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By Robert Rapier on Feb 27, 2011 with 125 responses

The Failure of U.S. Politicians to Open Electricity and Other Energy Markets

The following guest post was written by Mike Holly, who is the Chairman of Sorgo Fuels in Crosslake, Minnesota. Sorgo is a company involved in the production of energy from sweet sorghum, and Mike can be contacted at smikeholly “at” gmail.com. In his article, Mike touches upon a theme that I have complained about in the past: That U.S. energy policy favors specific technologies to such an extent that it effectively bars some promising technologies from competing.

My standard disclaimer applies: Publication of a guest post does not imply endorsement. Rather it indicates that I think the subject matter is worthy of debate and discussion.

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THE FAILURE OF U.S. POLITICIANS TO OPEN ELECTRICITY AND OTHER ENERGY MARKETS

By Mike Holly

Chairman, Sorgo Fuels

Over the last century, U.S. politicians have formulated policies favoring monopolies and their affiliates and friends, while picking winners and losers, often favoring higher-cost technologies, causing consumer and taxpayer rip-offs, increasing debt and pollution, and decreasing innovation, competitiveness, opportunities and growth.

FREE MARKETS (1879-1907)

Like most successful industries, energy started with free markets, competition, and innovation.  Before 1900, oil men like John D. Rockefeller built refineries, Thomas Edison and other developers built electric lighting, transmission lines and co-generation plants, and Henry Ford built cars that ran on both gasoline and ethanol.

Competition forced electricity producers to use efficient cogeneration plants producing both heat and power simultaneously.  Plants were fueled by wood, cleaner anthracite coals and oil.  They also used some hydropower.  More expensive natural gas, produced at coal mines, was used for heating, but not much power.

REGULATED MONOPOLIZATION (1907-1932)

In 1907, urban politicians started awarding territorial monopolies to investor-owned distribution, transmission and generation companies, and also natural gas companies.  They successfully lobbied politicians for protection from competition, even though the Supreme Court ruled that Rockefeller was in violation of the Sherman Antitrust Act in 1911.

Samuel Insull led the way in the power industry by buying a utility monopoly for the Chicago territory after contributing heavily to the Republican Party.  The government regulates these so-called public electric and natural gas utilities on a cost-plus-profit basis, routinely allowing them to charge captive ratepayers higher service fees by overvaluing purchases.

Regulated utility monopolies, with help from US politicians, illegally block competition by:

  • outlawing competing transmission and distribution grids and pipelines,
  • not allowing other lower-cost suppliers to use their grids and pipelines,
  • opposing independent utility transmission and distribution providers that could buy power from all suppliers, and
  • using predatory price cuts and cost shifting to undercut competition, including self co-generation

The politics is also encouraged by payoffs.  For example, our company lobbied for years the chair of the Minnesota House energy committee, who was later sent to prison after the electricity and natural gas utility Xcel invested in his company.

COMMUNAL NATIONALIZATION (1933-1965)

Public backlash against the role of investor-owned utility monopolies in help causing the Great Depression allowed mostly Democrat politicians, led by President Franklin D Roosevelt, to pursue national regulation favoring federal, municipal and rural cooperative public electricity and natural gas utility monopolies.

Government and community power has taken over almost a quarter of the electricity industry.  Public Power is also blocking competition by:

  • creating government monopolies with little incentive for cost control, low-cost power purchases or innovation
  • access to subsidized federal power and financing (especially hydro until 1950),
  • exemptions from federal income taxes, and
  • territorial battles (including litigation and elections) financed with taxpayer money against investor-owned power financed by ratepayers in a political battle independents can’t win.

Public officials have demanded kickbacks, through middle men, from independent suppliers seeking to sell them power.

CRISES REGULATION (1965-1992)

After 1907, monopolization and nationalization caused centralization of the industry.  Investor- and publicly-owned public electric utility monopolies built mostly large power plants fueled by fossil fuels, hydropower, nuclear and recently utility-scale wind power, which required longer distance transmission.

Fossil fuels, especially coal has always been significant for base loads, along with oil for other loads until it was replaced recently by natural gas.  Hydropower became dominant in the early 1900s until suitable large sites ran low around 1950.  Nuclear grew rapidly from the late 1960s until the Three Mile Island radiation leaks in 1979.

Excessive transmission led to higher costs, greater line losses, and brownouts starting in 1965.  Larger power plants brought dirtier fuels and pollution (especially from coal), the depletion of oil and later natural gas (by not using efficient cogeneration and biomass), and higher costs for ratepayers starting in 1973.

In 1973, at about the same time the nation started to need new cleaner energy sources, the Supreme Court ruled that, under the Sherman Antitrust Act, utility monopolies must share transmission lines.

Finally, politicians started opening some electricity markets, albeit briefly.  A 1978 Federal Act called PURPA required utilities to buy power priced at the utility’s (avoided) costs from independent power producers using renewable energy and cogeneration.

PURPA finally took effect in 1984, and for a short period between the late 1980s and early 1990s, new capacity additions by non-utilities actually exceeded those of utilities.  Non-utilities built about 80% low-cost cogeneration, fueled mostly by wood and natural gas, and also some renewable energy.

In some highly-populated states, regulators appear to have overestimated needs causing overcapacity.  The three regions around California, the Northeast and Texas built the most cogeneration, mainly by the influential petrochemical and paper industries.  .

But in most states, regulators allowed utilities to block non-utilities by calculating low needs and avoided costs.  The Federal Energy Regulatory Commission (FERC) made no effort to standardize procedures for more accurate calculation of avoided costs in all states.

During the 1990s, politicians, including Democrat President Bill Clinton, and regulators began a period of re-monopolization with policies favoring utility monopolies in regulated and later deregulated states, and ending the independent power industry before it hardly had a chance to develop.

State regulators reformed PURPA by ordering the setting of avoided costs through competitive bidding (as they had already used with natural gas).  But bidding is time-consuming and expensive, and even worse, utilities are allowed to rig bids in favor of higher-cost bids offered by themselves, affiliates and friends by:

  • skipping the bidding process whenever they want and just building their own plants,
  • bidding for any technology they or the politicians want (e.g., wind power), and
  • using preferential and subjective bidding criteria favoring their projects.

Bid rigging caused the addition of cogeneration to slow during the 1990s and accumulated cogeneration actually fell after 2000.  After 1992, the growth of wood and other biomass fuels also stalled.  Forestry industries are forced to send waste wood to landfills at high cost.

Utility monopolies like Xcel even select the worst biomass power projects to kill the industry.  Moreover, there is no incentive to develop new economic technologies in the U.S. because utilities can take them whenever they want.

DEREGULATED MONOPOLIZATION (1992-2002)

Politicians, including President Clinton, promised both power and natural gas suppliers would be able to compete in free markets.  But Clinton’s federal strategy was weak and corrupt, and relegated much to the states, where it was also corrupt, allowing utilities to write much of the rules.  Deregulation was rigged to fail and the result was deregulated monopolies, not competition.

Retail natural gas markets were poorly deregulated and in only a few states.  The Energy Policy Act of 1992 gave FERC authority over wholesale power markets, while some states tried consumer choice of electricity in retail markets.

For deregulation of wholesale power markets, FERC wanted a national grid, but states and utilities strung out reform by forcing the following weak compromises, even as non-utilities kept accusing utility transmission operators of discrimination:

  • in 1992, FERC failed to get utilities to file fair open access tariffs by offering access to lucrative market-rate contracts,
  • in 1996, FERC failed with Independent System Operators as nine states even filed a failed lawsuit to try to stop them,
  • in 1999, FERC failed with larger regional transmission organizations, and
  • in 2002, FERC failed to even get independent transmission providers and Standard Market Design and in 2003 was forced to quit the effort after many states lobbied Congress against them.

During deregulation of retail markets, the US and states favored old coal and nuclear plants, often spun off from regulated utility monopolies, with:

  • “grandfather” exemptions from meeting costly environmental, safety and siting laws imposed on new power plants.
  • stranded cost subsidies from consumers to cover losses and pay off their capital costs (when gas prices were low), but were not required to pay back stranded benefits to ratepayers that financed their plants when gaining windfall profits (from later high gas prices).
  • the selling many old plants to few buyers creating market power, while also failing to enforce antitrust laws.
  • the continuing of a preferential T&D grid with regulations blocking the siting of power lines to many potential, especially out-of-state, competitors, and
  • the dumping of surplus power by regulated utility monopolies in neighboring states, preventing both wholesale and retail competition.

Many independent power producers, that made the mistake of trying to compete as FERC-approved merchant plants in limited wholesale markets governed by rigged deregulation and regulation, went bankrupt as wholesale power prices fell 90 percent with overcapacity from 1999 to 2002.  Skyrocketing natural gas prices also hurt.

Federal agencies like FERC and state departments like the Illinois Department of Commerce failed to document market favoritism even when required by law.

Retail deregulation of power markets failed to produce significant competition, and instead resulted in massive consumer and taxpayer rip offs, in all 14 states that implemented it.  So the 10 other states that were also deregulating went back to regulation, which also failed to control costs in all 36 states.

FASCIST NATIONALIZATION (2002-)

Since 2002, U.S. politicians have responded to policy failures by partnering with favored industries to maintain the electricity and natural gas monopoly status quo, while trying to relieve recent energy crises caused by monopolization by picking of winners and losers with favoritism based on politics (not even planning or societal benefit).

In 2001, Republican President George W. Bush created The Energy Task Force.  The chair of the task force, Vice President Dick Cheney, held secret meetings with energy industry representatives and Bush donors.

The former “oil and gas man” Bush led the favoring of the U.S. oil and gas industry with war, environmental exemptions, and subsidies that resulted in costly messes.  He also mandated, while massively subsidizing, mainly uncompetitive renewable energies.

Bush led the invasion of Iraq to increase oil production, according to Federal Reserve Chairman Alan Greenspan.  Bush also founded Homeland Security, which was caught in September of 2010 spying on groups in Pennsylvania protesting environmental exemptions for oil and gas drilling.

Bush exempted deep water oil drilling in the Gulf of Mexico from environmental damages, leading to the Gulf oil spill.  His government also increased the production of natural gas supply by exempting shale gas production from the Safe Drinking Water Act, allowing the poisoning of people’s drinking water.

As President, Bush required that most new ethanol vehicle fuel capacity must process cellulose, which is difficult and expensive to process.  He was lobbied by venture capitalists, who have a history of creating and profiting from bubbles while leaving the country holding the bag.

Cellulosic ethanol technologies require significant breakthroughs that have not been realized despite large investments and even heavier subsidies than corn ethanol.  Big Oil and corn ethanol don’t appear threatened by the technology.

The government rationalized the cellulose mandate was needed because the corn ethanol industry was deemed unsustainable.  Over the previous three decades, the government, lobbied by the conglomerate Archer Daniels Midland, created a high cost and energy-inefficient corn ethanol industry through crop and fuel subsidies and other favoritism.

As Governor of Texas, Bush had led states mandating wind power, which also receives heavy subsidies.  Mandates grew throughout his Presidency and by 2008, wind power and also natural gas each accounted for over 45% of new nameplate generation capacity.  The US has recently spent over $10 billion per year on wind power without cost-benefit analyses.

Government and environmental groups have misled the country about the true costs of adding more than just a few percent of supply of wind power.  Utilities have been strangely ambivalent, perhaps because the wind industry poses no real competition.

The “Minnesota Wind Integration Study” misrepresents the cost of integration into the grid at 25% of total generation in Minnesota by assuming the power is spread throughout the entire Midwest grid (which is actually only about 2% integration).

The “U.S. Large-Scale Integration Studies” calculates the costs and benefits of using 20% wind power from the difference in operating, but not capital, costs compared to natural gas generation, while also assuming inflated gas costs and carbon taxes.

Meanwhile, a private study by Energy Ventures Analysis Inc. warns that because wind power is intermittent, it must be backed up by natural gas inefficiently without combined cycle.  Although more analysis is likely required, they estimate wind power increases generation costs by more than twice, while reducing greenhouse gases by a mere 11 percent.

