Guest Post by Willis Eschenbach
I will take as my departure point the following rather depressing chart from the US Energy Information Agency (EIA). It shows the rise in US electricity prices since 2001:
Figure 1. Increase in energy costs for the industrial, commercial, and residential sectors, along with the average, from the EIA. SOURCE
That is a 50% increase in electricity costs in about a decade, and as you can see, we’re getting shafted. Now, it may be that the advent of “SmartMeters” is responsible for the decoupling of the different types of rates in 2009. I say that because residential has continued to increase post 2009, while commercial and industrial have stayed about level. But that’s just a guess, and coupled or not, prices are way up.
I got to thinking about that, and about the difference in the price of electricity from state to state, as shown in below in Figure 2. I wondered how much of the state-to-state differences in prices was due to the different mixes of fuel.
So I went and got the data, and as usual, there are some surprises in the mix.
Figure 2. State by state electricity pricing, 2010. SOURCE
To understand the relationship of price to fuel mix, I used the data from the same source as Figure 1, the EIA (I downloaded “All Tables” from the top section of that link, which simplifies the process). They have individual tables which contain state-by-state information on the various fuel sources used to generate electricity. They divide these up as Coal, Petroleum Liquids, Petroleum Coke, Natural Gas, Other Gas, Nuclear, Hydroelectric Conventional, Other Renewable Sources, Hydroelectric Pumped Storage, and Other Sources. “Other Renewable Sources” in turn is broken down into Wind, Biomass, Geothermal, and Solar.
So after looking at all of those various fuel sources for electric generation, it turns out that you can actually get a fairly good handle on the state-by-state price using just four of those variables, and that the rest of them make little difference to the result.
Figure 3. Estimated state prices compared with actual prices, with the percentages of coal, hydro, nuclear, and biomass being the variables used to estimate state prices.
So what is the relationship between pricing and fuel? Here’s how Figure 3 was calculated.
You start with the average price, 13.25 cents per kWh. Then, you subtract five cents times the percentage of coal in the state’s mix.This drops the price by up to 4.6 cents, because as you might expect, coal plants are inexpensive. So if for example half your state’s power is from coal, on average that reduces the electricity price by 2.5 cents.
Next, you subtract five cents times the percentage of hydroelectric in the mix. Again, that reduces the average price, this time by up to 4.5 cents … hydro is cheap power as well.
So those two, coal and hydro, reduce the cost of electricity. Then you add three cents times the percentage of nuclear, which increases the price by up to 2.1 cents.
Finally, we have the other variable that increases the price, biofuel. Biofuel seems to be pretty deadly to a state’s electrical mix. It increases the cost of electricity by up to 5.3 cents per kWh, and is calculated by adding 34 cents times the percentage of biofuel.
The rest of the variables, wind and natural gas and all of the others, have only a very small effect on the state-by-state price. I suspect that the effect of natural gas in the mix will strengthen as the price drops and more plants are built … but for now, those are the variables that actually make a difference—coal and hydro drop the price, and nuclear and biomass increase the price.
Conclusions? … if you want cheap electricity, go with coal and hydro. And if you get desperate enough for renewables that you start messing with biomass and burning wood to make electricity? Well, you’re in deep trouble … and sadly, California, where I live, is a leader in that regard.
Which in part is why electrical prices here in California are through the roof. We have a draconian renewables target (33% renewables by 2020!!), and in a fit of chronic stupidity the lunatics in charge of the asylum decided NOT to count hydroelectric as a renewable. So we’re burning wood for electricity, and if the madness continues we’ll likely have to burn the furniture as well … and as a result of the 33% renewables target, plus the madness of denying that hydroelectric power is renewable, California ends up a “red state” in Figure 2, and my electric bill keeps rising.
That’s your electricity report on this fine morning, US Independence Day.
My best to everyone,
w.
[UPDATE] In the comments someone asked about the correlation between a state’s voting habits and its energy prices. I actually had started in that direction, and prepared a graph, but then I decided to make the post about the fuel rather than about the politics. However, since someone asked … read’m and weep …
[UPDATE 2] USA Today sez …
WASHINGTON — As President Obama pushes an aggressive national climate-change plan, his administration’s non-profit advocacy arm is becoming active in clean-energy drives across the country.
