Features

Production Tax Credit: High Cost Subsidy for Low Value Power

by Marlo Lewis on October 29, 2012

in Blog, Features

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In Wind Intermittency and the Production Tax Credit: A High Cost Subsidy for Low Value Power, economist Jonathan Lesser finds that “the vast majority of the Nation’s wind resources fail to produce any electricity when our customers need it most.” He also cautions that the wind energy production tax credit (PTC), which would add $12.2 billion to the federal deficit if Congress extends it for another year, adds billions of dollars in hidden costs to ratepayers “while undermining the reliability of the grid.”

Lesser’s analysis is based on nearly four years of data from three interconnection regions that account for over half of total U.S. installed wind capacity: Electric Reliability Council of Texas (ERCOT— over 10,000 MW of wind capacity), the Midwest ISO (MISO — almost 12,000 MW of wind capacity), and PJM Interconnection (PJM — over 5,000 MW of wind capacity).

In all three regions, over 84% of the installed wind generation infrastructure fails to produce electricity when electric demand is greatest.

In MISO, only 1.8% to 7.6% of wind infrastructure generated power during the peak hours on the highest demand days. In ERCOT, 6.0% to 15.9% of installed wind generated power, and in PJM, between 8.2% and 14.6% of wind produced power.

Demand for electricity is highest in the summer, especially during heat waves. But that is often when the wind stops blowing. The July 2012 heat wave is a case in point:

The July 2012 heat wave in Illinois, where temperatures soared to 103 degrees in Chicago, provides a compelling example of wind generation’s failure to perform when needed most. During this heat wave, Illinois wind generated less than 5% of its capacity during the record breaking heat, producing only an average of 120 MW of electricity from the over 2,700 MW installed. On July 6, 2012, when the demand for electricity in northern Illinois and Chicago averaged 22,000 MW, the average amount of wind power available during the day was a virtually nonexistent 4 MW.

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U.S. Biofuel Expansion Cost Developing Countries $6.6 Billion: Tufts

by Marlo Lewis on October 12, 2012

in Features

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U.S. biofuel expansion has cost developing countries $6.6 billion in higher food costs, estimates Tufts University economist Timothy A. Wise in Fueling the Food Crisis, a report published by ActionAid. A 10-minute video interview with Wise about his research is available here.

The 2007 Renewable Fuel Standard (RFS), established by the Energy Independence and Security Act (EISA), exerts long-term upward pressure on grain prices by diverting an ever-growing quantity of corn from food and feed to auto fuel. This is great for corn farmers but not good for U.S. consumers and harmful to millions of people in developing countries, many of whom live in extreme poverty.

“Commodity prices are a small percentage of the retail price of food in the US” because “we heavily process our food,” notes Wise. In contrast, in developing countries, ”commodity prices are a bigger percentage of the retail price, in part because people buy whole foods more often than processed foods.” Even small commodity price increases ”can have a big impact on local market prices in developing countries.”

As it happens, during the same period that U.S. ethanol production and corn prices increased, many developing countries became more dependent on grain imports to feed their people and livestock. The recent drought-induced spike in U.S. corn prices is “just the latest episode in a devastating, protracted global food crisis that has pushed millions into poverty and hunger around the globe over the past 6 years,” argues the ActionAid report.

To assess the impact of biofuel expansion on developing countries, Wise used a conservative estimate of ethanol’s contribution to corn prices and multiplied that by the quantity of U.S. corn imported by those countries. A summary of key findings follows:

  • Net Food Importing Developing Countries, among the most vulnerable to food price increases, incurred ethanol-related costs of $2.1 billion.
  • Thirteen developing countries incurred per-capita impacts greater than Mexico’s (where tortilla prices have risen 69% since 2005), and they include a wide spectrum of large and small countries from all regions of the developing world – Colombia, Malaysia, Botswana, Syria.
  • North African countries saw large impacts, with $1.4 billion in ethanol-related import costs, led by Egypt ($679 million). Other countries experiencing social unrest – Tunisia, Libya, Syria, Iran, Yemen – also suffered high impacts, highlighting the link between rising food prices and political instability.
  • Central American countries felt impacts nearly those of Mexico, scaled to population. The region has seen its dependence on food imports rise over the last 20 years, and corn imports cost an extra $368 million from 2006-11 due to U.S. ethanol expansion. Guatemala saw the largest impacts, with $91 million in related costs. In 2010-11 alone, U.S. biofuel expansion cost Guatemalans $28 million – an amount nearly equivalent to U.S. food aid to Guatemala over the same period.
  • Latin American partners to trade agreements with the United States saw high costs, as import-dependence grows. The six-year ethanol-related cost of corn imports was $2.4 billion for Latin American nations involved in NAFTA, CAFTA-DR, and the bilateral agreements with Panama, Colombia, Peru, and Chile.

