by jboullion | Jul 27, 2007 | Uncategorized
Petroleum and Natural Gas Watch
by Michael Vickerman, RENEW Wisconsin
July 27, 2007, Vol. 6, Number 9
Of all the issue areas that Congress dives into from time to time, none reveals the inability of our legislative branch to fashion an internally consistent national policy quite like energy. The usual items in an energy bill–tax credit extensions, fuel subsidies, fresh regulatory requirements (and loopholes), new rules on offshore drilling, etc.—are designed to reward specific industries and influential constituencies. This year’s energy bill promises to follow that timeworn path left by Congresses of yesteryear.
But an energy bill has to be more than the sum of its subsidies to constitute effective policy. This is especially true as we enter a time of growing resource and environmental limits that threaten to bite us in the collective behind if we don’t curb our profligate consumption of energy.
Now is not the time to continue subsidizing every form of energy that can be produced in the United States, as the current Congress seems intent on doing. In previous bills, Congress has taken great pains to make sure that every energy constituency—coal, oil, nuclear or renewables–gets its fair share of the federal pie, regardless of need or environmental impact. This is the cheap energy paradigm at work—promoting economic growth by artificially lowering energy prices.
But while this paradigm may have been defensible before U.S. oil output reached its maximum in 1970, it has no place in today’s energy-constrained world. Artificially lowering the cost of all energy sources will not only encourage waste and overconsumption, it will hasten the arrival of that traumatic day when the flow of cheap oil and natural gas cannot meet the demands of a hypermobile society.
It’s no secret that Congress lacks the stomach for offending powerful energy lobbies like Big Coal. But it’s simply not possible to institute policy changes, especially those intended to reduce carbon dioxide discharges into the atmosphere, without picking a fight with the coal industry, the electric utilities, and what’s left of the U.S. automotive industry. Therefore, if Big Coal pronounces itself satisfied with the energy bill’s contents when it is passed, you can be certain that Congress declined to incorporate any provisions that would cause coal’s share of the energy pie to shrink, such as a carbon tax or renewable feed-in tariffs.
What makes the United States singularly incapable of producing a coherent energy policy aimed at cutting energy consumption and using low-carbon alternatives to fossil fuels? I believe there are three factors explaining this lamentable state of affairs. The first is that your average American citizen has the energy IQ of beach sand, and, in this regard, your average Member of Congress is the mirror image of his or her constituents. For proof, I would direct your attention to Sen. Chuck Schumer of New York, who regularly appears on news programs to suggest that gasoline is overpriced at $3.00 per gallon and that motorists are being fleeced by dastardly oil companies.
Actually, at that price gasoline is a steal, and it would be so even at $4.00—the amount Canadians pay–or $5.00. Packing 125,000 Btu’s of energy, a gallon of gas will power the average car 25 miles, yet it costs less on a volumetric basis than milk, apple juice, Evian, coffee from Starbucks, Mountain Dew, Listerine, and Red Bull. Try getting that performance with a gallon of Gatorade in your tank. It will set you back $10 and you still wouldn’t be able to back your car out of the garage.
It should be noted that retail gasoline prices in Germany are the equivalent of $7.00 per gallon, yet its economy remains healthy. Why is that? Because Germany, unlike the underachieving U.S., has a national energy policy designed to transition the nation smoothly into a post-fossil fuel energy environment. By taxing fossil energy and providing long-term price support for wind and solar electricity production, the Germans are plowing today’s wealth into building up a sustainable energy system that can withstand the future economic dislocations resulting from Peak Oil and climate change.
Indeed, no other country has made as much progress as Germany in building up a renewable energy infrastructure for delivering low-carbon electricity to homes, businesses, and rail networks. But other countries that lack domestic supplies of fossil energy, like Spain, the Netherlands and Denmark, are also moving aggressively to harness their renewable resource base. They too are light years ahead of the United States in this regard.
A second problem confronting policymakers is the unequal distribution of energy resources across this vast country of ours. A handful of coal-producing states—West Virginia and Wyoming come to mind–are net fossil energy exporters, and will view with hostility any policy proposal that will place limits on energy extraction within their borders. Their power is magnified by the markets they serve, which include large swaths of the Midwest and South.
