Saturday, July 4, 2015

NY Energy Plan2015/NY Wind Energy in 2014

NY City’s only wind turbine of note, a 100 kw Northern Power Systems (a true champion in its class) installed in Brooklyn (Sunset Park, South Brooklyn Marine Terminal), owned by an Australian company, Sims Metal Management - Too bad it takes a foreigner to do what is right in this state, as no USA oligarchs in NY City have seen fit to do the right thing, despite wallowing in oceans of money that cannot find a profitable home….

This week a new NY Energy Plan got released; it has been in the works for over4 a year: Over 100,000 comments were received on this effort, but perhaps almost all of those got ignored. A quick summary - “All Hat, No Cattle”, and continued increasing reliance/dependence on/addiction to the Fracksylvania Marcellus shale fields for methane. Even though the “Plan” supposedly covers the 2015 to 2030 time period, odds are this will be obsolete long before 2020 - in other words, when gas prices start rising due to falling drilling levels and rapidly depleting “sweet spots”, this plan is worth loess than burnt toast.

And it’s been 2015 for 6 months now. This is the year that NY was supposed to have achieved 30% of its electricity production from renewables, or 25% (the 25% value was upped by another 5% around 2009). This 2015 goal was set up in 2005, which also set up NY’s pathetically bad but well intentioned Renewable Portfolio Standard (RPS). There were also some very aggressive energy efficiency standards/goals postulated, but performance in that area has also been underwhelming. The 25% or 30% values sound impressive, but thanks to hydropower (two major projects and hundreds of smaller ones) we were already at ~ 20% of our electricity from renewables. Anyway, what were the goals of the RPS and how did that work out?

Almost all of the renewable energy capacity installed that tapped the NY RPS as of the end of 2014 has been wind turbines, with minor amounts of hydroelectric (small and medium hydro), some landfill gas/anaerobic digesters a couple of biomass projects and some PV. In terms of delivered capacity, most new delivered renewable energy electricity has been wind, biomass, biogas and hydroelectricity. Less than 56% of target (1086 MW on a delivered basis, or MWd) has been achieved, and even that is a stretch - see In particular, for wind energy, according to NYISO, an average of 451 MW (3956 GW-hr/yr) was delivered from 1735 MW of capacity (MWc), for an average of 26% net output, which is not very good, especially since a lot of the locations where these were installed are in some of the best NY State wind sites. The American Wind Energy Association has a great summary of NY’s wind statistics here:

The subsidies offered by NYSERDA have ranged from 1.475 (2007) to 3.495 (2013) c/kw-hr; these have been for 10 years and they are in addition to the Federal PTC tax avoidance (passive income tax credit) and MACRS tax avoidance (State and Federal tax deduction) subsidies. By any standard in the US, these are pretty generous as a combined package - on a 10 year basis these (NYSERDA + PTC + MACRS) can range from 7.1 to 9.1 c/kw-hr. So what weren’t or aren’t those juicy subsidies/incentives enough to cause a giant wind energy stampede? After all, while the MACRS tax deductions and Investment Tax Credit (ITC) work whether the wind farm makes any or no electricity, both the RPS and the PTC are based on the amount of electricity made; the more electricity is made, the greater the subsidy.

The answers to the question involving the poor performance of the NY State RPS and why the really wimpy targets were not met all revolve around the “can’t make any money” to “can’t make enough money” variety from wind turbine installations. The money making aspect involves both the production of electricity as well as the price for that electricity, and whether or no they wind generator gets blocked from selling their product (called economic curtailment). While the “EC” part only amounts to around 2% of the wind energy generated, that is “pure profit avoided”, and it’s importance to profitability is quite significant, especially if profit margins are thin to begin with. One way to improve the profitability is to simply generate more electricity, and there actually there us a way to raise per turbine productivity, though it would involve additional expenditures. Another way to improve the productivity of new turbines (about 270 MW worth are supposed to be installed in the 2015 to 2016 time frame) is to actually install the turbines suited for NY winds, and to install them in a less crowded manner. When too many turbines are installed in too small an area, the overall wind farm productivity drops significantly, as some turbines “rob the wind” from nearby ones located downwind.

The early projections/expectations for the per turbine yields in NY State were based on an assessment of the hub height wind speeds where those turbines were installed - numbers north of 36% were often quoted. In 2014 the average for the state was 26.42%, or about 73% of the expected value. To get5 the same profit rate as was expected, the price of electricity (= subsidies plus NYISO price) obtained by the owners would need to be 38% over what was originally expected due to the craptacular performance of NY’s turbines. And those higher prices never happened; instead, average NYISO prices DROPPED by 40%. This means the NY’s turbine owners got a double dose of bad news. But in some ways, they sort of got what they deserved.

