Posts Tagged ‘renewable energy’

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NYT Energy For Tomorrow Closing Plenary video

April 16, 2012

Lynne Kiesling

Last week the New York Times hosted a conference called “Energy For Tomorrow”, and they have made video from all of the sessions available; there are several sessions discussing energy efficiency, natural gas, renewables, etc. I watched the closing plenary on Friday, for which the topic was subsidies in any or all energy industries (sorry, WordPress and the embed code aren’t playing well together). Among the speakers it features Rice economist Amy Myers Jaffe  (to whom we have linked here before), as well as friend-of-Knowledge Problem Branko Terzic from Deloitte Consulting.

The discussion was good and very informative, raising many of the aspects of the pros and cons of subsidies depending on their form and how they are implemented. Naturally, much of the discussion addressed solar and the unintended (but easily anticipated) costs illustrated by Solyndra and by Spain, whether subsidies generate more overall net benefits than a carbon tax would, and whether subsidies should focus on driving down costs and getting to grid parity or on R&D. I’ll let you form your own conclusions on those topics.

I found that Amy Myers Jaffe’s comments were the closest to what I would have said if I were on the panel. She critiques the use of subsidies very effectively, and encourages an energy policy focus on “targeting the externality” and pricing it in the market. Branko’s comments highlight the political economy of subsidies and whether subsidies are hidden or in plain sight.

Recommended for easing into your Monday.

Posted in Economics, Electricity, Regulation | Tagged , , , | 1 Comment »

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Measuring success by how much you spent on the program: A renewable energy example

April 10, 2012

Michael Giberson

In general, in public policy analysis, you’d like to judge ultimate success or failure of a program by its net results, by actual benefits less the costs involved in achieving those benefits. Admittedly sometimes benefits are hard to measure, but ultimately the point of a policy change is to bring about some improvement in something somewhere. Ultimately it would be nice, once a program is done, to try to find and measure that improvement.

What we often get instead, however, is an attempt to infer a benefit based on the expenditures on the program: how much money was spent, how many people were employed, how many miles of ditches were dug, and so on. This is, more or less, what we see this week from the U.S. Department of Energy in the study it commissioned from the National Renewable Energy Lab on the impact of the Section 1603 Treasury Grant Program.

The Section 1603 grants were payments made to qualifying renewable power projects in lieu of those projects claiming the Investment Tax Credit or Production Tax Credit subsidies for which the projects would have otherwise qualified for. The NREL study looked at the $9.7 billion in program spending up through November 10, 2011; by the time the program ended it’s three-year run in December 31, 2011 over $11 billion in federal funds had be committed.

The DOE asked NREL to estimate the effects of the 1603 program on jobs and economic expenditures. In NREL’s report they explicitly state that their work is an estimate of “gross jobs, earnings, and economic output.” This means that they don’t consider any private sector crowding out, any disincentives from the taxation needed to support the program, any consequences from duplication of other government incentive programs, and so on. They simply treat the federal resources as if it were manna falling from the heavens, and the jobs, capital, and industries that became involved in building renewable power plants would have otherwise sat idle. (Note that I’m not criticizing NREL in performing just a piece of the overall analysis, they just did the work that DOE asked for and paid them to do.)

But note that this is primarily a study which just measures the expenses of the program and a part of what the expenditures bought. So, it is a partial study of the costs of the Section 1603 program, and not any kind of estimate of any of the benefits of the program.

Nonetheless, in the DOE press release accompanying publication of the study, they said the study found “the program has been a huge success.” How does it justify its claim of success? By noting how much was spent, how many people were employed, and how many things were subsidized by the program.

The DOE is not the only one to claim success. At Climate Progress, Stephen Lacey’s assessment is titled, “Grant Program Supported Up To 75,000 Wind And Solar Jobs: Congress Killed It Anyway.” Lacey’s post does mention some of the construction activity might have happened even without the grants, and he observes it estimates just the gross impact (and, by implication, doesn’t reflect any negative effects due to the crowding out of unsubsidized economic activity). But along the way Lacey keeps claiming the program was a success. How does he know? Well, he summarizes from the NREL report: the government spent a lot of money, hired a lot of people, and subsidized the purchase of a lot of things.