Government studies actually inflate the costs of cogeneration by neglecting to recognize the economic benefits of heating.  Cogeneration is the most-efficient and lowest-cost generation, even compared to the most efficient natural gas combined cycle plants used today by utilities.

Obama and the Democrats have done virtually nothing to improve Bush energy policies that support monopolies and favored industries (except when forced to by the Gulf Oil Spill).  Both political parties still refuse to allow free markets, and perhaps pollution taxes, to foster the lowest-cost environmentally-benign energy solutions.

In the future, Republicans seek to subsidize high-cost and unproven “advanced” nuclear and coal (with carbon capture) for power monopolies, while Democrats want to continue subsidizing even higher-cost and unreliable wind and solar (and also conservation) by monopolies under government control.

Yet, the U.S. Energy Information Administration of the Department of Energy projects only biomass will gain electricity market share from 2013 to 2030.  But again, politicians are risking failure of both electricity and vehicle fuel markets by mandating and heavily subsidizing ethanol made from cellulose, along with electricity fueled by the lignin by-product.

Politicians even block proven and cost-competitive renewable energy.  For example, the European Union and United Nations have concluded cogeneration, not transport fuels, is the cheapest and best option for using cellulose to reduce greenhouse gases.

Brazil has used sugar cane to produce ethanol from the sugar and electricity from the cellulose at costs competitive with fossil fuels.  The nation is expected to co-generate 15 percent of its electricity from the cellulosic waste by 2015 (even with low feed-in tariffs set at hydropower costs).

Our company, Sorgo Fuels, has developed technology for a similar high-yielding sugar and cellulose crop called sweet sorghum which can be grown with low inputs on nonfood land, even in the northern US.  But the technology must be commercialized overseas because US politicians violate free markets by promoting monopolies, subsidies and mandates favoring other companies, crops and technologies.

Over 45 countries, including 20 in Europe, have adopted feed-in tariffs to provide fair prices to all independents using renewable energies and sometimes cogeneration.  Unfortunately, Europe can’t be relied upon for competition and innovation because the tariffs are often awarded to proven technologies at whatever price they need and EU countries have largely government-controlled financial systems with favoritism and risk aversion.

Meanwhile, U.S. politicians relegated the setting of feed-in tariffs to the states, where only five have been attempted and all have been failures (according to the Paul Gipe report), because they were limited by:

  • allowable capacities for total generation, technology types and individual projects,
  • qualifying technologies to only high-cost renewable energies (e.g., solar), and
  • payment only when utilities claim they need new capacity (e.g., using avoided costs)

CONCLUSION

U.S. politicians support free trade markets for other countries of the world, but won’t even allow all Americans to compete in free domestic markets.  Instead, Republicans foster monopolization while Democrats appear to also encourage monopolization but as a path to nationalization.  Both pick winners and losers in exchange for campaign contributions.

U.S. politicians have practiced corruption in most industries, not just electricity, including vehicle fuels and natural gas, as well as agriculture, health care, chemicals, materials, automobiles, computers, communications, housing, financials and labor.

The U.S. has two choices for the future.  The status quo will surely continue to result in high costs, crises, shortages, low growth, wage disparity, loss of industries, debt, poverty, depression, pollution, climate change and war, especially in the Middle East.  War has actually been America’s main economic savior in the past century.

The better choice is free markets, or other favoritism-free policies like fair feed-in tariffs set at the market rate, for entrepreneurs, which will likely bring innovation, new technologies and energy sources, low costs, competitiveness, opportunity, prosperity, a clean and stable environment and world peace.

  1. By Matt on February 28, 2011 at 7:11 am

    I stopped reading at “fascist.” I mean, come on.

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  2. By Sam Salamay on February 28, 2011 at 8:12 am

    The truth will save our nation. This article is the “truth.” Implementation with very little capital required will create traction. “Build it and they will come” is the mantra.

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  3. By Walt on February 28, 2011 at 8:35 am

    Robert Rapier said:

    U.S. politicians have practiced corruption in most industries, not just electricity, including vehicle fuels and natural gas, as well as agriculture, health care, chemicals, materials, automobiles, computers, communications, housing, financials and labor.


     

    Although many Americans complain about the corruption overseas in places like Russia, China, West Africa, etc., and suggest we avoid those places to have a “fair playing field” in this country to bring new technologies to market, I am not so sure anymore.  Perhaps many of us have been blindly optomistic that technology merit and third-party validation deserves the smarest money, but I used to think the smartest money came from the private sector.  Now, I really think that the smartest money looks to the government taxpayer to cover all the downside risks, and structures the least amount of upside potential.  For example, look at loan guarantees.  The government takes all the risk, but if it works they exit with nothing but a few fees in the deal, and the VC groups take all the gravy to the bank.  Everything is about fees, large stakes of equity and limited risk that needs to be backed by guarantees, long-term offtake agreements, and a few super majors who “bless” the innovation.  If it is so great…come on…why is not Exxon and BP throwing hundreds of millions at the sector?  The answer:  current legislation and what is being drafted to direct money in the furture.  It is to a large degree politics and corruption (legally structured to walk the line without falling into a litigation) that draws today’s smart money.  It has certainly given many of us a new definition of “smart money”…and I don’t see it the same way I did a few years back.  I do hope it changes.

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  4. By Kit P on February 28, 2011 at 9:43 am

    “I stopped reading at “fascist.” I mean, come on. ”

     

    It did not get nay better Matt, some examples:

     

    “held secret meetings with energy industry representatives and Bush donors”

     

    The meeting were not secret. I knew who met and what they said. For example, the CEO of the company I worked for held a news conference afterward on the steps of the capital. It may shock many but if you want to know about producing energy, you talk to those produce energy.

     

    “As President, Bush required that most new ethanol vehicle fuel capacity must process cellulose, which is difficult and expensive to process.”

     

    It is congress that passes legislation. The 2005 Energy Bill mandated biofuels and later legislation that mandated more cellulose ethanol. Bush did not veto either bill.

     

    “As Governor of Texas, Bush had led states mandating wind power, which also receives heavy subsidies.”

     

    Renewable energy was mandated. Since Texas has lots of wind, more wind was built. Also there was not a PTC at the time. While Bush favored state RPS, he opposed a federal RPS. This is a policy that I agree with because producing electricity is a local matter.

     

    What Mike Holly wants is a ‘feed-in tariff’ favoring his technologies. Me too! I think it would be ‘fair’ if the local utility was required to buy electricity at whatever price I thought was ‘fair’.

     

    Here is the problem, the local utility has an obligation to rate payers and investors to make good choices. I do not see any ‘national’ barriers to CHP. There is not a shortage of local utilities willing to work with business to develop CHP. However, for most businesses; making electricity and feeding it to the grid is a hassle that is an unprofitable distraction from their core business.

     

    “like fair feed-in tariffs set at the market rate”

     

    Regulated utilities are allowed by PUC to make a reasonable return on investment. What I pay for retail electricity includes not just the cost of generation, transmission, and taxes. If Mike Holly demands that utilities pay him $100/MWh because they are a bunch of corrupt, unsafe, polluters he will will fail. If he goes in with a business model that show how it will help the community, they will listen. People who work for local utilities do not live in NYC or DC.

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  5. By rrapier on February 28, 2011 at 11:40 am

    Matt said:

    I stopped reading at “fascist.” I mean, come on.


     

    I wouldn’t have used that word myself, either. I learned a long time ago that polarizing language will cause you to lose large segments of your audience, so I try to be a little more conservative with the words I write.

    RR

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  6. By Rate Crimes on February 28, 2011 at 12:48 pm

    I stopped reading at “fascist.” I mean, come on.

    The phrase used is “Fascist Nationalization”. It appears that the author is referring to a political and economic trend. By definition, the phrase is appropriate in the context of the article; albeit polarizing. We owe thanks to the author for challenging our preconceptions and opening the discussion to broader ideas.

    Energy is the foundation of our civilization, we and our markets are “free” only to the extent that each of us is free to choose what energy we consume (and thereby the byproducts we avoid). Today, there is no real “free market” in energy. There is no market diversity. Whatever socio-political sobriquet you may wish to attach to the system, central generation leads naturally to central planning.

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  7. By rate-crimes on February 28, 2011 at 12:57 pm

    “producing electricity is a local matter.” – Kit P

    Please define “local”.

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  8. By rate-crimes on February 28, 2011 at 1:05 pm

    “Here is the problem, the local utility has an obligation to rate payers and investors to make good choices.” – Kit P

     

    The problem is that too often their predominant (if not singular) obligation is to their investors, at a steep cost to ratepayers and other stakeholders.  A related problem is that they often reward their executives with many million dollars in annual compensation regardless of how well they meet their secondary obligations.

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  9. By rate-crimes on February 28, 2011 at 1:10 pm

    “Regulated utilities are allowed by PUC to make a reasonable return on investment.” – Kit P

     

    … profits without little, if any risk.  Or, via schemes such as the Price-Anderson Nuclear Industries Indemnities Act, where the risks are pushed into the public sector.

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  10. By BK on February 28, 2011 at 2:48 pm

    A worthwhile topic to consider. Unfortunately, much of the story is written with a highly biased view of past events, which by the time you slog thru it, I for one was completely turned off to what the author wants to do to improve things now.
    IMHO, a poor choice of a guest article, nowhere near up to the fact based analysis we’ve come to associate with Rsquared postings.

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  11. By Mike Holly on February 28, 2011 at 3:21 pm

    Matt said:

    I stopped reading at “fascist.” I mean, come on.

    Fascism simply means when government partners with favored industries and companies.  America is certainly not free markets.  Nor is it communism.  If you can’t face the facts what America has become you are not the type of person I am trying to reach anyway.
     

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  12. By Mike Holly on February 28, 2011 at 3:55 pm

    Kit P said:

    “I stopped reading at “fascist.” I mean, come on. ”

     

    It did not get nay better Matt, some examples:

     

    “held secret meetings with energy industry representatives and Bush donors”

     

    The meeting were not secret. I knew who met and what they said. For example, the CEO of the company I worked for held a news conference afterward on the steps of the capital. It may shock many but if you want to know about producing energy, you talk to those produce energy.

     

    “As President, Bush required that most new ethanol vehicle fuel capacity must process cellulose, which is difficult and expensive to process.”

     

    It is congress that passes legislation. The 2005 Energy Bill mandated biofuels and later legislation that mandated more cellulose ethanol. Bush did not veto either bill.

     

    “As Governor of Texas, Bush had led states mandating wind power, which also receives heavy subsidies.”

     

    Renewable energy was mandated. Since Texas has lots of wind, more wind was built. Also there was not a PTC at the time. While Bush favored state RPS, he opposed a federal RPS. This is a policy that I agree with because producing electricity is a local matter.

     

    What Mike Holly wants is a ‘feed-in tariff’ favoring his technologies. Me too! I think it would be ‘fair’ if the local utility was required to buy electricity at whatever price I thought was ‘fair’.

     

    Here is the problem, the local utility has an obligation to rate payers and investors to make good choices. I do not see any ‘national’ barriers to CHP. There is not a shortage of local utilities willing to work with business to develop CHP. However, for most businesses; making electricity and feeding it to the grid is a hassle that is an unprofitable distraction from their core business.

     

    “like fair feed-in tariffs set at the market rate”

     

    Regulated utilities are allowed by PUC to make a reasonable return on investment. What I pay for retail electricity includes not just the cost of generation, transmission, and taxes. If Mike Holly demands that utilities pay him $100/MWh because they are a bunch of corrupt, unsafe, polluters he will will fail. If he goes in with a business model that show how it will help the community, they will listen. People who work for local utilities do not live in NYC or DC.


     

    KIP, the meetings certainly were secret.  Environmental groups, who were not invited, sued to try to find out what went on.

     

    KIP says “if you want to know about producing energy, you talk to those produce energy.”  That kind of logic is what allows those that monopolize energy to keep monopolizing energy.

