Reuters - Toby Melville


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by CHRISS W. STREET | 31 May 2015 | Newport Beach, CA |

Photo Credit: Reuters – Toby Melville

Reuters - Toby MelvilleThe Sierra Club is upset because the California Public Utilities Commission (PUC) built a sophisticated and unbiased computer model to analyze the cost-effectiveness of new solar policy proposals. But despite all the Sierra Club’s political clout, the computer model determined is that none of the solar policy proposals are cost effective.

After years of paying about a $200 premium to buy any and all excess electrical power streaming from home and commercial building rooftop solar panels, California is supposed to be moving to “market-based solutions” for energy production.

To facilitate a fair and transparent analysis of competitive energy strategies, the PUC commissioned San Francisco/Vancouver-based consultants Energy + Environmental Economics (E3) to build an integrated “computer tool” to provide a rigorous technical analysis and make the computer tool accessible for use by all stakeholders.

E3 was considered an ideal vendor because their reputation for the unbiased rigor of their analysis that has qualified the firm to serve as expert witnesses in regulatory proceedings and commercial litigation. E3 also publishes in extremely credible scholarly journals. Given that the competing “stakeholders in the solar policy debate include the public, not-for-profits, regulatory commissioners, elected officials, academia and corporate executives and the press, E3 was accepted as a near perfect PUC vendor.

Despite oil prices falling by 45 percent last year, to PUC pushed up California’s commercial and industrial electricity rates to 11.9 cents per kilo-watt hour, the highest in the continental U.S. The reason for higher electric rates is to comply with the state’sRenewables Portfolio Standard that requires municipal power companies to double their percentage of “renewable” electric power from 18 to 33% in the next five years.

Renewable energy sources are very “intermittent and often non-dispatchable,” due to variations in wind and sunlight. The “capacity factor” of direct costs of producing electricity from wind is 4.2 times and solar is 9 times more expensive than natural gas. But adding in the indirect “stand-by” costs for keeping available fossil fuel capacity drives the “combined cost” for wind to 12.3 times and solar to 33.8 times the cost of gas.

Given that for manufacturing energy costs average about 150 percent more than labor costs nationally, the PUC cannot further raise business rates without further causing the state to lose large numbers of manufacturing jobs. The heavy burden of the stalled-out manufacturing sector since 2010 helps explain why California’s 16.8 percent poverty rate is one of the highest in America.

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