Coyote Blog

Via Christopher Horner:

Spain's Dr. Gabriel Calzada "” the author of a damning study concluding that Spain's "green jobs" energy program has been a catastrophic economic failure "” was mailed a dismantled bomb on Tuesday by solar energy company Thermotechnic.

Says Calzada:

Before opening it, I called [Thermotechnic] to know what was inside "¦ they answered, it was their answer to my energy pieces.

Dr. Calzada contacted a terrorism expert to handle the package. The expert first performed a scan of the package, then opened it in front of a journalist, Dr. Calzada, and a private security expert.

The terrorism consultant said he had seen this before:

This time you receive unconnected pieces. Next time it can explode in your hands.

Dr. Calzada added:

[The terrorism expert] told me that this was a warning.

The bomb threat is just the latest intimidation Dr. Calzada has faced since releasing his report and following up with articles in Expansion (a Spanish paper similar to the Financial Times). A minister from Spain's Socialist government called the rector of King Juan Carlos University "” Dr. Calzada's employer "” seeking Calzada's ouster. Calzada was not fired, but he was stripped of half of his classes at the university. The school then dropped its accreditation of a summer university program with which Calzada's think tank "” Instituto Juan de Mariana "” was associated.

Additionally, the head of Spain's renewable energy association and the head of its communist trade union wrote opinion pieces in top Spanish newspapers accusing Calzada of being "unpatriotic" "” they did not charge him with being incorrect, but of undermining Spain by daring to write the report.

In the 1970's, during the Arab oil embargo, oil company presidents were dragged to Washington to defend themselves from charges that they were holding tankers offshore to drive up prices and all kinds of crazy BS.  Since that time, in every oil price spike, oil companies were vilified by the Left for destroying the American economy by driving up oil prices (artificially, I suppose).

Now, however, is seems that this was all wrong.  The fossil fuel price increases and artificial supply shortages needed to cut our CO2 emissions by 50% are enormous.  The Europeans have $9 gas and they are not near these targets, in fact in many countries their fossil fuel use has gone up.  We have been in a substantial economic slowdown, but even at these lower output and consumption levels we are far short of a 50% target.

But now the EPA says it has a computer model (stop me if you have heard that one before in the global warming debate) that says that proposed efforts to cut CO2 emissions by 50% in the next 20 years will have a negligible impact on the US economy over the next 20 years.

But there's another reason it was disappointing that Obama didn't mention carbon pricing: his own EPA had handed him a perfect excuse just one day before. In a detailed analysis of John Kerry's American Power Act, the EPA provided estimates of how it would affect carbon emissions and how much it would cost the average American. The results were remarkably reassuring.

On the emissions front, the APA would have a dramatic effect: US emissions would be cut nearly in half by 2030 compared to doing nothing. That's an enormous impact.

But how much would it cost? The answer is: almost nothing. According to EPA's models, if we do nothing, consumption of goods and services in the United States will increase 74.1% by 2030. If APA is passed, consumption will increase 73.4%.That's it. We can cut carbon emissions nearly in half, and the net cost will be a decrease in consumption of 0.7% in 2030. EPA figures this comes to an average annual cost of $146 per household. That's 40 cents a day per family.

And everyone on the Left is credulously lining up to say that this sounds about right to them.    Well, now you tell us.   And if this is true, why have you been hammering on the oil companies for 40 years if oil price increases are virtually irrelevant to the economy.

Look, the is is utter BS.  I have a wild optimism about the power of free minds to innovate and handle about anything if they are allowed, but even so there is no way that an energy price increase (or artificial shortage, take you pick of mechanisms) large enough to cut output by 50% in 20 years will have a negligible impact on the economy.  No way.

Update: I am skimming the EPA power point presentation.  I am looking at one chart that shows a shows coal with CO2 capture around 5% of US energy production about 12% of electricity production by 2030.  Absolutely no freaking way.  They are on drugs.  CO2 capture is never going to happen except when exorbitantly subsidized by the government.

And they show natural gas going way down.  Why?  Replacing coal-produced electricity with natural gas produced electricity is probably the most effective single CO2 reduction step that exists after certain conservation approaches.  But despite huge availability in the US, they show gas consumption going down by half.  If so, those are some pretty screwed up incentives in the bill.

Update #2: I found the price chart.  Apparently they project they will get all this fossil fuel reduction with an increase of electricity prices from 11 cents per Kwh in 2030 without the law to 14 cents with the law.  Gasoline prices with the law will be increased by about 25 cents a gallon in 2030 by the law.  So we are going to get a government imposed 50% reduction in CO2 output in 20 years with a price increase that is within the natural variation over a couple of months in the gasoline market?  Yeah, right.  We all will be riding unicorns to work instead.

Bruce McQuain has this take from Obama's oil spill speech last night:

The rest of the speech was an exercise in what Obama does best "“ selling smoke. He begins it with a false premise:

But a larger lesson is that no matter how much we improve our regulation of the industry, drilling for oil these days entails greater risk. After all, oil is a finite resource. We consume more than 20% of the world's oil, but have less than 2% of the world's oil reserves. And that's part of the reason oil companies are drilling a mile beneath the surface of the ocean "“ because we're running out of places to drill on land and in shallow water.

