…and of the entire era of reliable and affordable electricity?
Is it hot where you are? Have you been enjoying your air conditioning? Appreciate it a little more after the power has come back on after an extended outage?
The American economy has made air conditioning broadly affordable, even by those whose incomes are fairly low. But how many people are going to be able to afford their A/C if electricity prices rise to the $.70 or $.80/kwh range?
Remember, Barack Obama said (in 2008) that under his plan, electricity rates would “necessarily skyrocket.” The only things that have prevented such skyrocketing from happening so far are (a) the unwillingness of Congress to pass a cap-and-trade bill, and (b) the vast expansion in supplies of natural gas–a key fuel for electricity generation–driven by advanced fracking technologies. In a second Obama term, neither of these factors would likely be operative. A court decision has now given the EPA the ability to do pretty much what it wants to do regarding regulation of CO2, and in an Obama administration, what it wants to do is to shut down America’s coal-based electricity generation. Also, the scale of the success of oil/gas fracking clearly took the Obama administration by surprise, and in a second Obama term there would be far more regulatory effort to tie the hands of this industry and limit the development of America’s natural gas resources.
(Electricity bills have increased in recent years–from a residential average of $.0945/kwh in 2005 to $.118/kwh in 2011…but that’s nothing compared to what will happen if Obama is reelected and the inhibiting factors described above are removed.)
Electricity cost and supply considerations do not only impact households, of course, they also impact businesses. Cost and reliability of electricity is especially important for many kinds of manufacturing businesses, and also for data centers–which play an increasingly important role with the growth of Cloud computing. Electricity cost is often a factor in company location decisions; internationally as well as within the country: for example, here’s a story about a Chinese company that moved from China to South Carolina in part because it can get electricity for 4 cents per kwh in SC as opposed to the 14 cents it had been paying in China. There’s not going to be too much of that kind of thing if we keep Obama and he succeeds in his plans to drive up America’s electricity costs.
A couple of months ago, I was vaguely listening to the radio while doing something else. There was a weather report about some bad storms somewhere, then something about power plants being closed. “Must be bad storms,” I thought, “I don’t think I’ve ever heard of closing power plants for a storm.” They I realized that the weather report had ended and the station had segued from weather into news reporting: the plants had not been closed temporarily on account of weather, but permanently, on account of actual or anticipated government regulations.
Destruction of a nation’s energy infrastructure has previously been something that was done by natural disasters or enemy action: for a country’s energy industry to be crippled by its own government is something relatively recent.
Not unique to the US, though…see this article about the increased risk of blackouts that Germany has imposed on itself through its worship of solar and wind generation and its government’s panicky actions regarding nuclear power.
See also:
Power: Mechanical, National, and Personal
Reactions from NPR listeners to the NYC blackout of 2003
Enjoy your air conditioning while you still have it.
“Destruction of a nation’s energy infrastructure has previously been something that was done by natural disasters or enemy action…”
The current situation is a good example of the latter.
If people perceive that environmentalists are coming between them and air-conditioned comfort (hell, survival), you’ll see environmentalists being burned as fuel.
Prediction: “if electricity prices rise to the $.70 or $.80/kwh range” in the first half of Obama’s (hypothetical) second term, the 2014 midterms will produce a House of Representatives with fewer than 100 Democrats.
I don’t think electricity prices would be likely to rise to THAT level DURING the period leading up to the 2014 midterm elections…what WOULD happen is that things would be set in place which would make such rises inevitable. The destruction of coal-fired plants, combined with the inevitable rise in nat gas prices, made much worse by a hostile environment for oil/gas drilling, the increasing grid instability owing to forced use of wind/solar without realistic consideration of the actual attributes of these power sources…sooner or later, these would have their effect. But long leadtimes mean that there can be a significant lag between a policy and its effects.
Percy & Dr Weevil…of course, the Democrats and their house media would do their best to ensure that the anger about prices and unreliability would be directed at evil, greedy power companies rather than at noble and idealistic environmentalists and dedicated, self-sacrificing public servants.
It had better not come to that … my own home is basically unliveable without AC and electricity, once the outside temp reaches 88-plus. It’s a modern house (built in the mid-1980s) and with no consideration for natural air-flow. I have lived in places where AC can be minimised, due to fortunate placement of windows, and a climate which permits use of a swamp-cooler. I have also lived in places where it was possible to manage daytime heat by opening up all the windows at sundown, and then closing them at mid-morning to preserve the night-time cool temperature. In Greece it was possible to live very comfortably through the summer, given a house with high cielings, a shaded balcony, and tall windows which encouraged the cool sea breeze to come inside and flow through. There are also houses that I know of locally which were built to take advantage of site orientation and prevailing breeze … most of those were built before 1920.
But if the costs of electricity rise to unsupportable levels in regard to air conditioning across the South … no,I think citizens would want to know why … and I think Dr. Weevil, Percy Dovetonsils, and David F. are right. There are are too many citizens and business enterprises who have taken root in the South and in the Southwest, who can be easily be driven back North,or into the temperate West. (Perhaps that is their grand scheme, all along?)
The Powers-that-be would not come off well, attempting to blame this all on ‘Big Power’. They no longer have command of the commications channels. Yes, I know that there is a large portion of the public who apparently get their news from network TV and print newspapers, still. But an increasingly large number of them don’t.
And when it reaches .75/kwh, the Leftists will blame the private utilities.
