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  • Our Disastrous Energy Policy, Continued

    Posted by Carl from Chicago on August 2nd, 2015 (All posts by )

    New Clean Air Act regulations have recently been proposed by the EPA.

    President Obama will unveil on Monday a set of environmental regulations devised to sharply cut planet-warming greenhouse gas emissions from the nation’s power plants and ultimately transform America’s electricity industry. The rules are the final, tougher versions of proposed regulations that the Environmental Protection Agency announced in 2012 and 2014. If they withstand the expected legal challenges, the regulations will set in motion sweeping policy changes that could shut down hundreds of coal-fired power plants, freeze construction of new coal plants and create a boom in the production of wind and solar power and other renewable energy sources.

    What is interesting is that the EPA recently had their ever-expanding mandate struck down by the Supreme court just a few short weeks ago, when their attempt to kill off coal through regulation of mercury and other pollutants was invalidated for not sufficiently weighing the cost of the proposed initiative.

    This administration has consistently failed to implement a coherent energy policy because they fail to understand basic economics and the barriers caused by NIMBY behavior (mostly by their own backers). When the administration first proposed a “nuclear renaissance” I explained how it would fail and that the companies that they selected were mostly the wrong ones. This failure gives me no pleasure because in fact I am a proponent of nuclear power; what must occur is that we need to change our regulation to speed approvals and enhance the economics of these investments. The other key element of a nuclear strategy is to resolve the dismal Yucca Mountain fiasco – even by government standards, our “management” of nuclear waste has been an epic failure.

    Wind power is a failure mainly because we lack the will to build a transmission infrastructure that can bring the electricity from places with high winds (like Wyoming) to other places where it is needed (the cities of California). Here is a web site that brings forward a well funded plan from billionaire Anschutz that has been dogged by ridiculous environmental barriers at every turn. If this was China that line would have been completed years ago; instead they are hundreds of millions of dollars into regulatory and environmental reviews that aren’t even related to actual technical or design challenges.

    The US has benefitted immensely from the fall in natural gas prices caused by entrepreneurs who figured out fracking and revolutionized the industry. This wasn’t governmental research; it was done by the private sector. The success of fracking in the USA is also enabled by our property rights system – individuals have an incentive to allow drilling on their land because they can reap the rewards in terms of royalty payments; we are like Saudi Arabia except the riches don’t go to oligarchs and dictators, they go to the people that own the land as well as the companies that innovate and turn that gas and oil into something useful at the pump or heating your home. We also have a well developed infrastructure for gathering and transporting natural gas that was also built by the private sector which benefited from the de-regulation of the natural gas industry back in the 1980s.

    Note also that coal plants are being added all around the world and incremental US coal usage is a “drop in the bucket”. The current administration is attempting to price coal out of all US markets through taxes and incentives which, in the end, will have only a minuscule impact on carbon world wide because of the massive expansion of coal power in China, India and even in Europe (which has seen a “coal renaissance” since nuclear is now often not viewed as a viable option and fracking hasn’t taken ahold there).

    In another bitter irony, raising the price of electricity for negligible reductions in US carbon emissions (which will be more than offset by rising carbon use elsewhere, as noted above) will have a disproportionate impact on the poor. Utility bills must be paid monthly or the power gets “turned off” – any raise will hit the poor directly in their pocketbook, forcing hard choices between food, medicine and education. The rich don’t notice a few extra dollars each month in their electric bills, but the poor definitely feel the pinch.

    The other disastrous impact of these policies is that it empowers companies to get “off the grid” and to generate their own power, which will push the burden of these disastrous policies ever more on the backs of consumers, especially the poor. A grid where wind and renewables play a prominent role is an unreliable grid, causing companies to spend billions on backup power that could have been avoided had we just continued our prior policies of requiring utilities and grid operators to develop plants and policies that ensure a balanced and reliable grid.

    By mandating expensive “alternative” energy without resolving the roadblocks and barriers to success, the administration is doubling down on failed and inept policies. Here’s what they should do, instead:

    1. Find the political will to resolve the Yucca mountain storage option for nuclear waste
    2. Devise a way to enable inter-state transmission lines to move power from where it is generated to where it is needed
    3. Remove regulatory and legal barriers to nuclear power by pre-approving designs and offering rational incentives
    4. Recognize the value of our low-cost US natural gas and classify it favorably against “renewable” offerings
    5. Work to raise the quality of our power in terms of reliability and voltage, which will reduce the need for companies to invest heavily in backup systems
    6. Find a way to keep costs down which will reduce the burden on the most vulnerable and also will disincentivize companies from going “off the grid” and generating their own power entirely

    Sadly, none of the above will happen, especially with our current administration at the helm. They are unreasonably and illogically at war with coal, strangling nuclear, and avoiding the entire topic of transmission which is at the heart of much of our problems. We are very lucky that the plummeting price of US natural gas, which is a phenomenon of the private sector not of government, has given the USA a windfall on our energy policy that has so far at least partially made up for our idiotic policy mistakes.

