Energy Fads, Follies and Failures

Live long enough as an American and you can watch the energy fads, and follies, repeat themselves.

I'm of the right vintage to do this, since I've paid at least some attention to energy issues dating back to the oil embargoes and shocks of the 1970s, which put rationing in place and had gas lines snaking around stations, spurring politicians to actions (overreactions, typically) that set the herky-jerky, reactionary, crisis-to-crisis pattern that's characterized U.S. energy policy ever since. Robert Bryce does an outstanding job of walking readers back through that sad and sordid history in this NRO piece, making too much additional commentary unnecessary.

It's just amazing that no one in a position of real responsibility knows this history and refuses to repeat it, since energy is the Achilles heal of a society like ours. Getting things wrong can have serious, serious economic implications, to which most Americans seem oblivious. Some awaken momentarily when another crisis point arises (typically, when the pain at the pump becomes excruciating), usually pointing fingers in the wrong direction, unable to connect the dots between policy causes and economic effects -- then go back to sleep, as feckless leaders centrally-plan "fixes" that fix nothing and establish a predicate for the next crisis.

How long an economic superpower can get along like this, with such an amateurish energy policy, only time will tell. But a day of reckoning will arrive. Obama's stunted and stumbling economy is just disguising problems that will begin to crop-up, in spades, if the American economy ever returns to old form.

But it's Saturday. And beautiful outside. There's lawn care to be done, a ball game to catch, a dog to be walked, maybe a margarita to savor later. There's no point in worrying about this now.  

Renewables Are "Winning" A Rigged Race

"Green energy" panacea-pushers at The Energy Collective (at least the name clues one in to their collectivist leanings) are hyperventilating again over the seemingly large percentage of new U.S. energy capacity being added by so-called renewables, which mostly means wind and solar. Here's the situation in one handy-dandy chart.

But these gains are only impressive when taken out of context.

Renewables only appear to be gaining so much ground because two of their primary (and most potent) energy sector rivals, coal and nuclear power, are effectively dead in the water, thanks to the unfavorable (nay, hostile) political and regulatory climate created by the Obama White House and its Big Green allies. Note the long string of zeros to the right of coal and nuclear power. Renewables are "winning" the Daytona 500 because their rivals are stuck in the pits.  

The long-rumored U.S. nuclear energy revival is nowhere in sight, despite President Obama's "all-of-the-above" campaign rhetoric. And while the shale gas revolution can't be ignored as a contributing factor, knee-jerk opposition from extremists, and the daunting regulatory climate such resistance creates, very likely trumps market conditions as a primary cause. And building new coal-fired power plants isn't any easier, given a wave of EPA carbon mandates (backed up my court rulings) that seem designed to outlaw America's most abundant domestic energy source. Add in all the direct and indirect support and subsidies renewables receive, including mandates that guarantee them a market share, and it's not easy to see why these niche energy technologies appear to be on such a roll.

Force them to compete in an honest and free energy market, in which politicians aren't rigging the game in favor of politically-popular "pets," and the new capacity added by wind and solar would be what it's been for decades -- relatively insignificant, in the grand scheme of things. All these trend lines show is that America's foolish rush down the "green energy" rabbit hole is accelerating, as it abandons tried-and-true for pie-in-the- sky.      

Nor does this gloating by "green energy" proponents take into account the quality of the energy being added, though that matters a great deal because not every megawatt is created equal. What counts most in this modern industrial society, which requires and expects on-demand energy, is dispatchability -- the ability of a generating entity to increase or decrease power (at the flip of a switch, ideally, or faster) in response to the ebbs and flows of demand on the grid. This kind of power, sometimes called "base load" or "peaking power," just isn't something intermittent energy generators like wind and solar can dependably provide, making them of marginal utility in the grand scheme of things.

Mild concerns about grid stability and reliability, in light of the looming carbon mandates, have recently been voiced by some members of the Federal Energy Regulatory Commission, which thankfully isn't chaired by shot-down Colorado nominee Ron Binz. But such worries are predictably pooh-poohed by Democrats on the board, who would rather risk rolling brownouts than inject a little realism into the debate. They might look to Germany as a case study in what can happen, in terms of grid instability, when you stumble dangerously far down this particular path.      

