Progressive Energy Policy: Too Much Sun, Too Little Sense

In the article, “Sierra Club slams Gov. McDonnell's Va. energy plan,” Associated Press, October 11, 2010, Steve Szotak writes that the Sierra Club is not happy with Governor McDonnell’s energy policy. In its report, entitled "Power Failure: How Virginia is Losing the Competition for Clean Energy Jobs," the Sierra Club states that the Governor has failed “to recognize and take advantage of abundant opportunities that exist with energy efficiency and renewable energy.” In addition to the criticism of McDonnell's proposed energy strategy, the Sierra Club report also recommends a series of proposals, among them:

• Utility rate structures that increase in price based on power consumption, and reduced rates for customers who use less power.

• Programs to help homeowners evaluate and retrofit their homes for energy efficiency.

• Adoption of a standard that requires at least 20 percent of electric demand be met by renewable energy by 2025.

• Rescinding tax credits paid to coal mining companies and utilities.

• Rebates or tax credits for investments in energy efficiency and renewable energy.

In effect, the Sierra Club wishes to replace market demand with political demand.

So how is the replacement of economic science (the law of supply and demand) by political science (the law of unintended consequences) working out so far in the real world? All we have to do is turn to two other recent reports.

In a July 31, 2010, Wall Street Journal Review & Outlook article, entitled “Peak Water,” it was reported that the state of Arizona has mandated that utilities produce 15% of their electricity from “green sources” by 2025. With more than 10 months of plentiful sunshine and vast tracts of desert, Arizona would appear to be ideal for solar. There is only one problem: because of solar’s low energy density, the steam turbine that drives the electrical generator requires twice as much water than a conventional coal plant. And that’s a big problem: there is limited water in the desert. In fact, in 2009, the Congressional Research Service examined the consequences of a solar expansion in the southwest, and reported that it could consume as much as 1% of the state's finite water resources within a few years. So, Arizona – which is currently a net exporter of conventional electricity to surrounding states (most notably California, the “greenest” of all states), is about to create a water shortage to meet some artificial environmental emergency.

How about electric vehicles (EVs)? In the Wall Street Journal article, “Bumpy road for electrics”, by Mike Ramsey, October 18, 2010, the Obama administration is spending more than $5B in tax credits, subsidized loans, and grants to automakers with the goal of getting one million EVs / hybrids on the road. Ford, Honda, Toyota, and various battery suppliers caution that this goal is too optimistic. According to Ramsey, “Many experts say the trade-offs and economics of the cars don’t make sense for most drivers – even with a $7,500 US tax credit to buyers.” Cars, like the Nissan Leaf and GM Volt will cost between $33,000 and $41,000: about twice the cost of similar conventional vehicles. Johnson Controls, which makes batteries for the cars, found that the pool of potential buyers, for which the cars make sense, is very small – about 3% of all drivers. What needs to occur to drive demand? According to Boston Consulting Group’s Xavier Mosquet, gas prices must rise to $8 to $9 dollars per gallon before electric cars will be cost effective.

Add to these unintended consequences, the fact that the Obama administration is promoting the idea of increasing the ethanol content of gasoline from 10% to 15%. Not only may such a move have a harmful effect on older automobile engines, but will provide additional incentives to agriculture to convert arable acreage from food production to fuel production. Based on various sources, one acre of land produces a paltry 12 to 20 gallons of gasoline per year or can feed 8 people.

So what can we conclude? In order to save the planet, we will have to make sure its inhabitants are living in poverty and hunger first. This is readily achieved by artificially raising the price of gasoline by taxing it so that electric vehicles are more “cost-effective.” In parallel, we can divert our water and agricultural resources to other uses, so that the price of food and water goes up. Not to worry, we can pay for it with the money we “save” from our now cost-effective transportation: that is, if we have enough food to eat or water to drink.

Maybe, just maybe, these folks should come in from the sun.