Driving Your Tesla in California Is Really, Really Expensive
Forgive the obviousness, but if you want to sell a new product, make it affordable. Electricity isn't new, but the effort to electrify much of our world — essential to decarbonization — is. Persuading people of middling means to, say, swap their gasoline-fueled car for a battery-powered one requires making not only electric vehicles affordable but also the electricity to charge them up.
Yet California, at the vanguard of net-zero, which recently announced a ban on sales of new gas-guzzlers by 2035, doesn't make it easy. The state sports not only the second-highest average residential electricity tariffs in the US, but also the most regressive.
Severin Borenstein, Meredith Fowlie and James Sallee of UC Berkeley's Energy Institute at Haas just published an analysis of detailed billing data for more than 11 million Californian households, in conjunction with Next 10, a non-profit organization. They found that electricity tariffs there are two-to-three times the “social marginal cost.” That's the actual cost to the utility of producing and delivering an extra kilowatt-hour of electricity to an existing customer, including an assumed social cost of emissions. These were modeled at about 8-9 cents per kilowatt-hour in 2019 compared with an average residential tariff for the state of 19 cents.
Most electricity bills consist of a fixed charge and a charge that varies with how much electricity we use. In theory, the fixed charge covers costs that don't change regardless of usage, such as building and maintaining the grid. In practice, all utilities recover some of their fixed costs through that variable charge. This is always a mismatch since fixed costs are fixed, regardless of how long you leave the lights on.
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