Why Can’t We Get All Our Electricity from Wind?

by Marlo Lewis on October 4, 2012

in Features

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Wind energy advocates often point out that a State, the U.S., or the entire world has enough wind energy to supply all of its electricity needs many times over. Writing in Scientific American, for example, Mark Jacobson and Mark Delucchi note that the world in 2030 is projected to consume 16.9 trillion watts (terawatts, or TW) of power, with about 2.8 TW consumed in the U.S. Total wind flows worldwide generate about 1,700 TW, and accessible wind resources total an estimated 40-85 TW. 

Based on such math, the American Wind Energy Association (AWEA) argues, for instance, that Arizona has enough wind to meet 40% of its electricity needs, Michigan wind resources could meet 160% of the State’s electricity needs, and wind in Oklahoma could provide nearly 31 times the State’s electricity needs. Yet despite ratepayer subsidies, special tax breaks, and renewable energy mandates and goals in 37 States, wind supplied 2.2% of total U.S. electric generation in 2010. Why don’t we get lots more of our electricity from this ’free,’ ‘non-polluting’ ‘renewable’ source?

The chief impediments are wind energy’s inherent drawbacks. First, wind energy is intermittent — at any given time the wind may blow too hard or too soft or not blow at all. Second, wind is non-dispatchable. When Shakespeare’s Owen Glendower boasted, “I can call spirits from the vasty deep,” Henry Hotspur replied: “Why, so can I, or so can any man; but will they come when you do call for them?” Like Glendower’s spirits, the winds answer to no man. The wind is not ours to ’dispatch’ as electricity demand rises or falls. 

There are three main ways of compensating for wind’s intermittency and non-dispatchability — pumped storage (pump water uphill when there’s too much wind relative to demand; let it run downhill and drive turbines when there’s too little wind), natural gas backup generation, and wind dumping (idle the turbines when demand is low). Incorporating those techniques to keep supply in balance with demand adds to the cost of wind electricity, which is typically more costly than coal- and gas-generated electricity even without storage and backup.

What’s more, according to a new Reason Foundation/Independence Institute report, the storage, backup, and idling costs become prohibitive as wind’s share of total generation increases beyond 10-20%. [click to continue…]

House Conservatives Draw a Line on Wind Tax Credit

by Myron Ebell on October 2, 2012

in Blog, Features

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Forty-seven Republican Members of the House of Representatives sent a joint letter to Speaker John Boehner (R-Ohio) this week announcing that they oppose including a provision to renew the wind production tax credit for another year in any broader legislation.  The letter concludes, “We believe that the Solyndra scandal has demonstrated that it is time for the federal government to stop picking winners and losers in the energy marketplace.  Twenty years of subsidizing wind is more than enough.  Our nation can simply no longer afford to pick winners and losers in the energy marketplace.  The PTC should expire at the end of the year under current law.”

Wind installations completed before the credit expires at the end of this year will still receive the 2.2 cents per kilowatt hour subsidy for ten years.  The one-year extension voted out by the Senate Finance Committee in early August would actually expand the program by allowing wind investors to claim an immediate 30% investment credit instead of having to wait ten years for a full payout and by allowing projects started (but not finished) next year to qualify.  The Congressional Budget Office estimates that the Senate version will cost $12 billion over ten years.

The joint letter was organized by freshman Representative Mike Pompeo (R-Ks.), who has led the effort against all energy subsidies and mandates in this Congress, including the T. Boone Pickens Payoff Plan to subsidize natural gas trucks and filling stations.  Crony capitalists have hit back with numerous ads attacking him in his Wichita-centered district.

