Posts Tagged ‘renewable power’

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Bad news for the natural gas suppliers, but good news for natural gas consumers

January 13, 2012

Michael Giberson

I’ve been meaning to remark on natural gas prices for several days, especially since a regular reader pointed out that natural gas prices have reached their lowest levels in a decade. But now, in what may be a first, I’ll just outsource the discussion by favorably linking to a post on the Climate Progress blog.

By the way, note that the prices shown in the post’s graphic (from EIA) are average prices over 2011. Current prices for natural gas are about $1 below what is shown there. (In January, typically peak demand time for natural gas!)

In the post Stephen Lacey worries about the effects of low natural gas prices on renewable power, and it is a problem if you want to roll out more renewable power capacity anytime soon, but for consumers it is a win-win. Low gas prices push down now on (non-transportation) energy prices, particularly power prices. The delay in new installations of renewable power means that, when natural gas prices recover in a few years, the power plants built will have better technology than exists today. Meanwhile, the subsidies avoided will have a very small but beneficial effect on the federal government budget.

And if your primary concern is greenhouse gas emissions, note that natural gas-fuels power plants will continue to displace coal-fired power even as the additions of renewable power plants are slowed.

Posted in Electricity, Energy markets, Environmental policy | Tagged , , | 5 Comments »

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Is subsidising renewable energy is a good way to wean the world off fossil fuels?

November 17, 2011

Michael Giberson

The Economist is hosting an online debate on the motion, “This house believes that subsidising renewable energy is a good way to wean the world off fossil fuels.” Matthew Fripp of the Environmental Change Institute at Oxford University has presented the affirmative case for the motion, Robert Bradley, Jr., of the Institute for Energy Research has argued the negative.

In closing arguments, Fripp makes what seems to be the best possible case for a combination of directed renewable energy subsidy (either renewable portfolio standards or feed-in tariffs) and gradually increasing carbon tax. While actual policy is unlikely to be as gradual, certain, and efficient as Fripp suggests, it seems desirable for policymakers to at least try, right?

That is, it seems desirable for policymakers to aim for gradual, certain, and efficient policy support for renewable energy assuming we accept the goal of weaning the world off fossil fuels. Bradley doesn’t.

Against a proposition that is formally about the means to an end, Bradley closes by arguing against the end. He argues cheap energy is good energy:

Good public-policy intentions are not enough …. Higher-quality, less-expensive energy enhances living …. This fossil-fuel dividend, if you will, enables a variety of lifestyle enhancements, including those for better health. Wealth is health, and human health should be at the core of environmentalism.

To me Fripp’s polished policy scenario is unappealing in part because of how appealing he makes it seem. (!) I’m not at all ready to turn the energy industry over to a central planning bureau, even Fripp’s ideal which would limit its interventions to minimally intrusive ways of promoting renewable power while a carbon tax was phased in and then disappear. Government attempts to manage the economy tend to destroy economic value; Fripp hasn’t convinced me government has overcome the knowledge problems and coordination problems inherent in economics action.

When renewable energy sources earn a place at the “high-quality, less-expensive” table, we’ll all be wealthier and healthier for it. In the meantime, in a world with significant problems of poverty and disease, wasting resources to install inefficient technology on large scale is destructive of wealth and health.

NOTE: At the moment I’m posting, the reader voting shows 49% in agreement with the motion and 51% opposed. Today, November 17, 2011, is the last day for reader voting. My recommendation: if you like government planning for the energy economy, vote Yes; if you prefer wealth and health, vote No.

Posted in Electricity, Energy markets, Environmental policy, Politics | Tagged , , , | 9 Comments »

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Massachusetts observes that green power mandates may be raising consumer costs

November 10, 2011

Michael Giberson

Let’s just say when the best example of a success story is a long-term contract signed by a utility and the Cape Wind project, you haven’t exactly resolved concerns about the practicality or cost-effectiveness of the law.

From the Boston Herald, “AG: Energy costs rising under Mass. renewables law“:

The Green Communities Act, signed in 2008 by Gov. Deval Patrick, was intended to help Massachusetts wean itself off fossil fuels and reduce emissions that lead to global warming.

