Q: What's The Fastest Way to Get 5 Million Green Jobs?
A: Start with 10 million current jobs.
Kenneth Green argues that Obama's claim that obsoleting current infrastructure and requiring its replacement with new, greener infrastucture creates jobs is just the broken windows fallacy (where have you heard anyone else say that?)
Unfortunately, the idea of government "job creation" is a classic example of the broken window fallacy, which was explained by French economist Frédéric Bastiat way back in 1850. It is discouraging to think that nearly 160 years later, politicians still do not understand Bastiat's basic economic insight....
Now consider Obama's "green jobs" plan, which includes regulations, subsidies, and renewable-power mandates. The "broken windows" in this case would be lost jobs and lost capital in the coal, oil, gas, nuclear, and automobile industries. Currently, these industries directly employ more than 1 million people. Conventional power plants would be closed, and massive amounts of energy infrastructure would be dismantled. After breaking these windows, the Obama plan would then create new jobs in the renewable energy sector. The costs of replacing those windows would ultimately be passed on to taxpayers and energy consumers.
Perversity of Government-Selected Winners
Technocrats love to pick winners. Leftish technocrats, in particular, love to believe that the complex operations of the entire economy choose technologies that are inferior to those the technocrat would have imposed on the economy had she been in charge. But here is what happens when they try, in a cautionary tail that is particularly relevant given the number of specific technologies Barrack Obama has said he would promote (e.g. a million plug-in hybrids by 2015) (via Tom Nelson)
But the costly effort to put more workers into vehicles powered by ethanol and other fuel alternatives has been fraught with problems, many of them caused by buying vehicles before fuel stations were in place to support them, a Washington Post analysis of federal records shows.
"I call it the 'Field of Dreams' plan. If you buy them, they will come," said Wayne Corey, vehicle operations manager with the U.S. Postal Service. "It hasn't happened."
Under a mandate from Congress, federal agencies have gradually increased their fleets of alternative-fuel vehicles, a majority of them "flex-fuel," capable of running on either gasoline or ethanol-based E85 fuel. But many of the vehicles were sent to locations hundreds of miles from any alternative fueling sites, the analysis shows.
As a result, more than 92 percent of the fuel used in the government's alternative-fuel fleet continues to be standard gasoline. A 2005 law -- meant to align the vehicles with alternative-fuel stations -- now requires agencies to seek waivers when a vehicle is more than five miles or 15 minutes from an ethanol pump.
The latest generations of alternative vehicles have compounded the problem. Often, the vehicles come only with larger engines than the ones they replaced in the fleet. Consequently, the federal program -- known as EPAct -- has sometimes increased gasoline consumption and emission rates, the opposite of what was intended....
The Postal Service illustrates the problem. It estimates that its 37,000 newer alternative-fuel delivery vans, which can run on high-grade ethanol, consumed 1.5 million additional gallons of gasoline last fiscal year because of the larger engines.
The article does not even mention that E85 ethanol made mostly from corn does absolutely nothing to reduce total CO2 production (it just shifts it around, due to the amount of energy required to grow corn and convert it to ethanol) while raising food prices.
California did something like this years ago, putting the force of subsidies and state law behind zero-emission vehicles. This wasted a lot of money on electric and hydrogen vehicles that were not yet technologically mature enough to prosper, while missing out on low (but now zero) emissions approaches that could have had much more impact because they were technologically ready (e.g. CNG for fleet vehicles).
Y'all know where I stand on the dangers of CO2. But if we really have to do "something", then the only efficient way to do it is with a carbon tax. But politicians hate this idea, because they don't want to be associated with a tax. But the fact is, that every other action they are proposing is a tax of some sort too, but just hidden and likely less efficient. There is no magic free lunch that Barrack Obama and his folks can think of and impose, no matter how smart they are. In fact, to some extent, smarts are a hindrance, because it tempts people into the hubris of thinking that they are smart enough to pick winners.
Postscript: If you are reading this and thinking "well, if I were in charge, I would not be that stupid and I could make it work" then you don't get it. 1) No one can make it work, for the same reasons the Soviets could not plan their economy from the top -- its just too complex. At best, policy-makers are choosing between a handful of alternatives to back. In contrast, every individual has a slate of opportunities to reduce his/her CO2 production at the least cost, and when you add up all these individual portfolios, that means there are hundreds of millions of individual opportunities that must get prioritized. That is what pricing signals do, but government bureaucrats cannot. 2) The morons and knaves ALWAYS take over. Even if you are brilliant and well-motivated, your successor likely will not be. For years, folks have generally been comfortable with the outsized role of the Federal Reserve because they thought Greenspan (and Volker before him) ran it brilliantly. Well, there are arguments to be made about this, but even if we accept this judgment, what happens when the next guy is in charge and is not brilliant?