Of course his claim about drilling in deeper water because we're running out of places to drill in shallow water is false. 97% of the shallow water on the Outer Continental Shelf -97%- has been placed off limits by government. The oil companies are forced into deeper water not by the lack of oil, but by government refusing to allow them to drill there.

As an aside, Daniel Foster makes a great point:

There's an added layer of irony here as well. As Planet Gore contributor Chris Horner rehearses at length in his book Power Grab, the prime architect of the cap-and-trade idea was "” you guessed it "” former BP CEO Lord John Browne. So there is a special kind of cognitive dissonance going on in the juxtaposition of BP bullying and carbon tax cheerleading.

Update, via Planet Gore:

So you have a Nobel winner who knows nothing about oil running the Energy Department and you have an environmental lawyer who knows nothing about drilling as the head of MMS, the oil-drilling regulatory body.

So, choosing key people in the Energy department and MMS based on their knowledge of about 2% of the energy world (wind and solar) is a problem?

Question:  How many years does it take for a typical government / green investment to pay off?

Example 1:

Mesa got $1 million in federal stimulus money to replace 2500 traffic lights with LED's. That's $400 a light which probably includes the cost of installation. Once they are operational, Mesa expects to save $0.028 million per year in electricity costs. At that rate, it will only take 35.7 years of savings to get the $1 million back.

Example 2:

Nine turbines from seven manufacturers, including Reno's Windspire, are being installed to test their performances in different environments. The first turbine was installed at the sewer plant in Stead and the second at Mira Loma Park.The nine turbines and several solar projects together are a $3.5 million investment, before $1.7 million in energy rebates are applied to reduce that cost. The projects are expected to save 788,932 kilowatt hours a year for an annual savings of $91,000 a year [a 38-year payback].

The latter example actually over-estimates the payback, because it ignores the substantial maintenance costs of wind turbines (what percentage have you actually seen running?) as well as the systematic over-estimation of their power output.  Incredibly, the SF Chronicle's green writer/blogger actually brags up the Reno boondoggle.

Postscript: In the comments of the wind turbine article I added, in response to the projects green credentials:

But, you say, its not about return on investment but CO2 reduction. OK, lets look at that, forgetting for a minute whether Reno taxpayers should be paying extra for electricity to reduce global temperatures by 0.00000000001C.

Let's consider an alternate investment in gas turbine electric generation, and assume it and the wind turbines are displacing coal-fired power. Per Kw-H, gas turbines are going to, even including the fuel, produce power for a fourth or less the cost of wind with these relatively small turbines. And gas is plentiful and most of it comes from the gold old USofA (or at least North America).

But it's not zero emission you say. OK, but if it is 1/4 the cost that means that it can displace four times as much coal power for the same investment. And it is as low of CO2 emissions per btu as you can get in a fossil fuel. In fact, 4X of gas generation would reduce CO2 emissions more than 1X of wind. So even in terms of CO2 emissions, wind here is a bad investment.

More here on the failure of European green energy subsidies.

At a speech a while ago, I told this to an investing group a while back:  Do the math.  You can't build a growth company on public subsidies.  It may be possible to grow at first when the subsidized activity (e.g. solar) is a tiny percentage of the market.  But once it starts to grow, the projected subsidies are astronomical.  The German solar subsidy is something like 50 cents per KwH -- to give one a sense of scale, the typical electricity price from fossil fuels there or here is something like 8-10 cents per KwH.  Subsidizing just 20% of US electricity production at this kind of rate would cost $50 billion a year.  Subsidizing all production would cost a quarter of a trillion dollars a year.

Take a company dependent on subsidies, figure out what their implied size is in 10 years based on current stock multiples, and then calculate what the public subsidy at current rates would have to be to support that size and a reasonable market share (because competitors are following the same model).  Investors who do this will quickly figure out that the subsidies needed to support their favored company are unsustainable.  Phoenix-based FirstSolar, a sometimes-darling of Wall Street, has had  a rocky year.  Its stock price has had several steep falls, each one just after rumors that Germany would cut its solar subsidy rate (actually its feed-in tariff, but the same idea).

My advice to the group was that if you were investing in green energy, either your company had a three year plan to reduce costs to be able to compete profitably in a subsidy-free environment, or else you are investing in pets.com.

Update: If you have Nancy Pelosi's husband on your board, you can probably extend your window to five years.

I am a little late on this but want to link it none-the-less:

As predicted was inevitable, today the Spanish newspaper La Gaceta runs with a full-page article fessing up to the truth about Spain's "green jobs" boondoggle, which happens to be the one naively cited by President Obama no less than eight times as his model for the United States. It is now out there as a bust, a costly disaster that has come undone in Spain to the point that even the Socialists admit it, with the media now in full pursuit....

La Gaceta boldly exposes the failure of the Spanish renewable policy and how Obama has been following it. The headline screams: "Spain admits that the green economy as sold to Obama is a disaster."

This is a failure of every single number ever published by supporters of government stimulus programs.  They always fail to acknowledge that the money for these programs came from somewhere.  It was being employed by someone to buy something or to invest in something or to pay someone's wages.  Every private company in the world seems to understand this concept of opportunity cost, so it is amazing that it is so hard to grasp in the media which breathlessly reports every BS number Obama has spit out.

