Coyote Blog

As many of you know, my company privately operates public parks and recreation areas.  With costs 50-70% lower than government management, one would think that private operation would be on the table as an option when government recreation budgets face shortfalls**.  However, this is seldom true.  The reason is that you will almost never, ever, ever hear discussion of efficiency improvements in any discussion of public park budgets.  100% of any such discussion will be "how do we find new revenue streams", even when those revenue streams are one or even two orders of magnitude smaller than potential efficiency gains.  When costs have to be cut, they are cut solely by closures and service reductions.

Which is why I smiled when I read this article about Connecticut State Parks sent by a reader:

The effects of state budget cuts will soon be felt at Connecticut’s 109 state parks, including cutbacks in lifeguard staffing and park maintenance and the closure of three state campgrounds.

The $1.8 million in reductions to park operations will take effect after the July Fourth holiday weekend, and Robert Klee, commissioner of the Department of Energy and Environmental Protection, said he expects additional cost-cutting steps next spring. DEEP faces an overall $10 million reduction in funding from the state’s general fund.

“By carefully analyzing how and when the public uses our state park system, we will achieve the savings we need while keeping much of what we offer at our 109 parks open and available to the public,’ Klee said.

But park advocates argue these reductions point to the necessity of identifying additional revenue streams to help fund the parks.

“This just underscores the need for these sustainability funds,” said state Sen. Ted Kennedy Jr., the Democratic co-chairman of the legislature’s Environment Committee. Kennedy and other lawmakers have proposed concepts over the years such as expanded park concessions, a tax on disposable plastic bags, higher park rental fees and sponsorships.

The only cost reductions discussed in the article are reductions in service days and hours.    If one were in private industry, one would approach this by identifying all the activities performed by the organization, such as bathroom cleaning and landscaping, and then look at benchmarks to see if others do it less expensively and then try to figure out how they do it less expensively and determine if those methods could be copied.  None of this ever occurs in the public sphere.  The several times I have suggested it in senior meetings, for example in California, the whole room goes quiet and looks at me like I am insane.

** In reality, every single government agency running parks has a shortfall, even when their budget is balanced.  Why?  Because virtually no agency, including the big ones like the National Park Service or California State Parks, fully cover all of their capital maintenance costs.  All these agencies have growing deferred maintenance accounts, even when they claim that budgets are nominally balanced.

Theorum:  A media article on a wind or solar project will give its installation costs or the value of its energy produced, but never both.

Corollary 1:  One therefore can never assess the economic reasonableness of any green energy project from a single media article

Corollary 2:  For supporters of green energy, there is a good reason for Corollary #1.

I am mostly inured to being told I am "anti-science" for thinking manmade global warming will be less than catastrophic.  In debate situations (which are increasingly rare, since most colleges where I do most of my speaking no longer want a second side in climate discussions) I usually can demonstrate I know a hell of a lot more about the science than my opponent in the first 3 minutes or so.

But the whole "pro-science" pose of environmentalists is especially funny when they get really excited about some very stupid technology.  Environmentalists' support for corn ethanol is a good case in point.  Most of them have retreated on this, and the media has pretty much allowed them to pretend they were never really vociferous supporters of this technology that most now consider (and I considered from the beginning) to be environmentally damaging.

Here is the new, latest, greatest example.  From Think Progress, where else, but the story has been reprinted all over the hip environmental Left:

The World’s First Solar Road Is Producing More Energy Than Expected

In its first six months of existence, the world’s first solar road is performing even better than developers thought.

The road, which opened in the Netherlands in November of last year, has produced more than 3,000 kilowatt-hours of energy — enough to power a single small household for one year, according to Al-Jazeera America.

“If we translate this to an annual yield, we expect more than the 70kwh per square meter per year,” Sten de Wit, a spokesman for the project — dubbed SolaRoad — told Al Jazeera America. “We predicted [this] as an upper limit in the laboratory stage. We can therefore conclude that it was a successful first half year.”

De Wit said in a statement that he didn’t “expect a yield as high as this so quickly.”

The 230-foot stretch of road, which is embedded with solar cells that are protected by two layers of safety glass, is built for bike traffic, a use that reflects the road’s environmentally-friendly message and the cycling-heavy culture of the Netherlands.

In the US, we pay about 12 cents a KwH for electricity  (the Dutch probably pay more).  But at this rate, in 6 months, the solar sidewalk has generated... $360 of electricity.  Double that for a year, and we get $720 of electricity a year.

How much did the sidewalk cost?  The article doesn't say.  You will find this typical of wind and solar articles.  If they quantify the installation cost, they will not quantify the value of power produced.  If they quantify the power produced, they will never quantify the installation cost. This article says the installation cost was $3.5 million, though I suppose one should subtract from that the cost to build a similar length concrete bike path, but that can't be more than $100,000 for 230 feet.  They say they are getting 70kwh per year per square meter, which is $8.40 worth of electricity per square meter per year.  Since regular solar panels - without all the special glass overlays and installation in the ground and inverters and wiring - cost about $150-$200 per square meter, you can see this is a horrible investment.

Part of the reason this is a bad investment is that solar panels are simply not efficient enough and cheap enough to be cost effective -- I think they will be someday, but not now.   But this project has special problems:

• The panels are actually in the ground with people driving over them.  Honestly, could one actually choose a worse spot for a solar panel?  This installation location, vs. say a roof, adds incredible cost to toughen the panels for wear.  Also, it increases their maintenance costs and likely reduces their life.
• Even worse, the panels have to sit flat on the ground, which is not the most efficient place for them.  Panels are most efficient if tilted at an angle and (in the case of Holland) facing south.  Further, they are more efficient up in the air where they do not get shaded by trees or buildings.

This is just stupid, stupid, stupid.  Perhaps if solar becomes more efficient and we have run out of space on every roof in the world, one might possibly maybe (but probably not) consider this.  But despite the inherent inanity of this idea, look at all the articles on Solaroad -- Think Progress, the Huffington Post, Engadget, Tree Hugger, Extreme Tech, NPR, Sustainable Business -- they all have multiple, gushing, unrelentingly positive articles about this.  Look at all the positively fawning comments on Think Progress.  I can't find a single article on the web that is even slightly skeptical.