     

    Bush led the cellulosic ethanol mandates after meeting with venture capitalist Vinod Khosla and others.  The support for the bill came from the administration, Congress simply passed his bill and Bush signed it.

     

    Bush said he liked wind and Texas built wind.  Although I am not familiar with the specific bids in Texas I doubt other renewable energies were allowed to bid against wind since there is no model to compare the different technologies.  Here in Minnesota, biomass and other technologies are not allowed to bid against wind.

     

    I oppose RPS unless it is accompanied by feed-in tariffs since the bidding is rigged.  Just ask any IPP in private.

     

    What Mike Holly wants is fair deregulation but since that seems to be impossible for US pols I would settle for ‘feed-in tariff’ (FITs) set at the market price, that is the lowest cost utility technology (ie natural gas combined cycle turbines).  FITs like used in Europe apply to all technologies not just mine.   

     

    If local utilities were willing to offer CHP companies fair prices the US would not have killed all new CHP since the early 1990s and especially since 2000.

     

    The local utilities are some of the most entrenched monopolists this nation has.  Before the early 1990s, I consistently received offers of under 2 cents per KWH for power.  Now we have competitive bidding and bid rigging.  There is no excuse for a country to award monopolies and make independents work with them.

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  13. By Mike Holly on February 28, 2011 at 4:03 pm

    BK said:

    A worthwhile topic to consider. Unfortunately, much of the story is written with a highly biased view of past events, which by the time you slog thru it, I for one was completely turned off to what the author wants to do to improve things now.
    IMHO, a poor choice of a guest article, nowhere near up to the fact based analysis we’ve come to associate with Rsquared postings.


     

    I am the one providing the facts.  I have seen no legit challenge of those facts.  If you are turned off to free markets or feed-in tariffs (like they have in Europe except set at the market price) then again you are not the person I am trying to reach.

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  14. By Benny BND Cole on February 28, 2011 at 4:58 pm

    Mike Holly-
    I enjoyed your post, but I think you lead your thoughts with a “nut graph” near the top. Whjat is your goal–electrcity produced by burning fuel from sweet sorghum? Liquid fuels for cars?

    And do you want utilitites to buy your electricity at avoided marginal costs?

    Frame bear the top of your post what you think is good policy, then reveal the weaknesses of current policy.

    The word “fascist” may be correct as you used it. When one looks at the heavy federal outlays in rural states, even worse words come to mind. But use such words sparingly–most readers will be jarred by the words, and not reach for the content. And you should make the content more clear.

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  15. By Mike Holly on February 28, 2011 at 5:15 pm

    Sheldon Richman does a good job of describing fascism, and America today, in economic terms in the The Concise Encyclopedia of Economics:

    Where socialism sought totalitarian control of a society’s economic processes through direct state operation of the means of production, fascism sought that control indirectly, through domination of nominally private owners. Where socialism nationalized property explicitly, fascism did so implicitly, by requiring owners to use their property in the “national interest”—that is, as the autocratic authority conceived it. (Nevertheless, a few industries were operated by the state.) Where socialism abolished all market relations outright, fascism left the appearance of market relations while planning all economic activities. Where socialism abolished money and prices, fascism controlled the monetary system and set all prices and wages politically. In doing all this, fascism denatured the marketplace. Entrepreneurship was abolished. State ministries, rather than consumers, determined what was produced and under what conditions.

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  16. By Mike Holly on February 28, 2011 at 5:30 pm

    Benny BND Cole said:

    Mike Holly-
    I enjoyed your post, but I think you lead your thoughts with a “nut graph” near the top. Whjat is your goal–electrcity produced by burning fuel from sweet sorghum? Liquid fuels for cars?

    And do you want utilitites to buy your electricity at avoided marginal costs?

    Frame bear the top of your post what you think is good policy, then reveal the weaknesses of current policy.

    The word “fascist” may be correct as you used it. When one looks at the heavy federal outlays in rural states, even worse words come to mind. But use such words sparingly–most readers will be jarred by the words, and not reach for the content. And you should make the content more clear.


     

    Thanks.  My goal was stated in the title: to open energy markets – free markets, fair deregulation, a level playing field, opportunity for all.  (If free markets can’t be done overnight, I support feed-in tariffs set at the total costs of the lowest-cost generation in the meantime).  The nut graph stated what I want to end – monopolies and the picking of winners and losers.  My technology is just one example of a technology that is being blocked by both.

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  17. By Agent Provocateur on February 28, 2011 at 5:39 pm

    Americans are insatiable, cannibalistic consumers of the world’s children. Now, the rest of the world is hard on our heels. Gobble, gobble.

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  18. By Optimist on February 28, 2011 at 6:02 pm

    Interesting article, Mike!
    Could be expanded under the title The Myth of American Capitalism, as you alluded to in the third last paragraph.

    If you can’t face the facts what America has become you are not the type of person I am trying to reach anyway.

    Careful, Mike, you’re not going to reach anybody by offending your readers. Stick with the facts, as you see them, and let the chips fall where they may. Debate the issues, and don’t stoop to judging the reader/commenter.

    Cellulosic ethanol technologies require significant breakthroughs that have not been realized despite large investments and even heavier subsidies than corn ethanol.

    Not true. As RR has pointed out cellulosic ethanol technology is a hundred years old. Financially viable cellulosic ethanol technologies do require significant breakthroughs, OTOH.

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  19. By Benny BND Cole on February 28, 2011 at 6:10 pm

    Mike Holly-
    What is your technology and product? Is it liquid fuel from sweet sorghum that can be made into electrcity through burning, along with chaff?

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  20. By Mike Holly on February 28, 2011 at 6:36 pm

    Optimist said:

    Interesting article, Mike!

    Could be expanded under the title The Myth of American Capitalism, as you alluded to in the third last paragraph.

    If you can’t face the facts what America has become you are not the type of person I am trying to reach anyway.

    Careful, Mike, you’re not going to reach anybody by offending your readers. Stick with the facts, as you see them, and let the chips fall where they may. Debate the issues, and don’t stoop to judging the reader/commenter.

    Cellulosic ethanol technologies require significant breakthroughs that have not been realized despite large investments and even heavier subsidies than corn ethanol.

    Not true. As RR has pointed out cellulosic ethanol technology is a hundred years old. Financially viable cellulosic ethanol technologies do require significant breakthroughs, OTOH.

    Thanks for the compliment.
     

    But I don’t agree that Matt is my reader since he said he stopped reading.  Nor do I think I was offensive.  He just isn’t the type of reader I am targeting, somebody that hangs onto one word that he doesn’t understand.  He could have asked me for the definition but instead he acted childlessly by playing a manipulative game of saying he stopped reading the article.  Fine, if he wants to just throw potshots and not debate I don’t need him.

    I also believe you took the next statement out of context.  In the previous paragraph I said cellulose was difficult and expensive to process, not that it couldn’t be produced. 

     

    [link]      
  21. By Mike Holly on February 28, 2011 at 6:49 pm

    Benny BND Cole said:

    Mike Holly-
    What is your technology and product? Is it liquid fuel from sweet sorghum that can be made into electrcity through burning, along with chaff?


     

    The sugar in the sugar juice of the cane is converted into ethanol, a liquid vehicle fuel, and the solid fiber residue (“cellulosics”) is burned to cogenerate electricity and heat for processing the ethanol.

    [link]      
  22. By Benny BND Cole on February 28, 2011 at 7:31 pm

    I like the approach–btw, palm oil plantations are making greater use of fronds to generate heat.

    Okay, a tough question: If your approach is sound, why not raise venture capital money? Why not produce and sell ethanol on the open market?

    PS, I totally support utilities being required to buy power at avoided cost.

    [link]      
  23. By Mike Holly on February 28, 2011 at 8:04 pm

    Benny BND Cole said:

    I like the approach–btw, palm oil plantations are making greater use of fronds to generate heat.

    Okay, a tough question: If your approach is sound, why not raise venture capital money? Why not produce and sell ethanol on the open market?

    PS, I totally support utilities being required to buy power at avoided cost.


     

    Like my article says, the whole PURPA avoided cost thing, which was rigged in most states by utilities claiming they didn’t need any more power, has been replaced by rigged bidding and rigged deregulation.  Utilities and their friends can take technologies anytime they want after developed by an entrepreneur with VC funding, because the utilities can build to satisfy their power needs without bidding or they can favor their friends in rigged bidding.  Moreover, the US government is mandating that almost all future ethanol be made from cellulose.  What venture capitalist would be interested in that?  And the less profits we can make, the more of the company the VC will demand.  What entrepreneur would be interested in that?  We need free markets.

    [link]      
  24. By Anonymous One on February 28, 2011 at 8:08 pm

    Mike Holly wrote:

    If local utilities were willing to offer CHP companies fair prices the US would not have killed all new CHP since the early 1990s and especially since 2000.

    I am the one providing the facts. I have seen no legit challenge of those facts.

    Non-zero CHP capacity additions since 2000, FIT, ITC
    http://www.epa.gov/chp/documen…..hedman.pdf

    [link]      
  25. By Optimist on February 28, 2011 at 8:17 pm

    Our company, Sorgo Fuels, has developed technology for a similar high-yielding sugar and cellulose crop called sweet sorghum which can be grown with low inputs on nonfood land, even in the northern US.

    How much nonfood land do you need per gal of ethanol? How much land is available? How do you define nonfood land? Can’t imagine there is too much land sitting idle, is there?

    [link]      
  26. By Kit P on February 28, 2011 at 8:26 pm

    “My goal was stated in the title: to open energy markets – free markets, fair deregulation, a level playing field, opportunity for all. ”

     

    Interesting, so does Duke Energy. Anything Mike Holly thinks he can do, Duke Energy can do better. That is how good they are!

     

    Traditionally, electric utilities have been regulated monopolies for the public good. Either investor owned or public utility districts. This system has worked very well too. The US enjoys affordable and reliable electricity. It is produced with safely and with insignificant environmental impact. The problem with a ‘free market’ is that energy producers could charge whatever they wanted by creating a shortage.

     

    It is not that Mike Holly or RateCrimes are feeble but large utilities have staffs that are very good and following the rules. One of the expectations of deregulation was that poorly managed nukes would not be able to compete. What happened was utilities that were very good at operating nukes bought them and turned them gold mines.

     

    In any case, I would like Mike Holly to tell me the capacity of his projects, the production cost, and the feed-in tariffs he would like to see.

     

    Readers here know I am an advocate of 50 MWe biomass plants. I would like to see a market that encourages that. However, there is not reason to oppose other forms of generations until you actually demonstrate that you can get the first 50 MWe running.

     

    [link]      
  27. By Mike Holly on February 28, 2011 at 8:35 pm

    Anonymous One said:

    Mike Holly wrote:

    If local utilities were willing to offer CHP companies fair prices the US would not have killed all new CHP since the early 1990s and especially since 2000.

    I am the one providing the facts. I have seen no legit challenge of those facts.

    Non-zero CHP capacity additions since 2000, FIT, ITC

    http://www.epa.gov/chp/documen…..hedman.pdf

    The link provided doesn’t dispute my claims in the article.
     

    You can clearly see how the growth of CHP declined during the 1990s

    and accumulated generation has actually levelled off since 2000,

    meaning no or little net capacity additions.

    But here is better data from the Energy Information Administration.

    http://tonto.eia.doe.gov/aer/t…..0803a.html

    [link]      
  28. By Mike Holly on February 28, 2011 at 8:39 pm

    Optimist said:

    Our company, Sorgo Fuels, has developed technology for a similar high-yielding sugar and cellulose crop called sweet sorghum which can be grown with low inputs on nonfood land, even in the northern US.

    How much nonfood land do you need per gal of ethanol? How much land is available? How do you define nonfood land? Can’t imagine there is too much land sitting idle, is there?


     

    There is plenty of marginal food land available on the low rainfall Great Plains.  But I am not here to argue just my technology, rather just using it as an example.  What I do want is for the US to open the markets for all technologies – no monopolies and picking winners and losers.

