California’s Climate Contradictions

New evidence that green policies punish the poor and subsidize the rich.

WSJ editorial. Excerpt:

"“California has charted an ambitious course towards decarbonizing its economy,” the study by nonprofit Next 10 and the University of California, Berkeley Energy Institute at Haas declares. “At the same time, California has among the highest electricity prices in the continental U.S. These two facts create a tension: decarbonizing the economy most likely requires electrification of transportation and space and water heating, but high prices push against such a transition. High prices also have troubling implications for equity and affordability.”  

No kidding. California’s myriad green-energy subsidies and mandates are baked into electric rates, which are now about 80% higher in northern California than the national average and twice as high in San Diego. 

The state requires renewables like wind and solar to make up 60% of electricity generation by 2030. The study says renewable prices (albeit with subsidies) are now roughly the same as other power sources, but utilities signed long-term contracts with solar and wind producers years ago when prices were higher. Utilities also need backup power when it’s cloudy, which adds costs. Yet the state sometimes has to pay Arizona to take its excess solar power to avoid overloading the grid.

And here’s the kicker: Folks with solar panels get paid for surplus power they don’t use—sometimes at two to three times the rate of wholesale power. So California pays the well-to-do to generate solar power it doesn’t need and then pays Arizona to take it.

We’ve written for years that state “net-metering” programs shift the grid’s fixed costs to low- and middle-income people without solar panels. The Next 10 study estimates that this cost shift translates into $230 more for an average annual electric bill and $124 for lower-income customers with subsidized rates in San Diego.

Yet 25% to 30% of all residential electricity is discounted for low-income customers, and “the cost of this subsidy is borne by all other customers,” the study says. In other words, the middle class ends up financing rate subsidies for the poor aimed at ameliorating the higher costs of solar subsidies for the well-to-do. California’s cap-and-trade program and utility “public purpose programs” like battery subsidies add several more cents per kilowatt hour.

The study concludes that the state’s electric rates are so regressive that they could discourage people from buying electric vehicles and electrifying their homes by replacing gas-fueled appliances. Instead of raising electric rates, the study suggests making policies more progressive by increasing income taxes to promote its climate goals. So subsidize the rich, then tax them more."