Californians can once again expect a spike to their utility bills, which are already among the highest in the nation, thanks to the Newsom administration’s pledge to buy electricity from offshore wind turbines. State-commissioned consultants expect residents will have to pay up to $40 billion, but outside experts predict the actual cost will be multiple times higher.
In August, the California Public Utilities Commission—appointed by Gov. Gavin Newsom (D.)—authorized the state to begin soliciting up to 7.6 gigawatts of offshore wind energy, starting in 2027. That commitment ignored its consultants’ recommendation to limit the project to between 1 and 3 gigawatts to avoid major increases to ratepayers’ electricity bills.
A state-commissioned analysis by Energy and Environmental Economics projected that relying on offshore wind energy for 7.6 gigawatts—a small fraction of California’s annual electric grid needs of 287 gigawatts—could save about $10 billion by 2045 in the most optimistic scenario. But it also predicted that the plan would more likely cost ratepayers as much as $40 billion. Outside experts believe that’s a major underestimate, with actual costs ranging from double to nearly quadruple that figure.
The high price tags reflect exorbitant costs associated with building special floating windmills and connecting them to land. They also come as Californians pay the third-highest average residential electricity rate in the nation, at 31.64 per kilowatt-hour.
Floating windmills are significantly more expensive than traditional ones, and because the technology is so new, it’s difficult to predict factors such as lifespan and maintenance costs, the experts said. “It’s good old fashioned grift,” said Jonathan Lesser, president of the energy consulting firm Continental Economics. “It’s the highest cost source of renewable energy. Why would you build that?”
Environmentalists claim wind energy is cheaper to produce once the infrastructure is in place, but their estimates tend to ignore that fossil-fuel-powered back-up energy is needed on days with little to no wind, according to Bjørn Lomborg, a visiting fellow at Stanford University’s Hoover Institution. Those traditional sources become more expensive since they have fewer hours to make up their capital costs.
The Cato Institute’s director of energy and environmental policy studies, Travis Fisher, said the upfront costs alone could reach $30 billion under the best-case scenarios. But when using the state’s most expensive potential price point, $10,000 per kilowatt, his projection skyrocketed to $80 billion.
Those estimates also only account for the upfront capital costs and don’t include other elements such as financing costs, depreciation expenses, or actually connecting the windmills to the onshore electric grid. Fisher declined to provide a 20-year estimate, as he couldn’t predict some costs such as operations and maintenance.
“In the worst case, the projects would be abandoned or never function as intended, and Californians could pay $80 billion, plus a large tab for transmission, and get little to nothing in return,” he said.
Lesser similarly estimated that upfront costs would hit $76 billion. But he predicted that would rise to $150 billion over an assumed 20-year lifespan for the turbines.
Traditional turbines aren’t an option since the ocean floor off California’s coast is too deep for fixed-bottom windmills to anchor to. Instead, energy companies are planning to import some 2,500 10-megawatt floating turbines from Europe or China, which would connect to the seabed through mile-long cables. Power from floating turbines for 2023 cost nearly 55 percent more than that from fixed turbines, according to the National Renewable Energy Laboratory.
Ultimately, California aims to add 25 gigawatts of offshore wind energy by 2045. Even Energy and Environmental Economics’s comparatively modest estimates found that residents wouldn’t see any financial benefits under those circumstances, with its most grim projections showing costs of up to $140 billion.
It’s also hard to predict how much the Newsom administration’s commitments to wind energy will affect any given ratepayer due to regional differences in how power is disseminated and how utility companies calculate bills, according to Russell Lowery, a former California lobbyist for the state’s biggest utility, PG&E. But the total cost, he said, will be “billions of dollars across California ratepayers.”
Even if California’s decision to buy offshore wind doesn’t ultimately cause a significant spike to utility bills, a small increase will contribute to the cumulative effect on residents’ electricity rates, Lowery said. The state keeps adding small amounts of expensive energy to its grid, which has incrementally and steadily raised costs.
“People call it ‘budget dust,'” Lowery said. “Ratepayers are drowning in budget dust. It’s all dust, but it’s a lot—and you’re drowning in dust.”
The utilities commission’s plan stems from a 2023 state law Newsom signed that ordered the creation of an artificial market for offshore wind through a taxpayer-funded purchasing agreement. Energy companies had argued that they needed guaranteed customers before sinking money into billion-dollar turbine plans. The law effectively promised them that the state will buy wind energy if they build turbines.
Over the past two years, offshore wind companies lobbied heavily to establish the state-guaranteed market, and their trade association asked regulators in May to agree to buy 10 gigawatts of wind power. One company, Invenergy, whose CEO is a major Democratic donor, spent more than $600,000 over the last legislative session to advocate on centralized procurement and other issues. Equinor, Golden State Wind, and the offshore wind trade association likewise spent hundreds of thousands of dollars each on advocacy.
Lesser said price tags could inflate quickly under a centralized power-brokering plan. He predicted that offshore wind companies “will be rewarded with contracts far above the market price.”
The central electricity purchasing plan is one of many strategies Newsom and other Democratic leaders are deploying as part of their mandate to make California carbon-neutral by 2045. In November, air regulators passed a carbon emission mandate for fuel sellers that’s predicted to hike the state’s gas prices by an estimated 65 cents per gallon, and just about every industry—including oil and gas, farming, fishing, construction, ports, and trucking—faces strict environmental regulations and orders to transition to electric power, which are also raising costs.
Newsom, meanwhile, issued an executive order in October urging his agencies to take steps that would reduce electricity rates.
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