The “wind shadow” effect has been well documented for a long time, and all developers can easily make use of very accurate software that models the effect of wind turbine placement AND topography AND surface vegetation/presence of trees. THEY HAD TO KNOW of the wind shadow effect. But then placing the turbines across more area means more lease payments and bigger installation costs per turbine/more transmission wire per turbine and possibly more headaches signing up people. Overall, this is a “greed equation” and they opted to minimize lease payments and wiring costs. However, they paid big time with poor performance. An example is the Steelwinds farm in Lackawanna, where hub height wind speeds average 7.6 m/s and yet output averages only 30% in a good year (there are also reliability issues with Clipper wind turbines). Those turbines tend to be aligned perpendicular to the prevailing wind, but even with the amazingly directed average direction, you just can’t put turbines with so little space between them (about 2.2 rotor diameters between each tower). The same goes for the turbines in Wyoming County and especially at the Maple Ridge wind farm.

Another factor in the poor financial performance was the high installation cost. An example is poor construction timing and a failure to use rail instead of trucks to transport the heavy components to as close to the location as could be done. hauling heavy towers and nacelles by truck is very expensive - trains are at least an order of magnitude cheaper. This had profound effects in Lackawanna (timing plus transport cost).

Next, there is the tower height. NY tends to be hilly and there are trees just about everywhere, and trees drastically degrade the wind resource, especially at only 80 meters above the found. In NY there are only two wind farms with taller towers - Hardscrabble (100 meter towers, 44 meter blades) and Marble River (95 meter towers, but with ~ 56 meter long blades). Given the large “surface roughness length” of 1 meter or more for any place other than the Lackawanna coastline, going taller taps much faster winds. However, if the goal is to minimize investment while maximizing short term gain, well, that is a conflict. NY’s developers chose the “quick and dirty” route, and they paid for that mistake many times over. It turns out that existing wind farms could utilize taller towers, at least for some of the turbines at a minimal cost, but since zero investment is the order of the day, that’s all that will be done for them. Taller towers also makes for quieter turbines at least as perceived on the found (inverse square law). So going to 120 meter hub heights from 80 meters (by putting in a 40 meter concrete lower section and then putting the 80 meter steel towers on those) would tap winds on average 9% faster that gives up to 30% greater average energy output while at the same time dropping the sound intensity by 2.25 times at the tower base.

Finally, there is blade length. New wind farms tend to use Low Wind Speed Turbines - such as the Stony Creek array (Wyoming County) and Marsh Hill (Steuben County) which use 100 meter rotors for 1.6 MW nacelles. Last year the Stony Creek array produced 33% of its rated capacity, which was 27% better than the NY average in a spot with less than optimal wind speeds. 

Of course, in a more ideal world, things like concrete tower sections would be made in NY State, and used for NY wind turbines that were properly spaced apart, used tall towers and LWST design. And for offshore wind arrays in Lake Erie, nearshore locations (where they COULD BE SEEN) combined with concrete “gravity” foundations and using LWST or near LWST. Offshore units should get AT LEAST 40% net outputs and more like 45% given the 8.5 m/s wind resource that exists above Lake Erie.

However, the biggest problem that sunk the NY State RPS was the Casino pricing system for electricity in NY State (alias NYISO pricing or LBMP - Location Based Marginal Pricing). The risk of NOT being able TO KNOW what future prices will be is a killer for wind power project financing. As luck would have it (or maybe luck had nothing to do with it), electricity prices collapsed in NY State following the combination of the Great Recession price crash (June 2008) and the fraudulent “fracking for methane” epidemic that followed, where drillers on average continually sold methane for less than the cost to make it and then drilled even more in an effort to get out of the debt incurred by selling for less than the cost of production. Instead of pegging the electricity price based on the cost to make it plus a reasonable profit, wind turbine  owners in NY State have the price of their electricity at the price set by natural gas. For the last several years this methane has been priced not at what it cost to make it but whatever it could be sold for, and then generally has been less than the cost to make it from MOST wells. Using this money losing methane to make electricity makes the electricity a bargain, but it also ruins whatever profitability might exist for alternatives to methane based electricity generation. Normally what “should happen” is that methane suppliers should restrict their output until prices rise to a point where drillers/producers can make a profit, but because of the way these drilling efforts were financed, that is not possible. Drillers have to produce as much as they can as soon as they can and if they go bankrupt in the process due to the conditions of the loans/bonds that were used to get the money to drill and frack those wells… and if the drillers go bankrupt, well, the financiers take possession of the company assets and then they sell them off to someone else, who continues this same crazy business arrangement. Such a calamity was not foreseen by competitors of methane production and usage - that when a glut of methane appeared, production would not be curtailed until prices rose but instead even greater amounts of methane drilling would be pursued. The greater production rates drive the prices EVEN LOWER and until mass quantities of drillers go out of business, the insanity never stops, and as long as the bankers/hedge funds keep providing the money, well, the fun just never ends…. And added to that is the fracking for oil frenzy, as many of the oil shale wells are also prodigious methane producers (Eagle Ford, Niobara, West Texas), dumping enormous amount of methane onto the market as a by-product of oil production.

Because the electricity prices wind turbine owners get in NY State are mostly pegged to methane prices, there is little profit potential to the business. Average NYISO prices have varied between 3 to 4 c/kw-hr since 2009, and not the anticipated 5 to 7 c/kw-hr. This was partly made up with rising REC (=RPS prices) in the bids submitted - the ones in 2013/2014 were 2 c/kw-hr greater than those in 2007-2008. However, they probably need to be even higher. But this also means that NYSERDA wouldn’t make its numbers - the 1086 MWd could not be achieved for the amount of money initially allocated in the 2005 RPS effort.

