Comments by Peter Z. Grossman Subscribe

On Price of US Wind Energy at 'All-Time Low' of 2.5 Cents per Kilowatt-Hour

This is an interesting post on the economics of wind and sounds very promising.  I think that the test should be to remove the PTC permanently and various other subsidies as well as RPS mandates.  If this is an inexpensive as well as reliable way to generate electricity then none of these should be needed. (Before anyone gets too excited, yes, remove all subsidies--nuclear, coal, solar, etc.) But if all of this is true about wind, perhaps one also needs to explain why wind development in Spain has virtually halted since many of the industry's benefits were "reformed."

August 28, 2014    View Comment    

On Germany's Energiewende Troubles Prove That Renewable Energy Has Failed. And Other Strange Ideas

If memory serves, Germany's Energiewende policies resulted from a strong belief among the German electorate about the importance and urgency of climate change.  Then after Fukashima, popular sentiment turned against nuclear power, which again policy sought to follow.  The irony is, of course, that if one believes in the importance of mitigating carbon dioxide emissions, one should embrace nuclear power at least for the medium term. (Fukashima illustrated that one shouldn't build nuclear plants in major eathquake zones just as Energiewende shows one shouldn't put up large solar arrays at high lattitudes.) Instead, Germany now is building coal-fired plants, which are the worst options for carbon mitigation, out of a fear of the possibility of an accident from what is at present the only means of no-carbon baseload electricity. Germans should ask themselves how many people have died from nuclear accidents and then how many have died (and how many others have suffered ailments) from coal production and combustion. The policy of Energiewende was well meaning but absurd especially with respect to solar. The new policy of no nukes shows that it is German policymakers, more than their windmills, that follow the (popular) breezes. 

February 4, 2014    View Comment    

On A More Realistic Cost of Wind Energy

This discussion, beginning with the original article, overall has been very interesting. I intend to direct students in my energy class to it.  Apollo analogies are, however, just political boiler plate and are inapt for any discussion of energy policy. As I make clear in my book, U.S. Energy Policy and the Pursuit of Failure (Cambridge University Press 2013), Apollo was a completely different kind of project from anything with a commercial purpose, like high density storage. Or as I once put it in an op-ed, "When was the last time you had to choose between a trip to Paris and a trip to the moon?" 

December 9, 2013    View Comment    

On Can Obama's Climate Change Policy Reduce Carbon Emissions?

As long as the administration equates climate policy with energy policy, we will likely fall far short of any emission-reduction goals.  Wind and solar subsidies and biofuel mandates have simply wasted resources and will continue to do so.  Meanwhile the development of natural gas resources and the switch from coal to gas in electric generation, which the president now seems to embrace, occurred in spite of, not because of, this administration's policies. Substitution of gas for coal will continue, but as you point out, this will likely mean higher natural gas prices in the future.

In the meantime, there is still this notion among policymakers that (as I document in my new book, has a long history) they can devise energy policies that will have the magical ability to solve energy, climate, unemployment, balance of payments, manufacturing development, technological leadership and spiritual problems at the same time.Typically those efforts solve nothing at all.  If there is to be large-scale carbon reduction it will ultimately require a price of carbon, not a bunch of wind farms or a billion more gallons of ethanol..   

July 3, 2013    View Comment    

On Vaclav Smil is Correct: Never Forecast

Yes.  Energy forecasting is a dangerous occupation.

There have been many absurd energy forecasts over the years, going back at least to William Stanley Jevons who argued in 1865 that the British economy would soon crash due to shortage of coal.  

In the early 1970s, prognosticators in the U.S. envisioned electric power shortages because they saw demand growing by 5-7% per year for the rest of the century. Why?  Well, because that had been true for the previous 20 years.  They forgot a maxim attributed to economist Herbert Stein: "If a trend is unsustainable it will stop."

June 9, 2013    View Comment    

On Obama 2014 Budget Energy Proposals: Stuck in A Timewarp

Goodness I guess I have some gaps in my knowledge of history.  I can't recall the government programs for television, dishwasher or personal computer commercialization.  Nor do I recall the government assistance programs at the outset for the development of the steam turbine, the incandescent light, the internal combustion engine (or the automobile that it powered), or the process of refining crude oil.

