Coyote Blog

Next week I am on a panel talking about alternative energy.  These guys have already told me they don’t want to re-fight the global warming science battle at this venue, and my guess is that there will be a lot of pragmatist corporate types who won’t really care about individual liberty or role-of-government issues  — they will only care if there is money to be made, even if it is by rent-seeking.  My best bet, I think, will be to discuss why alternative energy is a bad investment.  My sense is that it is a bubble investment, like goofy Internet stocks in the 1990’s or housing in the 2000’s.  Already, I think we see the crash in the corn ethanol business.

My two assumptions are

• I can’t think of any industries that were initially heavily subsidized that eventually found their way to competing successfully and growing without subsidies.
• With the exception of agriculture, the public’s tolerance for growing subsidies to a single industry eventually wanes.

I would love for commenters or emailers to send me contra-examples if they have them to either of these assumptions.  In particular, can you think of an industry that could not have grown initially without subsidies eventually prospering without subsidies.

To the second point, I looked at the numbers two ways.

1. In Germany, which is often held up as the model, feed-in tariff subsidies are between $0.06 (wind) and $0.50 (solar) a Kwh.  If the US reached a goal of 20% of its production in wind and solar (total production today is about 4000 billion KWh) then the subsidy would be between $50 billion and $400 billion a year.  It is hard to imagine these remaining popular for any period of time.  (lots of German numbers here and in the linked PDF)
2. Venture capitalists and investors are expecting the growth stocks they invest in to grow at, say, 30% a year.   Let’s assume alternative energy companies grow at 30% a year and the number of companies, attracted to the growth and subsidies, doubles every two years.  In this scenario, assuming unrealistically that the supply curve for alternative energy is flat rather than upward sloping, the amount of subsidies to support this growth would have to nearly double every year.  They would increase 21-fold in five years and 440-fold in 10 years.   In fact, given the shape of real supply curves, new more expensive capacity at the margin is replacing cheaper and cheaper alternatives, resulting in the need to grow subsidies even faster to keep up.   Never has happened, never will.  Once the industry outgrows the government’s willingness to grow subsidies, the whole thing crashes.

(PS – the subsidy could also be in the form of taxes that increase the cost of alternatives, or production and/or import restrictions on the alternatives).

Any help along these lines in the comments is appreciated.

Update: This seems relevant:

First Solar shares skidded 8% Friday to close at $116 after the company issued a murky business outlook beyond June. Until then, however, “orders look very strong,” First Solar CEO Robert Gillette said in a post-earnings conference call.

This commentary, along with price pressure and expected subsidy cuts solar panel makers get from the German government is making investors a bit more wary of First Solar, whose shares have been on a bumpy ride the past 18 months….

First Solar, helped by government tax credits extended to businesses for using solar power, has rewarded its investors since going public in November 2006 at $20 a share. The stock peaked at $317 in May 2008. But the shares have been skittish ever since.

Germany, the world’s biggest solar market, is weighing a 15% cut on so-called solar feed-in-tariffs. This could make solar installations less attractive.

First Solar projects 60% of its 2010 sales from German-related contracts, according to Wedbush Securities analyst Christine Hersey.

Remember from above, the German feed-in tariff for solar is around $0.58 per KwH, or fully $0.50 above the price paid for the fossil fuel base load.  At this subsidy level, the US would be paying $400 billion a year in subsidies and/or higher prices.

First Solar has grown at over 150% per year for the last 3 years so the 30% assumption above is conservative, as is the assumption about the number of competitors doubling every two years.

Another interesting note – First Solar makes a pre-tax margin around 33% of sales, which is over 6x larger than health insurance companies make (and are excoriated for).  Is it any wonder Germany no longer wants to keep subsidizing First Solar’s bottom line to levels far above most equipment manufacturing companies.

I was having a back and forth with a reader about wind power and how much fossil fuel capacity must be kept on standby to support grid reliability with wind.  Here are some excerpts of what I wrote:

Forget all of the studies for a moment.  I used to operate power plants.  Any traditional capacity (fossil fuel, nuclear) except perhaps gas turbines takes on the order of a day or more to start up – if you don’t take that long, the thermal stresses alone will blow the whole place up.  During the whole startup and shutdown, and through any “standby” time, the plant is burning fuel.   Since we don’t have a good wind energy storage system, some percentage of wind capacity must be backed up with hot standby, because it can disappear in an instant. We are learning now, contrary to earlier assumptions, that wind speeds can be correlated pretty highly over wide geographies, meaning that spreading the wind turbines out does not necessarily do a lot to reduce the standby needs.  And since plant startups take time, even gas turbines take some time to get running, the percentage of wind power that required hot backup is pretty high — I would love to find this percentage.

I found at least one source for such a percentage, which posits that for England, the percentage of hot backup needed is as high as 80%:  http://www.ref.org.uk/Files/ref.for.decc.28.10.09.i.pdf

I quote from page 6-7:

On any view, including the square root rule of thumb referred to above, the result, imposed for purposes of maintaining adequate response and reserve requirements, implies that a high degree of conventional (dispatchable) plant capacity is retained in the system to support wind generation. Thus, for 25 GW of installed wind capacity only 5 GW of conventional plant can be replaced leaving 20 GW in the role of standby capacity (also known as “Spare” or “Shadow Capacity”).3

So 80% of the expected production from wind has to be backed up with hot spares burning fossil fuels.  They go on to say that the percentage of required spare capacity may be lower if the grid area is substantially larger, but not a lot lower.  I had not considered hydro power, but apparently that can be used to provide some quick response to wind production changes.  The report also talks about diesel generators for standby since they can be started up quickly, but these are seriously inefficient devices.  Despite the report’s conclusion that the situation might be a bit better on the continent with a larger and more diverse grid, a report of the largest German utility seems to argue that German experience may actually be worse:

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.

It is hard to tell, because 48,000 MW is the nameplate capacity which is virtually meaningless, but my guess is that they are not doing better than 80%.

