I Do Not Think Your Data Means What You Think It Means

Kevin Drum, building on a story from the NY Times, uses data from the California Energy Commission to make the case that California is the most efficient user of electricity in the country and that this efficiency can be attributed sole to government intervention.  Drum, always on the lookout for an excuse for the government to take over some sector of the economy, concludes:

Anyway, it's a good article, and goes to show the kinds of things we
could be doing nationwide if conservative politicians could put their
Chicken Little campaign contributors on hold for a few minutes and take
a look at how it's possible to cut energy use dramatically "” and reduce
our dependence on foreign suppliers "” without ruining the economy. The
energy industry might not like the idea, but the rest of us would.

On its face, California's numbers are impressive.  The CEC's numbers show California to have the lowest per capita electricity use in the nation, using electricity at half the national rate and one quarter the "least efficient" states.

This would be really cool if it were true that a few simple public policy steps could cut per capital energy consumption in half.  Unfortunately, though I am willing to posit California is better than average (as any state would be with a mild climate and newer housing), the data doesn't say what Drum and the article are trying to make it say. 

The consumption data is from here.  You can see that there are three components that matter - residential, commercial, and industrial.  Residential and commercial electricity consumption may or may not be fairly apples to apples comparable between states (more in a minute).  Industrial consumption, however, will not be comparable, since the mix of industries will change radically state by state.  As an extreme example, states with high aluminum production or oil refining or steel making, which are electricity intensive, will have a higher per capita industrial electricity consumption, irrespective of public policy.  The graph Drum and the NY Times uses includes industrial consumption, which is a mistake -- it is more reflective of industry mix than true energy efficiency.

Take two of the higher states on the list.  Wyoming, at the top of the per capita consumption list, has industrial electricity consumption as a whopping 58% of total state consumption.  KY, also near the top, has industrial consumption at 50% of total demand.  The US average is industrial consumption at 29% of total demand.  CA, NY, and NJ, all near the bottom of the list in terms of per capital demand, have industrial use as 20.6%, 15.1%, and 16% respectively.  So rather than try to correlate electricity consumption to local energy regulations, it is clear that the per capita consumption numbers by state are a much better indicator of the presence of heavy industry. In other words, the graph Drum shows is actually a better illustration of the success of CA not in necessarily becoming more efficient, but in exporting its pollution to other states.  No one in their right mind would even attempt to build a heavy industrial plant in CA in the last 30 years.  The graph is driven much more by the growth of industrial electricity use outside CA relative to CA.

Now take the residential numbers.  Lets look again at the states at the top of the per capita list:  Alabama, South Carolina, Louisiana, Tennessee, Arkansas, Mississippi, Texas.  Can anyone tell me what these states have in common?  They are hot and humid.  Yes, California has its hot spots, but it has its mild spots too  (also, California hot spots are dry, so they can use more energy efficient evaporative cooling, something that does not work in the deep south).  These southern states are hot all over in the summer.  So its reasonable to assume that maybe, just maybe, some of these hot states have higher residential per capita consumption because of air conditioning load?  In fact, if one recast this list as residential use per capita, you would see a direct correlation to summer air conditioning loads.   This table of cooling degree days weighted for population location is a really good proxy for how much air conditioning is needed by state.  (Explanation of cooling degree days). You can see that states like Alabama and Texas have two to four times the number of cooling degree days than California, which should directly correlate to about that much more per capita air conditioning (and thus electricity) use.

In fact, I have direct knowledge of both Alabama and Texas.  Both have seen a large increase in residential per capita electricity use vis a vis California over the last thirty years.  Granted.  But do you know why?  The number one reason for increased residential electricity use in the South is the increased access of the poor, particularly poor blacks, to air conditioning.  It is odd to see a liberal like Drum railing against this trend. Or is it that he just didn't bother to try to understand the numbers?

