Thursday, July 17, 2008

More Energy Hijinks

Al Gore calls for a carbon-neutral grid within ten years

There is a somewhat useful attendant speculation on logistics here.

Yes, I do link to things other than the Oil Drum. Here TOD provides good data on where our power comes from, and why nameplate capacity is not the same thing as power delivered. However, his thoughts about wind power lead into the question I have about all this:

It seems fairly clear that a carbon-neutral grid is technologically possible. But where will the political will come from? Consumers buy their power from utilities, which in turn buy it from power plants. Because a utility is a natural monopoly, consumers can't individually reject the energy politics of their utility, unless they're prepared to go completely off-grid, which is not economically feasible for most.

This leaves State regulation as the best/only means of controlling where a utility buys its energy. PG&E has lately signed a number of big contracts to buy renewable power, as the State of California has a compulsory renewable portfolio standard. Which brings me finally to,

Is this really a Federal problem? What are the politics of making it into one?

I believe it is a Federal problem. The physical nature of the grid means that electricity is constantly passing between States, except in Alaska, Hawaii, and Texas. Given that your Investor-Owned Utility wants to burn coal in Kentucky, and sell the power to the Public Utility Commission in Atlanta, a National Renewable Portfolio standard makes legal sense.

But it also makes financial sense. It is all well and good to talk about "Building More Solar". But just who is going to set down and do that? Why build a plant that produces a kw/h for 5 cents, on its own schedule, when you can build one that produces power for 3 cents a kw/h, whenever you throw the switch?

With a State-level RPS, the PUC receives a mandate as part of its monopoly, and in turn stimulates the IOUs into helping the PUC achieve its goal. With a national RPS, individual IOUs would be directly required to diversify their portfolios, or be denied the right to transmit power across state lines. This would have several effects:

1) The culture of a particular state would allow for an 'opt-out'. This would not amount to seizure or nationalization.
2) The very people profiting from the externalities of carbon would be required to pay for the greening of the grid.

However, on the downside

1) There would be nothing requiring a PUC to buy the green power. Green capacity might just sit idle, if an IOU tried to charge more for its output.

Food for thought. Kudos to Gore for beginning the dialogue, and for pushing the overall discussion in the right direction.


Tommaso Sciortino said...

I don't understand why we'd bother with the alphabet soup of regulation when we could just adopt a carbon tax. This would automatically encourage suppliers to go green and wouldn't involve having Washington bureaucrats decide what counts as green and what doesn't!

Bret said...

The problem is the nature of the natural monopoly.

A carbon tax normally works by penalizing dirty industry so the price of their products goes up so demand goes down so dirty industry shrinks so the carbon tax worked.

Applied to energy, this would look more like penalizing dirty energy so the plant raises its rates so the utility raises its rates so you write a bigger check, or you sit in the dark.

Don't get me wrong, a carbon tax is a great idea. But the energy industry is a very special bear.

Tommaso Sciortino said...

On an unrelated note - I understand how a strict constructionalist can support the idea of sates granting local monopolies to energy industries. However I don't think I understand how a libertarian could do so since - after all - using government force to prevent people from competing with one particular business seems like the ultimate in "Me getting punished for the bad choices of others".

Don't get me wrong. As a liberal I can come up with all kinds of ways to justify it. But I don't see any libertarians grounds upon which to do so.

heidi heilig said...
This comment has been removed by the author.
Tommaso Sciortino said...

Invisible comments put it well. Let me not try to change the subject like that again.