On the other side of the coin are the West Coast states, Florida and New England, which are populous regions that which have no domestic coal interests to protect. Nor does the automotive industry have a big presence in these states. Not having to appease Big Coal or Big Auto enables state governments in these regions to plot a more aggressive course toward achieving emissions reductions and fuel diversity goals, as is being done in California and Florida.
One would expect members of Congress to promote the principal energy industries in their region. This predisposes them to enter into strategic alliances with other members representing different energy interests, usually of the “I’ll watch your back if you’ll watch mine” variety. Though these alliances are necessary for lubricating the deal-cutting and building support for the entire package, often it comes at the expense of public policy objectives.
Indeed, Congress is institutionally incapable to pass a comprehensive energy bill that attempts to diversify the nation’s energy resource base and scale back its carbon footprint unless it contains elements that work in the opposite direction (e.g., gasifying coal and expanding offshore drilling).
Further complicating matters is the very nature of the U.S. Senate itself, a body organized to magnify the power of individual states to block “national interest” initiatives from changing the status quo. Each state is equally represented in the Senate, no matter how populous. And Senate tradition grants committee chairpersons enormous deference to bottle up or water down legislation that might impose unwanted changes on the states they represent.
Another Senate tradition, the right of unlimited debate, is enforced by a rule that expressly allows a minority of senators to thwart the will of the majority. To shut off debate on a measure, especially one in which powerful economic forces and regional interests are pitted against each other, bill proponents have to line up not 51 but 60 votes. Under the rule, debate continues even if 59 senators vote in favor of ending it and only one votes against the motion.
The energy bill passed by the Senate in June came tantalizingly close to incorporating a 10-year tax package that would have raised $29 billion, mostly from oil and gas companies, and redirected it toward renewable energy development. The tax package was designed to be self-supporting; that is, it would not have trigged additional borrowing to underwrite the pro-renewable energy incentives.
Would such a tax package raise prices at the pump? A little. But remember too that $29 billion equates to about nine months’ profit for Exxon Mobil alone. And, from a social equity perspective, it’s always better to base energy subsidies and incentives on a real-time transfer of wealth than to saddle future taxpayers with even greater levels of indebtedness.
Nonetheless, the oil and gas companies objected to the closing of their favored tax loopholes, and they called upon their senatorial friends in the Oil Patch states to kill off this measure. To accomplish this, these senators made common cause with their counterparts from the Southeast and Rocky Mountain states, where Big Coal is very strong. Thought this minority bloc was outvoted 57-36, they managed to prevent the tax package from being attached to the larger energy package. In any other legislative venue, losing a vote by a margin of 21 would be considered a stinging defeat, but on the floor of the U.S. Senate, it counts as a win.
In his most recent installment of Lyndon Johnson’s biography, author Robert Caro points out that there have been only a few periods in the nation’s history where the Senate lowered the floodgates and allowed legislation reflecting the popular will to come washing through its portals. Those rare instances resulted from significant political realignments that put one party with an activist agenda firmly in power.
The closest the United States came to a coherent national energy policy was during the mid-to-late 1970’s. During that period there was a prevailing sense of anxiety over the nation’s energy security, and both the legislative and the executive branches responded to the national mood with decisive actions. In a five-year period Congress passed laws creating automobile fuel efficiency standards, prohibiting new gas-fired power plants, and requiring utilities to purchase electricity generated by independent entities. By the debased standards of current governance, those were amazingly productive years.
However, once the price oil dropped in the 1980’s, the urgency of the previous decade evaporated, and successive administrations began dismantling the policy initiatives adopted in the Ford and Carter years. When the Reagan Administration lowered fuel efficiency standards in 1986, Chrysler Corporation chairman Lee Iacocca said: “We are about to put up a tombstone ‘Here lies America’s energy policy.’”
It would take nothing short of a sea change to overcome Congressional inertia and recover the ground lost in the last 25 years or so. But though the prospects for a truly coherent national energy policy are improving — and the need has never been greater — both the citizenry and the current Congress are far too complacent to entertain changes that might involve belt-tightening and discipline. Given the current political dynamic, it would be unrealistic to expect this Congress, with its narrow majorities, to be the one that jump-starts the federal government into meaningful action.
Yes, we will see some progress on the energy front this year and next, but they will represent the sum of state government initiatives undertaken to counter the policy vacuum that persists at the federal level.
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Sources:
Caro, Robert A., Master of the Senate: The Years of Lyndon Johnson, 2002, Alfred A. Knopf Inc., New York.