In addition to that shortcoming, very few wind turbine minor component manufacturing and no major manufacturing has developed in NY State. As a result, the only jobs produced in this effort are a tiny number of maintenance technician ones and some one-time design and construction ones which disappear where the construction phase of the operation has been completed. Contrast this with Quebec (6000 jobs created) and Ontario (~ 12,000 jobs created). Without the jobs and the businesses that employ the workers, there is little incentive to have a serious wind energy policy; after all, almost all the wind turbine manufacturing jobs/business helped by the $3.4 billion worth of wind turbine installs in NY to date were located out of state or out of country. And of course, no one gets held accountable for that, either….

Of course, the “solution”to the lackluster and highly inadequate performance from the wind biz is even more hair brained - divert the money for solar PV installations. In this way, the same quantity of money as would have been spent on wind turbines will produce less than 20% of the electricity that would be made using 26% net output wind turbines, and 13% of that which could be made using 40% net output turbines. The net effect wiki be to replace LESS pollution based electricity with the $1 billion advocated for the NY Sun proposal that is to be stretched out over a decade.

While it is nice that NY State in its various entities subsidize PV (which may even involve purchasing Made in NY State PV systems via Solar City), it is a shame that the “missing” 500 MWd of electricity that was supposed to be created by the RPS will forever be missing in action. The Main Tier of the RPS will be lucky to ever get to 600 MWd even with the proposed 170 MWc of new projects:

 - Black Oak wind farm 12 MWc (Tompkins County)
 - Jericho Rise wind farm ~ 80 MWc (Franklin County)
 - Arkwright Summit wind farm ~ 80 MWc (Chautauqua County)

The two larger projects would be owned by the Portuguese monopoly EDPR, while the smaller one is planned to be owned by some members of the community, which would be quite a milestone for NY State (only 3 of the 1000+ wind turbines now installed in the state are owned by a member of/members of the community - 2 near Rochester and one near a ski hill adjacent to Massachusetts). These will be installed sometime in 2016 to 2017.

Of course, in 2016, the solar PV incentive called the Investment Tax Credit (ITC) expires (, so the solar installation plans - all thoroughly dependent unpin this passive income tax avoidance subsidy - may also go up in smoke. At a minimum the Republicans in the House and Senate will “put it up for legislative ransom (stop Obamacare implementation or Ban Abortion or go declare war on a nation with big oil reserves or else the ITC gets the axe!). The Republicans and especially the extremely extreme right wingers in the House will no longer approve ANY subsidies for wind turbines, fully prepared to see a $20 billion/yr industry go “poof” because wind turbines compete with nukes and methane from fracking. Should the PV industry be perceived as providing competition, they too will experience “The Chop”. To avoid “The Chop” they will have to essentially silence their advertising, PR and evangelical promotion efforts, which would be VERY DIFFICULT for a variety of reasons. A lot of PV advocates are of the “true believer” variety, as the subsidies provided to the PV industry are either invisible to them or now seem like a given, a birthright.. To get their subsidies extended, they will actually have to push the belief that they are invisible, and that the PV output in the US is likely to stay a small fraction of the total US demand for electricity.

The wind biz pushed the belief that wind turbines are cost effective against nukes, coal and methane, which is often true, especially if methane prices actually rise to reflect the actual real cost to produce that methane and also include a profit. Once the wind biz became viewed as a player in the electricity supply of this country (soon to be 5% by the end of 2015) and the effect of wind in displacing the consumption of 1.5 trillion cubic feet per year or more of methane became apparent, well, the proverbial gloves of the polluter based electricity biz cam off. Out came the proverbial maces, battle axes, nail protruding clubs, knives coated with poison, electroshock equipment and of course, IEDs. Its a multibillion dollar/yr business, with potential profits of over $1 trillion in a decade, and all is fair. There are only winners and losers, the living or the dead, and no prisoners are allowed. And there is only a decade or so of low cost to make methane left in the continental USA, so this should be prime profiteering time for the natural gas biz. Instead, it is mired in a gas bloat of mostly its own making (well, that and those who financed the fracking frenzy), with prices that are money losers for most in the biz, with methane prices to producers now in the $2/MBtu range. The almost last thing they need is MORE competition from the wind biz, and that problem seems to have been staunched for now with the demise of any extension of the PTC. Would the gas biz and its servants and supplicants the Republican Party allow an new entrant in anything other than a trivial mode? Not likely!. And will the solar PV true believers, many of who cannot compute what the real, unsubsidized cost per delivered mw-hr is, submit to hiding their real intentions (which, lets face it, do have a lot of merit, aside from the really high electricity production cost) of making the PV industry a real player in the US electricity supply? Also not likely.