 Update:  A reader sends me this epic video takedown of this stupid idea.  He did this in advance of the article today.  He finds it to be complete BS, despite the fact that he overestimates electrical production by a factor of 2.

From ReWire via Anthony Watts

A test of a solar power tower project in Nevada resulted in injuries to over one hundred birds, the federal government is reporting, though the project's owners say they've fixed the problem.

On January 14, during tests of the 110-megawatt Crescent Dunes Solar Energy Project near Tonopah, Nevada, biologists observed 130 birds entering an area of concentrated solar energy and catching fire. That's according to Rudy Evenson, Deputy Chief of Communications for Nevada Bureau of Land Management in Reno.

Evenson suggested that the birds may have been attracted by a glow the concentrated solar energy created above the project's sole tower.

...

According to Evenson, workers testing the plant moved approximately a third of the project's ten thousand mirrors to focus sunlight on a point 1,200 feet above the ground, approximately twice the height of the power tower at Crescent Dunes.

The test started at 9:00 a.m. on January 14, Evenson told Rewire. By 10:30, biologists working on the site began noticing what have become known as "streamers," trails of smoke and water vapor caused by birds entering the field of concentrated solar energy (a.k.a. "solar flux") and igniting.

By the time the test ended for the day at 3:00 p.m., biologists had counted 130 such "streamers." A subsequent test on January 15 reduced the number of mirrors aimed at the focal point above the tower, said Evenson, and that apparently ended the injuries to birds.

Our public utility APS wants to enter the rooftop solar business.  As a ratepayer and taxpayer, I have deep concerns about this because of the numerous ways this venture could end up with various hidden subsidies.

However, I find it simply hilarious that current rooftop solar providers, including #1 subsidy whore and crony capitalist SolarCity.  Here is what trade group Arizona Solar Energy Industry Association wrote in an email to me today.  I have highlighted some of the bits that got my blood boiling this morning:

In an unprecedented announcement that took the solar industry by surprise, Arizona’s largest utility, APS, announced that it intends to begin competing directly with Arizona solar installers. APS announced Monday that it is seeking permission to spend between $57 and $70 million -not including its profits- of ratepayer money to install solar on the roofs of homes in its service territory and to compete directly with solar installers of all sizes.

“The idea of our members who compete in the free market today having to all of a sudden compete with a regulated monopoly is frightening. How would you like it if the government just stepped in and started competing with your business?” said Corey Garrison, CEO of Arizona based Southface Solar and treasurer of Arizona Solar Energy Industries Association (AriSEIA). "APS has proposed subsidizing certain customers that allow it to put solar on their rooftops while the free market gets no more utility subsidy and actually gets charged for going solar."

It has been well publicized that APS spent much of the last year in a battle with the very industry it now seeks to dominate. Throughout 2013 APS urged the Arizona Corporation Commission to install a huge monthly tax on those who would put solar on their roof. It has also been reported that APS urged the Department of Revenue to institute a new property tax on rooftop solar panels that are leased to customers.

“After spending a year misleading the public with well-publicized lies and misdirection, APS seems to think this is a good time for it to be rewarded with an expansion of its monopoly franchise” said Corey Garrison

Unlike rooftop solar companies that must compete with each other on a level playing field, APS earns a guaranteed rate of return off of its assets including these proposed rooftop solar installations. If approved, APS would be permitted to advertise its solar product in its customer bills and to use its customer lists to market and sell, all with employees paid for by ratepayers. Unlike traditional, free market rooftop solar which is paid for only by the customer that installs the system, APS will be asking all its ratepayers to pay the cost of, and guarantee its profits on, each of the systems it installs under this program.

“This is a massive expansion of the monopoly into an area that is well served by the free market” continued Garrison, “what’s next; will APS ask to sell electric cars or ovens or some other set of goods or services?”

This is hilarious.  The rooftop installers in AZ lost some of the subsidy from power companies (e.g. APS) over the past years but still get a myriad of subsidies for themselves and their customers.  We will use one of the larger installers, SolarCity, as an example.  This is from the SolarCity web site:

Federal, state and local governments offer incredible solar tax credits and rebates to encourage homeowners to switch to renewable energy to lower their energy usage and switch to solar power. The amount of the rebate subsidy varies by program, but some are generous enough to cover up to 30% of your solar power system cost.

The federal government allows you to deduct 30% of your solar power system costs off your federal taxes through an investment tax credit (ITC). If you do not expect to owe taxes this year, you can roll over your credit to the following year.

.... Some locations have additional incentives to make solar even more affordable.  SolarCity will get the most for your project

SolarCity is committed to helping you benefit from every federal, state and utility rebate and tax credit available for your energy upgrade projects.

Navigating through government rebate programs on your own can be intimidating. SolarCity will identify all of the qualifying tax credit and rebate programs for your system and file the required paperwork for you. We will even credit you for the state rebate upfront so that you do not have to wait for the government to send you a check later.

This language is a bit odd, since in most cases SolarCity captures these credits for themselves and then passes on the savings (presumably, but maybe not) to customers via lower power costs, exactly the same model APS is proposing.

Customers, however, must sign a contract agreeing to cede "any and all tax credits, incentives, renewable energy credits, green tags, carbon offset credits, utility rebates or any other non-power attributes of the system" to SolarCity. The tax credits are passed on to its investors, which include the venture-capital firms Draper Fisher Jurvetson, DBL Investors and Al Gore's Generation Investment Management LLP.

The description by solar installers that they somehow represent the "free market" is simply hilarious, given the dependence of their industry on taxpayer subsidies (either of the installers or the customers).  SolarCity admits that their business would actually never be able to operate in a free market:

SolarCity officials, including Musk’s cousins and fellow Obama donors Lyndon and Peter Rive, acknowledged the company’s dependence on government support in its 2012 IPO filing. “Our business currently depends on the availability of rebates, tax credits and other financial incentives,” they wrote. “The expiration, elimination or reduction of these rebates, credits and incentives would adversely impact our business.”

