Posts from — September 2011
“Edison to Enron: Energy Markets and Political Strategies” (Book 2 of trilogy on political capitalism published)
“This scholarly work fills in much missing history about two of America’s most important industries, electricity and natural gas.”
– Joseph A. Pratt, NEH-Cullen Professor of History and Business, University of Houston
“An engaging look back at the market and political development of the U.S. energy industry. Industry and policymakers will benefit from reading this book.”
– Dr. Robert Peltier, PE, Editor-in-Chief, POWER magazine
Book 1, Capitalism at Work: Business, Government, and Energy, provided a worldview of market-based versus political business, as well as an interpretation of energy sustainability. The present volume (Book 2) examines the individuals and companies that are related to Enron’s prehistory.
Book 3, Enron and Ken Lay: An American Tragedy, will chronologically describe the rise and fall of Enron and the post-Enron world.
The trilogy and other writings on the intersection of business and government are featured at my website, Political Capitalism.
A video on Book 2 in the context of my book output is here.
Dust Jacket Description
Energy is the resource of resources—the master resource. The fossil fuels in particular—and the electricity generated from them—have made human life longer and better. For many, they have made life possible. Without energy, there would not be the modern world of production and consumption.
During the last 150 years, the United States has been at the forefront of energy development. Edison to Enron chronicles important swaths of that history, focusing on the great entrepreneurs in electricity and in natural gas, who turned potential into plenty and privation into prosperity.
Author Robert L. Bradley Jr. traces individuals and companies that made America an energy nation, from Thomas Edison and Samuel Insull in electricity, to John Henry Kirby in oil, to Clint Murchison, Ray Fish, Robert Herring, and Jack Bowen in natural gas. Companies such as General Electric, Houston Oil, Southern Union, Fish Engineering, Houston Natural Gas, TransCanada, Florida Gas, and Transco Energy are integral to Bradley’s energy history, which links the country’s nineteenth-century past to its twenty-first-century present. [Read more →]
September 30, 2011 1 Comment
Even if there were a usable model to analyze job creation, we are left with the problem of identifying which jobs are actually “green.” A renewable project can result in the employment of technical personnel trained to specialize in operating or maintaining its technology (whom we presume are green), as well as additional bartenders who will help the workers to enjoy their evenings (harder to classify as green).
The matter is important because any type of governmental or private spending might open up slots for bartenders. Renewable technologies, however, have been viewed as the foundation for a massive increase in skilled workers whose human capital will provide them with higher lifelong earnings.
Two recent studies point up that the choice of definitions can affect estimates of the green workforce, and show that an extremely small fraction of jobs defined as green are in renewables.
Brookings Study: Bus Drivers, Trashmen “Green’
The Brookings Institution recently estimated 2.7 million jobs associated with the “clean economy.” The categories include “Agricultural and Natural Resources Conservation” (18.9 %), “Regulation and Compliance” (5.3%), “Energy and Resource Efficiency” (31.0%), and “Greenhouse Gas Reduction, Environmental Management, and Recycling” (39.6%).
The clean economy expands its bounds by creative classification. Thus we find that energy efficiency includes 350,000 people in public mass transit, mostly bus drivers, and environmental management includes 386,000 people in waste management, formerly known as trash disposal.
The researchers chose not to use an alternative definition that would have been far more helpful to most readers: how many clean jobs have (or will) come into being as a result of recent and proposed energy, environmental and climate regulations? (And, of course, how many others will vanish.) [Read more →]
September 29, 2011 7 Comments
[Ed. note: The following is excerpted from Dr. Michaels's recent testimony before the Subcommittee on Water and Power. Part II tomorrow will examine how green jobs are defined by their proponents.]
It is rapidly becoming apparent that renewable energy is failing to produce the promise of painless prosperity embodied in “green jobs” that will simultaneously decrease unemployment rates and reduce pollution. Begin with some principles:
1. The proper goal of energy policy is to support the efficient provision of energy.
The lower the cost of energy to the economy, all else equal, the higher will be job creation and economic growth outside of the energy sector. Raising energy costs by forcing the use of uneconomic technologies that create more job slots will have exactly the opposite effect. Put simply, more workers in energy reduce the production of non-energy goods and services.
2. Any analysis of job creation by green energy must consider the simultaneous effect of job destruction.
Policies that raise the cost of energy to households and businesses must leave them with fewer funds to spend elsewhere. Such policies include the spending of tax revenues to support green activities instead of other government purchases or returning the funds to taxpayers. To a first approximation the net effect of such programs on employment will be zero. This is particularly important here because the new job slots are often visible, while the losses are dispersed among the thousands of goods and services that households and businesses will spend less on. Jobs that cost more to create will generally have higher costs in terms of lost jobs elsewhere.
