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Stop the nuclear industry bailout

March 3rd, 2010 No comments

And now a public service market  announcement (with the captioned title) from your friendly local mankind-hating envirofascist, courtesy of Dave Schwab of Green Change, who is apparently the author of the following missive that found its way into my email inbox:

Dear Tokyo,

President Obama has proposed a whopping $54 billion in loan guarantees for the construction of new nuclear power plants.

What does that mean? If the costly new nuclear plants aren’t finished, then taxpayers cover the huge financial loss.

If they are built, then we’re stuck with power plants that generate
overpriced electricity and create deadly radioactive waste that will
remain toxic for thousands of years.

Either way, the nuclear industry wins, and we lose.

Tell President Obama to stop the nuclear power boondoggle.

Nuclear power creates deadly radioactive waste, from the mining process
onwards.   It’s got a scary history: think Chernobyl and Three Mile
Island.

Just recently, a nuclear plant in Vermont was ordered shut down after
radioactive tritium, which is linked to cancer, leaked from the plant
into local water supplies.

Nuclear power is so financially risky that even Wall Street won’t bet
on it.  It’s a public health and financial disaster waiting to happen.

Instead, our government should promote energy efficiency and a
decentralized power system based on safe, clean, renewable energy.

Tell President Obama today: don’t risk our future with nuclear power subsidies!

Peace,

Dave Schwab

Online organizer
Green Change

Note that I strongly disagree that nuclear power presents serious health risks; it seems to me that the health hazards and risks from nuclear power activities are orders of magnitude less than those presented by coal and other fossil fuels. Nuclear “waste” has been well-managed, and is waste only because the government has stopped industry from re-using it as fuel in breeder reactors. So while I understand the “scary” nuclear power theme (a consequence of the massive and counterproductive role of government in developing and testing nuclear weapons), I think it is counterproductive.

I am in favor of nuclear power (though NOT in favor of subsidies), and believe we’d see alot more if coal was full-costed (it receives federal and state subsidies via licenses to mine, pollute the air and pollute land and water with wastes). I’ve blogged more on nuclear power here. As Cato’s Jerry Taylor put it: Nuclear power is “solar power for conservatives” and needs “a policy of tough love”.

However, I do feel strongly that we ought to encourage energy efficiency – by removing public utility power monopolies.

We ought likewise to eliminate subsidies for other types of power production, and instead let free markets and consumer and investor choice work their wonders.

Towards a productive libertarian approach on climate, energy and environmental issues

February 10th, 2010 No comments

[This is a work in progress and largely taken from previous posts, but readers might find some value in it in the meanwhile.]

1. Heated but vacuous climate wars

On environmental issues in general and climate in particular, find me someone (like George Will) ranting about “Malthusians” or “environazis” or somesuch, and I’ll show you someone who doesn’t understand – or refuses to acknowledge – the difference between:

(1) wealth-creating markets based on private property and/or voluntary interactions/contracts protected by law, and

(2) the tragedy of the commons situations that result when there are NO property rights (atmosphere, oceans), when the pressures of developed markets swamp indigenous hunter-gather community rules, in many cases where governments formally own and purport to manage “public” resources, and when governments absolve purportedly “private” actors from liability for harms to others (such as via grants of “limited liability“).

So what’s the deal? Here’s a perfect opportunity for skeptics to educate the supposedly market ignorant, but they refuse, preferring to focus instead on why concerned scientists must be wrong, how concerns by a broad swath of society about climate have become a matter of an irrational, deluded “religious” faith, or that those raising their concerns are “misanthropes” or worse.

Such pigheadedness is met by those on the left likewise see libertarians and small-government conservatives as deluded and/or deliberate pawns of evil Earth-destroying corporations.

Both sides, it seems, prefer to fight – and to see themselves as right and the “others” as evil – rather than to reason.

While we should not regret that we cannot really constrain human nature very well, at least libertarian and others who profess to love markets ought to be paying attention to the inadequate institutional framework that is not only poisoning the political atmosphere, but posing risks to important globally and regionally shared open-access commons like the atmosphere and oceans (which are probably are in much more immediate and grave threat than the climate). And they also ought to recognize that there are important economic interests that profit from the current flawed institutional framework and have quite deliberately encouraged the current culture war.

2. Why the reflexive libertarian disengagement?

I have on numerous occasions tried to point out, to posters on the Mises Blog who have addressed climate issues, the stunning unproductivity of the approach that they have taken — that of focussing on science and dismissing motivations and preferences, rather than exploring root causes and middle ground, and have continued to scratch my head at the obstinacy and apparent lack of vision.

The following seem to be the chief factors at work in the general libertarian resistance to any government action on climate change:

– Many libertarians, as CEI’s Chris Horner has stated,  see “global warming [as] the bottomless well of excuses for the relentless growth of Big Government.”  Even libertarians who agree that is AGW is a serious problem are worried, for good reason, that government approaches to climate change will be a train wreck – in other words, that the government “cure” will be worse than the problem.

– Libertarians have in general drifted quite far from environmentalists (though there remain many productive free-market environmentalists/conservationists). Even though libertarians and environmentalists still share a mistrust of big government, environmentalists, on the one hand, generally have come to believe that MORE government is the answer, despite all of the problems associated with the socialized ownership of resources and/or inefficient bureaucratic management (witness the crashing of many managed fisheries in the US), the manipulation of such management to benefit bureaucratic interests, special interests and insiders (wildfire fighting budgets, fossil fuel and hard rock mining, etc.) and the resultant and inescapable politicization of all disputes due to the absence of private markets. On the other hand, many libertarians  reflexively favor business over “concerned citizens”, while other libertarians see that government “solutions” themselves tend to snowball into costly problems that work in favor of big business and create pressures for more government intervention. Thus, libertarians often see environmentalists as simply another group fighting to expand government, and are hostile as a result.

– Libertarians are as subject to reflexive, partisan position-taking as any one else. Because they are reflexively opposed to government action, they find it easier to operate from a position of skepticism in trying to bat down AGW scientific and economic arguments (and to slam the motives of those arguing that AGW must be addressed by government) than to open-mindedly review the evidence or consider ways that libertarian aims can be advanced by using the pressure from “enviro” goals.