PV vs. the Fracking Methane Suppliers Analogy:

Unstoppable force meets immovable object. Oh boy…

BTW, the average installed cost of PV in NY for the last 3.5 years is now down to $5780/kwc ( At a money cost of 6%/yr for 25 years (a loan rate virtually impossible for most people or companies to access) that gives a real cost of electricity production of 41 c/kw-hr before any other costs (insurance, property taxes, inverter replacement, etc) and any profit are added in (12.5% net PV output). As long as the money paid to the PV generation owner mostly stays local, the economics of blending in this higher cost energy are not very hurtful, and can be quite beneficial. But when the money gets shipped out of the locality, well, that’s not good. And the high capital cost is either somebody else’s wages or a business owners profit, which in turn provide the basis for the taxes that keep things civilized. But could 41 c/kw-hr PV compete with 8 bc/kw-hr wind or the current grid rate of 3 to 4 c/kw-hr - probably not. So PV needs its subsidies to maintain the illusion that it is competitive, while also employing a lot of installers. 

Oh well, interesting times….

Thursday, June 25, 2015

World Wind Day and Economic Roadkill

Picture from of some really TALL turbines somewhere in Europe on a foggy day. You can also see the very tops of some major high voltage transmission towers (pretty tall in themselves) which are dwarfed by the turbine towers. In Europe, wind turbine towers of 135 to 149 meters (up to 489 feet) in height are getting more common - ones made of at least some or all reinforced concrete. For tall towers supporting that weight of the nacelle and staying rigid so that the flexing blades don’t take a whack out of the tower just can’t happen using steel for the tower - even 1” thick steel is too elastic. But, that’s where things are heading in places where the technology can profitably develop…. which unfortunately is not in the USA to the extent many would like to believe….

Last week was World Wind Energy Day (June 15), a “holiday” sponsored by the European Wind Energy Association Now, this is a PR holiday, but it is designed to get the public aware of and talking about wind turbines, what they can do, who they can employ and what it all means. And the industry and advocates of wind energy in particularly and renewable energy in general can celebrate what has been accomplished to date and perhaps speculate on what can be done with them in the future. There has been a lot of good accomplished so far, despite some pretty fierce opposition from the nuke, coal and methane pushers who seem so immensely better politically connected that those in the wind biz. If this aspect of renewable energy is to go further, it’s also going to have to do a lot better than it has been doing in the political realm. After all, with the correct politics, some really crazy subsidies can go into effect that make the most whacked technology (like nukes) seem viable - nukes being the prime example. Or perhaps energy generation approaches with drastically different costs can be priced identical with the differences covered by subsidies so that it appears that all are equally expensive. In the short term, politics trumps economics and politics determines what makes money and what does not. And it can get messy.

So far, the world is closing in on 400 GW of wind turbine capacity, and that will represent an investment of roughly $US 700 billion. At the end of 2014 installed capacity was around 370 GW ( and last year over 51 GW (about $US 80 billion to $US 100 billion) were put up. That’s not too shabby. Imagine what could be done if most governments really tried to push this technology instead of being cheerleaders for nukes, gas and coal and generally the equivalent of brakes with respect to wind turbines…. And as some of the cumulative graphs show,  exponential growth is still going on…..

But the problem is, this rate of wind turbine deployment is TOO SLOW. And it could be done SO MUCH FASTER. There could be SO MANY MORE PEOPLE EMPLOYED in making the stuff that goes into wind turbines.  A LOT MORE CO2 pollution could be avoided, with attendent climatic and ecological consequences minimized. All that is both great for business and great for workers and communities where people live and try to make a living. And once installed, this wind based electricity causes essentially no pollution. Depending on what type and where they are installed, all of the energy expended in making and installing them is paid back in electricity generated in 4 to 16 months. And once they are generating, these turbines don’t need any cooling water nor do they make air pollution, including particulates that might cause Alzheimers ( but do cause lung and heart disease, radiation that causes cancer and weakens immunity to all kinds of ailments not to mention acid rain, heavy metal poisoning as well as the CO2 pollution that is severely messing with our planet’s climate and energy balance.

Plus, you you can install more delivered electricity for a given cost with wind turbines than any other form of renewable energy (especially now that all the good hydroelectric sites are pretty much tapped out). ESPECIALLY IN THE USA. So if you only have $3 trillion to spare to power up our country with renewable electricity, you could easily do this within a decade while putting around 5 million people to work both directly and indirectly. And NO imports are needed to do this, either, though for all practical purposes, the technology to make and install wind turbines of the correct size and wind speed to rotor diameter ratio  and tower heights is imported from Europe. It would take well over $15 trillion to do that with PV, not to mention the much larger buffering/storage issues. In general, wind turbines make SOME electricity at least 80% of the time, while PV (especially fixed orientation solar) generally makes it less than a third of the time and less than a quarter of the time in the non-desert parts of the country.

And there is room for both, as long as people understand that PV is more of a “make work” for somebody arrangement than is wind turbines. That’s because electricity made from PVs is between 5 to 10 times more costly than from wind turbines. Of course, in the US that tends to be very difficult to comprehend because of who REALLY PAYS for the installation of PV. When up to 81% of a PV system is paid by somebody else (generally those who cannot take tax deductions/tax credits - in other words, the bottom half of the income distribution) and 73% of a wind turbine installation is (eventually) paid for by somebody else, well, those tend to be some really bent incentives. For some it actually benefits those with a lot of money to have higher priced renewables because that leads to greater amounts of tax avoidance. For wind, at least there is an incentive to generate as much power as possible (the PTC is 2.3 c/kw-hr of electricity sold - no sales, no tax avoidance potential). 

