Economics should be open

September 23, 2008

Comparing California and European Electricity Prices

Filed under: California, Energy — howardchong @ 7:02 pm

Just doing some looking into California’s brand new energy plan that came out today. (http://www.cpuc.ca.gov/PUC/energy/electric/Energy+Efficiency/EE+General+Info/eesp.htm)

I did a little digging and have found that wholesale prices are up about 40% in California compared to about 250% in Europe. This is wholesale, so it’s before taxes, etc. However, carbon taxes (and other input price taxes) do go into these numbers, as does EU carbon cap and trade program.

In my estimation, real change that isn’t mandate driven is gonna come from increases in the price of electricity. Europe looks like it’s done real change driven by treating energy as a scarce resource. We’ve escaped this in terms of electricity, though there are exceptions like Hawaii, Maine, and Alaska.

Note, however, that it’s not a completely apples-to-apples comparison. I am using Powernext (France) futures data for a quarterly contract and CA average wholesale prices reported by the Energy Information Agency (EIA). Notably, the volatility of CA is because it is a spot price. But as a comparison of levels, it is really illuminating.

What’s the difference? Hard to say. It could be an input price story, but a check at the most recent Sept 2008 World Bank Pink Sheet (google it) doesn’t show much of a difference in the price of Nat Gas across continents. The clearing wholesale price reflects the price of the marginal electricity generator: in both countries this should be natural gas.

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1 Comment »

  1. I have completely forgotten what the source of my California data is. I think it might be some Platts data or something from the EIA, but I forget. (darn!)

    The French data is from the Powernext energy trading platform. They give out data, I love you Powernext

    Comment by howardchong — February 25, 2009 @ 3:42 am


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