3. Double counting of jobs and unrealistic assumptions about labor markets. [Read more →]
September 28, 2011 10 Comments
When I was director of public policy analysis at Enron in the late 1990s, I hired climatologist Gerald North of Texas A&M as a consultant to help me get to the bottom of the raging debate between climate ‘skeptics’ and ‘alarmists.’ I was Ken Lay’s speechwriter, and I was concerned that Enron’s embrace of climate alarmism (we had seven profit centers banking on priced CO2 from government intervention) was intellectually off base and thus violated the honesty plank of corporate responsibility.
It was money well spent. Dr. North was personable and honest, although he had a propensity to default toward alarmism if you did not challenge him. (Such is the neo-Malthusian propensity of most natural scientists who see nature as optimal and the human influence as only downside.) This is why I have called Dr. North, to his chagrin, the non-alarmist alarmist.
North distrusted climate models. He noted time and again the personal relationships and personality traits in driving the scientist’s views. And his own sensitivity estimate was at the bottom end of the IPCC range. (North’s climate sensitivity estimate of about 2ºC for a doubling of atmospheric concentrations of greenhouse gases in equilibrium–with a plus/minus of .25ºC I would later find out–was an intuitive number.)
September 27, 2011 12 Comments
Military leaders are under pressure to not disrupt White House green energy policies even while green energy technology is disrupting our navigation aids and impairing U.S. national security.
Washington has a track record of muzzling military testimony to protect its pet policies and political friends. Last week, Air Force Gen. William Shelton admitted he was pressured by the administration to change his testimony regarding LightSquared’s network and its adverse impact on military space-based navigation systems. We applaud Shelton for not bowing to the pressure.
But the military has not been honest about the effect wind turbine technology has on our national radar systems.
The fact is that our air space has been made less safe by turbines and our national security compromised because of a reckless policy of siting wind towers within 50-miles of radar installations. Military radar experts in the field know the damage that’s been done. But with the debate surrounding energy policy dominated by politics and money, the military has bowed to the pressure.
Radar Interference and Mitigation [Read more →]
September 26, 2011 12 Comments
But what about the “environmental impact” of industrial development? Isn’t the “green” movement providing a salutary influence us by helping us combat that problem? Again, no.
The idea of “environmental impact” is what philosopher Ayn Rand called an “intellectual package-deal.” Such a concept dishonestly packages together two very different things—the impact of development on the human environment and the impact of development on the non-human environment.
Industrial development will certainly often harm various non-human environments—but it is a godsend to the human environment. By lumping together concern with the non-human environment (e.g., displacing some caribou to get billions of barrels of the lifeblood of civilization) and the human environment (e.g., air quality), anti-industrialists are able to dupe Americans into thinking that sacrificing to caribou somehow benefits them.
Historically, industrial progress brought with it a radical improvement of the human environment. Indeed, industrial progress essentially is the improvement of the human environment. The reason we develop is to make our surroundings better so that our lives are better, cleaner, healthier safer—in the face of a natural environment that is often hostile to human life.
Contrary to “green” mythology, man’s natural environment is neither clean nor safe. In a non-industrialized, “natural” state, men face all sorts of health dangers in the air and water, from the choking smoke of an open fire made using plant matter (a cause of over a million deaths a year to this day) to the feces-infested local brook that he must share with farm animals.
Industrial development gives men the technology and tools to make their environment healthier—from sanitation systems to sturdier buildings to less onerous job conditions to comfortable furniture to having healthy, fresh food at one’s disposal year round, to the wealth and ability to preserve and travel to the most beautiful parts of nature. And so long as we embrace policies that protect property rights, including air and water rights, we protect industrial development and protect individuals from pollution.
As for the “sustainability” of industrial progress, an accusation that dates back to Marx, this fails to recognize the fact (elaborated on by Julian Simon and Ayn Rand) that man has an unlimited capacity to rearrange nature’s endless stockpile of raw materials into useful resources—which is why the more resources we use, the more resources we have. [Read more →]
September 24, 2011 12 Comments
In the wake of two recessions following two fleeting, largely service-sector bubbles—the dot-com bubble and the housing/financial bubble—America’s intellectual and political leaders are championing the need for industrial progress.
The ubiquitous Thomas L. Friedman takes on the subject of industrial progress in his latest book, That Used to Be Us, coauthored by political scientist Michael Mandelbaum. The book begins by describing a China full of fast trains, stupendous buildings, and an aura of dynamism—and contrasting it to an America in which repairing a subway is a multi-year project. Such images resonate with readers and voters, who wonder with frustration why so much industrial innovation, production, and job-creation is happening overseas rather than in America.
In President Obama’s recent address on jobs, he angrily complained about the state of American industry:
Our highways are clogged with traffic. Our skies are the most congested in the world. It’s an outrage.
Building a world-class transportation system is part of what made us an economic superpower. And now we’re going to sit back and watch China build newer airports and faster railroads?
Obama is right about this much; the state of American industry is an outrage. America has enormous, incalculable, untapped potential to make industrial progress—to radically increase our standard of living through far greater productivity in energy production, in manufacturing, in construction, in mining, in transportation. Unfortunately, the statist philosophy of Obama, Friedman, et al leads them to speciously attribute the problem to lack of government—despite the unprecedented expansion of government over the last 50 years. They propose still more increases in government spending and controls, as if some magic manipulation is going to spark the next industrial revolution.