This reflexive hostility – at times quite startingly vehement – is a shame (but human), because it blunts the libertarian message in explaining what libertarians understand very well – that environmental problems arise when property rights over resources are not clearly defined or enforceable, and when governments (mis)manage resources, and that there are various private steps and changes in government policy that would undo the previous government actions that are at the root of environmentalists’ frustrations.The reflexive hostility is also a shame because it has the effect, in my mind rather clearly, of rendering libertarians largely blind to the ways that large energy, power and certain manufacturing corporations continue to benefit from (and invest heavily in maintaining) the existing regulatory structure, in ways that shift large costs and risks to unconsenting third parties.

– There are some libertarians and others who profess to love free markets at AEI, CEI, Cato, IER, Master Resource and similar institutions that are partly in pay of fossil fuel interests, and so find it in their personal interests to challenge both climate science and policy proposals that would impose costs on their funders.

I felt particularly struck by the commonness of a refrain we are hearing from various pundits who prefer to question the good will or sanity of environmentalists over the harder work of engaging in a good faith examination and discussion of the underlying institutional problem of ALL “environmental” disputes:  namely, a lack of property rights and/or a means to enforce them. 

3. The whys of climate concerns and calls for “clean” energy

I want to get started with a list of policy changes that I think libertarians can and should be championing in response to the climate policy proposals of others.

The incessant calls for – and criticism of – government climate change policies and government subsidies and mandates for “green/clean power” both ignore root causes and potential common ground.  As a result, both sides of the debate are largely talking past each other, one talking about why there is a pressing need for government policy to address climate change concerns, while the other is concerned chiefly about the likelihood of heavy-handed mis-regulation and wasted resources. This leaves the middle ground unexplored.

There are plenty of root causes for the calls for legislative and regulatory mandates in favor of climate policies and clean / green / renewable power, such as:

  • concerns about apparent ongoing climate change, warnings by scientific bodies and apprehensions of increasing risk as China, India and other developing economies rapidly scale up their CO2, methane and other emissions,
  • the political deals in favor of environmentally dirty coal and older power plants under the Clean Air Act,
  • the enduring role of the federal and state governments in owning vast coal and oil & gas fields and relying on the royalties (which it does not share with citizens, but go into the General Pork Pool, with a relatively meager cut to states),
  • the unwillingness of state courts, in the face of the political power of the energy and power industries, to protect persons and private property from pollution and environmental disruption created by federally-licensed energy development and power projects,
  • the deep involvement of the government in developing, encouraging and regulating nuclear power, and
  • the frustration of consumer demand for green energy, and the inefficient and inaccurate pricing and supply of electricity, resulting from the grant by states of public utility monopolies and the regulation of the pricing and investments by utilities, which greatly restricts the freedom of power markets, from the ability of consumers to choose their provider, to the freedom of utilities to determine what infrastructure to invest in, to even simple information as to the cost of power as it varies by time of day and season, and the amount of electricity that consumers use by time of day or appliance.

4. Is a small-government, libertarian climate/green agenda possible and desirable?

So what is a good libertarian to suggest? This seems rather straight-forward, once one doffs his partisan, do-battle-with-evil-green-fascist-commies armor and puts on his thinking cap.

From my earlier comment to Stephan Kinsella:

As Rob Bradley once reluctantly acknowledged to me, in the halcyon days before he banned me from the “free-market” Master Resource blog, “a free-market approach is not about “do nothing” but implementing a whole new energy approach to remove myriad regulation and subsidies that have built up over a century or more.” But unfortunately the wheels of this principled concern have never hit the ground at MR [my persistence in pointing this out it, and in questioning whether his blog was a front for fossil fuel interests, apparently earned me the boot].

As I have noted in a litany of posts at my blog, pro-freedom regulatory changes might include:

Other policy changes could also be put on the table, such as:

  • an insistence that government resource management be improved by requiring that half of all royalties from mineral and fossil fuel development be rebated to citizens (with a slice to the administering agency), and
  • reducing understandable NIMBY problems by (i) encouraging project planners to proactively compensate persons in affected areas and (ii) reducing fears of corporate abuses, by providing that corporate executives have personal liability for environmental torts (in recognition of the fact that the profound risk-shifting that limited liability corporations are capable of that often elicits strong public opposition and fuels regulatory pressure).

5. Other libertarian discussants

A fair number of libertarian commenters on climate appear to accept mainstream sciences, though there remain natural policy disagreements. Ron Bailey, science correspondence at Reason and Jonathan Adler, a resources law prof at Case Western, Lynne Kiesling at Knowledge Problem blog, and David Zetland, who blogs on water issues, come to mind.

I`m not the only one – other libertarian climate proposals are here:

  • Jonathan Adler at Case Western (2000); he has other useful commentary here, here,
  • Bruce Yandle, Professor Emeritus at Clemson University, Senior Fellow at PERC (the “free market” environmentalism think tank) and a respected thinker on common-law and free-market approaches to environmental problems, has in PERC’s Spring 2008 report specifically proposed a A No-Regrets Carbon Reduction Policy;
  • Iain Murray of CEI; and
  • Cato’s Jerry Taylor is a frequent commentator and Indur Goklany has advanced a specific climate change-targeted proposal.
  •  AEI’s Steven Hayward and Ken Green together have provided a number of detailed analyses (though with a distinct tendency to go lightly on fossil fuels).

Several libertarians recently urged constructive libertarian approaches to climate change:

There have been several open disputes, which indicate a shift from dismissal of science to a discussion of policy; the below exchanges of view are worthy of note:

  • The Cato Institute dedicated its entire August 2008 monthly issue of Cato Unbound, its online forum, to discussing policy responses to ongoing climate change.  The issue, entitled “Keeping Our Cool: What to Do about Global Warming“, contains essays from and several rounds of discussion between Jim Manzi, statistician and CEO of Applied Predictive Technologies, Cato Institute author Indur Goklany; climate scientist Joseph J. Romm, a Senior Fellow at the Center for American Progress; and Michael Shellenberger and Ted Nordhaus, the co-founders of The Breakthrough Institute.  My extended comments are here.
  • Reason Foundation, posted an exchange on Climate Change and Property Rights June 12th, 2008 (involving Reason’s Shikha Dalmia, Case Western Reserve University law professor Jonathan H. Adler, and author Indur Goklany); discussed by Ron Bailey of ReasonOnline here; here`s my take.
  • Debate at Reason, October 2007, Ron Bailey, Science Correspondent at Reason, Fred L. Smith, Jr., President and Founder of CEI, and Lynne Kiesling, Senior Lecturer in Economics at Northwestern University, and former director of economic policy at the Reason Foundation.
  • Reason Foundation, Global Warming and Potential Policy Solutions September 7th, 2006 (Reason’s Shikha Dalmia, George Mason University Department of Economics Chair Don Boudreaux, and the International Policy Network’s Julian Morris).