Every study I have ever seen has said that corn ethanol is only marginally energy-positive when its growing and production costs are considered and barely breakeven on CO2.  In other words, it costs a lot and does nothing, even before one considers negative effects to food prices and land use.

So of course, the Obama administration may soon demand that we subsidize more of it

Burdened by falling gasoline consumption and excess production capacity, ethanol producers appealed to the government on Friday to raise the 10 percent limit on ethanol in most gasoline blends to as high as 15 percent.

Ethanol plants are closing across the country and some ethanol producers are declaring bankruptcy. The appeal will require the Obama administration to decide whether to increase federal support for the industry, which has already benefited from an array of subsidies, tax credits and Congressional production mandates.

"Approving the use of ethanol blends up to 15 percent is a necessary and positive step," said Bob Dinneen, president of the Renewable Fuels Association, an industry lobbying group, "to ensure the full potential of a robust domestic ethanol industry."

The Environmental Protection Agency and the Energy Department have been testing higher ethanol blends. The E.P.A. has nine months to review the request, but it could decide before that to increase the blend cap slightly, to 12 or 13 percent.

Energy Secretary Steven Chu has indicated that he would favor at least a small increase in ethanol levels unless auto companies said there was a risk the change would damage their products.

At least the article is marginally honest - its starts with the true reason for the mandate - improving the bottom line of favored businesses, not energy or environmental policy.  Chu seems to be joining Krugman as another Nobel prize winner turned political hack.  In the past I have had Chu's supposed gravitas thrown at me in climate debates -- I think this should settle just how Chu makes choices between what science tells him vs. what politcal pressures are demanding.

For years I have said that daylight savings time likely made no sense as an energy saving program.  It was first used back in World War I, when electricity demand was primarily driven by illumination.  At that time, shifting the clock around to better match working hours with sunny hours (ie times with natural light) probably did save electricity.  But today, electricity demands are driven much more heating and cooling.  The same logic no longer holds.  In Arizona, the earlier the sun goes down, the less electricity we have to use when we are home in the evenings to keep the house cool.

It seems that research has confirmed my gut feel:

The result of the study showed that electricity use went up in the counties adopting daylight saving time in 2006, costing $8.6 million more in household electricity bills. The conclusion reached by Kotchen and Grant was that while the lighting costs were reduced in the afternoons by daylight saving, the greater heating costs in the mornings, and more use of air-conditioners on hot afternoons more than offset these savings. Kotchen said the results were more "clear and unambiguous" than results in any other paper he had presented.

Of course, daylight savings time will never go away, because modern environmentalism has become more a matter of making empty feel-good gestures than performing rational acts that actually improve something.

No, today's post is not on health care, but CO2 abatement.  Marlo Lewis looks at a new Harvard study, and concludes what I have been saying for years -- gas prices are going to have to be forced to $10 or more in this country before we even start making a dent in the Administrations or UN's CO2 abatement targets.   I obviously don't think it is justified based on my views on the climate sensitivity to CO2, but even if it were, let's not pretend it is somehow free.

Next week I am on a panel talking about alternative energy.  These guys have already told me they don't want to re-fight the global warming science battle at this venue, and my guess is that there will be a lot of pragmatist corporate types who won't really care about individual liberty or role-of-government issues  -- they will only care if there is money to be made, even if it is by rent-seeking.  My best bet, I think, will be to discuss why alternative energy is a bad investment.  My sense is that it is a bubble investment, like goofy Internet stocks in the 1990's or housing in the 2000's.  Already, I think we see the crash in the corn ethanol business.

My two assumptions are

• I can't think of any industries that were initially heavily subsidized that eventually found their way to competing successfully and growing without subsidies.
• With the exception of agriculture, the public's tolerance for growing subsidies to a single industry eventually wanes.

I would love for commenters or emailers to send me contra-examples if they have them to either of these assumptions.  In particular, can you think of an industry that could not have grown initially without subsidies eventually prospering without subsidies.

To the second point, I looked at the numbers two ways.

1. In Germany, which is often held up as the model, feed-in tariff subsidies are between $0.06 (wind) and $0.50 (solar) a Kwh.  If the US reached a goal of 20% of its production in wind and solar (total production today is about 4000 billion KWh) then the subsidy would be between $50 billion and $400 billion a year.  It is hard to imagine these remaining popular for any period of time.  (lots of German numbers here and in the linked PDF)
2. Venture capitalists and investors are expecting the growth stocks they invest in to grow at, say, 30% a year.   Let's assume alternative energy companies grow at 30% a year and the number of companies, attracted to the growth and subsidies, doubles every two years.  In this scenario, assuming unrealistically that the supply curve for alternative energy is flat rather than upward sloping, the amount of subsidies to support this growth would have to nearly double every year.  They would increase 21-fold in five years and 440-fold in 10 years.   In fact, given the shape of real supply curves, new more expensive capacity at the margin is replacing cheaper and cheaper alternatives, resulting in the need to grow subsidies even faster to keep up.   Never has happened, never will.  Once the industry outgrows the government's willingness to grow subsidies, the whole thing crashes.

(PS - the subsidy could also be in the form of taxes that increase the cost of alternatives, or production and/or import restrictions on the alternatives).