Anyway, how about $2 trillion for turbines and $5 trillion for PV, with roughly $500 billion for pumped hydro electrical energy storage…? The wind turbines/pumped hydro provides job creation and affordable electricity, while the PV provide jobs but jacks up the price of electricity in a steady and predictable manner. This way, electricity is not cheap and is thus less likely to get wasted on useless and valueless things, like that wall sized TV….

Right now this country has many pressing issues, but a closely related set of them is the lack of useful and especially decent paying jobs that really is coupled to a lack of renewable energy systems manufacture and deployment. Without the real wealth creating jobs, economic demand remains pathetic and lackluster, and Federal, State as well as local governments (whose incomes are tied to the performance of the economy and especially the number of people in the middle class) get starved for revenue. In turn, investments in what makes life livable (water, sewer, transportation, schools) do not get made or only get done at a fraction of the rate that they should be done. That in turn minimizes job creation on these public improvements, also helping to minimize economic demand. This gets to be a vicious spiral - also called an economic death spiral. Less economic demand leads to fewer investments which leads to fewer jobs which results in less economic demand…. One of the consequences is a “Sea of Money” that is looking for profitable investments and which generally cannot find them, which is why interest rates for large quantities of money are essentially zero - the ZIRP = Zero Interest Rate Policy. And example of this is explained in this article -

All investments are not the same. A massive investment in energy efficiency and swapping out depleting and polluting fossil fuel usage for renewables actually avoids future price shocks (both up and down) caused when energy prices drastically gyrate (most recessions are initiated to a big extent by sharp price rises in oil, natural gas and/or electricity). Recessions then drop energy usage which crashes prices and slows production of fossil fuels until supply and demand temporarily equilibrate. But since fossil fuel prices are generally unrelated to the actual COST to produce much of this supply, it tends to be things other than the average cost to produce fossil fuels that sets off a price spike. A large investment is renewables - especially those renewables with the lowest energy production cost - provides actual competition to fossil fuels (notably natural gas and coal) and lowers the demand for them and keeps the price and especially the profitability in them low to nonexistent. Renewables also employ more people per dollar invested than does a similar investment in coal and methane production - especially if those renewable systems are actually Made in USA.

We need something like 10 million jobs ASAP in this country to restore economic demand. And we need to restore economic demand in sectors of the economy that do not consume addition fossil fuels. For example, investing in mass transit that is electrically powered (mostly suitable for urban regions) creates a lot of short term jobs (construction and manufacturing), some permanent jobs, creates a demand for electricity and allows people and things to be transported with using petroleum, which we still import to the tune of $200 billion per year. That $200 billion/yr is also probably worth at least a 4 million job net loss to this country in itself. So even if the mass transit projects only knock back imports by 2 million bbls/day, that’s still a good thing. On the other hand, building more roads so that more cars and truck can roll across them consuming even MORE petroleum or at least NOT SHRINKING PETROLEUM USAGE - that is not the definition of a good investment….

The lack of a massive renewable energy effort is a crime in many ways - environmentally, climate, politically and especially economically. In effect, it leaves millions of people in this country as economic roadkill, at best, stalemated, at worst, preying on or hoping to get lucky over a few crumbs of the economic pie that they can grab or obtain. Of course, if they wanted to be successful in a life of crime, they would do the white collar thing - banking, investment, hedge funds, money laundering and financial consulting offer so many lucrative opportunities with a minimal probability of getting caught - the “too big to fail is also too big to jail” con is now a major sector of the US economy. And few of these criminal fraud schemes will produce investments in renewables - most of them actually make sure that long term mild yielding investments in renewables never occur. Or the returns to crime are just so much faster/bigger than those from renewables that renewable investments barely happen at all, and not in the quantity needed, either. It5’s the renewables version of Gresham’s Law ( - bad money drives out good money. A corollary is that bad investments (fraud/money laundering, real estate scamming, petroleum, coal, government insured nukes, suburbia) crowd good ones.

So, despite all the marvelous technological improvements in renewables, we need to stop placing faith in the idea they can undercut pollution based energy on price. Fossil fuels are what we run the military on, and what we go to war over (does anyone go to war over prime wind resource sites, or deserts for solar energy? Did not think so…). Nukes are where the vital part of mass produced atomic weaponry comes from. Prices can be set via crooked means too easily, especially in ways that favor those already rich from and continuing to get rich from pollution based fuel usage. If this generation wants to stop being economic roadkill, it’s going to have to get political about where jobs get created and what is considered valuable to do. As a society, we cannot survive without energy - maybe we can get by with less, but not “none”, at least for the vast majority of people. And the beauty of renewables in general and wind energy in particular is that job creation, wealth creation and energy production all come together at a price that can be afforded. And we don’t even need to go to war to steal somebody else’s energy, either. But that’s a different sort of “roadkill”….., and about as original as Wile Coyote’s sole goal in life, which was to catch that infernal Roadrunner. And how did that work out? Over and over and over again..... Anyone for a new oil and/or natural gas based war....?

