A Free-Market Energy Blog

Costing the Green New Deal and “Deep Decarbonization”: Some Clarifications

By -- July 11, 2019

“The danger is not a physically changed climate, natural or manmade. The real threat is wealth-destroying climate policies that would leave populations vulnerable to weather and climate from any direction and for whatever reason.”

“Climate alarmists operate like the ‘Borg Collective,’ whereas organizing free-market advocates is like cat herding. We could stand for a little more organization. Perhaps we can start by sharing and fine-tuning our GND energy cost estimates. Any suggestions would be appreciated.”

Various estimates have been made of the sizeable costs of the Green New Deal (GND), a proposal to forcefully move Americans away from the most affordable, reliable energies to so-called “clean” energies.

This post reassesses these costs with a plea to better coordinate economic analyses in order to counter the climate campaigners who demote economics and realism with end-is-near, last-chance alarm.

The danger is not a physically changed climate, natural or manmade. The real threat is wealth-destroying climate policies that would leave populations vulnerable to weather and climate from any direction and for whatever reason.

Patrick Henry said: “United we stand and divided we fall.” Greater economic understanding (what the other side does not want to discuss) can unite the nation for free-market, wealth-is-health policies to tame an inherently uncertain future.

Background

Since the announcement of the GND, several studies have attempted to quantify the energy-cost of forced, near-term transformation. These include (but are not limited to) the following cost estimates for decarbonizing the electric grid:

Organization Name of Study Cost Est.
American Action
Forum (AAF)
The Green New Deal: Scope,
Scale, and Implications
$5.4 T [1]
American Enterpris(AEI) The Green New Deal: Economics
and policy analytics
$9T/year
Wood Mackenzie Deep decarbonization requires deep pockets $4.5 T

It is important to note that even the GND’s most vocal advocate, Rep. Alexandria Ocasio-Cortez (AOC), stated: Any plan to adequately address climate change would likely cost at least $10 Trillion.

The term “at least $10 Trillion” should not be ignored. It should also be noted that both the AAF and AEI studies state that their estimates are highly conservative. Decarbonizing the electric grid is only part of the GND’s overall energy plan. The GND also intends to decarbonize (through electrification) transportation and buildings (among other objectives for market intervention within American energy consumption).

What should and should not be accounted for when estimating GND energy costs? What one chooses to account for (or does not choose) and the costs thereof can lead to highly divergent estimates as the above table illustrates. Accordingly, to get a quick “reality check” on these cost estimates, we have extrapolated additional studies. These include:

  • Black & Veatch study for SoCalGas: = $3 Trillion just for CA; = $25 Trillion extrapolated to U.S. population (but not adjusted for extremely different weather and appliance choice difference)
  • ICF study for AGA: = $0.6 to $1.2 Trillion;= $14.8 to $30 Trillion extrapolated for remaining 96% of U.S per EPA’s “Inventory of U.S. Greenhouse Gas Emissions and Sinks

Even $30 trillion might not be a worst-case scenario. This is because cold weather emergencies, such as “polar vortexes” and/or “bomb cyclones,” represent massive peak loads that are not suited to being supplied by renewables plus batteries.

Replacing such heating peak loads solely with electricity (especially renewable electricity and batteries) would drive costs considerably higher and subject consumers to grave risks; up to and including death due to exposure.

Why? Wind generators ice up and/or are routinely shut down (per manufacturer specifications) when it gets polar vortex-level cold. See Wind turbine shutdowns during polar vortex stoke Midwest debate. Likewise, solar photovoltaics don’t perform when covered in snow.

As for batteries, whatever storage capacity batteries have, it’s measured in hours; not the days vortex events last. Also, batteries’ storage capacity decreases rapidly as a function of decreasing ambient temperature. Even trying to charge batteries (especially lithium) is also highly problematic when it’s freezing cold; to the point that they can be permanently damaged by attempts to do so. The operator instructions on your cordless (lithium battery-powered) drill says so.

In addition to the above studies, there have been some other articles and events that deserve recognition. These include the Congressional Western Caucus press conference regarding the GND. It included several cost estimates; some of which are referenced in a PDF titled Green New Deals Costs. The following is an excerpt:

According to a McKinsey study, achieving net-zero greenhouse gas emissions would cost $11 trillion in the first ten years alone.

