Archive for the 'Energy & Power Generation' Category
Posted by Jay Manifold on 1st June 2014 (All posts by Jay Manifold)
Judging by what I see communicated by many of my longtime friends, there are a whole lot of confused people out there these days. Here is a helpful list for them:
- Only a small minority of projects, even in relatively successful organizations in highly competitive industries, deliver their promised scope, on time, within budget. A large majority are drastically scaled back, incur huge cost overruns, deliver years later than intended, or are canceled outright. Anything nefarious either fails or is publicized by whistle-blowers or investigators. There are no secret, vast criminal enterprises pulling the wool over the eyes of the populace, and the best-known entities in society, both public and private, can be astonishingly inept.
- Large publicly-funded initiatives, other than those intimately connected to the physical survival of the societies in which they are undertaken, are quite likely to be mainly for show, irrespective of their supposedly spectacular significance. The current American example is the ACA, which has not resulted (and almost certainly will not result) in either greater insurance coverage or lower costs, is notoriously not a fully government-operated, “single-payer” system, and has no pathway to lead to one. None of this matters; indeed, many of its provisions, if they ever go into effect, will do so only after the current Administration has departed from the scene. All that matters is that its perpetrators get to claim to have passed “historic” legislation ostensibly providing “universal” health care. For an example from an earlier generation, see the Space Shuttle, which was supposed to fly 50-60 times per year at $5.5 million per launch. The actual flight rate hovered around a tenth of what was promised, and each launch cost nearly a hundred times the original projection. Hilariously, President Obama is now being criticized for ending this, even though it was collapsing from its own weight and consisted mainly of workfare jobs in Republican congressional districts.
- Notwithstanding phenomena like the above, the United States is probably the most successful large-population country in the world due to its sheer realism, in particular the relative openness and process orientation of English common law, which (to quote myself) “rather than construct elegant theories and then shoehorn (or bludgeon) societies into an unchanging mold,” exhibits “a willingness to work with the world and human nature as it is.”
- Even ignoring the fantastic technological advances, quality of life in the US has improved immensely in the past two decades. Social pathologies have plummeted. The rates of some categories of crime are down 90%, to all-time recorded lows. There are now fewer abortions per capita than at the time of Roe v Wade. Probably three-quarters of Americans live in neighborhoods where violent crime is effectively nonexistent. And the worst labor market in 80 years has done nothing to reverse these trends.
- Large-scale, institutionalized technologies range from the very safe (electric-power generation [including nuclear] and transmission) to the so-safe-there-is-no-instance-of-recorded-harm (agricultural genetic engineering). The problem is that in much of the real (that is, Third) world, they are insufficiently available to provide the thoughtless, comfortable existence that pervades most of the West. Living “off the grid” / following a soi–disant “natural” lifestyle is a plaything of rich people who can slink away into town whenever they get tired of hewing wood and drawing water. Especially water with enterotoxigenic E. coli in it.
- Pharmaceutical companies are not trying to kill you, nor to provoke health crises to sell new drugs. They may in some instances be trying to convince you that your life depends on continuing to purchase their products, whether it actually does or not. Then again, so is the “health food” store down the street, and in all likelihood, what it’s pushing is far more dangerous.
- All religions are not equal. The general heuristic is to judge them by their effects, or at least by their efforts. Those prescribing global expansion through conquest and coercive displacement, and those (especially if they don’t refer to themselves as religions) prescribing the extermination of followers of other religions, are particularly problematic.
- Any conspiracy theory that mentions the Mossad, Rothschilds, etc, is every bit as viciously anti-Semitic as Mein Kampf and should be treated as such. Anyone expressing admiration for Marxist notions and personages is no better. Conspiracy theories involving the CIA quaintly ignore the NSA (which is ~6x larger) and, in any case, descend from Stalinist and Maoist propaganda during the early Cold War and the Korean War. Facile anger about the NSA, however, ignores its well-publicized activities with the analog wireline telecommunications of 30-40 years ago, as amply documented in Bamford’s The Puzzle Palace. The phenomena of Wikileaks and Snowden’s massive data theft are an existence proof that such activities can neither be kept secret nor have much influence on real-world events; as someone who read through the supposedly devastating Wikileaks cables remarked, “[American diplomats] sound like Canadians with better access.”
- No amount of “smart diplomacy” or supposed avoidance of provocation will protect a country from attack. Only a convincing ability to make an attack more trouble than it could possibly be worth can do that, and even such an ability may be insufficient to deter non-state actors and small groups. In combination with steadily declining costs of dual-use technologies, a more-or-less freelance WMD attack somewhere in the world seems inevitable. When it occurs, the greatest hazards to the immediate survivors will be 1) official overreaction, as by ordering the evacuation of a far larger area than was actually affected and 2) popular derangement, which in the worst-case scenario may create a conspiracy theory popular enough to put an extremist political movement in power, even in a large, democratic nation.
Commenters are encouraged to provide additional examples and corollaries.
Posted in Anglosphere, Anti-Americanism, Civil Society, Current Events, Energy & Power Generation, Health Care, History, Human Behavior, International Affairs, Management, Military Affairs, National Security, Organizational Analysis, Predictions, Religion, Society, Terrorism, USA, War and Peace | 17 Comments »
Posted by David Foster on 29th April 2014 (All posts by David Foster)
Christopher Hayes, who writes at The Nation, sees a connection between human slavery–in particular, human slavery as practiced in the US prior to 1865–and the use of fossil fuels. Specifically, he argues that the reluctance of energy companies and their investors to lose the financial value of their fossil-fuel assets is directly analogous to the reluctance of pre-Civil-War southern slaveholders to lose the financial value of their human “property”…and he goes on the assert that environmentalists attacking the use of fossil fuels are in a moral and tactical position similar to that of the pre-war Abolitionists.
His article reminded me of a few things.
1) Sometime around 1900, a young PR man who had recently been hired by GE in Schenectady realized that he had a problem. He had gotten his job through glowing promises about all the great press coverage he would get for the company. But his boss had called him in and announced that he had “a terrific front-page story” about a 60,000 kilowatt turbine generator that the company had just sold to Commonwealth Edison…and the PR man accurately realized that this story would get maybe a paragraph on the financial pages. Looking for ideas, he went to see GE’s legendary research genius, Charles Steinmetz, explaining that headlines need drama, and “there’s nothing dramatic about a generator.”
Steinmetz picked up a pencil and did a little calculating…and quickly determined that this one rotating machine could do as much physical work as 5.4 million men. The slave population in the US on the eve of the Civil War had been 4.7 million. To the young PR man, Steinmetz said: ”I suggest you send out a story that says we are building a single machine that, through the miracle of electricity, will each day do more work than the combined slave population of the nation at the time of the Civil War.”
