We make cheap clean power. Why do our factories pay so much for it?

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OPINION — On a sunny spring afternoon, California’s grid often swims in solar power so cheap that prices go negative — and yet a factory nearby pays some of the highest electricity rates in the country.

That’s the paradox at the heart of California’s manufacturing problem, one that SB 943 (Becker) seeks to solve. The issue isn’t how we generate electricity; it’s how we charge for it.

We often produce more solar than the grid can use, and we’re on track to waste more of it this year than last. That surplus power could run factories, cutting costs and clearing the air in communities suffering the greatest burden from factory pollution. Instead, our rate structure gets in the way.

High demand charges layered with other fixed charges apply to every kilowatt used, no matter when, so a factory running on cheap midday solar pays the same as one running during expensive peak hours. There’s no reward for using power when it actually helps the grid.

SB 943 fixes this disconnect by ensuring manufacturers pay for electricity in a way that better reflects when they use it, rather than discouraging electrification. The bill authorizes the Public Utilities Commission to cap add-on electricity charges for manufacturers switching equipment off gas.

That way, companies investing in clean industrial equipment can actually benefit from California’s low-cost clean energy. It also directs the CPUC to recommend transmission pricing reforms to the state’s grid operator, aligning costs with grid strain and rewarding factories for shifting usage to cheaper, cleaner off-peak hours.

Because the fee cap applies only to new electricity use replacing gas, it generates new revenue that could lower electricity bills for everyone, not just manufacturers.

Electricity pricing shapes where — and whether — manufacturers choose to invest. After California overhauled its cap-and-trade program, one recurring worry was “leakage,” manufacturers relocating to states with weaker pollution rules.

It’s a fair concern. When factories leave, everybody loses: the climate, workers, and the economy. We want manufacturing to thrive here, proving climate and economic leadership go hand in hand. But the leakage conversation has missed the most important piece of the puzzle: the cost of electricity.

Electricity prices determine whether a facility will upgrade to clean industrial equipment, like heat pumps, thermal batteries, and electric boilers.

Once a company makes that investment, it’s not going anywhere for a long time. When a manufacturer decides to modernize, it’s also deciding where to put down roots, and right now, California is making that decision harder than it needs to be.

Take Antora Energy, a Bay Area company that makes industrial heat batteries, technology that stores clean electricity as heat in manufacturing.

They’re expanding in San Jose and hiring more workers. But without electricity policy updates, they’re deploying their batteries elsewhere. Their newest project isn’t going to California; it’s going to South Dakota, which approved a rate structure that actually reflects the cheap cost of nearby renewable energy. Antora is a California company, using home-grown technology, yet we can’t deploy it here to clean up our own industrial pollution.

As a result, California is missing out on real economic benefits. A recent analysis from the Renewable Thermal Collaborative and the Industrial Heat Pump Alliance found that scaling up industrial electrification could create 73,700 jobs and $31 billion in economic activity, nearly $2 back per $1 invested. These are jobs for electricians, pipefitters, construction crews, and manufacturing workers.

California has all the puzzle pieces: cheap clean power, a skilled workforce, and manufacturers who want to invest here.

What’s missing is a rate structure that lets the math work. SB 943 puts cheap clean power to good use, which will bring billions in new investment, create tens of thousands of jobs, clean the air where it matters most, and keep manufacturing rooted in California for the long haul. The opportunity is right in front of us.

We just need the policy to match it.

Teresa Cheng is the California Director at Industrious Labs. Franki Gracey is the Senior State Policy Organizer at BlueGreen Alliance.