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A year ago during the Copenhagen conference on climate change, I published a post, Electricity for the Poor–What Copenhagen Really Needs to Confront, where I noted that some 1.5 billion people did not have access to reliable electricity supplies. To update this, there is more electricity generated this year than last, mostly due to newly commissioned large conventional sources of electric power – gas, coal, hydro, nuclear. The new estimate is 1.4 billion living in energy squalor.

To hear the good and the great at Cancun, the sustainability issue of energy poverty is hidden. Occasionally, one of the climate-change grandees slips up and admits that this the real subject is wealth redistribution, not climate. But that is about as close as it gets.

All the more reason that the international forums on climate change, energy environment, and the like should get to first principles and study this map:  The World At Night (courtesy of Bert Christensen)

When you fly overnight from Johannesburg to Europe the lights thin out just north of Lusaka, Zambia, a few more in Zambia’s Copper Belt and then nothing (and I mean nothing) until the North African coastline.  For most of this 11-12 hour flight there are no artificial lights below.  From the Sahara on south, but excluding South Africa, a region that is home to more than 400 million people consumes less electricity than New York City.

[Read more →]

My post last week evaluated the claim that wind generation can save money for power pool customers.  It was found that the supposed savings could be realized only if the elephant in the room – the above-market feed-in tariff – was ignored.  In other words, consumer payments for electricity from a power pool was half of the story; the real price had to include the consumer-qua-taxpayer funding of the feed-in-tariff (FIT).

And with this two-part scheme, games are played. Wind generators can bid a low price into the pool only to receive a higher FIT, which gives them an incentive to underbid. This might reduce the pool price but not overall cost to Germans for electricity.

Investing in New Generation: What Makes Sense?

If a generation resource is a good investment for its developers then it must return a profit to them.  In a normal electricity market this profit comes from supplying a segment of the demand (peak, intermediate/cycling, baseload) from a plant that is efficient technically and financially.

For existing plants and determinations of electricity costs in the here and now we can figure out the average cost of supplying electricity by calculating the weighted average cost of supply for each time period in the market every day.  If the addition of one generation source raises this weighted average without improving service quality or reliability, then it is not economical and would generally not be chosen in a well-functioning market.

But what about the future?  Electricity suppliers must invest large sums in new generation plants with the expectation that these plants will meet demand at the least cost.  This cannot be known with certainty, and mistakes are made all the time, especially when government policy and rent-seeking drive investment choices.

Transmission network operators – those in charge of the “natural monopoly” part of the power business – try to reduce the risk attendant to future supply by figuring out the least costly way to supply power and energy to their customers in the future, including the wires to transmit the electricity.  They have to take account of a long list of considerations: investment cost, fuel supply, emissions and licensing regulation, proximity to existing load centers and transmission nodes, transmission congestion – you get the idea.

The transmission system operator also has to pay attention to public policy – renewable energy mandates (“portfolio standards”), federal tax incentives (producer tax credits for wind and solar), feed-in tariffs, powerful politicians who do not want their vistas impaired – in a host of ways that directly impact their views of an optimal future generating system.

What Does the Wise Transmission Operator Do?

A wise investor in generation will first figure out what is economic to build? what are the physical constraints on the system? and finally, what limitations will public policy put on otherwise least cost generation choices?

A Case Study of “Germania”[i]

Let us imagine that we have a rather large and wealthy country to play with, one that currently has about 129 GW of installed generation capacity.  Further, we can imagine that this wealthy country, responding to its powerful environmental movement, has decided to

(i) phase out nuclear power;

(ii) limit future coal power-plant operations;

(iii) build a lot (a lot!) of wind generation plants; and

(iv) bring in most of its gas supply from Russia at prices linked directly to refined oil products and crude (i.e., high and volatile). [Read more →]

The innocent layperson may have gotten the idea that the Intergovernmental Panel on Climate Change (IPCC) represented the “consensus” view that urgent government action is needed to avert catastrophic impacts on humanity.

And yet, as Jim Manzi’s recent exchange with uber-alarmist Joe Romm makes perfectly clear, even the latest IPCC report punctures holes in the alarmist claims. Perhaps without realizing it, Romm implicitly admits that the IPCC AR4 report never supported the alarmist view.

Manzi Uses the IPCC to Take Down Al Gore

In his relatively new position as “in-house critic” at The New Republic, Manzi criticized a characteristically alarmist piece that Al Gore had published in the same venue. Manzi wanted to show that Gore was misleading the public on what the “scientific consensus” actually had to say about the risks of climate change. [Read more →]

On June 10, the U.S. Senate will debate and vote on a resolution of disapproval (S.J.Res.26), sponsored by Republican Senator Lisa Murkowski of Alaska, to stop the U.S. Environmental Protection Agency from ‘enacting’ controversial global warming policies through the regulatory back door.