Postscript #2: If you want a specific example, let's take plug-in hybrids. How can anyone be against these? I personally like the concept of cars being driven by electric traction motors (I like the performance profile of them) and would love a good plug-in hybrid. But what happens when we find out that many of these cars were bought in coal-burning areas where electricity is particularly cheap, and discover coal-fired electricity pollutes more than an internal combustion engine? Or when we use a cap and trade system to cut back on coal fired plants, and find that the huge number of plug-in hybrids are exacerbating brown-outs and electricity shortages? Or we find that the billions of dollars of capital diverted by the government to expanding plug-in hybrids could have easily yielded far more CO2 reduciton had it been applied in another area? That is why a carbon tax is the only way to go (if we are going to do anything) because it allows individuals to make capital expenditure decisions to reduce CO2 based on their vastly higher knowlege of the opportunities and the pricing signal of the tax.
A Thought on Global Warming Action
Here is the hard truth for those of us who believe that, since CO2 has had little effect on global temperatures to date, expensive abatement plans will similarly have little if any measurable effect: They are coming anyway. It is actually probable that the Republicans could combine with heavy industrial states like Michigan in the Senate to block dramatic new legislation. But President Obama already has the legal and legislative authority to enact sweeping and expensive CO2 mandates without going back to Congress.
So with that depressing thought, here is a bit of good news: The media may well come over to the skeptics' side soon, at least partially. Here is why: The media is extraordinarily loath to really challenge policy proposals in advance that are popular with the center-left. They are even less likely to challenge said proposals when they touch on a story of doom. There is nothing the media enjoys more than piling on a good public scare.
But history has shown that the media will turn on these proposals once they are implemented, and sometimes quite soon after. Remember ethanol subsidies? The press were behind this crap all the way, until Congress passed enhanced subsidies a while back, and then the press suddenly starting "discovering" the effect on rising food prices, the environmental problems with land use, the ugliness of some of the subsidy politics, the fact that few scientists think corn ethanol will actually reduce CO2, etc. Yeah, I know, all of this was entirely predictable (and predicted by many of us) in advance. But this just seems to be how the media works.
Because the only thing the media loves more than fear-mongering a crisis that is 20-years away is fear-mongering one that is visibly upon us. The press freaked at the California energy crisis a few years ago, peppering the public with stories of rising prices and rolling blackouts. And what has happened since then? Electricity demand has risen, no one can build electrical capacity, wind and solar are a joke, and Obama is only going to make it harder and more expensive to produce enough power (I think Obama's exact words were "bankrupt the coal industry.")
Obama and Ethanol
I think a lot of economists are of two minds about Obama. When they look at his economics team, they are impressed with the talent and depth. America could do worse than have economic policy guided by this team. But when Obama opens his mouth to express his own opinions on trade or economics or finance, I get really nervous. I keep wondering who will guide economic and energy policy -- his smart staff, or the Obama his smart staff keeps trying to hide.
Robert Bryce, the author of Gusher of Lies, one of the best books on global energy issues you will ever read, is also a co-editor of Energy Tribune, a leading monthly. In the October edition, he takes aim at ethanol calling it a scam and “pure, unadulterated lunacy.”
Bryce writes, “Barack Obama doesn’t want to talk about corn ethanol. And it’s no wonder. In early August, his campaign Web site purged several sections of his energy plan that talked about corn ethanol.
“Before the purge, Obama was touting corn ethanol as a pivotal element in his push for ‘energy independence.’ His site declared that Obama ‘will require 36 billion gallons of renewable fuels to be included in the fuel supply by 2022 and will increase that to at least 60 billion gallons of advanced biofuels like cellulosic ethanol by 2030.”
By August, however, Obama had come up with a new set of talking points on energy and “All mentions of corn ethanol were removed,” wrote Bryce. “The word ‘ethanol’ only appears once.”
Do not be fooled. Obama is a major proponent of ethanol. Bryce reports that, “In January 2007, Obama and two other senators, Democrat Tom Harkin of Iowa and Republican Richard Lugar of Indiana, introduced legislation called the ‘American Fuels Act of 2007.’ It aimed at promoting the use of ethanol and provided mandates for the use of more biodiesel.”
