Posts from — May 2012
“Ultimately, New York’s RPS will cost ratepayers billions of dollars to support the construction of new generation. And if the state continues to rely on wind as the dominate resource, more turbines will be necessary to make up for low capacity factors. The program is up for review again in 2013. It’s time for the PSC to remove the rose-colored glasses and acknowledge the program for what it is: Regulatory Capture at its finest.“
Tens of thousands of acres across New York State have been transformed into sprawling electric generating facilities. Specifically, some 18 industrial wind complexes house nearly 1,000 towering wind turbines that consume the landscape and threaten otherwise pristine communities.
Now, consider that another 1,500 giant towers will need to be erected by 2015 in order to satisfy the state’s 30% renewable energy mandate.
New York’s Renewable Portfolio Standard (RPS) can be credited with most of the wind development in the state. Officials insist the policy has helped New York diversify its energy resources and will ultimately lower electricity prices but such claims are more rhetoric than real.
New York’s RPS has already exceeded original budget projections, it’s current renewable targets are unrealistic, and claims that prices will drop are predicated on a flawed understanding of how the New York wholesale power market operates.
New York first enacted its renewable energy mandate in 2004 through regulations adopted by the Public Service Commission (PSC). At the time, about 19.3% percent of electricity retailed in the state was derived from renewable resources, with the vast majority coming from large-scale hydroelectric facilities upstate and in Canada. The PSC ordered the state reach a 25% renewables target by 2013 which meant an incremental increase of 10.0 million megawatt hours (MWh) from projects built after 2003. [Read more →]
May 31, 2012 4 Comments
Surprise! Current Motor Fuel Taxes Exceed the Estimated Social Cost of Carbon (SCC) in Most Industrialized Countries
“Simple math demonstrates that the average taxes (including duties) on gasoline and diesel in virtually every developed country exceed the average U.S. EPA’s (over)estimated global social cost of carbon now and through 2025 (at least). In fact, motorists in most European countries already pay taxes in excess of the upper bound estimate of the social cost of carbon through the middle of this century.”
According to the U.S. Environmental Protection Agency (EPA), the average global social cost of carbon (SCC), which is the level at which a global carbon tax should theoretically be set, ranged from $5.6 to $41.8 per tonne of carbon dioxide in 2010 (in 2012 US$), and should rise to between $18.7 and $77.4 in 2050 (as shown in Table 1). Per the EPA, the “central value” is represented by the “3% Average” column in the Table. Upper bound estimates are obviously much higher (see last column). 
There are several good reasons to believe that both average and upper bound SCC estimates are severely overstated. Suffice it to say that the major reasons for this are, first, the globe is warming much less rapidly than projected—not to be confused with “predicted”—by models of the same vintage as the models used by EPA to estimate SCC, that is, models from the 1990s and early 2000s [Ref. 2, pp. 4–13].
Second, the SCC estimates downplay, if not ignore, technological change that ought to occur over the next century or more and increase adaptive capacity, if the past couple hundred years are any guide. This means that impacts would be much lower than projected, particularly for the poorest countries which are deemed to be most at risk from global warming [Ref. 2, pp. 13–21]. No matter, for this exercise let’s assume that EPA’s SCC estimates are accurate. [Read more →]
May 30, 2012 12 Comments
The “Bootleggers and Baptists” theory of regulation, coined by Bruce Yandle in 1983 in Regulation magazine, uniquely explains what otherwise would be considered bizarre coalitions between moral crusaders and morally indifferent businesses.
In a later telling, Yandle explained how the theory
draws on colorful tales of states’ efforts to regulate alcoholic beverages by banning Sunday sales at legal outlets. Baptists fervently endorsed such actions on moral ground. Bootleggers tolerated the actions gleefully because their effect was to limit competition.
One such unholy alliance has emerged between environmentalists and some utilities in the context of the Environmental Protection Agency’s recent Utility Mercury and Air Toxics Standards (Utility MACT) rule.
Those unfamiliar with the Bootleggers and Baptists theory may conclude that those compliant energy companies are enlightened at long last. But those who know the theory will take a more cynical view.