A more recent SolarCity filing with the Securities and Exchange Commission notes: “[The company’s] ability to provide solar energy systems to customers on an economically viable basis depends on our ability to finance these systems with fund investors who require particular tax and other benefits.”

Rooftop installers also have their business buoyed by government mandates that power companies pay residential solar producers 2-3x the going wholesale market rate for any electricity they put into the grid

SolarCity also benefits from "net metering" policies that 43 states, including California, have adopted. Utilities pay solar-panel customers the retail power rate for the solar power they generate but don't use and then export to the grid. Retail rates can be two to three times as high as the wholesale price of electricity because transmission and delivery costs, along with taxes and other surcharges that fund state renewable programs, are baked in.

So in California, solar ratepayers on average are credited about 16 cents per kilowatt hour on their electric bills for the excess energy they generate—even though utilities could buy that power at less than half the cost from other types of power generators.

This was the battle referred to obliquely in the press release above.  The electric utility APS wanted to stop overpaying for power from these rooftop solar installations.   Rooftop installers fought back.  In the end, a fixed charge was placed on homeowners to account for part of this over-payment, an odd solution in my mind that seems to have ticked off both sides.

So the supposedly "free market" rooftop companies are competing successfully with regulated utilities because they got Federal, state, and local subsidies; are exempted from things like paying property tax on leased equipment that every other business has to pay; and get a mandate from the state that utilities have to pay double the market price for their power.  Is it any wonder that a regulated utility, which is no stranger to cronyism and feeding at the subsidy trough, might want to get a piece of that action?

ASEIA, you are welcome to duke it out for first spot at the trough with APS, but don't corrupt the word "free market" by trying to apply the term to yourselves.

Check out this payback analysis that is being trumpeted for wind power:

US researchers have carried out an environmental lifecycle assessment of 2-megawatt wind turbines mooted for a large wind farm in the US Pacific Northwest. Writing in the International Journal of Sustainable Manufacturing, they conclude that in terms of cumulative energy payback, or the time to produce the amount of energy required of production and installation, a wind turbine with a working life of 20 years will offer a net benefit within five to eight months of being brought online.

So of all the scarce resources that go into producing wind power, if you look at only one of these (energy), then the project pays itself back in less than a year.  This is stupid.  Yes, I understand that there are some "green" energy sources (*cough* corn ethanol *cough*) that cannot even produce more energy than they consume, so I suppose this finding is a step forward from that.  But what about all the other scarce resources used in producing wind power-- steel, labor, engineering talent, concrete, etc?  This is roughly like justifying the purchase of an 18-wheeler truck by saying it will pay off all the vanadium used in its production in less than a year.

Environmentalists seem to all feel that capitalism is the enemy of sustainability, but in fact capitalism is the greatest system to promote sustainability that has ever been devised.  Every single resource has a price that reflects its relative scarcity as compared to demand.  Scarcer resources have higher prices that automatically promote conservation and seeking of substitutes.  So an analysis of an investment's ability to return its cost is in effect a sustainability analysis.  What environmentalists don't like is that wind does not cover the cost of its resources, in other words it does not produce enough power to justify the scarce resources it uses.  Screwing around with that to only look at some of the resources is just dishonest.

The one reasonable argument is that the price of fuels does not adequately reflect the externalities of Co2 production.  I don't think these are high but obviously there are those who disagree.  The right way to do this analysis is to say that wind power provides a return only if electricity prices are X (X likely being well above current market rates) which in turn reflects a Co2 cost of Y $/ton.  My gut feel is that it would take a Y -- a cost per ton of CO2 -- way higher than any of the figures that are typically bandied about even by environmentalists to make wind work.

Postscript:  I did not critique the analysis of energy payback per se, but if I were to dig into it, I would want to look at two common fallacies with many wind analyses.  1) They typically miss the cost of standby power needed to cover wind's unpredictability, which has a substantial energy cost.  In Germany, during their big wind push, they had to have 80-90% of wind power backed up with hot fossil fuel backup.  2)  They typically look at nameplate capacity and not real capacities in the field.  In fact, real capacities should further be discounted for when wind power produces electricity that the grid cannot take (ie when there is negative pricing in the wholesale market, which actually occurs).

From James Delingpole:

The draft version of the report's Summary For Policymakers made the startling admission that the economic damage caused by "climate change" would be between 0.2 and 2 percent of global GDP - significantly less than the doomsday predictions made in the 2006 Stern report (which estimated the damage at between 5 and 20 percent of global GDP).

But this reduced estimate did not suit the alarmist narrative of several of the government delegations at the recent IPCC talks in Yokahama, Japan. Among them was the British one, comprising several members of the deep green Department of Energy and Climate Change (DECC), which insisted on doctoring this section of the Summary For Policymakers in order to exaggerate the potential for more serious economic damage.

"Losses are more likely than not to be greater, rather than smaller, than this range (limited evidence, high agreement)"

There was no evidence whatsoever in the body of the report to justify this statement.

I find it fascinating that there can be "high agreement" to a statement for which there is limited or no evidence.  Fortunately these are all self-proclaimed defenders of science or I might think this was purely a political statement.

Note that the most recent IPCC reports and new published studies on climate sensitivity tend to say that 1) warming in the next century will be 1-2C, not the much higher numbers previously forecast; 2)  That warming will not be particularly expensive to manage and mitigate and 3) we are increasingly less sure that warming is causing all sorts of negative knock-on effects like more hurricanes.  In other words, opinion is shifting to where science-based skeptics have been all along (since 2007 in my case).  No surprise or shame here.  What is shameful though is that as evidence points more and more to the lukewarmer skeptic position, we are still called evil heretical deniers that should be locked in jail.  Like telling Galileo, "you were right about that whole heliocentric thing but we still think you are evil for suggesting it."

