Written by Dr. Ernie Goss
On May 9 the California Energy Commission (CEC) unanimously voted to require that builders install solar energy generation in all newly constructed homes in the state. The CEC estimated that the mandate would add approximately $10,000 to the price of a new home, and importantly, reduce the state’s dependence on fossil fuels.
But how will displacing fossil fuel energy generation with solar affect electricity prices in the state? Currently, Californians pay the seventh highest electricity prices among the 50 states at $44.74 per million BTUs.
The latest U.S. Department of Energy data show that California obtains 52.3 percent of its electricity from natural gas, and 8.6 percent from solar. Replacing half of the state’s natural gas electricity generation with solar energy would increase the state’s electricity prices by approximately 26.7 percent to $56.48 per million BTUs. This would effectively boost the state’s electricity prices to the second highest in the nation, other factors unchanged.
Above and beyond the anticipated positive impacts on the environment, the new policy will add billions to the coffers of corporations (i.e. crony capitalism).
In 2016, Tesla Corp. purchased SolarCity for $2.6 billion with the solar firm accounting for $1.1 billion of Tesla’s 2017 revenues. Despite losing money for 59 of 60 quarters since incorporation in 2003 with accumulated losses of $5.0 billion, Tesla stock is currently selling for approximately $300 per share. It is clear that Tesla shareholders are expecting energy mandates, such as California’s, to enrich them in the years ahead.
Dr. Ernie Goss is an economist and research associate with the Craig School of Business at Fresno State. This piece was originally published on his blog, economictrends.blogspot.com.