KPCC's business analyst Mark Lacter talks about why declining gas prices aren't necessarily good for the economy; he also talks about why solar power isn't so popular.
Susanne Whatley: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, it looks like gas prices are coming down a little bit. This is good news for the economy…right?
Mark Lacter: Well, it’s good news for the wrong reason Susanne. Demand is down, and the investors who trade in oil futures are betting that growth is going to be pretty sluggish over the next few months. Now, don't get me wrong – it’ll be nice to see prices fall 40 or 50 cents a gallon. And maybe those savings will help grow the economy a bit more than if we’re stuck shelling out five bucks a gallon. But if you look at the bigger picture, these cycles of gas prices going way up and then going way down and then way up again only confuse our attitudes about energy use. You know, I came across a headline that reads, "Record gas prices spark interest in electric cars." It was from 2006. In some ways, we'd be better off if gas prices were at seven or eight dollars a gallon, and then just stayed there.
Whatley: I’m not lovin’ it, Mark. Better in what sense?
Lacter: At least then we would be forced to consider a more coherent energy policy - especially in Southern California, which continues to have some of the most polluted air in the country (not to mention the most congested roadways). At least then many of us might seriously consider taking mass transit or buying an electric car. Maybe local and state government would be under more pressure to make it easier for people to make the switch (something as basic as providing more battery recharging stations could be a big deal).
Whatley: But aren’t electric cars more expensive?
Lacter: I guess that's the point - if we figured that gas was high and was going to stay high, perhaps there would be a greater incentive to buy these cars - and as more people bought them, production might increase and prices might well come down. But that's a lot of ifs, and in the meantime, consumers usually just go after the cheapest alternative available – even if over the long run electric cars might be cheaper to operate. It’s so hard to break away from the internal combustion engine, especially since gas prices always come down to what we consider acceptable levels.
Whatley But whatever happened with making solar power more popular?
Lacter: Simple - the cost of installing a solar system hasn't come down to nearly the level that would make it attractive to a homeowner - at least not without a lot of help from both local governments and utilities. And at this point I wouldn't count on those folks. The L.A. Department of Water and Power has had a pretty good rebate deal for homeowners who install solar panels: A typical solar system runs about $40,000, and the program would contribute an average of 40 percent -- still pricey, but over the long run your monthly electric bills would go down. And DWP customers have been signing up for this program - around $110 million in rebate requests.
Whatley: Sounds like a lot…
Lacter: Well yeah – they’ve only budgeted $30 million (which by the way comes from other ratepayers) and there’s no more money left. And it's not just the DWP - similar programs that were offered by cities in Southern California have also run out of money.
Whatley: And if there are no rebates, I guess there's much less of an incentive to go solar.
Lacter: That’s right. The assumption had been that the cost of these solar panels would come down, but they've been talking about that for years - and so far it hasn't really happened. And keep in mind that California utilities are now required to get one-third of their power from renewable sources by 2020. If th-ey're having so much trouble with these rebate programs, which are pretty limited in scope, you have to wonder how the large-scale transition is supposed to happen - at least without driving up the cost of electricity to levels that people will find unacceptable. But it’s another example of not being able to make the transition to alternative energy – and it’s getting to be an old story.
Whatley: Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA Observed.com.