California Heading for a ‘Green’ Train Wreck

California reported a 12.4% unemployment rate for December 2009, matching the previous month’s rate and maintaining its place as the state with the 5th highest unemployment in the US. The housing bubble hit the state hard, though certainly not as hard as it hit Nevada and Arizona, yet home prices continue to be among the highest in the US (a story for another post).

Northrup-Grumman announced it would relocate the company’s corporate offices to Washington DC area, ostensibly to be closer to its main client, the US Government. Toyota will close their NUMMI auto manufacturing plant in Fremont in March (the last auto manufacturing plant in the state!) and move production to its plants in Texas and elsewhere because of high labor costs and high energy costs. Nissan Motor Co. completed moving its headquarters, and 1,300 jobs, to Tennessee in 2008. Interstate Bakeries Corp (Wonder, Roman Meal, Hostess Cakes, Drakes) left in 2009, also taking 1,300 jobs with them. At a time when Hollywood is celebrating its 100th birthday, the number of production days for feature films in L.A. is at a record low.

There are a number of reasons these and other businesses are closing their doors or leaving the state, but the reasons all stem from one common source; California state government.

• State taxes, among the highest in the US
• State labor regulations, among the most stringent and costly in the US
• State environmental regulations, the most restrictive in the US

While all of the above issues are bad and getting worse, that last item is the one that will drive the state to bankruptcy. In 2006 the state government passed AB32, California’s very own version of “stop anthropogenic global warming” legislation. Scheduled to go into effect in 2012, this one law will be the last straw for many California businesses.

The state is putting rules in place for owners of diesel-powered vehicles manufactured prior to 1996, and expected to operate more that 100 hours per year in the state, that will require them to replace the engines in their vehicles. Replacement estimates are between $60,000 to $90,000 per vehicle. Further, the old engine will have no value as they cannot be used in the state after the law is put in place. Many trucking firms and construction equipment firms are closing their doors because such expenses are beyond their ability to finance given the current economy.

Cement manufacturers will be driven from the state as the major byproduct of making cement is CO2. The only option these firms have short of relocating is called carbon sequestration; capturing the CO2 and injecting it into geologic formations for permanent storage … here in California, most likely abandoned oil wells. Just capturing CO2 is a very expensive process, not to mention there are few abandoned oil fields located near the majority of the cement plants in Southern California (located primarily in the desert, east of the coastal mountains). Sequestration is a very expensive proposition even in optimal conditions. Having to install a hundred plus miles of piping puts such an alternative outside of any economic reach.

What all of this means to the state’s electric energy industry is that the capacity problems the state had beginning prior to 2000 (resulting in the energy black-outs across the state) are going to be going away. So you might say “thank goodness” right? Sorry … new problem being created right now, courtesy of AB32.

All three of the state’s investor-owned utilities, as are some of the larger municipal utilities such as LADWP, implementing very large “renewable” energy programs (read photovoltaic (PV) solar power). For instance, Southern California Edison (SCE) has California Public Utility Commission (CPUC) authorization to build and own 250 megawatts (MW) of utility-owned solar photovoltaic capacity and to execute contracts up to 250 MW for generation from similar facilities owned and maintained by Independent Power Producers (IPP) through a competitive solicitation process. Not just 500 MW of new generating capacity, while the total load on the state’s generation capacity is shrinking, 500 MW of the most expensive generating technology.

Determining the cost for solar power by searching the web will give you answers ranging from $0.035/kWh to over $0.40/kWh; more than a magnitude difference. However, many sources pin the cost down to a value between $0.30 to $0.38/kWh. This compared to about $0.04/kWh for coal fired plants and $0.06/kWh for natural gas fired generation. More importantly, the fossil-fulled plants generate power even when the sun doesn’t shine, and very often are used as backup for PV.

Looked at from another perspective, the cost to build a natural gas fired generating plant ranges between $1,000 to $1,400 per kilowatt. Efficiency will range around 85%.