S.J.Res.26 would overturn the EPA’s endangerment finding, a December 2009 rulemaking in which the agency concluded that greenhouse gas emissions endanger public health and welfare. The endangerment finding is both trigger and precedent for sweeping policy changes Congress never approved. America could end up with a bundle of greenhouse gas regulations more costly and intrusive than any climate bill or treaty the Senate has declined to pass or ratify, yet without the people’s representatives ever voting on it.

At a minimum, as former Virginia Gov. George Allen and I explain elsewhere, unless stopped, the EPA will be in a position to determine the stringency of fuel economy standards for the auto industry, set climate policy for the nation, and even amend the Clean Air Act — powers never delegated to the agency by Congress.

S.J.Res.26 puts a simple question squarely before the Senate: Who shall make climate policy — lawmakers who must answer to the people at the ballot box or politically unaccountable bureaucrats, trial lawyers, and activist judges appointed for life?

Precisely because S.J.Res.26 would restore constitutional discipline to climate policymaking, regulatory zealots are mounting smear campaigns against it. Climate Progress calls it “polluter crafted” (impossible, because the language and form of the resolution are fixed by the Congressional Review Act). MoveOn.Org claims the resolution will condemn many Americans to “smoke the equivalent of a pack a day just from breathing the air” (utter nonsense – just one cigarette delivers 12-27 times the daily dose of fine particulate matter that non-smokers get in cities with the most polluted air). Environmental Defense Action Fund says the resolution will give corporate polluters a “bailout” (also impossible, because S.J.Res.26 is not a tax or spending bill). 

Train Weighs In, Ignores Obvious, Knocks Down Straw Man 

A more sophisticated attack comes from Russell Train, who served as EPA Administrator under the Nixon and Ford Administrations (1973-1977). In a May 24 letter to Senate leaders, Train warns that S.J.Res.26 would “rollback Clean Air Act protections.”

Not so! Yes, the resolution would “prevent the EPA from regulating greenhouse gas emissions.” But from its inception in 1970 through the present day, EPA has not regulated greenhouse gas emissions, and its recently finalized motor vehicle emission standards do not take effect until 2011. Train confuses “rollback” with containment. The only thing S.J.Res.26 would roll back is EPA’s regulatory overreach. [Read more →]

Nobel laureate Paul Krugman wrote a lengthy article, “Building a Green Economy,” in last Sunday’s New York Times Magazine. Krugman is an able writer.  He laid out the textbook arguments on climate change from the problem-and-act perspective, and his fact-of-the-matter tone and apparent expertise no doubt misled many readers.

Although he technically said nothing demonstrably false, Krugman gives the impression that there is widespread consensus that drastic action is needed to avert catastrophic climate change. This is simply not true, and all we have to do is actually read the consensus reports to see that Krugman is misleading his readers.

Krugman’s Summary of the Climate Science

After giving a good summary of the standard issues in the economics of climate change, Krugman pauses to comment on what the natural scientists (as opposed to the economists) have to say on the subject:

This is an article on climate economics, not climate science. But before we get to the economics, it’s worth establishing three things about the state of the scientific debate.

The first is that the planet is indeed warming. [I]f you look at the evidence the right way ­— taking averages over periods long enough to smooth out the fluctuations — the upward trend is unmistakable: each successive decade since the 1970s has been warmer than the one before.

Second, climate models predicted this well in advance, even getting the magnitude of the temperature rise roughly right. While it’s relatively easy to cook up an analysis that matches known data, it is much harder to create a model that accurately forecasts the future. So the fact that climate modelers more than 20 years ago successfully predicted the subsequent global warming gives them enormous credibility. [Krugman page 3, emphasis added.]

Now Krugman’s summary above is either accurate or not, depending on how much error we will tolerate in the predictions. But fair enough, we’ll agree with Krugman that climate models 20 years ago predicted higher average global temperatures, and that’s indeed what we’ve experienced. [Read more →]

Last week in the Huffington Post, climatologist Dr. James Hansen made an impassioned plea to President Obama to ditch cap-and-trade and instead advocate a plan to tax carbon-based fuels with 100% of the revenues returned to households. This was not the first time. Hansen made the same pitch back in December 2008 in a letter to President-elect Obama. President Obama did not heed Hansen’s advice, keeping his wagon hitched to cap-and-trade, the policy darling of Big Green, U.S. CAP, and congressional leaders. But with cap-and-trade bogged down on Capitol Hill, Hansen argues, his plan gives Obama ”a second chance on the predominant moral issue of this century.”

Hansen made the case for “tax-and-dividend” in testimony before the House Ways & Means Committee on February 25, 2009. I commented on Hansen’s testimony a week later on MasterResource. Substantively, there’s nothing new in Hansen’s Huff Post column, but rhetorically there is one modification. He now calls his proposal a “fee” rather than a tax. Despite Hansen’s earlier criticism of cap-and-trade as a hidden and thus dishonest tax, and his call for a “transparent” approach to reducing greenhouse gas emissions, he now avoids the “T” word as assiduously as any shifty cap-and-trader.

Today’s column offers a running commentary on Hansen’s Huff Post piece. [Read more →]