A Free-Market Energy Blog

Peltier: 'Chart a New Course' (POWER magazine editor rejects windgas for gas)

By Robert Bradley Jr. -- October 5, 2011

“The cost for wind’s little or no environmental benefit is high.”

– Robert Peltier, “Chart a New Course.” POWER, September 2011, p. 6.

POWER magazine’s editor-in-chief, Dr. Robert Peltier, is in the energy reality business. An honest broker, the professional engineer and former Stanford University professor assesses rival technologies as he sees them. And so at times, he is at odds with groups such as the American Wind Energy Association that peddle uneconomic technologies.

Peltier’s lead editorial in the September 2011 issue of POWER magazine is notwworthy for its arguments and for its import in the history of energy thought.

Future scholars will look back on our present debate and assess who had the best arguments, and who was willing to take risks to advance them–and who were the for-hire millers using half-truths and PR hits to evade the implications of consumer choice, technological reality, and sound science (and yes, climate science is hardly settled in favor of alarmism but just the opposite).

Peltier’s article, excerpted below, is italicized in places for emphasis by the present writer. Links have been added as well.

                                      “Chart a New Course”

…. An updated EIA report released in July determined that federal government subsidies have risen substantially during the past three years. In fact, overall renewable energy subsidies have almost tripled, increasing from $5.1 billion to $14.7 billion. In my opinion, we aren’t getting value for the money spent.

A Lucrative Business

My informal survey of the web sites of several wind turbine manufacturers found that the most often cited advantages of wind power are to reduce foreign oil imports (factually incorrect—unless wind power is used to power plug-in electric vehicles—as insignificant oil is used to produce electricity), produce millions of new, high-paying green jobs (we’re still waiting), and reduce carbon emissions.

Believing in these goals, the federal government (and many states, for that matter) developed a system of incentives for developers of renewable projects. Federal incentives include the production tax credit (PTC), an investment tax credit, or a cash-back or grant option worth up to 30% of the project value. The PTC is slated to expire at the end of 2012 for most renewable technologies.

However, the price tag for those incentives is quickly rising. The EIA, in a report covering FY2010, found that the magnitude of those subsidies continues to grow each year, as illustrated in the table. In fact, the subsidies for wind were up over 140% (187% in absolute dollars spent) over the past three years. [Ed. note: also see the analysis of the EIA study from the Institute for Energy Research.]

Federal energy subsidies/incentives re electricity generation (U.S. Energy Information Administration)

Failing the Carbon-Reduction Test

Wind power’s performance in reducing electricity system carbon emissions also gets low marks. In many regions, wind turbine owners have bid into the electricity market at below cost or even negative prices, often up to the value of the PTC. That forces coal plants to cycle during off-peak hours. In simple terms, the less-than-full-load operation of these coal plants results in less-efficient operation, therefore producing more carbon emissions per MWh produced.

The practical effect is little reduction in systemwide carbon emissions with the introduction of wind energy. The National Academy of Science (NAS), in a report published in early 2007, agrees. The authors of the “Environmental Effects of Wind Energy Projects,” concluded that “Wind power will thus not reduce carbon emissions; it will only slow the increase by a small amount.” Several subsequent independent studies have confirmed the NAS assessment.

Gas Game Changer

The magnitude of proven and potential gas reserves in the U.S. is enormous…. Proven shale gas reserves in the U.S. can keep the U.S. fueled for a century at today’s level of consumption. In addition, early assessment of deeper shale deposits, located beneath those now being tapped a mile or more below the surface, promise to be of even great magnitude. In other words, the U.S. is awash in natural gas for the foreseeable future. That “new normal” must be taken into consideration when designing or modifying incentive programs, such as those now in effect.

If the net effect of providing enormous incentives to build renewable energy plants is to reduce carbon emissions, then that advantage will also disappear in a future where low-priced natural gas pushes coal plants down the dispatch order, as has recently occurred in many regions. Given that natural gas produces less than half the carbon emissions of coal, the small reduction in carbon emissions previously produced by wind offsetting coal quickly evaporate.

The cost for wind’s little or no environmental benefit is high. The EIA’s latest estimates (Annual Energy Outlook 2011, April 2011) of the annualized cost of energy— inclusive of federal subsidies (2009$)—show how unaffordable renewable power is: solar thermal, $312/MWh; new nuclear, $114/MWh; wind, $96/MWh; and natural gas plants, $62/MWh. Given that the EIA report on renewable subsidies comes after the EIA’s AEO 2011 and that wind subsidies have risen substantially (more than $30/MWh) since these EIA estimates were released, it’s reasonable to estimate that the real market price of wind power is about $130/MWh without subsidies.

The renewable energy development path we’re now following is not sustainable. It’s a mistake to continue to invest in technologies that produce expensive power with no tangible benefit to the economy or the environment. With the unimaginable quantities of natural gas now available, it’s time to cut our losses and chart a new course, without subsidies for any electricity source.


  1. David Appell  

    (and yes, climate science is hardly settled in favor of alarmism but just the opposite)

    What does “the opposite” mean here–that it’s settled that there is no cause for alarm?

