There's Nothing More Frightening Than Rule By The "Smart"

Just a few short days ago I was pointing out that if you consider who some of the "smartest" people are (as measured by top credentials from top universities), you will quickly realize that allowing such people to have significant political power is "very frightening."  As a couple of examples, I used late 1970s top MIT Economics Ph.D.s Paul Krugman and Olivier Blanchard, who have used their credentials and their respective perches at Princeton/NYT and MIT/IMF to perpetrate on the world every kind of economic fallacy to justify expansion of government,  to undermine world economic performance, and to keep the people in check.

And now in this weekend's Wall Street Journal we find the prime real estate in the Review section given over to one Kenneth Rogoff for a lengthy piece advocating that the governments of the world phase out the use of cash.  The title of the article is "The Sinister Side of Cash."  It seems that Rogoff is just out with a new book ("The Curse of Cash"), and this big article gives him the chance to peddle it.

Who is this guy Rogoff?  You've already guessed correctly:  he is yet another contemporary of Krugman and Blanchard in the MIT Economics Ph.D. program of the late 70s.  (Rogoff actually took a year off -- to play chess! -- and got his Ph.D. in 1980.)  He's also a big-time professor of economics at Harvard.  And also one of Blanchard's predecessors as Chief Economist of the IMF.  Hard to be more of a genius than that, right?

And of course, what geniuses like Rogoff know more than anything is that their great genius gives them the ability to envision a far more perfect world than this imperfect thing we've been suffering with so far.  Naturally the visions of these geniuses are all variations of the same thing, namely some kind of government program to more closely monitor and/or control the people.  The geniuses know that there is no downside in such programs, first because the programs have been designed by themselves, and second because government programs are administered by all-knowing and perfect government functionaries, who are people like us and can always be trusted to do the right thing.

So what is the reason given to phase out the use of cash?  It's that the government money laundering laws, introduced in 1970 and tightened multiple times since, just haven't succeeded like they were supposed to in wiping out all crime involving money.  Now we learn that it wasn't the "laundering" of the money that was allowing crime to flourish, but the very existence of money in the form of cash:

There is little debate among law-enforcement agencies that paper currency, especially large notes such as the U.S. $100 bill, facilitates crime: racketeering, extortion, money laundering, drug and human trafficking, the corruption of public officials, not to mention terrorism. . . .  Cash is also deeply implicated in tax evasion, which costs the federal government some $500 billion a year in revenue.

I have previously covered the subject of criminalizing money laundering in two posts, The Joke Of Criminalizing Money Laundering (June 2015) and The Joke Of Criminalizing Money Laundering -- Part II (April 2016).  The short version is that the money laundering laws -- principally the Bank Secrecy Act of 1970, and amendments to same in the USA PATRIOT Act of 2001 -- were supposed to stamp out crime involving large amounts of money through deputizing the banks to spy on their customers 24/7 behind their backs and thereby enabling the authorities to "follow the money" to track down the crooks.  Forty-six years in, at a cost of massive expense to financial institutions and equally massive loss of freedom and privacy to the people, the government hasn't made the slightest dent in the big-money crimes (the biggest of which are the illegal drug trade and illegal gambling).  Indeed, it seems that a brand new heroin epidemic is exploding right now beneath their very noses.  Meanwhile they regularly prosecute banks and other financial institutions for failing at the impossible task of figuring out which of their customers are crooks, and they periodically prosecute some poor slob who had the temerity to use cash in large amounts for an otherwise perfectly legal purpose without reporting it to them (famous example: Denny Hastert).  And they cynically use the cry of "terrorism" (see, e.g., Rogoff quote above) to justify continuing and expanding the money laundering laws, as if those laws could be of any use catching terrorists (whose activities involve relatively small amounts of money) when they are useless in catching big drug dealers (whose activities involve much larger amounts of money).

And of course the answer of the geniuses like Rogoff to total government failure is always the same: double down!  We can finally succeed in stamping out this financial crime thing if only we hand over to the government yet more massive new powers, here the ability to track and trace everything the people do 24/7, down to the the smallest transaction.  (OK, in the article Rogoff says he would be willing to allow the continued existence of bills of $10 and smaller.  Thanks, Ken!)  All behind their backs, of course.  

