Vodoo Energy and Fuel Delusions

At the democrat national convention, an energy plank was adopted that is totally detached from reality and inconsistent with the goal of helping lower income citizens.

In part, the energy plank states, “We are committed to getting 50 percent of our electricity from clean energy sources within a decade, with half a billion solar panels installed within four years and enough renewable energy to power every home in the country. We will cut energy waste … through energy efficient improvements; modernize our electric grid; and make American manufacturing the cleanest and most efficient in the world. … We will transform American transportation by reducing oil consumption through cleaner fuels, vehicle electrification increasing the fuel efficiency … .”

 Today, according to the Energy Information Administration, we get 13% of our electricity from renewables and will get 23% in 2025. What kind of magic will take the projected 23% to 50%? Even with an aggressive program of even more wasteful subsidies and even more stringent regulations, there is not realistic way to increase the amount of electricity generated by renewables by a factor of 3.8 in a decade. The economic impact of shuttering coal and gas fired power on such an accelerated pace would easily exceed $366 billion between 2017 and 2031, the estimated cost of the Clean Power Plant rule according to the nationally recognized firm NERA.

There are over 7600 operational power plants in the US according to EIA. It is beyond wishful thinking to assume that a large fraction could be replaced in the next nine years. Permitting is often extended because of citizen and environmentalist opposition and once permits are granted, construction can take 1-2 years. In addition, capital constraints further limit how many plants a utility can finance simultaneously.

Renewables serve a niche market—areas with lots of sun and wind. There is currently no viable storage technology for excess power that is generated by renewables. Germany’s experience in forcing renewables into the market should be cautionary lesson for democrat dreamers. The cost of electricity in Germany is about 3 times higher than the average cost in the US and Germany has to rely on coal fired power for nighttime power generation, undercutting its drive to reduce CO2 emissions.

A report by the Institute for Energy Research concluded, “The high use of renewable energy in eastern Germany driven by government green energy policies is causing instability to its own electric grid as well as to neighboring countries, … Electricity bills are also expected to go up by 10 percent this year. With residential electricity prices in Germany already about 3 times higher than prices in the United States and increasing…”

 The bottom line on renewables and electricity in the democrat platform in the words of Vice President Biden, is malarkey.

The platform also promises “We will transform American transportation by reducing oil consumption through cleaner fuels, vehicle electrification increasing the fuel efficiency of cars … “. The Obama Administration has already almost doubled the CAFÉ standard for light duty vehicles, raising it from 27.5 mpg to 54.5 mpg by 2025. The incremental cost has been estimated to range from $3000 to $6000 per vehicle, which excludes the cost of subsidies for hybrids and electric vehicles. Unless the price of gasoline rises steeply, some estimate to the $4 dollar range, the fleet average will fall short of 54.5 because consumers prefer larger vehicles than the government preferred smaller ones that have higher mileage. The increased purchase price keeps older vehicles on the road longer and penalizes lower income purchasers.

The story is the same with fuels. The government continues to push ethanol even though it is not necessary, is more expensive, and can damage fuel systems. Although the government has been excessively optimistic about the technology to produce cellulosic ethanol, it is not commercially viable. As a result, corn remains the dominant feedstock for ethanol. As such, it diverts corn from food to fuel, raising the price of a range of food products.

As a nation, we need more factual statements about energy and less rhetoric since energy is and will remain a critical input to our economic well being. Politicians should learn that setting objectives is their job, achieving them is the market’s



Author: billo38@icloud.com

Founder and president of Solutions Consulting which focuses on public policy issues, strategic planning, and strategic communications.

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