2) Frederick Douglass, himself a former slave, visited a shipyard in New Bedford shortly after obtaining his freedom. Here are his comments on observing a cargo being unloaded:
In a southern port, twenty or thirty hands would have been employed to do what five or six did here, with the aid of a single ox attached to the end of a fall. Main strength, unassisted by skill, is slavery’s method of labor. An old ox, worth eighty dollars, was doing, in New Bedford, what would have required fifteen thousand dollars worth of human bones and muscles to have performed in a southern port.
3) Speaking of GE…Owen Young was a farm boy who grew up to become Chairman of that company. To his biographer (Ida Tarbell), he provided a vivid word-picture of what life had been like for a farm wife back in the slightly earlier times. Here, he remembers Monday–wash day:
He drew from his memory a vivid picture of its miseries: the milk coming into the house from the barn; the skimming to be done; the pans and buckets to be washed; the churn waiting attention; the wash boiler on the stove while the wash tub and its back-breaking device, the washboard, stood by; the kitchen full of steam; hungry men at the door anxious to get at the day’s work and one pale, tired, and discouraged woman in the midst of this confusion.
Read the rest of this entry »
Posted in Energy & Power Generation, Environment, Leftism, Tech | 31 Comments »
Posted by Jonathan on 1st March 2014 (All posts by Jonathan)
-Will Israel Be the Next Energy Superpower? – A balanced, thoughtful look at recent developments from Arthur Herman. There is cause for optimism.
-Wildlife photographer pleads guilty to violating Endangered Species Act – The gist of the story is that some guy was photographing “endangered” birds from less than 500 feet away, which apparently is a violation of the Endangered Species Act, and was turned in to the feds by zealous environmentalists who saw him do this. Of course he copped a plea. If he had taken his chances in court he could have ended up in jail for years. As it is he may still do time and will end up with a felony conviction and probably a big fine to make an example of him. The birds he supposedly harassed aren’t even rare, merely locally rare in Florida, and he didn’t harm any of them. At most he should have been fined a few hundred bucks and warned to stay farther away from the wildlife. But nowadays everything is a federal crime with draconian penalties, and you can’t fart in a wetland without violating some rule. And the enforcement agencies have to justify their budgets. He should have left the birds alone, but his punishment is cruelly excessive. Some of the comments in response to the article are remarkably heartless. Not just the EPA but also the Fish and Wildlife Service and the Park Service deserve substantial defunding.
-Possibly my best blog post ever.
Posted in Big Government, Civil Liberties, Energy & Power Generation, Environment, Humor, Israel, Law, Law Enforcement | 10 Comments »
Posted by Carl from Chicago on 26th January 2014 (All posts by Carl from Chicago)
The NY Times recently had an article about the high levels of pollution in India’s capital city, Delhi.
Beijing’s air pollution has reached such toxic levels recently that the Chinese government is finally acknowledging the problem – and acting on it. But in New Delhi on Thursday, air pollution levels far exceeded those in Beijing, only without any government acknowledgement or action.
When I was in India in late 2012 I too was overwhelmed and amazed by the level of smog and pollution in the capital. When you blew your nose, particulate matter came out in your snot. This photo taken below is out the window of our tour bus and you could not see large office buildings along the roadside a few hundred feet away.
The tuk-tuk in the photo (it is a three wheeled semi-motorcycle used as a taxi) is green and yellow because those are the official colors of vehicles using CNG, designed to reduce pollution, which are also used for city buses. Unfortunately the streets are clogged with traditional gas powered vehicles and myriad ancient looking diesel trucks which more than make up the difference.
Read the rest of this entry »
Posted in China, Economics & Finance, Energy & Power Generation, Environment, India | 7 Comments »
Posted by David Foster on 17th January 2014 (All posts by David Foster)
One more batch…
Freedom, the Village, and the Internet. Will social media re-create the kind of social control once often found in the village community?
301 Years of Steam Power. What they told you in school about James Watt and the invention of the steam engine was very likely wrong. Related: 175 Years of Transatlantic Steam.
An Age of Decline? Is America in one, and is the situation irretrievable?
The Baroque Computers of the Apocalypse. The remarkable air defense system known as SAGE.
Book and Video Reviews:
Fly the Airplane. Two flight instructors write about their romance, their flight around the country in a 1938 Piper Cub, and the life lessons that can be derived from aviation.
Elective Affinities. Goethe’s novel about a love quadrangle.
Wish Me Luck. A very good TV series about Special Operations Executive agents working in occupied France during WWII.
Author Appreciation: Rose Wilder Lane. RWL was both an astute and thoughtful political philosopher and a pretty good novelist.
Posted in Arts & Letters, Aviation, Civil Society, Energy & Power Generation, History, Human Behavior, Military Affairs, Political Philosophy, Tech, Transportation, USA, War and Peace | 3 Comments »
Posted by David Foster on 7th January 2014 (All posts by David Foster)
A Winter’s Tale. An appropriate post given today’s temperatures.
Saint Alexander of Munich. Alexander Schmorell, a member of the anti-Nazi student resistance group known as the White Rose, has been canonized by the Russian Orthodox Church Abroad.
Deconstructing a Nazi Death Sentence. The transcript of the verdict passed by the “People’s Court” on members of the White Rose provides a window into the totalitarian mind.
Despicable. US Secretary of State John Kerry, speaking in Istanbul, compared the victims of the Boston Marathon bombing to the nine Turkish activists killed by the IDF as they tried to break Gaza’s naval blockade.
Appropriate Reading and Viewing for Obama’s Surveillance State.
Six Hundred Million Years in K-12.
Some 3-D Printing Links.
Aerodynamics, Art History, and the Assignment of Names.
Posted in Arts & Letters, Aviation, Christianity, Current Events, Education, Energy & Power Generation, Environment, Israel, Obama, Philosophy, Religion, Tech | 1 Comment »
Posted by David Foster on 14th November 2013 (All posts by David Foster)
…in the fields of chimney-sweeping and firewood sales.
Some of this is just because people enjoy having and using a fireplace, which is good…much of it, though, is apparently because people can’t afford to heat their houses due to increasing energy prices, which is not so good.
I wrote about similar phenomena in Germany, here.
Posted in Britain, Energy & Power Generation, Environment, Germany | 13 Comments »
Posted by David Foster on 17th October 2013 (All posts by David Foster)
Here’s a new study from GE: The Age of Gas & the Power of Networks. I haven’t read it yet, but looks like it contains some useful data and some interesting thinking.
