Wednesday, July 31, 2013

Status Quo Coal vs. Distributed Wind and Solar

If you’re a proponent of distributed scale wind and solar, you frequently hear fossil fuel pundits repeat claims that distributed renewables are not cost effective and heavily subsidized.  With that in mind, let’s spend a little more time on my last post on the government incentives afforded to coal. I didn’t dwell much on the fact that the government and tax payers pick up the health and pollution costs of coal.  However, David Roberts has been thoroughly covering this issue.  A quote - The standards that govern combustion waste from coal plants are 31 years old; EPA has said repeatedly that they are no longer sufficient to protect public health. And even those standards are barely enforced. Of the 386 coal plants these groups investigated, 70 percent “are allowed to dump unlimited amounts of arsenic, boron, cadmium, mercury, and selenium into public waters, in violation of the Clean Water Act.” Only 63 percent are required to even track how much they are dumping. And almost half the plants are operating with expired Clean Water Act permits.
This is a textbook case of pollution externalities: The coal plants are saving money by polluting public water and degrading public health. The public pays the health and environmental costs and the plant owners sell “cheap power.”
I was going to also mention rail subsidies for coal transportation, and several other items, but Roberts has it covered. Another quote - Electricity from coal imposes more damages on the U.S. economy than the electricity is worth.  Individuals with an unquenchable thirst for more info on this subject will find plenty to read here.

Despite all this help from the U.S. tax payers, utilities seem to be having a lot of problems staying within their budgets on new coal plant construction.  

Things aren’t much better for the nuclear folks. These plants also receive heavy direct federal subsidies, in addition to the fact that our government (tax payers) handles the cost of storing nuclear waste and liability in case of an accident at nuke plants.
Anyway, it looks as though the verdict is in that established(entrenched) energy companies receive more federal help than renewables, but that fact will continue to be drowned out for the foreseeable future by well-funded industry lobbyists and their PR firms. 

What’s that? You say you don’t like cost over runs and would like to reward companies that innovate, offer choice, and keep costs in line?   A lot of utility customers in this country are served by franchised monopolies, so those folks are limited on their options, including generating their own electricity. A company called NRG, one of the largest electric providers in the U.S. wants to help. Their CEO has been touting an “end run” strategy as this blog post at RMI covers. As I mentioned in an earlier post, NRG wants to shake things up. A quote from the RMI post -  NRG’s plan hinges on a belief that if a utility can’t prove that it offers more value to its customers, those customers will leave.

So, our utility friends probably feel like they’re living out their version of the Chinese curse “may he live in interesting times”. However, it seems like the only strategy they have currently is to delay change as long as possible (PDF, also linked in the RMI post).  It looks like the utility industry will start to undergo some of the same changes we have seen in the telecom industry.   While there have been bumps in the road for sure in that industry transition, Stephen Lacey correctly points out that the telecom industry offers lessons for utilities and policy makers as we start to reshape the utility industry. Ironically, where rural folks have sometimes fared poorly under the telecom digital divide, they may have much more options with distributed generation. As Smart Grid News observes, electric customers will expect more choices from their electric providers.” They've also been bombarded by overwhelming choice in almost all other aspect of their lives – including areas such as television and telephones, which only 30 years ago were almost as restricted as electric power.”  Though not mentioned, a lot of those customers are also going to want to generate their own electricity. 

So, in closing, we have started an interesting journey. I think electric customers and climate hawks alike are really going to like the changes coming.  Some of the vested interests will fight it with everything they have, though that only seems like a temporary option.  A quote I found at this link comes to mind -   
“This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.”
1876, Western Union internal memo    
Or as James Sherwood mentions in the RMI post – “Expect more innovation, and enjoy the footrace—the last one to innovate will be extinct.”

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