California Energy Leadership: Leading the Race to the Bottom

California is apparently trumpeting its "leadership in energy."  The centerpiece of its claims is its low per capita electricity use.  Arnold is making the claim now, but Kevin Drum was pushing this a while back when he said:

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.

Max Schulz of the Manhattan Institute is not impressed:

California's proud claim to have kept per-capita energy consumption
flat while growing its economy is less impressive than it seems. The
state has some of the highest energy prices in the country "“ nearly
twice the national average "“ largely because of regulations and
government mandates to use expensive renewable sources of power. As a
result, heavy manufacturing and other energy-intensive industries have
been fleeing the Golden State in droves.

Neither am I.  I addressed this issue a while back in response to Drum's post, but since the meme is going around again, I will excerpt from that old post.

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.....

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....

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.

  • http://neubranderinc.com/blog/ Nobrainer

    Regarding the last couple sentences, it could be well argued that many states, particularly in the Southeast, regulate their prices downward. In particular, rates are fixed, or relatively fixed, such that they don't accurately account for fuel price fluctuations. However, you premise is still valid.

  • Roger

    Air conditioning make a big difference. The house I grew up in (in CA) had a swamp cooler which uses as much energy as a ceiling fan. And much of the Sacramento area has it's own giant swamp cooler a.k.a. the California Delta. Also 105 degrees in California is way better than 95 in Virginia. The mild weather is a big reason people stay in Cali despite the high high cost of living--that and Mexican food.

  • Scott Wiggins

    Comment from a California Real Estate developer circa 1900. "We're not selling land, we're selling the weather. We just throw the land in for free." California has some of the most temperate weather in the country. No surprise if they show low per capita energy usage. I owned a house is Orange county without air-conditioning. Most homes in the area did not have AC. This came as a big surprise to a young man from the deep south where we get 95 degree temps and 95% humidity on a fairly regular basis. In the south, AC is considered as essential as iced tea...

  • m

    Of the three investor-owned utilities in California, Sempra Energy subsidiary San Diego Gas & Electric is by far the furthest behind in attaining California's renewable energy portfolio standard (5.3% compliance versus 11.9% for Pacific Gas & Electric and 16.1% for Southern California Edison. source: http://www.cpuc.ca.gov/PUC/energy/electric/RenewableEnergy/progress.htm).

    Sempra's CEO also does not believe in global warming (source: http://www.signonsandiego.com/news/business/20060618-9999-lz1b18sempra.html). He has since toned down his public statements to say that the evidence on global warming is inconclusive and he will do what is in the best interest of his shareholders but I'll continue to judge him by his original statement.

    Based on these contrarian indicators, Sempra might not be a bad investment.

  • http://blog.neo-libertarian.com Neo-Libertarian

    To add to Roger and Scott's comments re California air conditioning - here in the SF Bay Area most apartments still do NOT come with air conditioning at all. The bay and the ocean generally keep things cool in conjunction with a nice, sun-dampening fog and even summer temperatures stay in a range considered chilly anywhere else. It also doesn't snow in the most densely-populated parts of California, because even though it seems like it's far enough north for it to snow in Sacramento or the Bay Area, it usually doesn't.

    So right there you have several million people never using A/C and tens of millions (at least two-thirds of the state, if not over four-fifths) whose heating bills rarely if ever contend with snow and ice. I think Warren's industrial explanation clearly could explain a much larger chunk of the state's supposed accomplishment, but perhaps the fair climate of California has an additional contribution to make here (at least pertaining to any residential efficiency).

    Also, ditto on the slammin' Mexican food here. That and the climate almost make the abusive bureaucracy, agressively self-entitled public unions and the confiscatory taxes worth it.

  • http://www.alcoholaddiction.org/california nishith

    I oppose CAFTA because it is a step backward for workers in Central America and a job killer here at home...Democrats understand the need to help our Central American neighbors reap the benefits of increased trade, but the costs of this CAFTA are too high with too little to justify this agreement’s deficiencies.

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    NISHITH

    California Alcohol Addiction Treatment