Energy & Power Generation

Access, Access, Access

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“Access, Access, Access” Rick Perry repeated to Bret Baier. It seemed a grilled candidate’s non sequitur to Baier’s question: weren’t many Texans uninsured? But I was struck by its truth. Insurance is of little use if no doctors take it, no medicine is available, deductibles and premiums are unmanageable. Positive rights – to food, to medicine, to jobs – are not rights. The theory never stands up to experience.

Perry’s run was brief; now, his task is encouraging access to energy of all kinds. Trump seemed an example of excess still is, I guess. But a nation not just energy independent but energy dominant is one empowered, free. And we can free others: a Europe not beholden to Russian oil is a healthier Europe. Neither Trump nor Perry invented fracking nor could Obama stop its success. But this administration respects it, clears the way for its natural flow.

Access, access, access how much does access to energy change our lives each day? How many are alive today because of access to energy forms unknown or at least unused 300 years ago? (Without air conditioning, I would have left my husband years ago. Then, again, he might have come with me.) Consider, though, the other extreme: we would be shocked to hear of elderly couples found frozen in the depth of winter, not uncommon in other times and places. How much more food is generated because of cheap energy? How broadly is food distributed?

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Planning for Failure

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When I worked in the power industry everyone understood that the cost of a power outage was high, but it was impossible to put a precise value on it. There is the reputational damage, the specific costs of payouts to businesses and residences that are impacted (depending on your jurisdiction), the cost of restoring service (typically it is “all hands” in terms of available personnel and equipment), and finally the loss of trust by your all-important regulator when you come back later and ask for an inevitable price increase for your customers.

The other, more subtle, cost of outages is the fact that businesses and residents must plan for unreliable power sources, and invest in backup generation which includes fuel, testing, etc… I would call this “planning for failure”. Over time, this also causes businesses to consider exiting the grid entirely in one form or another when they are large and capable enough, causing the remaining fixed costs to be borne by the remaining customers.

Here in Portland right now we are dealing with a major outage, as a fire caused a power outage to over 2000 customers downtown near the Pearl district. This isn’t 2000 customers… most of these meters are large businesses and buildings and not individual houses. In practical terms, the downtown Target is probably closed, Powell’s bookstore (a major tourist attraction) is closed, and many, many other smaller businesses and restaurants. It would be similar to a power outage taking out most of River North in Chicago where I used to live.

Luckily I live in a building with a backup generator, and they have fuel for 3 days, so we likely will be unaffected. That’s what you get when you pay more for a recently built class A apartment rather than an older vintage walkup. But many, many folks are going to be impacted by this (it was over 90 degrees yesterday) and many restaurants are going to have to throw out their food on top of losing a couple of days’ worth of customers.

As we re-think electricity and the grid entirely it is important to consider reliability in the equation. I believe that many individuals and businesses just take power for granted until it isn’t there anymore. This challenge will likely be exacerbated by renewables and solar power… in this outage it is a distribution system failure, but intermittent generation of power is another variable in the reliability equation.

Cross posted at LITGM

Hydrocarbon drilling in national parks

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Here are the basics. There are 59 national parks operated by the National Park Service. 17 are owned both on the surface and subsurface by the Feds with 42 having split ownership with private subsurface ownership of mineral rights. 12 parks currently have oil/natural gas drilling already occurring on them, or more than one fourth of the 42 split rights parks.

The National Park Service has been ordered to review the rules as to what is necessary to drill for oil and gas within a park, or in certain circumstances next to a park, if the subterranean horizontal section includes NPS administered park lands.

There’s a lot of confusion about what exactly has changed. Right now it’s only a rule review.

Obama’s “Nuclear Renaissance” Hit Again By Bankruptcy

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Since it was first announced almost a decade ago I’ve followed the “nuclear renaissance” that Obama touted and noted that it would likely end in failure due to the poor economics of these projects given our current, failed regulatory climate. The Federal government provided loans to get some of these projects off the ground. Now, with the bankruptcy of Toshiba’s Westinghouse unit, the whole process is collapsing and leaving half-built reactors and rate payers (and investors) in many jurisdictions likely to hold the bag for huge investments that aren’t going to generate power any time soon.