OK, now I have saved the most obvious fisking for last.  Because even when you correct for these numbers, California is pretty efficient vs. the average on electricity consumption.  Drum attributes this, without evidence, to government action.  The NY Times basically does the same, positing in effect that CA has more energy laws than any other state and it has the lowest consumption so therefore they must be correlated.  But of course, correlation is not equal to causation.  Could there be another effect out there?

Well, here are the eight states in the data set above that the California CEC shows as having the lowest per capita electricity use:  CA, RI, NY, HI, NH, AK, VT, MA.  All right, now here are the eight states from the same data set that have the highest electricity prices:  CA, RI, NY, HI, NH, AK, VT, MA.  Woah!  It's the exact same eight states!  The 8 states with the highest prices are the eight states with the lowest per capita consumption.  Unbelievable.  No way that could have an effect, huh?  It must be all those green building codes in CA.  I suspect Drum is sort of right, just not in the way he means.  Stupid regulation in each state drives up prices, which in turn provides incentives for lower demand.  It achieves the goal, I guess, but very inefficiently.  A straight tax would be much more efficient.

Please, is there anyone in the "reality-based community" that cares that their data really is saying what they think it is saying??

  • dearieme

    Perhaps his IQ is much less than his voltage?

  • http://dimer.tamu.edu/simplog?blogid=3 Jim Hu

    Nice post. I link to you at (http://dimer.tamu.edu/simplog/archive.php?blogid=3&pid=4126) and add a few thoughts of my own...I tried pinging a trackback, but got an error message.

  • Tim

    During the electricity shortage in California four years ago, the CEC broke down energy use, demand and supply as part of providing testimony in numerous legislative hearings. California, on a per capita basis, demands less PRIMARILY because air conditioning needs in California are less. Unless Drum can waive the magic "change the nation's climate" wand to reduce air conditioning needs in other states, his point is pointless.

  • Jim

    Ummm, regulation is state action. You assert as a fact that it is "stupid" regulation that drives up prices, and therefore consumption. If one assumes the opposite, that the regulation is not stupid, then you have state action that has reduced energy consumption, just as Drum has assumed. It might also help your argument if you could show how the percentages of industrial use in California has changed over the years. I don't know, I don't have that data, but isn't it possible that California has always had less industrial use than say the Midwest. Also, if California's state action has targeted industrial uses to a greater extent, it is possible that greater savings at the industrial level are going to be reflected in the percentages you cite.

  • http://www.transterrestrial.com Rand Simberg

    Another factor is whether or not a state uses gas or electric for home heating. For instance, in Florida, not only do we use a lot of electricity on air conditioning, we also use it for heating, when heating is necessary. It doesn't get cold enough here often enough to justify the running of utility lines for gas. In California, on the other hand, we didn't have an air conditioner (we lived near the beach) and used gas for winter heat. The only obvious significant use of electricity that I can think of in California in which it would exceed most other states is server farms.

  • Don Meaker

    I live in Los Angeles California, in a high desert community. Daily temperature swing is about 40 degrees F per day, with highs above 120 degrees. It isn't the humidity here, it is the HEAT!

    Survival is possible here because two strategies:
    1. Passive Cooling. We open our doors here at night, to take advantage of cooler night temperatures. We schedule our day to take advantage of our one hour or two hours a day of comfortable outside temperatures. In the summer that is 5:00AM, in the Winter that is 3:00 PM.

    2. You mentioned evaporative coolers. We call them "Swamp Coolers", and your readers may like to know the details. Our usual humidity is about 10%, so adding water to that reduces the dry skin problems that most of the nation only experiences in the winter. After your first year in the Desert, you get your "desert nose" a scar tissue that prevents nose bleeds from the dry climate.

    Swamp Coolers operate with a half horsepower fan to give as much cooling as a 7 horsepower air conditioner. California charges a hefty fee for water to residential customers, and subsidizes water for agriculture, but still, it is far cheaper to use the swamp cooler. Swamp coolers must have a place for the hot air to go, so most people have a window open, or even crack the front door with a brick.

