Broken Windows: Destroying Wealth To Create Green Jobs

25 Saturday Feb 2023

Posted by Nuetzel in Industrial Policy, Renewable Energy

Tags

Broken Windows Fallacy, Consumer Surplus, Dispatchable Power, Fossil fuels, Frederic Bastiat, Green Energy, Green Jobs, Job Creation, Keynesians, London’s Great Fire, Market Intervention, Michael Munger, Milton Friedman, Planned Obsolescence, Renewable Power, Societal Wealth

Investments in “green energy” create jobs, just like any other form of investment in physical assets. We’re told, however, that the transition to renewable energy sources will create a veritable jobs bonanza! Apparently, this is believed to be a great selling point for everyone to get behind. Sure, promoting job creation is always popular with politicians, and it is very popular with private actors seeking to win public funding of one kind or another.

The heavy emphasis on jobs creation brings to mind an old Milton Friedman story about a visit to China during which dignitaries brought him to a construction site, no doubt thinking he’d be impressed with their progressive investments in infrastructure. At the site, Friedman noticed workers digging a large trench or arroyo with shovels. When he asked why bulldozers or backhoes weren’t used, he was told that the jobs were too valuable. His response was something like, “Then have them use spoons!” The lesson, of course, is that merely creating jobs is not a prescription for building wealth and prosperity. But there is more at stake here than the low productivity of construction workers who lack the best tools.

There are some bad rationales for heavy investment in renewable energy sources, and I’ve addressed those at length previously. The appeal to job creation, however, is awful on simple economic grounds. It emphasizes a thing that is easily counted while ignoring massive costs that are generally untallied.

In the U.S. we have a huge base of productive capital that meets our energy needs, the bulk of which is built to utilize fossil fuels. That plant constitutes wealth to society, and not just to those with an ownership interest. Dispatchable power is available to the public at a rate below that at which they value the power. That ability to deliver consumer surplus on demand is a major aspect qualifying power capacity as societal wealth. The push for renewables, if wholly successful, would make the existing base of generating capacity redundant. There is no doubt that the ultimate goal of renewable energy advocates is to destroy existing capacity reliant on fossil fuels. They simply have not come to grips with the reality that it meets energy needs far more efficiently than intermittent renewables like wind and solar power. In spirit, the effort bears a strong similarity to destroying bulldozers to replace them with shovels, or spoons!

Recently, Michael Munger discussed the mistaken notion that renewable investments are justified based on job creation. He noted that with a coincident dismantling of the existing base of power generation, it amounts to exactly what Frederic Bastiat called the broken window fallacy, which insists that breaking windows is a great way to keep glaziers fully employed. There are many examples and variations on this idea, including so-called “planned obsolescence”.

Bastiat poked fun at an elite French government official who had marveled at the economic gains reaped in England with the rebuilding of London following the “Great Fire” of 1666. Bastiat engaged in some satire by suggesting that France could greatly benefit from burning Paris to the ground. But his point was serious: we often hear that reconstruction provides a silver lining for workers following hurricanes or other disasters. Fair enough: rebuild we must. The Keynesians among us would say it works out well for workers who are otherwise unemployed. Disasters destroy wealth, however, and often lives, not to mention opportunities for incremental wealth creation that are lost forever. The reconstruction jobs are not “good news”!

Unfortunately, people get carried away with broken windows arguments, using them to justify their own pet projects. The addition of new competing products and technologies is unquestionably healthy, but not when one side enlists the state as a partner in destroying viable incumbents and existing public or private wealth. For that matter, the state and its allies seem intent on destroying invested physical capital even before it’s services can come on line… if it’s viewed as the “wrong” kind of capital.

The costs of a transition to renewables is massive. The “big ask” for green energy involves not just taxpayer support for the build and usage, with all the inefficiencies endemic to taxation and market interventions. So-called green energy also entails huge environmental costs, and it calls for the wholesale destruction of an embedded industry. That means decommissioning invested assets having many years of useful life. And that goes for physical plant all the way from the wellhead to final use, including the destruction of stoves, cars, and other machines too numerous to mention. Those machines, by the way, still account for roughly 80% of our power use.

I leave you with part of Munger’s closing:

“Once you are duped into believing destruction is productive, almost everything that a rational public policy would label as a cost becomes, by some judo move of seraphic intuition, a benefit. … The problem is that jobs are not wealth. Wealth is access to the goods, products, and services that make our lives better. It is true that ‘studies show’ that wiping out all our productive wealth based on fossil fuels … would create jobs. Those ‘studies’ are among the best arguments against doing anything of the sort.”

Wind and Solar Power: Brittle, Inefficient, and Destructive

03 Thursday Nov 2022

Posted by Nuetzel in Environment, Nuclear power, Renewable Energy, Uncategorized

≈ 1 Comment

Tags

@MartialData1, @Mining_Atoms, B. F. Randall, Baseload Power, Blake Lovewall, Carbon Credits, Carbon Sink, Dispatchable Power, Fossil fuels, Greenwashing, Grid Stability, Intermittency, Land Use, Martian Data, Nuclear power, Plant Life Cycle, Polysilicons, Renewable energy, Solar Power, Turbine Blades, Wind Power, Zero-Carbon

Just how renewable is “renewable” energy, or more specifically solar and wind power? Intermittent though they are, the wind will always blow and the sun will shine (well, half a day with no clouds). So the possibility of harvesting energy from these sources is truly inexhaustible. Obviously, it also takes man-made hardware to extract electric power from sunshine and wind — physical capital— and it is quite costly in several respects, though taxpayer subsidies might make it appear cheaper to investors and (ultimately) users. Man-made hardware is damaged, wears out, malfunctions, or simply fails for all sorts of reasons, and it must be replaced from time to time. Furthermore, man-made hardware such as solar panels, wind turbines, and the expansions to the electric grid needed to bring the power to users requires vast resources and not a little in the way of fossil fuels. The word “renewable” is therefore something of a misnomer when it comes to solar and wind facilities.

Solar Plant

B. F. Randall (@Mining_Atoms) has a Twitter thread on this topic, or actually several threads (see below). The first thing he notes is that solar panels require polysilicon, which not recyclable. Disposal presents severe hazards of its own, and to replace old solar panels, polysilicon must be produced. For that, Randall says you need high-purity silica from quartzite rock, high-purity coking coal, diesel fuel, and large flows of dispatchable (not intermittent) electric power. To get quartzite, you need carbide drilling tools, which are not renewable. You also need to blast rock using ammonium nitrate fuel oil derived from fossil fuels. Then the rock must be crushed and often milled into fine sand, which requires continuous power. The high temperatures required to create silicon are achieved with coking coal, which is also used in iron and steel making, but coking coal is non-renewable. The whole process requires massive amounts of electricity generated with fossil fuels. Randall calls polysilicon production “an electricity beast”.

Greenwashing

The resulting carbon emissions are, in reality, unlikely to be offset by any quantity of carbon credits these firms might purchase, which allow them to claim a “zero footprint”. Blake Lovewall describes the sham in play here:

“The biggest and most common Carbon offset schemes are simply forests. Most of the offerings in Carbon marketplaces are forests, particularly in East Asian, African and South American nations. …

The only value being packaged and sold on these marketplaces is not cutting down the trees. Therefore, by not cutting down a forest, the company is maintaining a ‘Carbon sink’ …. One is paying the landowner for doing nothing. This logic has an acronym, and it is slapped all over these heralded offset projects: REDD. That is a UN scheme called ‘Reduce Emissions from Deforestation and Forest Degradation’. I would re-name it to, ‘Sell off indigenous forests to global investors’.”

