Category — California

“You don’t want [California's] system with caps, where you have trading, you have derivatives, you have markets that then collapse and don’t actually reduce emissions much. That’s been tried in Europe, and it didn’t do much.”

- James Hansen, quoted in David Baker, “James Hansen Blasts Cap-and-Trade,” San Francisco Chronicle, December 5, 2012.

“Cap-and-trade’s complexity provides a breeding ground for special interests…. Why do those special interests deserve it anyhow?”

- James Hansen, “The People vs. Cap-and-Tax,” New York City, January 12, 2010.

NASA climate scientist James Hansen has long attracted criticism as the progenitor of modern climate alarmism. In recent years, Hansen has been prone to hyperbolic statements against fossil fuels, ignoring the moral imperative for abundant, affordable, and reliable mass energies (called progressive energy by Alex Epstein). Hansen has also engaged in civil disobedience for his wrong-headed cause.

Hansen’s alarmism, and its policy corollary of government-engineered energy transformation, is deeply troubled by three factors as documented by fellow climate scientist Chip Knappenberger:

1. Global temperatures are not rising in tandem with greenhouse gas emissions (think global lukewarming);
2. Hansen’s “climate dice” can be unloaded; and
3. A carbon tax (Hansen’s alternative to cap-and-trade) is climatically useless.

Can James Hansen acknowledge the mere possibility of a benign or even positive human influence on climate? Such would be the beginning of an exit strategy, a soft landing, from what continues to shape up to be a Grand False Alarm. Hansen’s reconsideration, in fact, can begin with his own views of the 1990s on the complexity of his subject matter (see Appendix A).

Three Great Moments

But there is another side to the mad scientist that has interjected realism into the decarbonization debate. Three are mentioned here. [Read more →]

“I don’t think it’s the right thing to do to foist onto consumers … 20 to 30 percent higher energy rates in an opt-out program. If people want to spend more money … to buy green energy … that is terrific…. But to coerce them into doing it in an opt-out program … is the wrong approach.”

-   Mark Farrell, San Francisco Supervisor, 2012 (quoted below)

Thousands of San Francisco residents may be sucked into a green energy plan that will raise their electricity rates 77 percent without their knowledge or consent. Beginning next spring, half of the city’s 375,000 residential ratepayers will automatically be enrolled in CleanPowerSF – unless they take action to opt out of the program. Eventually the entire city will be enrolled in the program unless they choose to opt out.

Here is the sales pitch of CleanPowerSF:

Currently, you don’t have a choice in how PG&E selects your power. Your PG&E electricity is generated from a portfolio that includes carbon-emitting and nuclear energy sources like natural gas and nuclear power. CleanPowerSF will generate your electricity from a 100% renewable electricity portfolio. CleanPowerSF’s energy mixture will utilize resources like solar, wind, biogas and geothermal power, effectively the cleanest energy available in the United States.

City officials are hoping at least 90,000 households will choose to remain in the program — despite paying an average $18 more each month. That could be a safe bet, because many liberal, wealthy San Franciscans will embrace the opportunity to boast that their power is coming from a clean, green, renewable energy source.

Many residents, perhaps tens of thousands, who could not care less where their energy comes from may be stuck with a 23 percent total rate hike (the 77 percent commodity-charge increase averaged down by unchanged items such as transmission). They would be unaware of the change and not know about their option to get out of it–thanks to CleanPowerSF’s “Do nothing, and you will receive cleaner energy; it’s that simple” siren song. [Read more →]

“There is a vast difference between doing the right thing and doing the thing right. In this case, CARB is implementing AB32 in ways that ignore current realities and that likely make matters worse…. It is time for a major reset of the underlying law and its regulatory implementation.” – T. Tanton

The California Air Resources Board (CARB) is all-in, damn-the-torpedoes relating to AB 32, the state’s 2006 anti-global warming law, even while acknowledging that it will drive up the cost of energy. CARB chair Mary Nichols confirmed the start of a statewide cap-and-trade auction system November 14 under which industrial firms will buy and sell emission rights for pollutants–despite receiving unrebutted testimony from manufacturers and business owners about the very onerous, and even devastating, impact of moving forward with the auction.