I have to tell one of my favorite stories of chutzpah.  In the 1940’s and 1950’s, railroads were making the transition from steam engines to diesel engines.  One of the changes was that a diesel engine only needed a driver, it did not need a fireman as steam engines did to shovel coal and keep the boiler running well.   The unions of course saw this coming.  So what did they do?  They preemptively made the demand that diesel engines should have to have TWO fireman.  Railroads spent so much time fighting this insane proposal that it took them years to get the firemen per locomotive to the correct number (ie zero).

I am reminded of this story when I think of how the Obama administration has handled the issue of CO2 abatement.  Reasonable people understand that CO2 abatement will be horrifically expensive – it just will not be cheap in terms of cost or lost economic output and lost personal liberties to take the country back to a CO2 per capita it last had in the 19th century.     But rather than taking this on, the Obama administration preemtively attacked, saying that in fact Co2 abatement would lead to economic growth and job creation.  This was the broken windows fallacy on steroids, but the usual progressive illiterates and consumers of party talking points have run with it.

We are finally getting folks to start to address the true costs of CO2 abatement, and they are enormous.  People who push the precautionary principle try to say that even a small risk of climate catastrophe outweighs some minor abatement costs.  But does a small change of manmade warming outweigh a near certainty of enormous economic costs?

I have said for years that to really get to an 80% reduction target, gas prices would have to rise over $20 a gallon  (they are at $10 already in Europe and they are no where near the targets).  Some researchers looked at the gas price implications of more modest CO2 targets:

To meet the Obama administration’s targets for cutting greenhouse gas emissions, some researchers say, Americans may have to experience a sobering reality: gas at $7 a gallon.

To reduce carbon dioxide emissions in the transportation sector 14 percent from 2005 levels by 2020, the cost of driving must simply increase, according to a forthcoming report by researchers at Harvard’s Belfer Center for Science and International Affairs.

And this is with a straight tax, probably the most efficient way to hit the targets.  The study agreed that other intervenist approaches didn’t seem to work as well as a straight tax:

In the modeling, it turned out that issuing tax credits could backfire, while taxes on fuel proved beneficial.

The other day I was happy to see lefty Kevin Drum pointing out the obvious problems with subsidizing Edit Post ‹ Coyote Blog — WordPressethanol.  This is a step forward, when smart people on both sides of the aisle can agree that a certain approach is dumb.  Of course, given the incentives in government, that doesn’t mean that ethanol subsidies will actually stop.

So we make some progress on ethanol, but just replace it without another absurdly dumb subsidized energy technology, in this case wind.  Wind is not even close to being ready for grid service, and given the hot backup power one needs to cover its unpredictability, it does about zero to reduce CO2 emissions.  A series of studies have shown that it has done nothing to reduce fossil fuel consumption in either Germany or Denmark.  And the whole green jobs thing is even more absurd — it makes no sense theoretically, as shifting private investment to less economically viable uses has never, ever created jobs — and has been debunked in practice in both Denmark and Spain.

Unfortunately, the Obama administration has bent over backwards to ignore the science and push wind, for no other reason I can figure out except to avoid admitting he was wrong when he campaigned on wind.  This makes for a pretty depressing story, and, given there are more documents the Administration is resisting releasing under FOIA, probably more ugly news to follow.

Postscript: One way you could use wind is with some kind of storage system, of which I can think of two.  The first is to use wind to pmp water up hill into a reservoir where the potential energy could later be harvested as hydroelectric power.  The other is to use the wind power to make hydrogen from water.  You need some sort of process that can be stopped and started on short notice.

Bloom Energy is introducing what looks like a 200kW fuel cell that runs on natural gas for about $700,000.  That compares pretty favorably with the current cost of at least $2,000 per KW to build a coal plant, especially when one factors in reduced distribution and pollution costs.  We have gobs of natural gas and are finding more all the time, and (unlike something like hydrogen) the distribution and storage infrastructure is already in place.  Hope it works.

I often critique new energy technologies here, and that critique is often confused with a hostility to new technologies.  This is far from the case.  Living here in Phoenix, I would love to have cheap solar cells to spread over my roof like carpet.  What I am opposed to is government subsidies for technologies that are not even close to economic compared to current alternatives.   I don’t know the Bloom business model  (I am suspicious they have a large rent-seeking component if KP is funding them) but if they can make these work subsidy free, that’s great.

Why can’t our newspaper here in Arizona apply any skepticism to alternate energy technologies?  Sure, I think this technology is cool, where large solar dishes concentrate heat on what appears to be Stirling cycle engines  (the article, true to form, does not explain the technology, but a few hints plus the name of the company “Stirling Energy Systems” seems to point to that answer).  Other concentrator technologies focus on boiling water, so this a new approach to me.

However, why can’t the article actually address real issues, like “how does this technology stack up, based on cost and efficiency, vs. other solar technologies.”  It says it uses less water than other concentrator technologies, but is it more or less efficient?  No answer.

We can figure a few things out.  First, as with many “renewable” energy technologies, the company selling it engages in nameplate capacity abuse.  A 1MW coal plant produces 1MW all day long.  A 1MW wind plant produces 1MW when the wind is blowing hard, and less at other times.  And a solar plant produces 1MW when the sun is at its peak.   We can address this latter because folks have calculated sun equivalent hours, the number equivalent max sun-hours per day a site gets through the year.  For the best desert sites in the US, this number is around 6.  This means that the actual capacity of this plant is not 1.5MW, as stated in the article, but about a fourth of that, or  0.375MW.

This matters for a couple of reasons.  They state their build cost as $2.8 million per MW, which seems competitive to coal plants which cost $1.0-2.0 per MW, but in fact the reference number for this solar based on an apples to apples capacity comparison is actually  $11.2 million per MW.   The solar plant gets some credit for having no fuel costs, so it might be possible still for its power to be competitive, but it appears form the limited information in the article that it is not:

Singleton would not disclose what SRP will pay for the electricity, but said the utility will pay a premium for the environmental benefits of the power, and that the price is competitive with other sustainable-energy sources such as wind and geothermal power.