 

Finally, I have collected here some Austrian-based papers on environmental issues that are worthy of note:

Environmental Markets?  Links to Austrians

Ones such paper is the following: Terry L. Anderson and J. Bishop Grewell, Property Rights Solutions for the Global Commons: Bottom-Up or Top-Down?

Public Service Announcement: Google, GE, NRDC and The Climate Group call for real-time information technologies to cut emissions

December 19th, 2009 No comments

I copy below an interesting press release with the title noted above, regarding the “smart metering” of power consumption.

I have blogged previously on Google`s efforts to speed the introduction of Smart Meters.

Perhaps we will also see a little more focus on the negative role that our widespread public utility monopolies have played in inflating energy costs and dampening conservation, competitive pricing and green options, and greater interest in market freedom in the power sector?

Not simply greater information, but freer markets is what we need. This would accomplish more than more “green” mandates. Other libertarian ideas are here. As my favorite free-market blogger, Rob Bradley, once said so well: “a
free-market approach is not about “do nothing” but implementing a whole
new energy approach to remove myriad regulation and subsidies that have
built up over a century or more.”

December 15, 2009

“Citizens need better access to information about how they use energy –
and they need the tools to use less.” 

Today,
Google, GE, The Climate Group, and NRDC, supported by a broad group of
companies and organizations, called on governments across the world to
support citizens’ access to real-time information on home energy consumption. (Read the statement)

In homes, technology that makes energy consumption visible in the home
can help people save not only carbon but electricity costs.   Our recent case studies at www.smart2020.org
show that some homeowners were able to save 40 per cent on their
electricity bills from better understanding their patterns of energy
consumption.

The statement says “The bottom line is: We can’t solve climate change
if people are in the dark about how they use energy in their own homes.
Citizens need better access to information about how they use energy –
and they need the tools to use less.” 

By empowering citizens with information and tools for
managing energy, national and sub-national governments, businesses and
organizations around the world can harness the power of hundreds of
millions to fight climate change and save consumers millions of dollars
in the process.

Specifically, all countries should ensure that their citizens have access to basic information including:

  • Near real-time or real-time home energy consumption
  • Pricing and pricing plans
  • Carbon intensity, including source and carbon content of electricity

Today’s
call for supporting citizens’ access to information can be achieved
with technologies that exist today which can be rapidly deployed. To
get there, countries can provide incentives for energy monitoring
equipment and set rules for consumer access to information. They can
also enact stronger energy efficiency standards, as well as provide
financial incentives and variable energy pricing plans.

Dan Reicher, Director of Climate Change and Energy Initiatives, Google, said:  “By providing people with real-time home energy information we can make
a major down payment on tackling climate change while saving money and
creating exciting new industries and jobs.”

Steve Fludder, VP of GE’s ecomagination, said: “This is not future technology that were talking about. We can do this now.”

Molly Webb, Director of Strategic Engagement, The Climate Group
said: “Just as user-generated content drove Web 2.0, then
user-generated energy information and ‘the internet of things is our
future. With a strong global agreement to tackle climate change, ICT
infrastructure will be a key enabler in the short term of carbon
efficiency on a global scale.”

The statement comes after yesterday’s launch of SMART 2020: Pathways to Scale
which called for energy information for all. This information can be
used across the wider economy by citizens and businesses to enable a
range of innovations in services around energy and fuel efficiency. The
Climate Group is tracking these initiatives with measurable results on www.smart2020.org.

Read the statement here.

Categories: climate change, GE, Google, monopoly, power Tags:

Beyond zero-sum games: liberal press is starting to realize how state grants of monopolies to public utilities are the chief obstacle to energy efficiency!

October 15th, 2009 No comments

Michael Giberson at Knowledge Problem points to recent press coverage of the profoundly negative and perverse role being played by public utilities and their regulators.

Who knows, but isn`t there an opportunity here for market liberals and environmentalists to push for deregulation and greater competition in retail power markets, spearheaded by the federal government, and to have a deregulatory effort included in the climate bill?

Says Giberson: (emphasis in original)

The New Republic has an excellent article by Bradford Plumer about the current state of the electric power industry and the prospects of the industry achieving what diverse interests expect of it. (Yes, in TNR, who’d a thunk it?)
The article highlights the political economy of regulated electric
utilities and their immense lobbying savvy and political sway, and how
the existing regulatory framework acts to perpetuate the status quo.

The article leads off with an anecdote about Tom Casten
wishing to develop a combined heat and power (CHP) plant for a chemical
plant in Louisiana in the early 2000s
– you know, one of those
win-win-win projects that recycle waste heat to make electric power,
reduce air emissions, reduce costs to the industrial company host, and
still makes a profit for the CHP company. The proposed project
never got off the ground due to the lack of support from the local
utility, and that lack of support was attributed to a regulatory
structure which rewards utilities for owning power plants rather than
minimizing the cost of power to consumers.

The article goes on to tell more stories, and delves into issues
like renewable portfolio standards, distributed power, smart grid
visions, and how a mostly-regulated industry is going to do tackle all
of these changes while not upsetting existing political deals and
getting paid a fair rate of return.

Giberson further reports on another story:

A story posted Tuesday at the New York TimesGreen Inc. blog provides another example: “Discord Over Regulation of Car Charging.”
The story reports that the three major regulated electric utilities in
California each advocate different models for the regulation (or not)
of electric car charging stations by the California Public Utilities
Commission. Entrepreneurial companies like Better Place, trying
desperately to provide the electric vehicles that many consumers,
environmentalists, and policymakers say the country desperately needs,
find themselves caught in a regulatory battle.

 

Beyond zero-sum games: Instead of mandating "green power" and greater efficiency, why not mandate MORE COMPETITION in power markets?

