November 26, 2013 Leave a comment
There’s been enough going on that I’ve kind of let energy slide lately. I shouldn’t, like all the other projects built on magic and wishful thinking, they are running into the hard wall of reality. Some would say they are getting hammered. I tend to think of the hammer of reality as Mjølner, the modern incarnation of Thor’s Hammer, that can level mountains at a single stroke.
And Mjølner has been busy lately, rather than me rewriting it, I’ll simply excerpt from Marita Moon’s latest, and you can find the details at the link.
The whole idea of green energy—renewable resources—grew out of an energy reality that was much different from today’s. It was in the 1970s, following the OPEC Oil Embargo that solar panels began popping up on rooftops and “gasohol” subsidies were enacted. It was believed that green energy would move the U.S. off of foreign oil and prevent oil from being used as an economic weapon against us.
Today, that entire paradigm has been upended and OPEC’s power has been virtually neutered by increasing domestic oil production and decreasing gasoline consumption.
Jay Lehr, Heartland Institute science director, likens continuing “as though our new energy riches did not exist” to “ignoring our telecommunication revolution by supporting operator-assisted telephones with party lines.”
Mandated for blending into America’s gasoline supply in 2007 through the Energy Security and Independence Act, ethanol now has an unlikely coalition of opponents—including car and small-engine manufacturers, oil companies and refiners, and food producers and some environmental groups.
A national movement is growing and calling for the end of the ethanol mandates that, according to the WSJ, have “drained the Treasury of almost $40 billion” since the first gasohol subsides were enacted in 1978. Realize the word “Treasury,” used here, really means “taxpayer.”
“At the end of 2011, the ethanol industry lost a $6 billion per year tax-credit subsidy,” the WP points out. But the mandate for the American consumer to use ethanol remains through what Senator David Vitter (R-LA) calls: “a fundamentally flawed program that limps along year after year.”
Imagine the surprise, given that EPA Administrator Gina McCarthy asserts: “Biofuels are a key part of the Obama Administration’s ‘all of the above’ energy strategy, helping to reduce our dependence on foreign oil, cut carbon pollution and create jobs,” when, on November 15, the EPA gave a nod toward market and technological realities and, for the first time, proposed a reduction in the renewable volume obligations—below 2012 and 2013 levels.
On a call with reporters, a senior administration official explained: “While under the law volumes of renewable fuel are set to increase each year this unanticipated reduction in fuel consumption brings us to a point where the realities of the fuel market must be addressed to properly implement the program.”
The WP describes the problem: “Mixing more and more ethanol into a fixed or shrinking pool of fuel would bump up against the capacity of existing engines to burn it, as well as the capacity of the existing distribution network to pump it.” It states: “The downward revision of roughly 3 billion gallons is the first such reduction since Congress enacted the Renewable Fuel Standard (RFS) in 2007.”
The EPA’s decision is lauded by AAA President and CEO Bob Darbelnet: “The EPA has finally put consumers first.” He said the targets in the 2007 law are “unreachable without putting motorists and their vehicles at risk.”
Ethanol has been dealt a blow.
Here’s one of those rare times when the EPA is on the right track, likely it’s for the wrong reasons but even small blessings are welcome. I sit in the midst of millions of acres of corn, lots of it subsidized by ethanol, and I’ll tell you it’s a crock, it made a little sense when we were short of oil. So dod running the Germans running King Tiger tanks on charcoal, but it’s decidedly suboptimal.
And while I’m bashing my neighbors, have you noticed how bad soda made from corn syrup tastes, do you even remember what it used to taste like? You can still get the real stuff, look for Coke (and Pepsi too) products imported from Mexico. Here they are commonly available, and are made with real sugar.
Why are we in this spot? Because for about half of forever we have protected our sugar crop growers with ridiculously high tariffs, leading to corn being used instead, it’s not as good, but it is affordable. If the sugar guys can’t make it without my tax money, they, like corn farmers should go out of business.