Any help along these lines in the comments is appreciated.

Update: This seems relevant:

First Solar shares skidded 8% Friday to close at $116 after the company issued a murky business outlook beyond June. Until then, however, "orders look very strong," First Solar CEO Robert Gillette said in a post-earnings conference call.

This commentary, along with price pressure and expected subsidy cuts solar panel makers get from the German government is making investors a bit more wary of First Solar, whose shares have been on a bumpy ride the past 18 months....

First Solar, helped by government tax credits extended to businesses for using solar power, has rewarded its investors since going public in November 2006 at $20 a share. The stock peaked at $317 in May 2008. But the shares have been skittish ever since.

Germany, the world's biggest solar market, is weighing a 15% cut on so-called solar feed-in-tariffs. This could make solar installations less attractive.

First Solar projects 60% of its 2010 sales from German-related contracts, according to Wedbush Securities analyst Christine Hersey.

Remember from above, the German feed-in tariff for solar is around $0.58 per KwH, or fully $0.50 above the price paid for the fossil fuel base load.  At this subsidy level, the US would be paying $400 billion a year in subsidies and/or higher prices.

First Solar has grown at over 150% per year for the last 3 years so the 30% assumption above is conservative, as is the assumption about the number of competitors doubling every two years.

Another interesting note - First Solar makes a pre-tax margin around 33% of sales, which is over 6x larger than health insurance companies make (and are excoriated for).  Is it any wonder Germany no longer wants to keep subsidizing First Solar's bottom line to levels far above most equipment manufacturing companies.

I was having a back and forth with a reader about wind power and how much fossil fuel capacity must be kept on standby to support grid reliability with wind.  Here are some excerpts of what I wrote:

Forget all of the studies for a moment.  I used to operate power plants.  Any traditional capacity (fossil fuel, nuclear) except perhaps gas turbines takes on the order of a day or more to start up - if you don't take that long, the thermal stresses alone will blow the whole place up.  During the whole startup and shutdown, and through any "standby" time, the plant is burning fuel.   Since we don't have a good wind energy storage system, some percentage of wind capacity must be backed up with hot standby, because it can disappear in an instant. We are learning now, contrary to earlier assumptions, that wind speeds can be correlated pretty highly over wide geographies, meaning that spreading the wind turbines out does not necessarily do a lot to reduce the standby needs.  And since plant startups take time, even gas turbines take some time to get running, the percentage of wind power that required hot backup is pretty high -- I would love to find this percentage.

I found at least one source for such a percentage, which posits that for England, the percentage of hot backup needed is as high as 80%:  http://www.ref.org.uk/Files/ref.for.decc.28.10.09.i.pdf

I quote from page 6-7:

On any view, including the square root rule of thumb referred to above, the result, imposed for purposes of maintaining adequate response and reserve requirements, implies that a high degree of conventional (dispatchable) plant capacity is retained in the system to support wind generation. Thus, for 25 GW of installed wind capacity only 5 GW of conventional plant can be replaced leaving 20 GW in the role of standby capacity (also known as "Spare" or "Shadow Capacity").3

So 80% of the expected production from wind has to be backed up with hot spares burning fossil fuels.  They go on to say that the percentage of required spare capacity may be lower if the grid area is substantially larger, but not a lot lower.  I had not considered hydro power, but apparently that can be used to provide some quick response to wind production changes.  The report also talks about diesel generators for standby since they can be started up quickly, but these are seriously inefficient devices.  Despite the report's conclusion that the situation might be a bit better on the continent with a larger and more diverse grid, a report of the largest German utility seems to argue that German experience may actually be worse:

As wind power capacity rises, the lower availability of the wind farms determines the reliability of the system as a whole to an ever increasing extent. Consequently the greater reliability of traditional power stations becomes increasingly eclipsed.

As a result, the relative contribution of wind power to the guaranteed capacity of our supply system up to the year 2020 will fall continuously to around 4% (FIGURE 7). In concrete terms, this means that in 2020, with a forecast wind power capacity of over 48,000MW (Source: dena grid study), 2,000MW of traditional power production can be replaced by these wind farms.

It is hard to tell, because 48,000 MW is the nameplate capacity which is virtually meaningless, but my guess is that they are not doing better than 80%.

I have to tell one of my favorite stories of chutzpah.  In the 1940's and 1950's, railroads were making the transition from steam engines to diesel engines.  One of the changes was that a diesel engine only needed a driver, it did not need a fireman as steam engines did to shovel coal and keep the boiler running well.   The unions of course saw this coming.  So what did they do?  They preemptively made the demand that diesel engines should have to have TWO fireman.  Railroads spent so much time fighting this insane proposal that it took them years to get the firemen per locomotive to the correct number (ie zero).

I am reminded of this story when I think of how the Obama administration has handled the issue of CO2 abatement.  Reasonable people understand that CO2 abatement will be horrifically expensive - it just will not be cheap in terms of cost or lost economic output and lost personal liberties to take the country back to a CO2 per capita it last had in the 19th century.     But rather than taking this on, the Obama administration preemtively attacked, saying that in fact Co2 abatement would lead to economic growth and job creation.  This was the broken windows fallacy on steroids, but the usual progressive illiterates and consumers of party talking points have run with it.