The new Bank of America building near me has all kinds of plaques inside about how it is LEED certified.  How?  Well, I don't know the whole plan, but out front there are four reserved parking spaces for electric vehicles.  There are not any charging stations mind you -- those might cost money -- just parking spots for electric vehicles, right next to the handicapped spots.  LEED is a points based system and you can score a lot of points doing mindless, useless, zero-value stuff like this.

So I am not at all surprised to read this:

Washington, D.C. may have the highest number of certified green buildings in the country, but research by  Environmental Policy Alliance suggests it might not be doing much good.

The free-market group analyzed the first round of energy usage data released by city officials Friday and found that large, privately-owned buildings that received the green energy certification Leadership in Energy Design (LEED) actually use more energy than buildings that didn’t receive this green stamp of approval.

LEED is the brainchild of the U.S. Green Building Council (USGBC), a private environmental group.

Washington, D.C.’s Department of Environment made the capital the first city in the nation to mandate LEED certifications in the construction of public buildings. The standards are now being phased in.

The results are measured in EUI’s, a unit that relates a building’s energy consumption to its size; the higher the number, the more energy is expended by a smaller building.

Take the Green Building Council’s Washington headquarters. Replete with the group’s top green-energy accolade, the platinum LEED certification, the USGBC’s main base comes in at 236 EUI. The average EUI for uncertified buildings in the capital? Just 199.

Certified buildings’ average comes in at 205 EUI, still less efficient than that didn’t take home the ultimate green trophy.

“LEED certification is little more than a fancy plaque displayed by these ‘green’ buildings,” charged Anastasia Swearingen, LEED Exposed’s lead researcher on the project. “Previous analyses of energy use by LEED-certified buildings have consistently shown that LEED ratings have no bearing on actual energy efficiency.”

Hilariously, the problem cited with the certification program by government regulators is not that it is ineffective - after all, they can't admit that after requiring LEED certification in DC buildings.  Their only problem is that it is a private program outside of government control.  I am sure the folks who gave hundreds of millions to Solyndra would do much better managing the program.

The problem with LEED is the same problem that many ISO 9000 programs had -- it puts too much emphasis on process an inputs, and not enough on results.

Postscript:  One wonders why if there is a perfectly good "output" metric like EUI why people even bother with input-based systems like LEED.  If the government really wants to regulate here, the lightest touch would be to require architects and builders to estimate EUI of buildings for clients.  Then the owners themselves can decide if they are comfortable with their potential energy bills or want so more design work.

Master Resource looks at the California Valley Solar Ranch

In a realistic appraisal of the CVSR we should note the following:

· An investment of $1.6 billion 250 MW breaks down to an extravagant $6,400,000 per megawatt.

· The Solar Ranch covers 1,500 acres.

· The CVSR is projected to produce 482,000 MWh per year, implying an operating capacity factor of around 22%.

· Given a reasonable appraisal of the value of 482,000 MWh per year, it is not possible that the solar panels will be able to provide a return sufficient to pay back the $1.6 billion investment within their functional life (not even close), even when ignoring annual operating and maintenance costs. Hundreds of millions of dollars will be lost (see Updated CSVR Cash Flow).

....

A much more viable alternative to a solar generation facility, although not the only one, is a plant using natural gas. A natural gas combined cycle gas turbine (CCGT) facility capable of 250 MW would have required less than one-fourth the capital investment, would be capable of making four times the electricity per year at 88% capacity factor, and would fit on a single acre.

Also, a CCGT facility could have been located closer to the point(s) of actual use of the electricity, and could provide dispatchable energy which could be increased or decreased as demand fluctuates; something the solar facility is incapable of providing.

So why is this project even happening?  Because most of the project was funded by a taxpayer-gauranteed loan.  And then many of the players got direct subsidies and tax breaks.  And finally the electricity from the project gets bought at an above-market subsidized rate.

After my post the other day on how new award-winning supposedly environmentally sustainable parks are far more resource intensive than the old parks they were replacing, I have gotten a lot of feedback -- this is obviously a topic that strikes a chord with folks.  In particular, a reader (I always forget to ask if I can use their names) sent me this article on the new LEED Platinum-certified building in New York

When the Bank of America Tower opened in 2010, the press praised it as one of the world’s “most environmentally responsible high-rise office building[s].” It wasn’t just the waterless urinals, daylight dimming controls, and rainwater harvesting. And it wasn’t only the Leadership in Energy and Environmental Design (LEED) Platinum certification—the first ever for a skyscraper—and the $947,583 in incentives from the New York State Energy Research and Development Authority. It also had as a tenant the environmental movement’s biggest celebrity. The Bank of America Tower had Al Gore.

The former vice president wanted an office for his company, Generation Investment Management, that “represents the kind of innovation the firm is trying to advance,” his real-estate agent said at the time. The Bank of America Tower, a billion-dollar, 55-story crystal skyscraper on the northwest corner of Manhattan’s Bryant Park, seemed to fit the bill. It would be “the most sustainable in the country,” according to its developer Douglas Durst. At the Tower’s ribbon-cutting ceremony, Gore powwowed with Mayor Michael Bloomberg and praised the building as a model for fighting climate change. “I applaud the leadership of the mayor and all of those who helped make this possible,” he said.

Gore’s applause, however, was premature. According to data released by New York City last fall, the Bank of America Tower produces more greenhouse gases and uses more energy per square foot than any comparably sized office building in Manhattan. It uses more than twice as much energy per square foot as the 80-year-old Empire State Building. It also performs worse than the Goldman Sachs headquarters, maybe the most similar building in New York—and one with a lower LEED rating. It’s not just an embarrassment; it symbolizes a flaw at the heart of the effort to combat climate change...

“What LEED designers deliver is what most LEED building owners want—namely, green publicity, not energy savings,” John Scofield, a professor of physics at Oberlin, testified before the House last year.

I will go out and get a picture today of our local Bank of America branch.  It is LEED certified at some level, proudly displaying the certificate in the lobby.  Out front it has two parking spaces near the door for electric cars - it does not have a charger for them, just reserved preferred parking.  I am sure they got their LEED points this way.

