Newsletter 81 - Spring 2016

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The invisible hand
An environmental crisis?
Climate common sense
Clean Power Plan
Regional Greenhouse Gas Initiative
Video corner
SAFE Board
Join us

The invisible hand – Some believe capitalism suffers from a fatal flaw. All the actors involved are trying to promote their own “selfish” interests, so how can the economic results possibly serve the interests of society as a whole? With free choice and robust competition, however, a myriad of individual decisions will provide beneficial overall results. It’s almost as though – to use an analogy suggested by 18th century economist Adam Smith – the outcomes are guided by an “invisible hand.”

Theory aside, there is ample evidence that free market economies work better than centrally planned or managed economies. Consider the collapse of the former Soviet Union, the economic boom in China after markets were freed up, and the dismal track records of authoritarian regimes like those in Cuba and Venezuela.

Unfettered capitalism isn’t a satisfactory solution either, and government intervention is necessarily accepted for many purposes. Set and enforce ground-rules for economic transactions – establish zoning laws (who would want a factory in a residential neighborhood) - restrict noxious emissions (everyone needs to breathe) – etc. But for goodness sake, let’s be cautious about such deviations from free market principles lest this country become a centrally managed economy through the back door.

Unfortunately, there has been a lot of progress in that direction – with resultant loss of economic freedom, suboptimal economic choices, and slowing of economic growth. This newsletter will present a series of stories about government efforts to force reduced reliance on fossil fuels to illustrate the point.

Even if one subscribes to the manmade global warming theory, which SAFE views as unproven, the complex web of federal and state regulations that is being spun is hardly an effective response. Perhaps it’s time to reconsider some of the economic policies that are being implemented, both in the energy sector and other areas.

An environmental crisis? – Growing use of fossil fuels in an industrialized world has resulted in rising levels of atmospheric carbon dioxide (CO2). This is supposedly causing global warming, which threatens to spiral out of control. Watch out for dangerously hot weather, violent storms, droughts & flooding, and rising sea levels around the globe.

The proposed conclusion is that the use of fossil fuels must be curbed by encouraging energy conservation and a transition to alternative (renewable, clean, green, etc.) energy sources. And granted that less than 20% of global CO2 emissions are coming from this country, it’s been argued that the rest of the world will fall in line if the US “shows leadership.”

The most straightforward way to reduce the use of fossil fuels would be to impose taxes on carbon (highest for coal, based on its carbon content, and correspondingly lower for oil and natural gas). If the rates were set properly, carbon taxes should induce the desired changes without a lot of fuss.

Taxes are unpopular, however, and the carbon taxes would be readily apparent to the general public. Accordingly, regulatory approaches have been devised to achieve roughly the same results in a less obvious way.

Status quo, you know, is Latin for “the mess we're in.” – Ronald Reagan

Climate common sense – SAFE member John Greer presented a slide show on the manmade global warming (aka climate change) theory at the March 18 meeting of the Retired Men’s Luncheon Club. Here’s a brief recap of the presentation.

The Earth’s climate has been changing throughout this planet’s existence – starting long before human beings were in the picture – and will continue to do so. The most important causes seem to be periodic fluctuations in the Earth’s orbit around the sun (causing major cooling/warming cycles of about 100,000 years in duration) and periodic fluctuations in solar activity (thus, the “maunder minimum” around 1650 ushered in “the Little Ice Age”).

Also, shifting weather patterns cause global temperatures to fluctuate on a relatively short-term basis. A well-known example is the El Nino effect in the Pacific Ocean, which contributed to unusually warm weather in 1998, 2010 and currently.

CO2 levels in the atmosphere have fluctuated over time, and substantially exceeded the current level (about .04%) during some periods. Studies have demonstrated a correlation between higher temperatures and higher CO2 levels, but with temperature increases preceding CO2 increases rather than following them (as would be expected if CO2 increases were causing the higher temperatures).

Claims that “14 of the 15 warmest years on record have occurred since the year 2000” and “2015 was the hottest year” are based on an averaging of inherently unreliable surface temperature readings (going back to about 1880). Satellite temperature readings (starting about 1979; there are also weather balloon data back to 1958) indicate that there has been no significant global warming over the past 15 years or so. Also, studies based on indirect evidence (such as ice core analysis) have established that the climate was warmer in earlier periods, e.g., medieval times, than it is today.

As for projections of global temperatures by 2100, the computer models in use have consistently forecast temperature increases that failed to occur. So while further research on this subject is certainly in order, there is no apparent necessity for a quick transition to less reliable and more costly energy sources.

John’s presentation sparked a lot of interest and was well received. He’s also given the slide show to several other groups, and would gladly consider invitations to do so elsewhere.