Posted in Business, Energy & Power Generation, USA | 10 Comments »
Posted by Carl from Chicago on 30th September 2013 (All posts by Carl from Chicago)
In the NY Times they had an article on the possible partition of Middle Eastern countries in the wake of the Syrian uprising. It long has been taught that the borders of the Middle East are a “mistake” made by the Western powers when they carved the region up amongst themselves. The unspoken message is that all the “troubles” in the area would have been avoided had the Western powers split the countries up according to tribal, religious or other lines that could have resulted in more cohesive states. Much of this may be true – many of the borders appear arbitrary – and yet lands and territories changed hands many times across the historical record.
An area of interest to me is Eastern Saudi Arabia, which the NY Times listed (as conjecture) as possibly a separate country. On many dimensions that is logical; the population of that province has a large Shiite composition and this makes it distinct from the rest of Saudi Arabia (which is supposedly 95% Sunni, although figures are not necessarily to be trusted). Historically these Shiites faced heavy discrimination, (data is sketchy and incomplete) as summarized in this wikipedia article:
They have usually been denounced as heretics, traitors, and non-Muslims. Shias were accused of sabotage, most notably for bombing oil pipelines in 1988. A number of Shias were even executed. In response to Iran’s militancy, the Saudi government collectively punished the Shia community in Saudi Arabia by placing restrictions on their freedoms and marginalizing them economically.Wahabi ulama were given the green light to sanction violence against the Shia. What followed were fatwas passed by the country’s leading cleric, Abdul-Aziz ibn Baz which denounced the Shias as apostates. Another by Adul-Rahman al-Jibrin, a member of the Higher Council of Ulama even sanctioned the killing of Shias. This call was reiterated in Wahabi religious literature as late as 2002.
While these sorts of oppressive behaviors on the parts of the majority are generally tied to rebellion and are logical for the NY Times to think of as possible separate states, this neglects the key fact that the world’s largest oil field, the Ghawar Field, is located in that province. The idea that the Sunnis in Saudi Arabia would give up their oil, which accounts for 80% of revenues, is incredibly naive. The Saudis would never give up their oil, for it is the sole engine of their economy and standard of living. It isn’t known what they’d do if there was a serious rebellion in the area, but I would have to assume that they would take whatever steps were necessary to curtail it and keep the oil flowing. It should be relatively easy for the Saudi government to accomplish this due to their wealth and strength in numbers.
One way to do this would be just to hire mercenaries, which is a tool that the (minority) government in Bahrain is using to hold onto power. Bahrain’s situation is trickier since the Sunni government is a minority in this oil-rich country, but the use of force and violence has been enough to keep the rebellion at bay. One tool for the Bahrain government has been to hire Sunni mercenaries:
For decades, the Bahraini authorities have been recruiting Sunni foreign nationals in the security forces from different countries, including Egypt, Jordan, Syria, Iraq (Ba’athists), Yemen and Pakistan (Baluch) in order to confront any popular movement that usually comes from the Shia majority.
The idea that governments will give up valuable resources in the name of minority rights is a laughable Western idea. The NY Times map is a non-starter. The wealthy and powerful will not give up the (sole) source of their wealth without a tremendous fight from a determined and powerful enemy.
Cross posted at LITGM
Posted in Energy & Power Generation, History, Middle East | 10 Comments »
Posted by David Foster on 15th September 2013 (All posts by David Foster)
In 1712, Thomas Newcomen erected a steam engine of his own design near Dudley, in the West Midlands of England, thereby kicking off the age of steam. (Yes, this would have made a better post last year, to mark a round 300-year anniversary, but better late than never..)
We were told in the 5th grade that the steam engine had been invented by James Watt after noticing the way that the steam pressure in a teapot could cause the lid to lift a little. A nice story, but (a) James Watt did not invent the steam engine, and (b) early steam engines did not work the way that the teapot story would suggest.
In ancient Greece there were some experiments with the use of steam power to create mechanical motion; thereafter nothing significant happened in this field until the late 1600s, when Thomas Savery invented a device for raising water by steam: it was intended to address the growing problem of removing water from mines. Savery’s invention was conceptually elegant, with no moving parts other than the valves: unfortunately, it could not handle a water lift of more than about 30 feet, which was far insufficient for the very deep mines which were then becoming increasingly common.
Newcomen’s engine filled a cylinder with low-pressure steam, which was then abruptly cooled by the injection of a water jet. This created a partial vacuum, which pulled the piston down with great force–these were called “atmospheric” engines, because the direct motive force came from air pressure, with the role of the steam being simply to create the vacuum when condensed. After the piston reached the bottom of the cylinder, it would be pulled upwards by a counterweight, and the cycle would repeat. (See animation here.) Conceptually simple, but modern reconstructors have found it quite difficult to get all the details right and build an engine that will actually work.
These engines were extremely inefficient, real coal hogs, requiring about 25 pounds of coal per horsepower per hour. They were employed primarily for water removal at coal mines, where coal was by definition readily available and was relatively cheap. But as the cotton milling industry grew, and good water-power sites to power the machinery became increasingly scarce, Newcomen engines were also employed for that service. For example, in 1783 a cotton mill–complete with a 30-foot waterwheel–was constructed at Shudhill, near Manchester..which seemed odd given that there was no large stream or river there to drive it. The mill entrepreneurs built two storage ponds at different levels, with the waterwheel in between them, and installed a Newcomen engine to recycle the water continuously. The engine was very large–with a cylinder 64 inches in diameter and a stroke of more than 7 feet–and consumed five tons of coal per day.
Despite their tremendous coal consumption and their high first cost, a considerable number of these engines were installed, enough that someone in 1789 referred to the Newcomen and Savery engines in the Manchester area as common old smoaking engines. The alternative to the Newcomen engine described above would have been the use of actual horses–probably at least 100 of them, if my guesstimate of 40 horsepower for this engine is correct. These early engines resembled the mainframe computers of the early 1950s, in that they were bulky, expensive, resource-intensive, and limited in their fields of practical applicability…but, within those fields, absolutely invaluable.
Read the rest of this entry »
Posted in Britain, Energy & Power Generation, History, Tech, Uncategorized | 12 Comments »
Posted by David Foster on 24th July 2013 (All posts by David Foster)
A new coal-fired power plant is planned for Georgia.
To be built near Sandersville, GA. 850 megawatts, supercritical boiler, extensive equipment for reduction of SO2 , NOx, particulates. mercury and sulfuric emissions.
It takes a certain amount of courage to embark a project such as this one, given that we have a president who has declared war on coal:
“If somebody wants to build a coal-powered plant, they can, it’s just that it will bankrupt them.”
–Barack Obama, January 2008
Posted in Business, Energy & Power Generation, Environment, USA | 21 Comments »
Posted by David Foster on 26th March 2013 (All posts by David Foster)
At the age of 21, Danielle Fong cofounded LightSail Energy, a venture focused on energy storage via compressed air, with heat generated by the compression recovered for later use. Investors include Peter Thiel, Khosla Ventures, and Bill Gates. (GE and RWE of Germany are also developing a compressed-air-based energy storage technology that they call ADELE…it will be interesting to see how these two alternative approaches play out.)