Lovewall goes on to explain that these carbon offset investments do not ensure that forests remain pristine by any stretch of the imagination. For one thing, the requirements for managing these “preserves” are often subject to manipulation by investors working with government; as such, the credits are often vehicle for graft. In Indonesia, for example, carbon credited forests have been converted to palm oil plantations without any loss of value to the credits! Lovewall also cites a story about carbon offset investments in Brazil, where the credits provided capital for a massive dam in the middle of the rainforest. This had severe environmental and social consequences for indigenous peoples. It’s also worth noting that planting trees, wherever that might occur under carbon credits, takes many years to become a real carbon sink.

While I can’t endorse all of Lovewall’s points of view, he makes a strong case that carbon credits are a huge fraud. They do little to offset carbon generated by entities that purchase them as offsets. Again, the credits are very popular with the manufacturers and miners who participate in the fabrication of physical capital for renewable energy installations who wish to “greenwash” their activities.

Wind Plant

Randall discusses the non-renewability of wind turbines in a separate thread. Turbine blades, he writes, are made from epoxy resins, balsa wood, and thermoplastics. They wear out, along with gears and other internal parts, and must be replaced. Land disposal is safe and cheap, but recycling is costly and requires even greater energy input than the use of virgin feedstocks. Randall’s thread on turbines raised some hackles among wind energy defenders and even a few detractors, and Randall might have overstated his case in one instance, but the main thrust of his argument is irrefutable: it’s very costly to recycle these components into other usable products. Entrepreneurs are still trying to work out processes for doing so. It’s not clear that recycling the blades into other products is more efficient than sending them to landfills, as the recycling processes are resource intensive.

But even then, the turbines must be replaced. Recycling the old blades into crates and flooring and what have you, and producing new wind turbines, requires lots of power. And as Randall says, replacement turbines require huge ongoing quantities of zinc, copper, cement, and fossil fuel feedstocks.

The Non-Renewability of Plant

It shouldn’t be too surprising that renewable power machinery is not “renewable” in any sense, despite the best efforts of advocates to convince us of their ecological neutrality. Furthermore, the idea that the production of this machinery will be “zero carbon” any time in the foreseeable future is absurd. In that respect, this is about like the ridiculous claim that electric vehicles (EVs) are “zero emission”, or the fallacy that we can achieve a zero carbon world based on renewable power.

It’s time the public came to grips with the reality that our heavy investments in renewables are not “renewable” in the ecological sense. Those investments, and reinvestments, merely buy us what Randall calls “garbage energy”, by which he means that it cannot be relied upon. Burning garbage to create steam is actually a more reliable power source.

Highly Variable With Low Utilization

Randall links to information provided by Martian Data (@MartianManiac1) on Europe’s wind energy generation as of September 22, 2022 (see the tweet for Martian Data’s sources):

“Hourly wind generation in Europe for past 6 months:
Max: 122GW
Min: 10.2GW
Mean: 41.0
Installed capacity: ~236GW”

That’s a whopping 17.4% utilization factor! That’s pathetic, and it means the effective cost is quintuple the value at nameplate capacity. Take a look at this chart comparing the levels and variations in European power demand, nuclear generation, and wind generation over the six months ending September 22nd (if you have trouble zooming in here, try going to the thread):

The various colors represent different countries. Here’s a larger view of the wind component:

A stable power grid cannot be built upon this kind of intermittency. Here is another comparison that includes solar power. This chart is daily covering 2021 through about May 26, 2022.

As for solar capacity utilization, it too is unimpressive. Here is Martian Data’s note on this point, followed by a chart of solar generation over the course of a few days in June:

“so ~15% solar capacity is whole year average. ~5% winter ~20% summer. And solar is brief in summer too…, it misses both both morning and evening peaks in demand.”

Like wind, the intermittency of solar power makes it an impractical substitute for traditional power sources. Check out Martian Data’s Twitter feed for updates and charts from other parts of the world.

Nuclear Efficiency

Nuclear power generation is an excellent source of baseload power. It is dispatchable and zero carbon except at plant construction. It also has an excellent safety record, and newer, modular reactor technologies are safer yet. It is cheaper in terms of generating capacity and it is more flexible than renewables. In fact, in terms of the resource costs of nuclear power vs. renewables over plant cycles, it’s not even close. Here’s a chart recently posted by Randall showing input quantities per megawatt hour produced over the expected life of each kind of power facility (different power sources are labeled at bottom, where PV = photovoltaic (solar)):

In fairness, I’m not completely satisfied with these comparisons. They should be stated in terms of current dollar costs, which would neutralize differences in input densities and reflect relative scarcities. Nevertheless, the differences in the chart are stark. Nuclear produces cheap, reliable power.

The Real Dirt

Solar and wind power are low utilization power sources and they are intermittent. Heavy reliance on these sources creates an extremely brittle power grid. Also, we should be mindful of the vast environmental degradation caused by the mining of minerals needed to produce solar panels and wind turbines, including their inevitable replacements, not to mention the massive land use requirements of wind and solar power. Also disturbing is the hazardous dumping of old solar panels from the “first world” now taking place in less developed countries. These so-called clean-energy sources are anything but clean or efficient.

Net Zero: It Ain’t Gonna Happen

15 Thursday Sep 2022

Posted by Nuetzel in Central Planning, Environmental Fascism, Renewable Energy

≈ 2 Comments

Tags

Backup Capacity, Brad Allenby, Carbon Capture, Cost Parity, Decarbonization, El Hierro, Ezra Klein, Francis Minton, Geothermal, Green Energy, Green Mandates, Hydrocarbons, Intermittancy, Joseph Sternberg, Land Use Requirements, Legal Insurrection, Lithium Batteries, Manhattan Contrarian, Mark P. Mills, Murtaza Hussain, Net Zero, Rare Earth Minerals, Renewable, Solar Power, The Intercept, Tuomas Malinen, Walter Jacobson, Wind Power

A number of countries have targeted net zero carbon dioxide emissions, to be achieved within various “deadlines” over the next few decades. The target dates currently range from 2030 -2050. Political leaders around the world are speaking in the tongues favored by climate change fundamentalism, as Brad Allenby aptly named the cult some years ago. The costly net zero goal is a chimera, however. The effort to completely substitute renewables — wind and solar — for fossil fuels will fail without question. In fact, net zero carbon emissions is unlikely to be achieved anywhere in this century without massive investments in nuclear power. Wind and solar energy suffer from a fatal flaw: intermittency. They will never be able to provide for all energy needs without a drastic breakthrough in battery technology, which is not on the horizon. Geothermal power might make a contribution, but it won’t make much of a dent in our energy needs any time soon. Likewise, carbon capture technology is still in its infancy, and it cannot be expected to offset much of the carbon released by our unavoidable reliance on fossil fuels.

Exposing Green Risks

The worst of it is that net zero mandates will inflict huge costs on society. Indeed, various efforts to force conversion to “green” energy technologies have already raised costs and exposed humanity to immediate threats to health and well being. These realities are far more palpable than the risks posed by speculative model predictions of climate change decades ahead. As Joseph Sternberg notes at the link above, climate policies:

“… have created an energy system of dangerous rigidity and inefficiency incapable of adapting to a blow such as Russia’s partial exit from the European gas market. It’s almost inevitable that the imminent result will be a recession in Europe. We can only hope that it won’t also trigger a global financial crisis.”

Escalating energy costs are inflicting catastrophic harm on businesses large and small throughout the West, but especially in Europe and the UK. A Finnish economist recently commented on these conditions, as quoted by Walter Jacobson at the Legal Insurrection blog:

“I saw this tweet thread by Finnish economist and professor Tuomas Malinen:

I am telling you people that the situation in #Europe is much worse than many understand. We are essentially on the brink of another banking crisis, a collapse of our industrial base and households, and thus on the brink of the collapse of our economies.”