    Cross posted at LITGM.

     

    28 Responses to “Our Disastrous Energy Policy, Continued”

    1. Mike K Says:

      The anti-nuclear hysteria is the most successful KGB operation in the history of the USSR.

    2. Joe Wooten Says:

      Trying to build more transmission lines is inefficient. Line losses will eat up a lot of the power transmitted. It is better to build more power plants.

    3. pierr Says:

      Perhaps failure is a feature not a bug in this administrations view?

    4. Seasoned_Citizen Says:

      I smell Cloward & Piven behind this latest EPA woodpile.

      Bring the whole nation’s power down with rules, regs, Exec Orders.

      And where’s the “Second” house of government, a Congress of Critters, to counter-act a rogue Executive Branch?

      Query: How will Johnny Boehner + The “Rs” drink their Napoleon Brandy in the dark? Flashlights or Coleman lanterns will affect the flavor and ambiance. Oh, drat!

      Eureka! I’ve got it!

      AMERICA GOES AMISH!

      Coal oil lamps and candles. Yeah–that’s the deal.

      GOT AMISH?

      exempted from ObamaCare, no need for electricity…..

    5. Carl from Chicago Says:

      Agreed that if you had to choose between an incremental power plant and more transmission the plant is better. The issue is that we haven’t really upgraded our transmission grid or expanded it in decades and our population and usage base has dramatically shifted in the meantime.

    6. Mike K Says:

      “The issue is that we haven’t really upgraded our transmission grid or expanded it in decades and our population and usage base has dramatically shifted in the meantime.”

      This is not a new issue. Politicians get credit for new construction. Routine maintenance gets very few bits in the news. California has headlines and Facebook shaming of water users in the “drought,” a phenomenon I have watched for 60 years. About every ten to fifteen years we have a drought. This time, we have built no new water storage or supply lines and the state of California population has doubled in 30 years. Furthermore, a federal judge has ended irrigation of central valley crops to save a bait fish that swims into pumps. Unemployment on the agriculture belt is 50%.

      There were desalination plants all along the coast in the last drought., There are none now. Instead Jerry Brown plans to spend $65 billion plus on a train to nowhere.

      Much the same is true of highways and the air traffic control system. Canada privatized theirs.

      Of course, after the EMP we will be using candles anyway.

    7. GenEarly Says:

      This is just more Obamy graft and corruption to shovel feral gov dollars to democ-rat fat cat green donors.
      And if electric rates soar, who cares the WH has an unlimited utility budget.
      to think of it the Chamberpot Repubs fully funded the Obamy’s Agenda back in the 2014 lame duck con-gress.
      It’s All Good, comrades! The people who pay get to play. The rest of the sheeples always get what they deserve….
      leftovers.

    8. Robert Schwartz Says:

      Obama wants to destroy American power and his energy policy is focused on doing just that.

      As for a policy. We would be much better off with complete repeal of all existing federal legislation concerning energy. I think it clear that the US is easily capable of producing far more energy in the form of natural gas, petroleum, and coal, than we consume, and that if Federal regulation were abolished, the US would be a major energy exporter.

      The only energy policy we need is drill here, drill now, drill everywhere. The only R&D programs we need are in fourth generation fission reactors and in fusion reactors.

      We also need to abolish all subsidies for so called renewable energy, including indirect subsidies like utility purchase requirements and feed in tariffs. They are just ways to stuff cash into the pockets of Obama’s supporters. They do not, can not, and will never produce meaningful amounts of economically affordable energy. Building transmission lines to wind mills is the economic equivalent of staying warm by burning dollar bills — validly issued and outstanding bills.

      We will also need to begin a program to take down all the wind mills before they kill all of the birds and bats in the country, and before they start falling down and hurting people.

      Finally, abandon any hope of compromising with “environmentalists”, they are religious fanatics just as fanatical and cruel as ISIS. They will not be happy until you sacrifice your children to their chthonic gods. We will not be free and prosperous until the last “environmentalist” is strangled with the entrails of the last lawyer.

      Oh yes, and, Global Warming or Climate Change is a sham and a fraud. We should defund all research in climatology immediately.

    9. newrouter Says:

      >Decadence in a civilization can be reversed. While the barbarian civilization must evolve upward, the decadent civilization must undo the damage that is devolving it. This is easier than it seems. Unlike the barbarian civilization, the decadent civilization has most of the same infrastructure, physical and mental, of the vigorous civilization. Only its ideas have become corrupted.

      And even this deeper corruption is largely limited to the elites and the professional classes, while the rest of the civilization has experienced only a surface corruption that is easily wiped away.

