Streetwise Professor

August 18, 2020

California: Boom, Boom, Out Go the Lights

Filed under: Climate Change,Economics,Energy,Houston,Politics,Regulation — cpirrong @ 6:44 pm

Twenty years ago, California experienced its Electricity Crisis. Or, given current events (which will be the subject of what follows), may be known as the First Electricity Crisis. The problem in 2000-2001 was, in the main, a problem of insufficient generation, caused by a variety of factors. The ramifications of the supply shortage and resulting high prices for California utilities, ratepayers, and state finances were greatly exacerbated by a dysfunctional market design implemented only a few years before, in the mid-1990s. (When I gave talks about the subject, I used to quip: “California wanted to deregulate its power markets in the worst way. And it succeeded!”)

The lore of the crisis is that it was caused by Enron and other Houston bandits and their manipulative schemes. These schemes were not the cause of the crisis: they were the effect, and the effect of the dysfunctional market design, which created massive arbitrage opportunities which will always be exploited.

California is experiencing another crisis. It cannot yet rival the first, which went on week after week, whereas the current one has lasted about a week. But for the first time since Crisis I, the state is experiencing rolling blackouts due to a shortage in generating capacity.

The proximate cause of the problem is a massive heatwave which is causing high demand. A contributing proximate cause is low hydroelectric supply driven by a lower than average snowpack. But the underlying cause–and the cause that should get the attention of most Americans, including those who experience schadenfreude at the Insufferable State’s misery–is the Green Mania that has taken root in California which has made it impossible for the state to respond to demand spikes in the way power systems have done around the world for nigh onto a century.

In particular, California has adopted policies intended to increase substantially the share of power generated by renewables. This has indeed resulted in massive investments in renewables, especially solar power, which alone now accounts for around 12,338 MW.

But this capacity number is deceiving, because unlike a nuclear or coal or combined cycle natural gas plant, this is not available 24/7. It’s available, wouldn’t you know, when the sun shines. Thus, during the mid-morning to late afternoon hours, this capacity is heavily utilized, but during the evening, night, and early morning contributes nothing to generation. At those times, California draws upon the old reliables.

But that creates two problems, a short term one (which California is experiencing now) and a long term one (which contributed to the current situation and will make recurrences a near certainty).

The short term problem is that during hot weather, demand does not set with the sun. Indeed, as this chart from the California Independent System Operator shows, today (as on prior days) demand has continued to grow while solar generation ebbs. This figure illustrates “net demand” which is total demand net of renewables generation. Notice the large and steady increase in net demand during the late afternoon hours. This reflects a rise in consumption and not matched by a rise in solar generation before 1400, and a fall thereafter.

Go figure, right? Who knew that the hottest time of day wasn’t when the sun is at its height, or that people tend to come home (and crank up the AC) when the sun is going down?

Here’s the plot of renewables generation:

Note the plateau from around 1000-1400, and the decline from 1400 onwards–during which time load increased by about 10,000 MW.

So gas, nuclear, and (heaven forfend!) coal have to fill the growing gap between load and non-dispatchable renewable generation. They have to supply the net demand. Which brings us to the longer term problem.

The growth in solar generation means that conventional and nuclear plants aren’t generating much power, and prices are low, during the hours when solar generation is large. Thus, these plants earn relatively little revenue (and may even operate at negative margins) during these hours. This deterioration in the economics of operating conventional plants, combined with regulatory and political disdain for nuclear and coal has led to the exit of substantial capacity in California. A large nuke plant shut down in 2015, all 10 coal plants in the state have shut down (though three have converted to the environmental disaster that is biomass), as have many gas plants. In 2018 alone, there was a net loss of around 1500 MW of gas capacity, and from 2013 the net loss is about 5000 MW–over 10 percent of the 2013 level. (NB: the shortfall in capacity the last few days has been around 5000MW. Just sayin’.)

And note–demand has been rising over this period.

Notionally, the loss in nuclear and conventional capacity has been roughly matched by the increase in solar capacity. But again–that solar capacity is not available under conditions like the state has experienced over recent days, with hot weather contributing to high and rising demand in the late afternoon when solar output is declining. That is, these forms of capacity are very imperfect substitutes. They are most imperfect in the afternoons on very hot days. Like the last week.

In a nutshell, at the same time it massively incentivized investment in renewables, California has not incentivized the necessary investment in (or retention of capacity in) conventional generation. That mismatch in incentives, and the behavior that results from those incentives, means that from time to time California will have inadequate generation. That is, California has not incentivized the proper mix of generation.