Further, in conjunction with their press conference, the Caucus provided the following testimony (downloads via above press conference link):

  • Michael Zehr, Federal Policy Advisor, Consumer Energy Alliance
  • Myron Ebell, Director of Global Warming and International Environmental Policy, Competitive Enterprise Institute
  • Katie Tubb, Policy Analyst for energy and environmental issues, Heritage Foundation
  • Rick Manning, President, Americans for Limited Government
  • Mandy Gunasekara, Founder & President, Energy 45 Fund
  • Marc Morano, Director of Communication, Committee for a Constructive Tomorrow (CFACT)
  • Dr. David Legates, Professor of Climatology, University of Delaware
  • Thomas Pyle, President, American Energy Alliance
  • Bill Imbergamo, Federal Forest Resource Coalition

The “testimony” provided by Michael Zehr was unique as it attempted to quantify (with publicly available information) what it might cost normal residences to convert their gas appliances to (ostensibly clean) electric; a concern generally not addressed by most of the other references cited above. However, it did not consider the added cost of retrofitting electric panels and wiring to accommodate those appliances.

But a  recent study funded by the California Building Industry Association (CBIA), “Cost of Residential Electrification” did as shown below:

Many homes are not wired to handle the electric load from having all-electric stoves, space heaters, and water heaters in addition to their usual electric appliances. Homeowners would need to pay roughly $4,600 to upgrade their wiring and electric panel [in addition to the cost of the appliances].

We also reviewed the Manhattan Institute’s Mark Mills article titled The “New Energy Economy”: An Exercise in Magical Thinking. While it did not attempt to quantify the GND’s energy transformation costs, it did provide a thorough discussion of why we shouldn’t expect renewables and batteries to become a repeat of Redi Kilowatt and “too cheap to meter.”

On a closely related subject, the University of Chicago’s Energy Policy Institute (EPIC) recently published a study titled Do Renewable Portfolio Standards Deliver? In short:

These cost estimates significantly exceed the marginal operational costs of renewables and likely reflect costs that renewables impose on the generation system, including those associated with their intermittency, higher transmission costs, and any stranded asset costs assigned to ratepayers. The estimated reduction in carbon emissions is imprecise, but, together with the price results, indicates that the cost per metric ton of CO2 abated exceeds $130 in all specifications and ranges up to $460, making it at least several times larger than conventional estimates of the social cost of carbon

Deep decarbonization through electrification costs are huge; as are resultant economic damages. However, despite these costs (roughly in the range of the current National Debt or GDP), the goal posts are moving.  Now apparently, a 2 deg. C limit to global warming is no longer adequate. We must insure a global temperature increase of (no more than) 1.5 deg. C and simultaneously draw-down “excess” CO2 already in the atmosphere through “Negative Emissions Technologies” (NETs).

NET’s include various strategies ranging from relatively simple/inexpensive strategies such as natural photosynthetic soil regeneration techniques to relatively exotic/expensive “direct air capture” (DAC.) These can only make sense if subsidized by “carbon taxes” in the range of $100/ton. The following is a highly interesting excerpt from the above referenced NET study by the National Academies of Science (NAS):

The committee recognizes that there is a possibility that large negative emissions in the future could result in a moral hazard, by reducing humanity’s will to cut emissions in the near term.

In other words, it seems the NAS study is implying the more affordable the solution may be, the more of a moral hazard there is that people will not want to go along with the high cost “new deal to abandon fossil fuels. This flies in the face of claims that it’s about the climate. If the climate can be inexpensively ‘fixed’ by NET, why even consider the much more expensive and disruptive other options?

To me at least, it seems the real “moral hazard” rests with those who put groveling for research grants and subsidies ahead of people and society.

Now for a “dirty secret.” Not all strategies for deep decarbonization of the atmosphere are entirely misguided. For example, the potential exists for improving soil quality by sequestering atmospheric carbon, while simultaneously improving crop yield (see To Save the Earth, Get Down in the Dirt.)