October 11th, 2009 No comments

To my disappointment, it turns out that Joe Romm, who  maintains the Center for American Progress` Climate Progress blog, didn`t let through my prior comment about how our discussions about green/efficiency mandates ignore the 800 lb. gorilla in the room, namely, inefficiency stemming from the lack of competition in consumer electricity markets.

But I`m not so easily discouraged; on the heels of Google`s roll-out of software and a monitoring device specifically to enable consumers to more efficiently use electricity, I tried again (toned down so he would not have to see how guys like Steven Milloy mirror him).  Here`s the comment I submitted:

Joe, on the issuie of mandates, both you and Henderson fail to consider WHY our power system isn`t MUCH more efficient and doesn`t provide greater consumer choice – namely, grants by local governments of power monopolies and related regulatory balkanization.

Let`s not forget that the “ethical” argument for interfering with the market for electrical products is based on the fact that local governments have prevented competition in local markets for power generation and distribution.

That there are huge efficiency gains to be made in improving consumer electricity markets is precisely why Google is focussed on providing consumers with greater information about their electricity consumption.

Thus we see one of the continuing problems presented by the fight for control over the wheel of government: those who want to steer it their way are so sure they`re right – and convinced that the others are stupid or evil – that they can`t be bothered to try to notice or try to achieve shared objectives.

Google electrifies power consumers by pairing its free PowerMeter software with a power monitor provider; sideteps public utility monopolies

October 9th, 2009 No comments

“If you cannot measure it; You cannot improve it.”

— Lord Kelvin

I noted in February (“Empowering power consumers: Google beta tests software to give consumers real-time info“) that Google, whose climate change-related efforts I’ve blogged about previously,
has been beta testing a new “PowerMeter” software that – when coupled with a “Smart Meter” installed by the local utility – will help consumers to measure, track and compare their real-time
electric usage, thereby allowing them to make better choices as to when
and how they use electricity, and to better match such use
to the pricing programs of their utilities. Google testers
have found that the software allows them to relatively easily cut use
(by an average of 15%), and to save on their electricity bills by an
even greater percentage.

Google has just announced that it has side-stepped the need for consumers to wait for their utility to install a smart meter, by partnering directly with TED (“The Energy Detective“), the provider of the TED 5000 device, presently priced at about $200, that consumers can  have attached to their power supply.

More information is here (from The Energy Circle, which has been testing PowerMeter with an earlier TED device) and here (CNET).

Next up? Hope springs eternal that developments like this will remind policy makers, pundits, pressure groups (like the U.S. Chamber of Commerce and browbeating enviros like Joe Romm) that the real reason for the nasty public squabbling over “green” power mandates and subsidies (as I noted in a recent post about Steven Milloy`s railing about “evil” GE and federal stimulus
money
) is the fact that power markets are not free, but are burdened by sweet – and horrifically inefficient – cost+ deals to the public utilities. As I noted previously:

While there are plenty of root causes for the calls for legislative
and regulatory mandates in favor of clean / green / renewable power,
such as:

  • concerns about climate change,
  • the political deal in favor of dirty coal under the Clean Air Act, 
  • the enduring role of the federal and state governments in owning
    vast coal fields (the royalties from which it does not distribute to
    citizens but go into the General Pork Pool), 
  • the unwillingness of state courts, in the face of the political
    power of the mining industry, to protect persons and private from
    pollution and environmental disruption created by mining,
  • the deep involvement of the government in developing, encouraging and regulating nuclear power,

the most obvious and proximate root
cause is something that attracts far too little attention – the
frustration of consumer demand for green energy, and the inefficient
and inaccurate pricing and supply of electricity
.  It`s prettty clear that the
grant of public utility monopolies and the regulation of the pricing
and investments by utilities greatly restrict the freedom of power
markets, from the ability of consumers to choose their provider, to the
freedom of utilities to determine what infrastructure to invest in, to
even simple information
as to the cost of power as it varies by time of day and season, and the amount power consumers use by time of day or appliance.

With freer markets, we would see much more competition, better
pricing, much more cost-saving (and conservation), and more money
flowing into green power. So why is so little attention being paid to
all of the gains that could be achieved from less – and more rational –
power regulation?

Statism & clear partisan blindness: Joe Romm, Steven Milloy and ethical certainty over problems stemming from lack of competition in power markets

October 5th, 2009 No comments

Joe Romm of Climate Progress has a new post up that lambasts a recent WaPo op-ed by “environmental ethicist” David Henderson. Romm provides useful information on the relative efficacy of government technology forcing efforts, but comes down like a ton of bricks on Henderson, all while ignoring the 800 lb. gorilla in the room – consumer frustration over, and energy inefficiency resulting from, the lack of competition in local power markets.

In this, Romm mirrors anti-enviro Steven Milloy, who has been raking GE over the coals for its actions to support “green mandates” for subsidies that benefit GE by stimulating markets for GE`s energy-efficient smart meters and smart water heaters

I left the following note at Joe`s that draws attention to the parallels:

Joe, you marginalize yourself and do the debate a disservice by continuing to mirror partisans like Steven Milloy, who`s so busy demonizing those who want more green power and greater efficiency that he forgets to examine WHY our power system isn`t MUCH more efficient and doesn`t provide greater consumer choice – namely, grants by local governments of power monopolies and related regulatory balkanization

Let`s not forget that the environmentalists` “ethical” argument for interfering with the market for electrical products is [based on the fact] that local governments have prevented competition in local markets for power generation and distribution.

[To comment, please visit this post at my main blog at the Ludwig von Mises Institute.]

Categories: Joe Romm, monopoly, power, Steven Milloy Tags:

Steve Milloy criticizes GE’s "smart-meter profiteering" via green mandates, but ignores state grants of "public utility" monopolies

October 2nd, 2009 No comments

Anti-enviro gadfly Steven Milloy has a new blog post up that rightly skewers the green mandates that are providing a taxpayer-funded stream of business and profits to GE.  Notes Milloy:

GE announced today that utility giant American Electric Power (AEP)
will purchase 110,000 smart meters from GE. And just how is AEP
managing to buy all these smart meters? President Obama and Congress
are making us pay for them.

On Sep. 1, AEP applied to the Department of Energy for $75 million in federal stimulus money for the smart meter purchase.

It’s a good thing that GE’s Immelt sits on Barack Obama’s Economic
Recovery Advisory Board — how else would the Department of Energy know
to direct smart meter purchases to GE?