Support for the wind and solar tax credits is pretty uniform among Democratic Members of Congress.  Among Republicans, it tends to split along State lines.  Republican Members representing the 29 States with renewable portfolio standards (RPS) for electric utilities tend to support the tax credits because the subsidies lower the cost of renewable electricity.  Republican Members representing States without renewable requirements generally oppose the credits because taxpayers from their States are subsidizing the use of renewable energy in other States.  Here’s a map that shows the various state renewable requirements.

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Polling Purple, Spinning Green

by Marlo Lewis on September 28, 2012

in Features

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Polling these days is often a form a spin. Pollsters artfully phrase and sequence questions to elicit the answers the sponsor is paying for. The sponsor then uses the answers to influence the voter attitudes he pretends the poll merely reflects. The sponsor bets that more voters will support his agenda if they believe (however mistakenly) that most of their neighbors do too. It’s the old self-fulfilling prophesy trick.

Especially during the silly season, some organizations spend lots of cash trying to manufacture the appearance that their preferred candidate has already won. Their operative premise is that you can fool most of the people most of the time — or at least hoodwink enough people in swing (purple) states to make a difference at the ballot box.

What prompts this reflection is an article in today’s Greenwire about an opinion survey of swing state voters conducted by Public Policy Polling for the Natural Resources Defense Council (NRDC). The poll allegedly finds that voters in eight swing states prefer by 57% to 32% a presidential candidate who supports EPA regulation of mercury emissions from coal-fired power plants. That candidate, of course, is Barack Obama.

As discussed in previous posts on voter surveys conducted by Public Policy Polling, the trick is to frame the question so that most respondents give the sponsor’s preferred answer. Here’s the question as described in Greenwire:

Without specifying Obama’s or Romney’s position, the telephone survey asked voters: “One candidate for president supports EPA standards to reduce toxic mercury pollution from power plants; the other candidate says these limits would be bad for business and EPA should not reduce mercury pollution. Would you be more likely to vote for a candidate who supports EPA standards to reduce toxic mercury pollution or one who opposes them?”

In essence, do you want more or less “toxic mercury pollution” in the environment? Unless you happen to be a ”toxic mercury polluter,” you are more likely to respond that you are “more likely” to vote for the guy who wants to reduce “toxic mercury pollution.” This framing abstracts from all the scientific, technical, and economic information that a presidential candidate would need to make a rational choice in the public interest. 

By the EPA’s own reckoning, the costs of the mercury reductions required by the agency’s Utility MACT Rule exceed the quantifiable health benefits by a ratio of 1,600 to one or even 19,200 to one. And in the 22 years since Congress tasked the EPA to study the health risks of mercury, the agency has not identified a single child whose learning or other disabilities can be traced to power-plant mercury emissions. 

Include those facts in the question along with the statement that the EPA policy would be ”bad for business,” and the results would undoubtedly be very different from those NRDC is touting to the media.

Cloud Computing and Kyotoism: An Update

by Marlo Lewis on September 26, 2012

in Features

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Wouldn’t you know it, the day after I review Mark Mills’s analyses (in 1999 and 2011) of the digital economy as a key driver of demand growth for coal-fired electric power, I receive an EnergyFactsWeekly in my email box featuring new analysis by Mills on that very topic. It also contains links to two other related commentaries by Mills.

In The Efficiency Wall and the Future of the Internet’s Energy Cost, Mills reports that “the historic gains in computing energy efficiency started slowing down in 2005″ due to the “inherent physics” of existing chip technology. During the same period, however, ”the growth in global traffic on the Internet has continued rising at the same old staggering exponential rate.” The upshot? “This combination arithmetically guarantees a higher growth rate now in the total energy consumed by the Internet.”

 

Computing efficiency gains are rapidly approaching an “asymptotic wall” much as the power of jet engines and cruise speed of jet aircraft did in 1960.   

Jet engine power (measured in terms of the critical aviation metric, power per unit of weight) rose exponentially for the 20 years after invention, then hit a wall dictated by the inherent physics of the engines and materials. Consequently, the average cruise speed of jet aircraft also hit a wall.

