder what to do next on energy policy, there is no case study more important than California. One of the world’s largest economies, with nearly 30 million inhabitants, California for decades has lived on the progressive edge of American energy policy.

The state’s renewable energy mandate of 33% by 2020 has served as a beacon for anti-fossil fuel advocates nationwide. But as I have written elsewhere: “California isn’t a beacon of progress; it’s a lighthouse, showing the path to disaster.” Think of power outages when elevators are stuck, traffic lights go out to snarl transportation, and much more–with human lives, not only human comfort, at the margin.

California’s experience with renewable energy has been far short of what its advocates promised. And, ironically, the drive toward deploying more renewables has only heightened the need to build more fossil fuel generation. Starting to sound more like a warning siren than a clarion call?

A recent report detailed how California’s Riverside County has become the epicenter of the state’s renewable power movement, producing more solar power than anywhere else in the United States. But consider one of the impacts on the local economy. A 500-megawatt natural gas plant in the county pays nearly $6 million in property taxes, while a solar plant built just a few miles away pays less than $100,000.

And the jobs impact? Stated Riverside County Supervisor John Benoit:

On the face of it, it looks like a good deal. They talk about all these huge jobs and long-term benefits to the county. The truth is, it’s a very short term. “We’re going to be carrying the burden of having these types of facilities for decades to come, and because of the incentives that have been provided by federal and state government, there’s virtually nothing left for the county government or the local people to get benefit back after the small number of construction jobs are gone.

Alabama, Georgia Beware

That’s a far cry from the claim recently made by Alabama Environmental Council Director Michael Churchman that transitioning to renewables will create stronger local economies.

“Economic and environmental interests work in tandem,” Churchman tells us. Of course, his point of view is speculation, while California is living the reality. It’s the same reality that Spain lived through, as it lost two existing jobs for every one renewable energy job it created. You might call that ‘applied math.’

Stanford economist Frank Wolak, a California energy expert, says solar power for on-grid users could boost power bills as much as 50 percent, a conclusion similar to the one made by the state’s Public Utilities Commission.

In fact, two recently approved solar power plants in California ranged from $100 to $200 per megawatt hour, compared to the $16 consumers will pay for natural gas generation. That’s six to twelve times the cost of gas–and for an intermittent supply that must be backed by natural gas to even be usable. Solar is wildly uneconomic where there is an electricity grid–and thus a niche product for where there is no plug-in power.

Supervisor Benoit politely massages the cost premium:

[G]etting back to the old equation, do you want to spend a little bit more to be green? And the legislature and the governor in California have said clearly, we’re going to do that.

Meanwhile, in Georgia, solar industry advocates like Mark Bell of the Georgia Solar Energy Association, tell consumers that more solar energy is going to bring electricity rates down. Who are we to believe? Leaders in California who are dealing with the realities of aggressive renewable energy mandates, who oversee some of the nation’s highest power bills and who believe the jobs argument for renewables is overhyped?

Or environmental groups and solar industry spokespeople who are asking us to believe that the laws of energy economics wreaking havoc in California don’t apply to Southeastern states?

Now for the irony. More renewables in California is meaning more fossil fuels. Consider the picture painted by the Los Angeles Times in a recent article, Rise In Renewables Will Require More Fossil Fuels:

The Delta Energy Center, a power plant about an hour outside San Francisco, was roaring at nearly full bore one day last month, its four gas and steam turbines churning out 880 megawatts of electricity to the California grid.

On the horizon, across an industrial shipping channel on the Sacramento-San Joaquin River Delta, scores of wind turbines stood dead still. The air was too calm to turn their blades — or many others across the state that day. Wind provided just 33 megawatts of power statewide in the midafternoon, less than 1% of the potential from wind farms capable of producing 4,000 megawatts of electricity.

Golden-State Irony: Fossil-Fuel Rescue

In California, it is not uncommon for local power grids to lose as much as a thousand megawatts of wind and solar generation in as little as half an hour. That’s as much generation as a nuclear reactor or a small coal-fired plant. Such volatility on such a large scale threatens California’s grid with instability, meaning more back-up generation from fossil fuels must be built, mostly from natural gas.