    [link]      
  29. By Mike Holly on February 28, 2011 at 9:07 pm

    Kit P said:

    “My goal was stated in the title: to open energy markets – free markets, fair deregulation, a level playing field, opportunity for all. ”

     

    Interesting, so does Duke Energy. Anything Mike Holly thinks he can do, Duke Energy can do better. That is how good they are!

     

    Traditionally, electric utilities have been regulated monopolies for the public good. Either investor owned or public utility districts. This system has worked very well too. The US enjoys affordable and reliable electricity. It is produced with safely and with insignificant environmental impact. The problem with a ‘free market’ is that energy producers could charge whatever they wanted by creating a shortage.

     

    It is not that Mike Holly or RateCrimes are feeble but large utilities have staffs that are very good and following the rules. One of the expectations of deregulation was that poorly managed nukes would not be able to compete. What happened was utilities that were very good at operating nukes bought them and turned them gold mines.

     

    In any case, I would like Mike Holly to tell me the capacity of his projects, the production cost, and the feed-in tariffs he would like to see.

     

    Readers here know I am an advocate of 50 MWe biomass plants. I would like to see a market that encourages that. However, there is not reason to oppose other forms of generations until you actually demonstrate that you can get the first 50 MWe running.

     


     

    I won’t even respond to your patronization, except to say I will compete with utilities on a level playing field.   

    Nor will I discuss any specifics of our technology especially since that is not the issue.  The issue is for the US government to stop fostering monopolies and picking winners and losers.   

    I hope you are saying Duke Energy favors free markets.  But I don’t think you are since you start justifying monopolies.  Monopolies don’t serve the public good as I have outlined in my article. 

    Contrary to your claims (1) “Free market energy producers cannot charge whatever they want by creating a shortage” and (2) “nuclear plants didn’t suddenly become low cost.” 

    California and other states rigged deregulation by allowing utilities to sell their old coal and nuclear plants at below market value and then recoup their losses as stranded cost subsidies. 

    On the one hand, you say you would like to see a market that encourages 50 MW biomass plants.  And then you say it is not a reason to oppose other forms of generations until you actually demonstrate that you can get the first 50 MW running.  Common sense should tell you that we can’t demonstrate a technology until this country provides a market and market prices for it. 

    [link]      
  30. By rate-crimes on February 28, 2011 at 9:49 pm

    “large utilities have staffs that are very good and following the rules” – Kit P

    And the first rule is the golden one, “He who has the gold, makes the rules.”

    I agree, in that the engineers that I know who work at “large utilities” are very good engineers, and often good people.  Often, the best of them know when to appropriately break “the rules”.

    The extensive staffs of the finance and accounting departments of the “large utilities” are very good at capturing markets and squeezing them.

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  31. By rate-crimes on February 28, 2011 at 10:01 pm

    “What happened was utilities that were very good at operating nukes bought them and turned them [into] gold mines.” – Kit P

    Did you mean to say, “uranium mines”?  Laugh

    Actually, the largest nuclear power plant in the U.S. (Palo Verde) is mining large quantities of water and evaporating it as a final use in the middle of the Sonoran Desert.  Sure, you can claim that its using ‘reclaimed wastewater’, but it is a fact that the local aquifer has long been in overdraft by about a quarter-million acre-feet annually.  Who is going to pay to put that water back into sustainable balance?

    [link]      
  32. By Kit P on February 28, 2011 at 11:18 pm

    “The issue is for the US government to stop fostering monopolies and picking winners and losers.”

     

    States regulate electric utilities for the public good. Before a utility can sell electricity that Mike Holly might make the state PUC will weigh in on the ‘public good’. Idaho and Florida are two examples of states that have not allowed new coal plants to be built. Winners and looser get picked all the time. That is the job of government.

    “Often, the best of them know when to appropriately break “the rules”.”

     

    I would suggest the ‘best’ of them go beyond just compliance. A long time ago I read a report where Palo Verde had to shut down for a short period of time because they were not in compliance with a new regulation. Every nuke plant that I was at met that regulation years before it was a requirement, it was just good engineering. I was at one plant that said they were not required to do it. I said they would have to find some else to do my job.

     

    I mentioned Duke Energy earlier. There are some ‘rules’ that started out as good practices one place and become codified for every one.

     

    “Sonoran Desert”

     

    Sounds like Rate Crimes thinks too many people live in the Sonora Desert. Should we force him to move to protect the environment? When I say making electricity has insignificant environmental impact it is the context of the populations that lives someplace. This is why I say making electricity is a local matter. It is up to the people of Arizona how they protect their environment.

    [link]      
  33. By rate-crimes on March 1, 2011 at 6:54 am

    Sounds like Rate Crimes thinks too many people live in the Sonora Desert. Should we force him to move to protect the environment? – Kit P

    It more than “sounds like” you revel in ad hominen arguments.  There is no need to force me to make sacrifices to live more sustainably.  I’ve made more sacrifices than all but a few: including, moving away from the unsustainable horror that has been imposed on the Sonoran Desert.  I must admit my good fortunate to have such flexibility, as well as the knowledge and the skills to do so. 

     ”It is up to the people of Arizona how they protect their environment.” – Kit P

    First, generally speaking, the people of Arizona do not protect their environment: they mine it, they drain it, they scrape it, they ranch it, they trash it, they trade cropland for suburbs, and import nearly all their food.  They can do this because they built the nation’s largest nuclear power plant in a bone-dry desert, 50 miles west of the state’s capitol.  This thirsty behemoth is half-owned by California and out-of-state utilities and delivers much of its power to neighboring states.  That is NOT “local”.

    [link]      
  34. By Kit P on March 1, 2011 at 7:57 am

    “This thirsty behemoth is half-owned by California and out-of-state utilities”

     

    First of all, the state of California does not own any nuke plants. It is people like Rate Crimes who have banned building nuke plants in California cooled with sea water. I used to work at a nuke plant in California that was closed by the voters 20 years ago. I am still waiting for folks like Rate Crimes to show a better way. However all they produce is silly attacks.

    [link]      
  35. By rate-crimes on March 1, 2011 at 9:04 am

    “First of all, the state of California does not own any nuke plants.” – Kit P

    It appears that one must be very explicit when writing in your company.  It is certain that the careful readers here understood my phrase as, “California and [other] out-of-state utilities.”  Not, as you misinterpreted, ‘[The state of] California and out-of-state utilities.’

    “It is people like Rate Crimes [...]” – Kit P

    You immediately resort to your habit of slander and ad hominem attacks. 

    “banned building nuke plants in California cooled with sea water.” – Kit P

    Nowhere have I commented on nuclear energy other than with respect to Arizona energy policy.  Why should California build expensive, risky, unwelcome nuclear power generating plants on their own soil, when they can rely on Arizona unsustainably draining its own resources to operate such a plant?

    “I am still waiting for folks like Rate Crimes to show a better way.” – Kit P

    A “better way” to accomplish exactly what?  Your fundamental assumptions and goals are unclear.  I agree with the general theme of the author’s article that an excellent place to begin would be to make an honest accounting of the real costs of energy while opening markets.  I have been writing and speaking to that effect for nearly a decade. 

     ”However all they produce is [sic] silly attacks.” – Kit P

    Conflating me with “they”, is yet another example of your troubling approach to argumentation.  My pointing out the errors in your thinking and technique may well seem to you to be ”attacks”, but it is hardly “silly” to remove the illusion that your arguments are valid, or even correct.

    When an article detailing my analyses was published here and on TOD, within only a few minutes you were making inane, dismissive remarks.  It was baldly obvious that your comments were reactionary, and that you had not even taken the time to study the analyses.  ”Silly attacks”, indeed.  You are a hypocrite.  (That is not an attack, simply an observation of the facts.)

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  36. By rate-crimes on March 1, 2011 at 9:13 am

    “It is people like [some creature of his own delusional making] who have banned building nuke plants in California cooled with sea water.” – Kit P

    Perhaps, it was not the water, but the major fault zones that were at the center of the issue with nuclear power in California? 

    If your “people like” describes those with such rational, considered opinions, then I would be pleased to become a member of that group.

    [link]      
  37. By robert on March 1, 2011 at 9:21 am

    It’s not possible for the government not to pick winners and losers. When they passed the clean air act and coal plants can only exhaust so much particulate matter and so much mercury, where they set the levels will make coal economical– or not. With hindsite we know the winner was low sulfer western coal.

    At best we can ask the government not to rent seek and even that is not going to happen.

    You guys do know Palo Verde runs off of Phoenix grey water right? All thermoelectric plants use the same amount of water per kWh so it isn’t a nuke issue. If we want electricity and we don’t want to pay for photovoltaic, water is gonna evaporate.

    [link]      
  38. By rate-crimes on March 1, 2011 at 9:42 am

    “You guys do know Palo Verde runs off of Phoenix grey water right?” – robert

    Yes, that’s the standard advertisement.  The water is treated to within a short step of being potable.  About 63,000 acre-feet of that fresh water is evaporated annually.  Meanwhile, the Phoenix aquifer has long been in overdraft by about a quarter-million acre-feet annually.  The accounts are not balanced.

    “If we want electricity and we don’t want to pay for photovoltaic, water is gonna evaporate.” – robert

    It’s not that water evaporates.  Rather, it is that an ancient desert aquifer is being drained while large quantities of water are being evaporated, with little hope of that water returning to the aquifer in any reasonable timeframe.

    Of course, we all want electricity.  My hope is that we do a lot more with a lot less electricity; while accounting for the real costs of that electricity and all of its artifacts.

    The established economic scheme does not inspire much hope.

    [link]      
  39. By robert on March 1, 2011 at 10:00 am

    I would think the solution is grid parity photovoltaic electricity. But it is going to take a lot of government reasearch and development money to get there.

    [link]      
  40. By rate-crimes on March 1, 2011 at 10:08 am

    “The [Energy Task Force] meeting were [sic] not secret. I knew who met and what they said. For example, the CEO of the company I worked for held a news conference afterward on the steps of the capital.” – Kit P

    Here is something a little closer to reality: http://en.wikipedia.org/wiki/E…..Task_Force

    “It may shock many but if you want to know about producing energy, you talk to those produce energy [sic].” – Kit P

    Snarky, introductory phrases like, “It may shock many”, simply emphasize the false elitism and/or misdirection inherent in the complete statement.  The central issue is openness and inclusion.  No one is arguing that anyone should be excluded.

    [link]      
  41. By Mike Holly on March 1, 2011 at 10:12 am

    Kit P said:

    States regulate electric utilities for the public good. Before a utility can sell electricity that Mike Holly might make the state PUC will weigh in on the ‘public good’. Idaho and Florida are two examples of states that have not allowed new coal plants to be built. Winners and looser get picked all the time. That is the job of government.


     Picking winners and losers may be the job of government in a fascist or communist economy but not in a free markets. 

    Most state PUCs, especially here in Minnesota and all I have seen in the Midwest, serve the utility good, appointed by the Governor whose campaign is supported by the utilities.  Like I said in the article, there were a few large states that allowed PURPA to promote cogeneration, but those were few and far between.

     

     

    [link]      
  42. By rate-crimes on March 1, 2011 at 10:17 am

    I would think the solution is grid parity photovoltaic electricity. – robert

    “Grid parity” is a red-herring.  I think this is the central point of the article.  The economics of ‘the grid’ are an unsustainable delusion.  We should seek a loftier goal.

    By the way, in sunny Arizona, a personal investment in solar (PV) energy, even without incentives, will yield returns that are on par with similar, low-risk (i.e. predictable) investments (e.g. T-bills).  With incentives, in Arizona, the returns from an investment in solar will outperform the long-term, historical annual average return of the S&P 500.  This is further evidence that “grid parity” is a dangerous illusion; however useful it may be to the “natural” monopolies.

    [link]      
  43. By Mike Holly on March 1, 2011 at 10:20 am

    robert said:

    It’s not possible for the government not to pick winners and losers. When they passed the clean air act and coal plants can only exhaust so much particulate matter and so much mercury, where they set the levels will make coal economical– or not. With hindsite we know the winner was low sulfer western coal.