May 29, 2012 2 Comments
An eye-opening case can be made that Obama Administration’s EPA is threatening our energy, economy, health, welfare, justice, and civil rights. A stiff charge, indeed, but one that needs to be examined in due depth this Memorial Day and throughout the year.
EPA Administrator Lisa Jackson says we face grave threats to human health, welfare and justice. She’s absolutely right. However, the dangers are not due to factory or power plant emissions, or supposed effects of “dangerous manmade global warming.”
They are the result of policies and regulations that her EPA is imposing in the name of preventing climate change and other hypothetical and exaggerated environmental problems. It is those government actions that are the gravest threat to Americans’ health, welfare, and pursuit of happiness and justice.
By hyper-regulating carbon dioxide, soot, mercury, “cross-state air pollution” from sources hundreds of miles away, and other air and water emissions, EPA intends to force numerous coal-fired power plants to shut down years before their productive life is over; sharply reduce emissions from cars, factories, refineries and other facilities, regardless of the costs; and block the construction of new coal-fired power plants, because none will be able to slash their carbon dioxide emissions to half of what average coal-fired plants now emit, without employing expensive (and nonexistent) CO2 capture and storage technologies. [Read more →]
May 27, 2012 8 Comments
While recently researching energy history for a writing project, I was reminded of how valuable–and underrated–Robert Bradley’s Oil, Gas, and Government: The U.S. Experience is. While there are countless books covering the history of energy from one angle or another, very few, in my experience, can be counted on for precision and accuracy.
The majority of books I read that reference early petroleum history, for example, tell a radically oversimplified narrative of petroleum replacing whale oil. However, if one reads Harold Williamson and Arnold Daum’s definitive two-volume The American Petroleum Industry,  one learns about a far more intricate and interesting progress, including the one-time dominance of camphene, a turnpentine-based illuminant that preceded petroleum–or the story of “coal oil,” which was once believed to be the illuminant of the future. (I discuss this history in my essay Energy at the Speed of Thought: The Original Alternative Energy Market.)
What distinguishes Williamson and Daum–and Oil, Gas, and Government–is the systematic use of primary sources. For a researcher, this certainly makes life more difficult as it is far easier to use popular accounts as jumping-off points.
But the researchers who undergo this difficult task give the rest of us an enduring resource. Williamson and Daum present the essential technological and economic history of the industry through the 1950s, with exact quantitative data and contemporaneous images throughout. Bradley’s book gives us the essential political and political-economic history of the oil and gas industry through the 1980s, with pains-taking attention to detail. [Read more →]
May 25, 2012 2 Comments
MasterResource is about energy (the master resource). But our ‘free market energy blog‘ is also about the economic system of market capitalism versus political capitalism. In fact, under the category Corporate Governance, entries can be found for
- “Bootleggers and Baptists”
- Business strategy and messaging
- Corporate Social Responsibility (CSR)
- Free-market capitalism/Principled Entrepreneurship™
- Political capitalism/rent-seeking
- Postmodernist philosophy
- Resource ownership
And so it was with great interest that I found out that Stephen Hicks, a Ph.D. philosopher in the Objectivist tradition, is teaching a course on business ethics to MBA students at Loyola University Chicago. Loyola’s business ethics program is considered one of the finest in the country, and, in fact, was ranked first in the country last year by BusinessWeek.
Professor Hicks is not your average philosophy professor. His thought is firmly planted in the real world, being a student of business practices, the dynamics of capitalist progress, and the dynamics of government intervention (how one regulation leads to another). Hicks is expert in both Austrian-school and public-choice economics to these ends.
May 24, 2012 8 Comments
“Georgia Power’s Plant Vogtle is seen as the first example in the country’s ‘Nuclear Renaissance’. The technology indeed employs new simpler, safer, and more efficient designs than the last round of nuclear plants. However, there is nothing new about the crony politics and financial shenanigans surrounding the project.”
Georgia Power, a subsidiary of the mighty Southern Company, is pressing ahead with development of a two-unit, 2,240 Megawatt (MW) nuclear plant, Plant Vogtle. With a pending $8.6 billion federal loan guarantee, a cap on liability, production tax credits and pre-collection of profits this makes Georgia Power the nation’s biggest welfare queen.
