Ripoff Tech

Renewable energy is the latest scheme politicians and special interests have devised for extracting money from the public to enrich themselves and their supporters. The renewable energy mafia consists of opportunistic investors, ideological crackpots (e.g. the Sierra Club), utilities that don’t care how inefficient their generation is as long as they can pass on the cost to the public, global warming scientists, and politicians that count on the renewable-energy mafia for money and support. All this is possible because renewable energy has a positive image thanks to the people who should be defending the public but are either corrupted or don’t understand what is going on.

The financial scale is immense. In California electricity sales were $35 billion in 2012. The average retail price of electricity in California is around 14 cents per kilowatt-hour. This compares to about 8 cents in states that have not found the renewable energy religion. The differential gives the California renewable energy mafia about $15 billion a year to reward its friends and supporters. That’s just for the electricity sector.

The California definition of renewable energy is bizarre. For example, hydro would seem to be renewable since it uses no fuel, emits no CO2, and is powered by rainfall. But in California only small-scale hydro generating less then 30 megawatts is renewable. The Sierra Club doesn’t like dams that interfere with kayaking on rivers and it is probably that group’s influence that forced the small hydro requirement. Geothermal energy is considered renewable even though it generally isn’t since the underground heat reservoirs become depleted over time. Since renewable energy is heavily inspired by global warming ideology, one would think that energy sources that don’t emit CO2 would be favored. Nuclear electricity emits no CO2, the fuel is the cheapest of any fuel, is in nearly unlimited supply, and nuclear doesn’t stop when the sun goes down (solar) or when the wind stops blowing (wind turbine). But the Sierra Club and green ideologues hate nuclear, so nuclear is not classified as renewable.

California, like many other states, has a so-called renewable portfolio standard. This is a quota system that guarantees renewable energy preference over other forms of energy. California requires 20% of electricity to be from renewable sources and that is supposed to increase to 33% by 2020. By forcing a rapid expansion of renewable electricity, the producers, mainly solar and wind generators, are in a position to charge exorbitant prices for the electricity. Just how exorbitant the prices are is kept carefully secret so that the public cannot discover the magnitude of the rip off. The California Public Utilities commission approves power purchase agreements and this approval allows the cost to be passed on to electricity consumers. But since the power purchase agreements are kept secret there is no way for the public to know if these agreements are fair or are rewarding friends of the highly political public utility commission.

Constructing a wind or solar generating facility is heavily dependent on regulatory red tape. Those with good political connections are in a far better position to surmount the obstacles and end up with a facility with a guaranteed market at an extremely attractive price. This sort of unjust enrichment comes out of the pockets of the consumers of electricity.

Some years ago a venture capitalist told me that a prominent California politician had recently made a profit of $16 million from his involvement in an ethanol manufacturing plant. Ethanol manufacturing is a similar green energy boondoggle to renewable electricity. It is a reasonable assumption that many well-connected people are harvesting similar windfalls from the activities of the renewable energy mafia.

The Ivanpah solar power plant is located in the California desert near the Nevada border. It has three 50-story towers illuminated by hundreds of thousands of mirrors that track the sun and illuminate a steam generator atop each tower. In the photo below only one of the 3 units is operating. This plant cost $2.3 billion and will generate on average about 100 megawatts of electricity, if it works as planned. A cursory calculation shows that the cost of electricity generated by the plant is about 25 cents per kilowatt-hour. What the California utilities are actually paying for the electricity is, of course, secret. The construction of the plant is heavily subsidized by the federal and state governments, so the owners can probably make generous profits if they can sell the electricity for 15 cents per KWH.

What is the real value of the electricity generated by Ivanpah at a cost of 25 cents paid by government and electricity consumers? It is instructive to compare the Ivanpah plant with another generating plant a few miles away in Nevada. The Higgins gas-fired plant shown below is capable of generating about 5 times as much electricity on average as the Ivanpah plant. It works at night and on cloudy days. The Ivanpah plant occupies 4000 acres of desert, compare to about 40 acres for the Higgins plant. The Ivanpah plant cost $2.3 billion while the Higgins plant if constructed today would cost approximately $500 million. So, you get 5 times as much electricity at 1/4th the capital cost, or a ratio of around 20-1 in capital cost. Of course the Higgins plant needs to purchase natural gas in order to generate electricity. Roughly electricity from the Higgins plant costs 5 or 6 cents per KWH, compared to 25 cents for Ivanpah.

It may seem that the Ivanpah plant is producing 6 cent electricity for 25 cents. But, it is worse than that. The reason is that Ivanpah does not work at night or on cloudy days. That means that fossil-fuel plants have to be built and be on standby for the times that the solar plant is not able to supply electricity. The backup plants may even have to have spinning generators ready to take up slack at a moment's notice if a cloud blocks the sun, or in the case of wind, when the wind suddenly dies. That cost must be added to the cost of Ivanpah electricity -- probably another 4 cents per KWH, bring the total to about 29 cents. Another solar technology, photovoltaic panels, is somewhat cheaper, 18 or 19 cents total cost per KWH compared to about 29 cents for concentrated solar like Ivanpah. However, concentrated solar has the theoretical advantage that the heat can be stored in molten salts for use after sunset.

The ostensible motivation for renewable energy is global warming -- the theory that adding CO2 to the atmosphere from burning fossil fuels will cause a damaging increase in the Earth’s temperature. The theory is hanging by a thread because global warming stopped about 15 years ago. Global warming advocates have been changing their story in an attempt to salvage the theory. Now they say that adding CO2 to the atmosphere increases severe weather. The theoretical justification for this new theory is weak and the empirical evidence is mainly a matter of cherry picking start and end points of graphs so as to show an increase in severe weather. The fact that the advocates of renewable energy suppress CO2-free nuclear is a strong indication that they are more interested in money than in global warming or severe weather. If you work the numbers it is apparent that converting most electrical generation to nuclear would entirely stop the increase of CO2 in the atmosphere. Natural absorption would take care of the remaining CO2 emissions from burning fossil fuels for transportation and other purposes.

The price of natural gas has greatly declined in the U.S. due to new drilling techniques and fracking, or the fracturing of gas-bearing deep rocks with high pressure water. Gas that used to cost as much as $12 per million BTU now costs $5. Natural gas is a fuel that emits far less CO2 than coal because it has less carbon per unit of energy and because electrical plants that run on natural gas can be extremely efficient due to a technology, combined cycle, that uses a gas turbine followed by a steam turbine running off waste heat from the gas turbine. You might think that the people concerned about adding CO2 to the atmosphere would embrace fracking and cheap natural gas. Just the opposite is the case. These “environmentalists” are doing everything possible to outlaw fracking.

Finally, even if one buys into global warming, reducing CO2 emissions in the U.S. will have little effect because most emissions are from coal burning in Asia and it is in Asia where a rapid increase in CO2 emissions is taking place. This fact is largely ignored by the renewable energy advocates, another indication that their real motivations are ideological and financial.

The advocates of renewable energy have strong trade organizations and well-organized lobbying efforts. Much of the media still believes in global warming and renewable energy. The renewable energy promoters have well financed propaganda characterized by fictitious claims that the climate is getting worse and that renewable energy is competitive with traditional sources of energy.  A good idea might be to ask politicians how much money they are getting from green energy advocates and if any of their relatives are employed in the industry.

Norman Rogers is a volunteer Senior Policy Advisor for the Heartland Institute, a Midwest think tank. He writes often about climate change and green energy.