So how do you incentivize the retention of/investment in conventional capacity that will remain idle or highly underutilized most of the time, in order to accommodate the desire to increase renewables generation? There are basically two ways.

The first way is to have really, really high prices during times like this. Generators will make little money (or lose money) most of the time, and pay for themselves by making YUGE amounts of money during a few days or hours. This is the theory behind “energy only” markets (like ERCOT).

The problem is that it is not credible for regulators to commit to allowing stratospheric prices occur. There will be screams of price gouging, monopoly, etc., and massive political pressures to claw back the high revenues. This happened after Crisis I, as more than a decade of litigation, and the payment of billions by generators, shows. Once burned, twice shy: generators will be leery indeed about relying on government promises. (A David Allan Coe song comes to mind, but I’ll leave that to your imagination, memory, or Googling skills.)

Relatedly, who pays the high prices? Having retail customers see the actual price creates some operational problems, but the main problem is again political. So the high prices have to be recovered through regulated retail pricing mechanisms that give rise to the credible commitment problem: how can generators be sure that regulators will actually permit them to reap the high prices during tight times that are necessary to make it worthwhile to maintain the capacity?

That is, for a variety of reasons energy only pricing faces a time consistency problem, and as a result there will be underinvestment in generation, especially when renewables are heavily supported/subsidized, thereby reducing the number of hours that generators can pay for themselves.

The other way is the Klassic Kludge: Kapacity markets. Regulators attempt to forecast into the future how much capacity will be needed, and mandate investment in that amount of capacity. Those with load serving obligations must pay to buy the capacity, usually through an auction mechanism. The idea being that the market clearing price in this market will incentivize investment in the capacity level mandated by the regulators.

A Kalifornia Kapacity Kludge was proposed a few years back, but the Federal Energy Regulatory Commission shot it down.

All meaning that California leapt headlong into the Brave New Green World without the market mechanisms (either relatively pure, like an energy only market with unfettered prices, or a kludge like a capacity market) necessary to bridge the gap between demand and renewables supply.

So what happens? This happens:

California’s political dysfunction makes it a near certainty that it will not implement reasonable market solutions that will provide the right incentives, even conditional on its support for renewables. Indeed, it is almost certain that it will do something that will make things worse.

Milton Friedman once said that inflation is always and everywhere a monetary phenomenon. Given that the major power crises in recent years–in California, in Australia, and a near miss in Texas last year–have involved renewables in one way or another, I have an analog to Friedman’s statement: in the future, always and everywhere power crises will be a renewables phenomenon.

And this is why Americans should pay heed. Whatever ventriloquist has his hand up the back of Biden’s shirt has him promising a massive transition towards renewable electricity generation, beyond the already swollen levels (swollen by years and billions of subsidies). A vision, which realized, would result in California’ s problems being all of our problem.

So look at California like Scrooge did the Ghost of Christmas Future. And be afraid. Be very afraid.

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April 20, 2020

WTI–WTF?

Today was one of the most epochal days in the history of oil trading, which is saying something. The front month May contract–which expires tomorrow (21 April, 2020)–(a) settled at a negative price of -$37.63, (b) declined $55.90 from the previous day’s settlement, and (c) exhibited a trading range of $58.17, which is about 3.5x Friday’s settlement price.

Even these eye-popping numbers don’t tell the full story. The last traded price was -$13.10. Note that the settlement price is based on the volume weighted average price during the last two minutes of trading, so an average price of $-37.63 in the last two minutes and a last traded price of -$13.10 means prices moved more that $25/bbl in these minutes.

And we’re not done yet! As I write at 1841 CDT, the price is up to -$5.00–an increase of $32.63.

That there’s what they call volatility, folks.

To put these numbers in perspective, the largest trading range on the any day of the last three trading days of CL contracts from 2000-2019 is $26.65, a day around the time of the financial crisis and the aftermath of Hurricane Ike (October 2008 contract): here’s what I wrote about that event. The median intra-day range on the last three days is $1.6, the mean is $1.5, and the standard deviation is $1.47. So we are around a 40 standard deviation event here.

The largest daily price change during the last 3 trading days is $16.37, with a median of $.73 and a standard deviation of $1.45.