Clean Power Plan – The federal government has encouraged reduced use of fossil fuels in many ways, such as mandating growing volumes of ethanol in motor fuel, imposing increasingly stringent fuel economy standards for motor vehicles, and banning the production and sale of conventional light bulbs versus more efficient/expensive alternatives.

Congress balked at legislation to establish a national cap and trade plan for CO2 emissions, so the administration resorted to a self-help approach. It was a bit of a stretch to classify CO2 as a pollutant for purposes of the Clean Air Act, but the EPA did just that and has used its endangerment finding as one of the cornerstones for a slew of anti-carbon regulations.

One of these regulations is the Clean Power Plan, which is designed to force major cuts in carbon emissions from existing power plants. In our opinion, issuance of the CPP was beyond the EPA’s authority. See our
6/16/14 letter to the members of Congress and 11/26/14 comments to the EPA.

Congress did not take affirmative action, however, and the CPP was finalized in 2015. At last count, 29 states had joined in a legal challenge to this regulation, and the coal industry is pursuing a similar suit. A setback for affordable energy,
3/7/16. Pending a decision on the merits, the US Supreme Court has stayed CPP implementation.

When the smog lifts in Los Angeles, U.C.L.A.

Regional Greenhouse Gas Initiative – Nine eastern states, including Delaware, are participating in the RGGI, which was initially proposed by New York in 2005. It was envisioned that this regional cap and trade program for power plants would be a precursor for a national program, but no national program was ever established.

Delaware subsequently enacted a Renewable Energy Portfolio Standards Act (REPSA), under which Delaware distributors of electric power must acquire a gradually rising percentage (to 25% by 2025) of the power they distribute from renewable sources or else cover the deficit by purchasing renewable energy credits.

The REPSA provisions were later amended to classify fuel cells (usually powered by natural gas) as a “renewable energy” source under certain conditions. The purpose was to encourage Bloom Energy Inc. to build a fuel cell factory in Delaware, with a stream of incentive payments over 20+ years to be covered by a qualified fuel provider surcharge on Delmarva Power bills. This arrangement has withstood several legal challenges, all dismissed on procedural grounds.

CO2 emissions in Delaware and other states declined faster than expected, largely due to a shift from coal-fired to natural gas-fired power generation, causing the prices of CO2 allowances in the auction market to tank. State administrators involved with the RGGI recalibrated the arrangement by slashing the regional CO emission cap by over 40% in 2014. Corresponding changes at the Delaware level were made administratively rather than being proposed to the legislature.

Transparency – Renewable energy charges were formerly included in electric delivery charges on Delmarva Power bills without disclosure of their presence. Thanks to the yeoman efforts of civic activist (and SAFE member) John Nichols, DE Rep. John Kowalko, and DE Sen. David Lawson, among others, this will now be rectified.

The initial decision was to show a single “Renewable Compliance Charge,” without mentioning that it included a fuel cell surcharge. This is the current reporting pattern.

After numerous meetings with the Public Service Commission and staff members, it was ultimately decided that Delmarva Power should break the RCC into two components with the Qualified Fuel Cell Provider (or perhaps QFCP) charge to be shown separately.

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The expanded disclosure should start showing up on Delmarva Power bills in May. The above table shows what a hypothetical customer with monthly power usage of 1,404 KWH might expect to see as a result.

Not all of the problems with REPSA have been resolved. A legal challenge to the administrative changes re CO2 emission permits is pending, and unlike the Bloom Energy lawsuits it survived a round of procedural objections.

Also, there is an issue as to whether the total renewable compliance charges are compliant with the 3% of the supply charges cap specified in the REPSA. Using the data in the table one could conclude that said cap is being exceeded. Thus the total RCC ($11.24) represents over 8% of supply charges ($200 - $66 = $134).

It may be thought that the calculation should be made in some other manner, however, e.g., excluding the QFCP charge and/or using imputed benefits of renewable energy as an offset.

Video corner – Here are two videos re climate change and one about a different subject (there wasn’t a dry eye in the house):

El Nino effect, NOAA (1:54)

Patrick Moore, a co-founder of Greenpeace, debunks the manmade global warming theory, Prager University (4:54)

Amira Willighagen, O Mio Babbino Caro, Maastricht, 2014 (7:51)

SAFE Board
Andrew Betley, (302) 239-9679
Suzie Dickson
Edgar Fasig, treasurer, (302) 999-0611
Dan Kerrick, (302) 658-7101
Steve McClain, (302) 998-3910
Jerry Martin, (302) 478-5064
rycK Stout, (302) 478-9495
Bill Whipple, president, (302) 464-2688
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