As for R&D, as the last chapter of my new book shows, I have always been strong supporter of energy R&D and that advancements can come from both public and private R&D efforts.  But government-sponsored commercialization efforts for EVs are not R&D, nor are RPS standards or mandates that force consumption of such things as biofuels.   

Early adopters are a part of the process of technological diffusion but they usually are responding to a product not a tax rebate or subsidies.  Let's see what happens if all government benefits for EVs, wind, solar, and yes, for fossil fuels and nuclear power, too, are removed.  If there continues to be a wave of early adoptions of EVs (or other new technologies) leading to more widespread diffusion I'll be the first to applaud that success.  

April 13, 2013    View Comment    

On Obama 2014 Budget Energy Proposals: Stuck in A Timewarp

So far from finding this record to be evidence in favor of government energy programs I think that it  suggests the exact opposite.  For $90 billion the highlights are:

  • A toy for wealthy people who want show how earth friendly they are (Tesla)
  • 18 power generation projects, which have "a low risk of default because they were required to have buyers for their power output."  In other words they will make money because government has decided to burden rate payers by requiring them by mandate to pay high electric rates for renewable power production;
  • Buy recommendations for companies engaged in solar power; but what would the recommendation be without feed-in tariffs, RPS mandates, and so on.  It's hardly encouraging when companies are a "buy" based on government largesse;
  • 5000 charging stations for EVs that are uneconomic even with government support at every level, and that haven't succeeded in convincing consumers they are worth buying;
  • Grants to build up an industry from the ground up that has no particular rationale except one that exists in the minds of government planners--notwithstanding the fact that government has never succeeded in creating a new energy technology that could survive without continuing subsidies.
  • While I have more sympathy with smart grid investments, I think there are still institutional issues relating to the smart grid that will impede progress regardless of the federal money lavished on the program.

In any case, overall I think that the $90 billion has not been well spent.  True, Solyndra is an exception, but as I've noted before, avoiding bankruptcy is a very low bar especially for companies taking advantage of mandates, subsidies and feed-in tariffs.  Unfortunately with respect to government energy policy, waste, distortion and hubris are still the rule.


April 13, 2013    View Comment    

On Obama 2014 Budget Energy Proposals: Stuck in A Timewarp

"After four years in office, it's reasonable to expect an administration to have learned what works and what doesn't." Four years?  How about four decades.  As I say in my new book, "Policy failures are not a recent phenomenon. Nevertheless, for the last forty years it appears that policymakers have learned nothing from the past.That policy has always failed has seemed irrelevant to each new Congress, to each new presidential administration, to each new agency head.  It is as if officials are saying that they know their ideas will fail but they will pursue them anyway because they cannot think of anything else to do." 



April 12, 2013    View Comment    

On How Resource Limits Lead to Financial Collapse

For all its evocation of history, I find this post to be rather ahistorical,  There was, most economic historians believe, a major discontinuity in world history.  Beginning with the Industrial Revolution nations began to enjoy the possibility of continuous economic growth. Malthus was not wrong in 1799 looking backward; as Gregory Clark has argued in his book A Farewell to Alms, the world did face Malthusian crises on a regular basis, and Malthus was right in looking forward and saying all things equal there'll be another one.  But at just that moment things were no longer equal.  By the standards of the past there should be no way we can feed and clothe 6+ billion people; we should have had mass starvation and epidemics years ago.  

But the standards of the past are, well, passed.  As Nobel-Prize winning economist Douglass North has noted, until the 19th century long-run economic growth was essentially unknown, and examples of past failures of temporarily prosperous states--2000 years ago in some cases--are extremely problematic to apply today.  Rome, for example, grew rich not because of superior production but because of its ability to wage war and extract tribute from conquered peoples.  But when supply lines became too long, further conquest was forestalled and Rome began a long term decline.  