Also recommend is a recent House Agriculture Committee hearing titled: Managing for Soil Health: Securing the Conservation and Economic Benefits of Healthy Soils. If you watch the video archive from this hearing, you will notice something amazingly different about it compared to typical Congressional “infomercials.” None of the witnesses were groveling for subsidies. In fact, they were advocating for free market solutions; along with improved and expanding training.  To that I add one last reference; Hosea 4:6: My people are destroyed from lack of knowledge.

But economy and win-win are essential for all carbon capture and storage (CCS) options; not just agricultural. Government subsidies will only encourage rent-seeking by corporations and dead ends. Experiments should be undertaken with private-sector funding, not taxpayer dollars at a time of record deficits.

Conclusion

Within the “olden days” of regulated energy utilities, the economic analyses, ranking and selection process used to be called “least-cost planning” (LCP). However, LCP soon gave way to integrated resource planning (IRP); and that was quickly eclipsed by IRP as “institutionalized revenue plundering” to increase rate base and, most recently, further degraded by “beneficial electrification.”

Climate alarmists operate like the “Borg Collective” whereas organizing free-market advocates is like cat herding. We could stand for a little more organization. Perhaps we can start by sharing and fine-tuning our GND energy cost estimates. Any suggestions would be appreciated.

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[1] + $1.3 Trillion to $2.7 Trillion for “Net Zero Emissions Transportation System”

Mark Krebs, an engineer by training, has been involved with energy efficiency design and program evaluation for more than thirty years. He has served as an expert witness in dozens of energy-efficiency filings, which he summarized in a Public Utilities Fortnightly article, “It’s a War Out There: A Gas Man Questions Electric Efficiency” (December 1996). For more about Mark, please see his “category.”

8 Comments


  1. Ed Reid  

    All of the estimates of the costs of implementing the GND ignore the ~#60 trillion deadweight loss which would result from leaving fossil fuels in the ground and abandoning energy production and distribution assets before the end of their useful lives.

    https://www.therightinsight.org/Green-New-Deal-Deadweight-Loss

    Reply

  2. Mark Krebs  

    Thanks for your contribution to this growing body of work. It goes to underscore the need for additional collaboration.

    I sincerely apologize for not including a review of your work in this article. I simply forgot. Too many neutrino head shots or something I guess.

    Anyway, I won’t make that same mistake twice. Where I’d like to go with this is to organize some sort of workshop (perhaps via webinar) to get deeper into the weeds so that together we can share data-backed defenses against a highly organized and funded opposition. Would you be willing to participate?

    Reply

  3. Ron Clutz  

    Thanks Mark for this analysis. As Ed indicates, in addition to the direct costs of policies to replace fossil fuels (which G20 nations rely on for almost 90% of their energy), there is the lost revenue from petroleum taxation. For example:

    “Indeed, since 1981, when the failed wind­fall profits tax was first enacted, federal, state, and local governments in the U.S. have col­lected more in taxes from the oil industry than the industry has earned in actual profits for its shareholders. For example, after adjusting for inflation, the combined net earnings (net of taxes and expenses) for the largest petroleum companies between 1981 and 2008 totaled $1.4 trillion. By contrast, the total amount of taxes collected by U.S. governments from the oil companies topped $1.95 trillion, roughly 40 percent more than the industry’s combined profits. Tax collections exceeded company prof­its in 23 of the 27 years surveyed.” https://taxfoundation.org/oil-industry-taxes-cash-cow-government/

    Then there are the taxes collected from the sales of petroleum products. Gasoline for example is taxed to consumers at about $0.52 per gallon (almost the lowest rate in OECD). So with 142 B gallons sold in US annually, that is another US$ 75B, just from one FF product. Ending FF usage also means foregoing a great deal of public wealth.

    BTW your Patrick Henry quote reminds of what Benjamin Franklin said:
    “We must, indeed, all hang together or, most assuredly, we shall all hang separately.”
    Could serve as a slogan for cities and states signing up for Zero Carbon targets.

    Reply

  4. Mark Krebs  

    And thanks for additional data on lost tax revenue Ron. Documenting every Trillion helps!

    Reply

  5. Weekly Abstract of Local weather and Vitality # 367 – Next Gadget  

    […] Costing the Green New Deal and “Deep Decarbonization”: Some Clarifications […]

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