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?”
jorgekafkazar says:
July 4, 2013 at 3:27 pm
Curiously, I’d actually done that as part of the research, but even simpler, just with the percentage of the popular vote for Obama. I didn’t use it because I wanted the debate to be about the data and not the politics … but it’s an important chart, it says a lot, so here it is …
Thought you’d like it …
w.
richard verney says:
July 4, 2013 at 3:44 pm
Thanks, Richard. People don’t count the CO2 from biomass. Their reasoning is that the carbon in the plants was taken out of the atmosphere recently and is just being added back to the atmosphere.
Of course, the same is true of fossil fuels if by recently you mean “geologically recently”, but never mind that …
In any case, that’s the answer you’ll get if you ask someone about CO2 from biomass.
w.
Your nuclear power plant factor caught my interest. In general, price per KWH of nuclear generated power is relatively low compared to the prices you show. The question then is why does having nuclear power in a state indicate an increase in price as compared to states without it? The factors listed by some folks about accumulating reserves for decommissioning and costs of ongoing legal fights are already included in the actual KWH price. All I can do is speculate that since no significant nuclear power plant construction has occurred for decades, those that exist are in states that previously had very strong economies. Those plants now reside in states with less economic strength but still are burdened with regulations from more lucrative times.
@Poems of the Climate –
Do you live in a county where there is “check before you light”? Here in Butte County, wood burning is always prohibited on the coldest days, sometimes half the time for the entire winter.
Of course, it’s really about bossing people around in every detail of their daily lives and demonstrating power over them by making them suffer, not about the environment – many types of gas heaters produce microparticles and NO2 and other nor so pleasant pollutants, probably worse on balance than wood smoke.
But then, when were greens ever deterred from acting on destructive impulses by the environmental damage they do?
Kill them condors! Knock down them whooping cranes! Wipe out them swifts! Spread them microparticles that, unlike wood smoke particles, are all but impossible to cough up and get rid of! Let ’em suffer so I can feel warm and fuzzy. /sarc
P.S. I thought wood was renewable, b ut they want you to burn gas which isn’t.
I read your chart a bit differently – this is a chart of the devaluation of the dollar during the Bush years.
OK, that’s both true and silly. This is a chart of the devalutaion of the dollar in the modern era, showing the impact of dramatically falling methane (dirty, dangerous “natural” gas) prices since 2008. Obama hasn’t done anything for energy policy in the past 5 years except to drive a stake through the heart of the nuclear renaissance.
Prices have stabilized solely because improvements in fracking technology have flooded the market with temporarily cheap natural (dirty dangerous) gas. Luckily all of us on this site believe the threat from CO2 to be overblown, or we would all be up in arms over the expansion of another fossil fuel to provide our societal energy needs.
Willis Eschenbach says:
July 4, 2013 at 5:09 pm
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Willis
Thanks.
Thats the answer the green zealots would give, but it is a disengenuous one. In the real world, for every kWh produced by burning biomass, you get more CO2 emissions than would arise if coal had been used.
The simple answer is to not chop down the forest and/or to manage regeneration of the natural forest and one would enjoy all the CO2 sequestration that having forested land gives.
Better still, burn coal and plant some new forests. In this way, you retain the forest that would have been chopped down (to meet biomass needs), and you gain a new forest 9the planted forest). In this manner, there is even more CO2 sequestration, and less CO2 emissions in energy production (since coal emits less CO2 than biomass). A double win.
Going green should be to burn coal AND plant trees. Heck there is a lot of land out there that could be forested, or perhaps as a novel alternative, why not instead of foresting the land, use the land to grow some crops for food production. In this way we can have some cheap energy, we can not needlessly escalate CO2 emissions, and we can have some food to feed the world. Who could have thought that a green solution could have so many benefits.
The green zealots should be called out on the biomass fraud, for that is what it is.
Jarryd Beck says:
July 4, 2013 at 4:16 pm
I do love Oz, and me Ozzie mates are great, but yer a pack of pikers when it comes to electric costs … here in California, Anthony Watts is paying 92¢/kWh, and that’s not a typo, ninety-two cents.
Beat that one …
w.
Henry Galt says:
July 4, 2013 at 11:12 am
“Most of your country has ‘leccy prices to die for. I currently pay @ur momisugly 21 cents after ‘shopping around’ the UK for the ‘best available’ price.”
I shed a tear for the Brits daily. No kidding. With the exception of London, Britain has roughly the economy of Mississippi. I do not mean to put down Brits. I just mean to say that their lives are difficult. except for the elites.
Theo Goodwin says:
July 4, 2013 at 5:54 pm
Yeah, I lived in England for a summer or two. Good people, voting for corrupt politicians, much like the US….
In bleeding-heart socialist green Quebec, families pay 5.5c/kWh. Our power is about 95% hydro.
@willis, richard verney –
What do you suppose the CO2 emissions per watt-hour of energy from burning shit (a kind of biomass) are?
@numerobis –
Don’t the greenies demonize hydro in Quebec, like they do here in the Democratic Peoples’ Republic of Kalifornia? (Note who else the initials stand for – we’re getting close to matching them).
A word for coal. How easily forgotten that New England had deforested itself. Houses required 4-6 coards over the winter. an acre produces about a coard of biomass. The reforested states owe much of the recovery to coal and more recently in the last 50 years to oil. Come to think about it the whales must really appreciate the substitution of petroleum lubricant and electric lighting.
Might I point out that coal was less expensive alternative. We seem to be making a more expensive switch. Go figure!
Willis, It looks to me that if a state voted for Obama, they are being screwed exponentially rather than linearly as your regression assumes.
