Stop Complaining: Electricity Prices in America are LOW!
Richard W. Caperton continues his series on U.S. energy markets.
For decades, the mantra of the American utility industry has been toprovide power at the lowest possible cost. While reliability is toughto compare across countries, the evidence is that our utilities havealmost certainly succeeded at making power affordable.
That’s clear from the chart showing electric rates across the developed world, in cents per kwh.
American rates are low for a lot of reasons, including the fact that much of our infrastructure is fully-depreciated, regulators have generally done agood job of looking out for consumers, and our utilities arewell-managed.
Most interesting, though, is that the there’s very little correlation between the fuel that a country uses for power and electric rates. Australia, like the United States, is heavily coal-based. Portugal gets a huge amount of power from wind and solar. Spain famously hasinvested heavily in solar power. Canada uses primarily hydropower. France, with rates about twice those of the United States, uses nuclearpower.
This is not to say that nuclear power will necessarily raise rates,or that adopting Spain’s feed-in tariff for solar would necessarilyreduce rates. Instead, this demonstrates that a country’s entireelectricity system, not just its fuel mix, is the real determinant ofrates.
In the United States, we have a system that has kept rates low. Now, we need to build cleaner sources of power into that system. Whereas the old mantra was “affordable and reliable,” the new mantra has to be “clean, affordable, and reliable.”
– Richard W. Caperton is a Senior Policy Analyst with CAP’s Energy Opportunity team.
JR: Also, power doesn’t include the full cost of externalities — the harm it does humans and the environment (see Life-cycle study: Accounting for total harm from coal would add “close to 17.8¢/kWh of electricity generated”).
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