In other words, it is not competitive, so much so that they will not even reveal the price, and only subsidies and government mandates make it possible for a power company to buy the power.

Let’s do a reality check.  At best, they get 8 dishes per acre, and 25Kw per dish at max sun.  So this is 8 x 25 x 6/24 = 50Kw per acre.   Lets say we want to get rid of coal.  The US generating capacity of coal plants is about 336,000 MW, or 336,000,000 KW.  To replace it with this solar technology would require 6,720,000 acres (10,500 sq miles or 10% of the state of Arizona) and cost $3.76 trillion dollars if located in the best possible solar areas.   This is not cheap but is not awful.

If I am doing the math right, I get something like $70,000 per dish   (1 dish = 25Kw, $2.8 million per MW).  I would think there are a lot of rich folks with some acreage that would pay $70,000 for one of these bad boys.  It would look much cooler than solar panels on the roof.

I am done using the phrase “dangers of government trying to pick winners” because it implies that they sometimes might be successful.  They never are.  When governments choose, they choose losers.

I get a lot of pushback on this, because it seems to offend people’s intuition.  They will say they know lots of good people they trust in government — there is no way that all these smart, well-intentioned people are going to be so consistently wrong.

But the argument against government in this case (and in most other cases) is not based on the IQ or goodness of the individuals that populate it.  The argument is that even good people in groups make terrible decisions due to problems with their information and incentives.

The information problem is one that Hayek is famous for addressing.  In short, there is simply too much to know to make decisions for the entire economy.  In fact, folks with high IQ’s often do especially poorly in this context, because they tend to overestimate their own knowledge and problem-solving ability.   And, even if one could be omniscient, it is still impossible to pick winners because 300 million people have different preferences and so one solution based on one set of idealized or mean preferences is going to sub-optimize for a lot of people  (remember this now that we all have to have health insurance plans on the exact same terms and coverage).

The incentives issue is perhaps an even more powerful problem.  We only have to look at the most recent health care bill and its progress through the legislative process to understand the power of incentives to shape rules and legislation in absurd ways.

Ethanol is a great illustration.  Scorned by scientists as both bad energy policy and bad environmental policy, ethanol mandates and subsidies do nothing but hurt the environment.  Ethanol generally takes more fossil fuels to produce than it replaces, it does almost nothing to reduce CO2 emissions, and it creates new environmental issues with land use as well as social issues from rising food prices.  If you listed a hundred potential legislative initiatives to improve the environment and energy policy, ethanol would likely be in the bottom 10.  But never-the-less, it is consistently the number 1 legislative solution adopted by western democracies, including the supposedly science-based Obama administration.

I used to say that if we could move the first Presidential primary out of Iowa, ethanol might go away, but obviously that understated the appeal of subsidizing the agricultural industry under the thin veneer of environmental policy, as demonstrated by these nutty large subsidies in Europe.  Via Carpe Diem:

Biofuels production in Europe is heavily subsidized. Support has also been increasing in the past years and today stand at approximately EUR4 billion ($5.76B). Another way to look at subsidies is that every litre of ethanol consumed in Europe gets 0.74 EUR (about $4 per gallon) and every litre of biodiesel 0.5 EUR ($2.72 per gallon). The effective rate of assistance to biofuels (taking account of all measures of support) adds up to more than 250% for ethanol (see chart above). Biodiesel, and especially rapeseed crops, have lower effective rates of assistance (up to approximately 60%).

This structure of support and protection is not economically sustainable. It is rather close to economic madness to pursue the sort of self-sufficiency or industrial policy ambitions that have guided EU policy towards biofuels. The total cost of every unit of biofuel becomes far too high, which slows down the readiness to shift away from fossil fuels.

The biofuels policy in the European Union is a classic example of “green protectionism” – protectionism that is not motivated for the benefit of the environment, but which uses environmental concerns to pursue non-environmental objectives. The European Union runs an extensive policy for subsidies to biofuel production. Border protection increases the level of subsidy by giving a market support from consumers to producers. Standards are used to favour domestically produced biofuels. It is difficult to escape the picture of a policy driven by industrial ambitions rather than environmental concerns. The intention and/or the effect of Europe’s policy is associated with beliefs of self-sufficiency. Obviously, trade is not considered to be an integral part of an environmental ambition to shift from fossil fuels to biofuels.

James Hansen wrote an editorial supporting a revenue-neutral carbon tax, and while I don’t really agree with all of his justifications or economics, I do agree with his ultimate conclusion –that such a tax would be fairer, more efficient, less growth-killing, and ultimately more effective than the Frankenstein mess of parts that makes up the current cap-and-trade bill.

To be fair, I have been on this point for a while, having advocated a carbon tax offset by a payroll tax reduction to make it revenue neutral for some time, including in my most recent film.  I don’t think I have to tell my readers that I am not big on taxes nor am I of the belief that any strong action on CO2 emissions is necessary.

However, I am largely indifferent between a sales tax on fuel and an equal sized sales tax on labor (which is effectively what payroll taxes are).  There is no doubt that a reduction in payroll taxes would be a helpful step in this recession, and if folks would sleep better at night with less carbon emissions, I can tolerate trading one for another.

Jonathon Adler has more, including Paul Krugman’s negative reaction to the plan  (did this guy really once win the Nobel Price in economics?)

Via Maggies Farm

Related:  the total BS that is the Volt’s 230 mpg rating.

I had wanted to dig into the costs of a Florida solar facility that Obama recently visited.  Fortunately Ronald Bailey does it for us:

Now let’s do a rough calculation of the costs of DeSoto Solar versus conventional power sources. According to the Electric Power Research Insitute, a modern 1,000 megawatt coal plant without carbon capture technology would cost about $2.8 billion to build. Adding carbon capture would boost the cost to as much as $4.7 billion.

