Can Clean Energy Stay Affordable as Demand Goes Up

California has some of the highest energy costs in the nation, with a range of factors driving up utility bills at a faster pace than inflation. In a recent panel moderated by KQED climate reporter Laura Klivans, experts discussed the obstacles and solutions to achieving clean and affordable energy in California.

"The primary driver of the increases in electricity bills is, frankly, climate change," said Alice Reynolds, president of the California Public Utilities Commission, "having to adjust the system to make the infrastructure safer … as well as respond to the impacts of climate change, [which includes] repairs after wildfires, dealing with extreme heat" and providing the supply to meet higher and more volatile demand.

Along with higher demand during the day, Siva Gunda, vice chair of the California Energy Commission, observed that demand has lengthened across summer and winter. To meet demand for "the median of the day [and] these long tails happening because of climate change" requires investing in additional capacity. Right now, two systems must be running to maintain reliability on the grid-the legacy oil and gas system alongside the new renewable system. "When you're paying for two systems, the cost is going to be higher."

Gunda cited an expected rise in electricity use due to building, transportation, and data centers, which will further shift the point in the day when use goes up. That timing and usage "will drive the system you need to build," Gunda said, and recommended stabilizing regulations as California phases out refineries.

The cost to increase electrification on the grid goes into the rate base customers pay-"that [base is] the biggest part of lack of affordability," said Adria Tinnin, director of race, equity, and legislative policy at The Utility Reform Network (TURN). Wildfire mitigation and safety make up a large portion of the base rate, which Tinnin suggested might be lowered through more cost-effective approaches such as insulating conductors rather than burying wires underground.

Nora Sheriff, a representative for the California Large Energy Consumers Association, reminded the panel that subsidies and wildfire costs affect all classes of rate payers. Industrial customers pay a significantly higher rate in California than in nearby states, which can discourage investment. Sheriff advised more collaboration, particularly with industrial customers: "There are things industrial customers can and want to do now to help improve reliability and decarbonization," for example, investing in waste heat recovery to create energy on their own sites and developing long duration storage.

Tinnin pointed to legislative efforts that can help keep costs down, such as the savings gained by using public funding instead of private shareholder financing or loans. By following this approach, Tinnin said, the state can track funding, "and ensure the savings are passed on to the rate payers."

Sheriff forecasted affordable energy solutions that involve a regional energy market. The possibility of combining the many individual markets west of the Mississippi into two large markets could reduce the costs of upgrading the grid.

The lower costs of a regional market and the ability to exchange energy across the West may offer another benefit, according to Gunda: reduced greenhouse gas emissions. Markets across the region are not using the same resources during the day. Furthermore, "not all of them will have extreme weather at the same time."

Tinnin served as a counterbalance, voicing caution. "We're very concerned about maintaining California's autonomy." Tinnin wants a guarantee that "if the regionalization were to move in a different direction and [do] things we don't agree with or that go against California values, we have a way to exit."

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PPIC's Speaker Series on California's Future invites thought leaders and changemakers with diverse perspectives to participate critically, constructively, and collaboratively in public conversations. The purpose is to give Californians a better understanding of how our leaders are addressing the challenges facing our state.

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