William Yeatman

In February, the New York Times ran a stunning article, “A Huge Solar Plant Opens, Facing Doubt about the Future,” concerning the start of the Ivanpah project, the world’s largest concentrated solar thermal power plant. Situated in California’s Mohave Desert, Ivanpah generates up to 393 megawatts of solar power with 350,000 mirrors arrayed over five square miles, which redirect and focus the sun’s rays in the service of boiling water to drive conventional steam turbines. According to the New York Times report, industry analysts believe that the technology behind Ivanpah is no longer viable on the energy market, even though the project is brand new. It was “stunning,” to me, insofar as negative takes on green energy infrequently appear within The Grey Lady.

Yet the news also must have come as a shock to California ratepayers, who will be responsible for propping up this dead technology for the next two decades. In a recent interview on the invaluable Platts Energy Week with Bill Loveless, BrightSource Energy (the Ivanpah developer) senior vice president Joseph Desmond described the long-term purchasing power agreements his company signed with Pacific Gas & Electric and Southern California Edison as being akin to “building a hotel and having 100% occupancy guaranteed for twenty years the day you open.” Sounds like a great deal—for BrightSource.

It’s not as if Ivanpah’s power will be cheap. The exact terms of these long term contracts, known as purchasing power agreements, are not publicly available. However, we do know that the raw project costs were $2.2 billion, and that the peak power output is 393 megawatts. Because the sun only shines half the day, we can safely give the plant an effective capacity of 200 or so megawatts, although even this energy isn’t dispatchable. So that works out roughly to $2.2 billion for 200 megawatts of unreliable capacity, or $11,000/kilowatt. By comparison, the most recently constructed coal-fired power plant I can think of off the top of my head, Xcel Energy’s 760 megawatt Comanche 3 power plant in Pueblo, Colorado, which was outfitted with the latest, most expensive environmental controls, cost $1,700/kilowatt.*

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There exists an environmentalist strain of armchair psychology that dismisses the input of free-marketers on the issue of global warming, due their supposed affinity for conspiracy theories about runaway government. According to this line of reasoning, some “conservatives” are “individualists,” who innately reject global warming alarmism, because of an unfounded fear that mitigating climate change would endanger their civil liberties.

I’ve long dismissed this reasoning as self-serving propaganda. After all, what better way to de-legitimize your opponents than to call them kooks? It seemed to me like a cheap debate trick. Now, however, I’m not so sure. It’s not that I’ve joined the black helicopter crowd. Rather, evidence is mounting that environmentalists both prominent and plebeian are all-too willing to forsake my civil liberties in order to mitigate climate change, the supposed #1, end-all problem now facing mankind.

To wit, a group of Senators in January formed an ad hoc caucus of global warming alarmists and their first task was to pressure Sunday news programs on global warming coverage. To this end, nine Senators sent a letter to Fox News chief Roger Ailes, CBS News President David Rhodes, ABC News President Ben Sherwood and NBC News President Deborah Turness, deploring the paucity of coverage given to climate catastrophes. They concluded,

“We urge you to take action in the near term to correct this oversight and provide your viewers, the American public, with greater discussion of this important issue that impacts everyone on the planet.”

Not coincidentally, each network that received this letter ran a major climate change segment on its Sunday show within weeks.

Alas, these news nannies aren’t yet done. This week, one of the group, Sen. Sheldon Whitehouse, took to the floor of the floor of the world’s greatest deliberative body so as to bemoan the absence of coverage of the recent UN climate report by the cable news networks. No doubt, a strongly-worded letter “urging” the networks to “correct this oversight” is in the works.

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Readers of this blog are no doubt up to speed with the revolution in drilling technology—collectively known as hydraulic fracturing, or “fracking”–that has unleashed an American energy boom. Thanks to fracking, U.S. oil production grew by a record 1.136 million barrels a day last year to 8.121 million barrels a day. Gas production has increased by even greater leaps and bounds, such that there is clamoring on Capitol Hill to facilitate gas exports as a strategic geopolitical asset.

North Dakota has been a locus of the U.S. energy renaissance. It is the home of the Bakken formation, one of North America’s largest oil-rich shale plays unlocked by fracking. The economic impact has been eye-popping. The State now proudly claims the nation’s lowest unemployment and a per-person gross domestic output significantly higher than the national average. Last week, the Department of Labor released statistics showing that the citizens of North Dakota enjoyed the fastest year over year increase in personal income at 7.6 percent. Current per capita income in North Dakota is $57,000, second only to Connecticut, and has increased by almost 50 percent since 2009.

To better understand how the domestic energy industry is at work in North Dakota, check out the great infographic below, “The Burgeoning Bakken,” from Hart Energy by way of the Unconventional Oil & Gas Center.