National Environmental Trust: History of Fuel Standards, One Decade of Innovation, Two Decades of Inaction. URL: http://www.net.org/documents/cafe_history.pdf
by jboullion | Mar 20, 2007 | Uncategorized
Fossil Fuel Watch
Vol. 6, Number 5, March 20, 2007
by Michael Vickerman, RENEW Wisconsin
Awhile back, I wrote a column which was highly critical of using payback analysis to figure out whether installing a solar hot water system on one’s house makes economic sense. In almost every example you can imagine, the payback period for today’s solar installations ranges between long and forever. For my system, which started operating in January 2006, payback will be achieved in a mere 19 years using today’s energy prices, though by the time 2025 rolls around, half of Florida might be under water and the rest of the country out of natural gas.
What message does payback analysis convey to the average household contemplating a solar installation? It can be boiled down to this harsh assessment: the chances that you will be living in the same house when the system is fully paid off are remote, so you’re better off leaving solar off the table.
Indeed, payback analysis reinforces the popular perception that solar energy is unaffordable, and that homeowners should wait for technological improvements or cost reductions before pursuing this energy option. But from the standpoint of energy security and climate protection, every day of inaction leaves us in a deeper hole. We no longer have the luxury of waiting for external triggers — be they painful market signals or nasty resource wars — to spur us into doing the right thing.
But there’s no reason to let payback length rule one’s ability to invest in sustainable energy for the home or business, especially if there are other approaches to valuing important economic decisions. One way to sidestep the gloomy verdicts of payback analysis is to do what most companies do when contemplating a long-term investment like solar energy — calculate the internal rate of return (IRR) on the invested capital. The definition of IRR is the annualized effective compounded return rate which can be earned on the invested capital, i.e. the yield on the investment.
By using this familiar capital budgeting method, I’m able to calculate an IRR of 6.1% for my solar water heater if natural gas prices rise a measly 3% per annum. That yield exceeds anything that a bank will offer you today. It will likely outperform the stock market this year, which is due for a substantial downward adjustment to reflect the slow-motion implosion of the housing market now underway. And, unless you live in a gold-rush community like Fort McMurray, Alberta, your house will do well just to hold onto its current valuation, let alone appreciate by six percent.
While all investments pose some degree of risk, the return on a solar energy system is about as safe and predictable as, well, the rising sun. Fortunately for the Earth and its varied inhabitants, the center of our solar system is situated well beyond the reach of humanity’s capacity to tamper with a good thing.
The collector system is simplicity itself; the panels just sit there gathering all that exogenous, renewable energy during daylight hours, unencumbered with moving parts that can wear out. The panels degrade slightly from one year to the next, but they shouldn’t lose more than 20% of their efficiency over a 30-year period. And, in the event of a violent weather event like a hailstorm, one’s homeowner insurance policy should cover the damage. All told, solar energy, whether used for electricity or heat, is about as close as it comes to a risk-free investment.
But what about solar’s contribution to the market value of the house it serves, which can be easily measured? A 10-year-old solar energy system should deliver 20 more years of electricity or heat, reducing that house’s energy overhead during that period. In the case of my installation, the 20 years of avoided energy purchases starting in Year 11 should exceed my entire out-of-pocket expense. One can infer from that calculation that houses that capture solar energy on-site will appreciate faster–or depreciate more slowly — than houses that don’t.
Granted, calculating the IRR of a solar installation doesn’t capture the full range of benefits that flow to the system owner. It doesn’t, for example, factor in the possibility that, before too long, natural gas will become a rationed energy source, but that’s a political outcome whose probability and impacts are, at this point, unquantifiable. True, environmental externalities can be modeled but it’s just an academic exercise until emission offset markets like the Chicago Climate Exchange become accessible to homeowners and small business owners as well as to utilities and multinational corporations. But calculating the installation’s IRR allows system owners to see something about solar energy that is not revealed in payback analysis, which is that obtaining electricity and/or heat from the sun is a sustainable and risk-free way of creating household wealth. And if the numbers support this conclusion, then why aren’t we reinvesting every last penny of profit from our fossil fuel-based economy into creating a renewable energy platform for the future?