The 25 megawatt DeSoto facility cost $150 million. Scaling it up to 1,000 megawatts would cost $6 billion. But coal power plants operate 90 percent of the time snd solar only 30 percent, so in order to get the equivalent amount of electricity out of solar plant would mean tripling the capital cost for a total of about $18 billion. In other words, building a solar power plant costs between 4- and 6-times more than conventional, or even carbon capture, power. Even worse, a scaled up DeSoto-style plant costs 18-times more than a natural gas plant.

Tyler Cowen links to a good article that gets at the fallacy that suddenly obsoleting our energy infrastructure and having to rebuild it will be of net economic benefit.

Optimistically treating European Commission partially funded data, we find that for every renewable energy job that the State manages to finance, Spain’s experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created

Includes 1 million euros in government subsidies per wind job created.

In my mind, the green jobs mantra is a result of the CO2 abatement case becoming fatally weak, with supporters of legislation casting about for other justificaitons.  From the very beginning, many of the most passionate folks are on the AGW bandwagon not because they really understand the science, but because the theory provided justification for a range of government actions (reduced growth, limited technology, reduced energy use, reduction in global trade — even vegetarianism) that they supported long before AGW made the news.

Update: A quick note on a theme I harp on a lot – nameplate capacity for wind and solar is really, really misleading.  In Spain in the study cited, wind operates at 19% of nameplate over the course of a year and solar operates at 8% (figure 3).  The actual CO2 reduction is even worse, because, particularly for wind, fossil-fuel fired turbines have to be spinning on hot backup for when wind suddenly dies.  Germany, the largest wind user in the word, found only 1,000MW of reduced fossil fuel plant needs from every 24,000 MW of wind capacity.

Having read this:

In his proposed budget for 2010, Chu wanted $480 million to start eight Energy Innovation Hubs, or “Bell Lablets,” as he called them, to stimulate research in areas ranging from solar energy to new materials for the electric grid. Each would receive $35 million to get started, and $25 million more in each of the following 4 years.

Last week Congress poured semi-cold water on the idea….Its skepticism was no surprise, having been included this summer in reports accompanying the spending bills in the House of Representatives and Senate (House, Senate versions). In August, Science reporter Jeffrey Mervis described how Chu admitted to a mediocre job of selling the idea and overcoming congressional concerns that the concept was poorly thought out and not well-coordinated with other energy research at the Department of Energy. House appropriators were particularly unkind to the idea, noting:

A new set of centers with overlapping research goals risks adding confusion and redundancy to the existing fleet of research and development initiatives

So since everyone agreed it was a bad idea, they killed it right? Ha ha, cute idea, actually voting and spending money based on efficacy. In fact, they gave Chu quite a bit

Conferees to the Energy and Water spending bill approved funding for three of the centers, two in energy efficiency and renewable energy and one in nuclear energy.

If they really make no sense, how about “zero”

We Phoenicians, who live in one of the best solar sites in the world, have been anxiously awaiting a solar electric technology that makes economic sense.    I have a couple thousand square feet of nice, flat room that is just begging to get be off the grid.  Already, solar is economic for individuals in Phoenix, but only if you are willing to soak American taxpayers and your neighbors for 85% of the costs.  It would be nice if it were, you know, actually economic and not just subsidy bait for tens of thousands of dollars.  I have dug into many analyses that claim that solar has a 5-7 year payback, but never seen one that achieved these returns without substantial subsidies and rebates (beware the term “energy payback” which is not the same thing as investment payback (pdf))

For a while I have said that I thought traditional silicon/germanium IC-like wafer processes for making solar cells was just never going to get there, and that some other technology was necessary.   This might be one such example:

JA Solar, one of the big players in the solar industry, is working with Innovalight to commercialize the latter’s method for making silicon-ink-based, high-efficiency solar cells, the companies said this week.

… The solar cells are created by pouring an ink solution incorporated with silicon nanoparticles and then decanting the excess liquid to leave behind a crystalline silicon structure.

At the time of the 2007 announcement, Sunnyvale, Calif.-based Innovalight claimed its method not only resulted in solar cells that were cheaper to produce by as much as half, but that the crystalline structure resulting from the process made its cells more efficient at converting electricity.

Those claims now appear to be validated.

On Tuesday, Innovalight announced that an independent study of its method by the U.S. Department of Energy’s National Renewable Energy Laboratory and the Fraunhofer Institute for Solar Energy Systems in Germany confirmed that its silicon ink-based cells “demonstrated a record 18 percent conversion of efficiency.”

The 18% conversion efficiency is close to a record for thin films, but must be the “record” for production models, since higher conversions have been achieved in the lab.  18% is very good for a production device, particularly if it is cheaper to manufacture than current cells.

Frequent readers of this blog know that I am very skeptical wind will make very much sense as a major power source outside of a few niche applications.  Solar may not be economic today, but I think it will someday, and maybe even some day soon.  But I am not sure wind will ever be ready for prime time.

I thought this was pretty funny: (emphasis added)

In the space of one hour last month, electricity generated at wind farms in the eastern end of the Columbia River Gorge shot up by 1,000 megawatts – enough to power some 680,000 homes.

Less than an hour later, it plummeted almost as much.

Sitting in front of 10 computer screens in a fifth-floor room of the federal Bonneville Power Administration headquarters in Portland, Kim Randolph had to react quickly.

Working from a keyboard, she diverted millions of gallons of water away from massive turbines spinning in Columbia River dams and sent it around the dams.

The 17-year veteran power operations specialist remembers how fast she needed to work as a wind storm caused generation to peak and fall three times over eight hours.

The article is about the difficulty for grid operators in integrating and managing wind in the grid.  But here is the part that slides by — despite the electricity it is putting in the grid, wind is contributing…nothing.  Note that when wind production is surging, the utility is sending water around the turbines of the dam.  That lost potential energy is gone forever.  All the wind power did in this case is substitute for clean hydro power.  It has not value in this particular case (beyond the ability of the utility to put wind on its annual report and seek subsidies from the Obama administration).