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Last week, the EIA published a little-noticed analysis estimating that up to 25 percent of the nation’s coal-fired power plant fleet could be forced to retire due to the EPA’s 2012 Mercury and Air Toxics Standards rule, also known as the “Utility MACT.” Above, I’ve re-posted a chart that summarizes EIA’s findings.

Needless to say, these are significant retirements. While it’s true that EPA performed a reliability analysis of its Utility MACT, the Agency’s work was shredded by analysts at the Federal Energy Regulatory Commission. Notably, many of the coal plants in the northeast that are slated for retirement were called into service during the unusually cold winter of 2013-2014. Had they not been available, electricity and heating costs would have “skyrocketed.” After 2015, these plants will be shut down permanently. For more, see this recent New York Times article, “Coal to the Rescue, But Maybe Not Next Winter.” And those electricity generating units that decide to comply with the utility MACT, rather than retire, will be on the hook for almost $10 billion in annual compliance costs through 2020. Taking into account these direct and indirect costs, this is one of the most expensive regulations, ever.

That’s a description of some of the costs of the Utility MACT. Now, let’s turn to the “benefits,” which I’ve summarized in the graphic below.

That’s no joke: The actual justification for the Utility MACT, one of the most expensive and consequential regulations of all time, is to protect a supposed population of pregnant subsistence fisherwomen, who consume hundreds of pounds of self-caught fish from exclusively the most polluted inland bodies of fresh water. Don’t take my word for it! Below, I’ve posted this “evidence” of harm, as presented by the EPA.

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Perhaps you’ve heard or seen the eye-popping statistics, trumpeted by EPA and its supporters, regarding the incredible benefits supposedly wrought by the Clean Air Act.

In a recent study, for example, EPA claimed that in 2020 alone, the Clean Air Act would be responsible for “approximately $2 trillion” in benefits. Given that the costs of the Clean Air Act are estimated to be $65 billion in 2020, this represents a benefits-to-cost ratio of more than 30, which, of course, renders EPA’s work in a very favorable light. And it’s not just EPA trumpeting these numbers. Last week, Senate Environment and Public Works Chairwoman Barbara Boxer cited data from the aforementioned report, in order to rebut Republican criticisms of EPA Administrator Gina McCarthy. Indeed, environmental special interests always are quick to cite these benefits when they defend the agency they’ve captured.

Eighty-five percent ($1.7 trillion) of the $2 trillion number is derivative of two variables: (1) how many deaths EPA purports to prevent and (2) the supposed value of these prevented deaths. EPA forecasts that its regulations will prevent almost 240,000 deaths in 2020; the agency estimates that the value of a statistical life is about $7.4 million. Multiply those two data points, then adjust for inflation, and voila!—you’re at $2 trillion in “benefits” in 2020.

In this post, I will briefly explain that this result is a total sham, because the underlying numbers are unreliable to the point of being meaningless.

Start with EPA’s calculation of “prevented deaths”—i.e., the mortality benefits of environmental regulations. In fact, this estimate is based almost entirely on controversial, “secret” science. To be precise, in establishing a relationship between decreased air pollution and decreased mortality, EPA relies on decades-old data from the two reports, the Harvard Six Cities Study and the American Cancer Society’s Cancer Prevention Study II. So when EPA claims that it will prevent 240,000 deaths in 2020, this number is an extrapolation from these two key studies.

And yet, despite the evident importance of these two studies, EPA refuses to make publicly available the underlying data. For two years, House Science, Space and Technology Committee Lamar Smith has pressed the Agency to produce this “secret science.” And for two years, his requests have been rebuffed by the EPA. Remember, these studies were taxpayer funded. They serve, moreover, as the justification for public policy. And yet, EPA refuses to turn over the data to a Member of Congress. To read about Chairman Smith’s diligent efforts to unlock this secret science, see here, here, and here. Senate Environment & Public Works Ranking Member David Vitter also is investigating the matter. Suffice it to say for this post, EPA’s estimates of mortality avoided due to the Clean Air Act cannot be trusted.

What about the other variable, the value of a statistical life? How does the agency calculate this figure? The EPA does not place a dollar value on individual lives. Rather, when conducting a benefit-cost analysis of new environmental policies, the Agency uses estimates of how much people are willing to pay for small reductions in their risks of dying from adverse health conditions that may be caused by environmental pollution.

