A Free-Market Energy Blog


Posts from February 2013

McClendon’s Price Lesson at Chesapeake (“Depletable” resources expand)

By <a class="post-author" href="/about#m_lynch">Michael Lynch</a> -- February 28, 2013

“[Free energy] markets tend not only to clear, but to clear faster and at lower prices than anticipated.”

The resignation of Aubrey McClendon as CEO of Chesapeake Energy provides a good case to study in corporate strategic planning. Ignoring his financial side deals, for which he has received a good share of criticism, the wisdom of his primary strategy, the aggressive pursuit of shale resources, is an open question to many. Although he has been hailed as a pioneer and risk taker, clearly those risks have gone bad and should be examined.

Higher Prices: A Bad Bet

The core failing was his decision to bet the firm (essentially) on high natural gas prices. From 1997 to 2005, wellhead prices had increased from $3/Mcf to $8/Mcf (2010$), the highest level historically. This, combined with a neo-Malthusian mentality, convinced him and many others that prices would not be mean-reverting, but remain at levels from two to three times the historical average.

Dominion Virginia’s “Green” Solar Program: Bad Economics for a Misplaced Cause

By Charles Battig -- February 27, 2013

“[T]here is no companion prerequisite that such renewable programs be cost-effective or deliver reliable power…. This program appears designed for the privileged few to enjoy a subsidized electric energy existence, provides those ‘green bragging rights’ mentioned by a solar installer in this courtroom last September, but little else.”

Last May, Dominion Virginia Power petitioned the Virginia State Corporation Commission to introduce a voluntary ratepayer program to support up to 3 MW from distributed solar installations. Dominion seeks to offer the public an alternative to an existing, net-metering, residential solar panel program. This voluntary test Solar Panel Program would be guaranteed for five years at a “buy all/sell all” $0.15/kWh. It would be limited to an initial maximum scale of 0.2 percent of 2010 peak load.

Solar is an intermittent power source that would require storage to be on a stand-alone basis.

Maryland Offshore Wind: O’Malley’s Folly

By <a class="post-author" href="/about#llinowes">Lisa Linowes</a> -- February 26, 2013

“The Governor … earned the nod of those representing poorer districts by packing the bill with millions of dollars in grants to boost small and minority-owned businesses that might involve themselves in the offshore sector…. [P]rice caps on electricity bills [hides] the billions of dollars of extra cost that $190/MWh energy adds up to.”

Maryland governor Martin O’Malley is convinced he’s found the right formula for ensuring that his state becomes the first to site a wind facility off its coastline. Last week Maryland’s House quietly approved HB 226. The Senate version (SB 275), although still in Committee, is also expected to pass despite much controversy over cost and risks to captive ratepayers–and back-door cronyism for developers and other special interests.

But don’t be fooled by the political victory. Despite the Governor’s grand claim that his bill will deliver offshore wind at an affordable price, the numbers tell a different story.

The Light Brigade: Confronting the Anti-Energy, Pro-Blackout Rally in DC

By <a class="post-author" href="/about#tfisher">Travis Fisher</a> -- February 25, 2013

Beyond Locavorism: Food Diversity for Food Security (carbon-fuel transport remains essential)

By Pierre Desrochers and Hiroko Shimizu -- February 22, 2013

Germany’s Unaffordable Wind Power ($0.07/kWh surcharge for $0.20/kWh power, anyone?)

By Donald Hertzmark -- February 21, 2013

Power Density Separates the Wheat from the Chaff

By Kent Hawkins -- February 20, 2013

BC Hydro’s Billion Dollar Climate Bill

By Mark Walker -- February 19, 2013

AWED Energy & Environmental Newsletter: 2/18/13

By <a class="post-author" href="/about#john-droz">John Droz, Jr.</a> -- February 18, 2013

Free Market Environmentalism: Julian L. Simon Memorial Award Remarks

By Robert J. Smith -- February 15, 2013