Apparently the costs of trying to integrate wind into the grid is so high the utility tried to charge wind producers a higher integration charge than they do for other sources.   This attempt to set pricing equal to actual costs was apparently killed by pressure from the Obama administration, making sure that wind will continue to get preferential treatment and I presume substitute for dirty hydro power in the future.

Postscript: I just don’t see how wind is ever going to work on the grid.  In this case, wind is backed up by hydro, but in others it has to be backed up by spinning, fuel-burning fossil fuel plants.  Wind makes more sense to me linked to some type of flexible local process.  Using wind to make hydrogen from water may make sense.  Wind could store its energy by pumping water backwards back up a dam to be recovered as electricity through hydro power later.  Or it could run a local process, such as water desalinization  (a good potential candidate as sea breezes tend to be more constant).

All those confident in our ability to ramp up things like wind and solar quickly should take a long look at T. Boone Pickens decision to virtually abandon billions of investment in wind.

One of the ways I think our potential to increase renewables is over-stated is that the government has begun lumping hydro power into wind, as in these charts.  They show “renewables” as about 9% of electricity production.   Increasing this to, say, 20% seems daunting but doable – after all, we are just doubling it.

But in fact, almost all of the 9% is hydro power, and that is not going to increase (in fact environmental presure is actually to destroy several hyrdo facilities to allow the rivers to run free).  This means that to get total renewables to 20%, other renewables like wind and solar will have to increase from about 1% to 12%, or a twelve fold increase.  This is much more daunting, especially since a raft of subsidies and incentives and programs have gotten us to just 1%.

Postscript: Owning a home in Phoenix with a big flat roof, there is no one in the world rooting for solar to be economic more than I am.  I have run the numbers recently, and taking advantage of all government subsidies, the investment has about an 8-10 year payback.  It’s just not there yet.  Further, I worry that the current silicon/germanium IC technologies are dated and dead end.  I fear that buying solar now is like buying the last IBM mainframe before PCs came out.  I have a ton of confidence in the innovativeness of man, and believe that a real solar breakthrough will occur in the next 10 years.  Wind, on the other hand, is never going to work.  It is the ethanol of electricity production.

I have already written before about carbon offset companies apparently double or even triple counting carbon credits or offsets.  Here is another example, sent by a reader:

Reilly and Herrgesell, the company’s president and project manager, respectively, have been trying to develop a way to “incentivize the consumer” for nearly two years. What they came up with was a model for selling personal carbon credits.

“(It’s) a new idea,” said Herrgesell, “but a very powerful idea.”

To get started, you create a personal profile with usage data from your utility bills over the last year at My Emissions Exchange. Then, you reduce your energy consumption. My Emissions Exchange certifies your personal carbon credits, and sells them for you in the global voluntary carbon market.

The carbon credits are equal to a one-ton reduction in carbon emission, and are currently trading between $10 and $25, according to the site.

“This is the only effort out there that can align green activity with financial benefit,” said Reilly.

First, I have looked at the site in question, and find no differentiation for how one’s power is generated.  My power in Phoenix comes from a big honking non-CO2-emitting nuclear plant, so my actual carbon credits for reduction in electricity use are theoretically more complex.  Is the clean nuclear power I didn’t used sold so it substitutes for fossil fuel power?  Did I cut my power peak or off-peak?  And does it substitute for gas (not much CO2) or coal ( a lot of CO2)?  Its amazing that there are real markets that will accept such soft savings as real credits to be paid for.

Second, in the proposed Waxman-Markey bill, utilities get counted directly on their CO2 output, so either this program will have to go away or else it will represent a double counting of the same benefit (as at the utility level your reduction in electricity use will also “count”).

Third, the economic knowledge of the author quoted above is just staggeringly low.  I mean, all this time I thought electricity prices were how consumers were “incentivized” [sic] to use less power.  The implication is that somehow incentives are out of alignment and this is the “only effort” aimed at aligning them.  But consumers already save money by reducing their utility use (does anyone have a utility contract that reads the opposite?)  One might argue that these guys can provide an additional financial incentive that will create incentives for more conservation at the margin, but that’s about it.

Since 1972, oil company executives have, like clockwork, been dragged up to Washington every five years to defend themselves against charges that they have cartelized the oil industry with the express purpose of limiting supply and driving up prices to consumers.  Over the last 10 years, and particularly post-Katrina, scrutiny has fallen heavily on US refiners to justify refined product supply shortfalls and resulting price spikes.

So, after years of demagoguing oil companies for purposefully limiting refining capacity and output to drive up gasoline prices, Democrats in Congress are on the verge of passing Waxman-Markey, which will have the very focused and predictable result of… limiting US refining output and driving up gas prices.  In fact, the only possible way it will achieve its goals of limiting CO2 output is if it is wildly successful in reducing gasoline supply and driving up gas prices.  Amazing.

Yet more proor that what is never OK for the [private] goose is always OK for the [public] gander.

As I wrote before, Waxman-Markey puts most of the onus for CO2 reduction on refiners and transportation fuels, so that is the area we will see the most price increase if the bill passes.

So I ask you, after putting this huge effective tax on refiners, which will also in some cases force refiners to shut down capacity and produce less fuel, how long will it be before a politician starts to demagogue oil companies for rising gasoline prices and/or fuel shortages?

This is at the end of the day why Congress wanted cap-and-trade rather than a carbon tax.  By putting the tax on unsympathetic targets like oil companies, Congress and Obama can pretend that inevitable consumer price increases are the oil companies greedy fault, and not related to the actions in Washington.

The whole point of cap-and-trade (or a carbon tax) is to set broad costs of emissions or broad tradeable limits, and then let millions of individual consumers and industries figure out the most effective way for each of them to meet these costs or limits.  For example, if I were to have a personal cap, changes in my car’s MPG would be meaningless, because my work is 1.9 miles from my house.  I would probably start with putting the film coating on my windows of my house I have been considering.  They guy in New Jersey who drives 45 miles to work and has a small house might have a different solution.

