Friday, April 6, 2012

Energy Costs: Making the Problem Worse, Revisited

The Massachusetts state senate yesterday unanimously passed a piece of legislation that supporters erroneously claim will both reduce energy costs and increase "our commitment to renewable energy." This is nonsense. As I have argued at length before, the two objectives may be independently good and worthy, but with today's technology they work against each other. Increasing the mandated use of renewable energy will drive up energy costs - it just will. There is no plausible argument to the contrary. This may change in the future, but for now that is reality.

Here is Boston.com's blurb, which pretty well encapsulates the attempt to square the circle:
The Massachusetts Senate has unanimously passed a bill that aims to curb energy costs while requiring state utilities to buy more renewable power.
The bill passed Thursday requires utilities to enter long-term contracts with renewable power companies for 7 percent of their energy supplies, up from 3 percent.
The companies must competitively bid for the contracts, instead of one-on-one negotiations allowed now. And a state payment to utilities that agree to the deals drops from 4 percent of the contract's annual value to 1 percent.
The bill would also allow more frequent review of utility rate requests by state regulators.
That first line might as well read, "The Massachusetts Senate has unanimously passed a bill that aims to douse a fire by spraying it with gasoline."

The bill's supposed cost savings come through the new long-term contract and bid-competition requirements. At best these new requirements can hope - maybe - to slow slightly the price increases that will accompany implementation of the legislation's doubling of current renewable generation and purchase requirements. And we might not even get that (the sole-source fiasco of Cape Wind aside, there is no evidence that I am aware of that a lack of competitive bidding is a major driver of the significant delta between the cost of electricity generated by traditional sources and the much pricier juice squeezed from turbines, solar panels and the like).

Upshot: If implemented (it still needs to get through the House) this bill will bring Massachusetts even higher energy prices - just maybe not quite as much higher as what we'd get without its relatively flimsy price-control provisions.

Like Governor Patrick, the legislature is talking the talk when it comes to reducing energy prices while working to drive them ever higher. Our business community - much of which struggles every day to justify a continued presence here as the cost of doing business in the Commonwealth creeps steadily higher - ought to be screaming to the rafters about this one.

Postscript: It is telling that (according to the State House News), supporters of this bill think of it as the "Green Communities Act: Part Deux." That would be the same Green Communities Act that the Attorney General's office recently estimated will cost us a whopping $4 billion over the next 4 years to implement.

4 comments:

  1. You might find the cost breakdown below of value:

    http://www.capecodtoday.com/blogs/index.php/2012/04/06/cape-wind-costs-to-ratepayers-beyond-tin?blog=247

    It would seem the public widely supported Wind Energy and were it not for NIMBY OPPOSITION, greatly supported by the Dirty Energy Koch Brothers [the wealthy 1%], this would have been a completed project by now.

    These are a few comments of interest --
    97% of public comments received by MMS supported Cape Wind.

    McCain Campaign Chairman received $380k to stop Cape Wind

    Alliance to Protect Nantucket Sound [the group that opposed Cape Wind] is partially funded and shaped by an international energy conglomerate.

    ...Oxbow Corp.[AKA the Koch Brothers], which mines and markets energy and commodities, including coal, natural gas, and petroleum.

    Oxbow's founder, Osterville yachtsman William I. Koch, has been a cochairman of the alliance since 2005...

    More ominous is that the nuclear energy industry has 100% taxpayer funded loan guarantees.

    This was posted in 2010 - surely outdated by now [meaning solar and wind are less expensive] -

    Consider this -- Nuclear Energy costs
    $7,500 per kilowatt to build

    That’s more than double the capital costs for solar power and three and a half times the cost for wind.

    In other words, Republicans, lobbyists and Dirty Energy have prevented sensible alternative energy policies from being implemented.

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  2. Thanks Middleboro Review. I appreciate the comment, and it is useful information... but it is somewhat beside the point of my post for a couple of reasons:

    First and foremost, the degree to which a doubled "commitment" to renewable energy increases costs doesn't matter - it increases costs. Even your comment implicitly concedes that. So if the legislature pays lip service (a lot of it) to the need to reduce MA's comparatively high cost of energy and then turns around and enacts more legislation that increases those costs, that is a problem. If they then label that legislation a cost-reduction measure, even worse. As I wrote here and have written many times before, cost reduction and renewables are separate imperatives - it is a fiction to treat them otherwise.

    Second, even accepting the Cape Cod Times' estimates of direct consumer increases (which I have seen before and which are based on a series of best-possible-case assumptions), these aren't the consumers that energy costs most directly and negatively impact. While it is correct that quite obviously a single consumer who is forced to pay a small amount more in energy costs on an annual basis is highly unlikely to decamp to NH on that basis, it is also correct that a massive, energy-intensive corporation (say a data processor, a manufacturer, or a data storage firm) considering MA and other lower-cost states very likely WILL be influenced by the ever-increasing delta between our state and others when it comes time to weigh locations for expansion. I have talked with plenty of corporate officers who say that energy costs are the single greatest competitive disadvantage that we have - and this legislation makes that disadvantage worse while claiming to make it better.

    As to all the Koch Brothers stuff, a bit of unsolicited advice: it weakens your argument. There are plenty of good arguments to be made for government investment in renewable energy technologies. "Because _____ opposes it" isn't one of them.

    Thanks again for taking the time to comment.

    ReplyDelete
  3. It would seem that you have supported the argument for a responsible national energy policy that phases out Dirty Energy, phases out Dirty Energy subsidies and incentivizes alternatives.

    For instance:
    The largest single producer of greenhouse gases in New England is the Brayton Point power station in Somerset, which is largely fueled by coal.
    http://middlebororeview.blogspot.com/2012/02/three-reasons-cape-cod-and-middleboro.html

    In 2010, this was the Coal Ash stored in Massachusetts, threatening the environment:

    BRAYTON POINT 190,000,000 POUNDS

    SOMERSET 60,100,000 POUNDS

    SALEM HARBOR 140,800,00 POUNDS

    WEST SPRINGFIELD 40,000,000 POUNDS

    MOUNT TOM 75,200,000 POUNDS

    Those environmental threats are precisely why the Cape Wind opposition was egregious. Living downwind, surrounded by elevated childhood asthma rates and summer air inversions defines short-sighted vision.

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  4. Thanks again MR. You seem determined to have a side-debate - which is your right, of course. But I am going to exercise host's prerogative and decline. Again, I agree and believe that (a) the day is coming when renewables are a viable alternative to fossil fuels, and (b) that will be a happy day. I also believe that (a) that day is not here yet, (b) renewables are considerably more costly than traditional sources, and (c) Massachusetts has an energy cost problem that harms our economic competitiveness. Worse, political leaders across the spectrum believe these things as well - they talk about it all the time. If energy costs are a problem, then legislation that increases energy costs exacerbate the problem. The fact that those same political leaders claim to be solving the problem that they are exacerbating just adds insult to injury.
    If reducing costs were truly the imperative that these people claim it is, there is an easy, low-cost solution to the specific coal problem you just pointed out: natural gas, which is orders of magnitude cleaner, and suddenly cheap and plentiful.
    Thanks again for commenting.

    ReplyDelete

No spamming, flaming, cursing, or other such nonsense tolerated. Thanks for engaging on those terms - Greg