Posts from — July 2009

Ken Maize’s recent post arguing for a strong grid instead of a smart one made an important point: the Smart Grid is largely an assortment of tweaks and minor fixes that lets America’s utilities get by with the transmission status quo to cope with the growing demand and integration of intermittent renewables.

Policy should instead aim at a strong grid. Redundancies and “excess” capacity could better maintain reliability and lower delivered power costs in a world of monopoly utilities. It would also facilitate market transactions if competitive retail and wholesale power markets prevail.

Maize has well-founded concerns about how utilities in a smart-grid world will

1) administer their new gizmo-heavy systems;

2) justify the benefits that small consumers will get in return for higher bills, and

3) make up for the prospect for increased vulnerability to innocent or serious hacking.

Rate Base Aplenty

Unfortunately, the Smart Grid has one great upside for utilities. If politics force them to invest less in generation (what they should be doing), they will need to plug a hole in their rate bases, i.e. the assets on which they can earn regulated returns with near-certainty. The Smart Grid does just this; its sheer size will require lots of costly meters, communications hardware and software, equipment to process the information produced, and still more investments to dispatch generation and manage demand on the basis of that information. The full cost also includes stuff on the consumers side of the meter, some of which utilities are also likely to supply. [Read more →]

“If there is one thing I have been impressed with over the last decades, it is that when the environmental community defines a number one priority, something happens. Not always something good—but something.”1

Dr. Kenneth L. Lay, Chairman, Enron Corporation, June 1997 (1)

Who was the late Ken Lay, the architect and chairman of Enron throughout its 16-year history? All parties to the current legislative debate on a CO2 cap-and-trade bill should know. After all, Lay’s tireless efforts to promote CO2 regulation and enact renewable energy quotas make him a father figure for HR 2354, the Waxman-Markey climate bill, what I have called the Enron Revitalization Act of 2009.

In his lifetime, Lay did not win CO2 regulation, but he got a very damaging renewable energy mandate passed in his home state of Texas. I asked:

How has Texas, which consumer choice made the leading oil and gas state, become the second most politicized energy state in the nation (after California)?

The regulatory spiral can be traced back  to Enron, which in 1999 spearheaded a provision in the state electricity restructuring law (Senate Bill 7, signed by governor George W. Bush) establishing a statewide renewable-energy mandate. Enron’s lobbyists had in mind the special interest of Enron Wind Company, which is now part of General Electric.

It was a double win for the politically connected company. First, as the leading power marketer, and with its eyes on becoming the leading electricity retailer as well, Enron coveted mandatory open-access of electricity in the state. Secondly, it needed a big market for its money-losing Enron Wind. Cloaking both corporate-welfare goals in the guise of a renewable mandate got media-worshipped environmental groups on board to help push SB 7 across the finish line.

Whether it was hiring John Palmisano, writing op-ed’s, working with Clinton/Gore, contributing $1 million to Resources for the Future in appreciation of their cap-and-trade work, or a myriad other things, Ken Lay worked a mile a minute to promote CO2 legislation, all to help a variety of Enron profit centers (see below). [Read more →]

[Editor note: This April 27th post is reprinted with slight modifications in light of the current newsworthiness of Alaska's soon-to-be-ex-governor, Sarah Palin]

Last month, our friends over at the Heartland Institute published a front-page lead story in the April, 2009 edition of Environment & Climate News. Alyssia Carducci’s “Palin Energy Plan Receives High Praise” begins:

“Alaska Gov. Sarah Palin (R) has announced an ambitious plan to produce half of the state’s electricity from renewable sources by 2025. Palin’s plan, which empowers local municipalities to identify and develop the most cost-efficient renewable power sources available to them, won immediate praise from environmental groups, consumer groups, and industry.”

This article is yet more evidence that the inexplicable conservative love affair with Sarah Palin remains unrequited—at least, when it comes to economic policy in general and energy policy in particular. But Republicans, as the kids might say, “She’s just not that into you.” Let’s examine the litany of problems with Plain’s approach to energy. [Read more →]

“A reliable and affordable supply of energy is absolutely critical to maintaining and expanding economic prosperity where such prosperity already exists and to creating it where it does not.”

- John Holdren, “Memorandum to the President: The Energy-Climate Challenge,” in Donald Kennedy and John Riggs, eds., U.S. Policy and the Global Environment: Memos to the President (Washington, D.C.: The Aspen Institute, 2000), p. 21.