    At best we can ask the government not to rent seek and even that is not going to happen.

    You guys do know Palo Verde runs off of Phoenix grey water right? All thermoelectric plants use the same amount of water per kWh so it isn’t a nuke issue. If we want electricity and we don’t want to pay for photovoltaic, water is gonna evaporate.


     

    It certainly is possible for the government to not pick winners and losers.  Like the article said, government can apply pollution taxes or some other similar restrictive environmental laws.  But government should leave it up to generators to decide how to meet those restrictions.  Pols should not be picking specific technologies.

    [link]      
  44. By Mike Holly on March 1, 2011 at 10:26 am

    robert said:

    I would think the solution is grid parity photovoltaic electricity. But it is going to take a lot of government reasearch and development money to get there.


     

    I agree that the potential to minimize pollution should be a priority for R&D funding.

    [link]      
  45. By doggydogworld on March 1, 2011 at 10:54 am

    I don’t understand what the author wants? The freedom to build parallel transmission and distribution lines so he can sell his co-generated electricity to homes and small business locations like strip malls? That’s the only additional option I can see that a free market approach would give him.

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  46. By rate-crimes on March 1, 2011 at 11:47 am

    “The freedom to build parallel transmission and distribution lines [...]” – doggydogworld

    That is a silly comment.

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  47. By BK on March 1, 2011 at 12:02 pm

    Mike Holly said:

    BK said:

    A worthwhile topic to consider. Unfortunately, much of the story is written with a highly biased view of past events, which by the time you slog thru it, I for one was completely turned off to what the author wants to do to improve things now.
    IMHO, a poor choice of a guest article, nowhere near up to the fact based analysis we’ve come to associate with Rsquared postings.


     
    I am the one providing the facts.  I have seen no legit challenge of those facts.  If you are turned off to free markets or feed-in tariffs (like they have in Europe except set at the market price) then again you are not the person I am trying to reach.


     

    Just who is the person you are trying to reach then? I am sympathetic to your desire for free markets in energy. But your approach of treating everything that happened in the past as the result of some sort of evil cabal distracts anyone trying to read the article and understand your point. Unless of course you are trying to only reach people that believe the only place to get the “real story” is the Huffington Post.

     

    There are complicated issues in all of this stuff. A more balanced approach would help advance your argument. Read some articles that RR has posted for a primer in how to do that.

    [link]      
  48. By Mike Holly on March 1, 2011 at 1:01 pm

    doggydogworld said:

    I don’t understand what the author wants? The freedom to build parallel transmission and distribution lines so he can sell his co-generated electricity to homes and small business locations like strip malls? That’s the only additional option I can see that a free market approach would give him.


     

    Reforming deregulation would be another and simpler way of creating free markets.  The article says deregulation is free markets and explains how deregulation has been rigged by several poor policies that could be more easily reformed (than allowing parallel transmission and distribution lines).  I really don’t care exactly how free markets are created, but the US government must create them while stopping to promote monopolies and picking winners and losers. 

    [link]      
  49. By Mike Holly on March 1, 2011 at 1:17 pm

    BK said:

    Mike Holly said:

    BK said:

    A worthwhile topic to consider. Unfortunately, much of the story is written with a highly biased view of past events, which by the time you slog thru it, I for one was completely turned off to what the author wants to do to improve things now.
    IMHO, a poor choice of a guest article, nowhere near up to the fact based analysis we’ve come to associate with Rsquared postings.


     
    I am the one providing the facts.  I have seen no legit challenge of those facts.  If you are turned off to free markets or feed-in tariffs (like they have in Europe except set at the market price) then again you are not the person I am trying to reach.


     
    Just who is the person you are trying to reach then? I am sympathetic to your desire for free markets in energy. But your approach of treating everything that happened in the past as the result of some sort of evil cabal distracts anyone trying to read the article and understand your point. Unless of course you are trying to only reach people that believe the only place to get the “real story” is the Huffington Post.

     

    There are complicated issues in all of this stuff. A more balanced approach would help advance your argument. Read some articles that RR has posted for a primer in how to do that.


     

     

    You were ”completely turned off to what the author wants to do to improve things now” which is to create free markets.  I am trying to reach Americans who favor free markets.  If you now favor free markets perhaps you should read some other comments that can express their opinions better.

    Neither do I care for the tone of your response nor your comment that the article was not worthy of consideration. The history of the electricity is needed to explain how we got here, what has been tried, etc.  Some of the other commenters have appreciated the approach.  Perhaps the issues are too complicated for you.  If you want to debate the policies fine, but otherwise I really don’t think we have anymore to discuss.  

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  50. By rate-crimes on March 1, 2011 at 2:37 pm

    “But your approach of treating everything that happened in the past as the result of some sort of evil cabal distracts anyone trying to read the article and understand your point.” – BK

    The existence of any ”evil cabal” is not required in order for “everything that happened in the past” — or even some smaller segment of things past — to appear to be the result of evil intent.  However, it is required that too many people be easily distracted.

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  51. By Mike Holly on March 1, 2011 at 2:42 pm

    BK said:

    BK said:

    A more balanced approach would help advance your argument. 


     When Obama gives a speech it is not his job to explain the other side.  That is up the Republicans in their response.  And the Republicans don’t stop harping on Obama’s style but instead attack his policies.

     

    It is my job to criticize, not defend, American policies that have involved influence peddling, monopolization, nationalization, fascism, the picking of winners and losers,  etc.  At least KIP can do it, but all I hear from BK is style critiques.

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  52. By rate-crimes on March 1, 2011 at 2:47 pm

    “Unless of course you are trying to only reach people that believe the only place to get the “real story” is the Huffington Post.” – BK

    Are you referring to the Huffington Post before, or after it was owned by a corporate conglomerate?

    AOL acquires Huffington Post for $315 million

    [link]      
  53. By rate-crimes on March 1, 2011 at 2:58 pm

    “There are complicated issues in all of this stuff.” – BK

    None upon which, apparently, you are able to shine a light.

    “A more balanced approach would help advance your argument.  Read some articles that RR has posted for a primer in how to do that.” – BK

    You would do well to follow your own sage advice.

    I, for one, am inspired by someone who combines perception, understanding, and eloquence, with some ‘balls’.

    [link]      
  54. By Kit P on March 1, 2011 at 5:38 pm

    I go to the light switch and the lights come on. The house is automatically maintained at a temperature my wife likes. What’s the problem?

     

    “I am trying to reach Americans who favor free markets.”

     

    That would be nobody when it comes to utilities! Not even Mike Holly wants a free market. Mike Holly wants a market that gives him special privilege. Many utilities have programs to buy ‘green power’ but very few pick that option. I like my $30/MWh coal generation. However, I would prefer $20/MWh nuke generation. Hydroelectric is even better plus it makes nice lakes for boating.

     

    Nobody wants to buy $100/MWh electricity from Mike Holly. Free market, fascist market nobody wants what is Mike Holly peddling. Anonymous One did provide a link to shows that if you use a lots of electricity in your business and need process heat: investing in CHP and making your own electricity may be an economic choice. The presentation showed that many were doing it and there are many opportunities.

     

    The problem that Mike Holly has is not with the market but his production costs.

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  55. By rate-crimes on March 1, 2011 at 6:34 pm

    “I go to the light switch and the lights come on. The house is automatically maintained at a temperature my wife likes. What’s the problem?” – Kit P

    The problem is the many people who use each other to rationalize their own unconscientious consumptive habits while flippantly ignoring the externalities.

     

     

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  56. By rate-crimes on March 1, 2011 at 6:44 pm

    “I like my $30/MWh coal generation. However, I would prefer $20/MWh nuke generation. Hydroelectric is even better plus it makes nice lakes for boating.” – Kit P

    You appear to like your economic delusions.  You appear to enjoy ignoring the real costs and risks of the energy sources you prefer.

    Perhaps, that is why you insist on misinterpreting, misrepresenting and dismissing Mike Holly’s analysis.

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  57. By rate-crimes on March 1, 2011 at 6:50 pm

    “Mike Holly wants a market that gives him special privilege.” – Kit P

    I understood the article to propose exactly the opposite. 

    The proposal is for a market that eliminates, or at least minimizes, the long-established system of special privilege for traditional energy sources.

    [link]      
  58. By Mike Holly on March 1, 2011 at 8:40 pm

    Kit P said:

    That would be nobody when it comes to utilities! Not even Mike Holly wants a free market. Mike Holly wants a market that gives him special privilege. Many utilities have programs to buy ‘green power’ but very few pick that option. I like my $30/MWh coal generation. However, I would prefer $20/MWh nuke generation. Hydroelectric is even better plus it makes nice lakes for boating.

    Nobody wants to buy $100/MWh electricity from Mike Holly. Free market, fascist market nobody wants what is Mike Holly peddling. Anonymous One did provide a link to shows that if you use a lots of electricity in your business and need process heat: investing in CHP and making your own electricity may be an economic choice. The presentation showed that many were doing it and there are many opportunities.

    The problem that Mike Holly has is not with the market but his production costs.

    Stop misrepresenting what I have said.  You have not provided one shred of evidence that I am advocating any special privileges, rather I simply demand the right to compete with utilities on a level playing field.  I never said I wanted to sell power at $100 per MWH but rather at the market price.  Those green power programs are a total scam – the utility obtains higher cost renewable energy through rigged bidding or their own generation and then tries to disuade consumers from using renewables by selling it at a higher price, thus protecting their higher cost power plants.  The data from Anonymous One shows exactly what I said – the nation is adding no net cogeneration (because utilities are rigging the bids for the sale of excess power).  You don’t know anything about my technology, let alone my production costs.
     

    [link]      
  59. By Anonymous One on March 1, 2011 at 9:17 pm

    Mike Holly originally said

    If local utilities were willing to offer CHP companies fair prices the US would not have killed all new CHP since the early 1990s and especially since 2000.

    After my URL link, Mike Holly instead of repeating that exaggeration changed directions to say

    the nation is adding no net cogeneration.

    How many other exaggerations are in the article?

    [link]      
  60. By Anonymous One on March 1, 2011 at 9:19 pm

    Bold “all new” vs “net” doesn’t show up in block quotes

    [link]      
  61. By rate-crimes on March 1, 2011 at 10:03 pm

    “How many other exaggerations are in the article?” – Anonymous One

    How many vague aspersions will you cast?  If you wish to answer your own question, please try to be precise.

     

    [link]      
  62. By TommyVee on March 2, 2011 at 9:05 am

    The article ignores the many reasons that truly “free markets” cannot and will not exist in power distribution and generation.
    Simply go to India or Nepal and see the twisted mess of wires hanging above the street as various people string unsafe wiring systems to various places. Would anyone want to live in a town where instead of a single well-regulated distributions system, there were 15 different competing private distributions systems building poles and stringing wire helter-skelter wherever it gave them a competitive advantage, with public benefit, aesthetics, and safety not regulated by anything but the “free market”?
    Of course not, and no civilized country operates with such a system. Utilities are “natural monopolies” because establishing a truly “free market” for power generation would have so many negative societal impacts (continuous construction as competing companies built redundant infrastructure, dysfunctional systems that could not interoperate, massive externalities not represented in the “free market” (who pays for the extra 100,000 deaths a year that would be caused by “free market” coal?),etc.)
    So a true “free market ” in energy is simply a utopian aspiration that exists no where on Earth.
    The real question is how to do regulation in a way that delivers the cheapest, lowest impact, and most reliable energy to the consumer, not some pipe dream of “free markets”. Ensuring that regulation is fair, and effective is no simple task, requiring continuous evaluation and adjustment, but that is not a reason to abandon the democratic process to the vagaries of the “free market”.

    [link]      
  63. By Walt on March 2, 2011 at 9:31 am

    http://www.dailymail.co.uk/new…..m-age.html

    Overtime we will see the value in some of these markets that are subsidized with taxpayer money, and mandated by political forces.