The calendar spread is also extreme, settling at $58.06 between the June and the May. Meaning that if you had storage, you could get paid to take delivery, sell it forward, and lock in that $58.06 (net of what the storage costs you). I guess you could call that the megacontango.

All in all, a historically unprecedented day.

The proximate cause of these wild gyrations, and unprecedented negative prices is, of course, the collapse of demand and the looming exhaustion of storage space, including at the delivery point of Cushing, OK. But although this is a necessary condition for today’s events, it is not a full explanation.

The storage issue has been known for weeks, and discussed intensely. It had been priced in to a considerable degree: contango was already at a historically high level. What information about the availability of storage arrived between Friday and today? Unlikely to be anything that could cause such chaotic price movements.

The likely cause is the difficulty of liquidating about 100,000 open contracts (100 million barrels!) in such extreme technical conditions. It is plausible, and indeed likely, that strategic behavior–perhaps rising to the level of manipulation–is the major cause of how prices moved today against the background of conditions that were widely known on Friday.

Let me start out by noting that something similar, though not as extreme, occurred during the demand collapse and associated flooding of storage during the Financial Crisis. As I documented here, the expiries of the January, February, and March 2009 WTI contracts saw what were then historically unprecedented price collapses. So did other US grades of oil. Here’s a picture from the linked document:

The big downward spikes in the front month-back month spreads correspond with the days around expiry.

How does strategic behavior/market power/manipulation play into this? The model of short manipulation in my 1996 book (only $169 paperback–buy two!) and 1993 J. of Business article formalizes the argument, but the intuition is fairly straightforward. Manipulation exploits frictions and bottlenecks. (My article/book refer to “frictional manipulations.”). There is now a huge friction/bottleneck in Cushing–constrained storage. This bottleneck makes the demand curve for crude at Cushing extremely inelastic, and means that the movement of even small excess quantities of oil into that location will cause prices to decline dramatically.

In these conditions, a trader, or a group of traders with modest-sized short positions can exercise market power by delivering even a small amount of oil over and above the quantity that should flow to Cushing. This drives down the price and allows the trader or traders to cover his (their) position(s) at artificially low prices.

In this situation, the storage bottleneck is the gasoline, the exercise of the market power is the match. With 100,000,000 barrels of open long positions needing to liquidate, given the storage constraint, the resulting conflagration can be epic.

This is, at this stage, a hypothesis. It is a possible explanation of the beyond extreme movements observed today. Under the circumstances, it is a very plausible explanation, and one that deserves scrutiny. And given the amount of money that changed hands today (~$6 billion on a mark-to-market basis) I’m sure that it will get it.

The only parallel I can think of is the onion market in 1955, when the movement of a couple of superfluous carloads of onions into Chicago, and delivery thereof against futures, caused the price to crash below the cost of the bags that they had to be delivered in. There was no demand for the onions (being perishable, and people eat only so many hot dogs), so many of the excess plants ended up getting dumped into the Chicago River. (Which, in 1955, probably improved the water quality.) (Another irony being that Chicago means “stinky onions” in the Miami-Illinois Indian language.)

In 1955, demand was inelastic because onions are perishable (i.e., they can’t be stored). In a way, the lack of storage space makes oil perishable. Even if that analogy isn’t perfect, the economics are the same: an economic constraint (the non-storability of, or the lack of storage space) leads to extremely inelastic demand that makes short market power manipulation possible.

Tomorrow is the last trading day for CLK20. Strap it up! It’s going to be a wild ride.

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September 16, 2019

Beta O’Rourke Fails Texas History–and Texas

Filed under: History,Houston,Politics — cpirrong @ 7:14 pm

Democratic presidential candidate Robert Francis “Beto” (AKA “Beta”) O’Rourke, currently running neck-and-neck with Rounding Error, is attempting to jumpstart his floundering campaign with strident threats to confiscate “assault weapons”:

“Hell, yes, we’re going to take your AR-15,” the former Texas congressman shouted, to cheers from the audience. “We’re not going to allow it to be used against our fellow Americans anymore.”

This prompted Texas state representative Briscoe Cain to tweet: “My AR is ready for you Robert Francis.”

Beta then proceeded to go all drama queen, replying on Twitter: “This is a death threat, Representative. Clearly, you shouldn’t own an AR-15—and neither should anyone else.”

Going even drama queenier, Beta reported Cain to the FBI.

FFS. So what’s next? Will Beta demand the digging up and ritual burning of Charlton Heston’s corpse? (Actually kind of amazed YouTube/Google hasn’t consigned that to its memory hole.)

