David Michael

Ben Stein Favors Carbon Tax - To Support Big Oil

Mr Banks, you must be joking.

It is shocking that there is anyone willing to argue for a carbon tax. If the goal is to reduce emissions, there is no simpler or more effective concept than CAPPING the emissions. That's why cap-and-trade wins. Because the total amount of emissions is capped. Game over.

The trade part is just an added bonus that allows for those who need to reduce their emissions to choose the most economical method of doing so. Those who need to reduce emissions can choose to do so via new equipment, less output, or by purchasing the credits.

To What Extent Is Alternative Energy Performance Linked to Fossil Energy Prices?

Working in the energy industry, I have heard nothing about solar being anywhere close to what frflyer calls "grid parity". Efficiency and pricing on renewables of all types will keep them out of the market so long as natural gas prices are less than ~$10.

Note that I refer to natural gas. While our auto industry is addicted to oil, less than 1% of our electrical use is based on oil - indeed, the largest segment is driven by natural gas.

In order to have renewables generators running in a low-fossil-fuel price environment such as the current one, electricity rates would have to be raised in one form or another. It will take convincing the public that paying more for more environmentally-friend... generated electricity is worthwhile for the extensive subsidies that currently exist for the green energy industry to continue or be expanded.

Combining the Pickens Plan and an Auto Bailout

There's a great misunderstanding of the usefulness of wind power. It has a reduced CF (as noted above), however you can't simply build more wind farms to make up for that reduction. The low capacity factor (or availability, as those in the industry refer to it) is due to the unreliability of the fuel source - in this case, the wind. Whereas in a traditional natural gas-fired plant, fuel supply is rarely if ever a problem - a CF below 1 is generally due to planned maintenance work and the occasional generator trip due to an unforeseen problem.

Wind on the other hand, may stop at any point. As a result, there can be literally thousands of megawatts that the wind generators were producing that need to be replaced. This happens often in Texas, where there is an overabundance of wind generators in the west of the state. In order to prepare for the sudden reduction in power generation from the wind resources, one of two options is required: (1) a non-wind generator must be paid to "idle" or sit at a minimum, prepared to ramp up megawatt production as soon as the wind stops flowing; or (2) customers must be paid to accept the possibility of their power cut-off when the wind stops. Texas relies primarily on the latter.

Another major issue is the lack of an adequate transmission grid to carry power from the wind generators to the load centers. Again, Texas has numerous problems due to the wind generators being located in the west, and the load centers in the east. Anyone who works for a utility would be able to explain the purpose of having generation close to load; I will try to make it simple: apparent power is made up of watts (real power) and vars (reactive power). Reactive power essentially pushes the real power through the power lines. However, reactive power gets weaker and weaker over distance, meaning your sources of reactive power need to be near your load centers. Most generators produce both real and reactive power. One exception to this is, unfortunately, wind generators. So, in order to get the real power generated by the wind farms, not only would you need a number of new high-voltage power lines to carry the real power the great distance to the load centers, you would also have the additional expense of needing a source of reactive power along those lines. Good luck convincing anyone that a new 500kv power line needs to be built near their house.

In case this wasn't clear, allow me to sum it up: Wind power does not in any way reduce expenses. It may reduce emissions, as natural gas and coal fired plants could run at lower levels. But costs would be raised - not lowered.

Finally, the article above makes a dangerous assumption that natural gas prices will remain low. As anyone who watches this market saw this past summer, that is certainly not the case.

Watching TIPS, And Commodities Tips

John:

This is a great thought: "On a philosophical note it seems that the actions of our central bank and other major central banks are one more nail in the coffin of the era of bond market vigilanteism which began with Paul Volcker’s bold move to change the way the Federal Reserve operated in 1979."

It would be great if you could go into more detail in a future post, which would certainly enlighten those of us who weren't around during the previous shift in philosophy.