Jacobson also offers the following quote from Murtaza Hussain of The Intercept:

“If you turned the electricity off for a few months in any developed Western society 500 years of supposed philosophical progress about human rights and individualism would quickly evaporate like they never happened.”

Where’s the Proof of Concept?

This is not all about Russian aggression, however. We’ve seen the cost consequences of “green” mandates and forced conversion to wind and solar in places like California, Texas, and Germany even before Russia invaded Ukraine and began starving Europe of natural gas.

Frances Minton at the Manhattan Contrarian blog points to one of the most remarkable aspects of the singular focus on net zero: the complete absence of any successful demonstration project anywhere on the globe! The closest things to such a test are cited by Minton. One is on El Hierro in Spain’s Canary Islands, which has wind turbine capacity of more than double average demand, It also has pumped storage with hydro generators for more than double average demand. In 2020, however, El Hierro took all of its power from the combined wind/storage system only about 15% of the time. 2021 didn’t look much better. Diesel power is used to fill in the frequent “shortfalls”.

Land Use

The land use requirements of a large scale transition to wind and solar are incredible, given projected technological capabilities. Ezra Klein explains:

“The center of our decarbonization strategy is an almost unimaginably large buildup of wind and solar power. To put some numbers to that: A plausible path to decarbonization, modeled by researchers at Princeton, sees wind and solar using up to 590,000 square kilometers – which is roughly equal to the land mass of Connecticut, Illinois, Indiana, Kentucky, Massachusetts, Ohio, Rhode Island and Tennessee put together. ‘The m footprint is very, very large, and people don’t really understand that,’ Danny Cullenward, co author of ‘Making Climate Policy Work’, told me.”

That’s a major obstacle to accelerating the transition to wind and solar power, but there are many others.

A Slap of Realism

Mark P. Mills elaborates on the daunting complexity and costs of the transition, and like land use requirements, they are all potential show stoppers. It’s a great article excepting a brief section that reveals a poor understanding of monetary theory. Putting that aside, it’s first important to reemphasize what should be obvious: shutting down production of fossil fuels makes them scarce and more costly,. This immediately reduces our standard of living and hampers our future ability to respond to tumultuous circumstances as are always likely to befall us. Mills makes that abundantly clear:

“… current policies and two decades of mandates and spending on a transition have led to escalating energy prices that help fuel the destructive effects of inflation. The price of oil, which powers nearly 97% of all transportation, is on track to reach or exceed half-century highs, and gasoline prices have climbed. The price of natural gas, accounting for 40% of all industrial energy use and one-fourth of global electricity, has soared past a decadal high. Coal prices are also at a decadal high. Coal fuels 40% of global electricity; it is also used to make 70% of all steel and accounts for half its cost of production.

It bears noting that energy prices started soaring, and oil breached $100 a barrel, well before Russia invaded Ukraine in late February. The fallout from that invasion has hardened, not resolved, the battle lines between those advocating for and those skeptical of government policies directed at accelerating an energy transition. …

Civilization still depends on hydrocarbons for 84% of all energy, a mere two percentage points lower than two decades ago. Solar and wind technologies today supply barely 5% of global energy. Electric vehicles still offset less than 0.5% of world oil demand.”

As Mills says, it surprises most people that today’s high tech sectors, such as electronic devices like phones and computers, and even drugs, require much more energy relative to product size and weight than traditional manufactured goods. Even the cloud uses vast quantities of energy. Yet U.S. carbon intensity per dollar of GDP has declined over the past 20 years. That’s partly due to the acquisition of key components from abroad, mitigation efforts here at home, and the introduction of renewables. However, the substitution of natural gas for other fossil fuels played a major role. Still, our thirst for energy intensive technologies will cause worldwide demand for energy to continue to grow, and renewables won’t come close to meeting that demand.

Capacity Costs

Policy makers have been deceived by cost estimates associated with additions of renewable capacity. That’s due to the fiction that renewables can simply replace hydrocarbons, but the intermittency of solar and wind power mean that demand cannot be continuously matched by renewables capacity. Additions to renewables capacity requires reliable and sometimes redundant backup capacity. At the risk of understatement, this necessity raises the marginal cost of renewable additions significantly if the hope is to meet growth in demand.

Furthermore, as Mills points out, renewables have not reached cost parity with fossil fuels, contrary to media hype and an endless flow of propaganda from government and the “green” investors seeking rents from government. Subsidies to renewables have created an illusion that costs that are lower than they are in reality.

So Many Snags

From Mills, here are a few of the onerous cost factors that will present severe obstacles to even a partial transition to renewables:

Even with the best battery technology now available, using lithium, storing power is still extremely expensive. Producing and storing it at scale for periods long enough to serve as a true source of power redundancy is prohibitive.
The infrastructure buildout required for a hypothetical transition to zero-carbon is massive. The quantity of raw materials needed would be far in excess of those used in our investments in energy infrastructure over at least the past 60 years.
Even the refueling infrastructure required for a large increase in the share of electronic vehicles on the road would require a massive investment, including more land and at much greater expense than traditional service stations. That’s especially true considering the grid enhancements needed to deliver the power.

The transition would place a huge strain on the world’s ability to mine minerals such as lithium, graphite, nickel, and rare earths. Mills puts the needed increases in supply at 4,200%, 2,500%, 1,900%, and 700%, respectively, by 2040. In fact, the known global reserves of these minerals are inadequate to meet these demands.
Mining today is heavily reliant on hydrocarbon power, of course. Moreover, all this mining activity would have devastating effects on the environment, as would disposal of “green” components as they reach their useful lives. The latter is a disaster we’re already seeing played out in the third world, where we are exporting much of our toxic, high-tech waste.
The time it would take to make the transition to zero carbon would far exceed the timetable specified in the mandates already in place. It’s realistic to admit that development of new mines, drastic alterations of land use patterns, construction of new generating capacity, and the massive infrastructure buildout will stretch out for many decades.
Given U.S. dependence on imports of a large number of minerals now considered “strategic”, decarbonization will require a major reconfiguration of supply chains. In fact, political instability in parts of the world upon which we currently rely for supplies of these minerals makes the entire enterprise quite brittle relative to reliance on fossil fuels.

Conclusion

The demands for raw materials, physical capital and labor required by the imagined transition to net zero carbon dioxide emissions will put tremendous upward pressure on prices. The coerced competition for resources will mean sacrifices in other aspects of our standard of living, and it will have depressing effects on other markets, causing their relative prices to decline.

For all the effort and cost of the mandated transition, what will we get? Without major investments in reliable but redundant backup capacity, we’ll get an extremely fragile electric grid, frequent power failures, a diminished standard of living, and roughly zero impact on climate. In other words, it will be a major but unnecessary and predictably disastrous exercise in central planning. We’ve already seen the futility of this effort in the few, small trials that have been undertaken, but governments, rent-seeking investors, and green activists can’t resist plunging us headlong into the economic abyss. Don’t let them do it!

Electric Vehicle Fueling Costs in the Real World

31 Sunday Oct 2021

Posted by Nuetzel in Electric Vehicles, Renewable Energy

≈ 1 Comment

Tags

Anderson Economic Group, Biomass, Charging Time, Commercial Power Rates, Deadhead Miles, Dispatchable Capacity, Disposal Costs, Electric Vehicles, EVangelists, Fast Chargers, Fueling Cost, Intermittency, Internal Combustion Engines, Joe Biden, Nuclear Energy, Opportunity cost, Phantom Drain, Power Failures, Power Grid, Recharging Costs, Renewable Power, Thermal Energy

While the photo above exaggerates, honest electric vehicle (EV) owners will tell you that “refueling” is often not cheap or convenient. However, less jaded EV drivers and enthusiasts seem to view recharging costs through an oversimplified economic lens. A realistic accounting involves a variety of cost factors, including the implicit cost of the time needed to recharge when away from home. An analysis recently published by Anderson Economic Group (AEG) provides a thorough comparison of the costs of fueling EVs relative to vehicles powered by internal combustion engines (ICEs).