      The difficulty is however structural. A decadent civilization becomes more top-down with each year. And the source of the corruption is at the top. Removing the source of the corruption requires either removing all or almost all of the elites, and sizable sections of the professional classes as well. Or a campaign of ideas that transforms them as fundamentally as they were transformed.

      Either is a daunting proposition. Both require a fundamental transformation, but the former transformation is structural, a revolution that changes how a civilization is run, displacing elites across all the tiers of society, while the latter is a revolution of ideas. <

      http://sultanknish.blogspot.com/2015/08/a-tour-of-our-decadent-civilization.html#comment-form

    10. RegT Says:

      The – seemingly logical – notion that the poor will suffer from the rising costs of energy is not supported by reality. The reality that, as with phone service (cell and hardline), we who work for a living pay for service subsidized for the “poor”, including the “poor” welfare drones and the “poor” illegal aliens. There was a time when it was possible to voluntarily give help to the real poor, but now we are _forced_ to pay extra fees for just about all utilities, in order to cover those who cannot – or, more often, will not – support themselves.

      Not that the EPA or the rest of .gov actually gives a damn about the poor. It is simply another way to advance Cloward-Piven by draining the middle class.

    11. Doug Says:

      The human extinction movement hard at work.
      Nothing less than a strip mining process of the intrinsic wealth of a nation, then a scorched earth tyrants ideology of divide and conquer.

    12. Michael Hiteshew Says:

      The short essay by Sultan Knish – Daniel Greenberg that Newrouter linked is excellent.

    13. Joe Wooten Says:

      Carl, the lack f maintenance and expansion of the transmission grid is a direct consequence of he de-regulation and break-up of the old local monopoly utilities. They were broken up into a regulated distribution company, which gets the old cost + 8% rates, an unregulated generation company that can sell to the highest bidder, and a regulated, quasi-governmental regional transmission company which makes such low profits no one wants to invest money in them. I keep seeing calls from politicians to “invest” taxpayer funds in the transmission grid because I is so overloaded and out of date. If they just de-regulated them the problem would be solved fairly quickly.

      Half-assed deregulation is what is causing the problem, but as Glenn Reynolds notes with other governmental activities, there is insufficient graft in a totally de-regulated utility model.

    14. DirtyJobsGuy Says:

      The bigger threat is overreliance on natural gas. In the past (say the 1970s) power generation was well balanced between coal, nuclear and oil/gas with a local contribution from hydroelectricity. Production difficulties in any one sector would be bad but not catastrophic. The renewables fraud is just that, with vast subsidies and minimal impact on the overall economy. Once again though the greatest impact in on local communities dependent on coal mines, power plants and rail/barge lines. Just like the Northwest lumber restrictions these will result in ghost towns where only drugs and the dole will exist.

    15. David Foster Says:

      “ghost towns where only drugs and the dole will exist”

      If “progressive” policies continue to be ramped up, the whole industrial and mining sector of the US will be in basically the same situation as the Plains Indian tribes after the extermination of the buffalo.

    16. Jason In LA Says:

      For those who doubt the left’s hostility to inexpensive energy one only need to look at California. Currently crude oil is in a bear market trading near four year lows. But thanks to environmental regulations, we have limited the amount of refineries who can sell gas in the “Golden State”. As of August 3rd we are still paying $4.00 a gallon of gas. Only about .70 cents from its all time high reached in 2008. But the higher the retail price the lower the production, and that’s what they want. Less “dirty” environmental production.

    17. Will Says:

      “Energy prices will necessarily skyrocket” Not the exact or complete quote, but I remember hearing something like that a few years ago.

      I was in New York City in the early to mid-late seventies and can recall many of the high-rise apartment buildings in the dead of winter with their windows wide open. I was mortified, thinking those poor people had no windows…twenty years later, I was back, and the windows were still open in winter. This time I learned why. The stifling heat. Many, if not most of the apartments in my 21 story building always contained infants and elderly. ConEd cannot terminate service for non-payment if the residence has either of those two groups (probably more now) residing within. RegT is spot on.

    18. David Foster Says:

      There are a lot of analyses floating around like this one:

      http://www.businessinsider.com/goldman-on-solar-and-elon-musk-2014-3

      …in which Goldman asserts that solar will soon reach grid parity for a high % of US households.

      I have to question whether this analysis adequately accounts for the intersection of peak loads and solar-adverse weather/time-of-day considerations; it takes an awful lot of battery storage to cover a 3-day rainy period in a hot climate where everyone is using their air conditioning.

      What is really likely to happen, I think, is a lot of people relying on solar for *most* of their electricity needs, but maintaining a grid tie for the situations where their local battery runs out. They will then expect the grid to be there to serve them whenever they want it, but will violently object to paying any sort of readiness-to-serve charge to maintain the capacity for those times when they (and everyone else simultaneously) want it. Politicians will support them, and the economics of maintaining the grid (transmission, distribution, generation) will become increasingly problematic.