    [link]      
  64. By rate-crimes on March 2, 2011 at 10:04 am

    “Would anyone want to live in a town where instead of a single well-regulated distributions system, there were 15 different competing private distributions systems building poles and stringing wire helter-skelter wherever it gave them a competitive advantage, with public benefit, aesthetics, and safety not regulated by anything but the ‘free market’?” – TommyVee

    You are conflating distribution with generation.

     

     

    [link]      
  65. By Eddie Devere on March 2, 2011 at 10:18 am

    The level of quality of this article was poor. While the article tries to argue for “free markets,” it does not look deeply into why we don’t have a free market for electricity and natural gas, whereas we have a free market for computers, video game systems, clothing, etc…
    In my opinion, the real reason we don’t have a free market in the electricity and natural gas markets is that it would require duplication in the electricity lines and natural gas pipelines to each business or house.
    I would argue that the “corruption” and “monopoly” within the electricity and natural gas markets is an effect of the shear cost to connect multiple electricity lines and pipelines to a home or business, and not as the author implies the effect of some evil political plot.
    If we could figure out how to cheaply install multiple natural gas pipes and electricity lines to homes and business, then we could put the power back into the hands of the people (and their SmartPhones.) I wish that I had more choice in my natural gas and electricity companies, and could control my thermostat from my phone. Perhaps, in the not to distant future, this will be true.
    Until then, I am willing to accept a small level of corruption in the electricity and natural gas markets because I know that it would be more expensive for me to install a second pipeline from an independent producer or for me to generate electricity on site at my house.

    [link]      
  66. By rate-crimes on March 2, 2011 at 10:20 am

    “Overtime we will see the value [...]” – Wait

    Did you mean to say ‘Over time’?  Or, are you saying that it is ‘overtime’?

    You provide a link to an article by a writer who denies global warming, writes in support of nuclear energy, and consistently attacks wind power.  What is your point?

    [link]      
  67. By rate-crimes on March 2, 2011 at 10:22 am

    “In my opinion, the real reason we don’t have a free market in the electricity and natural gas markets is that it would require duplication in the electricity lines and natural gas pipelines to each business or house.” – Eddie Devere

    You too are conflating distribution with generation.

     

    [link]      
  68. By Mike Holly on March 2, 2011 at 10:24 am

    Anonymous One said:

    Mike Holly originally said

    If local utilities were willing to offer CHP companies fair prices the US would not have killed all new CHP since the early 1990s and especially since 2000.

    After my URL link, Mike Holly instead of repeating that exaggeration changed directions to say

    the nation is adding no net cogeneration.

    How many other exaggerations are in the article?


     

    I presented data supporting my case and you presented data that was a bit different.  I am not going to waste my time trying to figure out which is right.  It is better to just give your data the benefit of the doubt, especially since it doesn’t show any significantly better situation for CHP. 

    [link]      
  69. By rate-crimes on March 2, 2011 at 10:28 am

    “Until then, I am willing to accept a small level of corruption in the electricity and natural gas markets because [. . .]” – Eddie Devere

    I suggest that you don’t understand the level of corruption.

    Are you willing to accept a power company executive receiving a multi-million dollar compensation package for a year’s work?

    http://ratecrimes.blogspot.com…..ision.html

     

    [link]      
  70. By rate-crimes on March 2, 2011 at 10:34 am

    “The level of quality of this article was poor.” – Eddie Devere

    I suggest that, since it is apparent that you do not understand even the fundamental difference between distribution and generation, you are not qualified to judge the technical merits of this article.

    [link]      
  71. By Mike Holly on March 2, 2011 at 10:37 am

    TommyVee said:

    The article ignores the many reasons that truly “free markets” cannot and will not exist in power distribution and generation.
    Simply go to India or Nepal and see the twisted mess of wires hanging above the street as various people string unsafe wiring systems to various places. Would anyone want to live in a town where instead of a single well-regulated distributions system, there were 15 different competing private distributions systems building poles and stringing wire helter-skelter wherever it gave them a competitive advantage, with public benefit, aesthetics, and safety not regulated by anything but the “free market”?
    Of course not, and no civilized country operates with such a system. Utilities are “natural monopolies” because establishing a truly “free market” for power generation would have so many negative societal impacts (continuous construction as competing companies built redundant infrastructure, dysfunctional systems that could not interoperate, massive externalities not represented in the “free market” (who pays for the extra 100,000 deaths a year that would be caused by “free market” coal?),etc.)
    So a true “free market ” in energy is simply a utopian aspiration that exists no where on Earth.
    The real question is how to do regulation in a way that delivers the cheapest, lowest impact, and most reliable energy to the consumer, not some pipe dream of “free markets”. Ensuring that regulation is fair, and effective is no simple task, requiring continuous evaluation and adjustment, but that is not a reason to abandon the democratic process to the vagaries of the “free market”.


     

    My article made it clear that I consider deregulation as a form of free markets, that it was rigged to fail, and could be easily reformed if there was the political will.

    [link]      
  72. By Mike Holly on March 2, 2011 at 10:40 am

    Walt said:

    http://www.dailymail.co.uk/new…..m-age.html

    Overtime we will see the value in some of these markets that are subsidized with taxpayer money, and mandated by political forces.


     

    Over time we will see more wasted ratepayer and taxpayer money, debt, poverty, depression, etc, etc.

     

    Let those that advocate and own the technology, including the pols, finance its development with their money.

    [link]      
  73. By Mike Holly on March 2, 2011 at 10:43 am

    Eddie Devere said:

    The level of quality of this article was poor. While the article tries to argue for “free markets,” it does not look deeply into why we don’t have a free market for electricity and natural gas, whereas we have a free market for computers, video game systems, clothing, etc…
    In my opinion, the real reason we don’t have a free market in the electricity and natural gas markets is that it would require duplication in the electricity lines and natural gas pipelines to each business or house.
    I would argue that the “corruption” and “monopoly” within the electricity and natural gas markets is an effect of the shear cost to connect multiple electricity lines and pipelines to a home or business, and not as the author implies the effect of some evil political plot.
    If we could figure out how to cheaply install multiple natural gas pipes and electricity lines to homes and business, then we could put the power back into the hands of the people (and their SmartPhones.) I wish that I had more choice in my natural gas and electricity companies, and could control my thermostat from my phone. Perhaps, in the not to distant future, this will be true.
    Until then, I am willing to accept a small level of corruption in the electricity and natural gas markets because I know that it would be more expensive for me to install a second pipeline from an independent producer or for me to generate electricity on site at my house.


     

    The level of quality of this comment was poor. My article made it clear that I consider deregulation as a form of free markets, that it was rigged to fail, and could be easily reformed if there was the political will.

    [link]      
  74. By doggydogworld on March 2, 2011 at 10:46 am

    Mike Holly said:


     

    Reforming deregulation would be another and simpler way of creating free markets.  The article says deregulation is free markets and explains how deregulation has been rigged by several poor policies that could be more easily reformed (than allowing parallel transmission and distribution lines).  I really don’t care exactly how free markets are created, but the US government must create them while stopping to promote monopolies and picking winners and losers. 


     

    I’m sorry but if there is only one power line going into each house and business it’s a monopoly. It’s not a free market. You can’t make it a free market. There is no way around that. It’s the very definition of the word monopoly and the very opposite of the definition of free market. Governments can impose rules which pretend to turn monopolies into a free markets, but they cannot change the underlying reality.

    I lived in CA during their “deregulation” debacle a decade ago and I live in “deregulated” TX today. As an investment manager I followed the CA economics pretty closely plus got first-hand anecdotal info from some PG&E execs. I also did a lot of work the FCC’s attempt to impose faux free markets in local phone service (Telecommunications Act of 1996 and its aftermath). As with electricity “deregulation” the government claimed to create a free market for voice and data. But the new rules could not overcome the fact that there was only one local phone grid and the 1996 Act failed. True local telco competition only arrived when technology created other “phone lines” into the building; namely cable TV telephony and cheap cellular. It’s the same with electricity – one grid equals monopoly.

    LA’s muni utility (LA-DWP) opted out of CA’s faux deregulation follies
    and avoided the skyrocketing rates and blackouts. Likewise, San
    Antonio’s muni utility (CPS) opted out of the TX dereg scheme and now
    delivers electricity much more cheaply than any of the state’s “deregulated”
    utilities. Attempts to create faux free markets usually fail, often spectacularly. It’s generally better just to recognize the natural monopoly for what it is and regulate it accordingly. But even if someone does figure out how to create an efficient electric system via “deregulation” it will never be a free market and it’s completely inappropriate to use the term or to expect it to ever behave like a free market. The artificial rules imposed over top of the underlying monopoly structure will never have all the checks and balances of a true free market and will always be gamed by the various participants and their lobbyists. That’s just the way it is. It’s folly to pretend otherwise.

    If you wish to argue that deregulation can be improved I will not quarrel. Just don’t claim deregulation can create a free market, because it’s not possible.

    [link]      
  75. By rate-crimes on March 2, 2011 at 11:14 am

    ‘I’m sorry but if there is only one power line going into each house and business it’s a monopoly.” – doggydogworld

    You are the third commenter to conflate distribution with generation.

     

    [link]      
  76. By rate-crimes on March 2, 2011 at 11:32 am

    “It’s generally better just to recognize the natural monopoly for what it is and regulate it accordingly.” - doggydogworld

    Naturally, the ‘natural’ monopoly ends where distribution begins.  The product is generated.  Delivery is a service.

    While natural monopolies are well understood, regulation consistently fails.

    [link]      
  77. By Mike Holly on March 2, 2011 at 12:00 pm

    doggydogworld said:

    Mike Holly said:

     
    I’m sorry but if there is only one power line going into each house and business it’s a monopoly. It’s not a free market. You can’t make it a free market. There is no way around that. It’s the very definition of the word monopoly and the very opposite of the definition of free market. Governments can impose rules which pretend to turn monopolies into a free markets, but they cannot change the underlying reality.

    I lived in CA during their “deregulation” debacle a decade ago and I live in “deregulated” TX today. As an investment manager I followed the CA economics pretty closely plus got first-hand anecdotal info from some PG&E execs. I also did a lot of work the FCC’s attempt to impose faux free markets in local phone service (Telecommunications Act of 1996 and its aftermath). As with electricity “deregulation” the government claimed to create a free market for voice and data. But the new rules could not overcome the fact that there was only one local phone grid and the 1996 Act failed. True local telco competition only arrived when technology created other “phone lines” into the building; namely cable TV telephony and cheap cellular. It’s the same with electricity – one grid equals monopoly.

    LA’s muni utility (LA-DWP) opted out of CA’s faux deregulation follies
    and avoided the skyrocketing rates and blackouts. Likewise, San
    Antonio’s muni utility (CPS) opted out of the TX dereg scheme and now
    delivers electricity much more cheaply than any of the state’s “deregulated”
    utilities. Attempts to create faux free markets usually fail, often spectacularly. It’s generally better just to recognize the natural monopoly for what it is and regulate it accordingly. But even if someone does figure out how to create an efficient electric system via “deregulation” it will never be a free market and it’s completely inappropriate to use the term or to expect it to ever behave like a free market. The artificial rules imposed over top of the underlying monopoly structure will never have all the checks and balances of a true free market and will always be gamed by the various participants and their lobbyists. That’s just the way it is. It’s folly to pretend otherwise.

    If you wish to argue that deregulation can be improved I will not quarrel. Just don’t claim deregulation can create a free market, because it’s not possible.


     

    I’m sorry to have to say this, but Californians were pathetic during deregulation. 

    Deregulation assumed T&D was a monopoly and generation would be free market competition.  I was OK with that even though the Cato Institute argued for multiple lines.  I supported electricity and natural gas deregulation in Minnesota, but it was stopped when I demanded a level playing field – the utilities said it will be our way or no way at all. 

    California readily gave utility plants huge stranded cost subsidies just to get the deal politically done.  They also had strict environmental laws making the building of new power plants and lines nearly impossible.  How did you ever expect to get competition?