Promoting the Narrow Focus

AEG notes the shortcomings of most cost studies quoted by “EVangelists” (not AEG’s term):

“Many commonly-cited studies of the cost of driving EVs include only the cost of electric power for EVs, but compare this with the total cost of fueling an ICE vehicle. Moreover, many presume drivers can routinely charge at favorable residential rates, ignoring the much higher costs of the commercial chargers EV drivers must use when they are away from a residential charger (if they have one).”

The kind of incomplete assays to which AEG refers can lead to statements like the following, from none other than Joe Biden:

“When you buy an electric vehicle, you can go across America on a single tank of gas, figuratively speaking. It’s not gas. You plug it in.”

Well no, it’s not a single tank of “gas”. You still have to stop, plug into a source of power mostly generated by fossil fuels, and it might take a while to get back on the road.

Cost Categories

The AEG report concludes that vehicles powered by ICEs are far cheaper to fuel on average than EVs. The analysis considers several categories of fueling costs including:

Gasoline Prices vs. Commercial & Residential Power Rates: EV drivers recharging away from home often pay more costly commercial rates.
Registration Taxes: applied at EV charging stations, but bundled in fuel price for ICEs;
EV Charging Equipment: upgraded “Level 2” chargers are generally “encouraged” at purchase of an EV;
Deadhead Miles: usage costs on fueling/charging runs; there are far fewer EV charging stations than gas stations in the U.S., which can lead to costly “excursions”;
Charging/Refueling Time: much higher for EV drivers away from home;

Direct Costs

AEG performed their analysis using electric rates, gas prices, and other cost factors as of mid-2021. They did so for six “representative” vehicle classes: entry level, mid-priced and luxury EVs and ICEs. Direct monetary costs account for the first four factors listed above; they do not include the time costs of refueling.

AEG calculates that the direct monetary costs of driving 100 miles in a mid-priced ICE vehicle is $8.95, while the cost in a mid-priced EV using a high proportion of commercial charging is $12.95, about 50% more. The direct cost in a luxury ICE is $12.60, but for a luxury EV it is $14.15 (12% more) for mostly home charging and $15.52 (23% more) for mostly commercial charging.

In addition, AEG finds that the direct cost of EV fueling is far more variable than ICE fueling. This is due to widely varying rates for commercial and residential power, including time-of-day variation, differences in charger efficiency, and the varied structure of pricing at different commercial charging stations.

Implicit Time Cost

It should be obvious that the time costs of refueling EVs are more significant than for ICE vehicles. However, I believe AEG’s report might over-estimate the difference. They say:

“… it takes substantially longer to fuel EVs than for comparable ICE cars. Real world conditions often impose additional burdens, including these two:

Driving and charging time: … it often takes about 20 minutes to drive to a reliable DC fast charger. It often takes another 20 to 30 minutes for the charging process to complete. Of course, this is for fast DC chargers. Slower L2 chargers are much more common …
Recurrent reliability problems: EV drivers face recurring problems at chargers such as breakdowns, software bugs, delays in syncing the mobile application with the charger, charger output being significantly lower than advertised, and outright failures. This is in addition to the problem of vehicles blocking (or “icing”) EV charging spots.

Online forums are full of comments from drivers expressing frustration about these problems.”

All true, as far as it goes. The implicit value of this time depends on the driver’s opportunity cost. Whether valued at the minimum wage or at a much higher opportunity cost, AEG’s straightforward valuation of the time cost is five to six times as high for EV drivers than for ICE drivers, depending on the vehicle class. For EVs, the time cost AEG calculates can be more than $200 a month, or about $20 per 100 miles for a someone who drives 1,000 miles a month, versus about $4 for a similar ICE driver. Adding those values to the direct monetary costs (which AEG does not do) yields a total cost per 100 miles of $33 for a mid-priced EV versus about $13 for an ICE vehicle in that class. That’s 2.5 times more to fuel an EV than a comparable ICE vehicle!

However, I would discount the cost of EV fueling time, because many drivers can use this waiting time productively, whether performing certain work tasks remotely or simply enjoying it as an extension of their leisure time, reading or viewing/listening to content on their mobile devices, for example.

Other Qualifications

AEG acknowledges that their cost comparisons use commercial power rates to account for “free” chargers offered by some stores to shoppers and by some employers to workers as benefits. That’s because stores and employers compensate for that kind of service along pricing and other margins.

AEG does not account for “phantom drain” (the loss of EV battery power while not in use) and the costs of battery degradation over time. Nor do they attempt to quantify the use of battery power while charging takes place (which inflates charging time but also increases direct costs per mile).

I would also note that many of the EV cost disadvantages described by AEG are likely to diminish going forward. More charging stations are being added as the fleet of EVs grows. Battery technology is improving as well, and chargers will become faster on average. In addition, EV “engines” have far less complexity and fewer parts than ICEs, which undoubtedly confers maintenance cost advantages over a period of time.

The Green Itch

Finally, while some consumers might find that EVs scratch a certain green itch, these vehicles are not carbon neutral, as noted above. The vast bulk of the power they use comes from fossil fuels. Higher energy prices in general might or might not work to their advantage, but electric power availability is becoming less reliable as the push toward renewable power generation continues. As we have seen repeatedly, reliance on intermittent power sources has drastic consequences for users in the absence of adequate, dispatchable baseload capacity.

To put a somewhat finer point on the difficulties posed by the intermittency of renewable power, a great deal of EV charging is done at night, when solar panels are not harvesting energy. Wind turbines can harvest a greater proportion of their power at night, but they must be fairly tall to do so (the minimum height ranges from 30 to 100 meters, depending on local conditions). That requirement means that the manufacture and construction of these turbines and their towers is all the more carbon intensive. Furthermore, disposal of both solar panels and wind turbines at the end of their useful lives creates serious environmental issues that green energy advocates have been all too willing to ignore.

Ultimately, until our ability to store power at scale advances dramatically, the issue of renewable intermittency can only be dealt with via adequate baseload power. Growth in the number of EVs will require growth in the dispatchable capacity of the power grid, which means either more plants burning fossil fuels, nuclear power, hydroelectric, biomass, or thermal energy. The alternative is an increasing frequency of blackouts, which would drastically reduce the utility of EVs.

Renewable Power Gains, Costs, and Fantasies

01 Thursday Jul 2021

Posted by Nuetzel in Electric Power, Renewable Energy

≈ 2 Comments

Tags

Baseload, Blackouts, California, Combined-Cycle Gas, Dispatchable Power, Disposal Costs, Dung Burning, Energy Information Administration, External Costs, Fossil fuels, Francis Menton, Germany, Green Propaganda, Interrmittency, Levelized Costs, Modern Renewables, Peak Demand, Plant Utilization, Renewable energy, Solar Power, Texas, The Manhattan Contrarian, Willis Eschenbach, Wind Power

“Modern” renewable energy sources made large gains in providing for global energy consumption over the ten years from 2009-19, according to a recent report, but that “headline” is highly misleading. So is a separate report on the costs of solar and wind power, which claims those sources are now cheaper than any fossil fuel. The underlying facts will receive little critical examination by a hopelessly naive press, nor among analysts with more technical wherewithal. Of course, “green” activists will go on using misinformation like this to have their way with policy makers.