Postscript:  I am not religious but am fascinated by the comparisons at times between religion and environmentalism.  Here is the LEED process applied to religion:

• 1 point:  Buy indulgence for $25
• 1 point:  Say 10 Our Fathers
• 1 point:  Light candle in church
• 3 points:  Behave well all the time, act charitably, never lie, etc.

It takes 3 points to get to heaven.  Which path do you chose?

I get a lot of bizarre stuff but this one made me laugh:

The Turkish renewables market is set to grow rapidly and the Turkish International Renewable Energy Congress (TIREC) is your access point. Once again 500+ attendees, serious about playing their part in the growth of the market will attend to do business for two days of discussion, contact making, and lead generation.

Frequent readers of this blog will know that I am enormously skeptical of most fuel and efficiency numbers for electric vehicles.  Electric vehicles can be quite efficient, and I personally really enjoy the driving feel of an electric car, but most of the numbers published for them, including by the government, are garbage.  I have previously written a series of articles challenging the EPA's MPGe methodology for electric cars.

In just a bit, I am going to challenge some numbers in a recent WSJ article on electric vehicles, but first let me give you an idea of why I don't trust many people on this topic.  Below is a statement from Fueleconomy.gov, which bills itself as the official government source for fuel economy information (this is a public information, not a marketing site).  In reference to electric vehicles, it writes this:

Energy efficient. Electric vehicles convert about 59–62% of the electrical energy from the grid to power at the wheels—conventional gasoline vehicles only convert about 17–21% of the energy stored in gasoline to power at the wheels

The implication, then, is that electric vehicles are 3x more energy efficient than cars with gasoline engines.  I hope engineers and scientists can see immediately why this statement is total crap, but for the rest, here is the problem in short:  Electricity has to be produced, often from a fossil fuel.  That step, of converting the potential energy in the fuel to use-able work, is the least efficient step of the entire fuel to work process.  Even in the most modern of plants it runs less than a 50% conversion efficiency.   So the numbers for the gasoline cars include this inefficient step, but for the electric vehicle it has been shuffled off stage, back to the power plant which is left out of the calculation.

Today I want to investigate this statement, which startled me:

Factor in the $200 a month he reckons he isn't paying for gasoline to fill up his hulking SUV, and Mr. Beisel says "suddenly the [Nissan Leaf] puts $2,000 in my pocket."

Yes, he pays for electricity to charge the Leaf's 24-kilowatt-hour battery—but not much. "In March, I spent $14.94 to charge the car" and a bit less than that in April, he says.

This implies that on a cost-per-mile basis, the EV is over 13x more efficient than gasoline cars.  Is this a fair comparison?  For those who do not want to read a lot of math, I will preview the answer:  the difference in fuel cost per mile is at best 2x, and is driven not by using less fossil fuel (the electric car likely uses a bit more, when you go all the way back to the power plant) but achieves its savings by using lower cost, less-refined fossil fuels  (e.g. natural gas in a large power plant instead of gasoline in a car).

Let's start with his estimate of $14.94.  Assuming that is the purchased power into his vehicle charger, that the charger efficiency is 90%, and the cost per KwH in Atlanta is around $0.11, this implies that 122.24 use-able KwH are going into the car.  Using an estimate of 3.3 miles per KwH for the Leaf, we get 403 miles driven per month or 3.7 cents per mile in electricity costs.  This is very good, and nothing I write should imply that the Leaf is not an efficient vehicle.  But its efficiency advantage is over-hyped.

Now let's take his $200 a month for his Ford Expedition, which has an MPG around 15.  Based on fuel prices in Atlanta of $3.50 a gallon, this implies 57 gallons per month and 857 miles driven.  The cost is 23.3 cents per mile.

Already we see one difference -- the miles driven assumptions are different.  Either he, like a lot of people, don't have a reliable memory for how much he spent on gas, or he has changed his driving habits with the electric car (not unlikely given the shorter range).  Either way, the total dollar costs he quotes are apples and oranges.  The better comparison is 23.3 cents per mile for the Expedition vs. 3.7 cents a mile for the Leaf, a difference of about 6x.  Still substantial, but already less than half the 13x difference implied by the article.

But we can go further, because in a Nissan Leaf, he has a very different car from the Ford Expedition.  It is much smaller, can carry fewer passengers and less cargo, cannot tow anything, and has only 25% of the Expedition's range.   With an electric motor, it offers a very different driving experience.   A better comparison would be to a Toyota Prius, the c version of which gets 50MPG.  It is similar in most of these categories except that it has a much longer range, but we can't fix that comparison, so just keep that difference in mind.

Let's look at the Prius for the same distances we calculated with his Leaf, about 403 miles.   That would require 8.1 gallons in a Prius at $3.50, which would be $28.20 in total or 7 cents a mile.  Note that while the Leaf still is better, the difference has been reduced to just under 2x.  Perhaps more importantly, the annual fuel savings has been reduced from over $2200 vs. the Expedition that drove twice as many miles to $159 a year vs. the Prius driving the same number of miles.  So the tradeoff is $159 a year savings but with much limited range  (forgetting for a moment all the government crony-candy that comes with the electric car).

$159 is likely a real savings but could be swamped by differences in long-term operating costs.  The Prius has a gasoline engine to maintain which the Leaf does not, though Toyota has gotten those things pretty reliable.  On the other hand the Leaf has a far larger battery pack than the Prius, and there are real concerns that this pack (which costs about $15,000 to manufacture) may have to be replaced long before the rest of the car is at end of life.  Replacing a full battery pack after even 10 years would add about $1200 (based on discounted values at 8%) a year to operating costs, swamping the fuel cost advantage.

