Carl from Chicago

Business executive interested in history, economics, taxation and energy policy.

Realism on Alternative Energy – Wind Power

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Today Reuters posted a story called “Pickens backs off wind farm project”

Texas oil billionaire T. Boone Pickens has called off plans to build the world’s biggest wind farm in the Texas Panhandle, the Wall Street Journal said.
 
Pickens said the wind farm project was scuttled partly because of the lack of adequate transmission lines to carry the electricity from remote locations to cities, according to the paper.
 
The oil tycoon had hoped to build new transmission lines but could not secure financing, the paper said.

This paper neatly summarizes the impossible economics for most of these large scale alternative energy projects, focusing on areas that aren’t usually covered well by the media or academics.

One of the favorite alternative energy projects involve wind energy, basically giant windmills / turbines that generate electricity when the wind blows. Wind energy viability is determined by a lot of factors, including:

1. how much the wind blows, or more accurately, how “steadily” the wind blows at a relatively high rate of speed
2. cost of the turbines / windmills
3. reliability of the turbines / windmills (one of the major manufacturers out of India has been recalling and having issues with the blades)
4. ability to find permits to site the blades (famously the Kennedy’s are blocking them for damaging the “view” off their compound on the East coast)
5. amount of subsidy that the state power commission / Federal government is providing for the energy (else they generally aren’t financially viable)
6. access to transmission lines to bring the electricity back to the urban areas that are most likely to utilize this electricity
7. access to funding (debt and equity) that allows the developer to build and secure the land, materials and equipment to complete the job

Of all these items, people tend to focus on items 1-4 above, with some understanding that without 5 (subsidies or requirements to “source” a certain percentage of generation alternatively), it isn’t going to just happen.

However, #6 and #7 are actually the biggest bottlenecks right now, and tied to long term items that the state, local and Federal authorities are doing the least about.

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Your (Wasted) Federal Tax Dollars At Work

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One of the most basic concepts in real estate is TIMING. There is a time to buy properties (when the costs are low) and a time to sell properties (when the prices are high). This is such a basic concept that even a third grader could recite it.

How you can tell the difference between how the GOVERNMENT operates (with your tax dollars at risk) and how an INDIVIDUAL would choose, if it were their own money? Here is a classic example.

The old US post office in Chicago is a giant structure rising over I-290 (the main highway into the city coming in from the West) that has been abandoned since 1995, when a new post office was built.

While the Chicago real estate market absolutely boomed through the period from perhaps 2000 through the 2007-8 crash, the US government was unable to execute a deal of any sort. There were various plans to do so, but they didn’t reach a deal, and anyone who knows a government bureaucrat knows it is better to be “safe than sorry”. If the terms weren’t perfect and there was some controversy, just let it lapse, and who cares, your pay is the same, either way.

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Health Care and Static Analysis

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PANAMA AND ESCAPING HIGH US COSTS

One element that is generally not well considered in our health care debate is the fact that individuals will react (over time) to market signals and attempt to make rational financial decisions. A recent article from Business Week called “Panama – It’s the New Florida” with the tag line

Quality health care and low costs are luring lots of U.S. professionals

is useful to provide some background on this issue.

This article uses hyperbole – the total population of Panama is a bit over 3 million and U.S. residents are a small fraction of that total, while Florida has a population of 18 million – but the thinking is spot on, long term.

They mention a US citizen who has Parkinson’s disease and says

Researching rates in Seattle, she found that nurses run $25 an hour. In Panama City, where she has lived since 2007, they cost $25 a day.

Going overseas for medical work has a long tradition; generally it was the wealthy from Middle Eastern countries who came to Europe or the USA to receive advanced treatments. In recent years citizens of many nations featuring socialized medicine such as Canada travel overseas or to the United States to bypass waiting lists for critical procedures.

COST OF HEALTH INSURANCE

The most likely individuals to leave based on economics are those who retire early (like those in the article) and are ineligible for Medicare, which starts at 65. According to this survey (which is quite interesting, I recommend you click through and read it) – here are some numbers based on 2006 premiums and the survey was published in December, 2007:

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The Face of Stupidity

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At various times I have written about the “science” of project management, which claims vast increases in productivity and its new roots (mainly from the 1950’s) but in fact compares unfavorably against many historical projects, such as this post on a railway built in Skagway, Alaska in a rapid fashion in a brutal climate over 100 years ago. This isn’t to say that project management isn’t important, or that it shouldn’t be viewed as a critical skill set, but just to say that a proper historical perspective shows that project management has been around forever in various guises, even without mumbo-jumbo technical jargon created expressly for the field.

A recent article, with published photo, in the “PM Network“, showed the extreme limits of someone swallowing the methodology hook, line and sinker. I kept the caption with the photo but here is the text:

Companies want specific industry or technical experience rather than project management experience, which surprises me.

Let’s think about this astonishing statement, for a minute. When a company is hiring a candidate for projects, and they have multiple candidates to choose from (which is pretty much the norm with today’s economy), why WOULDN’T they look for someone from their industry (say, energy), with a specific technical capability (perhaps engineering), along with project management experience.

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Weird Chicago

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I usually carry my camera as I pass around Chicago on foot and try to capture anything that seems different or odd. Since my photos are famously low quality I try to make up for it with a high quantity.

In the upper left – this is a photo of a house in a VERY expensive part of River North, an old brownstone. But looking in the window I see… one of those “skull” vodka bottles – It is called “Crystal Head Vodka” and the link, strangely enough, comes to a sales pitch by Dan Akroyd.

In the upper right, a photo of Coyote Ugly, in River North, now defunct. Their web site mentions that many of their bars closed across the USA, but they still seem to be around in others. Strangely enough, someone walked up to me on the street and asked if I knew where Coyote Ugly was, and I did, and I also told him it was closed and directed him and his buddy to Hooters nearby. Very odd that I was the one of one thousand people who would know the answer to that question. Even funnier is the fact that at first the Coyote Ugly sign in the window said it was “closed for remodeling” – Ha Ha how would you even remodel that crappy place? Would you perhaps clean the floor or something? It was just benches and a bar. Maybe they’d fix that dentist chair that the girls spun guys around in.

In the lower left, a photo of perhaps the worst remodeling job I have ever seen. This is a main street, Ohio in fact, and someone put the crappiest addition ever atop a brick building, and then festooned it with antennas. Why do we even pretend to have zoning laws? Worst yet, it looks awful from above, and unfortunately I can see it in all its glory every day right outside my balcony.

In the lower right, we walked by the Lincoln Restaurant, on the corner of Lincoln and Irving Park Road, and they have BANJO MONDAYS! Now that is a demographic I didn’t think was that popular in Chicago, but what the heck do I know, after all people drink PBR, too, and think that is cool nowadays.

Cross posted at LITGM