Organizing for Action also has formed a partnership that steers its volunteers to purchase wind and solar power from a single company with ties to liberal groups.
“While we are doing all of this work to advance the president’s agenda in Congress, we also want to do everything we can locally to help switch to clean energy,” said Ivan Frishberg, Organizing for Action’s climate-change manager.
Organizing for Action, for instance, will recommend that its volunteers and activists who want to purchase renewable energy for their homes and businesses consider signing up with Ethical Electric, a firm that currently sells wind power in four Mid-Atlantic states and the District of Columbia and bills itself as a socially responsible energy supplier. It also has licenses that will allow it to expand to New York, Massachusetts, Illinois and Ohio.
…
Meredith McGehee, who examines government ethics at the Campaign Legal Center watchdog group, questions whether it’s appropriate for an organization so closely linked to a sitting president to develop ties with one business.
“You can say that developing clean energy is great, but do competitors feel the weight of the presidency being used to undermine their business model?” she said. “It raises questions about the ethical propriety of the use of the president’s bully pulpit.”
Putting all the money in your friends’ pockets raises ethical questions? Who knew?
So … as usual, the friends of Obama make bank, and everyone else says “How come the US government is favoring the President’s friends?”
It would be interesting too to see what the cost impact of all the subsidies for improving energy efficiency is. A lot of cash is handed out for replacing perfectly good water heaters with newer perfectly good water heaters, for example, and additional subsidies are handed out for installing multi-pane glass to home owners. Since the cost of generation is not a linear function of how much is generated (how much can it cost, for example, to open the penstocks?) these subsidized efficiencies result in lower use (fewer billable KWH) which means the rate has to go up to keep the books balanced. There’s no free lunch.
The same rate increase happened here in Washington State where hydropower is not considered a renewable energy source (else we would not get government handouts from the puppet masters in the other Washington) so when city water conservation mandates came out years ago our water usage dropped more than anyone predicted and the water providers were losing money (in the form of smaller profits – they were still profitable). So the rates were increased to maintain profitability. There’s something perverted about that – the expectation was we’d all share the booty our compliance promised.
Here in Houston, we have provider competition, which has lowered rates a good bit.
http://www.vaultelectricity.com/Compare-Houston-TX-Electricity-Rates.html
Texas has a lot of wind power, so some of the providers offer 100% green juice, wherein you pay about 0.3 cents more per kWh to alleviate your guilt. Best to compare the fixed term rates, which lock in a price. My fixed price today is about a penny less than my provider’s current price on the chart.
Skyrocketing electricity and fuel prices is their unhidden explicitly stated goal.
That is what they want. Because they want people to move less, produce less, do less. “Stay local.” It’s really the modern equivalent of a medieval hair shirt, of a kind of perverted Puritan ethic of “waste not, want not” that survives in the secular liberal mind.
How can they say out of one side of their mouth, as O’s Science Czar John Holdren, that they want to “de-develop the United States… and create a low-consumption economy,” or O’s past Secretary of (anti)-Energy Steven Chu that he wants gas prices to be like Europe (~$10+ a gallon), and out of the other side of their mouth, like during elections, say they are all for low energy prices and an “all of the above” energy policy.
Honestly, we failed big time during the 2012 elections to call them out of their obvious bs and deception. Now we get another chance in 2014 as Obama embarks on a perilous course intended to get energy prices to skyrocket. We need someone to found a new PAC and run an anti-agw campaign. The arguments on AGW are on our side, the public doesn’t know these arguments, and now a warmist study implies that indeed pubic opinion can be changed dramatically with an effective and saturation level ad campaign: http://wattsupwiththat.com/2013/07/01/skeptic-movies-meet-their-goal-whereas-alarmist-ones-does-not/
An anti-AGW ad campaign campaign could be self-supporting as conservatives would give huge $ to any campaign seen as effective. And the campaign would impact elections across the board (helping Republicans). So, somebody(s), just do it!
P.S. We need to attack AGW theory specifically, not that they want to raise fuel prices. Because if it’s for a good and noble and perhaps world saving goal, most people will excuse it. We have to show that AGW is bs. And we can. Yes we can!