Background

When the California’s Global Warming Solutions Act was enacted in 2006, things were quite different. Electricity prices were being pushed down by the early expansion of natural gas plenty. Other states and nations were considering similar climate change programs, and, in fact, the Western Climate Initiative set up by Western Governors looked to increase trade in emission allowances. Unemployment in the State was at about 7 percent, and the foreclosure debacle hadn’t yet hit (which would drive many cities to the brink of bankruptcy).

The prospect of “leakage” was known, but not the extent. Too much faith was held in the Hobson’s choice of cap-and-trade as opposed to the more draconian option of command-and-control regulation. And finally, national cap-and-trade seemed to be coming.

My how things have changed—except for the commitment to economy destroying state policies. The most notable change is that, nationwide, greenhouse gas emissions have already dropped to 1992 levels, without interventionist policies. California’s carbon intensity has improved 21 percent since the turn of the century. Compare this to AB32′s goal of reaching 1990 statewide emissions by 2020. [Read more →]

“In my period at Cato (1990–present), “Renewable Energy: Not Cheap, Not ‘Green’,” is probably our most important Policy Analysis in the energy/environment area. Bradley’s thorough review and analysis (60 pages, 325 footnotes) was a real pushback against the viability of ‘green’ energy in theory and practice.”

- Jerry Taylor, Senior Fellow and Director, Natural Resource Studies, Cato Institute.

On the fifteenth anniversary of “Renewable Energy: Not Cheap, Not ‘Green’” (yesterday), I recall, with no little pride, a lot of hard work that went into supplying the author with information about California’s wind and solar experience.

At the time I was working in the belly of the beast, the California Energy Commission (CEC) in Sacramento. The Commission was a major proponent of all things renewable, almost to the point of fanaticism. Well, actually far beyond that point (and that persists to this day), and therein lies a story about how I met a particular Texan and became the silent author of a major public policy study that still reads well today.

Three Amigos

Back in the 1980s and 1990s, I was fortunate to work alongside Richard Bilas, Vice Chair of the Commission, who was our ‘F. A. Hayek’ (think 1944 and Road to Serfdom). Dick Bilas was schooled in Austrian School and Public Choice economics and a real rarity–a free-market California energy regulator (and not wannabe energy planner).

And the third person in our group was Manual Alvarez, principal advisor to Commissioner Bilas, who actually cared about energy consumers. The three of us were rather wide-eyed at what can only be described as postmodern energy policy, a sort of ‘anything goes and is good if you really want it.’ [Read more →]

“Regulators who don’t approve smart stuff are by elimination reducing themselves to certificators of dumb stuff. When nuclear optimism peaked, backers said that its power would be “too cheap to meter.” The bill for the smart grid is turning out to be too confusing to meter, but like in the nuclear heyday, the momentum is irresistible.”

I have some kind words for the California Public Utilities Commission’s Division of Ratepayer Advocates (DRA), its in-house department charged with representing small consumers in rate proceedings.

DRA has long been agnostic about the benefits of smart meters. But with the release of “Case Study of Smart Meter System Deployment: Recommendations for Ensuring Ratepayer Benefits,” the issue of high costs relative to benefits is on the table.

Better late than never.

Complexity Unbound

DRA’s lightly redacted public version analyzes the gap between anticipation and reality in Southern California Edison’s “Advanced Metering Infrastructure” (AMI or SmartConnect) rollout program.

The numbers are interesting, but DRA’s big point is that the CPUC has hardly any idea about what it does or doesn’t know amid the hyper complexity of smart meter costs and benefits. [Read more →]

[Editor's Note: This post concludes a two-part series on counter-productive regulation passed in the name of addressing man-made climate change.]

In Part One yesterday, I summarized the recent research by U.C. Berkeley researcher Margaret Taylor, which found that cap-and-trade programs (CTP) impede technological innovation. Not only do they stifle future technological improvements, CTP often erase past improvements.