Extinguishing Dung Fires

The “Renewables Global Status Report” was published in mid-June by an organization called REN21: Renewables Now. Francis Menton has a good discussion of the report on his blog, The Manhattan Contrarian. The big finding is a large increase in the global use of “modern” renewable energy sources, from 8.7% of total consumption in 2009 to 11.2% in 2019. The “modern” qualifier is critical: it distinguishes renewables that made gains from those that might be considered antiquated, like dung chips, the burning of which is an energy staple in many underdeveloped parts of the world. In fact, the share of those “non-modern renewables” declined from 11.0% to 8.7%, almost fully accounting for the displacement caused by “modern renewables”. The share of fossil fuels was almost unchanged, down from 80.3% in 2009 to 80.2% in 2019. Whatever the benefits of wind, solar, and other modern green power sources, they did not make much headway in displacing reliable fossil fuel energy.

I certainly can’t argue that replacing dung power with wind, solar, or hydro is a bad thing (but there are more sophisticated ways of converting dung to energy than open flame). However, I contend that replacing open dung fires with fossil-fuel or nuclear capacity would be better than renewables from both a cost and an environmental perspective. Be that as it may, the adoption of “modern renewables” over the ten-year period was not at the expense of fossil fuels, as might be expected if the latter was at a cost disadvantage, and remember that renewables were already given an edge via intense government efforts to subsidize and even require the use of wind and solar power.

The near-term limits on our ability to substitute renewables for fossil fuels should be fairly obvious. For one thing, renewable power is intermittent, so it cannot be relied upon for baseload generation. The chart at the top of this post demonstrates this reality, though the chart is “optimistic” in the sense that planners have to consider worst-case intermittency, not merely average production by time-of-day. Reliable power sources must be maintained in order to prevent the kinds of disasters like we saw in Texas last winter when demand spiked and output from renewables plunged. This is an area of considerable denialism: a search on “intermittent renewables” gets you an unending list of rosy assessments of energy storage technologies, and very little realistic commentary on today’s needs for meeting base-load or weather-induced demands.

While renewables account for about 29% of global electricity generation, there is another limit on adoption: certain jobs just can’t be done with renewables short of major advances in battery technology. As Menton says:

“Steel mills and tractor trailer trucks and airplanes powered by solar panels? Not happening. … I think these people really believe that if governments will just do the right thing and require airplanes to run on solar panels, then it will promptly happen.”

Cost and Intermittency

Again, we’d expect to see more rapid conversion to renewable energy, at least in compatible applications, as the cost of renewables drops relative to fossil fuels. And major components of their costs have indeed dropped, so much so that the U.S. Energy Information Administration (EIA) now says they are cheaper than fossil fuels in terms of the “levelized cost” of new electric generating capacity. That’s the average cost per megawatt-hour produced over the life of a new installation. The EIA’s calculations are distorted on at least two counts, however, as Willis Eschenbach ably explains here.

The EIA’s cost figures reflect a “capacity factor” that adjusts the megawatts produced to presumed “real world” conditions. It’s more like a utilization adjustment made necessary by a variety of realities (intermittency as well as other technical imperfections) that cause output to run lower than the maximum under ideal conditions. Eschenbach reports that the factors applied by the EIA for solar and wind, at 30% and 41%, respectively, are overstated drastically, which reduces their cost estimates by overstating output. For solar, he cites a more realistic value of 14%, which would more than double the levelized cost of solar. For wind, he quotes a figure of 30%, which would increase the cost of wind power by more than a third. That puts the cost of those renewables well above that of a “combined-cycle gas” plant, which uses exhaust from gas turbines to generate additional power via steam.

The true costs of renewables are likely much higher than nuclear power as well, based on earlier comparisons of nuclear to combined-cycle gas. The EIA does not report a cost for nuclear power, however, because the report is for new capacity, and no additions of nuclear capacity are expected.

The Cost of Back-Up Capacity

Eschenbach notes a second major problem with the EIA cost comparisons. As discussed above, the intermittency of solar and wind power means that their deployment cannot provide for base loads. Other “dispatchable” power technologies, on which production can be ramped up or down at discretion, must be available to meet power needs when renewables are off-line, as is frequently the case. The more we attempt to rely on renewables, the more significant the intermittency problem becomes, as Germany, Texas, and California are discovering.

How to account for the extra cost of dispatchable power required to smooth production or meet peak demand? Renewables are simply incapable of doing so reliably, and back-up capacity ain’t free! Meeting demand at all times requires equivalent dispatchable capacity in the power mix. It requires not just dispatchable baseload capacity, but surge capacity! Meeting long-term growth in demand with renewables implies that new back-up capacity is required as well, and the levelized cost should reflect it. After all, those costs won’t be saved by virtue of adding renewable capacity, unless you plan on blackouts. Thus, the EIA’s levelized cost comparisons of wind, solar and fossil fuel electricity generation are completely phony.

Conclusion

Growth in wind and solar power increased their contribution to global energy needs to more than 11% in 2019, but their gains over the previous ten years came largely at the expense of more “primitive” renewable energy sources, not fossil fuels. And despite impressive declines in the installation costs of wind and solar power, and despite low variable costs, the economics of power generation still favors fossil fuels rather substantially. In popular discussions, this point is often obscured by the heavy subsidies granted to renewables.

In truth, the “name-plate” capacities of wind and solar installations far exceed typical output, so installation costs are spread over less output than is widely believed. Furthermore, the intermittency of production from these renewable sources means that back-up capacity is still required, almost always from plants fired by fossil fuels. Properly considered, this represents a significant incremental cost of renewable power sources, but it is one that is routinely ignored by environmentalists and even in official reports. It’s also worth noting that “modern” renewables carry significant external costs to the environment both during the useful life of plant and at disposal (and see here). It’s tempting to say all these distortions and omissions are deliberate contributions to the propaganda in favor of government mandates for renewables.

Texas Cold Snap Scarcity: Don’t Blame Markets!

18 Thursday Mar 2021

Posted by Nuetzel in Electric Power, Price Mechanism, Renewable Energy, Shortage

≈ 4 Comments

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Blackouts, Electric Reliability Council of Texas, ERCOT, February Cold Spell, Federal Energy Subsidies, Fixed-Rate Plans, Fossil fuels, Interconnection Agreements, Market Efficiency, Price Ceilings, Price Gouging, Renewable energy, Shortages, Solar Power, Supply Elasticity, Texas, Variable-Rate Plans, Wind Power, Winterization

People say the darnedest things about markets, even people who seem to think markets are good, as I do. For example, when is a market “too efficient”? In the real world we tend to see markets that lack perfect efficiency for a variety of reasons: natural frictions, imperfect information, taxes, subsidies, regulations, and too few sellers or buyers. In such cases, we know that market prices don’t properly reflect the true scarcity of a good, as they would under the competitive ideal. Nevertheless, we are usually best-off allowing market forces to approximate true conditions in guiding the allocation of resources. But what does it mean when someone asserts that a market is “too efficient”.

Not long ago I posted about the failure of Texas utility planners to maintain surge capacity. Instead, they plowed resources into renewable energy, which is intermittent and unable to provide for reliable baseline power loads. That spelled disaster when temperatures plunged in February. Wind and solar output plunged while demand spiked. Even gas- and coal-fired power generation hit a pause due to a lack of adequate winterization of generators. The result was blackouts and a huge jump in wholesale power prices, which are typically passed on to customers. The price to some consumers rose to the ceiling of $9/kwh for a time, compared to an average winter rate of 12c/kwh. A bill in the Texas Senate would reverse those charges retroactively.