Last year I was in California. Took a stroll one morning and stopped in a small place for breakfast. Had a hard time reading the menu and asked the waitress to turn a light on. “She said the owner growls when she does it…electric bill is killing him.”
Natural light….yeah that’s the ticket….
You think YOU are getting shafted!?! Come and let us (Britland) take you you back under our control (a fitting date to make the invite), then you’ll know what shafting really is. Even we, here in Britland, call it ‘rip-off Britain’. We’re being shafted on electric, gas AND water. Our water companies were sold off to the private sector (I think still the only country in the world to do it) and are now partly FOREIGN-owned!!! We HAVE to pay the water company, there is no alternative. We’re an island, and one of the wettest countries in Europe, but last year we had drought orders imposed. The water companies lose half of it before it even gets to our homes through leakage! If it weren’t true it would be funny. We’ve now decided not to burn coal anymore, and to let wind turbines be financially subsidised. We’re importing millions of tonnes of woodchips from the US even though we have massive coal reserves – which we’re leaving there. The government haven’t any money to build nuclear power stations, so we’re pleading with French and German companies to do it – but they will only do so if they are given cast-iron rights to rip us off in the future. We’ve been paying almost the highest world petrol prices for years because of taxation – which is 150% of the actual cost. Seriously, you couldn’t make it up.
USA, you’ve got it easy!
Looks like the northwest states do the best job maintaining more reasonable costs––all the way to the Mississippi! I’m in California, and the way I avoid the high prices of electric is I burn wood in the cold months.
henry@rafelis, philip, dena
sunshine for heating water is good & cheap. once only investment. count the no. of hours per annum. I think CA is high. Use electricity for heating the water in the geyser if there is no sun, like I do. Nuclear is facing new extra safety regulations, increasing the price,
thorium: I don’t know since I have not yet seen such a reactor…
The waste of coal is radio active (radium) never mind the cost of removing the SO2 to prevent acid rain.
hydro is no. 1, CH4 is no.2
proven stuff
no arguments there…
KR says:
July 4, 2013 at 10:36 am
Thanks, KR, but anyone (like your citation) who babbles about “external costs” without discussing “external benefits” is just pushing an agenda. I’ll pass.
w.
There seems to be a claim that natural gas is not significant source of power. Nothing could be less true – for the current year up to today, the percentage of electricity accounted for by various fuels is as follows : coal (39%), gas (26%), nuclear (20%), hydro (7%), all others (8%).
Nuclear folks claim their reactors provide he cheapest power, and have since 1999, when nuclear became cheaper than coal (less than 4 cents per kWhr). For sure nuclear fuel is the cheapest, at less than a penny per kWhr. There are also errors introduced when trying to determine cost of
power source using retail prices. The biggest errors occur with solar – a large portion of a rooftop
solar system is paid by the Fed govt – $6,000 for a 6 kW system which basically covers the cost of the panels. That cost needs to be included, but it is paid by taxpayers, not by customers on
their electric bill. Therefore the true effect of solar cannot be determined by looking at
electric rates, since a part of those costs occur elsewhere.
John says:
July 4, 2013 at 11:09 am
Interesting point, John. There are obviously a host of confounding variables, I’m just looking at the big picture.
w.
Henry Galt says:
July 4, 2013 at 11:12 am
Yes, I know, European pricing is through the roof … take a look at your energy mix if you want to know why? Britain has bet the whole paycheck on wind …
w.
Bill says:
July 4, 2013 at 11:21 am
True for everything but residential …
w.