A New York University student has developed a new substance for wound closure, which may be able to replace bandages in many cases. Any comments, Michael K?
Posted in Energy & Power Generation, Entrepreneurship, Medicine, Tech | 6 Comments »
Posted by Carl from Chicago on 23rd March 2013 (All posts by Carl from Chicago)
The utility industry in the United States has made a giant return to traditional rate-making in many parts of the country. For someone who is unfamiliar with the concept, here is a brief summary:
1. Utilities receive a “monopoly” on services in a particular region (a city or county) which means that they are the only company allowed to provide service (thus you don’t have 2 sets of power lines going to your house)
2. The utility submits their expenses and capital requirements to a state regulator, who approves the spending plan
3. For the portion of the utility funding that is provided by equity (shareholders), the company is allowed to earn a “rate of return” that gets included on rate-payers bills
When I was fully engaged in the industry in the 1990′s, there was massive talk of “de-regulation” and traditional “cost of service” regulation as described above was seen as an archaic relic to be disposed of as quickly as possible with newer, more innovative models. If you would have told someone in the mid 1990′s that here, 20 years later, utilities would be HAPPY to still be part of a guaranteed return on their regulated investments, you’d have been greeted with a blank look of incredulousness.
The most famous critique of this model was a CEO who was said to have stated that “this is the only industry where I can make more money by remodeling my office” which of course was technically a true concept. This sort of talk was endemic in the 1990′s.
To be fair, the entire energy business used to be run this way (except for the municipal entities which were completely owned by some part of the government), and now much of the generation and parts of customer services are run using other methods involving some sort of at least partial competition. The generation of power, for the most part, has been financed using alternate methods (auctions, price caps, etc…), but it is notable that the only utilities going forward with nuclear plants are those with the old-school rate of return regulation (Southern Company in Georgia and SCANA in South Carolina).
For those entities that are still primarily regulated (non-competitive) or whom have substantial portions of their business subject to this regulation, one item coming under fire is the “rate of return” that they receive on their equity capital. When I was in the industry this number was in the 12% – 14% range; per this WSJ article “Utilities’ Rates of Return Draw Flak”:
In 92 major rate decisions last year, regulators… granted gas and electric utilities returns of 10%, compared with 10.21% the prior year and 11% a decade ago.
These rates of returns, however, conflict with the type of risk profile and links to debt interest rates that traditionally anchor utility rates of return. Today interest rates are famously low, so why is it reasonable that utilities should earn 10% or more on returns when that sort of return is far out of reach in a 401(k) for investors, for example?
Further pressure on this model seems inevitable, although rate of return is rarely so simple because if a utility spends more than they plan, in most cases this essentially comes out of the return bucket, although their are exceptions like “pass through” increases for fuel which can be made depending on the jurisdiction. This sort of item should be watched by those who have utility investments, since a serious re-appraisal of this rate would likely push it down further.
As a long-time watcher of the industry, however, the continuing existence of this sort of rate of return regulation is astonishing, given how much it was ridiculed for so many years. It is sad that we haven’t come up with anything better in the interim. The issue with monopolies is not so much the rise in costs, but the lack of innovation, I once heard. This is the case with the rate of return model that continues to exist, today.
Cross posted at LITGM
Posted in Energy & Power Generation | 10 Comments »
Posted by Carl from Chicago on 10th March 2013 (All posts by Carl from Chicago)
Recently I was reading how a professor at the University of Illinois at Chicago was arrested for bringing an unloaded handgun to work, and that it made the news media. I reflected briefly on the fact that you can bring a loaded, concealed gun with you in most places in many states in the US and it wouldn’t be news, it would in fact be normal activity, for instance in the adjacent state of Indiana.
Meanwhile, in California, it is common for people to smoke marijuana openly as is discussed here. Needless to say, this behavior would get you immediately arrested in many states particularly in the south and midwest.
Taxation is also highly variable on a state and city basis. New York and California have some of the highest taxes, particularly on income beyond a particular level (progressive taxes). On the other hand, states like Florida and Texas have a much lower level of taxation and a much freer business climate in terms of regulation.
Without getting into the hottest of hot-button issues, clearly there are differences in the types of marriages and reproduction rights / right to life on a state by state basis. These differences are narrowing in some areas and getting wider in others.
Some states have “right to work” laws which massively limit union power, and have flourishing and expanding manufacturing economies as a result. Visit Alabama, South Carolina, and Texas to see where all the former manufacturing might in the midwest and Northeast and West Coast migrated to (if it didn’t go to China or overseas). The enacting of “right to work” laws obviously sends an important signal to business leaders whether or not a state is a friendly place to do business for incremental investment (along with taxation).
The “fracking” revolution has unleashed vast wealth in some states, and in other states it has been banned or severely curtailed. Meanwhile, California is going in on its own with carbon regulations and highly aggressive “green” energy targets, while other states are heavily reliant on traditional (and cost effective) technologies.
The differences on a state-by-state level on these different dimensions seem large and growing. They are much more subtle (though often correlated) with the Red / Blue analysis. An attempt to classify these vectors could be done as follows:
Energy Freedom – the ability to extract and use cost effective technologies (like natural gas, fracking, and coal) and a state’s willingness to invest more for reliability or the requirement to use expensive (green) technologies and curtail energy use even at the expense of industry competitiveness and reliability. California is likely on one end and Texas is on the other side, although many others have large freedom including Pennsylvania.
Safety Freedom – the right to defend yourself at home, in transit, at work and during study or whether that is assumed by the state. Sadly the most restrictive is Illinois and there are many candidates on the other side throughout the south and midwest (Indiana).
Personal Substance Freedom – the right to smoke, the right to drink, and the right to use various drugs or stimulants. Some odd states (like Colorado) are leading the way on this, it isn’t always the traditional Red / Blue divide.
Freedom to Work & Hire – the right to work and not be forced to join a union, and this is also tied with local laws and practices that limit the ability to hire and fire and direct hiring or limit firing in various dimensions.
Freedom to Build / Live / Rent – Houston is famous for having very limited zoning while other states and municipalities have highly restricted zoning practices. The New York co-op concept also severely limits new entrants along with rent control. These laws can also include whether you can work or have a business in your home. While subtle, these practices can have a large impact on prices and how the region functions.
Freedom From Excessive Taxation – Some level of taxation is necessary for government to function but high tax levels have severe intended and unintended consequences of under investment and evasion. Taxation includes state, local, city, sales, estate, property, and “sin” taxes. These vary significantly by area but are highest in California and the East Coast and likely the lowest in the South.