Julian Simon (1932–98) is an inspiration to many of us here at MasterResource. Indeed, this blog is named for Simon’s characterization of energy as the master resource. In honor of Simon, I have reproduced some quotations from the vast literature on that theme.

The primal importance of energy is recognized across the political spectrum as the views of John Holdren, Paul Ehrlich, and Amory Lovins attest. Affordable, reliable energy is thus the starting point for public policy debate. And oil, gas, and coal are the backbone of energy plenty, as even politicians are realizing now that government-forced energy transformation (energy rationing) is under debate.

“The future belongs to the efficient,” it has been said. And the foreseeable future belongs to the carbon-based energies.

Here are some quotations, beginning with Julian Simon’s classic. [Read more →]

“Enron Lives! in Waxman-Markey. The sooner the public, media, and intelligentsia realize this, the faster cap-and-trade can be put in the dustbin of bad ideas.”

- Cap-and-Trade: The Temple of Enron, MasterResource, May 14, 2009.

Joseph Romm holds a Ph.D. (in physics) from MIT and works for a 501(c)3 foundation. Being highly educated and in the education business, to most of us, means being careful and fair in our arguments–and avoiding reckless ad hominem argument. But not so with Joe as evidenced by his very inaccurate recent post against me.

In “George Will and WattsUpWithThat embrace a proud former shill for a man convicted on fraud and conspiracy charges,” Romm argues that I must be corrupt because of my former association with Enron and Ken Lay–and thus George Will and the mega-site WattsUpWithThat are party to corruption too.

I am surprised that Romm has taken this tack, for I have continually turned the tables on him regarding Enron. I am disappointed (but not surprised) that he ignored my posts and other readily available information that contradicts his argument and insinuations.

As I will again document for Romm’s information, I was a whistle blower against Enron’s climate alarmism and rent-seeking activities as director of public policy analysis and Ken Lay’s speechwriter.

But more than that, Enron’s fate is the perfect argument against the Romm-beloved HR 2454, the Waxman-Markey cap-and-trade bill, or what I call the  Enron Revitalization Act of 2009. Last year I did a reason.tv video about Enron, Obama’s Enron Problem, and I have posted repeatedly about how Enron’s failure and fraud were closely related to its “sustainable energy” strategy with solar, wind, and energy efficiency.

And to complete the argument, guess what company is antithetical to Enron in terms of corporate culture, energy strategy, and financial results? It is the company Romm loves to hate–Exxon Mobil, the anti-Enron!

Challenging Enron at Enron

At the website Political Capitalism, I have penned a short history and posted memos on my public-policy conflicts at Enron, information that Romm has ignored. Some Enron executives wanted me to be fired, and I reached an agreement with Ken Lay personally to not publish anything critical of windpower in order to stay with the company (Enron Wind was struggling, and we could not sell it when we needed to, which resulted in Enron’s first crime.) [Read more →]

“This agreement will be good for Enron stock!!”

- John Palmisano, “Implications of the Climate Change Agreement in Kyoto & What Transpired” (1997)

The 219–212 passage of HR 2454 inspires another look at Enron’s infamous “Kyoto memo,” written almost 13 years ago by company lobbyist John Palmisano. Indeed, an Enron memo upon House passage of the Waxman-Markey climate bill would have been similar! Change the dates and some other specifics and the bottom line would be the same–potential gains for Enron’s profit centers in wind, solar, CO2-emissions trading, energy outsourcing, and natural gas.

One can imagine a quotation like this from Enron’s fabled public relations department, hyperbolizing a half-victory into something bigger in the attempt to create a bandwagon effect:

“This historic vote was heard ’round the world,” stated Kenneth L. Lay, chairman of Enron Corp. “Although much work remains before we have new law, HR 2454 signals a new commitment toward clean, green energy, of which Enron is the acknowledged world leader. All of us look forward to working with lawmakers and citizens in this new era of global climate protection.”

Perhaps Al Gore himself would have placed a call to Ken Lay to congratulate the company that did to much so spark the CO2 reduction debate within the industry in the 1980s and 1990s. Indeed, the U.S. Climate Action Partnership (US CAP), a bootleggers-and-Baptists coalition that had much to do with the opening draft of Waxman-Markey, probably had more to do with Ken Lay protégé James Rogers  (now chairman of Duke Energy) than any other single person.

Reprinted below, verbatim, is the infamous Enron Kyoto Memo, the original copy of which is posted here. [Read more →]