Renewable energy mandate will wreak havoc on California's economy

Last month, California's new governor Jerry Brown signed his first major piece of legislation: a bill that requires the state's utilities to get 33 per cent of their electricity from renewable sources by 2020. Before signing the bill, Brown claimed that the measure "is about California leading the country." But the governor's political rhetoric ignores the higher costs that the mandate will place on California's residents and entrepreneurs, says Robert Bryce, a senior fellow at the Manhattan Institute.

California's residential electricity rates, at $0.144 per kilowatt-hour, are 30 per cent higher than the national average.

California lawmakers passed the renewables mandate, and Brown signed it, despite the havoc that similar policies are already wreaking on the Los Angeles Department of Water and Power (LADWP), the country's largest municipal utility.

In 2009, the LADWP told the Los Angeles City Council that its headlong pursuit of electricity from renewable sources could raise the city's electric rates by as much as 50 per cent by 2014.

Over the next five years or so, gas-fired electricity – which provides more than half of California's electricity – will cost about $63 per megawatt-hour.

By comparison, onshore wind-generated electricity is expected to cost almost 50 per cent more.

Offshore wind turbines will produce electricity costing nearly four times as much, and solar-thermal-generated electricity will cost nearly five times as much.

Residents of other states who want to dismiss the California renewable mandate as another example of the Golden State's nuttiness should be wary. More than two dozen states, as well as the District of Columbia, now mandate that certain percentages of electricity be derived from renewable sources. The combined electricity sales in those states accounts for more than half of U.S. electricity use. Promoters of these mandates seldom, if ever, discuss how the requirements will increase electricity costs. Instead, they routinely claim that the mandates will create "green" jobs, says Bryce.

Source: Robert Bryce, California Dreamin', National Review Online, May 3, 2011.

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First published by the National Center for Policy Analysis, United States

FMF Policy Bulletin/ 10 May 2011