Obama’s national campaign co-chair is Tom Daschle, the former Senate majority leader and longtime ethanol booster. Daschle serves on the boards of three key ethanol companies. Obama represents Illinois, a state that trails only Iowa and Nebraska in ethanol production capacity.
Ethanol is one of those political IQ tests. It makes such bad energy and environmental policy, but such good pork, that support for it is a great bellweather for what is driving a politician.
Is There a Zero-Cost Regulatory Solution to Energy Efficiency?
A while back, I criticized a story in the NY Times, as quoted by Kevin Drum, that said that California had among the lowest per capita electricity usage of any state (true) and that this was because of the intelligent regulation regime in the state (yes, but not the way they meant). The implication of Drum's argument was that there was some sort of efficiency ideal that a smart group of technocrats could reach at limited cost to the state (false). Specifically, Drum argued:
Anyway, it's a good article, and goes to show the kinds of things we could be doing nationwide if conservative politicians could put their Chicken Little campaign contributors on hold for a few minutes and take a look at how it's possible to cut energy use dramatically — and reduce our dependence on foreign suppliers — without ruining the economy. The energy industry might not like the idea, but the rest of us would.
My response, in part, was this:
Well, here are the eight states in the data set above that the California CEC shows as having the lowest per capita electricity use: CA, RI, NY, HI, NH, AK, VT, MA. All right, now here are the eight states from the same data set that have the highest electricity prices: CA, RI, NY, HI, NH, AK, VT, MA. Woah! It's the exact same eight states! The 8 states with the highest prices are the eight states with the lowest per capita consumption. Unbelievable. No way that could have an effect, huh? It must be all those green building codes in CA. I suspect Drum is sort of right, just not in the way he means. Stupid regulation in each state drives up prices, which in turn provides incentives for lower demand. It achieves the goal, I guess, but very inefficiently. A straight tax would be much more efficient.
As part of a presentation I am working on about global warming and proposed California CO2 abatement bill AB52, I had the occasion to do a bit more research. All of my data is from the Energy Information Administration, whose page URLs keep changing and thus breaking my links but this index page to data seems to stay the same.
I found three factors that seem to be the main drivers of state electricity demand (which is measured in all of the charts below in thousands of kw-h per capita). The first factor is climate, and certainly California has one of the milder climates. The chart below looks at residential electricity demand vs. cooling degree days (weighted for population location). Each data point is a state, with California is shown as the red data point:
We get something similar for heating degree days, with electrical use going down as the climate gets milder, though not as good of a fit, which is not surprising since electricity is less important to heating than cooling. Since California is well below the line, mild climate can be said to explain some of its lead on other states, but not all.
So I looked next at the percentage of electricity demand that goes to industry. More heavily industrialized states will have a higher total per capita demand, because heavy industry chews up electricity that other types of businesses do not. It turns out that California has a relatively low industrial use, which is not surprising given the regulatory environment there and the degree to which industry has been chased out of the state (one would have to be a madman to, all things considered, set up a new factory in California). So here is the same type of chart of total electrical per capita use by state vs. the % industrial demand, again with each data point a state and California in red:
Again there is a pretty strong relationship, and again we see some but not all of California's low per capita consumption explained. In effect, states on the left have exported their high-electricity-use industries to the states on the right (or to other countries).
I have saved the most obvious relationship for last: price. It turns out unsurprisingly that the states with the highest electricity prices have the lowest per capital consumption:
Rolling climate, industrial intensity, and price together, these factors seem to explain at least 80% of California's efficiency lead over other states. California government regulatory policy does indeed drive lower electrical consumption, just not exactly the way they would like you to think. By chasing industries out of the state and raising electricity costs above those of almost every other state, California has reached a lower per capita consumption level.
Dumbest Thing I Have Read Today
From the department of wishful thinking comes this:
The worst oil shock since the 1970s has put a permanent mark on the American way of life that even a drop in oil's price below $100 a barrel won't erase.
Public transportation is in. Hummers are out. Frugality is in. Wastefulness is out....
As prices come falling back to earth, Americans aren't expected to drop their newfound frugality. The jarring reality of $4-a-gallon gasoline stirred up an unprecedented level of consumer angst that experts say will keep people from reverting to extravagant energy use for years to come - if ever again.
High gas prices prompted calls to lower speed limits to 55 mph in some states and touched off a seemingly endless wave of "Go Green" campaigns.
"I see a permanent shift," said Kit Yarrow, a consumer psychologist at San Francisco's Golden Gate University who has studied how high oil prices have affected Americans' buying behavior. "Historically, when gas prices come down, people use more. But we've learned a lot of new things during this period and it will be hard to go back to our gas-guzzling ways."