    19. Robert Schwartz Says:

      “Removing the source of the corruption requires either removing all or almost all of the elites, and sizable sections of the professional classes as well.”

      No great loss as we have the worst ruling class ever.

    20. dearieme Says:

      I agreed that anti-nuclear hysteria is, in large part, a success for the KGB. The anti-coal madness seems to be a success for the whole irrationalist movement.

    21. Danny Nelms Says:

      Whatever happened to “merchant power,” micro to mid-sized gas turbines generating power at the point of use. For example, Capstone Turbine, Bladon Jets, et al. At one time the idea of residentil sized co-gen plants was taking hold. Generate home electricity and hot water needs using small and efficient natural gas Sterling engines.

    22. Xennady Says:

      “As of August 3rd we are still paying $4.00 a gallon of gas.”

      If only if there was an opposition party that would point out the sheer stupidity of this, and propose to change it.

      But there ain’t.

      I recall a few years ago reading that Obama’s energy secretary was caught on tape wishing for a $7.00 per gallon gas price.

      Gee, I thought I would see that clip a lot in the 2012 election season- but no. Instead I saw Mitt “Mittens” Romney bleating that he believed in global warming, while telling us that Barry was a nice guy in over his head.

      Hence, Romney was not elected president. If you offer the public a choice between the left and the left, they’ll pick the left every time- hat tip to Harry Truman.

      Pardon me again for saddling up on my hobby horse to ride down the witless GOP establishment once again, but if they were too stupid to understand why a clip of an Obama regime minion wishing for $7.00 per gallon gasoline would have political resonance then hoping that they would be able to figure out how to make a political case against the more obscure but more disastrous US energy policy is futile.

      Not that they’ve ever given any evidence that they actually understand the need to make such a political case, of course.

    23. Mike K Says:

      You have a good point about Romney, who I supported and wish had been elected.

      Businessmen seem to be uninterested in these issues and accept the “conventional wisdom” which is often that of the left. I wish some of these people kept a card file like Reagan did with these odd little facts in it.

      It’s a shame.

    24. Xennady Says:

      “You have a good point about Romney, who I supported and wish had been elected.”

      Me too, although I’ve had plenty to say about his political failings, here and elsewhere. However, I’ll say this about Romney- if any establishment politician has the sense to understand that something was really wrong with US energy policy Romney was the guy.

      I suspect somewhere in his master plan for America- perhaps written down in great detail on pages 5560 to 5890- he had a fine energy policy.

      The problem is that he wasn’t enough of a politician to get elected- or get the plan enacted, had he won.

      Yes, a shame.

    25. Whitehall Says:

      The tax treatment of investments in wind, nuclear, and transmission partially accounts for where the investment money goes.

      For tax purposes, one uses accelerated depreciation. One can write off wind investments in 3.5 years. Nuclear takes 20.5 years and transmission 25.5, the longest category.

      The result is that clever project financing can mean windfall cash profits for wind equity investors in years 1 through 3.

      See this for a more detailed treatment:

      http://www.americanthinker.com/articles/2009/10/how_taxes_pervert_our_energy_c.html

    26. David Foster Says:

      As a general point, the way capital investments are treated discriminates against *all* asset-intensive businesses, with certain political exceptions as noted above.

      I think very few people understand what “depreciation” actually means; they tend to think it is some sort of tax *benefit*….in reality, it is exactly the opposite. If you invest $100MM in a capital asset and pay for it with cash, then you have $100MM less in cash…but you do *not* get to deduct $100MM as a business expense, you are required to depreciate it over (for example) 20 years, which means your deduction is only $5MM/year…..so in year 1, you are paying corporate income taxes on $95MM in “profits” that you have actually (on a cash basis) not really made.

    27. David Foster Says:

      Also: if a business invents something and patents it, then the legal costs associated with the patent filing must be depreciate over time (usually 15 years, I believe.) This is not terribly burdensome if you’re GE parenting a new jet engine design on which you’ve spent $500 million in development costs…the patent costs are probably trivial in the scheme of things…but if you’re a small business the $30K or so the patent filing will cost you is painful enough, and requiring it to be amortized over 15 years adds to the pain considerably.

    28. raven Says:

      David Fosters first comment nailed the essential problem with wind and solar- what do you do when the sun don’t shine or the wind slacks off? No guarantee that is going only happen at low demand times. So there has to be backup-hydro, nuclear, coal etc to fill in when the green alternatives don’t cut it. Seems like they are working hard to get rid of that base load capability.

      It is one thing to talk about costs, quite another to have no electricity at all when it is needed. The taxpayers might be able to come up with money but there is no way they can pull a megawatt out of their hats.