“But,” notes Mills, ”there is a critical difference between aviation and digital traffic: the former rises linearly with population and wealth, while the latter grows exponentially as new applications continue to explode for Big Data.”

New materials and technologies are improving the energy efficiency of computing, but, says Mills, not enough to halt the growth in aggregate demand. He concludes with two predictions and a policy recommendation:

  • Digital energy consumption will rise, locked into the physics of supply and economics of demand, and
  • Energy costs will be increasingly dominated by factors external to the Internet, especially the cost of electricity. Cheap power will matter even more in the future.

We return to a familiar refrain? Dig more coal. [click to continue…]

Cloud Computing: Friend or Foe of Kyotoism?

by Marlo Lewis on September 25, 2012

in Blog, Features

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As I sit here typing away, Amazon.Com’s Cloud Player serves up 320 tunes I’ve purchased over the past year and a half. I can play them anywhere, any time, on any computer with Internet access. I don’t have to lug around my laptop or even a flash drive. What’s not to like?

Our greener friends worry about all the power consumed by the data centers that deliver computer services over the Internet. Think of all the emissions!

A year-long New York Times investigation summarized in Saturday’s (Sep. 22) edition (“Pollution, Power, and the Internet“) spotlights the explosive growth of the data storage facilities supporting our PCs, cell phones, and iPods — and the associated surge in energy demand. According to The Times:

  • In early 2006, Facebook had 10 million or so users and one main server site. ”Today, the information generated by nearly one billion people requires outsize versions of these facilities, called data centers, with rows and rows of servers spread over hundreds of thousands of square feet, and all with industrial cooling systems.”
  • “They [Facebook's servers] are a mere fraction of the tens of thousands of data centers that now exist to support the overall explosion of digital information. Stupendous amounts of data are set in motion each day as, with an innocuous click or tap, people download movies on iTunes, check credit card balances through Visa’s Web site, send Yahoo e-mail with files attached, buy products on Amazon, post on Twitter or read newspapers online.”
  • “To support all that digital activity, there are now more than three million data centers of widely varying sizes worldwide, according to figures from the International Data Corporation.”
  • “Worldwide, the digital warehouses use about 30 billion watts of electricity, roughly equivalent to the output of 30 nuclear power plants, according to estimates industry experts compiled for The Times. Data centers in the United States account for one-quarter to one-third of that load, the estimates show.”
  • “Jeremy Burton, an expert in data storage, said that when he worked at a computer technology company 10 years ago, the most data-intensive customer he dealt with had about 50,000 gigabytes in its entire database. (Data storage is measured in bytes. The letter N, for example, takes 1 byte to store. A gigabyte is a billion bytes of information.)”
  • “Today, roughly a million gigabytes are processed and stored in a data center during the creation of a single 3-D animated movie, said Mr. Burton, now at EMC, a company focused on the management and storage of data.”
  • “Just one of the company’s clients, the New York Stock Exchange, produces up to 2,000 gigabytes of data per day that must be stored for years, he added.”

The impact of the Internet — or, more broadly, the proliferation of digital technology and networks — on energy consumption and greenhouse gas emissions has been a contentious topic since 1999, when technology analyst Mark P. Mills published a study provocatively titled “The Internet Begins with Coal” and co-authored with Peter Huber a Forbes column titled “Dig more coal: The PCs are coming.” [click to continue…]

Should the GOP Champion Climate Change as a National Security Issue?

by Marlo Lewis on September 19, 2012

in Features

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Yes, argues Daveed Gartenstein-Ross in The Atlantic (Sep. 17, 2012). Gartenstein-Ross is the author of Bin Laden’s Legacy: Why We’re Still Losing the War on Terror. I haven’t read the book, but judging from the favorable reviews, Gartenstein-Ross has the ear of defense hawks of both parties. Does he offer sound advice on global warming?

In his Atlantic article, Gartenstein-Ross chides Republicans for taking a “decidely unrealistic tack” on climate change. “The available evidence overwhelmingly suggests that climate change is real; that extreme weather events are increasing; and that this dynamic will have an impact on American national security, if it hasn’t already,” he avers. He goes on to blame this summer’s drought on global warming, citing NASA scientist James Hansen’s claim that the 2003 European heat wave, the 2010 Russian heat wave, and the 2011 Texas-Oklahoma drought have “virtually no explanation other than climate change.” (For an alternative assessment, see these posts.) 