Also note that a 2x difference in fuel costs per mile does not imply a 2x difference in fuel efficiency.  Gasoline is very expensive vs. other fuels on a cost per BTU basis, due to taxes that are especially high for gasoline, blending requirements, refining intensity, etc.)  Gasoline, as one person once said to me way back when I worked at a refinery, is the Filet Mignon of the barrel of oil -- if you can find a car that will feed on rump steak instead, you will save a lot of money even if it eats the same amount of meat.    A lot of marginal electric production (and it is the margin we care about for new loads like electric cars) is natural gas, which is perhaps a third (or less) the cost of gasoline per BTU.   My guess is that the key driver of this 2x cost per mile difference is not using less fuel per se, but the ability to use a less expensive, less-refined fuel.

Taking a different approach to the same problem, based on the wells-to-wheels methodology described in my Forbes article (which in turn was taken directly from the DOE), the Nissan Leaf has a real eMPG of about 42 (36.5% of the published 115), less than the Prius's at 50.  This confirms the findings above, that for fossil fuel generated electricity, the Leaf uses a bit more fossil fuels than the Prius but likely uses much less expensive fuels, so is cheaper to drive.  If the marginal electrical fuel is natural gas, the Leaf also likely generates a bit less CO2.

So, why do we have all these "dirty" coal plants?  Market failure?  Industry greed?  Nope -- Carter-era government policy.  For you younger folks, here is a law you may have never heard of:

The Powerplant and Industrial Fuel Use Act (FUA) was passed in 1978 in response to concerns over national energy security. The 1973 oil crisis and the natural gas curtailments of the mid 1970s contributed to concerns about U.S. supplies of oil and natural gas. The FUA restricted construction of power plants using oil or natural gas as a primary fuel and encouraged the use of coal, nuclear energy and other alternative fuels. It also restricted the industrial use of oil and natural gas in large boilers.**

In other words, all new fossil fuel-powered boilers had to be coal-fired (which in a year or so, after Three Mile Island, translated to all new boilers since nuclear was essentially eliminated as an option).  Yes, this may seem odd to us in an era of so much environmental concern over coal, but something coal opponents don't tell you is that many of the exact same left-liberal-government-top-down-energy-policy types that oppose coal today lobbied hard for the above law several decades ago.  Here is a simplified timeline:

1.  Government energy policy sets price controls that create artificial shortages of oil and gas

2.  Government-created shortages of oil and gas lead to this law, with government demanding that all new fossil fuel-powered electric plants and boilers be coal powered.

3.  Government mandates on coal use create environmental concerns, which lead to proposals for taxes and bans on coal power.

4.  The need for government action against coal is obviated by a resurgence of oil and gas supply once government controls were removed.  However, in response, government beings to consider strong controls on expansion in oil and gas production (e.g. fracking limits).

** I got involved with this because I worked in an oil refinery in the 1980's.  We had to get special exemptions to run our new boilers on various petroleum products (basically byproducts and waste products of the refining process).  Without these, the law would have required we bring in coal to run our oil refinery furnaces.

You have to watch politicians' commercials

The Dish Network, in its continuing effort to attract new viewers, introduced a new DVR called the Hopper earlier this year. The Hopper's main appeal is that it allows you to skip past commercials entirely, and unsurprisingly, TV networks aren't very happy about this. But guess who else is unhappy?

At a Wednesday hearing on video distribution held by the Communications and Technology Subcommittee of the Energy and Commerce Committee, [Rep. John Dingell, D–Clueless] complained that the service will allow potential voters to skip past important commercial messages.

"I've got an election coming up, like all my colleagues," Dingell said, during his questioning of Dish Network Chairman Charlie Ergen. "We all put political ads on the local stations to reach our constituents. The Hopper potentially limits the ability of every member of this subcommittee to reach constituents to help them make up their minds on Election Day.

"Do you understand and appreciate the concerns that the politicians up here on the dais and other politicians everywhere will feel about that, yes or no?" Dingell asked.

I am glad to see that other sites with more influence than I are focusing attention on the electric vehicle mileage fraud.   The Green Explored site writes, via Q&O:

The EPA allows plug in vehicle makers to claim an equivalent miles per gallon (MPG) based on the electricity powering the cars motors being 100% efficient. This implies the electric power is generated at the power station with 100% efficiency, is transmitted and distributed through thousands of miles of lines without any loss, is converted from AC to DC without any loss, and the charge discharge efficiency of the batteries on the vehicle is also 100%. Of course the second law of thermodynamics tells us all of these claims are poppycock and that losses of real energy will occur in each step of the supply chain of getting power to the wheels of a vehicle powered with an electric motor.

Finally!  For months I have been writing about this and have started to believe I was crazy.   I have written two Forbes pieces on it (here and here) and numerous blog posts, but have failed to get much traction on it, despite what appears to be near-fraudulent science.  I wrote

the government wants an equivilent MPG standard for electric cars that goes back to the power plant to estimate that amount of fossil fuels must be burned to create the electricity that fills the batteries of an electric car.  The EPA’s methodology is flawed because it assumes perfect conversion of the potential energy in fossil fuels to electricity, an assumption that violates the second law of thermodynamics.   The Department of Energy has a better methodology that computes electric vehicle equivalent mileage based on real world power plant efficiencies and fuel mixes, while also taking into account energy used for refining gasoline for traditional cars.  Using this better DOE methodology, we get MPGe’s for electric cars that are barely 1/3 of the EPA figures.

The linked articles provide much more detail on the calculations.  As a result, when the correct methodology is applied, even in all-electric mode the heavily subsidized Fisker Karma gets just 19 MPG-equivalent.

Do you want to know the biggest energy advantage of electric cars?  When you fill them with energy, you don't stand there at the pump watching the cost-meter spin, as you do in a gas station.   It's not that the energy cost is lower, it's just better hidden (which is why I suggested the Fisker Karma be renamed the Fisker Bastiat, after the French economist who wrote so eloquently about the seen and unseen in economic analysis).  It's why, to my knowledge, no electric car maker has ever put any sort of meter on its charging cables.

In a Senate budget hearing with the Department of Energy, one would have expected a lot of questions about the loan program to avoid future Solyndras.  But Al Franken uses his time to pester the DOE to give taxpayer money to a corporation in his state.