Of course, AEP isn’t the only conduit for sending federal stimulus
money to GE. So far about 50 utilities have applied to DOE for a piece
of the almost $4 billion in stimulus money earmarked for smart meter
projects.

From an Austrian perspective, what`s wrong with this post? The simple fact that Milloy isn`t interested in problem-solving, but in bashing greens, Dems and GE. If he were a problem-solver, he would be a little less partisan and would devote a little more effort to throw light on some of the underlying factors that fuel green concerns and utility mandates, such a the little problem that states have prevented the development of free power markets by granting “public utility” monopoly status to local power providers, as I have noted in a number of posts.

A problem-solver might also devote some time to examining the entanglement of the state with other rent-seeking corporations, such as the coal producers; but those trapped in partisan, rent-seeking games are often good only at seeing the flaws of those whom they criticize, while ignoring the way that they themselves are co-opted by other rent-seekers.

I left Steven the following comment:

Steven I think your criticism of GE is fair, but it`s clearly lacking in context.

Where`s your post criticizing the states for their continuing grant
of monopoly status to “public utilities”, which is the chief reason why
there is no free market in providing power to consumers? With a free
markets, we`d have seen smart meters like GE`s years ago, and there
would be no basis for all of these “green power” mandates.

Why does everyone calling for or condemning government "green power" mandates ignore the frustrations resulting from public utility monopolies and regulatory Balkanization?

May 23rd, 2009 8 comments

The incessant calls for – and criticism of – government-funded/mandated “green/clean power” pork both ignore root causes and potential common ground.  As a result, both sides of the debate are largely talking past each other, one talking about why there is a pressing need for government policy to address climate change concerns (concerns underscored by the May 19 MIT study), while the other is concerned chiefly about the likelihood of heavy-handed mis-regulation and wasted resources.  This leaves the middle ground unexplored.

While there are plenty of root causes for the calls for legislative and regulatory mandates in favor of clean / green / renewable power, such as:

  • concerns about climate change,
  • the political deal in favor of dirty coal under the Clean Air Act, 
  • the enduring role of the federal and state governments in owning vast coal fields (the royalties from which it does not distribute to citizens but go into the General Pork Pool), 
  • the unwillingness of state courts, in the face of the political power of the mining industry, to protect persons and private from pollution and environmental disruption created by mining,
  • the deep involvement of the government in developing, encouraging and regulating nuclear power,

the most obvious and proximate root cause is something that attracts far too little attention – the frustration of consumer demand for green energy, and the inefficient and inaccurate pricing and supply of electricity.  It`s prettty clear that the grant of public utility monopolies and the regulation of the pricing and investments by utilities greatly restrict the freedom of power markets, from the ability of consumers to choose their provider, to the freedom of utilities to determine what infrastructure to invest in, to even simple information as to the cost of power as it varies by time of day and season, and the amount power consumers use by time of day or appliance.

With freer markets, we would see much more competition, better pricing, much more cost-saving (and conservation), and more money flowing into green power. So why is so little attention being paid to all of the gains that could be achieved from less – and more rational – power regulation?

Allow me to provide a few quotes and links to those interested:

1.  Lew Rockwell, President of the Ludwig von Mises Institute, “The Real Cause of Blackouts” (July 27, 2006):

Now, if markets were in charge, a heat wave would not be looked at as a problem but as an opportunity. Entrepreneurs would be swarming to meet demand, just as they do in every other sector that is controlled by markets. The power companies would be praying for heat waves!

Just who is in charge of getting electricity to residents? A public utility, which, in the absurd American lexicon, means “state-run” and “state-managed,” perhaps with a veneer of private trappings. If you look at the electrical grid on a map, it is organized by region. If you look at the jurisdiction of management, it is organized by political boundaries.

In other ways, the provision of power is organized precisely as a central planner of the old school might plan something: not according to economics but according to some textbook idea of how to be “organized.” It is “organized” the same way the Soviets organized grain production or the New Deal organized bridge building.

All of centralization and cartelization began nearly a century ago, as Robert Bradley points out in Energy: The Master Resource, when industry leaders obtained what was known as a regulatory covenant. They received franchise protection from market competition in exchange for which they agreed to price controls based on a cost-plus formula — a formula that survives to this day.

Then the economists got involved ex post and declared that electrical power is a “public good,” under the belief that private enterprise is not up to the job of providing the essentials of life.

What industry leaders received from this pact with the devil was a certain level of cartel-like protection, the same type that the English crown granted tea or the US government grants first-class postal mail. It is a government privilege that subjects them to regulation and immunizes companies from business failure. It’s great for a handful of producers, but not so great for everyone else.

There are many costs. Customers are not in charge. They are courted only for political reasons but they are not the first concern of the production process. Entrepreneurial development is hindered. Our current system of electrical provision is stuck in time. Meanwhile, sectors that provide DSL and other forms of internet and telecommunication services are expanded and advancing day by day — not with perfect results but at least with the desire to serve consumers. …

How New York and California consumers would adore a setting in which power companies were begging for their business …. Competition would lead to price reductions, innovation, and an ever greater variety of services — the same as we find in the computer industry.

What we are learning in our times is that no essential sector of life can be entrusted to the state. Energy is far too important to the very core of life to be administered by a bureaucracy that lacks the economic means to provide for the public. How it should be organized we can’t say in advance: it should be left to the markets. …

What we need today is full, radical, complete, uncompromised deregulation and privatization. We need competition. That doesn’t mean that we need two or more companies serving every market (though that was common up through the 1960s). What we need is the absence of legal barriers to enter the market.

2.  Lynne Kiesling, Senior Lecturer in Economics at Northwestern University and former director of economic policy at the Reason Foundation; participant in debate at Reason online “Carbon: Tax, Trade or Deregulate?

[M]ost people fail to realize that the abysmal job we do of pricing electricity contributes substantially to our energy use. The only resources that are priced as badly as electricity in our economy are highways and water.

Retail competition and choice for consumers would increase the offering of time-differentiated dynamic pricing, which shifts resource and electricity use across time. Research shows that this promotes conservation and more efficient use of electricity, increases offerings of green power to consumers who want to choose a green power option, and increases the incentives to develop and adopt technologies, such as price-responsive appliances, that enable private individuals to control their own energy use.

So the message from me is this: It’s a complicated, imperfect world, and the policies we can adopt that induce innovation and harness diffuse private knowledge will be the most effective for this long-term problem.