The main feature that has distinguished the last 200 years has been increasing productivity--the ability to make more with less.  Ms. Tverberg worries about the rising price of energy, but in fact we now produce a dollar of GDP with more than 50 percent less energy than we did in 1973.  Why? We increased productivity and efficiency and continue to do so. This makes real energy costs much lower than they would be in a world of stagnation.  

Much of this is from the benefits of technological change.  The fear expressed above that automation leads to recession and joblessness is simply not supported by the facts of the modern world.  Fears of this kind reflect a view of labor as a fixed quantity and that technological change that substitutes capital for labor means a net loss of jobs.  In fact technology changes the composition of labor but generally in the aggregate creates jobs.  A few hundred thousand operators lost their jobs with advances in telecommunications in the 1980s and 90s but telecoms added on net millions of employees because of these changes.

This is not to say that there aren't dangers ahead with respect to our economic future.  We will need to confront fiscal problem and we may have periods of low growth and recession.  At the same time, parallels with Egypt and Syria are entirely beside the point.  These are failed states that have never created the institutions needed for long term economic success or for political stability.

Finally, I would add that catastrophism has been a good way to sell airport paperbacks but every catastrophe scenario of the past 50 years has looked silly in retrospect.  Malthusians say it's just a matter of time before they are right. Maybe but from my viewpoint it doesn't seem anywhere near at hand. 

April 5, 2013    View Comment    

On Defining Success Downward?

I agree that R&D leads to many dead ends and that it is within the scope of government to fund R&D.  And I endorse the idea that the DOE should "encourage early stage R&D projects" and maintain continuity of funding.  But I think John Miller expresses the problem well in his comment above.

So much of recent energy policy has been aimed not at research but at commercialization. As Larry Summers admitted in an email the government is poor at venture capital but all too many of the billions spent have gone to making commercial successes of alternative energy technologies that are not commercially viable.

  • A mandate for 36 billion of biofuels is not R&D; in fact the current mandated level is not R&D eitther
  • A tax credit of $7500 for electric cars is not R&D
  • The all-electric car production facility in Tennessee that Sec. Chu touted is not R&D
  • Production subsidies for wind are not R&D
  • RPS mandates are not R&D; indeed a mandate is itself antithetical to real research but the administration is all for upholding the ethanol mandate and seeks a national RPS, and so on

I have heard various arguments about why the government needs to support commercialization of new energy technologies.  Often the claim is market failure, but for the last forty years (including the last four) government failure with respect to energy has been far more evident.


February 11, 2013    View Comment    

On Energy Policy as the Solution to Climate Change

It's hard to think of an approach more wrongheaded than the one John Kerry recommended and that is endorsed in this post.  Consider the last energy bill that was touted as a big step toward a solution for energy and CO2 mitigation.  That one, passed in late 2007, backed by most Republicans and Democrats (including President Bush and Senator Obama), has saddled us with the Renewable Fuel Standard, which has done little to reduce CO2 emissions and has produced many unanticipated bad effects. That seems inevitable when energy policy is supposed to be a cure-all. I have a more radical idea: How about an energy policy that deals with energy and a climate policy that deals with climate?

February 1, 2013    View Comment    

On Would a North American Energy Pact Lead to Energy Independence?

Your comment gets to the real problem with the notion of "energy independence."  Richard Nixon initially said that it meant complete self-sufficiency; Gerald Ford thought it meant the U.S. energy supply would be "invulnerable" and a Ford administration official told Congress the U.S. would be energy independent by 1985 and in later years would do even better than that!? Looking at the history of the energy conversation in the U.S. it becomes clear that "energy independence" can mean almost anything whether the proposal is U.S. energy independence, North American energy independence, or Western Hemisphere energy independence.  In fact, energy independence has become essentially meaningless but is still touted by politicians from Maine to Hawaii because it has had political traction--not because it is anything that policymakers really expect to achieve (whatever they think it means). .

As for your conclusion to leave oil trading to the market, I couldn't agree more.


Peter Z. Grossman

November 4, 2012    View Comment