A PV array will cost between $6,000 to $8,000 per kilowatt, depending primarily on construction issues. The efficiency of the array will vary greatly but never exceed about 30%, but can be lower depending on:

• the location (in the northern hemisphere, the further north, the lower the efficiency),
• the average air temperature at the location (the higher the temperature, (the lower the efficiency),
• whether the array is tilted at the optimum angle for the location,
• maintenance of the panels  (are the panels routinely cleaned in locations where there is little rainfall).

What all this means is that electric rates in California are going to rise yet again, even though the state already has some of the highest rates in the US. I wrote here about developing PV or wind generating resources as an alternative to fossil or nuclear fueled plants. I also encourage you to to read a blog called NoFreeWind that has several great posts supporting these same conclusions; current PV and wind technology  cannot be used as an alternative to thermal generating technology powered by fossil or nuclear fuel. Nevertheless, companies already stressed financially may be pushed to either move out of the state or close as a result of all this “free” energy.

All this to affect less than 0.05% of the world’s CO2 emissions (and I say effect because it will not eliminate CO2 emissions) in the backdrop of the Climategate revelations and new evidence that the “science” behind Anthropogenic Global Warming (AGW) may not be as “settled” as has been reported so breathlessly by the main stream media over the last 20 years.

Meg Whitman, former CEO of eBay and current Republican candidate for governor of California, wrote an article Friday calling for a re-look at AB32.  AB32 has a trigger to postpone implementation of specific regulations when there is “a threat of significant economic harm.” I haven’t studied the bill enough to understand the implications of this trigger, but I’d lay odds that pulling this trigger would not provide the relief needed, in any economy. Further, I disagree with Whitman on moving forward with “clean”energy options for reasons stated above.

Destroying the state’s economy in the name of AGW, at a time when many renowned climate scientists are rightfully questioning the veracity of the AGW “science” is the equivalent of allowing the terrorists that planned and carried out the 9/11 attacks to have access to protection under our constitution … oh, wait … well, equivalent to the government taking over the auto companies … wait … oh, never mind! Find your own analogy!

A few groups have began to organize for the purpose of stopping or suspending AB32. The apparent leader among them, Citizens to Suspend AB 32, is an education and initiative project chaired by California Assemblyman Dan Logue.

Regardless of how, this train wreck needs to be stopped and soon if we want to avoid turning California into Michigan with a beach!

Global Warming Protest in South Dakota

Hundreds of committed individuals gathered in Oglala, South Dakota to protest global warming. As seen in the press photo, these are individuals with a serious stake in the argument. Their spokesperson said “we hope to maintain this vigil for as many months as it takes to stop the warming, even though we know it is inevitable the warming will come.”

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Cap and Tax and Tax and Tax and Tax ……

It has been a while since I last posted. A number of things have converged to the point that I just didn’t have the initiative to write … on anything! However, it’s time to pull myself up by my boot-straps (I always mentally image someone defying gravity as they lift themselves off the floor) and get back to it.

There are so many topics to muse on, so this evening I’ll post on Owe-bamacare. For now, I’d like to pass along the text of a speech Senator James Inhofe (R-OK) made in the last meeting of the Senate’s Environment & Public Works Committee prior to the August recess.

Climate Change and Ensuring that America Leads the Clean Energy Transformation

August 6, 2009

Madame Chairman, thank you for holding this hearing today. This is the last hearing on climate change before the August recess, so I think it’s appropriate to take stock of what we’ve learned.

Madame Chairman, since you assumed the gavel, this committee has held over thirty hearings on climate change. With testimony from numerous experts and officials from all over the country, these hearings explored various issues associated with cap-and-trade-and I’m sure my colleagues learned a great deal from them.

But over the last two years, it was not from these, at times, arcane and abstract policy discussions that we got to the essence of cap-and-trade. No, it was the Democrats who cut right to the chase; it was the Democrats over the last two years who exposed what cap-and-trade really means for the American public.

We learned, for example, from President Obama that under his cap-and-trade plan, “electricity prices would necessarily skyrocket.”

We learned from Rep. John Dingell (D-Mich.) that cap-and-trade is “a tax, and a great big one.”

We learned from Rep. Peter DeFazio (D-Ore.) that “a cap-and-trade system is prone to market manipulation and speculation without any guarantee of meaningful GHG emission reductions. A cap-and-trade has been operating in Europe for three years and is largely a failure.”