3.  Paul Joskow, current President of the Alfred P Sloan Foundation and former head of theMIT Department of Economics (now on leave) and former director of the MIT Center for Energy and Environmental Policy Research; speech at the National Press Club in September 2008:

For almost 50 years this sector was stuck in an organizational and regulatory framework that may have been well matched to the electricity generation and transmission technology available in 1935, but was surely poorly matched to changes in technology, new technological opportunities, contemporary investment needs, or current economic and environmental challenges. Then in the early 1980s, electricity sector reformers began to stir, responding to concerns about the system of regulated vertically integrated monopolies inherited from the 1930s. The “good old days” of regulation represent a view to the past with rose colored glasses. The system of regulated vertically integrated monopoly was plagued by cost overruns associated with nuclear power plants, poor operating performance for both nuclear and large fossil-fueled plants, poor fuel procurement decisions, wide price differences between neighboring areas, excess generating capacity, inefficient dispatch and economy energy trading between generating companies, regulatory incentives to keep old inefficient plants operating rather than retiring them, too many small utilities to take advantage of economies of scale, institutional and technological barriers to using the transmission network to access lower cost power, productivity lags, and inefficient retail prices. The system …was unnecessarily costly and inefficient.

Reformers looked to the favorable experience with restructuring, competition, and regulatory reform in other sectors and with electricity in other countries to help to solve the problems associated with the fragmented electric power sector made up of over 100 vertically integrated geographic monopolies. Municipal distribution companies and large industrial customers were especially aggressive at promoting reforms focused on open transmission access, the creation of transparent organized regional competitive wholesale markets, and (in the case of large industrial customers) retail competition.

A large number of states initially embraced this restructuring, competition, and regulatory reform vision and began to implement it. In 2000 it looked like restructuring and competitive market reforms were going to sweep the U.S. electric power industry.

Then came the California electricity crisis, the collapse of Enron and a number of merchant generating companies, increased volatility to natural gas markets and associated volatility in wholesale electricity market prices, and a long march upward in fossil fuel prices ultimately resulting in rising retail electricity prices in both regulated and restructured states. Most of the states that were leaders in restructuring during the late 1990s, when natural gas prices were low and there was excess capacity, initiated reforms during a period when regulated prices for generation service were expected to be much higher than perceived comparable competitive wholesale market prices. The expectation was that over time retail prices would fall. This forecast was based on the assumption that low prices for natural gas in particular would continue and that a new system built on efficient CCGT technology would evolve. At that time, a major “problem” that many of these states had to cope with were the “stranded generation costs,” primarily associated with what were perceived to be costly nuclear power plants, that were expected to result from the introduction of real wholesale and retail competition. This was expected to be a “transition problem” because it was expected that competition would result in market prices that would fall to levels below the embedded costs of nuclear plants and older fossil plants that would have otherwise been used to calculated (higher) regulated retail prices.

However, as natural gas and coal prices continued to rise far above anyone’s expectations, many of these states soon found that competitive market prices were rising dramatically along with natural gas prices (which affect competitive wholesale electricity prices in most regions of the country) — arguably rising to levels above what regulated prices would have been today under the status quo ante (though this requires a difficult counterfactual analysis). This, of course does not mean that these electricity sector reforms were a failure. In states that adopted the restructuring, wholesale and retail competition model, retail prices now reflect marginal supply costs, as they should to give consumers the right price signals to use electricity wisely. Rather it means that regulated prices are or would have been too low to give consumers appropriate incentives to make wise consumption decisions.

In evaluating restructuring, competition and regulatory reform one must understand all of its efficiency and distributional properties, not just at short run price effects. From an efficiency perspective, the restructuring reforms implemented at the federal level and in some states have led to numerous cost reducing successes in the face of rising fossil fuel prices.  These include dramatic improvements in the performance of divested nuclear plants, significant improvements in the performance of fossil plants that now face market incentives, roughly 200,000 GW of new (mostly merchant) gas-fired generation has been added to the system between 1999 and 2004, while the risk of cost overruns, fuel price fluctuations, demand variations, and availability problems experienced by some of these plants were shifted to their owners through the market rather than borne by consumers through cost-of-service regulation. There is good empirical evidence that the expansion of the boundaries of RTOs (e.g. PJM) have led to significant changes in power flows and more efficient dispatch of power plants, while inefficiencies are observed at the boundaries of RTOs that have not agreed to be consolidated (e.g. NY/NE). Gradual improvements in wholesale market designs have increased the efficiency of these markets and have restored investment incentives. Moreover, retail prices now respond quickly to changes in wholesale market prices, providing consumers with the right price signals rather than the wrong price signals resulting from retail price regulation. And these price signals are properly differentiated by time and location to reflect marginal supply costs, rather than the depreciated original cost of generating plants built 50 years ago. Demand management programs linked to short-term supply and demand conditions are expanding quickly as well in the reform regions.

Of course, the full reform program has not been implemented in large areas of the South, the West, and portions of the Midwest. The partial electricity reform equilibrium that we appear to be in now will not serve the country well and is potentially quite unstable. We have a system that is 1/3 reformed and 2/3 stuck in the structural and regulatory paradigm of the 1935s or somewhere in between.

The problems created by an antiquated industry structure and incompatible mix of state and federal regulation have not gone away. They are lurking out there to undermine achieving the goals that I enumerated earlier. Absent a comprehensive national electricity policy framework this sector is and will perform poorly in meeting the four sets of goals that I discussed earlier.

Joskow has spelled out his specific proposals for reform, which I note here.

4.  Google, September 19, 2008 press release – “Partnering with GE on clean energy“:

Today we announced that we’re joining forces (PDF file) with GE to use technology, information and corporate resources to drive the changes necessary to empower consumers with better energy choices. We will focus on improving power generation, transmission and distribution – a combination of technologies that could be known as the “smart grid.” (It would be fair to refer to electricity technologies in common use today as a “grid of only average intelligence.”)

The existing U.S. infrastructure has not kept pace with the digital economy and the hundreds of technology opportunities that are ready for market. In fact, the way we generate and distribute electricity today is essentially the same as when Thomas Edison built the first power plant well over one hundred years ago. Americans should have the choice to drive more fuel efficient cars – or even electric cars – and manage their home energy use to reduce costs, and buy power from cleaner sources, or even generate their own power for sale to the grid.