Great, but resources consumed is not a measure of success. Any fool can spend money, but spending it well can be a challenge. Is there any evidence in the NREL report that the money was well spent?

If the answer to that question is “no,” then we can’t conclude that the program was a success.

ADDITIONAL LINKS: Reactions to the NREL report from North American Windpower, Solar Industry magazine, and Clean Technica. Rep. Ed Markey (MA) cited the report in calling for Republicans to support “revisions to the tax code that level the playing field for clean energy.”

Posted in Energy markets, Environmental policy, Politics, Regulation | Tagged , , | 3 Comments »

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Natural gas is too cheap and too plentiful

December 2, 2011

Michael Giberson

Russel Smith thinks we should use government power to limit natural gas production in order to boost gas prices. Why? Because he is the executive director of the Texas Renewable Energy Industries Association and cheap and plentiful gas is cutting into the business opportunities of renewable energy companies.

“The price is so low, there’s so much being produced, and it’s perverting the effort to move renewables into the marketplace,” he said.

He continued:

With the addition of shale gas to the marketplace and continuing low gas and power prices, Smith said renewables have been unable to gain the traction that was anticipated a few years ago.

“Because prices are so low, the momentum to bring large-scale solar and wind, especially solar, to the market has been somewhat stymied,” he said. “The differential in the price of natural gas and solar wasn’t there five years ago as momentum was building.”

The article said Smith initially suggested the idea of regulating gas production to spark discussion during a conference panel. (Reminds me of the Adam Smith quote on business gatherings: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”)

If he can’t convince regulators to limit gas production, Russel Smith suggested that government could do more to boost demand for natural gas: exports, LNG for long-distance trucking, anything that might help boost the price of the competition. Such moves would, said Smith, “improve the situation for natural gas and everyone else.”

Not quite everyone else, right?

Posted in Energy markets, Environmental policy, Regulation, Uncategorized | Tagged , , | 3 Comments »

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Wherein the jobs jobs jobs rhetoric hampers solar power development

November 4, 2011

Michael Giberson

If you believed what politicians say about green energy and jobs, you probably think they fit together like peanut butter and jelly squished between layers of bread. Has there been a renewable power subsidy announcement or ribbon-cutting ceremony where the word “jobs” was not featured in the first two or three sentences uttered by politicians? When it comes to public policy, job counting is the new measure of policy.

So in the outer suburbs of Phoenix, Queen Creek town officials counted up the jobs associated with a couple of solar power projects proposed to occupy a large bit of their industrially-zoned property with the help of some town economic development funds. Turns out it doesn’t take a lot of people to maintain a large-scale PV power system, and they’re mostly low level maintenance workers. The jobs-counting is giving the town second thoughts about the projects.

Now, in some big-picture, overall costs-and-benefits, thorough and balanced look at energy technologies, that it doesn’t take a lot of highly paid professionals to operate a PV solar power facility is a good thing. It is one of the reason that PV power has such a low marginal cost of operation. But in the kookier world where local economic development, renewable power rhetoric, and taxpayer subsidies collide, jobs are counted as benefits and then the analysis stops.

Two comments: First, PV power remains more expensive than alternative sources of power even admitting the presence of larger external costs for fossil-fueled power plants. We likely would be better off if money currently being used to build solar projects now were spent on additional research instead. Queen Creek may be on the right track, even if for the wrong reason. Solar advocates are promising that grid-parity is just around the corner, so why are we wasting money building inefficient projects now instead of spending that money on getting us around that corner?

Second, the number of jobs a policy is expected to create has very little relevance to the evaluation of public policy proposals. Mostly what matters is whether the benefits of a policy proposal exceed the projected costs (plus, you know, those old-fashioned ideas about the proper scope of government and trying not to infringe on people’s rights).

Environmental economist John Whitehead is right to hope that environmental policy creates few jobs, because, as he explains, it would mean that businesses have found lower cost ways to get cleaner air and water.

Posted in Electricity, Energy markets, Environmental policy, Technology | Tagged , , | 3 Comments »

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At Freakonomics, the realization that state solar power policies may be less than optimal

August 11, 2011

Michael Giberson

File it under “Ya think???”