Monday, June 1, 2015

A Graph That Says So Much

Figure 2-1 from a recent US Department of Energy Publication “Enabling Wind Power Nationwide” - 

Recently the US Department of Energy (DOE) published a couple of wind turbine related publications — “Enabling Wind Power Nationwide” (above link) and “Wind Vision Report” ( Both more or less coincided with the annual American Wind Energy Association annual meeting, convention and exposition (just concluded) which was held in Orlando, Florida this year. Odds are, this was not an example of fortuitous coincidence. If you are interested in renewable energy, future economic activity or how the US is likely to obtain electricity once all the existing nukes shut down due to old age (as they will not be replaced with new nukes) and the demise of most of the fracking sourced methane industry due to too much darn fraud, these are just the ticket.

What the graph in Figure 2-6 nominally states is that the Levelized Cost of Energy (in this case, produced electricity) has more or less “flatlined” after dropping drastically from around 50 cents/kw-hr to around 5 cents/kw-hr. The shape of this cost curve is known as an exponential decay, and in economics this is the sign of a technology that has achieved “maturity”. Future declines in cost are not likely to come about from technological improvements (such improvements will keep the costs from rising, however); lower costs of electricity production from wind energy now are most likely to happen via reductions in the cost of FINANCING such projects. Actually, the technology aspect can be seen in this graph, which uses a lot of the same information (from the Wind Vision report):

And at present, there is simply NO competing renewable energy technology for delivering electricity in mass quantities anyway near the quantity AND price that Low Wind Speed Turbines (and commercial scale modern wind turbines) can make electricity. Elsewhere in the two reports, the installed capital costs of wind farms are discussed (page 6 of “Enabling…”) and the average in this country (2013) was $1.63 million per MW of capacity. Compare that with the US average for PV ( for the last year ($3.33 million/MW) and then compare average efficiency (delivered MW-hr/yr per MW of capacity) (32% for wind and 15% for PV (, though this is LOCATION SPECIFIC). On a completely average basis, PV electricity should be 4.35 times as expensive as wind turbine electricity before maintenance costs (1 c/kw-hr for wind turbines) are factored into the cost of energy equation. And in no way is that remotely competitive. Other renewable electricity sources may be cheaper (hydroelectricity, especially), but that option has mostly been tapped out in this country, and it is now irrelevant and becoming more so due to Global Warming induced climate changes in many parts of this country. Geothermal heat to electricity and tidal energy also works only in some spots in the continental US, as does “solar thermal to electricity” and biomass (which requires water to grow stuff and which is inappropriate in deserts and semi-deserts.

So of the two renewable energy approaches which have the capability to power up the country many times over, there is a more expensive form (PV) and a less expensive form (commercial scale wind turbines). In much of the US PV is much more than 4.4 times the delivered capital cost, simply because the actual probability of sunlight shining through clouds/rain/fog/snow is less than 50% and or the wind resource is just so darn awesome (most of the Great Plains, notably Kansas and Nebraska). Of course, the advantage of renewables over pollution sourced approaches to electricity manufacture (coal, methane, nukes) is that renewables don’t deplete, they don’t undergo catastrophic meltdown disasters and that CO2, CH4 and certain poisons (radon, mercury, sulfur and nitrogen oxides, carcinogenic and other diseases causing dusts) are not hurled into the atmosphere. But once the renewables versus non-renewables debate is concluded, there is the question of WHICH renewables to use.

In the US, essentially ALL electricity manufacture is subsidized to some extent via avoided taxes and the avoidance of paying “external costs”. Probably the worst offender of the external cost subsidy rackets is the nukes via avoidance of the trash disposal costs (after all, there is no POLITICAL solution to that which someone won’t hate and be adversely affected by) and via avoidance of “catastrophic meltdown insurance” costs. After all, the empirical probability of a catastrophic meltdown somewhere in a world with about 400 operating nukes is once per 10 years. The US has about 100 of those, and almost all of them are between 30 to 50 years old. These are now entering the “old age” catastrophe mode. Coal has all kinds of avoided costs that add up to around 12 c/kw-hr if CO2  pollution was properly costed at ~ $80/ton and the health effect of coal combustion based particulates were accounted for, and there definitely is a depletion factor for at least Appalachian coal. As for methane, well, how long can it be sold for less than the cost to produce it, especially once the Marcellus “sweet spots” get tapped out? And there are those climate altering effects of CH4 leakage/emanations and CO2 pollution, which so far this year have almost got the attention of most “climate ignoramuses” in Texas and Oklahoma. Those three electricity generation approaches - coal, methane and nukes - are now the economic equivalent of “dead men walking” and SO 20th century, too. Maybe a good name for them would be “Zombie technologies”, though zombies are probably eraser to kill off……