    In some residential neighborhoods this can cause a home security issue, and many householders carry a pistol around with them as they do their daily chores. Bad news for anyone who may try to break in! That is not what many people from California coastal areas expect, and takes a bit of getting used to.

  • DMonteith

    "In other words, the graph Drum shows is actually a better illustration of the success of CA not in necessarily becoming more efficient, but in exporting its pollution to other states."

    This phenomenon probably accounts for a large percentage of the energy efficiency and environmental progress seen in the US as a whole for the last couple of decades. To call environmental news out of China (America's manufacturing and industrial heartland) sobering doesn't begin to do it justice, and their energy consumption is growing exponentially.

  • Nick Bradley

    Can we look at the data and see how much each state spends on energy per capita? California uses less but pays more per unit of energy; I'd like to see how it breaks out as $$ per capita.

    We can calculate (total amount spent on energy) / (population) / (per capita income). The results should tell us who has the better energy policy...

    The final figures would even give an advantage to CA and other "rich" states because their per capita income is higher. I haven't crunched the numbers, but I assume that it would reveal that Alabama has the best energy policy because (1) prices are low, (2) energy use is high, and (3) per capita income is high.

    We can also look at the total amont of money spent on energy costs per year as a % of GDP (even though GDP is a poor indicator of economic vitality, IMHO, it's the most commonly used).

    The results I got aren't what I expected. When we look at energy spent per capita, California spends the 41st most. Here are my rankings:

    Wyoming, Louisiana, Hawaii, South Carolina, Alabama, Texas, Delaware, Nevada, Mississippi, North Carolina, Tennessee, Vermont, Florida, New York, Connecticut, Massachusetts, New Hampshire, Pennsylvania, Oklahoma, North Dakota, Kentucky, Ohio, Maine, Alaska, Georgia, Indiana, Iowa, Kansas, Arkansas, Virginia, Montana, Nebraska, New Jersey, Maryland, Wisconsin, Arizona, West Virginia, Idaho, Missouri, Oregon, California, Rhode Island, South Dakota, Minnesota, Michigan, Illinois, Washington, New Mexico, Colorado, and Utah.

    I haven't compared these #s to GDP data, income levels, nor have I adjusted it to climate. But looking at policies at these particular states, this blog may need to re-examine its hypothesis. Perhaps we should look at Illinois' policies, because they're (1) hot and humid in the summer, but freezing in the winter, (2) heavily-populated, and (3) industrialized.

    California's economy is structured to use less energy, however. It is not a big manufacturing hub, and it's three biggest industries are agriculture, Media, and IT. None of the those are energy-intensive, but Californians are stil paying less per capita.

    If we look at residential spending on energy per capita, which would take commercial enterprises and and industry out of the equation, California only pays the 48th most (Florida pays the most, more than 2x what Californians pay per capita).

    Perhaps the answer is that State laws have put prices caps on energy, causing shortages. So Californians are paying it in rolling brownouts instead of in cash.

  • DMonteith

    "The US average is industrial consumption at 29% of total demand. CA, NY, and NJ, all near the bottom of the list in terms of per capital demand, have industrial use as 20.6%, 15.1%, and 16% respectively. So rather than try to correlate electricity consumption to local energy regulations, it is clear that the per capita consumption numbers by state are a much better indicator of the presence of heavy industry."

    "The graph is driven much more by the growth of industrial electricity use outside CA relative to CA."

    There is no data here to back your certainty that industrial flight from California is greater than from other states. You have demonstrated that industry is lower in California than average, but not that it is decreasing more than elsewhere.

    Your points regarding air conditioning and price incentives, however, are more compelling.