A post at Freakonomics by Steve Sexton concludes that California’s solar power subsidies may not be making the best use of the technology. Sexton points out, for example, the 1,923 residential rooftop systems installed in cloudy San Francisco rather than sunnier California locations:

If San Francisco’s residential solar panels were relocated to Apple Valley, they would produce another 2.1 million kilowatt-hours (kWh) of electricity each year—enough to power 320 average California homes.

Similarly, we could consider state policies that made New Jersey one of the fastest growing markets for solar power panels. Installing solar panels in New Jersey instead of the sunnier desert southwest is like throwing away about 30 percent of the power production potential of the equipment.

Posted in Electricity, Energy markets, Environmental policy | Tagged , , | 2 Comments »

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More on Evergreen Solar’s move to China

January 20, 2011

Lynne Kiesling

As an addendum to Mike’s post Monday about Evergreen Solar and Ed Glaeser’s comments, note that WW at The Economist’s Democracy in America blog has also posted some remarks on the subject. In particular, he focuses on the use (or uselessness) of solar technology subsidies as social policy:

If subsidies for solar-panel manufactures is good policy, that’s because it forestalls future costs to the economy and the environment by hastening the day alternative-energy sources become cheaper than coal and oil. But these supports make sense neither as a way of creating jobs nor as a way of reducing income inequality. Indeed, because state subsidies to industry so rarely produce a stable source of jobs or growth, in the end they tend to amount to little more than transfers of taxpayer money to rich people.

Posted in Economics, Environmental policy, Technology | Tagged , | Comments Off

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Evergreen Solar moves manufacturing to China

January 18, 2011

Michael Giberson

In my view most “green jobs” arguments are bunk. While such estimates may have their practical uses, for the most part they are convenient lies. Industry lies to politicians and bureaucrats to get subsidies, and politicians recycle the lies to get votes. My view is not particularly subtle.

Edward Glaeser provides a subtler view, illustrated in his assessment of the most recent “green jobs fiasco” argument. Evergreen Solar recently decided to move its manufacturing plants from Massachusetts to China. Evergreen had received several million dollars in green energy and local economic development subsidies as it grew from an idea to an employer of 800 or so workers, but in the end lower costs (and an offer of still more subsidies from the Chinese government) led it to move manufacturing oversees.  Does this mean subsidies for green jobs don’t work?

Glaeser observes:

The main difficulty with solar energy has always been cost, which is why the falling price of solar panels that seemingly pushed Evergreen to close Devens is actually good news.

As long as solar panels are getting cheaper, we shouldn’t worry about where they are being produced. We should continue financing research on solar technology as long as that research continues to produce cost-cutting breakthroughs, like “string ribbon” technology, but we shouldn’t pretend that cheaper solar energy will end up employing millions of our less-skilled citizens.

And even more to the point:

Massachusetts’s edge lies in ideas, not products. Those ideas are best produced in creative clusters, built around cities, where knowledge moves easily from inventor to entrepreneur. The only production that really needs to occur in greater Boston is the early-stage manufacturing that can be an important part of the research process. Mature companies, like Evergreen Solar, naturally move their factories to lower-cost areas.

Posted in Economics, Energy markets, Environmental policy, Politics | Tagged , | 3 Comments »

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Speaking of smoke: Oregon’s only coal power plant may convert to biomass, but plan has many unknowns

November 9, 2010

Michael Giberson

The High Country News reports that Portland General Electric is considering shutting down its Boardman, OR, coal-fired power plant, with costs of Clean Air Act compliance cited as the cause.  However, another option under consideration is conversion of the plant to biomass, more specifically converted to use a torrefied Asian cane that would be grown specifically to fuel the plant.

But it’ll take years of study to determine if that would work, plus at least $600 million to convert the plant, install additional pollution controls, and build a torrefaction facility. To reduce transport costs, PGE also would need to grow as much as 100,000 acres’ worth of cane on arable land within 50 miles of the plant. “It’s a giant experiment,” says Jaisen Mody, PGE’s general manager of generation projects, “with a lot of challenges.”