Oddly, air-conditioning a home is cheaper than winter heating one in places like NH, where I live. But the perception is that one is a necessity, the other a luxury. Like the preference for the dangers of alcohol over marijuana, it’s just history and culture – no rational basis.
AVI…are you heating with nat gas, or fuel oil? Seem to be a lot of places in the Northeast where gas is unavailable because the local pipes haven’t been built.
I suspect that Thorium reactors will become popular if electricity prices rise above 0.40/kwh. Electricity will be generated locally, probably DC only, and the current super large generators would be closed down. An overactive EPA would be grounds for secession.
Power to the people. Power comes from a locally controlled and defended power plant.
EPA Delivers the Apocalypse
05/23/12 – Doug Ross Journal
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[edited] PJM Interconnection is the company that operates the electric grid for the 13 states Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia, and the District of Columbia.
It held its 2015 capacity auction last week. These are the first real, market prices that take Obama’s most recent anti-coal regulations into account. He is keeping his 2008 campaign promise to make electricity prices “necessarily skyrocket.”
The market-clearing price for new 2015 capacity – almost all natural gas – was $136 per megawatt. That’s eight times higher than the $16 price for 2012. In the mid-Atlantic area covering New Jersey, Delaware, Pennsylvania, and DC, the new price is $167 per megawatt. For the northern Ohio territory served by FirstEnergy, the price is a shocking $357 per megawatt.
These massive price increases arise from environmental regulations which go into effect in 2015 on coal fired power plants.
These are not computer models, projections, or estimates. These are the actual prices that electric distributors have agreed to pay for new capacity. The costs will be passed on to consumers at the retail level.
=== ===
Russ Roberts interviewed Nobel Prize winning physicist Robert Laughlin a couple of years ago.
Takeaways:
* because of its atomic structure, carbon may be the most efficient source of energy in the universe. As such we will continue to consume it because people want cars, electricity, and other byproducts.
* the most feared enemy of an oil company is a coal company: if the price of petroleum derivatives like gasoline, lubricants, many plastics, etc. rises too high then the Fischer-Tropsch process becomes the most economical way to produce petroleum products. The Fischer-Tropsch process extracts liquid hydrocarbons from coal, natural gas, and other carbon sources using techniques that have been in development since the twenties and commercialized since the mid-1930s.
* a preview of what happens if there are electricity shortages was the California Energy crisis: care for the earth went out the window, coal plants were running on the beach in Malibu, and the incumbent governor was run out of office in favor of an former Austrian body builder.
Given a choice between the Earth and air conditioning, the Earth will always lose.
Andrew G…I looked at the PJM capacity auction thing a while back, and it’s not as bad as it sounds. What is being auctioned off is reserved capacity, and those costs typically represent only about 10% of the total price at the consumer level. So even if there was a 10:1 increase in price from the capacity auction, this would actually net out to “only” a doubling of consumer price per kwh.
I need to look at this some more, but am not sure that the quoted 8:1 number for capacity pricing, across the entire PJM region, is correct.
Dr. Weevil Says on
July 5th, 2012 at 5:00 pm
Prediction: “if electricity prices rise to the $.70 or $.80/kwh range” in the first half of Obama’s (hypothetical) second term, the 2014 midterms will produce a House of Representatives with fewer than 100 Democrats.
I am not sure that there will be elections in 2012, given that Obama has claimed the power to impose laws and void others at will, with no one pushing back. If there is an Obama “second term”; I am positive there will not be 2014 elections.
Subotai Bahadur
To David Foster,
Thank you for the insight.
“AVI”¦are you heating with nat gas, or fuel oil? Seem to be a lot of places in the Northeast where gas is unavailable because the local pipes haven’t been built.”
I lived in Hanover NH for a year in 1994-95. My winter heating bill was $400/month with oil. In California, with A/C, my electric bill was high but not that high.
“Given a choice between the Earth and air conditioning, the Earth will always lose.”
Sorry, guys, but once again, The Simpsons were way ahead on this:
Mr. Burns: “Oh, so Mother Nature needs a favor? Well, maybe she should have thought of that when she was besetting us with droughts and floods and poison monkeys. Nature started the fight for survival and she wants to quit because she’s losing? Well, I say hard cheese!”
The California Legislature has mandated that utility get X percent of their power from “green” sources – again driving up the costs.
One could use natural gas for air conditioning for residentual use but the capital costs would be much higher.
I’ve followed the “deregulation” of electric markets for decades – did a big paper on it for my MBA in fact.
Frankly, the whole movement has been pretty much a bust, at least compared to a non-corrupt rate based price regulation scheme. Some economies have been achieved but those could be attributed to the more rapid introduction of highly efficient combined cycle gas turbine plants fueled with natural gas. They would have taken longer to achieve market penetration in a regulated environment.
Capacity margins have strunk with deregulation. In “the good old days” of a regulated utility, the widely accepted goal was a 20% reserve to allow for breakdowns, maintenance, and such. That has been reduced to maybe 10% which saves money but increases risk of overload and blackouts.
The one big hope with deregulation was that creating a market would reduce the temptations for political interference and payoffs. Prior to California’s deregulation, the then speaker of the Assembly Willie Brown was caught picking up a $50,000 extortion payment from Northern California’s biggest investor-owned utility.
Add in the renewables mandate and “demand control” schemes, and our precious system of reliable and low cost electricity slowly becomes a thing of the past.
Coal-fired plants in the Chicago area closed due to the increasing costs of regulation. This put hundreds of well paid workers on the street in the midst of high unemployment. Of course this also reduced the available capacity in the system and will inevitably drive costs up.