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Thorner: Common Sense Prevails in Climate Change Presentation

Nancy J. Thorner


Saturday, October 17, 2015

Common Sense Prevails in Climate Change Presentation

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30 Years of the AWEA

“The private sector can be expected to develop improved solar and wind technologies which will begin to become competitive and self-supporting on a national level by the end of the decade if assisted by tax credits and augmented by federally sponsored R&D.”

– American Wind Energy Association, et al. (1983). Quoted in Renewable Energy Industry, Joint Hearing before the Subcommittees of the Committee on Energy and Commerce et al., House of Representatives, 98th Cong., 1st sess. (Washington, D.C.: Government Printing Office, 1983), p. 52.

https://www.masterresource.org/production-tax-credit-ptc/awea-vs-ptc/

Indeed, what more need be said?

More Taxpayer Billions to be Frittered Away in California???

Ivanpah Solar Facility

Ivanpah Solar Facility

World’s largest solar plant applying for federal grant to pay off federal loan

By William La JeunesseFoxNews.com

And referencing my prior article regarding solar projects in CA:

https://jerrygraf.wordpress.com/2013/12/15/what-happened-to-5-36-giga-dollars-in-ca/

“As NRG’s chief executive, David W. Crane, put it to Wall Street analysts early this year, the government’s largess was a once-in-a-generation opportunity, and ‘we intend to do as much of this business as we can get our hands on.‘ NRG, along with partners, ultimately secured $5.2 billion in federal loan guarantees plus hundreds of millions in other subsidies for four large solar projects” Eric Lipton & Clifford Krauss – NY Times

Link

Eight Energy Myths Explained

Gail Tverberg

Gail Tverberg

“Gail Tverberg is a writer and speaker about energy issues. She is especially known for her work with financial issues associated with peak oil. Prior to getting involved with energy issues, Ms. Tverberg worked as an actuarial consultant. This work involved performing insurance-related analyses and forecasts. Her personal blog is ourfiniteworld.com. She is also an editor of The Oil Drum.”

 

Eight Energy Myths Explained

 

Irrational Fears: We should think sensibly about nuclear energy’s risks

Nathan Myhrvold presents an excellent position on Nuclear Energy in the MIT Review.

http://www.technologyreview.com/view/526426/irrational-fears/

“There is one source of carbon-­emission-free energy that is cheap, reliable, and proven to work on a large scale: nuclear power (see “Nuclear Options”). It often gets a bad rap because of perceived safety problems. In reality, it has become a sort of litmus test for societal rationality. People have a hard time estimating some kinds of risks. For example, they fret about the safety of flying but show little concern for driving, despite statistics showing that cars kill vastly more people than planes do.”

graphitix860_6

I don’t necessarily agree with Mr. Myhrvold’s tacit acceptance of the evils of CO2 and anthropogenic climate change theory; but regardless, I do agree with his assessment of the need to develop nuclear energy as part of our future energy strategy.

Energy density is the key.  Nuclear sources, combined with natural gas, can provide energy with the reliability, dipatchability, and density required.  Solar and Wind simply cannot.

LEEDCo Lake Erie Wind Project: Joint Letter of Protest

“We ask that you deny any permit to LEEDCo for siting of 6-9 turbines in Lake Erie…. Sadly, it is extremely easy to refute and challenge the environmental guidance this project is putting before you. It is disappointing that this project has progressed even thus far.”

See article and joint letter at:

http://www.masterresource.org/2014/04/leedco-lake-erie-protest-letter/

See also:

https://jerrygraf.wordpress.com/2013/09/29/analysis-of-leedco-icebreaker-project-do-wind-watts-really-work/

 

What happened to 5.36 giga-dollars in CA?

“The government support — which includes loan guarantees, cash grants and contracts that require electric customers to pay higher rates — largely eliminated the risk to the private investors and almost guaranteed them large profits for years to come. The beneficiaries include financial firms like Goldman Sachs and Morgan Stanley, conglomerates like General Electric, utilities like Exelon and NRG — even Google.”    Eric Lipton & Clifford Krauss –  NY Times

Recently an article by Pete Danko entitled “Solar Power Hitting New Records in California” appeared on Earthechling.com.  The article indicates that installation of solar energy generation facilities is growing dramatically in California, and specifically touts three major large scale solar PV installations that are now in-progress or on-line recently;  the California Valley Solar Ranch, Antelope Valley Solar 1, and the Topaz Solar Farm, representing a combined nameplate capacity of over 1000 mega-watts (1 giga-watt).