We are finally getting folks to start to address the true costs of CO2 abatement, and they are enormous.  People who push the precautionary principle try to say that even a small risk of climate catastrophe outweighs some minor abatement costs.  But does a small change of manmade warming outweigh a near certainty of enormous economic costs?

I have said for years that to really get to an 80% reduction target, gas prices would have to rise over $20 a gallon  (they are at $10 already in Europe and they are no where near the targets).  Some researchers looked at the gas price implications of more modest CO2 targets:

To meet the Obama administration's targets for cutting greenhouse gas emissions, some researchers say, Americans may have to experience a sobering reality: gas at $7 a gallon.

To reduce carbon dioxide emissions in the transportation sector 14 percent from 2005 levels by 2020, the cost of driving must simply increase, according to a forthcoming report by researchers at Harvard's Belfer Center for Science and International Affairs.

And this is with a straight tax, probably the most efficient way to hit the targets.  The study agreed that other intervenist approaches didn't seem to work as well as a straight tax:

In the modeling, it turned out that issuing tax credits could backfire, while taxes on fuel proved beneficial.

The other day I was happy to see lefty Kevin Drum pointing out the obvious problems with subsidizing Edit Post "¹ Coyote Blog "” WordPressethanol.  This is a step forward, when smart people on both sides of the aisle can agree that a certain approach is dumb.  Of course, given the incentives in government, that doesn't mean that ethanol subsidies will actually stop.

So we make some progress on ethanol, but just replace it without another absurdly dumb subsidized energy technology, in this case wind.  Wind is not even close to being ready for grid service, and given the hot backup power one needs to cover its unpredictability, it does about zero to reduce CO2 emissions.  A series of studies have shown that it has done nothing to reduce fossil fuel consumption in either Germany or Denmark.  And the whole green jobs thing is even more absurd -- it makes no sense theoretically, as shifting private investment to less economically viable uses has never, ever created jobs -- and has been debunked in practice in both Denmark and Spain.

Unfortunately, the Obama administration has bent over backwards to ignore the science and push wind, for no other reason I can figure out except to avoid admitting he was wrong when he campaigned on wind.  This makes for a pretty depressing story, and, given there are more documents the Administration is resisting releasing under FOIA, probably more ugly news to follow.

Postscript: One way you could use wind is with some kind of storage system, of which I can think of two.  The first is to use wind to pmp water up hill into a reservoir where the potential energy could later be harvested as hydroelectric power.  The other is to use the wind power to make hydrogen from water.  You need some sort of process that can be stopped and started on short notice.

Bloom Energy is introducing what looks like a 200kW fuel cell that runs on natural gas for about $700,000.  That compares pretty favorably with the current cost of at least $2,000 per KW to build a coal plant, especially when one factors in reduced distribution and pollution costs.  We have gobs of natural gas and are finding more all the time, and (unlike something like hydrogen) the distribution and storage infrastructure is already in place.  Hope it works.

I often critique new energy technologies here, and that critique is often confused with a hostility to new technologies.  This is far from the case.  Living here in Phoenix, I would love to have cheap solar cells to spread over my roof like carpet.  What I am opposed to is government subsidies for technologies that are not even close to economic compared to current alternatives.   I don't know the Bloom business model  (I am suspicious they have a large rent-seeking component if KP is funding them) but if they can make these work subsidy free, that's great.

Why can't our newspaper here in Arizona apply any skepticism to alternate energy technologies?  Sure, I think this technology is cool, where large solar dishes concentrate heat on what appears to be Stirling cycle engines  (the article, true to form, does not explain the technology, but a few hints plus the name of the company "Stirling Energy Systems" seems to point to that answer).  Other concentrator technologies focus on boiling water, so this a new approach to me.

However, why can't the article actually address real issues, like "how does this technology stack up, based on cost and efficiency, vs. other solar technologies."  It says it uses less water than other concentrator technologies, but is it more or less efficient?  No answer.

We can figure a few things out.  First, as with many "renewable" energy technologies, the company selling it engages in nameplate capacity abuse.  A 1MW coal plant produces 1MW all day long.  A 1MW wind plant produces 1MW when the wind is blowing hard, and less at other times.  And a solar plant produces 1MW when the sun is at its peak.   We can address this latter because folks have calculated sun equivalent hours, the number equivalent max sun-hours per day a site gets through the year.  For the best desert sites in the US, this number is around 6.  This means that the actual capacity of this plant is not 1.5MW, as stated in the article, but about a fourth of that, or  0.375MW.

This matters for a couple of reasons.  They state their build cost as $2.8 million per MW, which seems competitive to coal plants which cost $1.0-2.0 per MW, but in fact the reference number for this solar based on an apples to apples capacity comparison is actually  $11.2 million per MW.   The solar plant gets some credit for having no fuel costs, so it might be possible still for its power to be competitive, but it appears form the limited information in the article that it is not:

Singleton would not disclose what SRP will pay for the electricity, but said the utility will pay a premium for the environmental benefits of the power, and that the price is competitive with other sustainable-energy sources such as wind and geothermal power.

In other words, it is not competitive, so much so that they will not even reveal the price, and only subsidies and government mandates make it possible for a power company to buy the power.