  • cpl

    Two things:

    •You failed to note the effect of population on these graphs and ratios. Wyoming has a population of 500,000 residents, while California's is nearly 33 million. Wyoming's largest city, Chyenne, is home to 55,000 people. California's largest city, Los Angeles, is home to 4 million (and 3 times that living within the "Greater LA Area"). Wyoming has about 6 people per square mile, California has 208. A single large industrial user has a greater power use ratio effect in Wyoming than 65 similar users in California. Due to population density the pollution from a single large industrial plant in California has a per-capita effect nearly 41 times the impact of the same plant in Wyoming.

    Comparing California's situation to Wyoming's is like comparing orange trees and grasslands. If there's a lesson to be drawn you might consider looking at efficiencies of scale. That would lead to a more correct analysis of the huge differences between the two examples than the simplistic and over-spun "exporting pollution" in boldface.

    •The comment "Stupid regulation in each state drives up prices..." made me LOL! Clearly you were not in California in 2000 or 2001, or you would have written "Stupid DE-regulation drives up prices."

    Nonetheless your point about prices/demand could well be correct, but it's also beside the point. The point of the article was that California's pollution controls resulted in lower energy usage than other places. Despite nearly doubling our population since 1970, California's air is cleaner today than it was in the 1950's & 1960s. As a kid who grew up in Southern California during those years, and who was able to use lung pain as a practial measure of physical exertion, I'll gladly spend more and use less if it means breathing without pain.

    But now the facts about "stupid regulation." In 1975 Los Angeles had 118 Stage 1 Smog Alerts, by 1995 we were down to 14, we haven't had a single one since 2003. We can see the difference, we can smell the difference, we can feel the difference. You call that "stupid regulation," I call that success.

  • http://bowramp.blogspot.com 74

    A couple of other points to throw in the mix.

    One of the reasons the cost/capita in CA, OR, and WA is so low is access to cheap hydroelectric power. Hydro power from the BPA (Bonneville Power Authority) is available to all three states at reduced rates.

    cpl -- I grew up in LA myself and went back there for a visit in 2001. True, I didn't get the chest pains I used to have, but on the other hand, I still couldn't see Mt. San Antonio from Pomona. The reason the smog alerts are fewer, is related to the type of pollution reduction. The other stuff seems to be as nasty as ever.

    I once did some IT work in the offices of some energy brokers. I picked up just enough info from those guys to realize that the energy market (sources, regulations, etc.) is so complex that it would confuse a ten-legged spider -- far too complex to properly disect here.

  • http://americankernel.com Katie's Dad

    My name is Kevino Drumtoya, you kill my thesis, prepare to die...

  • http://www.thedonovan.com BillT

    NJ's industrial demand for electricity only stands at 16% because, with the exceptions of lighting (a year-round demand) and air conditioning (a seasonal demand and all industries don't require it), our industrial base uses natural gas.

    Which is only common sensical, considering how much of the stuff is produced by our executive and legislative bodies (considered by most of us here to be simultaneously identical and superfluous)...

  • Steve in Princeton

    Good blogpost... This note is for Jim. I agree with Warren's "stupid" comment though he should have explained why he made it. The point is, CA and some other states have regulations that affect more inefficient energy generation and transmission and higher wholesale prices. This is "stupid" because the extra costs go to inefficiencies, energy traders, utility lobbyists, and the like. To get the same effect, the states could simply import best-practice energy policy and tax electricity up to the preexisting prices. Then at least the state would raise revenue -- even as a Norquist conservative I would prefer that outcome.

    I also don't have the data at hand, but I would assert that California's industrial use has certainly declined. The massive aerospace, manufacturing, defense, and shipbuilding industries formerly based in California are nearly all gone.

    Dmonteith makes an absolutely critical point about offshoring -- one we must always keep in mind when considering energy policy's true effects in the last 30 years.

  • JohnDewey

    cpl: "Clearly you were not in California in 2000 or 2001, or you would have written "Stupid DE-regulation drives up prices."

