Carl from Chicago

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

Around Chicago June 2011 (more)

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Upper left – a car that should definitely not be on the street – a Lamborghini parked right out on the street on a busy Friday night in River North. Upper right – all I could think of when I saw that ridiculous photo of a laptop strapped to the handlebars of a motorcycle was “Get a damn iPhone or a Garmin”. Really… that is plain crazy and in a nutshell explains how having the most up to date laptop has gone from a must-have to an I’ll-wait-a-while type of purchase. Lower left – can’t argue with that sentiment about spring, but funny that it is on a trash bin door. Lower middle – great license plate on a truck in front of the post office. Too true and it should say retire at 50 but that probably won’t fit on the plate. Tzar bar – popped up in my neighborhood on Ontario and funny that the name of what was essentially the Emperor of Russia is now a trendy name for a nightclub. Pictures here looks like a fun and expensive place to visit if you are under 30 and can burn a few hundred bucks / night and stay out until daylight.

Cross posted at LITGM

Chicago Tribune Finally Wakes Up On Our Dismal Energy Future

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Over the last few years I have written many articles about power and electricity, and in particular how transparently wrong the “dreams” and plans are for alternative technologies or the re-birth of nuclear power (although that makes me sad, for I am a big supporter of nuclear power).

A large part of the problem is that there are many variables that need to be understood in order to see what is likely to occur in the future in the energy industry. These include:

1 The motivation of key players, whether they are utility companies, government entities like the TVA or the Los Angeles Department of Water and Power

2 The financial capabilities of the key players, because often the ones with the largest amount of available funding are unlikely to “risk it all” for uncertain financial gains

3 The role of state regulators, since the utility industry still has a very strong state orientation, particularly in Texas, which has its own grid (except for El Paso)

4 The role of Federal regulators, who have can order components of deregulation which have shaken up the industry for better and for worse

5 The role of Federal agencies, such as the Nuclear Regulatory Commission, which for the most part has rubber-stamped nuclear re-licensing so far (prior to Japan), and the Department of Energy which has spectacularly failed with the Yucca Mountain storage project for nuclear waste. Also the EPA with particulate emissions

6 The role of special interest groups, particularly those against new construction of nuclear or coal plants, or transmission lines to connect the grid. These interests have won huge and damaging victories such as the demented Shoreham situation and the transmission line under Long Island that can’t be powered on

7 How electricity works (and gas, for they are intertwined), with the key note being that it is a “peak” business and not having the right amount of power in the right place makes for bad outcomes (blackouts)

8 That “classes” of rate payers such as industrial titans (aluminum plants), companies, government entities and residents have different motivations and goals. One of the most insightful things I heard in a rate case proceeding was “I don’t care if you raise utility rates, just don’t raise them on my class of service”

9 The different segments of utility operations, from generation to transmission to distribution, and how each has different economics and “closeness” to customers (you may hate your local distribution utility, but it is the generation and the lack of transmission that is driving the rates that they must charge)

10 The role of individual politicians, such as prominent ones from either party that come into power and proclaim that they can “change” the system or achieve a particular type of transformation

11 The fact that utilities are regressive in that an increase in utility rates disproportionally impacts the poor because it can represent such a big portion of their expenses and the utility actually takes action if you don’t pay (one of my first encounters in the industry happened when a small child on a plane asked if I was the guy who “turns off the power” when I said I worked in the electricity industry)

12 The availability and impact of alternatives of which the most important by far is decline in the price of natural gas for generation or to a lesser extent the fact that gasoline powered generators for home backup were once rare but are getting more common, and that many major businesses simply have to purchase parallel backup power units(quite expensive) because they can’t rely on the “dirty” power from their local utility

13 The advancement of technology captures the popular imagination, but I hardly pay attention to it at all. Our energy infrastructure is ancient; our hydro faculties may as well have been built by the ancient Egyptians, and the vast, vast majority of our nuclear plants are running on technology designed 30-40 years ago. Items like smart metering and “alternative” technologies are a drop in the bucket and don’t solve our fundamental issues of lack of base-load power and properly placed and sized transmission lines

14 The cost & availability of money whether measured in interest rates or in availability of credit or buying power is very important to capital-intensive businesses; in the 70’s during high inflation up to 25% or more of the cost of a major investment such as a nuclear power plant was just capitalized interest which was driven by the high cost of money

15 The motivation of oligopoly players is important since major utilities are adjacent to one another and tend not to compete in the other guys’ backyard; the most famous example of this was AT&T which was broken up in the classic Judge Greene decision in 1982 and then regrouped slowly over the next 25 years as shown in this hilarious but true Colbert bit

Of all the variables… the popular imagination tends to favor #13 “new technology” with magazines like Popular Mechanics talking up new reactor designs and other cool advances as well as #10 when the incoming administration talked of a (never-gonna-happen) “nuclear renaissance” in 2008.