Beta, who is from Texas, apparently needs a Texas history lesson. Cain’s sentiment has a long tradition in Texas, dating from the dawn of the Republic in 1835, in fact.

The story is this. In 1831, the Mexican government gave the Anglo “Texian” citizens of Gonzales a small cannon for use in defense against marauding Comanches. When the Texians became restive a few years later, and began to resist the Mexican government, the Mexicans thought better of their gift and sent a detachment of 100 men under a Lieutenant Francisco de Castañeda to retrieve it. Men from Gonzales and other towns rallied, and told Castañeda to bugger off. They emphasized their message with a homemade flag depicting the image of a cannon, with the words “Come and Take It” emblazoned on it.

After some fitful skirmishing, Castañeda decided he’d rather not, actually, and so he scooted off, leaving the cannon in the Texians’ hands.

Castañeda was not only present at the very beginning of the Texas Revolution in Gonzales: he was present at the end, surrendering the Alamo to Juan Seguin on 4 June, 1836. Two time loser. Id, puta!

State Rep. Cain was therefore echoing a proud Texas tradition, and O’Rourke, who affects some Mexican connection with his faux nickname (why isn’t that considered cultural appropriation?) (maybe his ancestors served in the San Patricio Battalion!) is the one playing the role of the threat to the liberties and right of self-defense of Texans–and Americans generally.

So as someone who got to Texas as soon as I could, I say to Beta: Come And Take It. And that is your history lesson for today.

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September 2, 2017

Harvey’s Danger Has Passed (For Most, Though Not All)

Filed under: Climate Change,Houston,Politics — The Professor @ 9:36 pm
The last several days in Houston have been warm and sunny. Most stores are open (with the surprising exception of a local Starbucks), traffic is getting back to normal–unfortunately (I-610 in particular is a nightmare). There are still flood waters in some locations, but most of the water has drained. I drove on US-59 (I-69, which nobody calls it) yesterday. Here’s how it looked a few days ago.

us59_kayak_at_hazard_dave_rossman

Some of the bayous are pretty much back to normal. Here is Brays (or Braes) Bayou, at Calhoun Rd. near UH, as of Friday–less than 48 hours after the rain stopped.

brays_bayou_calhoun

That doesn’t look much different than on a normal day. (This bayou has been subject to a lot of Corps of Engineers work post-Allison. The place I first lived in for a bit had been flooded up to the 1st floor ceilings during Allison. That area did not flood this time around. Whether that can be attributed to work on the bayou I can’t say.)

I only had to contend with many small lizards who took refuge on my 2d floor patio. When I sat out there after the storm, I felt like I was at a casting call for a Geico commercial.

Thank you to all who contacted me via various channels to inquire about how I was faring. I am deeply grateful, and am glad to say that unlike so many others, I was mainly inconvenienced, rather than suffering bodily or material harm. I am deeply sorry for those less fortunate than I: there but for the grace of God . . .

As I told most of those who wrote, the impacts were highly variable, and largely driven by proximity to the bayous. Or as Beldar, who returned from a long blogging hiatus to write about Harvey put it, there were highly localized but widely distributed areas of impact. In the areas that it was bad, it was horrid. But the bad areas were not as ubiquitous as viewing the news would suggest.

As some commenters have noted, and has been widely recognized, Houston and Texas have acquitted themselves very well. The contrast with the New Orleans during and post-Katrina is remarkable on every dimension. Rather than social disintegration, there has been solidarity and a spirit of mutual aid. My tennis coach’s father works with Red Cross, and says that they have more volunteers than they can handle. The lines in grocery stores that I visited once they reopened were amazing placid, with people patiently chatting while waiting their turn. Would that Christmas shopping scenes be as civil.

But of course, numerous people of ill will outside of Houston and Texas have taken this opportunity to take swipes at the city, state, and their people. Examples include a disgusting “cartoon” in Politico (a Tweet of which the gutless bastards deleted when called out on it), an even more disgusting cartoon in Charlie Hebdo, and more Tweets than I could count claiming that Harvey was divine justice for Houston’s petrol-chem industry–presumably these were Tweeted from artisanal wood and hemp smart phones by people who don’t drive, eschew all plastics, and produce all their own food using only llama dung as fertilizer. (The Unabomber was an evil bastard, but at least he lived what he believed.) These criticisms make as much sense as fundamentalists blaming earthquakes in the Bay Area as God’s retribution on sodomites (which is an illustration of how political opposites are often doppelgängers).