California’s Global Warming Solutions Act (AB32) and the Air Resources Board’s implementation of that law to date provide a sobering example of the Taylor Thesis.

California Improvements before Cap-and-Trade

California is the only state insisting on implementing economy wide cap-and-trade. The climate impact, if the programs (unrealistic) goals are achieved, are miniscule. Nonetheless, the program is to start later this year, according to the California Air Resources Board (CARB). Not acknowledged by these uber-bureaucrats, California has the third BEST carbon intensity in the U.S., according to the Congressional Research Service.

The carbon intensity of the U.S. is only a quarter of China’s and is well below the average of the world. Every ton of cement California imports from Arizona, every basket of fruit the U.S. imports from Chile, and every techno-gadget we import from Asia, in other words, result in a net increase of emissions, compared to our producing those things here at home. [Read more →]

Part I yesterday reviewed in-state electricity generation and power imports required to meet California’s current power demand. Part II today shows how Renewable Energy Credits may be used to meet California’s aggressive renewable energy goals.

Renewable Energy Credits

Renewable Energy Credits (RECs) are the power generation credits that a distribution system can use to meet its renewable portfolio. These RECs come in two flavors—bundled and unbundled. The bundled RECs are the credits that are bought and used within the same distribution system; unbundled RECs are those bought by one distribution system but used in another. These RECs are managed by the Center for Resource Solutions, which also prevents double counting of credits.

Unbundled RECs are particularly interesting, because it means that a distribution system doesn’t need to build renewable energy power plants because the distribution system can simply buy the renewable power that is generated in another distribution system.

Paper Renewables?

This creates significant problems for the exporting distribution system. For example, the Bonneville Power Administration is currently negotiating with California about (in BPA’s words)

potentially significant negative consequences for Northwest and California consumers if decisions about the use of unbundled RECs are made without full consideration of the infrastructure requirements associated with the delivering a reliable, least cost supply of renewable energy to California.

So, what are the consequences? The use of unbundled RECs seems to mean that California could purchase all the renewable power generated by all the windmills that are connected to the California grid.

This is happening right now as California is contracting for wind energy from places as far away as Alberta, Canada. The electricity generated in Alberta, however, will not arrive in California. It is too far away. The only thing that is happening is that Californians are paying for it to meet their renewable portfolio. This seems pretty strange, that Californians are required to pay for a benefit that they don’t get.

The fact that 15 percent of its imports in 2009 are “unspecified” probably means that California intends to purchase enough renewable energy credits to meet its goal. This would mean that it would not need to build any more renewable power generators. It just needs to purchase the power from its neighbors (at the expense of the rate payers in California).

There are three major problems with unbundled RECs: [Read more →]

California is committed to a renewable energy portfolio to provide 33 percent of its electricity by 2020 from qualifying resources such as wind, solar, geothermal, biomass, and small hydroelectric facilities.

Can this portfolio succeed? Ambitious goals take more than legislative action to have a chance for success. It takes an actual plan that can be implemented with actual engineering accomplishments.

Drastic Increase Needed

In order to determine the probability of success, we can look at California’s renewable energy sources in prior years. These are available on the Internetand are presented in the following graph.

The plot shows the actual renewable sources of electricity generated in California from 2005 to 2009 and shows the projected increase required to achieve the goal of 33 percent by 2020. Notice that the renewable contribution has been rather constant over the previous years and requires a dramatic increaseto achieve the goal. This implies that something different needs to be done than what has been done it the past, otherwise the projection line will be ever steeper and eventually needs to be abandoned.

Looking at the Pieces

So, exactly which of the renewable energy sources can be increased to reach the goal? It is generally accepted that biomass, geothermal, and small hydro cannot be increased significantly, which leaves the intermittent sources of solar and wind to do the job. Is it reasonable to expect that solar and wind can accomplish the task? The gap that must be closed by 2020 is 21 percent of the total electricity consumption.