    If so, I can’t possibly fathom how you can claim that. I hear that said a lot by people with vested interests (and their contrariness seems to be getting more stark and vehement as the evidence becomes more apparent), but when I go to climate science conferences and read climate science journals I see very, very few presentations and papers that disagree with an anthropogenic influence on climate. In fact, this influence is now taken as proven and is the new foundation on which the discussions now begin. The extent of the influence is still somewhat uncertain (and, by the nature of the system may always be so), but some work suggests the consequences could be very significant — indeed, alarming — and uncertainty cuts both ways.

    Your mention of “half-truths and PR hits” is particularly rich.


  2. Jon Boone  

    Of course, Bob Peltier is right. Perhaps even more than he states, however. The EIA’s annual cost of energy in 2011, pegging wind at $96 per MWh–and more likely at about about $130 per MWh, does not account for wind’s utter lack of effective capacity. Consequently, the $114 per MWh for nuclear baseload (with an annual capacity factor of 92=%), and the $62 per MWh for natural gas as a baseload/load following provider, are bargains, since they generate high levels of effective capacity. Paying anything for zero capacity wind, with its flopping fish-off-the-hook performance, seems quite nuts.

    However, Dr. Peltier does not address what will likely be the big wind/gas fandango this fall, as AWEA and ANGA promote the wind/gas tango, carrying the banner that it is natural gas that can enable renewables like wind, thereby saving the world from coal. But screwing rate and taxpayers big time. What a crock…!


  3. David Appell  

    Actually Peltier is wrong, and by more than most realize. Generating power with fossil fuels creates more damage than value-added. That’s the conclusion, at least, of Yale economist William Nordhaus in a new paper:

    Muller, Nicholas Z., Robert Mendelsohn, and William Nordhaus. 2011. “Environmental Accounting for Pollution in the United States Economy.” American Economic Review, 101(5): 1649–75.

    Coal-based power is worst of all. In addition, the National Academy of Sciences estimates that fossil fuel use causes damages of at least $120 B/yr to health and the environment:

    “Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use”
    National Research Council, 2010

    Of course, no one on forums like this wants to mention external costs, because including them makes it clear that we are all subsidizing fossil fuels by a huge amount through worse health and higher medical costs.


  4. Jon Boone  

    Nonsense. Peltier’s thesis is confirmed by the way all mature societies have consciously chosen to harness fossil fuels in pursuit of modernity, including China, India, Indonesia, along with the Western World. The US increased its coal production last year. All have gladly traded off problems posed by fossil fuels in exchange for the affordable, effective power they provide. Neither the environmental nor the health issues flowing from fossil fuel use are particularly hidden–and many of them have been successfully addressed through technological mitigation–scrubbers on coal plants, for example, though there is still a residue of undesirable residue, such as mercury and SO2. The risks of these consequences, however, pale beside the benefits of fossil fuel use. Just having reliable pervasive electricity would, by itself, vastly improve quantity and quality of life in many areas around the world.

    The academic doggerel emanating from Muller, et al, with its cherry picked risks and its soft pedaling of the full range of benefits produced, must seem naively amusing to the leaders of the real world as they continue to increase fossil fuel activity.

    This comment is not an apology for fossil fuel use but rather one that comports with reality–not wishful thinking.


  5. rbradley  

    Nordhaus had to make the perfect knowledge assumption–what he called the ‘environmental pope’ assumption of known problem, known solution, and perfect implementation of the ‘solution’ (no government failure)–to justify policy activism in his earlier writings.

    I’ll have to look a this, but I fear a garbage in-garbage out problem.

    And with total emissions down of known pollutants (versus CO2), aren’t negative externalities being internalized?


  6. bpm  

    I am glad to Mr. Boone comment on the benefits of fossil fuel use. We so often see and hear shouts of the “hidden cost”, but none of the benifits. These comments come from folks that have no idea of what its like to have to work hard from daylight till dawn to simply provide food. It’s as though they have a wistful vision of Utopia with no environmental effects what so ever. Yet, most of the really extreme damage to environment in this country was done before we used fossil fuels. (Have you seen a huge herd of buffalo lately?)

    One other quick note, how is it people seem to worship at the alter of the windmill these days? Those things ruin the horizon on the prairie. If you’re going to build them ugly things, put them in the cities on top of building and a school yards and such. Get ’em off my prairie…


  7. Michael Goggin, AWEA  

    It must burn Robert Peltier to see his own magazine reporting the facts, which is a marked departure from what Power Magazine did during his tenure there:

    Just six months ago, Power Magazine, under Peltier’s direction, covered the exact same report in one of the most blatant attempts to hide the truth ever witnessed:


    • rbradley  

      Robert Peltier, a PHD engineer and former university teacher, has a skill set to not take studies at face value but ask the hard questions.

      NREL is wholly dependent on government and energy interventionism for its existence. They are intellectual bodyguards for wind power and mandated energy efficiency, in particular.

      At the end of the POWER review that you laud as a correction, the writer wrote:

      “The authors conceded during a press call on the report that they did not have access to data on transmission or power purchase agreements that could be implicated by the potential changes. Thus, the study might have modeled more flexibility into the system than it would actually have.

      The study also focused only on operational issues and did not consider other factors such as power market impacts, capital costs, or transmission costs. Future work at NREL may examine these issues.”

      This study needs more critical review, a good thing since the burden of proof should be on those who advocate coercion over voluntary transactions between consenting adults.


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