The cost of energy for Washington, D.C., residents has been rising.
In June, the district’s Public Service Commission approved Pepco’s request to increase electricity rates by $109 million over three years. In May, gas at the pump broke the $3 mark in May for the first time in the area since the mid-2010s. August prices are 50% higher than last year’s. Natural gas for home heating this summer hit $1.55 per therm, up 20% from last year.
Many factors affect energy prices, from pandemic-related changes in demand to the fracking revolution’s massive supply of cheap oil and natural gas. Very few of them are directly influenced by political decisions. But one factor is the drive by Democratic-controlled states (and federal districts!) to eliminate emissions of carbon dioxide.
What we see in Washington is the impact of the Democratic district council’s efforts to reach “net-zero” emissions of carbon dioxide.
In May, the District of Columbia Public Service Commission announced that escalating requirements for “non-carbon, renewable” energy, such as wind and solar power, in the district’s Clean Energy Act cost customers $65 million in 2020 — or about $228 for each one of our 284,000 households. The requirement hit 20% in 2020, and it rises steadily to 100% by 2032. It is likely, then, that the added cost to customers’ bills will be at least five times as high in 2032.
The district’s residents receive nearly all our electricity from companies that buy it off a grid that includes many Northeastern states. All the electricity on that grid (natural gas, coal, hydro from dams, nuclear, wind, and solar) is mixed together. Hence, a provider for Washington, D.C., can’t actually buy or deliver certain types of energy from the grid. What the Clean Energy Act requires, though, is that the provider purchase certificates that have the same effect. They are buying not just an amount of power, but also a certificate from a generator of an equal amount of “renewable” power. The cost of the more expensive power and these certificates is then passed along to consumers. That’s what makes up our $65 million annual tab.
The Public Service Commission also reported that the cost to district consumers for its “non-carbon, renewable” mandate was $38.5 million in 2015. About half of that cost was penalties (“compliance fees”) for providers not buying enough certificates. By 2020, the penalties have fallen by over 50% as companies learned how to handle the system. The $65 million cost to consumers comes largely just from the purchase of the “renewable” power and the certificates.
As the non-carbon requirement rises, it has the effect of pushing generating companies to create more wind and solar power. Despite significant federal subsidies, wind and solar are more expensive to build and transmit than natural gas, coal, and hydropower and require far more landscape to be taken for a unit of energy production. They also are not “on-demand” like the traditional sources, so they require battery storage, which is inefficient and represents an additional cost. This also raises the cost to consumers when the purchase of wind and solar power and its certificates is mandated.
Electricity is just the tip of the iceberg for a “net-zero” approach. It’s only one of many areas covered by the district’s Clean Energy Act. Others include taxes for heating with natural gas or fuel oil that are added to fuel bills and placed in a Sustainable Energy Trust Fund. Natural gas taxes will triple from $0.015 per therm now to $0.045 in 2026. Fuel oil taxes will double from $0.0016 per kWh to $0.0029. An excise tax is being phased in on cars that don’t meet higher and higher efficiency standards. There will be fines on building owners who don’t increase building efficiency by 50%, on commercial fleets that are not 50% electric, and on owners of gas-powered cars to push them toward electric vehicles.
Of course, local costs are small compared to the way “net-zero” will play out on the national economy as a whole. The cost of renewable energy and its dedicated transmission infrastructure continues to skyrocket and is absorbed into the price of goods and services. If global competitors such as China, India, and the European Union continue to make carbon-averse declarations without following through with the costly steps to achieve them, we could be looking back fondly on the days when “net-zero” only cost us $65 million.
Caleb Rossiter recently retired after a 40-year career as a congressional staffer, professor, and think tank director. He taught mathematical models and quantitative methods for international affairs at American University. He can be reached at [email protected].