Because of their size and cost, it is worthwhile to take a look at these three facilities in greater detail:

Project

Nameplate capacity (MW)

Projected annual output (MWh)

CF (%)

Capital Cost

$/watt

California Valley   Solar Ranch

250

482,000

22.0%

$1,600,000,000

$6.40

Antelope Valley Solar   1

250

482,000

22.0%

$1,360,000,000

$5.44

Topaz Solar Farm

550

1,096,000

22.7%

$2,400,000,000

$4.36

Combined Totals

1050

2,060,000

22.4%

$5,360,000,000

$5.10

Analysis of Economics and Performance

A simplistic but reasonable financial analysis can be conducted using the following assumptions:

  • The average wholesale price of electricity in southern California in 2013 is about $36 per MWh.
  • Price of electricity will rise at a rate of 2.5% per year.
  • PV cell output will degrade at a rate of about 0.5 % per year.
  • O&M costs for the systems will be about 0.5% of the original capital cost per year.

Please refer to this link to the CA Solar Projects Analysis; and note that, in an effort to simplify, the analysis ignores significant issues such as:

  • The cost to operate and maintain a traditional fueled back-up system of equal or greater capacity, which is necessary to meet demand at night and when the sun is not shining adequately.
  • The extra cost of integrating a diffuse and inconsistent supply onto the grid.
  • The cost of service on any debt incurred for the capital investment or O&M costs.
  • The cost of taxes, lease payments, depreciation, and other costs not noted.

The bottom line demonstrates, even with all these other costs ignored, that only 40% of the original $5.36 billion combined capital investment can be returned over 30 years by sale of electricity at market rates.

ROI Chart

To be clear, the point of the simple analysis is to demonstrate that the owners and operators of the solar facilities cannot expect the sale of electricity at market rates to return their investment and cover their O&M costs, not even remotely.  So, if the money is not coming from the sale of electricity at market rates, then where is it coming from?? 

The answer to this question is that the money to prop up these non-viable ventures is coming from the taxpayers and from the consumers of electricity.  The taxpayers are on the hook for low interest guaranteed loans, and are footing the bill for production tax credits and/or stimulus grants.  The owners and operators of the solar facilities are also the recipients of special Power Purchase Agreements (PPAs) that guarantee the sale of their electricity at greater than market rates; the costs of which are, of course, absorbed by the consumers.

“As NRG’s chief executive, David W. Crane, put it to Wall Street analysts early this year, the government’s largess was a once-in-a-generation opportunity, and ‘we intend to do as much of this business as we can get our hands on.’  NRG, along with partners, ultimately secured $5.2 billion in federal loan guarantees plus hundreds of millions in other subsidies for four large solar projects”    Eric Lipton & Clifford Krauss –  NY Times

Cost (Risk) vs. Benefit

I have often heard the argument that life is not all about economics, and not everything can be reduced to a cost analysis; but I contend that in a very basic sense this is not true, and that life IS all about cost and risk vs. benefit analysis.  Money just happens to be the predominant way in which we measure cost and risk in modern society.

With regard to energy strategy the same principle applies; everything is a cost vs. benefit analysis.  It may be popular to think that “it does not matter what it costs” (I hear this frequently), but this is simply not true.  Society has limited resources, and it does matter.  If your community invests in solar panels they are making a cost vs. benefit judgment.  If they do this instead of buying a fire truck, and you are the fire victim awaiting assistance, you might have a different perspective on the wisdom of the judgment.  If our government promotes and subsidizes solar (or wind) energy generation we are making a cost vs. benefit judgment.  If we drive up the cost and reduce the availability of electricity so that people suffer, we may have made an un-wise judgment.

The negative “externalities” associated with fossil fuels and CO2 emissions are often cited as reasons (excuses) to proceed with government subsidized solar energy projects, regardless of the reality of performance and cost. However, when we recognize the negative “externalities” associated with reliable, abundant and relatively low cost electricity, we must also recognize the huge positive “externalities”.  The overwhelming benefits gained by humanity for the past century from advances in food production, health and longevity, industrial production of necessities (and luxuries), transportation, scientific knowledge, communication, etc. have been driven in no small part by abundant, reliable, and relatively low cost electricity.

In a recent article on MasterResource, David Howden discusses the concept of subjective externalities, and writes the following with respect to CO2 emissions in particular:

“………..Maybe instead of being a negative externality there is actually a positive aspect to these emissions, and as per standard microeconomic theory those who benefit should pay those who create the positive externality. Everyone on the planet eats food, so perhaps a tax should be imposed on every global citizen to remunerate the creators of carbon dioxide. 

I doubt this suggestion will find much support; I don’t even believe in it! But the reason that I don’t believe in it has nothing to do with my feelings over the goodness or badness of the externalities in question. Instead it stems from a recognition that we just don’t know what the relevant externalities are.” 

David Howden – The Externality Debate: Remember Subjectivity in Economic Science

 I understand the need to protect the future of our environment for my children and grandchildren, but I will not ignore reality and stand-by while our economy is sacrificed on the altar of climate change theology; because this will do no good for my children and grandchildren either.  There is a balance that needs to be struck. There is no doubt we in the USA need to alter our energy strategy. The question of how we will change it, however, must be determined by scientific evaluation of fact and logical cost vs benefit analysis of performance and economics.