Freedom of Marriage Choice – A larger portion of states are recognizing marriages beyond the traditional marriage, and this varies by state
Freedom of Reproductive Rights – There are a wide variety of approaches and trends on a state level and then there are practical impacts, as well. This is highly variable by state in practice
Freedom on Medical Rights – an emerging model will be how each state approaches new medical practices and funding methodologies, along with the practical availability of doctors that subscribe to the state’s controls and funding methods. This area will grow exponentially in the near future
I believe that these sorts of analyses on a state by state level are much more useful than the traditional Red / Blue view (although they are often correlated) and when you start to dig in to the differences on a state and municipal level they are staggering, particularly when you view the extremes.
It would be interesting and useful to begin to put together the various data sets to analyze states and municipalities along these continuums, and others that I’ve likely missed.
Cross posted at LITGM
Posted in America 3.0, Big Government, Business, Civil Liberties, Economics & Finance, Energy & Power Generation, Health Care, Law Enforcement, Real Estate, RKBA | 9 Comments »
Posted by Carl from Chicago on 9th February 2013 (All posts by Carl from Chicago)
France and Nuclear Power – Losing Its Edge
France has long pioneered a tradition of being reliant on nuclear power. France has 59 nuclear reactors and delivers a very high percentage of their total power needs through nuclear power, as well as being a major exporter of electricity to adjacent nations. France chose nuclear power after WW2 because they lacked local energy resources and had a strong engineering capability.
The company that runs the nuclear industry is called EDF. EDF is 84% owned by the French government, so you could basically say that the French government owns by far the most significant portion of their own electricity industry (and 15 nuclear reactors in the UK, to boot). Currently EDF pays a very high dividend, yielding 7.7%, due to the fact that their market capitalization has declined precipitously while the company has tried to keep the dividend constant.
For many years EDF provided France low cost electricity, which provided a competitive advantage against their industrial neighbors such as Germany. Today, however, Germany has a cost advantage over France in terms of power, since the price of coal has dropped and Germany uses a significant amount of coal to burn their own electricity. One of the main reasons that the price of coal has dropped is the rise of natural gas in the USA, which in turn allows the US to export their surplus coal overseas to Europe. This article from Bloomberg provides a good overview of the competitive situation.
“French energy used to be competitive,” said Emmanuel Rodriguez, head of energy for the French unit of ArcelorMittal, the world’s biggest steelmaker, which also has operations in Germany. “This model is crumbling. Germany is now better than us whereas a decade ago they were much more expensive.” French power prices for big industrial users are projected to average as much as 25 percent higher next year than in Germany, according to Uniden, a lobby whose members consume 70 percent of electricity used by industry in France.
In another sign of the upside-down world we live in, EDF’s dividend at 7.7% is far higher than what they are paying in yield on debt of 4.375%, even debt that looks suspiciously like equity here in the US (a perpetual dated bond is debt without a maturity date).
France is also struggling as they try to build new nuclear reactors. The next generation plant being built for EDF by Areva has had cost overruns and schedule delays:
EDF has previously said France’s first EPR would cost €3.3 billion and start commercial operations in 2012, after construction lasting 54 months. The estimated cost has now increased to €8.5 billion ($11 billion) and the completion of construction is delayed to 2016.
Energy Futures Holdings
Energy Future Holdings took a major Texas utility (TXU) private in a 2007 deal that leveraged up the company with $45 billion in debt in 2007. 2007 was a horrible year for most deals across almost all sectors including real estate as it was the “height” of the bubble before it all came crashing down. TXU, one of their entities, has bonds trading as low as 15 cents on the dollar (for bonds that have an interest rate of 10.25%, to boot) per this Bloomberg article.
The company has struggled to be profitable ever since the LBO, as the shale revolution created a glut of natural gas, pushing U.S. prices to the lowest since 1999 last year
While EFH is not a public company, they do have publicly traded debt and thus they have an active investor relations department. If you read through one of their documents you can see their expectations for natural gas prices and how they have been able to keep the company going for as long as it has due to a strategy of hedging against low priced natural gas, as well as through what seems to be very effective management of costs. However, the large debt load likely has to be restructured since a company that was built to profit from a marginal cost of power based on $14 / unit priced natural gas cannot service that debt load with the cost of natural gas between $2 – $4 / unit.
Cross posted at LITGM
Posted in Energy & Power Generation, France | 8 Comments »
Posted by David Foster on 25th January 2013 (All posts by David Foster)
“It is so cold in here,” said Gretchen. “The fire is almost out.”
“I will go to our woodpile and bring more wood,” said Hans.
“There is none left, Hans,” replied Gretchen sadly. “We have used all our wood that we saved for the winter.”
“I will go into the great forest,” responded Hans, “and bring more.”
“Hans!” said Gretchen with alarm. “The forest wardens will take you! I have heard that there are more of them, and they are fiercer than ever toward wood thieves!”
“Nonetheless, I must try, dear Gretchen,” replied Hans firmly, “for you and for the little ones.” He put on his thin overcoat, opened the door, and stepped outside into the icy, howling blast.
A folk tale from the Middle Ages?
Read the rest of this entry »
Posted in Big Government, Energy & Power Generation, Environment, Europe, Germany, Leftism | 20 Comments »
Posted by Carl from Chicago on 26th December 2012 (All posts by Carl from Chicago)
While I am a big supporter of nuclear power, the insane regulatory framework in the US and our broken financial incentive mechanisms for utilities has doomed the promised nuclear “renaissance”. The only places where nuclear plants in the US are even being attempted have “old school” regulation with “cost of service” opportunities that basically mean that the utility will recover whatever they put into service and earn a return on that investment. These include 1) South Carolina, where SCANA (a relatively small utility) is building two 1,100 MW reactors and 2) Georgia, where Southern Company (and a variety of municipal entities) are building two 1,154 MW reactors. The oddest entity, the Tennessee Valley Authority (TVA), is a Federal entity, which allows it to move forward with completion of a unit that is 1,180MW.
No utility in a state with deregulation (partial regulation) can contemplate a nuclear plant, because of the high costs which must be recovered from an open market. The price of electricity is very volatile, driven by demand, weather, and the price of alternative fuels. The low price of natural gas today, not foreseen when these plants were considered back in the late 2000′s, would make high enough energy prices to recapture these costs (and earn a profit) on an open market impossible. The price of natural gas could rise and other factors (such as the impending retirement of much of the US’ coal fleet due to EPA strangulation) could also make them economically viable; but these factors are not present today.
Beyond the enormous (and likely fatal) financial risk that these mega-projects have, (SCANA’s market capitalization is $6B, and the 2 reactors are “planned” to cost $9B), these projects have historically been plagued with immense delays and catastrophic failures such as abandonment. When these projects started, optimistic dates and costs were trotted out, ignoring both the sad history of mega-overruns and the fact that today’s regulatory and legal climate are even MORE unfavorable than those in the 1970′s when the earlier failures occurred. I knew that delays were inevitable, and unfortunately, enough time has passed that the companies are starting to admit their failures (to date).