I cross-linked my post on a few platforms, and a friendly commenter opined that the jump in prices occurred because “markets were too efficient”. For a moment I’ll set aside the fact that what we have here is a monopoly grid operator: “market efficiency” is not a real possibility, despite elements of competition at the retail level. There is, however, a price mechanism in play at the wholesale level and for retail customers on variable rate plans. Prices are supposed to respond to scarcity, and there is no question that power became scarce during the Texas cold snap. Higher prices are both an incentive to curtail consumption and to increase production or attract product from elsewhere. So, rather than saying the “market was too efficient”, the commenter should have said “power was too scarce”! Well duh…

If anything, the episode underscores how un-market-like were the conditions created by the Texas grid operator, the ironically-named Electric Reliability Council of Texas (ERCOT): it allowed massive resources to be diverted to unreliable power sources; it skimped on winterization; it failed to arrange interconnection agreements with power grids outside of Texas; and it charged customers on fixed-rate plans too little to provide for adequate surge capacity, while giving them no incentive to conserve under a stress scenario. ERCOT can be said to have created a situation in which power supply was highly inelastic, which means that a normal market force was short-circuited at a time when it was most needed.

ERCOT‘s mismanagement of power resources is partly a result of incentives created by the federal government. The installation of wind and solar power generation came with huge federal subsidies, which distort the cost of the energy they produce. Thus, not only were incentives in place to invest in unreliable power sources, but ERCOT forced electricity produced by fossil fuels to compete at unrealistically low prices. This predatory pricing forced several power producers into bankruptcy, compromising the state’s baseline and surge capacity.

There are plenty of distortions plaguing the “market” for electric power in Texas, all of which worsened the consequences of the cold snap. This was far from a case of “market efficiency”, as the comment on my original post asserted.

The very idea that markets and the price mechanism are “ruthlessly efficient” is a concession to those who say high prices are always “unfair” in times of crises and shortages. We hear about “price-gougers”, and the media and politicians are almost always willing to join in this narrative. Higher prices help to ease shortages, and they do so far more quickly and effectively than governments or charities can provide emergency supplies (unless, of course, a monopoly grid operator leaves the state more vulnerable to stress conditions than necessary). Conversely, price ceilings only serve to exacerbate shortages and the suffering they cause. So let’s not blame markets, which are never “too efficient”; sometimes the things we trade are just too scarce, and sometimes they are made more scarce by inept planners.

Renewables and Preempted Prosperity

10 Wednesday Jul 2019

Posted by Nuetzel in Central Planning, Renewable Energy

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carbon Sensitivity, David Middleton, Economic Cost of Carbon, Fossil fuels, Intermittancy, John Barry, Los Angeles Eland Project, Martin Heidegger, Matt Ridley, Michael Schellenberger, Murray Bookchin, Renewable energy

Coerced conversion to renewable energy sources will degrade human living conditions. That’s certainly true relative to a voluntary conversion actuated by purely private incentives. It’s likely to be true even in an absolute sense, depending on the speed and severity of the forced transition. A coerced conversion will mean lower real incomes during the transition (one recent estimate: $42,000 total loss per U.S. household to transition by 2030), and the losses will continue after the transition, with little redeeming improvement in environmental conditions or risk.

The Reality

There are several underpinnings for the assertions above. One is that the sensitivity of global temperatures to carbon forcings is relatively low. We know all too well that the climate models relied upon by warming alarmists have drastically over-estimated the extent of warming to date. The models are excessively sensitive to carbon emissions and promote an unwarranted urgency to DO SOMETHING… with other people’s money. There is also the question of whether moderate warming is really a bad thing given that it is likely to mean fewer cold-weather fatalities, increased agricultural productivity, and significant reforestation.

Another underpinning is that the real economics of renewable energy are vastly inferior to fossil fuels and will remain so for some time to come. Proponents of renewables tend to quote efficiencies under optimal operating conditions, free of pesky details like the cost of installing a vast support infrastructure and environmental costs of producing components. Solar and wind energy are tremendously inefficient in terms of land use. One estimate is that meeting a 100% renewable energy target in the U.S. today would require acreage equivalent to the state of California. And of course rare earth minerals must be mined for wind turbines and solar panels, and fossil fuels are needed to produce materials like the steel used to build them.

But the chief renewable bugaboo is that the power generated by wind and solar is intermittent. Our ability to store power is still extremely limited, so almost all surplus energy production is lost. Therefore, intermittency necessitates redundant generating capacity, which imposes huge costs. When the winds are calm and the sun isn’t shining, traditional power sources are needed to meet demand. That redundant capacity must be maintained and kept on-line, as these facilities are even costlier to power up from a dead start.

LA Hucksterism

These issues are typified by the unrealistic expectations of Los Angeles’ plan to replace 7% of the city’s power consumption with renewables. The cost predicted by LA regulators is slightly less than 2 cents per kilowatt hour for solar and even less for battery power, which are unrealistically low. For one thing, those are probably operating costs that do not account for capital requirements. The plan promises to provide power 16 hours a day at best, but it’s not clear that the 7% estimate of the renewable share takes that into account or whether the real figure should be 4.2% of LA’s power needs. The project will require 2,600 acres for solar panels, and if it’s like other solar plant installations, the stated capacity is based on the few hours of the day when the sun’s rays are roughly perpendicular to the panels. So it’s likely that the real cost of the power will be many times the estimates, though taxpayers will subsidize 30% or more of the total. And then there is the negative impact on birds and other wildlife.

The Question of Intent

Michael Schellenberger goes so far as to say that a degraded standard of living is precisely what many fierce renewable advocates have long intended. Modern comforts are simply not compatible with 100% renewable energy any time soon, or perhaps ever given the investment involved, but a target of 100% was not really intended to be compatible with modern comforts. In fact, the renewable proposition was often intermingled with celebration of a more austere, agrarian lifestyle. Schellenberger discusses the case of Martin Heidegger, an early anti-technologist who said in 1954 that modern technology “puts to nature the unreasonable demand that it supply energy....” Of course, Heidegger was not talking about the use of solar panels. Others, like Murray Bookchin, were ultimately quite explicit about the “promise” of renewables to dial-back industrial society in favor of an agrarian ideal. And here’s a quote from a new book by John Barry, Professor of “Green Political Economy” (!) at Queen’s University Belfast:

“The first question which serves as the starting point of this chapter is to ask if the objective of economic growth is now ecologically unsustainable, socially divisive and has in many countries passed the point when it is adding to human wellbeing?”

If that’s the question, the answer is no! The quote is courtesy of David Middleton. Green Professor Barry has one thing right, however: growing anything will be tough after crowding erstwhile farm and forest land with solar panels and wind turbines. But at least someone “green” is willing to admit some economic realities, something many alarmists and politicians are loath to do.

Welfare Loss

Involuntary actions always involve a welfare loss, as “subjects” must sacrifice the additional value they’d otherwise derive from their own choices. So it is that coerced adoption of renewables implies a starker outcome than zero economic growth. Objective measurement of all welfare costs is difficult, but we know that the adoption of renewables implies measurable up-front and ongoing economic losses. Matt Ridley notes that the impact of those losses falls hardest on the poor, whose energy needs absorb a large fraction of income. This, along with fundamental impracticality and high costs, accounts for the populist backlash against radical efforts to promote renewables in some European states. The politics of forced adoption of renewables is increasingly grim, but attempts to sell a centrally-planned energy sector based on renewables continue.

Ridley is rightly skeptical of carbon doomsday scenarios, but the pressure to curb carbon emissions will remain potent. He advocates a different form of intervention: essentially a carbon tax on producers with proceeds dedicated to new, competing sequestration or carbon capture technologies. Still coercive, the tax itself requires an estimate of the “economic cost of carbon”, which is of tremendously uncertain magnitude. The tax, of course, has the potential to do real harm to the economy. On the other hand, Ridley is correct in asserting that the effort to fund competing carbon-capture projects would leverage powerful market forces and perhaps hasten breakthroughs.