“This issue is someplace between a significant concern and a major problem,” says electricity system expert Severin Borenstein, a professor at UC Berkeley’s Haas School of Business. “There is definitely going to be a need for more reserves.”

The price to California electricity ratepayers of building such reserve generation, on top of the already high cost of renewable power, will likely be billions of dollars in the coming years. So much for the notion that renewable power will save anyone money.

In fact, California is showing us just the opposite. Ratepayers are paying more money for inferior energy–and misallocating scarce resources in violation of Economics 101.

It’s a lesson to which lawmakers and policy leaders across the rest of the U.S. should pay close attention.


  1. Ran  

    Amazing. And California doesn’t count hydro-electric as part of their renewables. What is truly amazing is that the experiments have all been done in Europe, and Spain is now the poster child.


  2. Pierre Charles  

    Lance; good article, but the $16/mWh for gas seems low. Maybe $60 for new plant LCOE and $25-$35/mwh dispatch of existing combined cycle.


  3. Andrew Keenan  

    Has anyone from your organization estimated the years supply of natural gas in the US? I was told by the CFO of Atlanta Gas & Light that it was 100 years. That was two years ago, so 98 years?


    • rbradley  

      Supplies, believe it or not, increase or hold steady with consumption, so the 100 year estimate would still hold.

      We are finding more oil and gas than we are consuming here in the U.S. and in the world.


  4. Michael Giberson  

    Related: Germany, with its avid support of renewable power and desire to retire nuclear plants, is burning newer more efficient coal plants and burning more coal.

    Inside Climate News reports: http://insideclimatenews.org/news/20130724/why-germanys-greenest-city-building-coal-fired-power-plant


  5. Eddie Devere  

    You overall conclusions may be correct, but you need to check your calculations for the levelized cost of natural gas. The levelized cost of a natural gas combined cycle power plant is not $16/MWh, as you state in the article.
    The fuel cost alone is ~$30/MWH (assuming $4/GJ and 50% HHV efficiency), and the levelized capital plus the operating costs are another $15-30/MWh, depending on location the plant is built.
    If the price of natural gas paid by the utility were to increase to global levels or 2007 levels of ~$12/GJ, then the fuel costs are alone would be ~$90/MWh.
    I’m all for using natural gas at power plants while the price of NG is low (especially if there is capture & sequestration of the CO2), but it’s important to not overstate the case. Solar power is not “6 to 12 times more expensive than natural gas.”


  6. Lance Brown  

    All, just wanted to clarify that the numbers I used were straight from he report from Fox News that I cited.


    No original calculations performed.


  7. 24 July 2013 | If You Voted For It — You Own It  

    […] Master Resource on Cost of CA Energy Policy:  “Two recently approved solar power plants in California ranged from $100 to $200 per megawatt hour, compared to the $16 consumers will pay for natural gas generation. That’s six to twelve times the cost of gas–and for an intermittent supply that must be backed by natural gas to even be usable.”  […]


  8. Kent Hawkins  

    Anyone wanting a fuller discussion of levelized costs can refer to my series starting at http://www.masterresource.org/2012/09/wind-consequences-i/. In $/MWh I put coal in the high $60s, nuclear in the high $90s, gas in the low $70s and wind at $250 plus depending on the wind scenario looked at. Basically this series is a framework for looking at all the cost considerations resulting in numbers that should be approximately right versus wrong with considerable precision. Most other analyses you see will leave something out.

    In the case of nuclear I used nuclear implementation costs of $8 million per MWh versus the DOE $5.3 to be conservative. More realistic wind turbine life times of 15 years are used versus the conventional design spec of 20 years, or financing period of 30 years used for all generation types (DOE/EIA assumption).


  9. California Energy Policy: Southeastern States Beware | Pickens GOP  

    […] California Energy Policy: Southeastern States Beware — MasterResource. Share this:FacebookTwitter No comments Posted in Agenda 21, Campaigns & Elections, Cause […]


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