One day, perhaps, the grid won't function as it does today. One day, perhaps, we'll have the ability to store-up intermittent energy and dispatch it on-demand, addressing this deficiency. But until that someday arrives we're stuck with the reality of the grid as it works now, which limits renewables to a niche roll. Simply touting added capacity, without also examining what kind of capacity is being added, seems like just another effort to lead energy illiterates down the primrose path.     

Green Bubble Bursting

Defy the logic of the market and the market will eventually have its revenge.

Panacea-peddling politicos have been using our tax dollars to prop up "green economy" fantasies that don't make market sense. And that "bubble" -- like all the government-induced bubbles before it -- is destined to burst.

Nothing will really improve in America as long as good intentions continue to be an acceptable excuse for bad results.

Bjorn Channels Bastiat to Expose the "Green Jobs" Myth

Bjorn Lomborg, "the skeptical environmentalist," has a good piece in Slate taking on the myth of the "green energy" economy -- which should be required reading for all those who are still drinking the "new energy economy" Kool-aid peddled by one former Colorado governor. The claimed economic benefits are largely an illusion, Lomborg explains, which results from studying only one side of the ledger, a common mistake among economic illiterates.

Lomborg's analysis is straight out of Bastiat, the free-market pamphleteer and popularizer who explained this oft-made mistake in a famous essay, "What is seen and what is not seen." Wikipedia explains Bastiat's point as follows, for those who aren't inclined to read the essay:

"One of Bastiat's most important contributions to the field of economics was his admonition to the effect that good economic decisions can only be made by taking into account the "full picture." That is, economic truths should be arrived at by observing not only the immediate consequences – that is, benefits or liabilities – of an economic decision, but also by examining the long-term consequences. Additionally, one must examine the decision's effect not only on a single group of people (say candlemakers) or a single industry (say candles), but on all people and all industries in the society as a whole. As Bastiat famously put it, an economist must take into account both "What is Seen and What is Not Seen." Bastiat's "rule" was later expounded and developed by Henry Hazlitt in his work Economics in One Lesson, in which Hazlitt borrowed Bastiat's trenchant "Broken Window Fallacy" and went on to demonstrate how it applies to a wide variety of economic falsehoods."

The "green energy economy" is an illusion generated by looking at only one side of a multi-sided equation -- by focusing on the apparently-obvious benefits and beneficiaries, while ignoring the less-obvious costs and economic casualties that stem from a government-ordered reallocation of scarce resources. The economic illiterate applauds the new job being "created" in the wind turbine plant -- a job being subsidized by federal or state "incentives" -- but ignores the job that's destroyed at the coal mine or on the drilling rig, all because politicians decide that they know better than the market does about how to organize the energy sector.

True "economic literacy" requires an ability to see not just what seems obvious, but what is harder to see but is just as consequential. When you see the picture in totality, the "green jobs" delusion disappears.

The Confession of Al Gore

Energy realist Robert Bryce (author of several excellent books on energy issues) writes about Al Gore's alcohol problem in the Daily Beast. It wasn't the devil, but raw presidential ambition, that lured the former divinity student over to the dark side. But now he's come clean, by joining an Ethanolics Anonymous 12-step program. It had to be good for his soul.

I seriously doubt this admission of fallibility by the High Priest of Environmental Hype will lead to other recantations, but one can always hope.

Xcellent Journalism

The Denver Post's Vincent Carroll should win some sort of journalism award for his series of columns -- here's the latest -- exposing the incestuous, three-way relationship between Xcel Energy, the Ritter Administration and the Colorado Public Utilities Commission. Spawned of this unholy trinity was a “green energy” bill passed in the last session, HB-1365, which puts the screws to Xcel customers in order to bankroll an unnecessary technology shift for the company, from coal-fired to natural gas-fired plants. This was also a huge gift to natural gas companies, while potentially putting coal producers on the ropes.