To which most Texans reply: we really don’t give a shit what you think. Or as one meme put it: Hold our beer–we got this.

And of course there are those who are using this to advance their political obsessions. I’ve already mentioned those who assert, obnoxiously and ad nauseum, that Harvey was the inevitable and predictable result of climate change. Among the most prominent, and certainly most execrable of these, was one-time economist Jeffrey Sachs:

Gov. Abbott, we would like to bid you a political adieu. Perhaps you can devote your time to rebuilding Houston and taking night classes in climate science. Senators Ted Cruz and John Cornyn, you will soon be asking us for money to help Texas.

My answer will be yes, if you stop spewing lies about climate dangers, agree to put US and Texas policy under the guidance of climate science, back measures to lower carbon emissions and stay in the Paris Climate Agreement. Then, of course, let’s help your constituents to rebuild.

And to ExxonMobil, Chevron, Koch Industries, ConocoPhillips, Halliburton, and other oil giants doing your business in Texas: You put up the first $25 billion in Houston disaster relief. Call it compensation for your emissions. Tell the truth about growing climate threats. Then, as citizens seeking the common good, we will match your stake.

This is the rankest opportunism, and his entire piece is written with a reckless disregard for the evidence about the link between CO2 and hurricanes generally (which is equivocal at best), and about the link between anthropogenic effects on climate and Hurricane Harvey in particular.

As I noted in my earlier post, Harvey was not an exceptionally powerful storm by historical standards, and indeed storms of its intensity were actually more common during the period prior to large increases in CO2 emissions. Harvey’s devastating effects were a result of the chance interaction of weather patterns that led Harvey to meander and linger over Houston.

At present another hurricane–Irene–is forming in the Atlantic. To illustrate the role of weather, there are two scenarios for its track. If the dominant weather pattern over the North Atlantic is a strong high pressure region, it will likely hit the US, most likely Florida. A weaker high pressure area, will result in Irene turning north and petering out in the Atlantic.

The other hobby horse being ridden with abandon is that Houston’s pro-development policies increased the damage: I’ve read that Houston’s lack of zoning bears some of the blame. Two of the most strident advocates of this view include The Economist and Bloomberg Business Week.

Well, on one level, this is Captain Obvious DUH territory: no development, no damage. More seriously, it is difficult to see how any policy change would have had an appreciable impact. The Houston Has No One to Blame But Itself litany wreaks of the correlation-causation fallacy, and post hoc ergo propter hoc arguments.

Where to begin? I guess with the fact that this was truly an exceptional storm, with record rainfall. Given Houston’s topology and geography, there would have been massive flooding even had the place been inhabited by Karankawa and the Akokisa indians living in grass huts sleeping on chickees, as it was once upon a time.

Houston is flat as a table. It is cut by numerous bayous and streams: its nickname is “The Bayou City.” Many of these streams are quite winding, which means that when they take on a lot of runoff, the water goes up and over the banks rather than rushing out to Galveston Bay, because it has nowhere else to go.

Yes, the pavement and building increases runoff. But several factors need to be kept in mind. First, Houston’s soil is sandy and its water table is very high, meaning that even absent parking lots and streets and buildings the capacity of the soil to absorb is limited. Second, contrary to the prejudices of people who write about Houston in blissful ignorance of the facts, Houston has the largest amount of green space of any city in the United States. Only about 10 percent of the area in Houston is rated as impermeable, and 90 percent is ranks less than 2 on a 5 point scale of permeability (with a lower score indicating greater permeability). Third, many of the outer lying areas that flooded were inundated by the Brazos River and connecting streams, which is another meandering stream, and which was not swollen by runoff from suburban developments, but which just couldn’t handle all the rain and the runoff from undeveloped areas.

And can anyone honestly say that any of Harris County would be that much less developed under any alternative development policies? Zoning for instance, might have affected the distribution of business and maybe some residential areas, but the total amount of the county that would be built on would almost certainly be virtually the same.

Yes, if Houston had adopted the policies of Detroit, and suffered the same economic shocks, there would be a lot more green space and Harvey would have done a lot less damage. No serious person considers that a good trade-off.