Let's do a reality check.  At best, they get 8 dishes per acre, and 25Kw per dish at max sun.  So this is 8 x 25 x 6/24 = 50Kw per acre.   Lets say we want to get rid of coal.  The US generating capacity of coal plants is about 336,000 MW, or 336,000,000 KW.  To replace it with this solar technology would require 6,720,000 acres (10,500 sq miles or 10% of the state of Arizona) and cost $3.76 trillion dollars if located in the best possible solar areas.   This is not cheap but is not awful.

If I am doing the math right, I get something like $70,000 per dish   (1 dish = 25Kw, $2.8 million per MW).  I would think there are a lot of rich folks with some acreage that would pay $70,000 for one of these bad boys.  It would look much cooler than solar panels on the roof.

I am done using the phrase "dangers of government trying to pick winners" because it implies that they sometimes might be successful.  They never are.  When governments choose, they choose losers.

I get a lot of pushback on this, because it seems to offend people's intuition.  They will say they know lots of good people they trust in government -- there is no way that all these smart, well-intentioned people are going to be so consistently wrong.

But the argument against government in this case (and in most other cases) is not based on the IQ or goodness of the individuals that populate it.  The argument is that even good people in groups make terrible decisions due to problems with their information and incentives.

The information problem is one that Hayek is famous for addressing.  In short, there is simply too much to know to make decisions for the entire economy.  In fact, folks with high IQ's often do especially poorly in this context, because they tend to overestimate their own knowledge and problem-solving ability.   And, even if one could be omniscient, it is still impossible to pick winners because 300 million people have different preferences and so one solution based on one set of idealized or mean preferences is going to sub-optimize for a lot of people  (remember this now that we all have to have health insurance plans on the exact same terms and coverage).

The incentives issue is perhaps an even more powerful problem.  We only have to look at the most recent health care bill and its progress through the legislative process to understand the power of incentives to shape rules and legislation in absurd ways.

Ethanol is a great illustration.  Scorned by scientists as both bad energy policy and bad environmental policy, ethanol mandates and subsidies do nothing but hurt the environment.  Ethanol generally takes more fossil fuels to produce than it replaces, it does almost nothing to reduce CO2 emissions, and it creates new environmental issues with land use as well as social issues from rising food prices.  If you listed a hundred potential legislative initiatives to improve the environment and energy policy, ethanol would likely be in the bottom 10.  But never-the-less, it is consistently the number 1 legislative solution adopted by western democracies, including the supposedly science-based Obama administration.

I used to say that if we could move the first Presidential primary out of Iowa, ethanol might go away, but obviously that understated the appeal of subsidizing the agricultural industry under the thin veneer of environmental policy, as demonstrated by these nutty large subsidies in Europe.  Via Carpe Diem:

Biofuels production in Europe is heavily subsidized. Support has also been increasing in the past years and today stand at approximately EUR4 billion ($5.76B). Another way to look at subsidies is that every litre of ethanol consumed in Europe gets 0.74 EUR (about $4 per gallon) and every litre of biodiesel 0.5 EUR ($2.72 per gallon). The effective rate of assistance to biofuels (taking account of all measures of support) adds up to more than 250% for ethanol (see chart above). Biodiesel, and especially rapeseed crops, have lower effective rates of assistance (up to approximately 60%).

This structure of support and protection is not economically sustainable. It is rather close to economic madness to pursue the sort of self-sufficiency or industrial policy ambitions that have guided EU policy towards biofuels. The total cost of every unit of biofuel becomes far too high, which slows down the readiness to shift away from fossil fuels.

The biofuels policy in the European Union is a classic example of "green protectionism" "“ protectionism that is not motivated for the benefit of the environment, but which uses environmental concerns to pursue non-environmental objectives. The European Union runs an extensive policy for subsidies to biofuel production. Border protection increases the level of subsidy by giving a market support from consumers to producers. Standards are used to favour domestically produced biofuels. It is difficult to escape the picture of a policy driven by industrial ambitions rather than environmental concerns. The intention and/or the effect of Europe's policy is associated with beliefs of self-sufficiency. Obviously, trade is not considered to be an integral part of an environmental ambition to shift from fossil fuels to biofuels.

James Hansen wrote an editorial supporting a revenue-neutral carbon tax, and while I don't really agree with all of his justifications or economics, I do agree with his ultimate conclusion --that such a tax would be fairer, more efficient, less growth-killing, and ultimately more effective than the Frankenstein mess of parts that makes up the current cap-and-trade bill.

To be fair, I have been on this point for a while, having advocated a carbon tax offset by a payroll tax reduction to make it revenue neutral for some time, including in my most recent film.  I don't think I have to tell my readers that I am not big on taxes nor am I of the belief that any strong action on CO2 emissions is necessary.

However, I am largely indifferent between a sales tax on fuel and an equal sized sales tax on labor (which is effectively what payroll taxes are).  There is no doubt that a reduction in payroll taxes would be a helpful step in this recession, and if folks would sleep better at night with less carbon emissions, I can tolerate trading one for another.

Jonathon Adler has more, including Paul Krugman's negative reaction to the plan  (did this guy really once win the Nobel Price in economics?)

Via Maggies Farm

Related:  the total BS that is the Volt's 230 mpg rating.