This article describes how Southern Company has begun to waver from their cost and schedule estimates.
Southern Co. has had a simple message for the past few years: The effort to build the country’s first new nuclear power plant in a generation was on time and on budget. Now, that message is changing. The $14 billion project to build two reactors at Plant Vogtle is trending hundreds of millions of dollars over budget and trailing more than a year behind schedule, according to a report from a state-hired construction watchdog.
TVA recently has begun acknowledging their delays and cost overruns, too, per this article.
Unit 2 at the Watts Bar Nuclear Plant in Spring City, Tenn., is up to $2 billion over budget and three years behind, according to the Tennessee Valley Authority. TVA blames its own management oversight and planning. Instead of basing a plan and estimates on the twin reactor already running at Watts Bar, the utility used as a model the only other reactor work that had ever been deemed on time, close to budget and a success: Unit 1 at Browns Ferry. The trouble was that Browns Ferry and Watts Bar are completely different types of reactors with different work spaces and work needs.
Not only is the TVA admitting the cost and schedule delays, their official in charge of the plant just left the organization.
SCANA too has been acknowledging delays and cost overruns. Per the first article cited above:
In Jenkinsville, S.C., the Scana Corp.’s $9 billion expansion of its Virgil Summer nuclear power station began with work on two new reactors in late March. The Summer reactors already are reported to be at least $300 million over budget because components did not meet shifting safety standards.
Here is a SCANA presentation to EEI from their investor relations web site. Go to page 8, which shows the rising costs and tail of their planned nuclear investment. Frame this page and come back to it 3-4 years out and if it looks anything like this it will be a huge win for SCANA and the US nuclear power industry. Sadly enough, the odds are likelier that the Cubs will win the world series than that the “real” spend will look close to that graph. Note that SCANA is a 55% owner of this plant so it only represents their portion of the spend (other utilities and municipalities foot the rest).
Thus in conclusion:
1. The entities that are embarking on the nuclear construction adventure are either virtually immune to market forces (TVA) or are under “old school” regulation that lets them recover the cost in customer rates regardless of whether or not it makes economic sense
2. While these entities went into the projects with optimism despite the dismal track record of delays and outright abandonment common to nuclear construction, their exhortations and optimism are starting to fade early on in the projects
3. The US has far more to do in the form of favorable “one permit” regulation and removal of potential lawsuits and other barriers, as well as additional financial incentives, before the US nuclear industry really has a chance
Cross posted at LITGM
Posted in Energy & Power Generation | 9 Comments »
Posted by Carl from Chicago on 22nd December 2012 (All posts by Carl from Chicago)
In the US, our energy policies have been transformed by fracking, which has led to an abundance of natural gas and re-invigorated our domestic oil industry, to boot. When I first worked in the energy business they still talked about how the natural gas industry was forced to curtail new hookups of houses in the 1970′s because we believed that we were about to run out of the fuel, and the costs in the 1990′s were about $2 / unit. After a spike up to $14 / unit (which contributed to the bankruptcy of California), economic forces and not government intervention led to the innovation and today’s low prices in the $2 – $4 / unit range.
When natural gas first fell into this low price range, industry participants were basically “waiting it out” to see if prices would rise. The price of natural gas plays a huge part of the overall energy pricing market, since natural gas “peaking” plants are turned on during spikes and they set the marginal cost of power during those peak events. During times of peak usage coal, nuclear and hydro plants reap a windfall since their costs are (comparatively) fixed if the price spikes are set by high natural gas prices. These price spikes have been significantly lessened and now natural gas is used not only for peak plants but for base-unit capacity. If the price of natural gas ever rose near those peaks in the $10+ / unit range all those investments would be un-economical, but price spikes in those ranges don’t seem to be coming in the near future.
Last Hurrah For Wind Subsidies
The wind industry is basically a creation of government incentives worldwide. The Spanish market collapsed completely instantly when incentives evaporated. The US turbine market is about to collapse as well as soon as a governmental program providing subsidies in the form of tax credits to all wind installations in service by year end, as described in this Bloomberg article.
Wind-turbine installations are exceeding natural gas plants in the U.S. for the first time this year as developers rush to complete projects before the expiration of a tax credit for renewable energy. New wind capacity reached 6,519 megawatts by Nov. 30, beating the 6,335 megawatts of natural gas additions and more than double those of coal.
It isn’t known whether or not this tax credit will be renewed; if it isn’t the US turbine industry will likely grind to a halt since wind isn’t competitive in the US without large subsidies. Unlike natural gas, which can be found in areas connected to the gas pipeline grid, most of the best wind locations are not connected to the electricity transmission grid and the costs and barriers to installing these transmission lines are insurmountable under the current regulatory regime, dooming wind to a niche tax subsidized role. Our existing wind infrastructure will sit in place, earning the tax credit, with little or nothing added going forward without new incentives.
Read the rest of this entry »
Posted in Energy & Power Generation | 7 Comments »
Posted by David Foster on 17th December 2012 (All posts by David Foster)
Peter Thiel put $300K into this company, which seeks to capture waste heat from power generation facilities (and other forms of low-grade heat) by artificially creating very tall vortices. The system works something like a very tall chimney, but without the expense of constructing such a chimney. Simple explanation here.
(When I wonder “will this work?”, I don’t mean at a technical level..sounds like experimentation has demonstrated that it will, at least at a small scale…I mean “work” in a commercial sense)
They cite 35% as a typical efficiency for a thermal power plant (which sounds about right) and estimate that their system could recover 20% of the now-wasted heat, resulting in an overall plant output increase of about 40% with no increase in fuel consumption. However, I’d make the point that new combined-cycle power plants are considerably more efficient–GE is claiming 60% for some of their “H” series machines…which is obviously a good thing but leaves less wasted heat to be recovered. Still, there is a lot of rejected heat even from combined-cycle turbines…and not all power plants are going to be combined-cycle..for one thing, I don’t think CC plants can use coal unless it is first gasified.
Lots of issues between development and large-scale deployment, of course..costs of large-scale systems are hard to estimate until you actually build one and operate it for a while, and I also wonder about public acceptance (and aviation safety/traffic implications, were these plants to be built out densely.) It’s a very creative concept, and I’m glad to see Thiel putting some money behind it…lots more will be needed to reach a commercial level.
I’ll be watching this with interest.
Posted in Business, Energy & Power Generation, Tech | 15 Comments »
Posted by Carl from Chicago on 27th November 2012 (All posts by Carl from Chicago)
Since I spent a lot of time in the power generation business I am always interested in electricity systems. India is probably the first country I’ve ever been to where you can regularly witness electricity theft from the system on a large scale.