But this whole philosophy of letting individuals drive the bus flies in the face of everything Congress believes in.  They believe they are smarter than you or I, and thus they should pick the solutions, not us.  And allowing for individual action doesn’t generate campaign contributions like picking winners does.

So despite being a cap-and-trade bill, Waxman-Markey essentially picks winners.  One way is through targeted investments of taxpayer money in technologies whose owners have lobbied hard before Congress.  Another is this:

The legislation will drive up individual and commercial consumer’s fuel prices because it inequitably distributes free emissions “allowances” to various sectors.  Electricity suppliers are responsible for about 40% of the emissions covered by the bill and receive approximately 44% of the allowances – specifically to protect power consumers from price increases.  However the bill holds refiners responsible for their own emissions plus the emissions from the use of petroleum products.  In total refiners are responsible for 44% of all covered emissions, yet the legislation grants them only 2% of the free allowances.

This means that Congress has decided to extract all of the CO2 reduction from transportation and other refined fuel users, rather than from electrical power generation.  Is this because they have some study in hand that shows the best bang for the buck in reducing CO2 comes from transportation?  Of course not, and even if they did, it would be hard to believe given the number of large coal plants in this country that generate far more CO2 than even a fleet of Escalades.

No, the reason for this is purely political — every representative has an electric utility in their district lobbying and paying campaign contributions, but few have organized lobbies of automobile drivers.   And so, rather than pushing for fuel shifts from coal to gas or nuclear in power generation, this bill will primarily achieve its meager results from making it more expensive for people to drive.

Apparently California has passed a new law that requires land use planning to be tied to the CARB CO2 emissions limits.  Well, all of us who make our money in neighboring states will certainly be happy to have yet more Californians driven into our arms.

This effort is based in part on the claim, which I see all the time, from here, based on a Brookings Report here:

Residents of Portland emit 35 percent less carbon per capita than those of other US cities

Portland is the #1 poster child for “smart growth” style urban planning,  and so smart growth advocates have decided that Portland’s low carbon footprint is due to smart growth.

Interestingly, though Brookings certainly supports smart planning, their study has moments of honesty that everyone tries to ignore.  For example, it makes points I have made over and over about the cities at the top of the electrical efficiency and low emissions lists:

The fuel mix used to generate electricity matters in residential footprints. A high-carbon fuels mix significantly penalizes the Ohio Valley and Appalachian regions, which rely heavily on coal power. Alternatively, hydro-reliant metro areas such as Seattle have substantially smaller residential footprints.

Pricing influences the electricity component of the residential footprints. Each of the 10 metro areas with the lowest per capita electricity footprints in 2005 hailed from states with higher-than-average electricity prices, including California, New York, and Hawaii. Many Southeastern metro areas, on the other hand, with high electricity consumption per capita have had historically low electricity rates.

Weather unmistakably plays a role in residential footprints. High-emitting metro areas often concentrate in climates that demand both significant cooling and heating, such as in the eastern mid-latitude states. In contrast, the 10 metro areas with the smallest per capita residential footprints are all located along the West Coast, with its milder climate.

So, let’s take Portland.  It has a mild climate, it has higher than average utility prices, and its electricity is supplied in large part by zero-emission hydro plants.  Small wonder it does well on the footprint analysis.  But given all these advantages, supp0rters want to claim Portland is near the top not due to any of this stuff but due to land planning and mass transit?  In fact, transit’s share of commutes in Portland has been steadily falling for years, despite the urban legends to the contrary.

But here is another reality check on the list — Portland is #3.  #1 on the list is Honolulu, a very mild climate and certainly no poster child for anti-sprawl.  Even more telling is #2 – Los Angeles.  LA has an even lower carbon footprint than Portland.  So much for smart growth and transit ridership as the main explanation!   Even Phoenix, the most spread out non-transit-using city in the country is above average at #21 out of 100, despite having what is most certainly NOT a mild climate.   My guess is that it has something to do with that clean, carbon friendly nuclear power plant just outside of town, the largest in the US.

Postscript: This report claims that smart planning is better than a carbon tax because people don’t respond to changes in gas and electricity prices.  But the fact that the lowest carbon footprints and lowest per capita electrical use areas correspond with those with the highest prices gives the lie to that proposition.

I cannot believe I actually have to write this, but apparently there are a number of folks in Washington and the media for which this will be a surprise.  Specifically:  A carbon tax or a cap-and-trade bill must either greatly increase prices of fossil fuels and the products of their combustion, or else they will have no impact on CO2 emissions.   Placing a high cost on emissions, and then giving everyone with a modicum of lobbying power an exemption is not going to move the meter either.  All the absurd talk of stimulation from new green jobs not-withstanding, either a climate bill imposes huge new costs or it has no real impact on emissions.  One simply cannot get to an end point of obsoleting the entire US electrical generation and transportation infrastructures for free.

As someone who thinks the threat from Co2 is greatly exaggerated, this is why I have never worried overly much about American legislative efforts.  Congress will mandate something or other that will not have much effect and will impose a lot of cost, but politicians will stop way short of the draconian legislation that would be necessary to achieve their stated carbon goals (e.g. 80% reduction).  European politicians are way more committed than ours are to Co2 reductino, and Europe hasn’t really done much at all either.  A legislative body that continues passing costs to our kids in the Social Security ponzi scheme and an administration that plans already to add 10 trillion to the national debt doesn’t really care about future generations.  If they are unwilling to bear current pain for future benefits in fiscal policy, they certainly aren’t going to do it in the much more uncertain arena of climate policy.

Postscript: Note that the costs can show up in other ways.  For example, if one puts carbon caps in place as well as price controls, the cost would appear in the form of massive shortages, lines, and blackouts.  If one tried to address the problem via command and control solutions, the cost appears in massive capital spending requirements that cannibalize from economic growth  (which are likely to be made all the worse given that the commanders will probably not mandate the best solutions — in fact, given variations from individual to individual, they simply cannot mandate the best solution for everyone).