While the ethanol mandate hasn’t been eliminated, the administration has wavered and has given a nod toward “market and technological reality.” Likewise, those of us oppose government mandates and subsidies were handed a small victory in Arizona when, on November 14, the commissioners tipped their hand by setting a new direction for solar energy policy. In a 3-2 vote, the Arizona Corporation Commission (ACC) took a step and added a monthly fee onto the utility bills of new solar customers to make them pay for using and maintaining the power grid.
While the ACC decision didn’t make national headlines, as the EPA decision did, it has huge national implications.
The issue is net-metering—a policy that allows customers with solar panels to receive full retail credit for power they deliver to the grid. Supporters of the current policy—including President Obama—believe that ending it “would kill their business.” Opponents believe it “unfairly shifts costs from solar homes to non-solar homes.”
The ACC vote kept the net-metering program, but added a small fee that solar supporters call “troubling.” Officials for SolarCity and SunRun—companies that install solar arrays—have reportedly said: “The new fees mean fewer customers will be able realize any savings.”
“What amounts to a $5 charge is a big hit to the solar industry,” said Bryan Miller, SunRun vice president for public policy and power markets. “In our experience, you need to show customers some savings.”
Considering that Arizona Public Service Co. (APS) wanted to cut the rate paid to customers with solar and wanted a much larger fee added, the ACC decision might not seem like a victory. In fact, the solar supporters called it a victory for their side, claiming “policymakers in Arizona stood up for its citizens, by rejecting an attempt from the state’s largest utility to squash rooftop solar.” But that’s not the full story.
Renewable energy has suffered a setback in both the EPA ethanol decision and the ACC solar decision. Shouldn’t wind be next?
That’s an improvement but I see no particular reason any producer of solar power should be paid more than the wholesale rate for peak power, otherwise we are simply subsidizing inefficient suppliers at the expense of consumers.
On November 14, fifty-two Congressmen signed a letter, organized by Rep. Mike Pompeo (R-KS), calling for the end of the wind production tax credit (PTC). In the letter addressed to Rep. Dave Camp, chairman of the Committee on Ways and Means, they point out that the PTC, which was scheduled to end on December 31, 2012, was extended “during the closing hours of the last Congress,” as a part of the American Taxpayer Relief Act (ATRA). Not only was it extended, but it was enhanced by modifying the eligibility criteria. Originally, wind turbines needed to be “placed in service” by the end of the expiration of the PTC to qualify for the tax credit. Under ATRA, they need only to be “under construction” to qualify.
The letter points out: “If a wind project developer merely places a 5% deposit on a project initiated in 2013, it will have at least until 2015 and possibly 2016 to place the project in service and obtain the PTC. That means that a wind project that ‘begins construction’ in 2013 could receive subsidies until 2026.”
Like ethanol and solar, “the growth in wind is driven not by market demand, but by a combination of state renewable portfolio standards and a tax credit that is now more valuable than the price of the electricity the plants actually generate.”
These mandates and tax credits are remnants of an outdated energy policy that is akin to “ignoring our telecommunication revolution by supporting operator-assisted telephones with party lines.” America’s energy paradigm has changed and our energy policies need to keep up and be revised to fit our new reality.
As always, if you want efficiency, which translates to the lowest price, let the market decide, without government intervention.
Go, Mjølner, Go
- Green Energy: The Rotary Dial Phone of the Future (cornwallwindwatch.wordpress.com)
- EPA right to put brakes on ethanol mandate (thenewstribune.com)
- Controversy brews over increased ethanol fuels for older cars (reviews.cnet.com)
- Subsidizing green energy is like supporting operator-assisted telephones with party lines (ConservativeActionAlerts.com)
- Time to rethink ethanol (timesunion.com)
- Heartland Institute Energy, Environment Experts React to New EPA Ethanol Rule (CurrentHomeMortgageRate.com)