And the predictable bad news is already coming in. Recent news reports state that Vogtle may be nearly $1 billion above budget. Bad for electricity users and taxpayers; good for utility stockholders given that the extra rate base receives a guaranteed rate of return.
All these financial goodies didn’t come from performance in the marketplace but from well-planned lobbying at the state and federal levels. Tracing the actions and rationalizations that went into getting this project off the ground and into construction is illustrative, although disheartening. [Read more →]
May 23, 2012 19 Comments
The American Energy Alliance (AEA) and the Institute for Energy Research (IER) have created a new platform, American Products. American Power. to educate the nation about the critical role that energy plays for our economy and in our daily lives.
IER is an educational non-profit under Section 501(c)(3) of the Internal Revenue Code; AEA is an advocacy non-profit under Section 501(c)(4) of the code. I am founder and CEO of IER.
Here is the website’s introduction to the new initiative:
Welcome to American Products. American Power. If you shaved today, brushed your teeth, or are reading this on a computer, you already know us.
You also probably know that energy makes it possible to heat our homes, cook our food, and fill our gas tanks, but it does much more. Energy protects our troops and keeps our firefighters and police officers safe. Energy from oil, natural gas, and coal is responsible for hundreds and hundreds of everyday products. Coal provides the affordable energy that powers our factories and the raw materials used to make hundreds and hundreds of products we use every day are derived from oil and natural gas. [Read more →]
May 22, 2012 2 Comments
“Do you like to get a good pay and benefits without having to get a PHD?”
The Offshore Oil Guide (OOG) advertises itself as “the Premier Web Portal for finding offshore oil rig and marine job opportunities. This website was setup as a single access web portal to provide everything you need to know to find, apply and secure an offshore oil rig job.”
Currently on the OOG site, there are 28 countries with offshore job portals: USA, United Kingdom, United Arab Emirates, Turkey, South Africa, Singapore, Saudi Arabia, Russia, Qatar, Philippines, Peru, Pakistan, Oman, Norway, Nigeria, New Zealand, Mexico, Malaysia, Kuwait, Indonesia, India, Hong Kong, China, Canada, Brazil, Bahrain, Australia, and Argentina.
In the USA section, as is the case in other countries, there are 27 job types: Company Man; Cook; Crane Operator; Derrickman; Drilling Engineer; Entry Level; Floor Hand; Geologist; Medic; Motorman; Mud Engineer; Oil Driller; Oiler; Painter; Pipeline Engineer; Radio Operator; Rig Electrician; Rig Mechanic; Rig Operator; Roughneck; Roustabout; ROV Operator; Subsea Engineer; Toolpusher; Welder; Well Site Engineer; Winch Operator.
May 21, 2012 3 Comments
“If you want to be an economist, it would be wise to study the economy.” 
It was a simple but profound statement made in an everyday email exchange. The writer was Peter Boettke, the author of an important new book, Living Economics: Yesterday, Today, and Tomorrow (reviewed below), which makes a case for realistic, applicable, fascinating economics in place of so much of the hyper-theoretical, classroom variety.
Real-world economics elucidates the world of business, politics, and decision-making in general. Such analysis and application brings in real-world energy, the subject of MasterResource and much of my books.
A prolific scholar, Dr. Boettke is BB&T Professor for the Study of Capitalism, Mercatus Center, and University Professor of Economics and Philosophy, Department of Economics, all at George Mason University. He was profiled for his good teaching work in the Wall Street Journal piece, Spreading Hayek, Spurning Keynes.
Boettke is considered a leader of Generation 6 of the Austrian School of Economics.  Yes, the iconic Milton Friedman said there was only good economics and bad economics, and not schools of thought. But Austrianism is surely a useful way of characterizing real-world economics premised on sound assumptions and logical reasoning.
Hail to Boettke’s new book! What follows is a review, “Economics By and For Human Beings,” by big-picture-thinker Jeffrey Tucker. Tucker, formerly of the Mises Institute, is now executive editor at Laissez-Faire Books. [Read more →]
May 18, 2012 No Comments