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The Debate Over California's Solar Energy Policy

California Solar Policy

In July, California Governor Jerry Brown, announced a plan to increase the state's renewable energy to a 12-gigawatt by 2020, by relying on “tens of thousands of little decisions” by residents and business owners. Brown cited the cost of routing large-scale energy farms in remote areas as a reason for focusing on smaller projects. He also cited the delays in previous large-scale desert projects due to litigation over natural resources, native animals, and Native American sites.

However, a recent article from Freakonomics.com points out several concerns with this plan, based on simple cost-benefit analysis:

-Individuals (such as homeowners and small businesses) do not make decisions based on what is “socially optimal”

-Densely populated areas such as San Francisco and other coastal regions do not produce as much solar energy as other regions in the state, such as Apple Valley. The article explains that if the same number of solar panels that currently exist in San Francisco were relocated to Apple Valley, the increase is solar electricity produced could power an additional 415 homes

-If current residential solar panels throughout the state were moved to sunnier cities, production would increase by 15%, powering an addition 13,000 homes

Cities such as San Diego, Fresno, Clovis, and Bakersfield currently top the list of cities with the largest number of solar panels (along with San Francisco). This is a good start, as these cities produce far more solar energy than their northern counterparts.

Interestingly, in the state of California, political party is not an indication of renewable energy policy, with conservatives and liberals giving equal priority to this issue. However the article explains the difference between a “free market” approach and a “behavioral economics” approach in understanding the dilemma:

“Free-market economists embrace the power of many individual decisions to guide markets and direct resources to their highest value. Yet the burgeoning field of behavioral economics has documented many instances in which consumers make mistakes. Consumer errors are much more likely with large investment decisions that require complex calculations involving discounting and expectations of future prices. Even if consumers execute the discounted cost-benefit calculus correctly, their objectives may be different from those of society, causing efficiency losses for policies that rely on their utility maximizing behavior.”

Possible solutions:

-Homeowners in sunny inland regions who would otherwise not be able to afford solar installation could rent their rooftops to those city dwellers who want to invest in solar (though the rate would have to be under $200 for this to make sense)

-Cities could organize groups of residents interested in investing in solar to invest in group purchases in sunnier locations to maximize energy production

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