In remarks prepared for a legislative oversight hearing, [Massachusetts Attorney General Martha] Coakley indicated that a review by her office found plenty to like about the three-year-old law, along with some concerns.

“In short, we have found a number of benefits — including increased energy efficiency programs that lead to savings for many consumers,” Coakley said. “But we also have found that the (law’s) programs have escalating costs that will cause an increase in electricity rates.”

The cost of implementing the law will exceed $4 billion over the next four years, Coakley said, resulting in the estimated 7 percent increase in the total delivered costs of electricity to consumers and businesses. She noted that Massachusetts electric customers already pay some of the highest rates in the nation and that the state is “likely to remain at the top of that list.”

Okay, so they’ve identified the costs at over $4 billion for the next four years. The article doesn’t mention any estimate of the benefits created.

(Note that it wasn’t Coakley that cited the Cape Wind deal, but rather the state’s Secretary of Energy and Environmental Affairs and the chairwoman of the Department of Public Utilities.

“A long-term contract provides the certainty that can be critical in making financing available,” [DPU chairwoman Ann] Berwick said.

Of course she is right! A long-term contract can transfer a substantial portion of the riskiness from the private investors to the utility’s locked-in ratepayers. It can be a great deal for the investor, and I’m sure the investors are quite happy to have government policy and state policymakers helping to ensure a good return on their private investments.

Uh, and by the way ratepayers, your already high rates are going higher.)

Posted in Electricity, Environmental policy, Regulation | Tagged , , | 1 Comment »

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White House advisors: Federal loans for renewable power projects going to the wrong projects

November 5, 2010

Michael Giberson

From news reports:

The federal loan guarantee program for renewable energy projects should either be fixed or scrapped, senior White House advisors wrote in a memo to President Barack Obama last week.

Obama’s top environmental advisor Carol Browner, top economic advisor Lawrence Summers and Vice President Joe Biden’s chief of staff Ron Klain identified in a memo dated 25 October what they see as shortcomings of the section 1705 Energy Loan Guarantee program.

The program has been criticized for moving too slowly to give final approval for a significant number of projects and could be at risk of failure, the advisors warn. Not only does it provide incentives for too few projects, it may be picking the wrong ones: subsidizing projects that may have happened without subsidies or projects with weak economics that would struggle to find private financing, they wrote.

The advisors note the political ramifications of dropping the program. It is part of last year’s big stimulus package, and shifting its money elsewhere might suggest the stimulus was less than a resounding success. (Politics is like this, it is so hard to learn from your mistakes because you never admit to making any.)

But on this question of picking the wrong projects, I’m wondering what other kinds of projects there might be. Projects with solid economics will happen without subsidies* and projects with weak economics will struggle to find private financing.  I guess the advisors are hoping for projects with “baby bear bed” economics: neither too hard nor too soft, but just right.**

For more, here is a Wall Street Journal story with an example of a project that was going to happen anyway:

President Obama’s top advisers recommended cutting off funding for a federal loan-guarantee program meant to spur the construction of wind and solar farms and other alternative energy projects, saying taxpayer dollars might be better spent elsewhere.

But the advisers, including Mr. Obama’s outgoing National Economic Council Director Lawrence Summers, energy policy czar Carol Browner and Ron Klain, chief of staff to Vice President Joe Biden, warned Mr. Obama that pulling money from the program would risk antagonizing powerful allies in Congress, and would “signal the failure of a Recovery Act program that has been featured prominently by the administration,” according to an Oct. 25 memorandum viewed by The Wall Street Journal.

The memo questions the logic behind subsidizing a big wind farm project in Oregon that Energy Secretary Steven Chu praised last month as “part of the administration’s commitment to doubling our renewable energy generation by 2012.” Mr. Chu said the federal government would provide, subject to conditions, a partial guarantee for a $1.3 billion loan for the project.

