Why do Californians use less electricity than everyone else?

August 12, 2013

The average Californian uses about 33 percent less electricity at home than the average American in the rest of the country. That shouldn't be overly surprising, given the state's mild weather.

What is surprising, though, is that California's electricity use has basically stayed flat for the past four decades, in stark contrast with the rest of the United States

Since 1960, household electricity use in the rest of the United States has more than tripled, climbing past 12,000 kWh per person on average (although it has plateaued of late). By contrast, in California, electricity use per capita doubled in the 1960s but then more or less stopped growing for the next four decades.

Why would that be? One popular theory is that California's particularly aggressive green policies should get credit. Back in the 1970s, the state began adopting stringent standards to promote energy-saving appliances and home insulation. Then, in 1982, California tweaked its utility regulations, in a policy known as "decoupling." Power companies would no longer get paid based on the number of electrons they sold. Instead, they'd have incentives to promote efficiency.

On top of that, California has some of the highest retail electricity prices in the country. That, too, blunts household demand and gives people more incentive to conserve. (The average energy bill in California is actually lower than elsewhere in the country because people use less electricity.)

In a 2010 paper (pdf), the World Bank argued that California's electricity consumption has stayed flat "thanks largely to" that big efficiency push. And the chart up top remains an oft-cited argument in favor of stricter government efficiency standards.

Not everyone agrees with this assessment, however. In a recent working paper, Georgetown economist Arik Levinson argues that a few "long-run trends" — things unrelated to energy policy — can explain as much as 88 percent of the gap in electricity use between California and the rest of the country. That is, efficiency standards might be getting too much credit.

First, there's climate — though not in the way you might think. Yes, California has lovely weather, and its residents tend to use less energy for heating and cooling. But the real story, Levinson suggests, is what's going on in the rest of the country. More and more Americans have been moving to warmer regions in the South and West and cranking the A/C as they get richer (while using less gas for heating). That explains about one-third of the disparity in electricity use.

Demographics are another underrated factor. In most of the United States, the number of people per household has been shrinking over the last 50 years. That has a big impact on electricity use: A person with his own home uses more power than a person sharing a house with others. But, oddly enough, household size has stayed roughly flat in California over this period. That fact alone accounts for 40 percent of the gap in electricity use.

Now, as Levinson clarifies in a recent VoxEU essay, he's not saying California's efficiency standards have been ineffective. It's just that their effect is tougher to disentangle than the chart above suggests. After all, both the federal government and other states later followed California in crafting their own appliance and building codes. So it's quite possible that everyone's electricity use would be higher in the absence of these standards.

That said, if we're trying to get a precise estimate of how much energy-saving policies can actually do, that much-cited chart up top isn't nearly as persuasive as it first seems.

Update: For those who wanted to dig deeper into this debate, Devra Wang of the Natural Resources Defense Council has some critiques of Levinson's research here.

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Neil Irwin | August 12, 2013