Since 2010, notes Gartenstein-Ross, the Department of Defense has classified climate change as a conflict accelerant — a factor exacerbating tensions within and between nations. Well, sure, what else is Team Obama at DOD going to say in an era of tight budgets when no rival superpower endangers our survival? The concept of an ever-deepening, civilization-imperilling climate crisis is an ideal mission-creep accelerant. 

Gartenstein-Ross concludes by urging Republicans to face “reality” and take action on climate change. However, he offers no advice as to what policies they should adopt. Does he favor cap-and-trade, carbon taxes, the EPA’s greenhouse gas regulatory cascade, ’all of the above’? Gartenstein-Ross doesn’t say. He ducks the issue of what economic sacrifices he thinks Republicans should demand of the American people. 

Below is a lightly edited version of a comment I posted yesterday at The Atlantic on Gartenstein-Ross’s article: [click to continue…]

Another Study Debunks RFA/Vilsack Claim Ethanol Reduced Gas Prices by $1.09/Gal

by Marlo Lewis on September 17, 2012

in Features

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A new study by the Energy Research Policy Foundation, Inc. (EPRINC) further debunks the popular talking point of USDA Secretary Tom Vilsack and the Renewable Fuel Association (RFA) that ethanol reduced gasoline prices by $0.89/gal in 2010 and $1.09/gal in 2011.

As noted previously on this site (here and here), Vilsack and the RFA tout a study by Iowa State University’s Center for Agricultural Research and Development (CARD), which concluded that if ethanol production had remained at year 2000 levels, the U.S. motor fuel supply would have been billions of gallons smaller and, thus, significantly pricier in 2010 and 2011. Subsequent studies by FarmEcon, LLC and MIT/UC Davis spotlighted CARD’s unrealistic assumption that the refining industry would not have increased gasoline production to meet consumer demand in the absence of policies mandating and subsidizing the blending and sale of increasing quantities of ethanol as motor fuel.

The EPRINC study (Ethanol’s Lost Promise: An Assessment of the Economic Consequences of the Renewable Fuel Mandate) shows, in addition, that if ethanol output had remained constant at the year 2000 level, refiners could have made up for the shortfall without importing or even refining “a single additional barrel of crude oil.” The Renewable Fuel Standard (RFS) has increased ethanol production by about 400,000 barrels per day (bbl/d) since 2000. A “remarkably small operational adjustment” in refineries’ product mix – a 1.8% increase in gasoline production — could have covered an ethanol shortfall of 400,000 bbl/d in 2011.

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Another Skewed Poll ‘Finds’ Voters Support Green Agenda

by Marlo Lewis on September 13, 2012

in Features

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An opinion survey commissioned by the Sierra Club supposedly shows that Oklahoma voters overwhelmingly favor the expansion of wind and solar power and the phase out of coal-fired power plants. An obvious implication is that Oklahoma Sen. James Inhofe, the Senate’s leading critic of the Obama administration’s anti-coal policies, is out of step with his constituents.

This is an old trick (see my post on a similar, NRDC-sponsored poll of Michigan voters in House Energy and Commerce Chairman Fred Upton’s district). When a pollster asks leading questions, he can usually elicit the answers his client is paying for.

In the Sierra Club-sponsored survey of 500 registered Oklahoma voters, 78% of those polled said they generally support expanded use of renewable energies like wind and solar power, and 62% said they would support phasing out some of the State’s coal-fired power plants.

The Sierra Club’s polling strategist waxed enthusiastic about the results, Greenwire reports:

“The results of this poll are remarkable,” Sierra Club polling strategist Grace McRae said in a statement.

“Across the nation, support for clean energy is high, but in Oklahoma, nearly 8 out of 10 voters support expanding use of clean energy resources like wind and solar. Oklahoma’s leaders and utilities should take note: Oklahomans want clean energy.”

Okay, let’s look at how the survey reaches those ”remarkable” results. [click to continue…]

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