From Greenlaunches.com (via Engadget) comes a technology that I have written about before to leech energy from cars to power buildings:

Now when you shop, your can be responsible to power the supermarket tills. As in with the weight of your vehicles that run over the road plates the counter tills can be given power. How? Well, at the Sainsbury’s store in Gloucester, kinetic plates which were embedded in the road are pushed down every time a vehicle passes over them. Due to this a pumping action is initiated through a series of hydraulic pipes that drive a generator. These plates can make up to 30kw of green energy in one hour which is enough to power the store’s checkouts.

The phrase “there is no such thing as a free lunch” applies quite well in physics.  If the system is extracting energy from the movement of the plates, then something has to be putting at least as much energy into moving the plates.  That source of energy is obviously the car, and it does not come free.  The car must expend extra energy to roll over the plates, and this energy has to be at least as great (and due to losses, greater) than the energy the building is extracting from the plates.  Either the car has to expend energy to roll up onto an elevated plate to push it down, or else if the plates begin flush, then it has to expend energy to pull itself out of the small depression where it has pushed down the plate.

Yes, the are small, almost unmeasurable amounts of energy for the car, but that does not change the fact that this system produces energy by stealing or leeching it from cars.  It reminds me of the scheme in the movie “Office Space” when they were going to steal money by rounding all transactions down to the nearest cent and taking the fractional penny for themselves.  In millions of transactions, you steal a lot but no one transaction really notices.

I have seen this idea so many times now portrayed totally uncritically that I am almost beginning to doubt my sanity.  Either a) the media and particular green advocates have no real understanding of science or b) I am missing something.  In the latter case, commenters are free to correct me.

By the way, if I am right, then this technology is a net loss on the things environmentalists seem to care about.  For example, car engines are small and much less efficient at converting combustion to usable energy than a large power station.  This fact, plus the energy losses in the system, guarantee that installation of this technology increases rather than decreases CO2 production.

Postscript: One of the commenters on my last post on this topic included a link to this glowing article about a “green family” that got rid of their refrigerator:

About a year ago, though, she decided to “go big” in her effort to be more environmentally responsible, she said. After mulling the idea over for several weeks, she and her husband, Scott Young, did something many would find unthinkable: they unplugged their refrigerator. For good.

How did they do it?  Here was one of their approaches:

Ms. Muston now uses a small freezer in the basement in tandem with a cooler upstairs; the cooler is kept cold by two-liter soda bottles full of frozen water, which are rotated to the freezer when they melt. (The fridge, meanwhile, sits empty in the kitchen.)

LOL.  We are going to save energy from not having a refrigerator by increasing the load on our freezer.  Good plan.  Here is how another woman achieved the same end:

Ms. Barnes decided to use a cooler, which she refilled daily during the summer with ice that she brought home from an ice machine at her office.

Now that’s going green!  Don’t using electricity at home to cool your groceries, steal it from work!

Update: The one place one might get net energy recovery is in a location where cars have to be breaking anyway, say at a stop sign or on a downhill ramp of a garage.  The plates would be extracting speed/energy from the car, but the car is already shedding this energy via heat from its brakes.  Of course, this is no longer true as we get more hybrids with dynamic breaking, since the cars themselves are recovering some of the braking energy.  Also, I have never seen mention in any glowing article about this technology that placement is critical to having the technology make any sense, so my guess is that they are not being very careful.

I already in a previous post deconstructed Kevin Drum and Joe Romm’s critique of the carbon tax.  One reason they don’t like the carbon tax is:

Well, for one, it doesn’t have mandatory targets and timetables.  Thus it doesn’t guarantee specific emissions results and thus doesn’t guarantee specific climate benefits.  Perhaps more important, it doesn’t allow us to join the other nations of the world in setting science-based targets and timetables.  Also, a tax lacks all of the key complementary measures — many of which are in Waxman-Markey — that are essential to any rational climate policy, but which inherently complicate any comprehensive energy and climate bill.

What they are basically arguing is that a carbon tax works by hundreds of millions of individuals making decisions in reaction to higher prices, and chosing their own way to reduce carbon production.  They don’t trust this kind of bottom up chaos, despite the fact this is how our entire economy and society works, except for a few corners where beltway guys live and breath in their own reality.  They want a few “scientific” guys at the top picking winners and subsidizing technologies and particular approaches.

I described why I disagreed with this  (or you could spend some time with Hayek to really understand why it is wrong) but I found it staggering that the very next post from Kevin Drum in my feed reader was this one:

Via the LA Times, this is the best news I’ve heard all day:

The Obama administration on Tuesday proposed renewable fuel standards that could reduce the $3 billion a year in federal tax breaks given to producers of corn-based ethanol. The move sets the stage for a major battle between Midwest grain producers and environmentalists who say the gasoline additive actually worsens global warming.

….While biofuels as a whole — including grasses and even algae — are considered promising alternatives to petroleum, some researchers have begun challenging the use of corn for this purpose.

In particular, they point to the “indirect land-use” effects of pulling corn out of the world food supply, which could force farmers in developing nations to clear rain forests — and release massive amounts of carbon dioxide in the process — in order to plant corn.

Please dump the corn ethanol subsidies.  Please, please, please.  Dollar for dollar, it might well be the stupidest use of taxpayer cash in the entire federal budget.

Since ethanol is the largest example of Congress’s past attempts to set “rational climate policy,” what in the hell gives Drum confidence things are going to be any different in the future?  It is yet another example of technocratic planners arguing that the failure is not top-down planning, just the particular individuals doing the planning.  If only my guys did the planning, things would be different.  Right.

Besides, it was a Democratic Congress that passed the last round of ethanol subsidy increases and a Democratic Congress that is upping them again.  So it is Drum’s guys doing the planning, and they are making a hash out of it, as all planners do.

For the record, I don’t want my guys in DC doing the planning.  I want 300 million people making their own damn choices.  When did this ever stop being a liberal value?