Really? I could have sworn people said that in 1972 and again in 1978. But the SUV and the Hummer were not even invented until after these oil shocks. He mentions the 55 mph speed limit, but we once had a national speed limit at 55 in the 1970s and we chucked it. What possible evidence does this guy have, particularly since the recent shock was not nearly as bad as 1972 or 1978. In fact, you can see that here in this graph of gas price pain:
And, we have not seen the absolute shortages and gas lines we saw in the 1970s. Usually these weird statements like this published by the AP are the start of some kind of broader political campaign. The only thing I can guess is that this is the front end of some leftish/Obama polical message that we need to keep slamming on government conservation directives and alt-energy subsidies even as prices fall.
This week, the Republican Party in its national platform called for an end to ethanol mandates in just the latest shot at a fuel alternative that, in some circles, has grown more target than treasure.
This was the part that was depressing:
High ranking politicians, including presidential candidate John McCain, have publicly opposed ethanol subsidies before, but the platform approved during the Republican convention in St. Paul, a corn-belt capital, marks the first time a major U.S. party has taken an official stance against publicly funded ethanol incentives.
Talk about the emperor's new clothes. If only we could get the first step on the campaign trail out of Iowa.
Someone Else Joins the "Peak Whale" Bandwaggon
Katherine Mangu-Ward makes a point I have also made on occasion:
take a moment to thank the man who really saved the whales: John D. Rockefeller.
In 1846, Americans dominated the whaling industry with 735 ships. John D. Rockefeller gets into the oil refining business in 1865. By 1876, kerosene is routing whale oil, and the whaling fleet was down to 39 ships, because kerosene was just so darn cheap:
The price of sperm oil reached its high of $1.77 per gallon in 1856; by 1896 it sold for 40 cents per gallon. Yet it could not keep pace with the price of refined petroleum, which dropped from 59 cents per gallon in 1865 to a fraction over seven cents per gallon in 1895.
This dynamic is also instructive for those fretting that we're going to run out of oil, just as many undoubtedly worried that we were going to run out of whales. (Note to self: Check historical record for instances of the phrase "Peak Whale.")
I don't want to be overly self-referential here, but I actually "found" this reference to peak whale theory over two years ago when digging through the archives of this blog's 19th century predecessor, the Coyote Broadsheet:
As the US Population reaches toward the astronomical total of 40 million persons, we are reaching the limits of the number of people this earth can support. If one were to extrapolate current population growth rates, this country in a hundred years could have over 250 million people in it! Now of course, that figure is impossible - the farmland of this country couldn't possibly support even half this number. But it is interesting to consider the environmental consequences.
Take the issue of transportation. Currently there are over 11 million horses in this country, the feeding and care of which constitute a significant part of our economy. A population of 250 million would imply the need for nearly 70 million horses in this country, and this is even before one considers the fact that "horse intensity", or the average number of horses per family, has been increasing steadily over the last several decades. It is not unreasonable, therefore, to assume that so many people might need 100 million horses to fulfill all their transportation needs. There is just no way this admittedly bountiful nation could support 100 million horses. The disposal of their manure alone would create an environmental problem of unprecedented magnitude.
Or, take the case of illuminant. As the population grows, the demand for illuminant should grow at least as quickly. However, whale catches and therefore whale oil supply has leveled off of late, such that many are talking about the "peak whale" phenomena, which refers to the theory that whale oil production may have already passed its peak. 250 million people would use up the entire supply of the world's whales four or five times over, leaving none for poorer nations of the world.
I wrote more about John D. Rockefeller (including his role in saving the whales) in my praise of Robber Barrons several years ago. In addition to Rockefeller, the article also discussed Cornelius Vanderbilt as the 19th century precursor to Southwest Airlines. From the Harper's Magazine in 1859:
...the results in every case of the establishment of opposition lines by Vanderbilt has been the permanent reduction of fares. Wherever he 'laid on' an opposition line, the fares were instantly reduced, and however the contest terminated, whether he bought out his opponents, as he often did, or they bought him out, the fares were never again raise to the old standard. This great boon -- cheap travel-- this community owes mainly to Cornelius Vanderbilt".
The Hands That Currently Produce Things People Actually Want Can Also Fix Broken Windows
If you have watched the Olympics at all, you have likely seen the Obama commercial promising:
"The hands that install roofs can also install solar panels. The hands that build today's cars can also build the next generation of fuel-efficient vehicles. Barack Obama [will] ... create 5 million jobs developing homegrown energy technologies."