Subsidies also tend to be a two way street, and they definitely encourage dependency. With the dependency often comes higher installed costs. For example, the average installed cost of the 130 MW (7749 installations) of PV capacity in put up in NY State since June 1 2010 (when the flood of pusedo-slave labor made PVs was in full swing) is $5.7 million per MW of capacity ( That’s $742 million worth of practice. Those are roughly twice what they are in Australia, where labor costs are quite similar. By and large, that difference is in the management and regulation aspects - in other words, local installation company owners tend to take a very big cut of the action. In fact, roughly 43% of the installation cost is “margin and financing” while installation labor is 11% and the actual PV panels themselves are 16% of for the US, and in NY these numbers are even worse. For this report, read it and weep (page 4): 

Since so much of the PV installation costs are subsidized (in NTY State they can amount to more than 18 c/kw-hr for 20 years, versus 2.8 c/kw-hr for wind turbines (PTC and MACRS as pro-rated over 20 years)), what’s the incentive to cut costs? After all, the higher the installed price, the greater the tax avoidance possibilities….. Furthermore, with so few US PV manufacturers and so many installers, the emphasis on PV manufacture as a source of profits and employment vanishes, especially since imports either directly from slave labor lands (China) or indirectly (Taiwan PV modules use made in China PV cells) have effectively removed profits from the picture. A lot of PV manufacturing is state or national government owned in China, and the goal of these entities is to employ people, to consume coal based electricity and to earn foreign exchange revenue, even if local taxpayers are partly picking up the tab. Perhaps that is why there are so few remaining US PV manufacturing facilities that continue to operate….

Of course, having millions of house, apartment, office and business rooftops is a socially and environmentally desirable thing to do, although the ramifications of all those hundreds of billions of dollars tied in in efforts that provide NO FINANCIAL GAIN, PROFIT or TAXABLE INCOME and which would, if current trends persist, result in the avoidance of HUNDREDS OF BILLIONS OF DOLLARS in TAXES paid really need to be thought out. Then there is the question of who is going to provide the energy storage for those PV systems which will tend to make most of their electricity in the 6 hours per day (9am to 3 pm) of maximum possible solar irradiance, at least on sunny days. It may actually be better if some pif those PV panels are pointed west or southwest (gets more afternoon sun) even though the maximum PV output for stationary panels always comes from panels oriented due south. Do owners of afternoon oriented panels get compensated for their less than optimum PV orientation? If not, then PV generation will always max out at noon, even though electricity demand tends to max out between 4 and 7 pm…. And who pays for the storage that buffers PV output with electricity demand? What about the extra transmission and distribution wiring needed when generation only is significant for 6 hours a day, if at all? Such questions are irrelevant when “PV penetration” is low, but when it starts getting above 10% of the rated capacity of a region, these questions become quite relevant.

And who eats the extra costs…? For example, governments will either have to raise taxes and/or cease doing what is asked of them when their electricity costs rise. Businesses either have to eat the costs or raise prices when the cost of their delivered electricity rises. In Europe, Germany’s policy of sticking residents with the added cost of renewables (mostly PV) while large businesses get electricity without the renewables adder is considered a subsidy in its own right. It turns to that the added costs due to onshore wind, biomass and biogas are barely noticeable - should they have to also subsidize PV, especially when there are so few manufacturing jobs associated with PVs in Germany any more?

Few businesses - especially ones in competitive sectors of the economy - want to raise their costs of production, and few can afford that. The same logic applies to local governments (school districts, municipalities, villages, towns, cities, counties and even states. For businesses, it is a zero sum game - added costs get balanced by reduced wages to employees, lower profits and resulting lower tax revenues paid by them to local, state and Federal governments, and higher probabilities of going out of business. Those businesses that are most electricity intensive (notably manufacturing, which is the core wealth creation source for this country) get hit the worst and thus they are the least likely to select PV as their main source of electricity. Instead, PV gets reserved for those who can afford it, those with defacto monopolies (Google) or those whose profits reside from exploitation of defacto slave labor - such as Apple Computer. For those in competitive businesses, the lowest cost renewable option - wind power - would be their only renewable option. However, almost all businesses in NY State don’t even do that option - they tend to go with the “default options” - mostly nukes and methane.  They chose pollution based electricity generation, as it is the lowest cost short term solution. The same applies to local governments and school districts that are still feeling the lash of “Austerity”.

A classic example of this is NY State’s electricity buying habits. One of the biggest consumers of electricity in NY State is the SUNY/CUNY system. Based on the SUNYAB (28,000 students) consumption rate of ~ 22 MW, the 450,000 students of SUNY and CUNY probably create a demand for ~ 350 MW on an average basis. Since all of NY’s wind farms last year made ~ 400 MW on average, having these institutions collectively use only wind power would double the use of/demand for wind power. But this would mean that extra money would need to be spent to pay for electricity that has a generated cost greater than the present NYISO Casino price ($28.52/MW-hr at 10:53 on 6-1-2015, or 2.852 cents/kw-hr). Essentially no electrical generation entity other than NYPA (hydropower) can be profitable at such prices. Thus, if SUNY/CUNY were to buy wind power, their operating costs would rise, and it would be either taxes on SOME NY’ers (billionaires anyone? or more likely, anyone BUT billionaires) or tuition rises that would allow this to happen. The idea that SUNY and CUNY can magically increase costs, not receive additional state taxpayer money, still continue with bloated high level administrative salaries and not decrease other wages is just ludicrous. And so, one of the biggest consumers of pollution sourced electricity paid with taxpayer money (and all tuition money is taxpayer money once it is paid to SUNY/CUNY) continues along on its merry way. And if you raise this, the overpaid administrators (or the occasional underpaid ones) will point to some trivial purchase of “out of state RECs” at bargain basement prices, too. That ~ 350 MW of year after year market demand could leverage $2.6 billion in additional investment, as well as massive “tank you’s” from Quebec, Ontario, Michigan, Ohio, Wisconsin and Pennsylvania (where turbines and their major components - blades, steel, towers and gearboxes - are made). After all, we just install them in NY (that’s only $500 million out of the $2.6 billion investment), but it is better than nothing….