Megan McArdle points out the real problem that carbon taxes and other CO2-abatement approaches have — they only really work if it they are painful.  I mean, the whole point is not supposed to be to raise government revenue or just arbitrarily raise prices.  The whole point is to change behaviors, and the most powerful tool for behavior change is price changes.

Global warming activists are talking about 80% CO2 reductions.  This is an enormous number, especially since the relative cut has to be even higher to account for future growth, as reductions are generally pegged to current (or as in Kyoto, past) CO2 emissions levels.

A 40-cent gas tax is not going to do it.  Or, looking at how much behaviors changed when gas prices recently went up to $4, a $2.00 gas tax is not going to do it.  The Europeans have $6+ gas taxes and that is not enough to reach the levels activists want for this country.   It is likely going to take $10+ gas to even start to get the reductions in use and the shifts to much more expensive carbon-less technologies that would be required to hit 80% type goals.

All this means that we are NEVER going to have a carbon tax that really reflects the necessary rates to hit the emissions targets Obama and the alarmists claim to be committed to.  That is why we will get backdoor taxes that try to hide the tax and shift the blame away from Congress.    But none of these schemes, including cap and trade, will have any meaningful impact unless they lead to consumer price increases that change behaviors of the end users**.  But these approaches are preferable to lawmakers, as they somewhat disguise the relationship between legislation and prices, and give them some ability to blame private companies for the price increase, even where these increases are the inevitable result of carbon caps.

Postscript: This is further complicated because the major technologies the government is attempting to subsidize as part of meeting these goals are virtually useless.  Two in the transportation sector – ethanol and electric vehicles – are of questionable merit.  Ethanol has about zero efficacy in reducing Co2, and may actually increase it (but it is essential if one wants to win the Iowa caucuses).  Electric vehicles have some potential, but their impact is dependent on how electricity is generated.  Based on the current mix, shifts to electric vehicles just shift emissions from one place to another without much net reduction.  If someone were to propose a massive nuclear and electric vehicle program, they might convince me they were on to something.

**PS#2: I suppose you could reach these goals without fuel price increases.   Two alternatives:

• Mandate certain transportation and other technology solutions, as well as certain limits (e.g. maximum house size, maximum number of TV’s, etc).  This still has cost, though, in terms of enormous losses in personal liberty as well as likely enforced higher costs of major purchases, like cars.  So this is still likely a price increase, it just shows up in a different place.  Also, this may well not work — there is very good evidence that without price changes in fuel, consumers react to higher MPG in their cars by driving more, thus sibstantially dilluting the carbon effect.
• Enforce carbon limits combined with price caps on fuel and electricity.  This would be effective, probably, but of course would result in massive shortages of gas and electricity.  The rationing challenge would be enormous.

The Thin Green Line passes on an editorial from today’s SF Chronicle:

California should continue to lead the way in the fight against climate change by requiring cleaner-burning fuels in this state.

The state Air Resources Board is scheduled to vote today on whether to force refiners and distributors to reduce the “carbon intensity” of the transportation fuels they sell, starting in 2011. The so-called Low Carbon Fuel Standard represents a critical step toward this state’s commitment to reduce overall emissions of heat-trapping gases by a third by 2020.
Passage of a California cleaner-fuels standard would intensify the pressure on Congress to make a national commitment to promote lower-carbon options to gasoline and diesel.

Holy moly, I never thought of this?  It’s brilliant!  Let’s just legislate that hydrocarbons should have less carbon!  And tell the refiners to figure it out.

In all seriousness, assuming this is not just insane (which may be a poor assumption in CA) I presume they have something in mind here.  Does anyone know what opportunity they see, because I sure don’t.  Here is why I am confused:

Basically transportation fuels are made up various hydrocarbon chains.  The shortest is methane, CH4, then C2H6, then C3H8, etc.  As the chains get longer, the molecule gets heavier  (for example, CH4 is a gas at room temperatures; C3H8 is propane, which is a gas but a liquid under pressure in our BBQ tanks; C8H18 is octane and liquid at normal car operating temperatures.)

Motor fuel is a careful blend of many different molecules, and is actually frighteningly complex (the above just discusses straight chain forms, there are also rings and other shaped hydrocarbon molecules).  There are literally hundreds of specs it has to meet, and several present difficult tradeoffs that must be carefully balanced.  Trying to make one spec can easily put one out of another spec.  So this is an optimization equation with a lot of constraints.

All things being equal, decreasing the carbon intensity of fuel basically means making it lighter, with shorter molecules.  Why?  Well, look at the molecular equations.  Basically a straight chain hydrocarbon is C(x)H(2x+2).  Shorter molecules get a higher ratio of their BTU’s from combustion of hydrogen vs. larger molecules get a higher ratio of their BTU’s from carbon.

So, it is correct that burning propane in a car vs. currently formulated gasoline will be less carbon intensive, with only the teeny tiny problem that most cars today cannot burn propane.  Modern engines are carefully built to run most efficiently (valve design, cylinder pressure and size, air mixtures, fuel injection)  on a certain range of gasoline, and that range is moderately narrow.  And, besides the pure physics of engine design, lightening up motor fuels will create a variety of secondary problems — for example, lighter fuels tend to have higher vapor pressures and volatility that can cause vapor lock in engines on warm days.  Another way to reduce carbon intensity is to go from ring molecules (e.g. benzine) to straight chains of the same size, but this creates other problems, for example in maintaining octane numbers.

And speaking of unintended consequences, my understanding is that environmentalists like diesel engines, because the best diesel technologies today are far more efficient than gasoline engines.  But diesel is a heavier, more “carbon intensive” fuel than gasoline.  So is the carbon dioxide emissions from a heavier fuel in an engine that is more efficient less or more than a typical gasoline engine?  Who knows, and the answer is probably “it depends” anyway.

Update: I think I have figured it out.  The California legislature is going to mandate changing the size of the 2p valance shell, allowing more hydrogen molecules per given carbon molecule.