It all gives off a strong whiff of conspiracy -- an impression reinforced by the reluctance of key players to document the behind-the-scenes wheeling and dealing. Carroll already has written several columns (including this one) about how Xcel and the PUC are using a new two-tiered rate structure to gouge electricity users with what Mike Rosen has dubbed the "air conditioning tax," in the name of encouraging energy efficiency. Now he’s taking a closer look at the coal-to-gas deal – and doing the public a huge service by staying on the scent.

Cloakroom collaborations between businesses and politicians aren't exactly new, or newsworthy. But what makes the PUC's behind-the-scenes involvement so troubling is the organization’s critical role in implementing legislation that it secretly helped craft. PUC Chairman Ron Binz, a social engineer with a strong green streak, told Carroll the PUC became involved in bill-crafting very late in the game. But any involvement is too much involvement, in my opinion.

The PUC is supposed to serve as an impartial and independent regulatory and rate-setting entity that primarily looks out for the public interest. It shouldn’t be a backroom deal-maker, or involved in drafting legislation it will later have to implement. The collaboration between Ritter, Xcel and the PUC (private environmental groups were also involved) ought to be investigated (and not just by one intrepid columnist), and implementation of the law should be suspended, if that’s possible, until the public knows everything that happened behind the scenes.

Blind Faith

Sometimes I get really annoyed with Denver Post columnist Vince Carroll. I guess it's a case of pundit envy.

He keeps writing the columns that I would be and should be writing, if only I had the time (and the skill). He did it again this week with a piece on New Energy Economics, a field of theory that has nothing to do with Real World Economics, as Carroll points out. But trying to reason with people on so-called "green energy" is like trying to get a Jihadist to join a kibbutz. It's a discussion, as Carroll point out, in which reason doesn't apply and trying to make sense is a waste of time.

Here's an excerpt:

"Maybe he needn't worry about making sense. A surprising number of Americans seem to believe the normal rules of economics and government investment don't apply to clean energy — that subsidies, for example, create more jobs than they destroy. Recently, when an Associated Press-Stanford University survey asked people whether policies to combat global warming "would cause there to be more jobs, fewer jobs or wouldn't affect the number of jobs," 40 percent said more jobs, 33 said "no effect" and only 23 percent said "fewer."

The most sensible answer — "government industrial policy is almost never an efficient way to allocate resources, so I'm guessing job growth will be slower as a result" — wasn't even an option.

Most commentators who support growing subsidies for clean energy dismiss the possibility that the money might do as much or more good invested, say, in other cutting edge technologies where the returns would be higher. Or, if they're like The New York Times' Thomas Friedman, they simply ignore the inevitable trade-offs. Friedman tirelessly promotes the idea that "building a clean-power economy" at government direction and support will make us "stronger, more innovative and more energy independent" — without ever asking the question, as George Mason professor Don Boudreaux points out, "compared to what?"

As Boudreaux explained on his blog, "How can Mr. Friedman be so sure that the benefits of windmills, solar panels, and battery-powered electric cars will exceed the costs of making — will exceed in value that which must be foregone to make — these green fetishes a reality?

"Of course, he cannot be sure. Not even close. Like so many other pundits, Mr. Friedman simply ignores, or arbitrarily discounts, the costs of turning his oh-so-lovely daydreams into quotidian actuality."

Last week, The Wall Street Journal's Jeffrey Ball reported that "government spending and price supports accounted for about one-third of the roughly $145 billion invested worldwide in clean energy in 2009 . . . ." Little wonder that under the Obama stimulus plan, "renewable energy producers are eligible for cash grants totaling 50 percent of the cost of projects they do this year — however high those costs go."

At what point does this gusher of subsidies become a scandal?"

Not any time soon, apparently.

It's not just the subsidies but the government mandates that are helping to prop-up an "industry" that can't stand on its own, an "economy" that makes no real market sense. Carroll points out that members of the Church of New Energy Economics, Colorado Chapter, are preparing to push for even higher statewide renewable energy production quotas this legislative session.

Heaven help the common ratepayers of Colorado if they succeed.