A few reactions:
- Private individuals, not politicians, create jobs
- Job promises like this are never incremental, nor can they be. If the hands that build current SUV's can build electric cars instead, then we haven't added any new hands, we've just changed what they are working on.
- It strikes me that this is the broken windows fallacy writ large. In effect, Obama promises to make much of our perfectly-serviceable transportation and electrical generation installed base obsolete, requiring an enormous effort to replace it. But the resources to fund this huge new investment have to come from somewhere. Industries that flourish and grow under this government enforced shift in capital will be offset by those that are starved. Every other part of the economy will slow due either to higher taxes or higher prices (or both) that subsidize this effort. But since it is harder to find and count the latter than the former, it makes for a good, un-auditable political pledge
- I'll bet that 5 million number focus groups really well, but does it make any sense at all? Here are some current employment numbers for the US as of January, 2008:
|Construction of power generation facilities:||137,000|
|Power generation and supply:||399,000|
|Production of power gen. equipment||105,000|
|Production of transportation equipment (planes, trains, autos, boats, etc)||1,637,000|
OK, so the total employment of all these industries that might be related to an alternate energy effort is about 2.28 million. So, to add 5 million incremental jobs would require tripling the size of the utility industry, tripling the size of the utility construction and equipment industry, tripling the size of the auto industry, tripling the size of the aircraft industry, and tripling the size of the shipbuilding industry. And even then we would be a bit short of Obama's number.
A Quick Note on Solar Capacity
Via Jonathan Adler:
The [two new solar] plants will cover 12.5 square miles of central California with solar panels, and in the middle of a sunny day will generate about 800 megawatts of power, roughly equal to the size of a large coal-burning power plant or a small nuclear plant.
I don't know this exact location, but you can see from here, the best one can probably expect from central California is about 6 peak sun-hours per day (more explanation here). This means that even in a very good solar location, the plant will produce over the course of a year 25% (6/24) of nameplate capacity. This means that to actually replace a large coal-burning power plant, 50 square miles of solar panels would be required (assuming that one has a 100% efficient way to store power for non-sunny times, a technology that does not currently exist).
Light Rail and CO2
The other day, I posted an update to my light rail bet saying that not only was light rail incredibly expensive for the amount of transportation it provides, it is not even clear that it provides any "green" benefits (with "green" today meaning only the potential to reduce CO2, since the global warming hysteria has sucked all of the oxygen out of other environmental goals).
The Antiplanner has more information, this time from the transportation planners in Denver. Normally, transportation planners grossly exaggerate the benefits of their proposed systems, so it is interesting that even they so no net CO2 savings from their proposed rail lines:
The Antiplanner’s review of rail transit and greenhouse gases found that Denver’s light-rail lines produce more greenhouse gases per passenger mile than a typical SUV. The Gold Line DEIS agrees, admitting that the rail alternative will result in a regional CO2 increase of 0.034% (see page 3.7-10).
By the way, the Denver system does not do so great on the financial part either:
Now, RTD says the line will cost more than $600 million, which is a lot for a mere 11 route miles. Moreover, RTD has changed the proposed technology to something it calls “electric multiple-unit commuter rail,” which sounds something like the Chicago Electroliners or some of the Philadelphia commuter trains.
For this high price, the DEIS reports incredibly trivial benefits. The proposed rail line is projected to take 0.0085 percent of cars off the road. Of course, that’s for the region as a whole, but in the corridor it will take a whopping 0.227 percent of cars off the road. A handful of buses could do as well.
While that might seem terrible, it actually outdistances our guys here in Phoenix, who are projecting that the next 3.2 mile line here will cost $306 million. While the Denver line is projected to cost $10,300 per foot, the Phoenix line will cost at least $18,000 per foot.
Update on My Light Rail Bet: The Energy Issue
I generally have a bet I make for new light (and heavy) commuter rail systems. I bet that for the amount the system cost to build, every single daily rider could have instead been given a Prius to drive for the same money; and, with the operating losses and/or subsidy the system requires each year, every one of those Prius drivers could be given enough gas to make their daily commute. And still have money left over. I have tested this bet for the systems in Los Angeles and Albuquerque.