This is the answer as to why so many bone-headed loans were made despite evidence of likely disaster.  You can bet that Boxer and Feinstein were all over the DOE several years ago pushing for the Solyndra loan.  Franken doesn't give a rip whether the loan is smart or not, or whether the taxpayers' money is safe or not.  He wants a multi-million dollar press release to get himself in the Minnesota news for a newscycle or two helping out the home state.  After that, the money's purpose has been achieved and I can't imagine him caring what happens to it.  Certainly that is the fate of most of these jobs-related government investments - big splashes up front with promises of hundreds of new jobs, but absolutely no scrutiny in the back end when, likely as not, these jobs don't actually materialize.

Lost in the discussion of Dan Carol's criticism of Steven Chu and his conduct in the Energy Department was an amazing implicit assumption about the DOE's mission:

“Secretary Chu is a wonderful and brilliant man, but he is not perfect for the other critical DOE mission: deploying existing technologies at scale and creating jobs,”

Seriously, is this really their mission?

Via Business Week

 Beacon Power Corp., an energy- storage company that received $43 million in backing from the U.S. program that supported failed solar-panel maker Solyndra LLC, filed for bankruptcy after struggling to raise private financing.

The money-losing company, which makes flywheels that manage energy moving through a power grid, had sought to avoid the fate of Solyndra, which entered bankruptcy last month after receiving a $535 million loan guarantee from a U.S. Energy Department program designed to spur alternative energy development. Beacon faced delisting of its shares by the Nasdaq Stock Market and warned in an Aug. 9 regulatory filing that it might not remain a “going concern.”...

In addition, Beacon received $29 million in grants from the U.S. and Pennsylvania for a 20-megawatt plant in that state and hired Group Robinson LLC to help raise more funds for the $53 million project. Group Robinson, a Menlo Park, California- based renewable-energy consulting company, also was helping Beacon find customers outside the U.S.

This is not an accident.  By definition, the government is investing in companies that every other private lender and investor turned down.

Apparently Obama is claiming:

“[Energy] Secretary [Steven] Chu has assured me that within five years, we can have a battery developed that will make a car with the equivalent of 130 miles per gallon.’”

The irony is that if you grade the equivalent mpg of electric cars by the methodology outlined by Chu's own energy department, the number would be about a third of that.  Only by the EPA's flawed methodology do we get equivalent MPG's for electric cars anywhere near 130.

I wrote about this whole sordid mess of inflated MPG numbers for electric cars here.

I have argued many times that private investors, over the long haul, will make better investment choices than the government, in part because they have better incentives and information to guide their decision-making.  The straw-man argument against this is to point out anecdotes of failed private investments.  Heck, I can do that.  Pets.com famously blew through $300 million of private capital with a corporate strategy that never made much sense to people.

The Pets.com investors were chagrined, and probably learned a lesson from their mistake.  Certainly most of us thought the blame, if blame existed, for the debacle rested on the investors for pouring money into a bad proposition.  Certainly no one accused the management of fraud -- I am sure they were diligently, honestly trying to make the company a success, even if they were misguided as to where that success lay.

As it turned out, everyone, not just the Pets.com investors, learned from the mistake.  The failure was an important driver in an industry-wide rethink as to what a successful Internet business model might look like.  This benefit only came because people were willing to acknowledge not just that the Pets.com investment was flawed, but that it represented a systematic mistake that was being made vis a vis Internet startup investments.

Now, consider solar manufacturer Solyndra.  It failed this week, likely taking with it most of $535 million in taxpayer money that the Obama Administration was so eager to give them that it short-cutted its internal processes to fork over the cash more quickly.

Many of us on the outside would love to see the government rethink such investments in a systematic way, and reconsider if it is even possible for the government to make such investments, and in particular whether "green jobs" investments make any sense at all.

But the likelihood of that kind of introspection happening in the public world is about zero, and my bet is that Obama is going to propose more of the same tonight in his speech.

In fact, the Department of Energy (the source of the loan) and the FBI have today sent armed agents into Solyndra looking for evidence of fraud.   While Zero Hedge argues that fraud would be bad for Obama, in fact I think it would probably be the best possible outcome and one he is hoping for.  If he can say, "wow, you and I both got tricked here by some evil folks we are going to put in jail" it deflects attention from the fact that he put a half billion dollars of taxpayer money into a business plan that never made a lick of sense.

Another me-too solar manufacturer with a factory in California of all places was never going to compete in a global commodity market.  This company's plan was always to sell dollars for 50 cents and to make it up on volume.  I don't see how any investor thought this was going to work.  My guess is that the private investors didn't know much about solar and invested because it had a certain hip-ness to it, or less charitably, they knew it never made sense but hoped that Uncle Sam, once it was already in for a half billion, would keep more money flowing or perhaps agree to buy out their production at above market prices.

There may have indeed been fraud, but as in the case of Pets.com, it is perfectly possible no real internal fraud existed and they ran through a ton of money against a stupid business plan that should never have been funded.  Obama would greatly prefer to call it fraud rather than his own failure of judgement.  As an aside, Fannie and Freddie are pursuing exactly the same course in suing banks, arguing that they were defrauded by the banks in buying mortgages, a fairly laughable proposition in the great scheme of things when one considers Fannie and Freddie were at the forefront of the industry in driving down lending standards and promoting the expansion of the mortgage market.

Most of you will know that the California solar company Solyndra has failed, burning through in less than two years nearly $535 million in taxpayer money.

I wrote in Forbes yesterday that it was a headscratcher why anyone thought this a sound investment

Obama’s investment of taxpayer money into Solyndra is a great example.  It is clear little due diligence was completed before the loan guarantees to Solyndrawere rushed out the door in 2009 in time to meet Energy Secretary StevenChu’s artificial target date for the first loan of Obama’s green jobs program.  A good, well-timed sound bite on the evening news was more important that the actual details of the investment.