Sources:
http://en.wikipedia.org/wiki/Internal_rate_of_return
Petroleum and Natural Gas Watch is a RENEW Wisconsin initiative tracking the supply demand equation for these fossil fuels, and analyzing its effects on prices, consumption levels, and the development of energy conservation strategies and renewable energy alternatives. For more information on the global and national petroleum and natural gas supply picture, visit “The End of Cheap Oil” section in RENEW Wisconsin’s Web site. These commentaries also posted on RENEW’s blogand Madison Peak Oil Group’s blog.
by jboullion | Dec 29, 2006 | Uncategorized
by Michael Vickerman, RENEW Wisconsin
Vol. 5, Number 9, December 28, 2006
A year ago my wife was firmly in charge the household laundry. Now, not only am I washing and drying all our clothes, including the sheets, towels, and pillow cases, I find myself looking forward to doing it. What is going on here?
A divorce? Wrong answer. Anyway, that would only explain the shift in personnel, not the attitudinal change. A personality transfer à la “Freaky Friday”? Incorrect. This is not a case of life imitating a Disney movie.
Place the blame instead on our rooftop solar water heating system, which was installed in January 2006. That purchase challenged me to think about integrating our solar ration”the daily allotment of sunlight that falls on our house and yard”more effectively into our regular routines. And few routines are as unavoidable as doing the laundry.
It so happens that we share a clothesline with two neighboring households. In years past, my wife would hang the clothes out to dry during the warm summer months, but in the colder months she would simply transfer the wet clothes to the gas-fired dryer stacked above the washing machine.
One may wonder: why deviate from that routine? Using the washing machine and dryer in our decidedly unfinished basement would allow her to go through a week’s worth of dirty laundry and finish the job in three hours.
But some time this spring, a question started plaguing me: if it’s a good thing to use sunlight instead of natural gas to wash clothes, why isn’t it equally true for drying them? And if my solar panel can preheat up my water tank on a sunny day in March, why not rely on the same energy source to dry the wet clothes after they’ve been washed?
With these questions tumbling round and round inside my brain, I decided to take action by commandeering the laundry and doing it myself. So what did I learn?
First and foremost, weather conditions should be the deciding factor in selecting when to do the wash. On cold days, clothes dry much faster in breezy, sunny days than in slack days under overcast skies. If you’re depending on the weather to deliver the energy it takes to dry your laundry, you’ll need scheduling flexibility and an opportunistic attitude. And I can’t emphasize enough the value of periodically checking the Internet weather sites, particularly the radar images, to avoid being unpleasantly surprised by sun showers or swiftly moving thunderstorms.
Everything you hang on the solar dryer, as I like to call it, will become dry over time. The same is true for garments hung inside your house or apartment. But there will be occasions, especially around the winter solstice, when there isn’t enough solar energy outside to finish the job by sundown. If your goal is to avoid using a fossil-fueled dryer, then you’ll need to deploy a drying rack or two to take advantage of the low-humidity warmth inside your dwelling. In the dead of winter, your furnace or wood stove can deliver whatever supplemental heat is needed to dry a full load of laundry in a 24-hour cycle.
Since I’ve taken over laundry duties, the combination of our solar ration and the available indoor heat handles about 80% of what the gas dryer used to do. The only action the gas dryer sees these days is towels and heavy garments.
And how is my obsession with the solar ration affecting our bottom line? While it’s too soon to estimate an annual savings, we did use about 20% less natural gas this November versus the year-earlier period, even though November 2005 was a much warmer month.
The rewards of a well-used solar dryer are by no means limited to the energy and dollar savings reported on the monthly utility bill. The best part of the package is the time spent outside. There you can take the pulse of the day from the sunlight, clouds, air temperature, wind and humidity that make up this continuous flux of energy that we call the weather. Relying on solar energy in this way makes a person more attuned to the ebb and flow of weather conditions. Yes, forsaking the fossil-fueled dryer for the great outdoors does take more time and effort, but it’s a small price to pay for eliminating the drudgery that comes with doing the laundry on autopilot.
Amazingly enough, community prohibition of clotheslines is not uncommon in the United States. Ironically, this inane belief that the sight of gym trunks and sweat socks hanging in a yard will drive property values lower is strongest in the Sun Belt, a region where solar drying”and water heating–should be the norm and not the exception. What can you say about a mindset that thinks nothing of wasting a precious fossil fuel on doing the laundry just to keep up appearances? Given how prevalent this silly and self-destructive behavior is in our land, is the imminent arrival of the oil peak and terminally declining natural gas stocks necessarily a bad thing?
