Streetwise Professor

FWIW, I am one of the “experts” on the WSJ’s new “The Experts: Energy” feature.  The first installment was a week ago.  The next one, about renewables, runs next Monday-tax day! Yay!

The question was: “What is the most promising renewable?”  My first instinct was to respond with the punch line from the very non-PC joke Ty Cobb told to a journalist who interviewed him late in life: “I feel like the country boy whose Mama told him to say something nice to his prom date, and he told her: ‘you don’t sweat too much for a fat girl.'” But I resisted the temptation to say that on the WSJ: here, not so much resistance.  But you’ll just have to wait a week to see what I said.  Snarky, but not quite so snarky as that.

It wouldn’t be quite so hard to answer the question: “What is your least favorite renewable?”  Here, we have to have separate categories for electricity generation and motor fuel.

With respect to electricity, the runaway winner is wind.  Economically: a turkey.  Environmentally: it kills turkeys.  Well, maybe not turkeys, but it does slaughter countless winged creatures.  Not that enviros will tell you that.  Rather, they are willing participants in a conspiracy of silence to cover-up the avian and chiropterian holocaust.

First, the economics.  Really.  I don’t have to go find these things.  They find me.

I could go on and on, but let me just point you to Germany.  Germany has made a huge bet on wind.  Huge.  And it is becoming a huge economic albatross (speaking of birds) around Merkel’s neck.  Two articles this weekend point that out, both from sources that are usually pretty enviro-friendly.

The first is from Bloomberg:

With consumer power bills increasing and Merkel facing elections in September, Germany’s energy policy is rising on the political agenda. The cost of developing wind farms in the North Sea has surged following construction glitches and delays in linking turbines to the grid.

“The entire energy switch has derailed,” Marc Nettelbeck, an analyst at DZ Bank AG, said this week by phone from Frankfurt. “The difficulties connecting offshore wind farms to the power grid reduces their profitability and renders the original investment calculations of utilities invalid.”

Merkel has sought to spur development of wind farms at sea — where gusts are typically strong enough to keep turbines generating around the clock — because most renewable sources can’t provide constant, or baseload, power like nuclear plants.

The connection setbacks are “problematic for baseload power capacity and can lead to the failure or delay of the energy switch,” Nettelbeck said.

Spending Reduction

EON, the country’s biggest utility, said last month it will lower clean-energy investments to less than 1 billion euros in 2015 from 1.79 billion euros last year. RWE will cut annual renewables spending in half to about 500 million euros in the next two years.

Read the whole thing.  It gets worse.

The second is from the FT:

The EU’s biggest economy has long been a champion of renewable power, a haven investors could depend on.

This made it a green leader well before it decided to phase out nuclear power after the 2011 Fukushima disaster in Japan, and drive its renewable generation up even further.

Though it is not very sunny nor even that windy, Germany now accounts for nearly half of Europe’s solar power capacity and 30 per cent of its wind power.

Renewable power – mostly wind, solar and biomass – made up a formidable 22 per cent of Germany’s electricity generation last year.

But, with the levy added to German power bills to help pay for this growth nearly doubling to €0.053 per kWh – and an election looming in September – environment minister Peter Altmaier has unveiled plans to freeze renewable subsidies for two years. He has also said future rises would be limited to 2.5 per cent a year after that.

Other proposals to reduce costs include a requirement for renewable generators to sell their electricity to buyers under long- term power purchasing agreements – a far less attractive option than the current system of selling power to the grid and getting paid a set tariff.

These new measures are supposed to take effect from August, but face so much political opposition that nothing may happen before the election.

Still, the consequences have been swift. One big municipal utility with substantial renewable investments, Munich’s Stadtwerke München, has already suspended new clean power projects.

Germany touts that it has made 1.4 billion euros on exporting surplus power (mainly from wind).  It doesn’t tout the fact that it spent 14 billion euros subsidizing wind production.  (H/T Tim Worstall.)

Wind is a diffuse energy source.  Wind production is greatest at night, and smallest when it’s hot.  Meaning that it is there when you don’t need it and isn’t when you do.  Load tends not to be located in windy places, meaning that it requires a substantial investment in transmission.  And wouldn’t you know (a) this is expensive, and (b) people don’t like transmission lines.  Wind is also intermittent, and requires backup traditional generation (fossil fuel or nuclear).

Other than that, it’s great.

But it’s so environmentally friendly, right? Aren’t these small prices to pay?

Why don’t you go ask your fine feathered friends that question?

Wind turbines A/K/A bird cuisinarts, bat blenders.

Master Resource and Watts Up With That? provide chapter and verse about the number of flying creatures killed every year by wind turbines.  The numbers are in the 10s of millions in the US alone, not to mention Europe. Each turbine kills several hundred birds per year.  In some locations, bats are major contributors to the body count.

In contrast: it is estimated that the Exxon Valdez spill killed less than 700,000 birds.

So surely, the enviros are shrieking in their opposition to wind, right? Right?

Hardly.  And as the links above demonstrate, the Federal government is actually complicit in efforts to cover up the bird and bat body counts.  Indeed, the Feds actually give licenses to kill.

To recapitulate.  Wind is economically inane and environmentally dubious.  Other than that, I see no problems whatsoever.

Now ethanol.  Another historically enviro-leaning source, The Economist, takes it apart.  Like wind, it is neither economically efficient nor environmentally friendly:

Moreover, ethanol burned in an engine produces more than twice as much ozone as the equivalent amount of petrol. Ground-level ozone is a big cause of smog. And, while good at boosting a fuel’s octane rating, ethanol packs only two-thirds the energy per gallon of petrol. As a result, motorists get fewer miles per gallon using fuel blended with ethanol than with undiluted petrol. So, even if blended fuel is cheaper per gallon than petrol (thanks to ethanol’s subsidies), the overall cost of using it tends to be higher

Not to mention (which the Economist does) that ethanol mandates are screwing up the gasoline market, and inflating the price of motor fuel in the US.

And definitely not to mention (which the Economist does not, at least in this article), that the subsidy- and mandate-driven demand for ethanol has increased the demand for corn, thereby increasing corn prices, and food prices generally.  The biggest victims of this?  The poor, notably in developing countries, who spend a very large fraction of their income on food.

Wind and ethanol are monstrosities.  Moreover, governments-through subsidies and mandates-are the Frankensteins who created these monsters.  (At least the original Dr. Frankenstein created only one monster.)

To the extent that fossil fuels create externalities, it is best to provide incentives to reduce their consumption, and to encourage the production of substitutes, through taxes (taking into account the heavy tax burden that fossil fuel consumption already incurs).  Then let market participants determine the most efficient way to mitigate these externalities.  Instead, for decades governments have attempted to pick winners, and constructed an elaborate system of subsidies and mandates that have been driven by politics and politicking, and which have led to the massive stimulation of the worst of the non-fossil fuel technologies: wind and (corn-based) ethanol. In so doing, they have picked total losers.

What’s more, the subsidization of inefficient technologies, actually suppresses the incentive to develop more efficient technologies (where efficiency includes the environmental costs).   This unseen impact is arguably as devastating as the seen effects-and those are bad indeed.