We all receive an electricity bill once a month that encourages little except prompt payment. What if, instead, we had access to real-time information about home energy use? What if our flat screen TVs, electronic equipment, lights and appliances were programmed to automatically adjust to save money and cut energy use? What if we could push a button and switch the source of our homes’ electricity from fossil fuels to renewable energy? What if the car sitting in our garage ran on electricity – the equivalent of $1 per gallon gasoline – and was programmed to charge at night when electricity is cheapest?

This vision is what unites Google and GE. We’ll start by working together in Washington, D.C. to mount a major policy effort to enable large-scale deployment of renewable energy generation in the United States.[deregulation? mandates?] We’ll also work on development and deployment of the “smart” electricity grid that will empower consumers, utilities, and technology innovators to manage electricity more efficiently and lower their carbon footprint. Finally, we’ll collaborate on advanced energy technologies, including technologies to enable the large-scale integration of plug-in vehicles into the grid and new geothermal energy technologies known as enhanced geothermal systems (EGS).

As I have noted elsewhere








While Smart Meter / Smart Grid programs have been growing, there is still considerable market fragmentation and rights of consumers have not been clearly spelled out. According to Google, while some state regulators have ordered utilities to deploy smart meters, their focus has been on their use by utilities and grid managers, and not on consumer rights to the information they generate.  As a result, Google is engaged in policy advocacy as well; says Google:

“deploying smart meters alone isn’t enough. This needs to be coupled with a strategy to provide customers with easy access to energy information. That’s why we believe that open protocols and standards should serve as the cornerstone of smart grid projects, to spur innovation, drive competition, and bring more information to consumers as the smart grid evolves. We believe that detailed data on your personal energy use belongs to you, and should be available in an open standard, non-proprietary format. You should control who gets to see your data, and you should be free to choose from a wide range of services to help you understand it and benefit from it. For more details on our policy suggestions, check out the comments we filed yesterday with the California Public Utility Commission.”

 

 

5.  Jerry Taylor, senior fellow at Cato Institute, “The Right Way to Fix the Grid“, August 19, 2003 (New York Post):

Yes, the need for more investment in the grid seems clear. The system was designed to handle a limited number of transactions, not the large interstate exchanges of electricity now common. Moreover, transmission capacity has been stagnant relative to the growth in power generation, stressing the system even more.

Why has the grid deteriorated?

* Transmission projects are considered, approved and paid for at the state level – but the benefits cross state lines. And state-level decision-makers understandably resist using ratepayer dollars to pay for investments that will mainly help out-of-staters.

* In much of the country, incumbent utilities and state politicians actively resist improving the grid. Vertically integrated companies (which own the generating plants, transmission lines and distribution networks within a service territory) often fear that a more robust transmission system would boost potential competition.

Many politicians also oppose grid improvements because new transmission capacity would make it easier for out-of- state customers to bid-away the cheap power from in-state consumers.

* Returns on transmission are regulated, so utilities have found that they can make more money by investing in virtually anything besides transmission infrastructure.

* With many regulatory fights still unresolved, and the potential for profit thus unclear, investors have delayed risking their money on the grid.

The solution now in vogue to solve these problems is to give the Federal Energy Regulatory Commission more authority over transmission investment. State regulation of transmission is, after all, an archaic relic of another era; and all who use the transmission system are vulnerable to the weakest links in it.

But forcing utilities to invest in transmission upgrades through increased federal regulation is too crude and blunt a policy hammer. It may get the job done to some degree, but running industries by federal dictate is less efficient than ensuring that proper incentives exist for the industry to operate efficiently on its own.

Instead, why not try deregulating the grid? Kill the cap on transmission profits. Jettison the state regulations that protect transmission companies from competition. Cease the endless political debate over how the transmission lines ought to be organized and managed and let grid owners discover for themselves how to most efficiently run their businesses – something market agents are more adept at learning than legislators or regulators.

Most analysts are convinced that the transmission system is a natural monopoly, and so recoil at the very thought of competition to the grid. But it already exists, in the form of natural-gas pipelines.

All new power plants, after all, are natural gas-fired. They can be located far from urban areas and their product shipped to urban areas via the electricity-transmission system, or they can be located in urban areas and their output shipped locally.

The competition between gas and electric transmission is no worse than the competition between cable and satellite television service providers.

Deregulation would also mean an end to rules that force grid owners to do business with anyone who wants access to their wires. Transmission providers should be allowed to negotiate the terms and conditions for both putting power into the lines and for taking it off.

Those who own the power lines, after all, have a greater incentive to ensure that their lines run safely than do the regulators who watch over them, particularly since they wouldn’t be able to rely on regulatory bodies to guarantee them a rate of return on their investments.

Deregulation can’t guarantee that blackouts would never again occur. But it would almost certainly lead to a faster flow of dollars into overdue investments in reliability and a far wiser use of such dollars than would the orders and mandates being contemplated in Washington.

More by Taylor on power regulation here and here.

Any Austrians who have read through this may be familiar with these words from Roy Cordato:

“by placing environmental problems within the context of personal and interpersonal plan formulation, we discover that they are not about the environment per se but about the resolution of human conflict. …

“Humans cannot harm the environment. Instead, they can change the environment in such a way that it harms others who might be planning to use it for conflicting purposes.”

“The focus of the Austrian approach to environmental economics is conflict resolution. The purpose of focusing on issues related to property rights is to describe the source of the conflict and to identify possible ways of resolving it.”

“Environmental problems are brought to light as striking at the heart of the efficiency problem as typically seen by Austrians, that is, they generate human conflict and disrupt inter- and intra-personal plan formulation and execution.” 

Do Austrians and others have their problem-solving caps on, focussed on aiding conflict resolution?  Or are they instead simply fighting over the wheel of government, in a way that ensures the continuing frustration of the concerns that many have about apparently very serious climate change risks? 

In which I applaud another balanced, productive post by Dr. Reisman, and draw attention to a post by Lew Rockwell on the need for more power competition

April 23rd, 2009 11 comments

[Snark Factor:  Ridiculously High]

In honor of Earth Day, yesterday Dr. George Reisman, Professor Emeritus of Economics at Pepperdine University and author of Capitalism: A Treatise on Economics, put up a fun little post that mocks the full-employment arguments made by President Obama on behalf of environmentalists and investors in the wind and solar power industries.