    I have seen the same sort of preferential treatment in telecom deregulation.  

    But if for semantic reasons you don’t want to call it free markets and just wish to argue that deregulation can be improved, I welcome that.  During deregulation, most didn’t even want to call it deregulation but rather restructuring.  Frankly I don’t give a crap what anyone calls it as long as it gets done.  But don’t tell me what I can call it.

    [link]      
  78. By Walt on March 2, 2011 at 5:59 pm

    Rate Crimes said:

    “Overtime we will see the value [...]” – Wait

    Did you mean to say ‘Over time’?  Or, are you saying that it is ‘overtime’?

    You provide a link to an article by a writer who denies global warming, writes in support of nuclear energy, and consistently attacks wind power.  What is your point?


     

    Sorry, I was not being serious.  I’m not happy with the way government is spending my money on renewable energy.

    [link]      
  79. By doggydogworld on March 2, 2011 at 6:18 pm

    Rate Crimes said:

    You are the third commenter to conflate distribution with generation.


     

    And you continue to perpetuate the myth that they can be separated cleanly and completely. It’s a nice ivory tower theory, but why can’t anyone actually get it to work? The real world is not so easy. Grid stability demands a tighter coupling between generator, grid and load than the ivory tower guys and faux free market proponents admit. A single regulated provider handles all this internally. If they fail at any level the customer knows who to blame. Faux-dereg schemes that try to put rules in place to handle all the various contingencies are inevitably subject to system-gaming when times are good and finger-pointing when it all hits the fan.

    I’m not saying you can’t ever devise a faux-free market system robust enough to handle all these contingencies. But it’s obviously very difficult and not at all clear it’s worth the trouble.

    [link]      
  80. By Mike Holly on March 2, 2011 at 7:42 pm

    In free markets, supply and demand are not regulated or are regulated with only minor restrictions.  Power plants can compete to sell electricity to users just like growers compete to sell apples to grocery stores.   The fact that producers must pay common carriers, like transmission and roads (who may be regulated by government), doesn’t mean generation is not governed by free markets under the laws of supply and demand.

    Deregulation was on the right track by seperating transmission from generation.  But then pols let generators game the system and with preferential treatment that was not at all complicated.  The pols ignored my demands for public policy analysis and let the utilities write the rules.  The promise of savings from competition and innovation should be worth the simple effort it would have taken to make deregulation work, but they were more concerned about their utility campaign contributers than consumers. 

    [link]      
  81. By Mike Holly on March 2, 2011 at 8:26 pm

    Some states (like Illinois) simplified the whole T&D issue by just have auctions – the lowest cost bid to the ISO won. But even simple systems like that failed because states gave simple preferential treatment like grandfather exemptions, stranded cost subsidies and siting barriers against new power plants. No, doggy it wasn’t rocket science that rigged deregulation to fail and it would be likely very simple to make it work even now.

    [link]      
  82. By rate-crimes on March 2, 2011 at 8:30 pm

    “And you continue to perpetuate the myth that they can be separated cleanly and completely.” – doggydogworld

    No, I have not.  I simply pointed out your error in conflating the two, and made the distinction between genaration and distribution/delivery.  You over-react.

    Perhaps it would be possible to separate genaration from distribution if the system was not already entrenched.  The extant reality will make more equitable solutions difficult.

    [link]      
  83. By rate-crimes on March 2, 2011 at 8:42 pm

    “Grid stability demands a tighter coupling between generator, grid and load [...]” – doggydogworld

    Your use of the singular tense for “grid”, “generator”, and “load” exposes the limited nature of your thinking and/or prejudices.

     

    [link]      
  84. By Kit P on March 2, 2011 at 10:27 pm

    “The real question is how to do regulation in a way that delivers the cheapest, lowest impact, and most reliable energy to the consumer, not some pipe dream of “free markets”. Ensuring that regulation is fair, and effective is no simple task, requiring continuous evaluation and adjustment, but that is not a reason to abandon the democratic process to the vagaries of the “free market”.”

     

    Well said TommyVee. It should be pointed out that utilities comes in all shapes and sizes from small COOPs, PUD, MUNIs to big city investor owned utilities (IOU). The city where I went to high school actually had two providers, city light and IOU that supplied NG and electricity.

     

    “Until then, I am willing to accept a small level of corruption in the electricity and natural gas markets because I know that it would be more expensive for me to install a second pipeline from an independent producer or for me to generate electricity on site at my house.”

     

    Eddie I would suggest that the level of corruption at utilities is very small. There are exceptions:

     

    “LA’s muni utility (LA-DWP) opted out of CA’s faux deregulation follies and avoided the skyrocketing rates and blackouts.”

     

    I suspect doggydogworld was not watching very closely. Public power played by different rules. The biggest gouger of California rate payers was LADWP able to sell cheap coal generated electricity generated in other states. LADWP GM was S. David Freeman. Worked down the hall from him when closed Rancho Seco. While ripping off his neigbors, S. David Freeman stood on the capital steps in Sacramento as Governor Davis’s energy czar blaming companies willing to invest in California.

     

    The rolling blackout in California was caused by a shortage of generating capacity. No amount of pleading by utility executives would get the governor to speed the process. It took three times longer to get a permit in California than Texas. In Texas, deregulation worked to get investment in power plants. It would have worked in California, if permits has been issue faster.

     

    When people cite corruption ENRON comes to mind. However, ENRON was not a electric or NG utility. ENRON was a energy marketing company among other things. In 1997, they bought Portland General Electric.

     

    At the same time I worked for Duke Power which became Duke Energy when it merged with NG production and pipeline company. Duke Energy was criticized for not being more like ENRON. Duke Energy had a much more conservative investment policy and ethic of bring value to customers by keeping costs down. I do not think deregulation is a bad idea for generation.

     

    “Antonio’s muni utility (CPS) opted out of the TX dereg scheme and now delivers electricity much more cheaply than any of the state’s “deregulated” utilities.”

     

    I would look at the mix of coal/nuclear/NG. That is what determines the cost of generation. Well manged, forward thing utilities will serve their customers better.

    [link]      
  85. By rate-crimes on March 3, 2011 at 7:07 am

    “Eddie I would suggest that the level of corruption at utilities is very small.” – Kit P

    Spoken like a true loyalist.  The visible “exceptions” of corruption are neither infrequent nor unspectacular.  Even if you subscribe to a forgiving definition of “corruption”, episodes such as the hexavalent chromium scandal, or the San Bruno pipeline explosion should give one pause to raise suspicions.

    My own favorite example of corruption is less apparent:  the long-standing use of rate schedule structures to defeat the value of independent investments in energy conservation and solar energy in order to maintain a captive, profligate consumer market in Arizona: our nation’s sunniest state wherein is located the nation’s largest nuclear power plant and numerous coal-fired power plants.

    [link]      
  86. By Kit P on March 3, 2011 at 8:43 am

    “Spoken like a true loyalist.”

     

    No one has ever heard me defend Pacific Gas and Electric. In any case, hexavalent chromium is an environmental issue and pipeline explosions are a safety issue. These may be examples of poor management but not corruption.

    CEO of utilities have the responsibility of supplying millions of families with electricity while managing thousands of employees and billions in assets. It demands the highest standards of ethics and a job that humbles most. I wonder how many millions of customers Rate Crimes is responsible for providing energy but when I see leaps of logic to cast dispersions of hard working people I wonder what their agenda is:

    “My own favorite example of corruption is less apparent:  the long-standing use of rate schedule structures to defeat the value of independent investments in energy conservation and solar energy in order to maintain a captive, profligate consumer market in Arizona: our nation’s sunniest state wherein is located the nation’s largest nuclear power plant and numerous coal-fired power plants.”

     

    Now that is just delusional. First, the utility does not set the rate structure; the PUC does. Second, solar does not replace coal or nukes which provide base load power. If the rate schedule provided $1000/MWh for solar the best that would happen is summer demand for natural gas would be reduced. The most likely thing that would happen is a bunch of corrupt solar salesmen would sell junk to unsuspecting consumers that does not work very well.

    Solar has a history too, it is not one of bragging about performance.

    I love environmentalist who think solar is great. Take the best solar project. To replace a nuke plant at that rate of construction would require 485 years. There would be no more desert, just solar panels. If you did replace one large nuke or coal plant then you would need an army of technicians driving out to keep them working. Do the math, when construction rate equals failure rate that is the limit of solar potential. Diffuse sources of energy require a large amount of equipment. Even a very small failure rate results in a large number of failures.

    [link]      
  87. By rate-crimes on March 3, 2011 at 9:07 am

    “These may be examples of poor management but not corruption.” – Kit P

    Spoken like a true loyalist.

    [link]      
  88. By rate-crimes on March 3, 2011 at 9:12 am

    “First, the utility does not set the rate structure; the PUC does.” – Kit P

    In Arizona, The Corporation Commission approves the rate schedules tendered by the utiltiies.

    [link]      
  89. By rate-crimes on March 3, 2011 at 9:23 am

    “Second, solar does not replace coal or nukes which provide base load power.” – Kit P

    No such thought was expressed.  However, your expression of these thoughts does expose the limits to your thinking.  Professional deformation?

    In sunny Arizona, solar provides about one percent of the electricity generated in the state.  This amount of solar generation is tragic considering its potential for trimming the community’s aggregate peak demand.

    [link]      
  90. By rate-crimes on March 3, 2011 at 9:26 am

     ”I see leaps of logic to cast dispersions [sic] of hard working people [...]” – Kit P

    Exactly what aspersions have been cast on whom?

     

    [link]      
  91. By rate-crimes on March 3, 2011 at 9:31 am

    “If the rate schedule provided $1000/MWh for solar the best that would happen is summer demand for natural gas would be reduced.” – Kit P

     The dynamics of rate schedules can be complex.  It is not a simple matter of comparing two numbers.

     

    The mechanics of Arizona’s rate schedules are explained in detail on the Rate Crimes blog.

    [link]      
  92. By rate-crimes on March 3, 2011 at 9:41 am

    “The most likely thing that would happen is a bunch of corrupt solar salesmen would sell junk to unsuspecting consumers that does not work very well.” – Kit P

    Now, that is a broad casting of aspersion upon a group of very hard-working people.  Thanks for showing us how it’s done.

    Yes, it’s a messy industry whose sins are apparent.  That is what often happens in an emerging market that is over-incentivized.  Unfortunately, the solar industry must advance against entrenched interests whose considerable profits rely on hiding the true costs of their product.

    [link]      
  93. By rate-crimes on March 3, 2011 at 9:45 am

    “To replace a nuke plant at that rate of construction would require 485 years.” – Kit P

    You are repeating your silly, false argument of totality.

    [link]      
  94. By rate-crimes on March 3, 2011 at 9:52 am

    “There would be no more desert, just solar panels.” – Kit P

    Another extremist, reactionary argument of totality.

    Great swaths of the desert have already disappeared under slabs, driveways, sidewalks, and roads.  There is plenty of space on top of that for solar that might provide shade and insulation – as well as power — for the built environment.

    [link]      
  95. By rate-crimes on March 3, 2011 at 9:55 am

    “an army of technicians driving out to keep them working.” – Kit P

    You really don’t know what you’re talking about, do you? (asked rhetorically)

     

    [link]      
  96. By rate-crimes on March 3, 2011 at 9:57 am

    “Even a very small failure rate results in a large number of failures.” – Kit P

    Let us imagine the results of one failed nuclear reactor… oh!, wait!, we don’t have to imagine!

    [link]      
  97. By russ on March 3, 2011 at 1:30 pm

    Not often I agree with Kit but in this case he has made numerous valid points while Rate Crimes is just posting green nonsense.

    Solar thermal is a good case of the suppliers and middlemen being very greedy. The prices for flat plate collectors that have nothing high tech in them is totally out of line.

    I would love to see a break down cost like they do for equipment in the computer or cell phone industry for a thermal panel. Guaranteed the manufacturers don’t want the public to see that! Aspersions need to be cast about many in the solar industry.