Logistical and financial challenges have long plagued biomass power plants, regardless of fuel source. The industry peaked in the mid-’90s; since then, it’s been hampered by supply difficulties, deregulation and the relatively low cost of fossil fuels. This summer, plans for a $500 million, 107-megawatt hybrid solar thermal and biomass plant in Fresno County, Calif., were scrapped; developers blamed project economics and an inadequate local biomass supply. An $8 million plant built in 2007 to power a Nevada prison with forest waste was shut down in September, after running into wood-supply problems and local clean-air standards more stringent than the federal government’s. Still, “if the world puts a price on carbon,” says Lee Rybeck Lynd, biomass expert and professor of engineering at Dartmouth College, “we’ll see better economics and greater activity in biomass.”

That raises a more fundamental question: Just how green is biomass?

The article continues with a discussion of the “how green is biomass” question. Worth contemplation if you are interested in renewable power.

An assessment of “The Environmental Impact of Biofuels,” to be published in the Annual Review of Ecology, Evolution, and Systematics concluded:

Biofuels are the most land-intensive form of energy production. The land requirements for biofuels have potential negative consequences for biodiversity and GHG emissions by causing, either directly or indirectly, the conversion of natural ecosystems to cropland. Although the magnitudes of these effects are poorly constrained, we can identify strategies to mitigate these effects. Development that follows the mitigation hierarchy can dramatically improve outcomes for biodiversity. The mitigation hierarchy follows these steps for development: (a) avoid sensitive areas, (b) minimize impacts through best practices, (c) restore areas after use, and (d ) fund compensatory offsite mitigation. In the case of conversion to biofuel crops, avoiding sensitive areas is perhaps the most important and complex of these steps. [Citations omitted.]

Since the PG&E proposal would convert existing crop land (given the area, wheat is likely the displaced crop) to biomass plants, it avoids direct conversion of undeveloped lands to agricultural use. On the other hand, unless abandoned or marginal crop land it used then at the margin either some other farm land must be added to replace the lost production or food costs will rise.

Posted in Electricity, Energy markets, Environmental policy | Tagged , | 1 Comment »

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Sunny Texas and solar power

November 8, 2010

Michael Giberson

The Houston Chronicle reports the growing interest in Texas in still-expensive solar power:

Surely some wiseacre is on record observing that there are two things Texas has plenty of: hot air and hot sun.

But Texas may eventually have the last laugh. The state, which already leads the nation in turning wind into electricity, has quietly begun to harvest sunlight on a large scale.

Its first solar farm, an array of 215,000 photovoltaic panels that capture sun rays and turn them into power, went on line Thursday in San Antonio. Statewide, at least six more projects are in earlier stages of development.

Who ends up laughing may depend on who ends up paying for the projects. In this case the captive customers of San Antonio municipal electric company CPS Energy are on the hook for a 30 power purchase agreement. Currently solar power projects remain much more expensive than many other technologies for producing electricity.

Posted in Electricity, Environmental policy | Tagged , , | Comments Off

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Harder to hand out subsidies than you think

August 20, 2010

Michael Giberson

It is harder to hand out subsidies than you think, or at least hard to do it well.

The Arizona Republic explains some of the difficulties utilities in the state are having with their renewable energy subsidy programs.  For example, when Salt River Project announced it was going to cut it’s subsidy for home residential solar installations, a rush of last-minute applications for the higher subsidy rate cost the utility millions.

When Arizona Public Service saw its subsidy budget running out, it too dropped its subsidy rate, but to avoid a last minute rush like SRP, Arizona Public Service cut it’s rebate without advance notice. The sudden change surprised contractors and consumers who had consummated deals without knowing that the rebate had changed, and many of the consumers then wanted out of the deals.

One of the problems highlighted in the article comes from a whipsaw effect on contractors who see booms and busts in installation businesses when subsidy rates jump around. Of course these difficulties don’t have anything to do with renewable power per se, just with the general difficulty of program design and implementation. So don’t go thinking, “Aha, I knew renewable power was bad all along.”

(However, if you come away from the story thinking, “Aha, I knew electric utilities were not very sophisticated in understanding consumer behavior beyond what shows up in a load profile ….”)

Posted in Electricity | Tagged , | 2 Comments »

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