Charting all the ways ‘green madness’ means Californians pay more

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California boasts some of the highest retail electricity rates in the country, second only to Hawaii, despite being the fourth-largest electricity producer.

California’s high energy prices are the direct consequence of a misguided policy that pushes renewables ahead of fossil fuels. An “all of the above” approach that combined fossil fuels with renewables would naturally lower prices, prevent rate spikes, and ensure reliability. Such a balance is sorely needed. 

Since the 2002 inception of California’s Renewable Portfolio Standard (RPS), which mandated that renewable energy would encompass 20% of all energy production in the state by 2017, the goalposts have moved further to the extreme.

The goal was first expanded in 2015 to 50% by 2030, then in 2018 to 60% by 2030, with an ultimate goal of 100% by 2045. These rules require utilities to get a rising share of their power from renewables, at a cost higher than the market would otherwise choose. Utilities recover those extra costs by jacking up rates for consumers.

The California Independent System Operator (CAISO) operates the wholesale electricity market for about 80% of California and a small portion of Nevada. In doing so, it supports Sacramento’s renewable energy push, even as it creates reliability and pricing challenges.

CAISO is supposed to provide the cheapest electricity available at any given time from the nearest, most affordable, and available source possible. Solar and wind are made to appear cheaper than natural gas and other traditional fuels, thanks to government subsidies to solar and wind. Despite having its market share forcibly diminished by renewables, natural gas still provided 31% of California’s total net electricity generation in 2025.

For example, the California Solar Initiative provided billions in rooftop solar subsidies before shuttering in 2016. Those without solar energy paid billions in costs until reforms were made in April 2023. .

Curtailment is another problem. It forces to utilities to buy excess solar energy even when consumers aren’t using it. Consumers absorb this loss and pay higher rates for wasted energy.

And since solar energy is prioritized during the day, natural gas plants are forced to limit production even to the point of remaining idle. However, when the sun sets and demand increases substantially, natural gas power plants must ramp up production, which can be more costly than producing at a consistent rate.

To address that issue, California has deployed large-scale utility battery storage to absorb excess midday solar energy, releasing that energy at night to reduce reliance on gas ramping. So far, 21,860 MW of storage has come online, and California also uses batteries located out-of-state.

But battery capacity is being stretched beyond the 4-to-8 hour capability of current storage. That’s because solar and wind are intermittent, and so gas plants are needed to cover seasonal lulls or multi-day periods when solar and wind are low. That increases maintenance costs, and makes gas power more expensive to maintain on a unit basis, even while the state depends on it for a reliable electricity supply.

California’s “cap-and-invest” program to fight climate change adds significant compliance costs for producers. These costs are inevitably passed on to consumers as higher rates. To offset these cost increases, California started the California Climate Credit, essentially a dividend returned to consumers. However, in California fashion, this does nothing to address the notoriously high rates and the policies that cause them; it simply puts a band-aid on a growing problem instead of providing meaningful financial relief.

Despite the costs, Sacramento continues its years-long campaign to force consumers to accept a manipulated market that prioritizes environmental politics over affordability and reliability.

Californians regularly pay unnecessarily high rates. The solution is simple: let the market provide all kinds of energy, and stop the renewable mandates and subsidies that drive costs higher.

Caleb Jasso is a Senior Policy Advisor at the Institute for Energy Research.

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