We learned from Sen. Dorgan (D-N.D.) that with cap-and-trade “the Wall Street crowd can’t wait to sink their teeth into a new trillion-dollar trading market in which hedge funds and investment banks would trade and speculate on carbon credits and securities. In no time they’ll create derivatives, swaps and more in that new market. In fact, most of the investment banks have already created carbon trading departments. They are ready to go. I’m not.”

We learned from Sen. Cantwell (D-Wash.) that “a cap-and-trade program might allow Wall Street to distort a carbon market for its own profits.”

We learned from EPA Administrator Lisa Jackson that unilateral U.S. action to address climate change through cap-and-trade would be futile. She said in response to a question from me that “U.S. action alone will not impact world CO2 levels.”

We learned from Sen. Kerry (D-Mass.) that “there is no way the United States of America acting alone can solve this problem. So we have to have China; we have to have India.”

We learned from Sen. McCaskill (D-Mo.) that if “we go too far with this,” that is, cap-and-trade, then “all we’re going to do is chase more jobs to China and India, where they’ve been putting up coal-fired plants every 10 minutes.”

In sum, after a slew of hearings and three unsuccessful votes on the Senate floor, the Democrats taught us that cap-and-trade is a great big tax that will raise electricity prices on consumers, enrich Wall Street traders, and send jobs to China and India-all without any impact on global temperature.

So off we go into the August recess, secure in the knowledge that cap-and-trade is riddled with flaws, and that Democrats are seriously divided over one of President Obama’s top domestic policy priorities.

And we also know that, according to recent polling, the American public is increasingly unwilling to pay anything to fight global warming.

But all of this does not mean cap-and-trade is dead and gone. It is very much alive, as Democratic leaders, as they did in the House, are eager to distribute pork on unprecedented scales to secure the necessary votes to pass cap-and-trade into law.

So be assured of this: We will markup legislation in this committee, pass it, and then it will be combined with other bills from other committees. And we will have a debate on the Senate floor.

Throughout the debate on cap-and-trade, we will be there to say that:

According to the American Farm Bureau, the vast majority of agriculture groups oppose it;

According to GAO, it will send our jobs to China and India;

According to the National Black Chamber of Commerce, it will destroy over 2 million jobs;

According to EPA and EIA, it will not reduce our dependence on foreign oil;

According to EPA, it will do nothing to reduce global temperature;

And when all is said and done, the American people will reject it and we will defeat it.

Thank you, Madame Chairman.

There are many markets around the world trading in many different types of commodities. The so-called Cap and Trade legislation ostensibly creates a marketplace in which to trade in ‘carbon credits.’ There is however, a significant distinction between ‘carbon credits’ and every … every other commodity; the other commodities are tangible! Gold, silver, oil, pork bellies … anyone can see, touch, feel, horde, personally own and hold any of these. Not so for ‘carbon credits.’ A carbon credit is a pound (or kilogram) that someone, somewhere didn’t emit into the atmosphere. They are totally intangible!

Last month the British authorities made several arrests related to a scheme some less-than-honest folks had undertaken to financially enrich themselves in a less-than-honest way. On August 19th the Financial Times reported:

Fraud investigators arrested nine people on Wednesday over a suspected £38m [$62.6 million] carbon credit trading scam in one of the clearest signs yet of criminals targeting international schemes to combat climate change.

More than 100 Revenue & Customs officers raided dozens of properties in the south of England over an alleged cross-border fraud to evade value added tax, just weeks after the Treasury imposed emergency rules in an effort to curb the problem.

Trading in carbon credits – allowances for companies to produce greenhouse gases – has been dogged by problems, from legal but ethically dubious practices to alleged scams involving fictitious products.

“Fictitious products” … an understatement! There are many, many reasons to defeat the Cap and Trade legislation the Dems are trying to shove down our throats. The aspect of a market without tangible assets assures an unlimited number of ways to introduce fraud. The Heritage Foundation has many articles and studies on the subject; I highly recommend you educate yourself about this most important issue.

At a minimum, Cap and Trade will keep us in this recession for years and cause more people to lose their jobs as businesses adjust their strategies in order to account for substantial increases in energy prices.