But Mr. Obama’s senior advisers wrote in their memo that the wind farm—sponsored by Caithness Energy LLC and General Electric Co.—”would likely move without the loan guarantee.”

“The economics are favorable for wind investment given tax credits” and state regulations that require electric companies to boost their use of renewable power, they wrote.

The memo adds that the project’s corporate backers “would provide little skin in the game (equity about 10%),” while the government would provide “a significant subsidy (65+%).”

The memorandum also questions the project’s environmental benefits, saying carbon dioxide emissions “would have to be valued at nearly $130 per ton for CO2 for the climate benefits to equal the subsidies (more than six times the primary estimate used by the government in evaluating rules).”***

*By “may have happened without subsidies” they mean “may have happened without Section 1705 federal loan guarantees (but already enjoying the production tax credit or investment tax credit and state renewable power mandates and other federal state and local benefits.”)

**Goldilocks did eventually find that “just right” baby bear bed, but that was not the end of her story. I suspect that these reports are not the end of the story on failing policy ideas that can’t be let go.

***I’m shocked, shocked to find it claimed that subsidizing renewable power projects is an expensive way to obtain climate benefits. (Actually, I am kind of surprised to find Obama White House advisors making this claim.  Maybe they could turn their powers of analysis on the proposed National Renewable Portfolio Standards or the existing production tax credits.)

Posted in Energy markets, Politics, Regulation | Tagged | 1 Comment »

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Shifting policy extinguishes short-lived Spanish solar boom, fortunately

March 9, 2010

Michael Giberson

The New York Times has a fascinating story on the solar power industry boom and bust in Spain created by shifting public policies. Similar effects have been observed from shifts in subsidy support for renewable power development in the United States, though because the subsidy was smaller and spread over a larger area the consequences were not so dramatic as described in the Spanish solar policy case.

The renewable power industry usually takes these boom-and-bust cycles as evidence that long-lasting subsidies are needed, but it may just signal that the subsidies are poorly designed and so neither economically nor politically sustainable.

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

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Integrating variable energy resources to the electric power grid

January 26, 2010

Michael Giberson

Are their barriers impeding integration of variable energy resources to the electric grid? FERC wants to know:

The Federal Energy Regulatory Commission (Commission) seeks comment on the extent to which barriers may exist that impede the reliable and efficient integration of variable energy resources (VERs) into the electric grid, and whether reforms are needed to eliminate those barriers. In order to meet the challenges posed by the integration of increasing numbers of VERs, ensure that jurisdictional rates are just and reasonable, eliminate impediments to open access transmission service for all resources, facilitate the efficient development of infrastructure, and ensure that the reliability of the grid is maintained, the Commission seeks to explore whether reforms are necessary to ensure that wholesale electricity tariffs are just, reasonable and not unduly discriminatory. This Notice will enable the Commission to determine whether wholesale electricity tariff reforms are necessary.

Hmmm, “variable energy resources”?  Does that mean things like steam generation units that can be adjusted up and down over some range (but not things like a gas turbine that is either on or off, but not adjustable in between)? No, they mean “variable but not very controllable energy resources” such as wind and solar power.  They write: “For purposes of this proceeding, the term variable energy resource (VER) refers to renewable energy resources that are characterized by variability in the fuel source that is beyond the control of the resource operator.”

I wonder why they didn’t just use the term “renewable energy resources”? Were they afraid of offending hydro and geothermal interests?  Are they hoping to ease the taint of not-very-controllable from renewable energy resources?

The proceeding is “Integration of Variable Energy Resources” (FERC RM10-11-000). In paragraph 10, FERC states:

Our goal is not to adopt rules that favor one type of supply source over another. Instead, the Commission’s purpose in this proceeding is to investigate market and operational reforms necessary to achieve two goals: first, to ensure that rates for jurisdictional service are just and reasonable, reflecting the implementation of practices that increase the efficiency of providing service; and second, to prevent VERs from facing undue discrimination. These goals are consistent with the requirements of sections 205 and 206 of the FPA.

The challenge here is in separating the “due discrimination” from the “undue discrimination,” which is to say the charges and special terms and conditions applied to VERs that are reasonable given the character of the resource from the charges, terms and conditions which are unreasonable.