Below is the example provided by EPA:

“Suppose each person in a sample of 100,000 people were asked how much he or she would be willing to pay for a reduction in their individual risk of dying of 1 in 100,000, or 0.001%, over the next year. Since this reduction in risk would mean that we would expect one fewer death among the sample of 100,000 people over the next year on average, this is sometimes described as “one statistical life saved.” Now suppose that the average response to this hypothetical question was $100. Then the total dollar amount that the group would be willing to pay to save one statistical life in a year would be $100 per person × 100,000 people, or $10 million. This is what is meant by the “value of a statistical life.”

Simply put, this metric makes no sense. The “value” of each “prevented death” is ascertained by asking people how much hypothetical money they’d be willing to spend in order to avoid a fraction of one percent chance of death. How could this possibly have meaning? Absolutely nothing is concrete. The question doesn’t actually pertain to your money, after all. More importantly, there’s zero referent for estimating the value of reducing your mortality risk by a fraction of one percent. The “benefit” is a total abstraction.

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Nearly three years ago, in the immediate wake of the Fukushima Daiichi disaster, the Washington Post published a dispatch from its Tokyo correspondent Chico Harlan, reporting that Japan had turned to renewables:

A new energy policy, which Japanese Prime Minister Naoto Kan began to outline this week, would emphasize solar and wind power and require pricey investment and yet-to-be-determined innovation…Although the prime minister has set new [and ultra-aggressive renewable] energy targets, he has yet to give specifics of how those goals will be reached…”

I made light of the report, in particular the part about how the Prime Minister’s plan was based on an “as-yet-to-be-determined” innovation, which struck me as wishful thinking. At the time—May 29th, 2011, to be exact—I predicted that reality would intervene, and Japan would turn to coal to replace nuclear, because intermittent renewable energy simply cannot function as a base load power source. To be precise, I wrote,

When Japan starts building large plants, my bet is that they’ll be coal powered.

Nearly three years later, it’s come to pass. Below is the lede to an article from Friday morning’s Wall Street Journal

Japan is turning into a rare bright spot in the world coal market, stepping up coal-fired power generation to replace nuclear plants that went offline after the 2011 Fukushima accident.

Japan’s embrace of “dirty” coal, climate change notwithstanding, is a bow to reality. As I explained three years ago, renewables simply aren’t up to the challenge:

Electricity generation, generally speaking, falls into two categories: Base-load generation and peak generation. Basically, there’s a relatively stable “base”-line demand for electricity throughout the day, which is supplied by “base load” generation. From 4-6PM, when most people come home from work and turn on their air conditioners, televisions, and laptops, there is a spike, or “peak,” in electricity demand. Base load generation is met at the lowest cost by large power plants running at a high efficiency, like coal, nuclear, and hydro. Peak power is best supplied by natural gas power plants that can be ramped up and down most quickly and efficiently, although hydro is good for this, too, because the energy is stored [mechanically] and can be dispatched fast. Renewable energy, like wind and solar, is unreliable, so it’s good for nothing.

I was being cheeky when I said green energy is “good for nothing”; in fact, wind and solar power do produce energy, however inefficiently, and this energy does have value. Nonetheless, it’s true that wind and solar have next-to-no applicability as a base load source, due to the simple fact that a base load source MUST be highly reliable, which, again, is inherently untrue of wind and solar. To be sure, it’s possible we’ll have a breakthrough in battery technology. But we’re nowhere near that now, evidently, and until energy storage is commercialized, it remains true that renewable energy can’t replace conventional energy sources for base load. Because of this reality, Japan turned to coal.

Last Saturday, from 8:30-9:30 PM, I and thousands others joined my colleagues at the Competitive Enterprise Institute to celebrate Human Achievement Hour. The holiday is both a tribute to the human innovations that have allowed people around the globe to live better, fuller lives, and also a defense the basic human right to use energy to improve the quality of life of all people. To be precise, Human Achievement Hour is a cheerful response to the depressing alarmism of modern environmentalism. The gloomy greens propagate a message that virtually all economic development is evil, because it necessarily despoils pristine ecology. By celebrating Human Achievement Hour, we give ascendancy to mankind, and readily recognize that the surest path to both human and environmental well-being is wealth creation, fossil-fuel production, transportation, refinement, and consumption included.

In fact, Human Achievement Hour isn’t the only holiday observed on Saturday night, from 8:30 to 9:30 PM. Contemporaneously, the World Wide Fund for Nature sponsors Earth Hour whereby participants symbolically renounce the environmental impacts of modern technology by turning off their lights.

While Earth Hour supporters may suggest rolling brown-outs in India are desirable, we respectfully disagree. Reliable electricity is one human achievement people can celebrate. To this end, we advocated that people take part in Human Achievement Hour by keeping their lights on for one hour.

To learn more about Human Achievement Hour, see here or here. Below, I spoke about the holiday with Ezra Levant of Sun News.