But, in fact, little due diligence should have been necessary.  Already in 2009 it was clear that the solar panel industry had commoditized, and low-cost manufacturing would be the key to succefully competing in the market.  Further, European countries whose subsidies and high feed-in tariffs for solar were driving most of the market growth were already in the process of dialing back those incentives.

Surely any reasonable investor would have been leary about entering such a market with an under-scale startup, much less one which chose California of all places to build their plant.  Most rational investors would cite California as a huge liability in a falling-price commodity market, but it was an asset for a company trying to compete in capturing taxpayer dollars, being the home of many of the most powerful politicians most likely to buy into the green jobs boondoggle (of course it did not hurt that Solyndra’s largest investor is a major Obama campaign contributor).

It turns out that the numbers were worse than I imagined, and reading ZeroHedge, it seems like some outright fraud may be involved (hat tip to a reader who I cannot never figure out if he wants to have his name mentioned or not)

What was in the prospectus was, no doubt, the real reason that investor chose to take a ‘pass’ on the deal. There were revenue/expense numbers for the nine months preceding the proposed deal:

Revenue: $58.8mm

Cost of Goods Sold: $108.0mm

That is an absolute complete disaster. This is a low margin business to begin with. At Solyndra they were losing 84 cents for every dollar of sales. Adding in SG&A and CapEx the losses and cash drain had to be very heavy.

Wow, that is really a fail.  Even in the worst run late 90's Internet company I ever encountered, they were not selling dollars for 50 cents.  One wonders what numbers Steven Chu and company saw before they funded this dog, and whether from the very beginning these guys were counting on a steady stream of 9-figure government subsidy checks.

My new column is up at Forbes, and discusses why politicians, particularly this administration, think they can allocate capital better than the market

The problem is that this top-down override of market capital allocations is almost certain to destroy wealth, because there are at least two problems with it (beyond the obvious liberty and property rights issues).

First, the decisions are being made by, at most, a few hundred government workers.  There is no possible way these workers can ever gather the knowledge and information posessed by millions of private actors making similar investment decisions.  Like monkeys throwing darts, some of the investments will work out, but on average their success rate has to be far lower than the network of individuals in the broader economy.

Second, and probably more important, government decisions-makers have terrible incentives when making these investments.  Seldom, if ever, are government re-allocations of capital made with an expectation of earning a return.  In fact, many of these programs promote themselves explicitly as shifting capital to investments no rational private investor would touch.  These investments are undertaken because they promote some sexy technology, or create jobs among a favored constituency, or even just because they make for a nice bullet point on a politician’s reelection web site.

Obama’s investment of taxpayer money into Solyndra is a great example.  It is clear little due diligence was completed before the loan guarantees to Solyndra were rushed out the door in 2009 in time to meet Energy Secretary Steven Chu’s artificial target date for the first loan of Obama’s green jobs program.  A good, well-timed sound bite on the evening news was more important that the actual details of the investment.

But, in fact, little due dilligence should have been necessary. ....

This is like the third one in just a few weeks:

Solyndra, a major manufacturer of solar technology in Fremont, has shut its doors, according to employees at the campus.

"I was told by a security guard to get my [stuff] and leave," one employee said. The company employs a little more than 1,000 employees worldwide, according to its website....

Solyndra was touted by the Obama administration as a prime example of how green technology could deliver jobs. The President visited the facility in May of last year and said  "it is just a testament to American ingenuity and dynamism and the fact that we continue to have the best universities in the world, the best technology in the world, and most importantly the best workers in the world. And you guys all represent that. "

The federal government offered $535 million in low cost loan guarantees from the Department of Energy. NBC Bay Area has contacted the White House asking for a statement.

Beyond the whole green jobs boondoggle, trying to compete at low-cost manufacturing of a commodity product in California of all places is simply insane.

Every time you see a politician claiming he created jobs with some expenditure of taxpayer money, you have to ask yourself, what would private investors have done with that money had it not been taken away from them?  Via John Stossel

In a new article, "The Myth of Green Energy Jobs: The European Experience", the environmental scientist and a resident scholar at the American Enterprise Institute writes,

"Green programs in Spain destroyed 2.2 jobs for every green job created, while the capital needed for one green job in Italy could create almost five jobs in the general economy."

This story is from the WSJ, and gets extra bonus points for including the poster-boy of the corporate state, Jeffrey Immelt

Treasury and OMB singled out an 845-megawatt wind farm that the Energy Department had guaranteed in Oregon called Shepherds Flat, a $1.9 billion installation of 338 General Electric turbines. Combining the stimulus and other federal and state subsidies, the total taxpayer cost is about $1.2 billion, while sponsors GE and Caithness Energy LLC had invested equity of merely about 11%. The memo also notes the wind farm could sell power at "above-market rates" because of Oregon's renewable portfolio standard mandate, which requires utilities to buy a certain annual amount of wind, solar, etc.

But then GE said it was considering "going to the private market for financing out of frustration with the review process." Anything but that. The memo dryly observes that "the alternative of private financing would not make the project financially non-viable."

Oh, and while Shepherds Flat might result in about 18 million fewer tons of carbon through 2033, "reductions would have to be valued at nearly $130 per ton CO2 for the climate benefits to equal the subsidies (more than 6 times the primary estimate used by the government in evaluating rules)."

So here we have the government already paying for 65% of a project that doesn't even meet its normal cost-benefit test, and then the White House has to referee when one of the largest corporations in the world (GE) importunes the Administration to move faster by threatening to find a private financial substitute like any other business. Remind us again why taxpayers should pay for this kind of corporate welfare?

First, the moment GE said that this could be financed privately, the Feds should have said "then what the f*ck are you talking to us for? Get out of here."  By the way, privately probably does not mean privately -- it probably means going to private banks or investors who in turn access many of the same taxpayer funds.

Second, its amazing that the threat to finance this privately rather than sponging off taxpayer funds is treated as a threat by the Obama Administration.  They desperately want to "take credit" for the project and can only do so by spending our money  (this is the same impulse that propels politicians who have never given a dime to charity to want to spend taxpayer money in order to be called "caring.")