On the comment thread, I couldn`t resist expressing my appreciation, while introducing newer readers to the deeper challenge to which Dr. Reisman invites his readers:

I too have enjoyed another delightful article from Dr. Reisman; bravo!

But Dr. Reisman`s style does seem to present problems of
interpretation for some readers, whom do not seem to understand that
while Dr. Reisman appears to simply be bashing environmentalists or
environmentalism generally (by focussing on the most absurd arguments
that some of them offer), he is in fact challenging his readers to do
precisely what he has studiously avoided.

That is, far from simply pulling the wings off of flies as he might
seem to some, Dr. Reisman is actually suggesting that serious students
of economics and libertarian approaches to society should diligently:

  • – seek to engage others productively and with sympathy, in a manner
    carefully designed to improve the functioning of markets and ancillary
    institutions that enhance plan formation across society;

    – note that there are many important, valuable open-access/unowed
    resources and government-owned resources – in which property rights and
    pricing mechanisms are working poorly at best;

    – acknowledge that while proposed “solutions” offered by
    environmentalists may be misguided, enviros have legitimate preferences
    as to how such resources should be protected, managed and distributed;
    and

    – recognize that the concerns of enviros frequently arise in
    response to government interventions have clearly benefitted powerful
    insiders, including wealthy investors and large enterprises, while
    shifting costs and risks more broadly.

    As a result, Dr. Reisman`s tongue-in-cheek posts are in fact searing
    indictments
    of the status quo and tbe fat cats who are using government
    to stifle open competition, consumer choice and innovation, while
    frequently generating large external costs. Unlike some who spoil the
    fun by engaging in the pedestrian task of spelling out the problems
    with the status quo that enviros are right to be dissatisfied with, Dr.
    Reisman treats his readers as adults by bracingly challenging them to
    use their thinking caps and to clear their own heads.

    For those for whom this task is too difficult, perhaps this piece by Lew Rockwell might be a good start:

    “Just who is in charge of getting electricity to residents? A
    public utility, which, in the absurd American lexicon, means
    “state-run” and “state-managed,” perhaps with a veneer of private
    trappings. If you look at the electrical grid on a map, it is organized
    by region. If you look at the jurisdiction of management, it is
    organized by political boundaries.

    “In other ways, the provision of power is organized precisely as
    a central planner of the old school might plan something: not according
    to economics but according to some textbook idea of how to be
    “organized.” It is “organized” the same way the Soviets organized grain
    production or the New Deal organized bridge building.

    “All of centralization and cartelization began nearly a century
    ago, as Robert Bradley points out in Energy: The Master Resource, when
    industry leaders obtained what was known as a regulatory covenant. They
    received franchise protection from market competition in exchange for
    which they agreed to price controls based on a cost-plus formula — a
    formula that survives to this day.

    “Then the economists got involved ex post and declared that
    electrical power is a “public good,” under the belief that private
    enterprise is not up to the job of providing the essentials of life.

    “What industry leaders received from this pact with the devil was
    a certain level of cartel-like protection, the same type that the
    English crown granted tea or the US government grants first-class
    postal mail. It is a government privilege that subjects them to
    regulation and immunizes companies from business failure. It’s great
    for a handful of producers, but not so great for everyone else.

    “There are many costs. Customers are not in charge. They are
    courted only for political reasons but they are not the first concern
    of the production process. Entrepreneurial development is hindered. Our
    current system of electrical provision is stuck in time. Meanwhile,
    sectors that provide DSL and other forms of internet and
    telecommunication services are expanded and advancing day by day — not
    with perfect results but at least with the desire to serve consumers.

    “How New York and California consumers would adore a setting in
    which power companies were begging for their business and encouraging
    them to turn down their thermostats to the coldest point. Competition
    would lead to price reductions, innovation, and an ever greater variety
    of services — the same as we find in the computer industry.

    “What we are learning in our times is that no essential sector of
    life can be entrusted to the state. Energy is far too important to the
    very core of life to be administered by a bureaucracy that lacks the
    economic means to provide for the public. How it should be organized we
    can’t say in advance: it should be left to the markets. Whatever the
    result, you can bet the grid would not look like it does today, nor
    would its management be dependent on the whims of political
    jurisdiction.

    What we need today is full, radical, complete, uncompromised
    deregulation and privatization. We need competition. That doesn’t mean
    that we need two or more companies serving every market (though that
    was common up through the 1960s). What we need is the absence of legal
    barriers to enter the market.

    Thanks, again, Dr. Reisman, for challenging us, and not pandering to the dullest and laziest among us, the way Lew Rockwell does!

    Your admiring pupil (and fellow enviro-hater),

    TT

  • Published: April 23, 2009 5:32 AM

 

For those who think that Dr. Reisman is being serious in his one-sided attack on enviros while ignoring the problems of ongoing rent-seeking by entrenched statist corporations, I would be pleased to refer to other posts in which he is clearly posting tongue-in-cheek and intends no rancor or imbalance.  A good example would be his light-hearted post in March 2007, Global Warming: Environmentalism’s Threat of Hell on Earth, in which Dr. Reisman appeared to seriously argue that

there is a case for considering
the possible detonation, on uninhabited land north of 70° latitude,
say, of a limited number of hydrogen bombs. … This is certainly
something that should be seriously considered by everyone who is
concerned with global warming and who also desires to preserve modern
industrial civilization and retain and increase its amenities.
If
there really is any possibility of global warming so great as to cause
major disturbances, this kind of solution should be studied and
perfected. Atomic testing should be resumed for the purpose of empirically testing its feasibility.

While apparently serious, how could this possibly be a libertarian, nonstatist proposal?  The answer clearly MUST be – since Dr. Reisman is a lover of freedom and markets, and not of big government, goverment-run mega projects or statist corporate rent-seeking  – that Dr. Reisman was NOT being serious.  Instead, in his usual playful manner, he was simply inviting his readers to see through his words, and to productively engage those who are concerned with climate or other commons issues, on the basis of a cool consideration of libertarian and market principles.

Inquiring minds might like to note that I have remarked on Dr. Reisman`s  productive and insightful playfulness on a number of other occasions, on top of comments on his environment-related posts,  which have been fertilizing the LVMI pages since the 2005 Earth Day.

Q.E.D.