Toshiba Corp’s U.S. nuclear unit Westinghouse filed for Chapter 11 protection from creditors on Wednesday, just three months after huge cost overruns were flagged, as the Japanese parent seeks to limit losses that threaten its future. Bankruptcy will allow Pittsburgh-based Westinghouse, once central to Toshiba’s diversification push, to renegotiate or even break its construction contracts, though the utilities that own the projects could seek damages. It could even pave the way for a sale of all or part of the business. For Toshiba, the aim is to fence off soaring liabilities and keep the group afloat.

These partially built reactors in Georgia and South Carolina were commissioned because local laws and regulations allowed for the costs of these investments to be passed on to the rate payer (local folks paying electric bills). In other states with different sorts of regulatory models, these sorts of investments would have been uneconomic, which is the primary reason why everyone else in the USA balked at the nuclear renaissance, even when it was partially underwritten by the Federal government with loans.

There are now two problems for rate-payers in Georgia and South Carolina:

1) the companies now have to build these reactors without price guarantee from Toshiba, meaning that the (likely) giant costs of the overruns will be borne by local ratepayers or the companies themselves. If the unit is in bankruptcy and walled off from the funds of the parent corporation (which is the purpose of the bankruptcy, I am assuming), it seems unlikely that anyone else would step up and backstop such a guarantee.

2) this bankruptcy is likely to cause significant delays in construction, meaning that the long, miserable process of getting certified to start up the reactor is going to be pushed out further into the future. This means that it will be that much longer until the unit starts generating power and “earns back” the investment, and all the costs of the reactors will accrue interest and financing charges for that much longer while construction proceeds (rate payers)

Note that there is precedent for taking gigantic write downs and abandoning abandoned reactors. Here is a link to the abandoned reactors in Washington and the famous Shoreham debacle in New York.

None of this seems to be impacting the stock prices of Southern Company (SO) and Scana (SGC) this morning so maybe the market knows something that I don’t. Scana is holding a press conference to describe their next steps in the process today and I didn’t seen anything yet scheduled on Southern Company’s web site.

Cross posted at LITGM

Two Very Poor Analyses

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Forbes ran an article with the headline “Solar employs more people in US electricity generation than oil, coal, and gas combined” and goes on to say “It’s a welcome statistic for those seeking to refute Donald Trump’s assertion that green energy projects are bad news for the American economy.”

Unmentioned in this article is the point that energy production is not done for the purpose of energy production; it is done for the purpose of energy use…and production modes which are more expensive tend to cost jobs downstream.  If an excessive emphasis on solar and wind cause electricity prices to rise significantly, the negative impact will fall on those who work in manufacturing and other fields that are energy-intensive.

To take an extreme case, one could easily create millions and millions of jobs in energy generation by requiring that all electricity be generated by human beings turning cranks connected to generators.  It is silly to look at job-creation as a good thing in isolation, without considering factors other than the number of people hired.  The Forbes article also neglects to mention the point that in most technologies, and certainly in electricity generation, the construction phase of a plant generally requires a lot more labor than does the ongoing operation of that plant.

An even lower depth of mediocrity is reached in this International Monetary Fund article:  Counting the cost of energy subsidies.  This study considers traffic congestion and vehicle accidents as ‘externalities’ from fossil fuel usage.  In reality, of course, the replacement of all gasoline-and-diesel-powered vehicles with electric vehicles recharged from solar/wind…or even their replacement by unicorn-powered vehicles requiring no other energy source whatsoever…would by itself have no effect whatsoever on traffic congestion and vehicle accidents.  And while the elimination of automobiles and trucks completely would certainly eliminate traffic congestion, it would also lead to delays in travel which would greatly exceed the magnitude of the congestion-caused delays.

Putting lots of math in a study is not a substitute for common sense.