At the same time, they ignore the most blatant impediment to industrial progress—an impediment caused by policies they support. This impediment is an open secret readily discoverable by asking American industrialists what is holding them back.
When I do this, I hear one theme repeated over and over: it is ruinously difficult to start new industrial projects because of our anti-industrial, “green” policies. [Read more →]
September 23, 2011 14 Comments
On August 8, 2011, EPA published the Cross State Air Pollution Rule (CSAPR) in response to the court decision, North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008), which vacated the Clean Air Interstate Rule. But instead of building on the lessons learned of successful programs, the rule makes so many changes to the cap-and-trade provisions that pollution reduction is in real doubt. Moreover the changes are so extensive that reliability impacts are possible.
The rule requires 23 states to reduce annual SO2 and NOx emissions to help downwind areas attain particulate matter and ozone ambient air quality standards. This rule replaces EPA’s 2005 Clean Air Interstate Rule with three different cap programs.
A 2012 annual SO2 cap is set at 3,385,929 tons as compared to the recent (average 2008 to 2010) emissions of 5,216,931 tons. There is a 2012 annual NOx cap set at 1,245,869 tons compared to the recent emissions of 1,595,756 tons.
Finally, EPA established a 2012 Ozone Season NOx cap 495,314 tons compared to recent emissions of 566,363 tons. In all three programs there is another round of reductions in 2014.
According to EPA, Cap and Trade is a market-based policy tool for protecting human health and the environment. A cap-and-trade program first sets an aggressive cap, or maximum limit, on emissions. Sources covered by the program then receive authorizations to emit in the form of emissions allowances, with the total amount of allowances limited by the cap. Each source can design its own compliance strategy to meet the overall reduction requirement, including sale or purchase of allowances, installation of pollution controls, implementation of efficiency measures, among other options.
Individual control requirements are not specified under a cap-and-trade program, but each emissions source must surrender allowances equal to its actual emissions in order to comply. Sources must also completely and accurately measure and report all emissions in a timely manner to guarantee that the overall cap is achieved.
Unfortunately, there are significant problems with CSAPR cap and trade. [Read more →]
September 22, 2011 2 Comments
One of the reasons governments have been pushing biomass burning is the notion that it would displace fossil fuels and thereby reduce CO2 emissions. Biomass is renewable and displaces fossil fuels. But would it reduce CO2 emissions?
Fossil Fuels: Ancient Storage
In Batteries from the Carboniferous, I noted that fossil fuels are Nature’s ancient method of storing solar and photosynthetic energy in the ground. Inadvertently, fossil fuels have served as a multimillion year old storage battery, which sat in the ground because no species had learned to use it efficiently until human beings figured out how in recent centuries.
Because using it releases a number of pollutants, however, fossil fuels are a somewhat imperfect battery. These pollutants are: particulate matter, sulfur dioxide, nitrogen oxides, various hydrocarbons and carbon monoxide (the latter two if combustion is less than 100% efficient). [Note: CO2 is not in my list of pollutants. It is the stuff of life, rather than a pollutant. You, dear reader, are 18% carbon, virtually all of which originates in CO2 in the atmosphere. Don’t try to go without carbon!]
In order to figure out whether burning biomass rather than fossil fuels would reduce atmospheric CO2 emission, consider the following analogy. [Read more →]
September 21, 2011 9 Comments
[This post reproduces a front-page story in the New York Times business section that excitedly reported a breakthrough with solar energy as represented by a heady energy company named Enron. Formed in the mid-1980s, Enron had just entered into the solar business and was destined to revitalize--if not save--the U.S. wind industry just a few years later.]
“Federal officials, aware that solar power breakthroughs have shined and faded almost as often as the sun, say the Enron project could introduce commercially competitive technology without expensive Government aid.”
Allen Myerson, Solar Power, for Earthly Prices, New York Times, November 15, 1994.
The nation’s largest natural gas company is betting $150 million that it can succeed where the Government has so far failed: producing solar power at rates competitive with those of energy generated from oil, gas and coal.
The Enron Corporation plans to build a plant in the southern Nevada desert that would be the largest operation in the country making electricity directly from sunlight, producing enough to power a city of 100,000 people. It is expected to begin operating in late 1996.
Grand promises in the late 1970′s about the potential of virtually pollution-free, endlessly renewable energy sources like solar energy faded into an embarrassed hush. But several of the nation’s leading solar power experts say Enron’s optimistic goal is probably reachable.
The reason is that during the last decade, the cost of solar power generation has quietly declined by two-thirds. Far from depending on some wondrous breakthrough, the experts say, Enron can offer commercially competitive solar power by inexpensively mass-producing solar panels, and then employing thousands of them in the Nevada desert. [Read more →]
September 20, 2011 13 Comments