The electrical systems seemed to be reliable during the time I was there, although it was likely “low season” since it wasn’t very hot out (November) which I assume sets the peak demand for India.
The power routinely turned on and off in one of the hotels I stayed at. The lights would go out completely for a moment until the “hum” of the backup generator kicked in. Likely the inclusion of backup power is an absolute requirement for the type of higher level tourist hotels that I stayed in.
High quality hotels in India had the European model where you had to put your key card in the slot when you entered the room in order to turn the power on or keep it running for more than a few minutes. This model power down the room when you are out.
The newer office parks where the IT service industry was located had what appeared to be modern electrical systems with many of the lines buried underground. The transmission lines along the highway often appeared new, even if they ran right by huts and houses that obviously had no power since they weren’t connected to the local distribution system.
India also appeared to be air conditioned in the major tourist areas for hotels and shopping as well as the newer office parks. The buildings were designed as if to rely on central air conditioning and the backup power was there to provide electricity when the power goes out (although I don’t think they could run A/C indefinitely).
Cross posted at LITGM
Posted in Energy & Power Generation, India | 10 Comments »
Posted by David Foster on 5th November 2012 (All posts by David Foster)
One of the most depressing things about the last several years is the degree to which many Americans have come to believe that our best years are behind us. Surveys show that a high percentage of people believe their children will live less-well than themselves. The belief is pervasive that our current economic problems are not a mere cyclic downturn, but rather that we have entered an era of sustained decline.
I assert that American decline is by no means inevitable…and if we do wind up in long-term decline, it will be driven not by any sort of automatic economic process, but rather by our own choices–especially our own political choices.
We talk a lot, here and elsewhere, about our problems as a society–and properly so–but let’s change focus for a few minutes and think about our assets.
America has vast energy resources. For oil and gas, fracking really is a game changer. We have vast reserves of coal, and plenty of opportunities to employ nuclear energy safely and responsibly. (Solar and wind can also play a role, but these will be niche sources only for a long time.) And low-cost and widely-available energy greatly improves the economics of many manufacturing businesses, as I’ve pointed out in other posts. European manufacturers, for example, wish their countries had direct access to large supplies of low-cost natural gas.
America has wide swaths of fine agricultural land, and many excellent farmers. These are not trivial factors in a world which is becoming increasingly wealthy, filled with billions of people who want and need to improve their diets. And agriculture’s impact is not limited to those who are actually on farms–agriculture also drives activity in transportation, in equipment manufacturing, in fertilizer production.
And speaking of transportation: while there have been many concerns about “America’s decaying infrastructure,” America also has infrastructure elements which are very strong. America’s freight railroads are probably the best in the world, and represent a powerful economic asset. The country is cris-crossed by thousands of miles of pipelines which carry oil, natural gas, jet fuel, ammonia, CO2, and many other commodities, efficiently, silently, and safely. Our airports, air carriers, and air traffic control system combine to enable the transportation of vast numbers of passengers and considerable quantities of freight, reliably and safely. The Internet has emerged, in only 20 years, from being a limited experimental network to being a large-scale enabler of commerce and of new businesses.
America has millions of people with entrepreneurial spirit–people who want to do new things, to put their personal stamp on the world, to make a contribution in ways that are not necessarily predefined by tradition or edicted by higher authority. Some will start the next Intel or Apple; for some, their scope will be limited to a well-loved local restaurant or to a home-based craft business. All are important.
Our venture capital industry is an important enabler of high-growth new businesses, and our private equity industry plays a key role as well. “Crony capitalism,” while it has grown unhealthily, has not reached the levels it has in many other countries, and badly-managed or ill-thought-out enterprises can still go broke and be restructured (or disappear) without being bailed out by political pals, leaving the field clear for the new and better–and for talented people who are not among society’s “insiders.”
Credentialism in the U.S. has indeed reached unhealthy levels, but it is still quite possible for people to succeed–and succeed in a big way–without the imprimatur of an “elite” college or an accent indicating an “appropriate” class position.
Read the rest of this entry »
Posted in Academia, Big Government, Business, Civil Society, Economics & Finance, Education, Elections, Energy & Power Generation, Entrepreneurship, Political Philosophy, USA | 18 Comments »
Posted by James R. Rummel on 3rd November 2012 (All posts by James R. Rummel)
Pity the UK government. Like most, they have had a great deal of trouble closing the gap between money spent and tax revenue. And, like most, they have scrambled to raise taxes in order to increase the amount of money coming in.
One of the items hardest hit with rising tax rates in Great Britain is beer.
The powers-that-be have enacted a “beer duty escalator“, which automatically raises the tax on beer by 2% over inflation every single year. According to the article behind the last link, the average beer drinker in the UK now pays £177 every year just in taxes alone. The average pub owner must shell out £66,000 per year in beer taxes, above and beyond the overhead costs that come from running any small business. And, thanks to the automatic increases, every year is going to be worse than the last.
As any economist who hasn’t drunk deep of the Liberal kool-aide will tell you in a heartbeat, adding frivolous costs to any commodity will result in limiting demand. Beer sales in the UK have plummeted, while close to a score of pubs across the island nation have been going out of business every week.
Just think of all those people who were dependent on the family business, now out of work and on the dole. I don’t have the numbers to tell for sure, but it wouldn’t surprise me in the least to find out that any jump in revenues realized by the beer duty have been more than offset by the increased number of people who now rely on public assistance.
Read the rest of this entry »
Posted in Anglosphere, Britain, Economics & Finance, Energy & Power Generation, Taxes | 9 Comments »
Posted by Michael Kennedy on 14th October 2012 (All posts by Michael Kennedy)
There is still considerable talk about global warming, or as it is now termed, “climate change.” California is about to destroy a large part of what is left of its economy by initiating a new “Cap and Trade” program that will spike energy costs and drive more employers from the state. New reports are casting more doubt on the reality of “climate change” and now there is more information that warming ended in 1997. The past two years have shown a definite cooling trend.
The world stopped getting warmer almost 16 years ago, according to new data released last week.
The figures, which have triggered debate among climate scientists, reveal that from the beginning of 1997 until August 2012, there was no discernible rise in aggregate global temperatures.
This means that the ‘plateau’ or ‘pause’ in global warming has now lasted for about the same time as the previous period when temperatures rose, 1980 to 1996. Before that, temperatures had been stable or declining for about 40 years.
There is even new debate among climate scientists.
Some climate scientists, such as Professor Phil Jones, director of the Climatic Research Unit at the University of East Anglia, last week dismissed the significance of the plateau, saying that 15 or 16 years is too short a period from which to draw conclusions.
