California has long been a leader when it comes to electricity policy, but not always in a good way. Two decades ago, the state restructured its electrical markets as part of a then-nationwide trend toward deregulation. The basic idea behind California’s move — that consumers would benefit from more competition in electrical generation — was correct. After all, states like Texas show that electrical competition can be a great boon. Yet California pursued a “uniquely ill-designed and poorly-implemented market construct” that resulted in skyrocketing consumer bills and energy shortages that helped poison the whole idea of electrical competition for a generation.

Now, California risks making another major mistake — this time for renewable energy. The cost of renewable power has fallen dramatically over the last decade. As a result, what was once a boutique power source is poised to become a major player in electrical markets. Unfortunately, some in government and the environmental movement have misinterpreted these market advances as evidence that a transition to renewable energy must be driven by government fiat.

The California legislature is currently considering Senate Bill 100, which would mandate that 100 percent of the state’s retail electricity come from renewable energy and “zero carbon resources” by 2045. This represents a substantial increase from the state’s already ambitious Renewable Portfolio Standard mandate of 50 percent by mid-century.

SB100’s top-down approach could prove to be a costly mistake for the state and for renewables in general. While never an ideal policy, at low levels, an RPS or subsidies may not be felt by the consumer or taxpayer because the overall price tag remains low. That’s particularly true when other factors (such as falling prices or California’s broader carbon policy) would have led to more deployment anyway. As these programs scale up, however, costs can rise drastically.

While it’s very hard to predict what the exact cost of any technologies will be, it is almost certain that an aggressive RPS over the next two decades will be expensive — and likely very expensive. Even if the per-unit cost of wind and solar fall well below fossil units and storage costs continue to fall with projections, integrating very high levels of variable resources on this time frame will result in poor capital efficiency. This drive up costs. The rising frequency in solar curtailments by the California grid operator already illustrates the early stages of this challenge. Should government-driven deployment of renewable energy lead to a cost explosion or serious reliability issues, it could serve to generally discredit renewables in the eyes of the public.

This is not to say that renewables are bad or that they cannot grow rapidly as a share of the overall electrical market. But to succeed, both renewables and other forms of clean energy must grow organically, rather than being pumped full of artificial subsidies. This means fostering an environment where competition drives costs down and consumers have the freedom to choose their energy sources. Indeed, evidence already suggests this is hugely important in the effort to drive affordable decarbonization.

And, if we want to drive decarbonization, we have to demonstrate that it aligns our economic and environmental interests so other countries find it in their self-interest. For example, Texas has the most competitive electricity system in the country and is decarbonizing quickly, integrating renewables affordably and has the best retail electric price performance of any state the past decade (by far). This model is the favorite of economic conservatives, energy consumers and is turning heads in the environmental community.

Pragmatic environmental groups and clean energy foundations have started to recognize these facts and are pivoting more toward competitive markets and away from RPS as a preferred tool. An affordable clean energy future requires unleashing market forces rather than restrictive central planning. The question for Californians is whether they wish to pursue expensive, contentious decarbonization or pursue their self-interest and embody an affordable clean energy future.

Image credit: Jenson

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