Well, it turns out I left something out. Many people are interested in commuter rail because it is perceived to be greener, which nowadays generally means narrowly that it uses less energy and thus produces less CO2. But in fact, it may not. Blogger John Moore sent me a link to this article by Brad Templeton analyzing energy usage in various transportation modes. While a full train can be fairly efficient (just as a full SUV could be if 7 passengers were in it), cars and trains and busses are seldom full. When you look at their average load factors, trains are seldom better than cars:
In fact, a car at its average load factor (1.57 pax) has about the same energy use as busses or light rail per passenger mile. The analysis is difficult to do well, but even with errors, its clear that rail projects do not dominate over car travel in terms of energy use (One must be careful to differentiate rail project construction decisions from individual choice of mode decisions -- an individual at the margin shifting from car to train saves a lot of energy; a city choosing to invest in a large new rail system to entice drivers off the road does not).
In fact, relevent to my bet, Mr. Templeton says this:
My first conclusion is that we would get more efficient by pushing small, fuel efficient vehicles instead of pushing transit, and at a lower cost.
He explains his results, which are counter-intuitive to many
A full bus or trainload of people is more efficient than private cars, sometimes quite a bit more so. But transit systems never consist of nothing but full vehicles. They run most of their day with light loads. The above calculations came from figures citing the average city bus holding 9 passengers, and the average train (light or heavy) holds 22. If that seems low, remember that every packed train at rush hour tends to mean a near empty train returning down the track.
Transit vehicles also tend to stop and start a lot, which eats a lot of energy, even with regenerative braking. And most transit vehicles are just plain heavy, and not very aerodynamic. Indeed, you'll see tables in the DoE reports that show that over the past 30 years, private cars have gotten 30% more efficient, while buses have gotten 60% less efficient and trains about 25% worse. The market and government regulations have driven efforts to make cars more efficient, while transit vehicles have actually worsened.
In order to get people to ride transit, you must offer frequent service, all day long. They want to know they have the freedom to leave at different times. But that means emptier vehicles outside of rush hour. You've all seen those huge empty vehicles go by, you just haven't thought of how anti-green they were. It would be better if off-hours transit was done by much smaller vehicles, but that implies too much capital cost -- no transit agency will buy enough equipment for peak times and then buy a second set of equipment for light demand periods.
A lot of his data can be checked at the US Department of Energy data book here. In particular, you can see the key numbers in table 2.12. After perusing this data for a bit, I had a few other reactions:
- Commercial air travel gets a bad rap. On a passenger mile basis, it is really not worse than driving and only about 20% worse than Amtrack (and probably the same as Amtrak or better if you leave out the Northeast Corridor). (table 2.14)
- Busses have really gotten way more inefficient over the years, at the same time cars have become substantially more efficient. While the government criticizes its citizens for not practicing enough energy conservation, in fact its citizens have been buying more and more fuel efficient vehicles while the government has been buying less efficient vehicles. (table 2.13)
- While passenger cars have increased substantially in efficiency, over the road trucks have seen no progress, and have actually gotten less efficient over the last 10 years (table 2-18)
Make sure to read the whole article. I think the author is pretty fair at achnowleging where the uncertainties are in the analysis. He also has comparisons of mass transit energy numbers between cities. A few individual cities seem to beat even the most efficient cars -- most, including places like New York, do not.
Postscript: I don't think numbers for New York include taxis. If they did, New York would likely look terrible. From an energy standpoint, taxis are a horrible transportation option, perhaps the worst possible. It would be interesting to know how many New Yorkers who look down on SUV's routinely get around town using taxis.
Solar Concentrating Plants
For a while, I have been writing that traditional silicon/germanium based solar-electric panels are not yet economic as an electricity source.
I have hopes for other technologies eventually making direct solar conversion to electricity. However, there seems to be some activity in solar concentrating plants, where solar energy is reflected onto tubes to boil water and drive traditional steam turbines to generate electricity. Fortune has an article on one such plant opening recently:
The completed solar arrays will be trucked to California where Ausra is building a 177-megawatt solar power station for utility PG&E (PCG) on 640 acres of agricultural land in San Luis Obispo County. (To see a video of the robots in action, click here.) The arrays focus sunlight on water-filled tubes to create steam to drive a turbine. Ausra manufacturing exec David McKay points to where standard-issue boiler pipe will be fed into a machine and treated with a proprietary coating that transforms it into a solar receiver.
I would love for this to work, but the article goes on to say that this approach still requires federal tax subsidies to compete with other electricity sources. I am not very familiar with the economics of such plants. Does anyone have a link or source that delves into the economics. I am increasingly frustrated of late with alternate energy articles that fail to give any of the relevent economic info. For example, I read an article in the Arizona Republic (sorry, lost the link) about Arizona's first wind project, but I could not get a sense from the article if the power was being purchased at market rates or some special inflated rate.