Indeed, there have been floods as extreme and even more extreme, back when Houston was far less developed than today. A good example is 1935, when Buffalo Bayou crested at 54 feet. It crested at a mere 40 feet in 2017. But downtown Houston has flooded ever since there was a downtown Houston, because downtown Houston lies hard up a flood-prone bayou. And it was put there because that bayou was the city’s economic link to the world, and which eventually made it one of the great ports in the United States.

In sum, given the prevalence of floods before the boom of the recent decades, it is difficult indeed to attribute this week’s floods to that boom. Instead, the floods are a constant, as is Houston’s geography and topology. Combine those with biblical rains, heavy even by Houston standards, and we have what we have.

Some–The Economist for example–blame permitting of houses in 100 year flood plains. The impact of this (the magazine estimates 8600 houses so located) on the total volume of flooding is certainly trivial, meaning that there are no external effects to speak of. Those who built in these locations assumed the risk, based on the same information The Economist used to make its calculations.

Yes, to the extent that such development is encouraged by subsidized flood insurance, or the prospects of post-flood government assistance, too many of such houses are built, and the private losses are socialized to US taxpayers at large. I completely agree with the principle of making people bear the full cost of insuring the risk, or the full cost of losses if they choose to build but underinsure. But again, the contribution of this to the magnitude of the flooding is probably too small to even measure: the magnitude of the flooding was due to record rain and Houston’s topography. Further, it also likely represents a small fraction of the estimated $160 billion in damage from the storm.

Jeffrey Sachs writes: “Houston has been growing rapidly without attention to flood risk.” It has been growing rapidly, but to say that this growth has occurred without attention to flood risk is a damnable lie–a libel, actually. Especially post-Allison (in 2001) there has been an effort to reduce the city’s vulnerability to flooding. Of course, as with any government endeavor, one can criticize the execution, and the priorities: as commenter and friend Tom Kirkendall notes, money squandered on sports stadiums and light rail (the lightest aspect of which is ridership) could have been better spent on infrastructure, including drainage improvements. But there has been considerable attention. There has been work on the bayous. (For example, there has been ongoing work on Brays Bayou near Calhoun for some time–and the crews were back at work on Friday.)  Moreover, as any Houstonian with a car can tell you (and that is the vast majority of Houstonians, as many outsiders often snarikly remark), every road repaving project is a long running saga because in addition repaving, the city is installing huge storm sewer lines. Shepherd has been a nightmare for years because of such a project.

If you look at the 2011-2015 Houston capital improvement plan, which sets out the various major road projects, you will see that almost all of them include “improving drainage.” There are 27 references to this in the document.

The strategy has been to try to direct runoff to the major highways, which is one reason for some of the most striking images of the flooding. Better to flood freeways than neighborhoods.

So Jeffrey Sachs, in his lofty and deliberate ignorance, can fuck right off.

The rainfall in Harvey was approximately double that of Allison, and covered a much wider area. For example, one reason that some of the major disasters Harvey caused did not occur with Allison is that the former storm overwhelmed the Addicks and Barker Reservoirs, whereas that did not happen with the latter because the heavy rain area did not extend that far.

I do not know for certain, but it is my impression that the Harvey flooding in the area that Allison also hit hard is comparable to what happened in 2001, despite the fact that Harvey’s rainfall was about double Allison’s. A comparison of 2017 and 2001 will tell a lot about how well post-Allison infrastructure changes mitigated the damage this time around.

Post-Allison, the Harris County Flood Control District put out an excellent report on the storm, and its effects. It was titled “Off the Charts” to indicate how exceptional Allison’s rains were. Since Harvey’s were about double Allison’s, off the charts doesn’t even come close to describing 2017.

No doubt HCFCD will put out a post-Harvey report, and will be challenged to come up with a appropriate title. I look forward to reading it, paying particular attention to what it has to say about the effect of post-Allison mitigation efforts.

But the basic point is that this is not primarily, or even secondarily a policy issue, regardless the attempts of opportunists to make it so. This was a historic storm–an epic storm–produced by a chance interaction of weather events. It dumped huge rains on one of the largest cities in the US–in amounts that would have no doubt overwhelmed every major city in the US. Moreover, it hit a city which nature made preternaturally vulnerable to flooding.

In sum, Harvey is a natural disaster. The economic cost is indeed due to economic development, but that is primarily an effect, rather than a cause, as Jeffrey Sachs, the Economist, Bloomberg BusinessWeek and myriad others with an axe to grind would make it.

Musical postscript. I survived Harvey’s danger, and didn’t even have to climb a flagpole.

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