Liked your graph of rates vs. Obama %. In all fairness though the biases could be purely regional. Perhaps, if you have historical data, the vertical access should be the % increase since 2008. I live in an “Obama” province and our rate increases are about double inflation. If it passes the eyeball test, you could also show the polynomial trendline.
Quite a rigged system we have tolerated, eh?
And to think the pompous leftists historians still insist on propagandizing that the Louisiana Purchase and Alaska ( Seward’s Folly ) were some kind of political mistake or even corruption. They have elevated some of the most trivial things during random (R) administrations to legendary status while routinely ignoring stuff like (D) cronyism, which is exactly what this is.
For example, one of their favorite criticisms of Harding just might come back and bite them in the @ass. Wikipedia: Teapot Dome
The (D)emocratic-Socialist swine and their (R)epublicrat enablers have seen that scandal and raised it an order of magnitude by just renaming the bribes “campaign donations”, skipping the middlemen and handing out taxpayer money directly into the hands of their fraudster cronies.
America is gonna need a new Independence Day.
There are several reasons why nuclear seems expensive.
1. Reinvestment of profit to increase capacity – money goes to future generations, not today’s. “In 1980, nuclear plants produced 251 billion kWh, accounting for 11% of the country’s electricity generation. In 2008, that output had risen to 809 billion kWh and nearly 20% of electricity, providing more than 30% of the electricity generated from nuclear power worldwide”
http://www.world-nuclear.org/info/Country-Profiles/Countries-T-Z/USA–Nuclear-Power/#.UdYtWb5–Uk
2. From the same source, upgrading of older plant, which is more expensive that building new plant. “Capacity factor has risen from 50% in the early 1970s, to 70% in 1991, and it passed 90% in 2002, remaining at around this level since. The industry invests about $7.5 billion per year in maintenance and upgrades of these.”
3. Political incompetence led to waste of money. Example, shelving the Yucca Mountain proposed waste disposal. “The total cost of constructing and operating the repository is divided between utility ratepayers and taxpayers, with ratepayers estimated to pay just over 80%, or $77.3 billion.”
http://www.world-nuclear-news.org/newsarticle.aspx?id=20196
In general, the nuclear industry has seen costing move from traditional, verifiable figures to include semi-abstract figures, mainly ‘social’; costs, like fiddling with how much insurance has to be paid and how far in advance of claims – if any. The regulatory regime has been way too expensive in view of the very good safety record and it continues to grow disproportionately. The cost of checking USA reactors after Fukushima was high and resulted, IIRC, in practically no engineering changes from existing. “In the United States, nuclear operators will be expected to spend an additional $1 million per reactor to account for additional post-Fukushima safety arrangements, said John Ritch, director general of the World Nuclear Association based in London” ( an estimate one year after Fukushima). http://www.reuters.com/article/2012/03/08/nuclear-fukushima-idUSL5E8E76VC20120308
There are other reasons, but these are long enough. The bottom line is that “There are currently 432 operable civil nuclear power nuclear reactors around the world, with a further 68 under construction.” http://www.world-nuclear.org/Nuclear-Basics/Global-number-of-nuclear-reactors/#.UdY1ML5–Uk The people building these have a vision of the future that is not stupid.
Finally, is carbon capture and storage is made mandatory in the future, nuclear costs will easily fall below fossil fuel costs and will be higher than only large scale hydro.
Electricity costs are largely driven by the levelized capital costs of the assets. This means it depends in large part on how old these assets are. Nuclear is the perfect example. The plant I work at cost just over 1 billion for 2200 MWe. The two units were completed in the mid and late seventies. Plants completed in the 80s could easily cost 4 times as much for half the capacity.
This same levelized capital cost issues apply to installed scrubbers and any other large capital improvements that had to be made over the last decade or so. Nuclear will be looking at significant new capital expenditures for upcoming license renewal periods also. Similarly they apply to any transmission upgrades that may have been made in your area that are included in the rate structure.
One key point to understand is that electricity rates, in regulated states, are based on the cost to build and operate the assets. The older the assets are the cheaper your electricity is likely to be. However, when something major needs replaced the rates will make a step change. You could NEVER build a plant/transmission line as cheaply today as those that were built 60 years ago.
The cost to operate power plants has also gone up since this is driven by fuel costs for most plants (notable exceptions are hydro and nuclear). They have gone up along with the secular bull market in commodities.
richard verney says:
July 4, 2013 at 5:40 pm
“Better still, burn coal and plant some new forests. …”
Dude! You gotta be careful about these things. If you plant more and more forests, you get more and more photosynthesis, and more and more oxygen in the atmosphere. Pretty soon, some asshole in New Jersey will light a cigarette, and then, BOOM!
Sounds like a lovely business opportunity is opening up – buying electricity at the industrial price and selling at a markup to residential users.
Willis writes “Anthony Watts is paying 92¢/kWh, and that’s not a typo, ninety-two cents.”
What is an “Event day” from that graph?
Cost of any commodity is usually determined by supply vs demand. I would think the first order comparison to be made would be increases in supply vs demand for each state rather than their mix of energy types.
I also note that supply for the US in total hasn’t moved much over the last decade. Perhaps its simply not increasing fast enough in some States.
http://www.eia.gov/electricity/capacity/
Ian H: “Sounds like a lovely business opportunity is opening up – buying electricity at the industrial price and selling at a markup to residential users.”
California tried that back around 1998/1999. It worked great. Just ask Enron.
(Moral: Never let an agriculture and resource futures market company re-design your utility industry.)
There seems to be an outlier at around 18% and 40+percent Obama voters. Which state is that?
Willis, your regression sure shows how people have it bassackwards – the greater the harm done to them by der Fuehrer, the more they voted for him. Go figure.
(The one high price-low vote outlier was, one would assume, Alaska.)