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Petroleum and Natural Gas Watch is a RENEW Wisconsin initiative tracking the supply demand equation for these fossil fuels, and analyzing its effects on prices,
consumption levels, and the development of energy conservation strategies and renewable energy alternatives. For more information on the global and national petroleum and natural gas supply picture, visit “The End of Cheap Oil” section in RENEW Wisconsin’s web site: www.renewwisconsin.org. These commentaries also posted on RENEW’s blog: http://www.zmetro.com/community/us/wi/madison/renew
and Madison Peak Oil Group’s blog: http://www.madisonpeakoil-blog.blogspot.com
by jboullion | Nov 16, 2006 | Uncategorized
by Michael Vickerman, RENEW Wisconsin
November 16, 2006
The gale-force winds that reshaped the political landscape this November augur well for new initiatives to substitute fossil fuel use with renewable energy.
To a degree unmatched in previous elections, candidates articulated an energy agenda that emphasized greater reliance on bioenergy, wind, solar, and conservation—and won, often by convincing margins. The renewable energy tide swept through not only both chambers of Congress but also many statehouses across the country. Only the Southeastern states seemed to escape its impact.
For example, the incoming governor of Massachusetts, Deval Patrick, distinguished himself by endorsing the controversial Cape Wind project in Nantucket Sound. Patrick’s sensible support for what could be the nation’s first offshore windpower plant is a welcome departure from the unremitting hostility that his predecessor, Mitt Romney, directed toward it.
In Patrick’s eyes, Cape Wind is the only large-scale generating option that does not add to the load of greenhouse gases emanating from Massachusetts sources. Contrast that understanding with Romney’s decision to pull Massachusetts out of a New England-wide greenhouse gas reduction initiative and you’ll begin to appreciate just how much more friendly towards renewable energy the Bay State will be.
Here in Wisconsin, Governor Jim Doyle repeatedly pointed to his leadership on energy policy, highlighted by the recently adopted Efficiency and Renewables Law, as a compelling reason to return him to office.
This law, which will increase the renewable energy content of the state’s electricity to 10% by 2015, was the culmination of a bipartisan, deliberative, consensus-building process that took more than two years to complete.
By contrast, Doyle’s challenger, Congressman Mark Green, was unable to persuade voters that he, too, staunchly supports renewables. Moreover, voter perceptions of Green were colored by his long association with the “drill ‘em dry” camp in the House of Representatives, as exemplified by Tom DeLay and Richard Pombo. The disparity in their respective energy agendas contributed to Doyle’s surprisingly easy reelection.
There were a few Republicans, like California Governor Arnold Schwarzenegger, who chose effective governance over the strident partisanship that characterized the 109th Congress. This summer, Schwarzenegger and the Democratic-controlled state legislature worked cooperatively to pass a landmark law that seeks to cut California’s greenhouse gas emissions by 25 percent, dropping them to 1990 levels by 2020. This initiative will undoubtedly increase renewable energy’s market share in the Golden State.
For clean energy supporters, the sweetest moment came when voters in California’s 11th District handed the aforementioned Richard Pombo a stinging defeat. Pombo, who has never met an environmental law he didn’t try to repeal, is the architect of a House bill that would open up the entire Outer Continental Shelf to oil and gas drilling. In a symbolic twist, Pombo lost to a challenger, Jerry McNerney, who has worked in the wind energy industry for over two decades.
The campaigns of Patrick, Doyle, Schwarzenegger and McNerney succeeded in framing renewable energy as an economic development strategy that also happens to prevent pollution and address national security. And, as happened during Doyle’s and Schwarzenegger’s first terms, it is possible to mobilize strong bipartisan backing for pro-renewable energy initiatives even in the teeth of an election year.
The election results are indicative of two positive developments: that Americans are taking energy issues more seriously, and that renewable energy’s appeal now transcends partisan affiliations. We now have, for the first time in many years, a window of opportunity to establish a responsible national energy policy instead of the smorgasbord of subsidies we now have.
Indeed, the message from the voters could not be clearer: let conservation and renewables lead the way to a cleaner, healthier, more secure energy future.
Vickerman is executive director of RENEW Wisconsin, an independent, nonprofit organization that acts as a catalyst to advance a sustainable energy future through public policy and private sector initiatives. For more information on RENEW’s work, visit our web site: www.renewwisconsin.org. These commentaries also posted on RENEW’s weblog.