    But California's electricity industry was not de-regulated, was it? Try answering these questions from Jerry Taylor and Peter Van Doren of the CATO Institute:

    "What kind of "deregulation" imposes rigid government dictates on how industries should organize themselves? What sort of deregulation keeps fixed prices on retail providers? What kind of "deregulation" requires retailers to buy power through a state-run central exchange? And what brand of "deregulation" forbids retailers from buying electricity more than one day ahead?"

    No sir, you cannot blame the California electricity mess on deregulation.

  • DaveC

    A few additional points to consider:

    1) Why are we accepting Kevin's premise that "lowest electricity use per person" be considered a good thing?
    2) "Per capita income" doesn't mean alot in a state like California, which would seem to have a greater "income disparity" than most states. An income distribution graph might be helpful.

    Put these two points together, and why couldn't the true result simply be "California has more low-income illegal immigrants than other states, and they don't have the money to run AC, Big-screen TV's, Computers, etc.".

    I'm not sure this study has any value, let alone pointing to the efficiency of regulations.

  • spencer

    while you may be right about the shifts in the composition of production in California away from
    energy intensive industries this is true for the country as a whole.

    I just checked the data at BEA and could only go back to 1997 but since 1997 real gdp growth has been well above the national average in California. From 1997 to 2005 it grew 41% as compared to 28% for the entire US--about one-third higher-- and I have no reason to assume the 1980-1977 data would show anything different.

    What I get from this and the the chart is that California has achieved significant energy conservation without hurting the overall state economy.

    Guuess what, it was achieved through higher prices. Duuh -- as an economist why should you be surprised?

    The question becomes one of cost-benefits to see if the gains are worth the costs. But you do not address that question. Drum assumes it does and I'll agree that is a biased conclusion.

    But all I see you have done is mudy the water without asking or attempting to answer the relevent questions.

  • Raven

    About Alaska's low energy useage:
    We use a LOT more wood and coal for heating than we do anything else. And with so little demand for air conditioning...

    Furthermore, about those high energy prices, have you considered the costs of infrastructure? They have more to do with our prices than "stupid government regulations" (though, admittedly, the rabid tree-huggers haven't helped any).
    Weather effects and the terrain and (lack of) population density are the greatest factors on the cost of infrastructure which is the greatest factor in the cost of electricity (or any other form of energy in AK).

  • Nick Bradley

    Spencer,

    California, has one of the highest rates of population growth. It would be interesting to look at per capita GDP growth. I got numbers from 2000 to 2005:

    US per capita GDP growth: 21.12%

    CA per capita GDP growth: 18.58%

    If I adjust for the estimated number of illegals that are in CA in '00 an '05 (2m and 2.5m), CA's % growth drops to NEGATIVE 6.8%. Granted these numbers are like comparing apples to oranges because yours included the tech boom in CA, while mine included the bust.

    But looking at per capita #s is very revealing...

  • Klug

    Thank goodness I wasn't the only person who looked at this graph over lunch and said: "What the hell is this?!?" The trends didn't make any sense to me.

  • Anonymous

    Nick I do not know where you got your data.
    But according to the state gdp data published by BEA from 2000 to 2005 the increase in real gdp was:
    us 12.2%
    ca 14.8

    according to the us census over the same period
    population growth was:
    us 5.3%
    ca 6.7%

    this gives us per capita real gdp of:
    us 6.8%
    ca 8.1%

    so what is the source of your data?

    As someone who works closely with this data all the time your data of real per capita gdp growth for the us of over 4% annually --your 21.2 divided by 5 -- looks way, way, way too high.

  • Tesla

    San Diego Gas & Electric
    Year 2000: Average price paid 11.58 cents per kilowatt-hour; Average consumption per residential customer 5,919 kWh.
    Year 2005: Average price paid 20.44 cents per kilowatt-hour; Average consumption per residential customer 3,059 kWh.

    Yup. Price signals work.