Reblogged this on Power To The People and commented:
The weather was more extreme in 1913. https://notalotofpeopleknowthat.wordpress.com/2013/01/20/how-extreme-was-us-weather-in-2012/
There is no consensus among scientists about CO2 Climate Change Theory. Cook fasely identified climate scientists as believing in the theory when in point of fact they did not http://www.populartechnology.net/2013/05/97-study-falsely-classifies-scientists.html
Professor Salby’s analysis that CO2 is not the primary driver of Climate Change has been replicated and proved correct by “Swedish climate scientist Pehr Björnbom who confirms that temperature, not man-made CO2, drives CO2 concentration in the atmosphere. Dr. Björnbom confirms Salby’s hypothesis that the rate of change in carbon dioxide concentration in the air follows an equation that only depends on temperature change, detailed in his report Reconstruction of Murry Salby’s theory that carbon dioxide increase is temperature driven [Google translation].” http://hockeyschtick.blogspot.com/2013/07/swedish-scientist-replicates-dr-murry.html
We need to do everything (legally) in our power to stop the authoritarian mad men in the UN and President Obama from controlling our energy resources by government fiat and driving people into poverty for no reason. The main people who have a “vested interest” in destroying America’s fossil fuel resources are the corrupt green crony capitalists who donated heavily to Obama and the mainly white false prophets of doom and gloom in Acacemia and Green Activist conclaves.
http://greencorruption.blogspot.ca/2013/01/big-wind-energy-subsidies-hurricane-of.html#.UczLxcu9KSM
Headline CPI from 2001 to 2013, which probably understates somewhat the inflation seen by the average person, is up 31.52%, which includes food and energy. Leaving out food and energy, costs are up 25.86%. So at least half of the increases you are looking are due to a dollar that buys less now than then.
JDN says:
July 4, 2013 at 11:34 am
Very little, actually. The real outliers are places like Maine and New York.
I assume the costs of nuclear are related to regulations and protests. The permitting process is a nightmare, and premature closure (because of protests, but also because of unexpected aging) is also in the mix.
w.
I should point out that a .65 correlation coefficient is not particularly high – it means that less than 40% of the variance of retail rates can be accounted for by using the power source information.
It also may take into account the fact that states often import electricity from sources that I don’t believe can be determined from the stats available from the EIA.
Hawaii baffles me; why is its electricity so expensive?
Reliable renewables are great near where they are available. Hydro in mountainous river systems, tidal barrages in areas with high tidal ranges (with impact assessment for wildlife, of course) and geothermal on the sides of volcanoes.
Geothermal works in Japan and Iceland.
So why does Hawaii have high electricity costs?
The Ghost Of Big Jim Cooley says:
July 4, 2013 at 11:44 am
Sadly, Big Jim, everything you say is true … I’m just doing what I can to keep the US from following the same path.
Regards,
w.
I probably should have sited my source: the BLM CPI tables: http://www.bls.gov/cpi/cpi_dr.htm#2013 Interestingly just leaving out energy, costs are up 27.46% from May, 2001, to May, 2013.
@Eric Simpson –
Funny how Holdren and Chu and of course der Fuehrer (with his $100 million family vacation to long-suffering Africa, relying on its bounteous resources of shit – uh, biomass – for cooking) sure aren’t in any hurry to reduce THEIR consumption and downsize THEIR lifestyles.
The hypocrisy, the effrontery, the in-your-face middle digit of these people defies belief. Why can’t more people see this?
arthur4563 says:
July 4, 2013 at 11:51 am
This is why I say people should quote what they object to. Who is claiming that “natural gas is not significant source of power”? Certainly not me …
w.
The Ghost Of Big Jim Cooley says at July 4, 2013 at 11:44 am…
Everyone note this.
He is absolutely right. Price is not the only issue here. Sovereignty is important. You can’t be independent if your resources are drained as a tribute just to drink water, turn on a light or not freeze at night.
And if you were the foreign power with a tributary state, wouldn’t you want a little extra right now… just when times are hard, you know.. of course just now….
Every other state should look on our works and despair, at our stupidity in the UK.
arthur4563 says:
July 4, 2013 at 12:03 pm
Actually, 0.65 is the R^2, which is the square of the correlation, and is the amount of variance explained … which leaves only 35% unexplained. And for a rough-cut estimate like this, that’s pretty good, considering we haven’t allowed for things like transmission distance and subsidies and a number of other variables.
w.
@Willis@John –
Yes, the rebates for solar panels and such are a part of the cost of renewables paid by taxpayers, and even the new water heaters might be considered a part of that too.
And now the US is to export vast amounts of woodchips to power a converted coal power station on the east coast of the UK, following a massivly expensive conversion. Subsidised transatlantic madness, financed by British consumers (luckily I live in Norway).