I had wanted to dig into the costs of a Florida solar facility that Obama recently visited.  Fortunately Ronald Bailey does it for us:

Now let's do a rough calculation of the costs of DeSoto Solar versus conventional power sources. According to the Electric Power Research Insitute, a modern 1,000 megawatt coal plant without carbon capture technology would cost about $2.8 billion to build. Adding carbon capture would boost the cost to as much as $4.7 billion.

The 25 megawatt DeSoto facility cost $150 million. Scaling it up to 1,000 megawatts would cost $6 billion. But coal power plants operate 90 percent of the time snd solar only 30 percent, so in order to get the equivalent amount of electricity out of solar plant would mean tripling the capital cost for a total of about $18 billion. In other words, building a solar power plant costs between 4- and 6-times more than conventional, or even carbon capture, power. Even worse, a scaled up DeSoto-style plant costs 18-times more than a natural gas plant.

Tyler Cowen links to a good article that gets at the fallacy that suddenly obsoleting our energy infrastructure and having to rebuild it will be of net economic benefit.

Optimistically treating European Commission partially funded data, we find that for every renewable energy job that the State manages to finance, Spain's experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created

Includes 1 million euros in government subsidies per wind job created.

In my mind, the green jobs mantra is a result of the CO2 abatement case becoming fatally weak, with supporters of legislation casting about for other justificaitons.  From the very beginning, many of the most passionate folks are on the AGW bandwagon not because they really understand the science, but because the theory provided justification for a range of government actions (reduced growth, limited technology, reduced energy use, reduction in global trade -- even vegetarianism) that they supported long before AGW made the news.

Update: A quick note on a theme I harp on a lot - nameplate capacity for wind and solar is really, really misleading.  In Spain in the study cited, wind operates at 19% of nameplate over the course of a year and solar operates at 8% (figure 3).  The actual CO2 reduction is even worse, because, particularly for wind, fossil-fuel fired turbines have to be spinning on hot backup for when wind suddenly dies.  Germany, the largest wind user in the word, found only 1,000MW of reduced fossil fuel plant needs from every 24,000 MW of wind capacity.

Having read this:

In his proposed budget for 2010, Chu wanted $480 million to start eight Energy Innovation Hubs, or "Bell Lablets," as he called them, to stimulate research in areas ranging from solar energy to new materials for the electric grid. Each would receive $35 million to get started, and $25 million more in each of the following 4 years.

Last week Congress poured semi-cold water on the idea....Its skepticism was no surprise, having been included this summer in reports accompanying the spending bills in the House of Representatives and Senate (House, Senate versions). In August, Science reporter Jeffrey Mervis described how Chu admitted to a mediocre job of selling the idea and overcoming congressional concerns that the concept was poorly thought out and not well-coordinated with other energy research at the Department of Energy. House appropriators were particularly unkind to the idea, noting:

A new set of centers with overlapping research goals risks adding confusion and redundancy to the existing fleet of research and development initiatives

So since everyone agreed it was a bad idea, they killed it right? Ha ha, cute idea, actually voting and spending money based on efficacy. In fact, they gave Chu quite a bit

Conferees to the Energy and Water spending bill approved funding for three of the centers, two in energy efficiency and renewable energy and one in nuclear energy.

If they really make no sense, how about "zero"

We Phoenicians, who live in one of the best solar sites in the world, have been anxiously awaiting a solar electric technology that makes economic sense.    I have a couple thousand square feet of nice, flat room that is just begging to get be off the grid.  Already, solar is economic for individuals in Phoenix, but only if you are willing to soak American taxpayers and your neighbors for 85% of the costs.  It would be nice if it were, you know, actually economic and not just subsidy bait for tens of thousands of dollars.  I have dug into many analyses that claim that solar has a 5-7 year payback, but never seen one that achieved these returns without substantial subsidies and rebates (beware the term "energy payback" which is not the same thing as investment payback (pdf))

For a while I have said that I thought traditional silicon/germanium IC-like wafer processes for making solar cells was just never going to get there, and that some other technology was necessary.   This might be one such example:

JA Solar, one of the big players in the solar industry, is working with Innovalight to commercialize the latter's method for making silicon-ink-based, high-efficiency solar cells, the companies said this week.

... The solar cells are created by pouring an ink solution incorporated with silicon nanoparticles and then decanting the excess liquid to leave behind a crystalline silicon structure.

At the time of the 2007 announcement, Sunnyvale, Calif.-based Innovalight claimed its method not only resulted in solar cells that were cheaper to produce by as much as half, but that the crystalline structure resulting from the process made its cells more efficient at converting electricity.

Those claims now appear to be validated.

On Tuesday, Innovalight announced that an independent study of its method by the U.S. Department of Energy's National Renewable Energy Laboratory and the Fraunhofer Institute for Solar Energy Systems in Germany confirmed that its silicon ink-based cells "demonstrated a record 18 percent conversion of efficiency."

The 18% conversion efficiency is close to a record for thin films, but must be the "record" for production models, since higher conversions have been achieved in the lab.  18% is very good for a production device, particularly if it is cheaper to manufacture than current cells.

Frequent readers of this blog know that I am very skeptical wind will make very much sense as a major power source outside of a few niche applications.  Solar may not be economic today, but I think it will someday, and maybe even some day soon.  But I am not sure wind will ever be ready for prime time.