From the Interagency Task Force on Commodity Markets, via Mark Perry:
The Task Force’s preliminary assessment is that current oil prices and the increase in oil prices between January 2003 and June 2008 are largely due to fundamental supply and demand factors. During this same period, activity on the crude oil futures market – as measured by the number of contracts outstanding, trading activity, and the number of traders – has increased significantly. While these increases broadly coincided with the run-up in crude oil prices, the Task Force’s preliminary analysis to date does not support the proposition that speculative activity has systematically driven changes in oil prices.
The world economy has expanded at its fastest pace in decades, and that strong growth has translated into substantial increases in the demand for oil, particularly from emerging market countries. On the supply side, the production of oil has responded sluggishly, compounded by production shortfalls associated with geopolitical unrest in countries with large oil reserves. As it is very difficult to rely on substitutes for oil in the short term, very large price increases have occurred as the market balances supply and demand (see top two charts above).
If a group of market participants has systematically driven prices, detailed daily position data should show that that group’s position changes preceded price changes. The Task Force’s preliminary analysis, based on the evidence available to date, suggests that changes in futures market participation by speculators have not systematically preceded price changes. On the contrary, most speculative traders typically alter their positions following price changes, suggesting that they are responding to new information – just as one would expect in an efficiently operating market.
Congress and other agencies have commissioned studies of this type on oil markets and prices approximately every 90 days or so for the last 35 years, and every one of them have come to the same conclusion: Oil markets move based on the participant's best guesses about trends in supply and demand. Duh. As I wrote previously, the last hydrocarbon price manipulation case I have seen in court was aimed at a group that allegedly manipulated prices for 30 seconds at the end of a trading day whose closing price affected certain contracts. And it is not clear that they were successful.
I Would LOve to See This Happen
San Francisco has a ballot initiative this November to seize all PG&E transmission lines and assets in the city such that all city power comes from a new government owned utility. Further, the initiative would require that this new entity get 100% of its power from renewables, particularly wind and solar, by 2040. It is similar to a 2001 initiative.
All due respect to PG&E's private property, but I would love to see this happen. If I were governor, I would be seriously tempted to encourage them to proceed, with the only proviso that no one else in California be allowed to sell electricity to San Francisco on the hugely unlikely possibility that there might be a day without sunshine in San Francisco. (I find it hilarious that San Francisco's solar future is trumpeted in the "fog city journal.") This might actually be a big enough disaster that even the media would have trouble ignoring its spectacular failure. It would also do wonders for the Arizona and Nevada economy, as major industries would move our way.
I am sure San Francisco is well on their way to success. After all, the city just completed its largest ever solar project.
The solar system is expected to generate 370,000 kilowatt hours of electricity annually, enough to power 80 San Francisco homes.
Wow. It can power 80 whole homes, as long as its not night time or winter (when it is seldom sunny in SF).
More on Wind Capacity
The other day I wrote to beware of rated capacity for wind and solar, because such plants tend to run way below their rated capacity on a 24-hour average. MaxedOutMamma reads the wind report of the largest utility in Germany, which is as a country is among the largest adopters of wind power. She finds this interesting bit:
As wind power capacity rises, the lower availability of the wind farms determines the reliability of the system as a whole to an ever increasing extent. Consequently the greater reliability of traditional power stations becomes increasingly eclipsed.
As a result, the relative contribution of wind power to the guaranteed capacity of our supply system up to the year 2020 will fall continuously to around 4% (FIGURE 7). In concrete terms, this means that in 2020, with a forecast wind power capacity of over 48,000MW (Source: dena grid study), 2,000MW of traditional power production can be replaced by these wind farms.
This is an even lower substitution factor than I mentioned previously, and is so because this report looks not just at the percent of time wind is blowing at full speed, but also at the peak load conventional power plants that must be kept running on standby due to the unreliability of wind. At this 24:1 substitution ratio, folks like Al Gore and Boone Pickens will bankrupt us. But of course, their investment portfolios, laden with alt-energy investments, will be paying off.
Twisted Into Pretzels
A few weeks ago, Kevin Drum had a post on shale oil development, quoting from a speech by Congressman Ken Salazar. It is hard to really excerpt the piece well, but my take on their argument against shale oil leasing is:
- Shale oil technology is unproven
- The government is leasing the shale oil rights too cheap
- There is already plenty of shale oil land for development, so new leases won't increase development
- This is just being done by the Bush Administration to enrich the oil companies
- The administration is rushing so fast that Congress has not had the chance to put a regulatory regime in place
In many ways, the arguments are surprisingly similar to those against new offshore and Alaskan oil leasing. Through it all, there is this sort of cognitive dissonance where half the arguments are that the oil won't be developed, and the other half seem to be based on an assumption that a lot of oil will be developed. For example, how can the leases be "a fire sale" if shale oil technology is unproven and development is not likely to occur? I would say that if these assumptions were true, then any money the government gets for a worthless lease is found money.