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Around Chicago June 2011

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Upper left that sticker on the window says “I love manboobs and I like to cry”. No idea what to make of that but it is damn funny. Middle top – you can’t have a party without throwing a couple cans of PBR down, apparently. Upper right the ad is for a “cheap and tacky 2 bedroom” and the yellow sign is kind of tacky, too. Lower left – all you can eat sushi? Does that sound like a good idea? Didn’t they see that episode where Homer “denuded” the all-you-can-eat shrimp bar? Lower right – I see a lot of graffiti but this is pretty funny and not your usual tagger someone added “Got any dr*gs?” to the Chanel model.

Assad Makes A Crucial Error

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Revolutions start sometimes over items where they are least expected. The entire “Jasmine Revolution” which began in Tunisia was sparked by a vegetable vendor setting himself alight (poor pun there) and becoming a world wide sensation.

In Libya I believe that Gaddafi had the opposition on the ropes and his tanks and heavy weapons were about to take Benghazi when he made the critical error of telegraphing his plans for human rights abuses which I wrote about here.

In Syria, the government just made a horrendous tactical mistake that seems to be a combination of the two items listed above. While protests have rocked Syria, their brutal authorities have taken extreme measures to combat the protestors including sending tanks into cities and stationing snipers on rooftops to limit movement and terrorize the civilian population (I fear that the Arab dictators have seen the power of snipers through the US involvement in Iraq and Afghanistan and are now turning this against their people).

The government tortured a 13 year old boy to death named Hamza al-Khateeb and then returned his mutilated body to his parents a week later. You can read the details here but they are very gruesome and apparently there is a video of this on the internet as well. It appears that the Syrian government gives back these tortured remains to their parents in order to show how vengeful that they can be and to intimidate the population, the term used in the article was to “advertise their crimes”.

“This is a campaign of mass terrorism and intimidation: Horribly tortured people sent back to communities by a regime not trying to cover up its crimes, but to advertise them.”

People apparently poured out into the streets and this has been picked up around the world. Syria now will have significant issues even attempting to re-integrate with other nations now that these sorts of crimes have been documented; they will likely be poison even among those normally willing to do business with barbarians.

I don’t know if it is related but it might be – the Syrian government has promised to release all political prisoners, which would be a significant move if in fact they follow through on this promise; on an analogous note the ruler of Yemen has been promising to step down for some time now but always finds a reason for delays.

When you really think about it these sorts of regimes are amazing; there are entire armies and paramilitary groups that are focused solely on keeping the ruling dictator in power; they think nothing of torturing, maiming and indiscriminately killing THEIR OWN PEOPLE en masse. Generally for this type of behavior there is some sort of political theory (fascism, communism, socialism, etc…) but for these types of thugs it is just to utilize every lever of the state to stay in control. I would be interested to hear what their rationale is for killing their own people. And at what point, if ever, they’d be willing to stop.

They may have gone too far with torturing and killing this 13 year old boy. This type of behavior emboldens protestors even those facing death. This event may lead to the eventual downfall of Assad. I certainly hope so.

The Moral Bankruptcy of International Organizations

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In the category of “headlines so obvious that you can’t believe you haven’t seen them sooner” here is a BBC article titled

Qatar’s Bin Hammam accused of buying 2022 World Cup

While I am far from a football expert I wrote about it here in particular how the greens that protest everything under the sun didn’t seem to mind NOT using some of the dozens of world class stadiums already built for football (soccer) around the world and let Russia and Qatar win the next 2 world cups, which required the construction of many more stadiums, which strikes me as completely the opposite of being “green”, but I can’t follow their logic anyways.

Back to the Qatar bid which seemingly MUST have been based on bribery because no logical set of criteria would award this tournament to a bidder that

1) had a non-existent history of success and barely even participated in the sport on the global stage
2) had no facilities to utilize
3) would likely have to play games under the blazing sun in virtually a furnace
4) would have to truck all fans in from around the world to attend the games

But of course we know why they won as is stated in the article above.

Suspended Fifa vice-president Jack Warner has made public an e-mail that claims Mohamed Bin Hammam “bought” the 2022 World Cup finals for Qatar.

I do like Australia’s response to the final outing of this obvious outcome.

Meanwhile, independent Australian senator Nick Xenophon has demanded that Fifa refunds the Aus$45.6m ( £29.6m) they spent on their unsuccessful bid to host the 2022 World Cup. Xenophon said: “It appears corrupt and highly questionable behaviour goes to the core of Fifa. “Australia spent almost $46m on a bid we were never in the running for.”Now we hear that bribes may have been made to fix the result for who will head up Fifa.”

Finally let’s just drop the pretense of these international organizations being for anything other than the interests of those that run them. That goes for the Olympics too. Want to reward Russia for their fine behavior in the international stage, including the invasion of Georgia and general meddling in all the states on their borders? Give them the winter Olympics, in a facility that isn’t even built (no bribery there, either).