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

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Tres Amigas project discussed on public radio show

November 20, 2009

Michael Giberson

My most recent 15 seconds of fame*: The Environment Report: The ‘Tres Amigas’ Project. (Or, if you prefer, you can listen to today’s full 4:00 minute news segment.)

In the segment I make the outrageous claim** that the project is located in an area where many renewable power resources will be built.  The Environment Report is public radio news service focused on environment issues, they were interested in Tres Amigas transmission project because it is promoted as a “renewable energy hub.”***

 

*Actually, my part is slightly less than 15 seconds, closer to 12, but fame is generally parceled out in 15-unit intervals and I want it all.  The Tres Amigas segment is about a minute long.

**Actually, I make the relatively obvious observation described, but I’m trying to develop a reputation for outrageous claims in case, later, I want a job hosting a cable news program.

***For more substance on the Tres Amigas project, read the USA Today story, try my guest post at Alt Energy Stocks or see the earlier posts here at KP on the topic.

Posted in Electricity | Tagged , | 2 Comments »

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Long-distance transmission complements “local self reliance”

November 18, 2009

Michael Giberson

A few weeks ago we mentioned commentary by John Harrell of the Institute for Local Self Reliance asserting that the “last thing renewable energy needs right now are new transmission lines.”  The ILSR has a recent study suggesting the almost every state could be energy self sufficient relying only on in-state renewable power sources.  I remarked, “While I agree that ‘local self-reliance’ in energy may be possible, I don’t think most people are willing to pay the price of such extreme energy independence.”

Comes now Tom Konrad at the Clean Energy Wonk blog who takes a long hard look at the price of local renewable energy self-reliance as conceived of by the ILSR.  The short version of Konrad’s assessment is that (1) the high levels of renewable power proposed will require support from substantial quantities of relatively expensive energy storage, and (2) that transmission can reduce the amount of storage needed.  Those two points, combined with reasonable estimates of the costs of transmission and storage,  reveals that the energy storage + long-distance transmission approach dramatically reduces the cost of pursuing widespread renewable power deployment. (The full version of Konrad’s assessment provides a more complete takedown of the ILSR’s “Heresy on Transmission.”)

In other words, a little extra long-distance transmission investment would go a long way toward making the ILSR’s vision of widespread renewable power an attainable system.

Don’t get me wrong, I still think either vision is way-out-of-the-ballpark crazy for the foreseeable future.  Still, there is a difference between “astronauts landing on Mars” crazy, and “astronauts landing on Pluto” crazy.  Both are way, way out of the ballpark at present, but one will always be way more economical than the other.

[Konrad also blogs at clean energy investing site Alt Energy Stocks.]

Posted in Energy markets, Environmental policy | Tagged , | 5 Comments »

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The unequivocal superiority of the feed-in tariffs for renewable power?

August 13, 2009

Michael Giberson

At the IEEE Spectrum’s EnergyWise blog, Bill Sweet discusses one implication of current low power prices: even with generous subsidies, a potential wind or solar power plant project may not be profitable if power prices are expected to stay low.

Sweet seems to believe this is a problem that requires a solution.  In a parenthetical remark, he says:

(Note in this connection, however, the unequivocal superiority of the “feed-in” tariffs that countries like Germany and Spain have adopted to encourage investment in wind and solar. In those countries, investors are guaranteed prices for electricity generated by renewables over time, regardless of what happens to general electricity rates.)

If the goal of public policy is to encourage continued building of wind and solar power plants with no regard for whether anyone really needs or wants to pay for the output of those plants, then a feed-in tariff is just the thing.  (For background, see Wikipedia on feed-in tariff).

On the other hand, and maybe this is just the economist in me coming out, it seems rather sensible to have policies that provide larger inducements to build new power plants when more power plants are needed and smaller inducements to build new power plants when we already seem to have plenty of power plants available.

Posted in Electricity, Energy markets, Regulation | Tagged , | 1 Comment »

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