Mandated Misery

The attempt to force a complete conversion to renewable energy sources is meeting increasing political challenges as its cost is revealed more clearly by experience. Alarmists have long recognized the danger of economic damage, however. Thus, they try to convince us that economic growth and our current standards of living aren’t as good as we think they are, and they continue to exaggerate claims about the promise of renewable technologies. One day, some of these technologies will be sufficiently advanced that they will be economically viable without taxpayer subsidies. The conversion to renewables should be postponed until that day, when users can justify the switch in terms of costs and benefits, and do so voluntarily without interference by government planners.

The Renewable Energy Jobs Hoax

30 Tuesday May 2017

Posted by Nuetzel in Renewable Energy, Subsidies, Uncategorized

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Fossil fuels, Government Subsidies, infrastructure, James Taylor, Job Creation, Jobs Objective, Marginal cost, Mark Zuckerberg, Renewable energy, Renewable Energy Subsidies, Tariffs, Tim Worstall

James Taylor at Forbes reveals the dishonest math behind the claim that renewable energy generates more jobs than “conventional energy”, i.e., fossil fuels. It’s a simple trick, as Taylor explains:

“… renewable energy advocates create the broadest possible definition of workers ‘supported’ by the solar power industry, falsely claim that the solar power industry ’employed’ all these workers, and then compare that to the narrowest possible definition of just a single segment of workers ‘directly’ employed in the ‘extraction’ component of the much larger natural gas industry.“

Taylor notes that, “In reality, renewable energy isn’t even in the same universe of job creation as conventional energy.” He goes on to cite the report on which these claims are based and picks it apart. The renewable energy job assertions are obviously self-intereseted, as rent seeking lobbyists know that the political class is dominated by easy marks for renewable energy wonder-stories.

Of course Taylor is correct that the claims about renewable energy jobs are false in the aggregate sense. However, it might or might not be true in the marginal sense, and that’s clearly the sense in which the claim is intended to be taken, despite the fact that the data used is not marginal in nature. If true, it’s not a selling point for renewable energy subsidies because “more jobs” represents a greater marginal cost.

And that brings us to an even more critical issue missed by Taylor: public policy should not be based on the objective of direct job creation. Jobs are a cost, not a benefit. We value the finished goods, not the inputs required to produce them. If you don’t quite get that, imagine two bids for the construction of new kitchen in your home. Same plans, same completion date, similarly brilliant customer reviews of the competing contractors. Without knowing the actual bids, if one contractor tells you it’s a three-man job and the other says it’s a four-man job, you’ll be pretty certain which bid you’ll want to accept.

Ah, but you say, that’s not a fair comparison, because I’m paying for it. Yes you are, just as taxpayers (and more generally society) must pay for the subsidies that lobbyists wheedle out of politicians. Or you say, Ah, but we want more renewable jobs because we want renewable energy, ’cause it’s just right. Maybe, maybe not, but if that’s so, then the idea that the cost is higher because more jobs are required per unit of energy is not a good rationale.

It’s often the case that public policy aimed at “creating jobs” is not accompanied by higher output, lower prices, or even… more jobs! For example, tariffs on foreign goods give an advantage to American producers, but at the cost of job losses in import industries and higher domestic prices that harm consumers more broadly, and thereby reduce jobs. When certain industries or firms are subsidized by the government, the taxpayer is harmed directly, not to mention suppliers of alternatives. This is true at the local and national levels: politicians love to talk about job creation when they offer incentives for new facilities or relocations to their jurisdictions, but these subsidies may put other local firms at a competitive disadvantage and leave taxpayers holding the bag for public services supplied to the recipient firm. When government undertakes large taxpayer-funded infrastructure projects, which might or might not boost productivity, the taxes are damaging and the projects are often poorly planned and lack effective cost controls. Jobs are not a reason to support such projects.

Similar points have been discussed in the past here on Sacred Cow Chips, with links to articles emphasizing the distinction between direct jobs created and economic welfare like this one. “Jobs” should never be a policy objective in and of itself. As Tim Worstall explains in a brief review of Mark Zuckerberg’s recent commencement address at Harvard, jobs simply are not the point! Policy must have a better rationale than the high cost of the labor input!

The Wind, The Sun, and a Load of Subsidies

17 Thursday Mar 2016

Posted by Nuetzel in Environment, Renewable Energy, Subsidies

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Abandoned Wind Turbines, Baseline Capacity, Cronyism, Decarbonization, Energiewende, Federal Energy Regulatory Commission, Intermittency, Investor Intel, John Peterson, Peaking Capacity, Power Storage, Renewable energy, Rooftop Solar, Seeker Blog, Solar Reimbursement Rates

Renewable energy sources are not economically viable without subsidies, and they can impose some ugly external costs. Taxpayer subsidies for renewables like solar and wind projects are rationalized on the grounds that adoption will reduce carbon emissions and bring declining costs, ultimately saving resources by virtue of “free inputs”: the sun and the wind. But the cost of carbon emissions is highly uncertain, even speculative, and subsidies usually manage to get wasteful projects off the ground that are all too often run by political cronies. Despite the free variable inputs, these projects entail substantial resource costs that are conveniently overlooked by supporters. No wonder so many renewable outputs cannot be sustained without a continuing flow of aid.

What happens when the subsidies reach their sunset? There are thousands of abandoned wind turbines littering the U.S. (and a number of abandoned solar farms, too). There are several thousand turbines at one abandoned wind farm north of Los Angeles and another east of the Bay Area. There are many more in Hawaii, Iowa, Maine, Texas and other states. Attorneys often warn landowners that lease agreements with wind developers are risky. There are a number of ways that crony wind developers impose “external costs” on landowners. Eventual disposal is a risk, as the developers might just be inclined to take the subsidies and run.

Again, wind’s big advantages, aside from the subsidies, are that wind itself is free and produces no carbon, but other resources needed to make use of wind energy are not renewable, and producing those inputs produces CO2. To build and install the windmills requires materials (including steel and scarce rare-earth materials used in the electronic components), machinery, and of course labor and land costs. There is also a substantial investment in connecting windmills to the power grid. Ultimate disposal is a certainty, and it is not cheap. Then there is a controversial cost in terms of slaughtered avian life. Increasingly, wind turbines are thought to create health issues for people living nearby.

Solar power has the same advantages as wind in terms of a free input and no direct carbon output. In addition, the cost of solar panels has declined precipitously. Rooftop solar installations have allowed consumers to sell power back to electric utilities at certain times. In fact, without those “reimbursements” on top of the subsidies, installed on-site solar power would not be economically viable for many households and businesses. Reimbursement rates are therefore a huge controversy. Solar advocates have insisted that consumers should be reimbursed at the retail price of electricity. That is difficult to square with the fact that utilities could produce that power themselves for much less. It is especially difficult to square with the fact that the excess solar generation is often mismatched with the timing of power demand.

This brings us to the achilles heel of wind and solar power: wind and sunshine are intermittent, and not just on a daily basis, but over weeks, whole seasons and even years. This risk can be diversified geographically, but only to an extent, and effective power storage options do not presently exist and will not exist for some time, even with massive subsidies. Intermittent energy production requires the availability of other reliable power sources that are costly to turn on and off as needs dictate. It requires other “peaking” capacity to fill the “valleys” in wind and solar output, and baseline capacity is needed to provide for the less variable components of demand. Baseline capacity relies on nuclear power (which many solar advocates abhor) and carbon-emitting fossil fuels. Peaking capacity is typically provided by oil and natural gas generators. Hydro-electric power can be used as baseline or dialed back as needed, but hydro capacity is generally limited.

Renewable energy activists speak of replacing traditional power sources with wind and solar power. It is difficult enough, however, for wind and solar to replace peaking capacity, let alone baseline capacity. Peak wind and solar power production is not well-aligned with peak power demand in many areas (see the second chart at this link). The extra resources required to provide redundant facilities are significant, with ratepayers picking up the tab.