Similarly, how are oil companies going to enrich themselves by paying for leases if the technology is not going to work and no development is going to occur? This same bizarre argument became Nancy Pelosi's talking point on offshore oil leasing, by saying that oil companies were somehow already cheating us by not drilling in leases they already have. Only the most twisted of logic could somehow come to the conclusion that oil companies were enriching themselves by paying for leases were they found no developable oil.
From the standpoint of Democratic Party goals, there is absolutely nothing bad that happens if the government leases land for oil shale or oil drilling and oil companies are unable to develop these leases (there is some small danger of royalty loss if leases are not developed when they could be economically, but most private royalty agreements are written with sunset periods giving the lease-holder a fixed amount of time to develop the lease or lose it -- I don't know how the government does it). The net result of "no drilling" or "oil shale technology turns out not to work" is that the government gets money for nothing.
Here is the problem that smart Democrats like Drum face, and the reason behind this confusing logic: They have adopted environmental goals, particularly the drastic reduction of CO2 in relatively short time frames, that they KNOW, like they know the sun rises in the east, will require fuel and energy prices substantially higher than they are today. They know these goals require substantially increased pain and lifestyle dislocation from consumers who are already fed up with fuel-cost-related pain. This is not because the Democrats are necessarily cruel, but because they are making the [faulty] assumption that the pain and dislocation some day from CO2-driven global warming outweighs the pain from higher priced, scarcer energy.
So, knowing that their policy goal is to have less oil at higher prices, and knowing that the average consumer would castrate them for espousing such a goal, smart Democrats like Drum find themselves twisted into pretzels when they oppose oil development. They end up opposing oil development projects because in their hearts they want less oil around at higher prices, but (at least until their guy gets elected in November) they justify it with this bizarre logic that they oppose the plan because it would not get us oil fast enough. The same folks who have criticized capitalism for years for being too short-term focused are now opposing plans that don't have a payoff for a decade or so.
At the end of the day, most Democrats do not want more oil developed, and they know that much higher prices will be necessary to meet their climate goals. It sure would be refreshing to hear someone just say this. As I wrote at Climate Skeptic, the honest Democrat would say:
Yeah, I know that $4 gas is painful. But do you know what? Gas prices are going to have to go a LOT higher for us to achieve the CO2 abatement targets I am proposing, so suck it up. Just to give you a sense of scale, the Europeans pay nearly twice as much as we do for gas, and even at those levels, they are orders of magnitude short of the CO2 abatement I have committed us to achieve. Since late 2006, gas prices in this country have doubled, and demand has fallen by perhaps 5%. That will probably improve over time as people buy new cars and change behaviors, but it may well require gasoline prices north of $20 a gallon before we meet the CO2 goal I have adopted. So get ready.
Postscript: By the way, oil companies have been trying to develop shale oil since the 1970s. Their plans went on hold for several decades, with sustained lower oil prices, but the call by the industry to the government for a clarified regulatory regime has been there for thirty years. The brief allusion in Salazar's speech to water availability is a valid one. I saw some studies at Exxon 20+ years ago for their Labarge development that saw water availability as the #1 issue in making shale oil work.
PPS: I mention above that the pain of fuel prices not only hits the wallet, but hits in term of painful lifestyle changes. One of the things the media crows about as "good news" is the switch to mass transit from driving by a number of people due to higher oil prices. This is kind of funny, since I would venture to guess that about zero of those people who actually switched and gave up their car for the bus consider it good news from their own personal life-perspective. Further, most of the reduction in driving has been the elimination of trips altogether, and not via a switch to mass transit. Yes, transit trips are up, but on a small base. 95%+ of reduced driving trips are just an elimination of the trip. Which is another form of lifestyle pain, as presumably there was some good reason to make the trip before.
Update: Updated on Canadian Oil Sands production here. Funny quote:
Fourth, and potentially most important, the U.S. “green” lobby is pushing legislation that could limit purchases of oil sands products by U.S. government agencies based on its GHG footprint. It would be well beyond stupid for Congress to prohibit our buying oil from Canada while we increase buying it from countries that threaten our security. But just because something is stupid certainly does not mean Congress may not do it.