But, back to the graph at the top of this article. What does it ALSO say? Well, in no uncertain terms, it says that the cost of an installed turbine just is not related to the rate at which wind turbines are installed in this country. It does NOT say that making them more expensive or less expensive will affect the installation rate, though more expensive turbines theoretically should slow down the installation rate. And even though the real production cost electricity from a turbine is roughly 25% or less - and in NY, close to 12% of the real cost of PV electricity - than PV based electricity and that PV is now a “competitor” to wind based electricity, well, this graph says that such facts are meaningless. This is because OTHER factors are far more important than the actual cost of production with respect to the rate that wind turbines are installed in the US. Odds are these are political, initially, as well as “competition” related - wind actually CAN compete with methane sourced electricity, more wind based electricity means less need to use methane to make electricity, and it has effectively killed off the need for ANY new nukes (and that is a good thing!) or new coal burners (also a good thing!). Of course, “compete” is not really definable, as no one actually knows what the price of methane will be for the next 25 years (on average, probably a LOT higher than it is right now), and without a knowable price, you can’t compute what the actual long term price of methane source electricity will be over such a time period.

Right now wind turbine provide an average of 20 GW of electricity, and by the end of 2016, that number will be 25 GW. That will avoid the consumption of about 1.8 trillion standard cubic feet of methane each year for electricity production, which is around 6.8% of present US consumption. If US consumption seas to rise by that much, what would methane prices be 28.5% higher over “medium long term” when the price elasticity of demand is -0.24, and 59% higher in the “short run” where the price elasticity is -0.11 ( To translate this into dollars just for electricity, this is roughly a 29% increase in generated electricity prices, worth around 1 c/kw-hr. That may not sound like much, but that would suck $40 billion/yr out of electricity consumers and dump that money into the owners of methane producing wells. But most methane is sold for heat or chemical purposes (about 70% of methane sales/30% of methane gets used to make electricity). The net effect of now wind turbines would be to suck roughly $130 billion out of residential, business and governmental methane customers (methane users) and dump into into the gaping maw of methane producer owners. Which these days happens to be a lot of Hedge fund speculators who own corporate bonds that have been becoming increasingly valueless, along with the advice of these “Hedgies”.

And yes that would suck, big time. You could easily induce a recession with that kind of arrangement - indeed, most recessions in the last 40 years have been initiated by fossil fuel “price shocks”. And since the total amount of money invested to date in US wind turbine installations is around $130 billion….. well, our SOCIETY and the vast majority of its people gets a 1 year payback on its wind turbines. And yes, you also won’t find that in the top graph, either, nor will you find the reasons why the cost to produce electricity is unrelated to the rate that they are installed. The actual reasons why there is no empirical connection between electricity production cost from wind turbines and the installation rate of wind turbines is both dirty politics and “hockey on the boards/no holds barred economics”. Because in this country if you have money odds are you can buy desired short term political outcomes. And with those political outcomes, you can affect and effect what makes a profit, what gets defined as “investment grade” and where money gets invested, even if it loses tremendous amounts of shareholder value, year after year. Right now and for the last 6 years, natural gas has been a tremendous money loser, and it has often/generally been sold for below what investors were told it would sell for. As a result, hundreds of billions of dollars of corporate now junk rated bonds were sold, all on the promise that oil and methane sales revenue (in many cases, not very distinguishable from each other) would pay for dividends, pay the interest on bonds, cause stock values to go up and thus give investors a nice profit and then some with essentially no risk at all.

Oops. Brought to you by the bankers, financial advisors and others that practice “rip their face off” (a term Goldman Sachs investment advisors use nowadays to describe what they will do to many of their CLIENTS) investment strategies, and who also facilitated The Great Recession….. Check this out from September of 2014 - before the rout in oil prices had really got noticed…

But anyway, what the top graph DOES say is that if you want to increase the rate at which the lowest cost form of renewable electricity generation is deployed in this country and in the process, replace “obsoleting” other approaches to making electricity, any faith in traditional economics (the low cost provider will prevail) is sadly misplaced. Low cost has very little influence. Odds are, you should look to the political realm for solutions. And while that may be (= IS) disturbing, well, apparently that where the solution to pollution resides…… as low production cost approaches seems to be a losing theme…


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