    What failed reactor is Rate Crimes talking about – none in particular – just throwing out the standard green line that the sky is falling.

     

     

     

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  98. By rate-crimes on March 3, 2011 at 3:25 pm

    “Rate Crimes is just posting green nonsense.” – russ

    One wonders why if it is “nonsense”, then it must also be “green nonsense”.  Your words betray your bias.

    Is “green nonsense” something similar to reclassifying nuclear power as renewable?

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  99. By rate-crimes on March 3, 2011 at 3:29 pm

    “Not often I agree with Kit but in this case he has made numerous valid points” – russ

    If you wish to stand by the opinions of Kit P, perhaps you should list a few of the points with which you agree.

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  100. By rate-crimes on March 3, 2011 at 3:33 pm

    “Solar thermal [...]” – russ

    Since solar thermal has not been a topic that I have addressed, why would you sandwich in a rant about it between two lines criticizing me?

    Perhaps you would like to comment on something that I have actually said?

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  101. By rate-crimes on March 3, 2011 at 3:58 pm

    “What failed reactor is Rate Crimes talking about – none in particular” – russ

    Really?!  Are you unable to recall even one nuclear reactor failure?

     

    Kit P said, “Diffuse sources of energy require a large amount of equipment. Even a very small failure rate results in a large number of failures.”

    His first sentence does not even make logical sense as a comparison.  All sources of energy require “large amounts” of equipment.  That’s the nature of complexity.  One great advantage of PV is that once it is set up, it requires relatively little care . . . or the maintenance of a refueling system.

    Kit P’s equally fuzzy second sentence makes little sense.  History has shown that a series of small failures (design, mechanical, ‘human’, etc.) can lead to catastrophic results in a nuclear plant.  It would be kind of Kit P to provide evidence that “a very small failure rate” results in “a large number of failures”, catastrophic or otherwise, in power generation systems employing “diffuse sources”.

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  102. By rate-crimes on March 3, 2011 at 4:04 pm

    “[Rate Crimes is] throwing out the standard green line that the sky is falling.” – russ

    You seem to be “throwing out” a lot of dismissiveness without directly addressing anything substantial.  To what “sky” do you refer?  Certainly, there is a lot of warm, bright, solar energy falling from above.

     

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  103. By rate-crimes on March 3, 2011 at 4:10 pm

    “The prices for flat plate collectors that have nothing high tech in them is totally out of line.” – russ

    Please be specific.  What “flat plate collectors”?  What do you mean by, “high tech”?  Is someone purchasing them at exhorbitant prices?  If so, then why?

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  104. By rate-crimes on March 3, 2011 at 4:14 pm

    “Aspersions need to be cast about many in the solar industry.” – russ

    All industries need valid criticism in order to be healthy.  However, vague,  broad, unsubstantiated, and reactionary aspersions are not helpful.

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  105. By Kit P on March 3, 2011 at 7:26 pm

    Here is a link to a good solar project in Arizona.

    Tucson Electric Power (Springerville Generating Station: http://www.greenwatts.com/page…..Output.asp )

     

    Today’s output is about 28 MWh.Very good!

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  106. By Kit P on March 3, 2011 at 7:38 pm

    So how long does it take Palo Verde Nuclear Generating Station to match the very good solar PV facility?

    Less than 30 seconds.

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  107. By Kit P on March 3, 2011 at 7:58 pm

    Gosh that is 2880 good solar projects I wonder how long it takes to design, permit, and build 2880 solar projects. Don’t anti-nukes like Rate Crimes insist on public debate and endless lawsuits. How will solar systems affect tortoises.

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  108. By Kit P on March 3, 2011 at 8:01 pm

    Then
    there is the issue of companies that sell solar PV making campaign
    contributions.

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  109. By Kit P on March 3, 2011 at 8:11 pm

    How about a broader perspective with the California ISO reporting 2003 MWh of solar.

    http://www.caiso.com/green/ren…..sWatch.pdf

    It would take Palo Verde Nuclear Generating Station half and hour to match match that output.

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  110. By Kit P on March 3, 2011 at 8:19 pm

    The upper right graph shows how important solar is in the renewable energy mix.

    Solar is 3% of the renewable energy mix in California.

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  111. By Kit P on March 3, 2011 at 8:21 pm

    Burma Shave!

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  112. By rate-crimes on March 3, 2011 at 9:44 pm

    “Then there is the issue of companies that sell solar PV making campaign contributions.” – Kit P

    Stats please.  How do other industries’ contributions compare?

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  113. By rate-crimes on March 3, 2011 at 9:47 pm

    “The upper right graph shows how important solar is in the renewable energy mix.” – Kit P

    How, exactly, do you define “importance”?

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  114. By rate-crimes on March 3, 2011 at 9:56 pm

    “anti-nukes like Rate Crimes” – Kit P

    Pro-reason.   There is no denying that nuclear power has its place.  But, I’m also pro-accountability.  Too many of the real costs of traditional fuels are hidden and/or postponed.  Too little of today’s ‘profits’ are being invested in researching cleaner, safer, and sustainable solutions.

     

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  115. By rate-crimes on March 3, 2011 at 10:12 pm

    “So how long does it take Palo Verde Nuclear Generating Station to match the very good solar PV facility?

    Less than 30 seconds.” - Kit P

    What is the half-life of Technetium-99?

    220,000 years

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  116. By rate-crimes on March 3, 2011 at 10:14 pm

    “Burma Shave!” – Kit P

    Home-grown aloe!

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  117. By Kit P on March 3, 2011 at 11:52 pm

     

    “What is the half-life of Technetium-99”

     

    If you mean technetium-99m which is used as a radiopharmaceuticals, that would be 6.01 hours.

     

    A concept tat is hard for some to understand is that a long half life infers a low activity.

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  118. By rate-crimes on March 4, 2011 at 5:40 am

    “If you mean technetium-99m [...]” – Kit P

    No.  But I suspect you know what was meant. 

    “So how long does it take Palo Verde Nuclear Generating Station to match the very good solar PV facility?

    Less than 30 seconds.” - Kit P

    As you likely know, there is a long list of fission products that must be stored and secured for a little longer than 30 seconds, and several that must be stored and secured for many multiples of the length of recorded human history.

     

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  119. By rate-crimes on March 4, 2011 at 5:41 am

    “A concept tat [sic] is hard for some to understand” – Kit P

    Someone who practices condescension as often as you do should at least try to avoid typos.

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  120. By Kit P on March 4, 2011 at 1:15 pm

    “Stats please.  How do other industries’ contributions compare?”

     

    Actually I was mocking Rate Crimes by imitating both his style and using baseless arguments.

     

    “How, exactly, do you define “importance”?”

     

    I suspect I would define ‘important’ the same way most people would. If I ask the grade school kids that I teach chess to, to rank California renewable energy sources in order by looking at the graph, they would be able to do it.

     

    I conclude that solar is unimportant that it is not worth mentioning. I have explained the engineering reasons for this, basically solar is not a very good way of making electricity. If Rate Crimes would like to explain or provided an example that show otherwise instead of debate the meaning of “importance”, I am listening.

     

    I would suspect that Rate Crimes would justify solar panels not making electricity by saying they do not make

     

    “As you likely know, there is a long list of fission products that must be stored and secured for a little longer than 30 seconds, and several that must be stored and secured for many multiples of the length of recorded human history.”

     

    Actually that is not correct. I am primarily concerned with short lived fission products. When a reactor is critical, about 10% of the energy comes from fission products. When the chain reaction is stopped, the ‘decay heat’ from these fission products must be removed or the fuel assemblies would over heat.

     

    Since fission products decay exponential in a predictable fashion. After 24 hours, the spent fuel assemblies can be transferred to a storage pool. After about 5 years, the spent fuel assemblies can be transferred to dry storage cask where they could sit forever as a practical matter. After about 300 years, all the short lived fission products are gone and the activity level is about the same as background.

     

    There is no scientific reason for the public to be concerned about the safety of future generations. There may be some economic reason to not put spent fuel assemblies inside a dry tunnel inside a desert mountain. About 95% of the energy that can be produced b fission still remains.

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  121. By Kit P on March 5, 2011 at 11:54 am

    “musings of grade school children”

    Grade school children who demonstrate the use of logical thinking by playing chess. If you take a poll of an average group of school children I would suspect many would think solar is an ‘important’. However, give kids a set of data and see what the logical conclusion they come to.

     

    One of the interesting things about helping with chess clubs and science fairs is to watch kids develop. I recall one little girl who was the biggest disruption in the kindergarten class. Chess was a social thing for her. A few years later I was judging a local tournament being careful to avoid the class my son was playing in. I noticed that my son got bumped from board one and the girl that started at board one stayed there winning all 5 matches. A silly little girl had become a formidable chess player.

     

    Hopefully at some point in the life of a child, the rational part of the brain turns on. Those who have raised kits through the teen years know what I mean. There was a popular saying with the hippie crowd. Never trust anyone over 30. I did have bell bottoms and long hair but I could see the logical outcome of drug use and unprotected sex. Others might argue that I had been brained washed by those over thirty.

     

    The point I am trying to get to is that I have 40 years of data for making electricity with both solar and nuclear. When I first got interested in nuclear power it was the ‘new’ thing with potential to become an important part of the generating mix. Nuclear power has become become an important part of the mix because of a dedication to excellence. There was a time 10 years ago when I thought nuclear power would go the way of the buggy whip. At that time, I had been at 6 plants in a row that only paid lip service to the concept of excellence.

     

    This brings us to the topic of this tread. Rate payers were fed up with expensive nuke plants that did not run well. Open the electricity generating market and cheap NG will replace nukes. For a little while, nuke plants were falling like dominoes. However, those who ran nuke plants dedication to excellence knew the value of good running nuke plant. A combination of accusation and mergers led to a fleet of 104 US nukes operating 10% above there original design capacity factor of 80%. New plants will have a CF=95% because the reliability has been designed in.

     

    The bottom line is that nuke plants are and will continue to be an important part of the mix.

     

    I had not written a business plant before getting into renewable energy. Play with a spread sheet for a high capital cost project and the importance of maximizing CF becomes apparent. Dedication to excellence is just as important. If your project is not making electricity it is losing money.

     

    Forty years later, solar continues to fail to achieve the potential that advocates cite. Solar is a totally insignificant source of electricity. Every governor of California and democrat POTUS promotes putting a million PV systems on roofs if homes, a process that is dedicated to political correctness and not excellence. Utility scale scale solar systems like Springerville show that excellence can be achieved by limiting the open market to those who demonstrate the organizational skills.

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  122. By rate-crimes on March 4, 2011 at 9:20 pm

    “I would define ‘important’ the same way most people would. If I ask the grade school kids [..] they would be able to do it.” – Kit P

    So, you base your understanding of ‘importance’ on the musings of grade school children.  I should have known.

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  123. By rate-crimes on March 5, 2011 at 1:30 pm

    “The bottom line is that nuke plants are and will continue to be an important part of the mix.” – Kit P

    No doubt. 

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  124. By rate-crimes on March 5, 2011 at 1:33 pm

    “Forty years later, solar continues to fail to achieve the potential that advocates cite. [...] Utility scale scale solar systems like Springerville show that excellence can be achieved” – Kit P

     

    “limiting the open market” – Kit P

    You’re not entirely sane, are you?

     

     

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  125. By R. Dean on November 1, 2013 at 4:38 pm

    Sir – utilities are “ambivalent” to wind power? Last year 74 US utilities purchases wind generated electricity. This year to date, utilities have issues Request For Proposals for over 3,900MW new capacity, and year to date over 6,000MW new capacity was signed in Power Purchase Agreements (20 years). It is quite the opposite as to what you state, utilities are waking up and seeing that wind energy can offer long term savings over current market prices to their customers. And as technology continues to improve (see GE’s Smart turbine and battery storage) and costs continue to fall, this will become even more important source of power generation to them. Eventually momentum in favor of wind power will overcome the hold that fossil fuel lobbyists have had on this nation. Clean, affordable energy.

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