I thought this was pretty funny: (emphasis added)

In the space of one hour last month, electricity generated at wind farms in the eastern end of the Columbia River Gorge shot up by 1,000 megawatts "“ enough to power some 680,000 homes.

Less than an hour later, it plummeted almost as much.

Sitting in front of 10 computer screens in a fifth-floor room of the federal Bonneville Power Administration headquarters in Portland, Kim Randolph had to react quickly.

Working from a keyboard, she diverted millions of gallons of water away from massive turbines spinning in Columbia River dams and sent it around the dams.

The 17-year veteran power operations specialist remembers how fast she needed to work as a wind storm caused generation to peak and fall three times over eight hours.

The article is about the difficulty for grid operators in integrating and managing wind in the grid.  But here is the part that slides by -- despite the electricity it is putting in the grid, wind is contributing...nothing.  Note that when wind production is surging, the utility is sending water around the turbines of the dam.  That lost potential energy is gone forever.  All the wind power did in this case is substitute for clean hydro power.  It has not value in this particular case (beyond the ability of the utility to put wind on its annual report and seek subsidies from the Obama administration).

Apparently the costs of trying to integrate wind into the grid is so high the utility tried to charge wind producers a higher integration charge than they do for other sources.   This attempt to set pricing equal to actual costs was apparently killed by pressure from the Obama administration, making sure that wind will continue to get preferential treatment and I presume substitute for dirty hydro power in the future.

Postscript: I just don't see how wind is ever going to work on the grid.  In this case, wind is backed up by hydro, but in others it has to be backed up by spinning, fuel-burning fossil fuel plants.  Wind makes more sense to me linked to some type of flexible local process.  Using wind to make hydrogen from water may make sense.  Wind could store its energy by pumping water backwards back up a dam to be recovered as electricity through hydro power later.  Or it could run a local process, such as water desalinization  (a good potential candidate as sea breezes tend to be more constant).

All those confident in our ability to ramp up things like wind and solar quickly should take a long look at T. Boone Pickens decision to virtually abandon billions of investment in wind.

One of the ways I think our potential to increase renewables is over-stated is that the government has begun lumping hydro power into wind, as in these charts.  They show "renewables" as about 9% of electricity production.   Increasing this to, say, 20% seems daunting but doable - after all, we are just doubling it.

But in fact, almost all of the 9% is hydro power, and that is not going to increase (in fact environmental presure is actually to destroy several hyrdo facilities to allow the rivers to run free).  This means that to get total renewables to 20%, other renewables like wind and solar will have to increase from about 1% to 12%, or a twelve fold increase.  This is much more daunting, especially since a raft of subsidies and incentives and programs have gotten us to just 1%.

Postscript: Owning a home in Phoenix with a big flat roof, there is no one in the world rooting for solar to be economic more than I am.  I have run the numbers recently, and taking advantage of all government subsidies, the investment has about an 8-10 year payback.  It's just not there yet.  Further, I worry that the current silicon/germanium IC technologies are dated and dead end.  I fear that buying solar now is like buying the last IBM mainframe before PCs came out.  I have a ton of confidence in the innovativeness of man, and believe that a real solar breakthrough will occur in the next 10 years.  Wind, on the other hand, is never going to work.  It is the ethanol of electricity production.

I have already written before about carbon offset companies apparently double or even triple counting carbon credits or offsets.  Here is another example, sent by a reader:

Reilly and Herrgesell, the company's president and project manager, respectively, have been trying to develop a way to "incentivize the consumer" for nearly two years. What they came up with was a model for selling personal carbon credits.

"(It's) a new idea," said Herrgesell, "but a very powerful idea."

To get started, you create a personal profile with usage data from your utility bills over the last year at My Emissions Exchange. Then, you reduce your energy consumption. My Emissions Exchange certifies your personal carbon credits, and sells them for you in the global voluntary carbon market.

The carbon credits are equal to a one-ton reduction in carbon emission, and are currently trading between $10 and $25, according to the site.

"This is the only effort out there that can align green activity with financial benefit," said Reilly.

First, I have looked at the site in question, and find no differentiation for how one's power is generated.  My power in Phoenix comes from a big honking non-CO2-emitting nuclear plant, so my actual carbon credits for reduction in electricity use are theoretically more complex.  Is the clean nuclear power I didn't used sold so it substitutes for fossil fuel power?  Did I cut my power peak or off-peak?  And does it substitute for gas (not much CO2) or coal ( a lot of CO2)?  Its amazing that there are real markets that will accept such soft savings as real credits to be paid for.

Second, in the proposed Waxman-Markey bill, utilities get counted directly on their CO2 output, so either this program will have to go away or else it will represent a double counting of the same benefit (as at the utility level your reduction in electricity use will also "count").

Third, the economic knowledge of the author quoted above is just staggeringly low.  I mean, all this time I thought electricity prices were how consumers were "incentivized" [sic] to use less power.  The implication is that somehow incentives are out of alignment and this is the "only effort" aimed at aligning them.  But consumers already save money by reducing their utility use (does anyone have a utility contract that reads the opposite?)  One might argue that these guys can provide an additional financial incentive that will create incentives for more conservation at the margin, but that's about it.