Given the current state of technology, pushing renewable energy goals even further, to the replacement of baseline capacity, is misguided at best. Yet it has been tried, with unintended but easily foreseeable consequences. Germany’s Energiewende program seeks to “decarbonize” power production without nuclear power. The costs have been very high:

“The report gives enough detail that you can see why Germany’s nuclear ban leads to a shocking cost of avoidance of $300 [/mt CO2]. … J.P. Morgan modeled a balanced deep decarbonization strategy, which using 35% nuclear, costs only $84/mt CO2. Note that the $300 is a bare-bones estimate – none of the cost of the additional transmission infrastructure required by high-renewables is included in the analysis. Even so the baseline Energiewende plan will double already second-highest in Europe current costs from $108 to $203/MWhr.“

California officials apparently want to go in the same direction. John Peterson reinforces the difficulties of integrating renewable energy capacity into the power grid in a recent post at InvestorIntel:

“The disadvantages [of intermittent power sources] include:

Intermittent power sources must have conventional backup for frequent periods when the wind and sun aren’t feeling particularly cooperative;
Cannibalization of peaking plant revenue streams results in higher electric costs for all because interest, depreciation, overhead and other fixed operating expenses must be recovered from fewer units of production;
When utilities pay premium prices for renewables, that indirectly increases electricity prices for all; and
When Federal, State and local treasuries subsidize the construction and operation of intermittent power sources, they indirectly increase everyone’s tax burden.“

The U.S. Federal Energy Regulatory Commission (FERC) is currently investigating the risk of intermittent energy sources to the reliability of the power grid.

“Power demand is relatively predictable and conventional power plants, like nuclear plants and natural gas, can adjust output accordingly. Solar and wind power, however, cannot easily adjust output. Peak power demand also occurs in the evenings, when solar power is going offline. Adding green power which only provide power at intermittent and unpredictable times [and stopping or even retiring other capacity], makes the power grid more fragile.“

Given decreasing costs, solar energy is likely to play an increasing role in power production in the future; wind production to a lesser extent. Both will depend on advances in the technology of power storage. However, there are still tremendous diseconomies that make current, widespread adoption of both wind and solar power a “Renewable Irony“. Like other attempts to centrally plan economic activity, the intentions are well and good, but execution requires mandated behavior and artificial inducements that impose heavy costs on society. Renewables should not be forced on us prematurely. They will happen voluntarily and naturally if we let them, guided by market signals as technology matures and resource scarcities evolve.

Subsidized Waste: The Renewable Irony

12 Tuesday May 2015

Posted by Nuetzel in Renewable Energy

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Charles Frank, Christopher Helman, Elon Musk, Energy Matters, Energy storage, Energy subsidies, Lobos Motl, Renewable energy, Tesla Powerwall battery, The Brookings Institution, The Economist, Viv Forbes, Wind and solar

The new Tesla “Powerwall” home battery is probably most noteworthy for the breathless hype it has generated. The $3,500 cost for the 10 kWh version is not cheap, and the installed price is probably closer to $7,000. The battery has a limited number of charge cycles, though Tesla has not fully disclosed all of the specifications. People of considerable expertise in this area (not me!) do not believe that Tesla’s new battery is the least bit innovative as an energy storage technology. See this post by Lobos Motl, or this one by Christopher Helman. This is not to say that Tesla has not made contributions to battery technology, only that this variation is not new, except for the marketing.

How can it pay for itself? The promise is not so much for back-up power during outages. Instead, it is an arbitrage play allowing consumers to store power during off-peak hours and avoid usage during peak-price hours. But the application (and hope) that has excited the media and well-meaning greens is efficient storage of power generated by intermittent, renewable sources. Tesla’s marketing effort certainly fostered such hopes; those with home solar panels may have Tesla sugar plums dancing in their heads.

Advocates of renewable energy can rightly claim that the costs of energy storage (and some forms of renewable power generation) have been declining. But there is still a mismatch between expectations and reality: the Tesla battery is not new technology, and it is not really cheap in terms cost per unit of energy stored and later delivered. The economic viability of intermittent sources of power obviously depends on the combined cost of storage, transmission and the power generated by a renewable source relative to other fuels, including the initial capital outlays. This is reviewed at the Energy Matters blog in “The High Cost of Renewables“, which is largely based on this paper from The Brookings Institution by Charles Frank.

It’s relevant to compare renewables such as wind and solar to nuclear energy and natural gas as replacements for “base-load” coal plants. Nuclear and gas power are often touted as viable, reduced or no-carbon solutions to providing for the energy needs. Two issues make renewables more costly than nuclear and gas in terms of installed cost per kilowatt, despite the huge up-front installation costs of nuclear. The first is the intermittency of wind and solar power generation. According to Frank’s calculations at the link above, this factor alone causes solar to be nearly four times as costly as nuclear energy, and wind to be more than 25% more costly. The second issue is that wind and solar installations have short useful lives relative to nuclear. This adds to the wind and solar cost disadvantages, but the practice of dividing costs by the number of years of useful life probably distorts the comparisons. The shorter-lived installations can be expected to involve lower costs at replacement, which should be averaged into a comparison with a longer-lived asset. Still, there is no question that renewables are more costly than gas and nuclear power.

Critics took Frank to task over certain assumptions following the publication of his paper. He offered rebuttals here, here and here in which he revised his calculations in ways that tested his critics’ assertions. Frank’s conclusions are the same:

“Taking all changes into account, my main conclusions are strengthened. Wind continues to rank number four and, by a large margin, solar number five. Gas combined cycle continues to rank number one by a large margin, although nuclear drops from two to three [behind hydroelectric power].”

This article in The Economist also emphasizes the problem of intermittency:

“… countries which have a lot of renewable generation must still pay to maintain traditional kinds of power stations ready to fire up when demand peaks. And energy from these stations also becomes more expensive because they may not run at full-blast.“

“Firing-up” a power station repeatedly consumes fuel at a greater than proportionate rate. If fossil fuels are involved, this process eats into the presumed benefits of using renewables. Of course, there are other factors that make large-scale renewable energy “farming” undesirable, such as massive land requirements and danger to birds and even marine life. Here is another piece offering a reality check on the true costs of wind power.

Certain forms of renewable energy and energy storage technologies will continue to advance and their costs will decline over time. However, solar and wind power are currently more costly than other alternatives. The benefits of these technologies to society are highly speculative, since models of carbon-forced climate change do a poor job of explaining the actual climate. In any case, climate change, should it occur, is not unambiguously costly. In the absence of more convincing evidence, the costs of renewable energy supplies should be fully internalized by rational actors (who may have personal preferences for renewables) in private, arms-length transactions. Unfortunately, to date, the growth in the share of renewable energy production in most countries has been abetted by government subsidies, so even the aforementioned private actors are collecting rents at the expense of the rest of society. The extra costs imposed on society represent a waste of resources.

In the absence of compelling evidence of pure public benefits, new technologies should be subject to true market tests, not forced upon the public by mandates or encouraged via artificial self-interest created by subsidies. In “Green Energy Policy: ‘Nothing That Works’“, Viv Forbes discusses the real goals of the extreme green lobby, quoting several environmental radicals. Here is the “money” quote:

“… Amory Lovins of the Rocky Mountains Institute, said: ‘It would be little short of disastrous for us to discover a source of clean, cheap, abundant energy, because of what we might do with it.’“

There are a few countries that have attempted to adopt aggressive policies of renewable energy mandates. Here is a discussion of the German “Green Energy Debacle”. Australia has had its share of problems as well. And here is a warning about the implications of green policy and the imposition of “energy poverty on poor countries“.