Others disagreed. Professor Judith Curry, who is the head of the climate science department at America’s prestigious Georgia Tech university, told The Mail on Sunday that it was clear that the computer models used to predict future warming were ‘deeply flawed’.
Even Prof Jones admitted that he and his colleagues did not understand the impact of ‘natural variability’ – factors such as long-term ocean temperature cycles and changes in the output of the sun. However, he said he was still convinced that the current decade would end up significantly warmer than the previous two.
California, of course, is not going to wait to see if the trend continues with cooling.
Oct 2 (Reuters Point Carbon) – California Governor Jerry Brown has signed two bills related to the use of revenue raised through the sale of carbon allowances, although details of how the money will be spent won’t be determined until next year.
The bills are the first to address the estimated $660 million and $3 billion in revenue that will be generated during the first year of California’s carbon cap-and-trade scheme, which begins in January.
The first bill creates a new account for the revenue to be deposited into, and directs the Department of Finance and the California Air Resources Board (ARB) to develop an investment plan for the funds.
That plan, expected to be released in the spring of 2013, will be submitted for approval to the legislature as part of the governor’s budget and will be reviewed and updated on an annual basis.
It doesn’t matter that the state is going broke. Left wing pieties still rule California.
Posted in Big Government, Britain, Business, Diversions, Energy & Power Generation, Environment, Leftism, Political Philosophy | 7 Comments »
Posted by Dan from Madison on 21st September 2012 (All posts by Dan from Madison)
Around a decade or so ago a lot of things began to change in the world of residential HVAC (Heating, Ventilation and Air Conditioning). What I am going to discuss here is HVAC centric, but can apply across any industry where the government can (and does) make rules that on the surface mean “well” but in reality, just end up costing the consumer bucks$$$.
About five years or so, the manufacture of central air conditioners was mandated to be no less than thirteen SEER (Seasonal Energy Efficiency Rating). The previous minimum was ten SEER.
On the surface, this doesn’t appear to cause too many problems, besides cost the consumers more money on their initial installation, since the 13 SEER product cost more money (more raw materials to get that energy savings). Sadly, the engineering and physics (which can’t be mandated) told us different.
From an article by Michael Prokup (sorry can’t find the link):
Older evaporator coils operate at lower temperatures and pressures than modern evaporator coils.
Without getting into too heavy of an engineering discussion, this means that basically, the new 13 SEER units won’t work well with the old evaporator coils that sit on top of the furnace. The air conditioning cycle uses condensation and evaporation of a chemical (at this time, it was R-22) to move the heat from inside the house to the outside. Moving from 10 SEER to 13 SEER changed the whole game. No longer could a contractor come to your house and simply replace the outside condensing unit – now the evaporator had to be replaced, adding a lot of cost to the job – especially if the inside unit was sheetrocked into a closet, or was in some other type of area that was difficult to access. Apartment building owners were also affected by this.
Read the rest of this entry »
Posted in Big Government, Energy & Power Generation, Environment | 30 Comments »
Posted by Carl from Chicago on 16th September 2012 (All posts by Carl from Chicago)
This post is an intersection of my research on the power industry around the world and a lack of understanding of the power of capitalism that I see reflected around me in Chicago and in many news outlets.
India’s Power Industry
The NY Times recently had an article titled “Scandal Posts a Question: Will India Ever Be Able to Tackle Corruption?“. The article described a scandal about India’s coal mining industry, a critical element of their power generation since India has heavy reliance on locally sourced coal.
Coalgate, as the scandal is now known here, is centered on the opaque government allotment process that enabled well-connected businessmen and politicians to obtain rights to undeveloped coal fields.
Why is this important? Per the article, 57% of India’s power is generated by coal. The industry is hobbled for lack of coal. 300 million Indians are without electricity, and a recent blackout effected huge areas of the country.
The Indian government used a bureaucratic process to assign out rights to these coal fields, instead of an overt capitalistic auction process (a fact that the NY Times article fails to mention), and many politicians and their cronies of course received the rights, likely due to overt or covert bribery and connections.
(the) $34 billion coal mining scandal that has exposed the ugly underside of Indian politics and economic life: a brazen style of crony capitalism that has enabled politicians and their friends to reap huge profits by gaining control of vast swaths of the country’s natural resources, often for nothing.
Why does this matter? When property rights are doled out in this manner, the people who receive them aren’t the BEST POSITIONED to develop the assets. If a profit seeking company paid for an asset in a public auction, they would be paying cash from investors (or out of their own pocket) and would need to “monetize” the asset in order to achieve a proper return back to investors. You don’t go into the auction without a plan to develop the asset, since you would be bidding against actual competitors who were motivated to do so and they’d likely pay more than you would. Per the article on India, this is the type of behavior that you see, instead:
Investigators now say that some of the favored applicants, having acquired the coal fields free, quickly sold them for tens of millions of dollars to steel or power companies. Others simply kept them as an asset and have not yet developed them, even as the country faces blackouts and coal shortages.
The NY Times treats this as some sort of “scandal” rather than as a FEATURE of socialistic systems. Politicians in these systems are exactly like capitalists in a capitalist society, using their role to obtain power and riches rather than for some sort of utopian “betterment of mankind” which the NY Times would likely expect them to do. In fact, these sorts of behaviors are modeled as successful and drive out would-be capitalists since the politicians in socialist societies hold the cards in terms of laws and processes and will use them against those trying to open up the process to a fair and transparent capitalist alternative.
India has no power for 300 million people, an unreliable system with rolling blackouts, and is crippling growth BECAUSE IT RUNS POWER AS A SOCIALIST SYSTEM RATHER THAN A CAPITALIST ONE. The answer is absolutely as simple as that. The scandal and the failures are product of a socialist system as doomed to fail as the USSR’s five year plans.
The answers to this problem of inadequate power are simple and can be found in any text from Smith to Hayek.
1. Sell state owned coal fields to qualified bidders (have the capital and means to develop the fields) in an open and transparent auction process
2. Protect the property rights of power developers by ensuring that they are able to build and site transmission lines and power stations appropriately
3. Protect the property rights of power companies by ensuring that they are able to charge and collect from customers and eliminate illegal connections to their systems
4. For areas that are a local monopoly (distribution), the state should ensure that performance and reliability are monitored via clear criteria and that entities that don’t comply should be fined or the franchise put up for auction to another qualified entity
Since the NY Times fundamentally doesn’t understand how capitalism works and that it is a BETTER solution that top down central planning or socialistic bureaucratic “queuing” models” (of which this is a primitive variant) they don’t make any of these recommendations. Scandals aren’t a problem – they are a direct result of the SYSTEM and will always be present in these sorts of political environments.
Cross posted at LITGM
Posted in Economics & Finance, Energy & Power Generation, India | 8 Comments »