Solar currently contributes only 0.3 percent (2009) of the electricity used in California. This contribution is too small to expect a significant contribution by 2020. It might be doubled by 2020, but this is still a small amount.

Windcontributed 2.7 percent (2009). The expectation that it will close the 21-percent renewable gap is unrealistic, however, for the following reasons: [Read more →]

“The fraudulence of … ‘goals’ for emission reductions, ‘offsets’ that render even iron-clad goals almost meaningless, an ineffectual ‘cap-and-trade’ mechanism must be exposed. We must rebel against such politics-as-usual.”

- James Hansen, “Never-Give-Up Fighting Spirit,” November 30, 2009

“The truth is, the climate course set by [the] Waxman-Markey [cap-and-trade bill] is a disaster course. It is an exceedingly inefficient way to get a small reduction of emissions. It is less than worthless….”

-James Hansen, “Strategies to Address Global Warming,” July 13, 2009.

The case for government intervention in the name of addressing man-made climate change concerns alleged market failure. But there is a second key factor in the debate over public policy activism: government failure.

The letter below, signed by 41 Left environmental groups , is a welcome example of policy activists assessing the ‘cure’ in terms of the ‘disease’. And it is a reminder that cap-and-trade on the federal level–long championed by Environmental Defense Fund (EDF) and such corporations as Enron (Ken Lay) and Duke Energy (James Rogers, a Lay protoge)–is dead from both sides of the political spectrum.

The California protest brings to mind the trenchant criticism of federal cap-and-trade by James Hansen. “Washington appears intent on choosing a [cap-and-trade] path defined by corporate greed,” Hansen wrote last year. “Unless the public gets engaged, the present Administration may jam down the public’s throat just such an approach, which, it can be shown, is not a solution at all.”

Hansen added in the same article:

“Cap-and-trade’s complexity provides a breeding ground for special interests…. [T]ry reading the Waxman-Markey 2,000-page bill to figure out who would get the money! Why do those special interests deserve it anyhow?”

- James Hansen, “The People vs. Cap-and-Tax,” paper delivered to the Chairperson of the Carbon Trading Summit, New York City, January 12, 2010. [Read more →]

Despite the state’s deep economic wounds, California’s Governor Jerry Brown last month signed SB 2X that increased the state’s already ambitious renewable portfolio standard (RPS) goal from 20% to 33% by 2020. Together with the state’s Global Warming Solutions Act of 2006 (AB 32), which requires caps on greenhouse gas emissions starting next year, the new law will push up the price of electricity and further delay the Golden State’s economic recovery by permanently driving away businesses and manufacturing jobs.

Worst-Run State: Kentucky, then ….

Last October, 24/7 Wall St., a financial news and opinion electronic newsletter, ranked the best- and worst-managed states in America. The best-run state was Wyoming, which received high marks in just about every category. Wyoming is also the least-populous state, perhaps hinting at one reason for its success.

The worst state on this list was Kentucky, barely edging out California for last-in-class honors. “While it does not quite rank as the worst state on our list, California stands out as being among the most poorly governed,” the publication wrote. “The most populous state in the union has been mired in debt and political unrest for nearly a decade. It bears the unique honor of being the only state considered economically unstable enough to have its debts, at a record $341 billion, rated at an A- by S&P.”

This year, without the $3.5 billion in federal stimulus funds to cover their losses, California legislators may finally be forced to pragmatically deal with a $19 billion budget deficit, which comes on top of a 2010–2011 carryover deficit of $6.1 billion.

Other Bad Ratings

A low opinion of California’s business climate is not limited to 24/7 Wall St. In its 2010 annual survey of the best and worst states for business, The Chief Executive magazine gave its “booby prize” for worst state to California for the second year in a row. The global consulting firm Bain & Co. found that “California is far worse [for business] than any other state by a very significant margin.” Development Counselors International (specialists in business relocations) surveyed corporate executives in March 2011 and found that 72% responded that California has the “worst business climate” in the entire U.S. [Read more →]