To anyone with the slightest understanding of human nature and incentives, the results of Rogoff's program are completely predictable.  The professional criminals involved in big-time financial crime will find a substitute for cash.  Maybe it's Bitcoin.  Maybe it's another crypto-currency.  Maybe it's some other currency than dollars.  Maybe it's gold.  Maybe it's existing dollar bills in circulation (which could gradually become more valuable as they become scarcer over time.)  Maybe it's all of the above.  The big-time crooks have the need and the time to find the substitute.  You do not.  So the government gains absolutely nothing against the big-time crooks, but gets the ability to track and trace everything the regular people do.

So is your thought, so what?  What do I have to worry about if the government gets my monthly credit and debit card statements?  I'm law abiding!  That's what you think.  There are said to be over 4000 federal crimes alone (nobody has an exact count!).  Criminal defense attorney Harvey Silverqlate has a book titled "Three Felonies a Day," the title reflecting the number of crimes you are likely committing on a regular basis without knowing it.  For a small sampling of crimes that you may be committing, see this article "8 Ways We Regularly Commit Felonies Without Realizing It."    

Government flunkies would never do something so evil as flyspecking the financial records of their political opponents to find something to prosecute, would they?  Really, you owe it to yourself to pay attention to this issue -- and to use cash everywhere you possibly can.

A Ray Of Hope On The State/Local Pension Front?

The good people at Maggie's Farm today post a link to an article from California's East Bay Times reporting on the latest court decision concerning legislative attempts to address the state and local pension crisis.  The court decision in question issued from the California Court of Appeals on August 17.  It concerns a California statute effective in 2013, and the efforts of the pension board of Marin County to implement that statute.

It's been a while since I posted on the issue of the state and local pension crisis.  This post from January 2014 has a good background.  But this crisis is so slow-moving that the word "crisis" itself is rather ill-fitting, and it's hard to maintain any sense of urgency about the subject.  Still, this is a gigantic problem.  The California Court of Appeals decision cites various sources that put the overall size of the problem (all states) in the range of $3 to 4 trillion -- and it could be even substantially higher if you use lower interest rates to measure the future obligations.  But it's unlikely that any state or local pension plans will actually run out of money and start bouncing checks until well into the 2020s.  Nevertheless, plenty of these plans are already so deep in the hole that there is no clear way out short of fundamental restructuring of the pension obligations -- and then, many state constitutions (not to mention the federal constitution's Contracts Clause) have provisions that many courts have interpreted to prohibit or severely constrain the fundamental restructuring of obligations.  So the problem just slowly worsens and worsens, and generations of politicians take the opportunity to punt and leave the situation to their successors. 

Two of the states in deepest trouble are Illinois and California.  In recent years Illinois passed two statutes to deal separately with the situations of the Illinois State and the Chicago pension plans.    In both instances, the Illinois legislature made the bold step of cutting already-accrued benefits of the workers, taking the position that it could do so under its emergency police powers given the direness of the situation.  In two opinions of the Illinois Supreme Court, one from May 2015 and the other from March of this year, that Court rather angrily struck down the legislature's efforts as contrary to the Illinois Constitution.  The Illinois Court took note of the fact that the legislative changes would modify not just future accruals, but also already-accrued benefits.  But its decisions did not turn on that distinction, and appear to stand for the proposition that an employee who joins the system and works for even one day has a constitutional entitlement (under the Illinois State Constitution) to have no reductions in his pension accruals of any kind throughout an entire 40 year working career.

So, into this breach now leaps the California Court of Appeals in its case of Marin Association of Public Employees v. Marin County Employees' Retirement Association, et al.  A major case from California is particularly noteworthy because, at least up until this time, California has been known for what has sometimes been referred to as the "California rule" of state pension obligations, which is that, even in the absence of any state constitutional protection, any government employee who works for even one day as part of a pension plan can never have his ongoing pension accruals cut in any respect, no matter how trivial.  I'm not sure that that is an accurate statement of the pre-existing California case law, but certainly many advocates have taken the position that that is what the California cases have stood for.  

This new case arises in the context of a statute designed to address issues arising from what was perceived as abusive employee pension "spiking."  It seems that the pensions in question were calculated based on so-called "final average pay," and the employees would maneuver to get various things, otherwise not normally a part of pay, paid to them in cash in their final years in order to get those things included in the pension calculation and drive up the pension amount.  Examples mentioned in the opinion included unused sick days, unused vacation days, and payments for waiving health insurance.  The statute passed by the California legislature allowed pension boards to modify the definition of a term called "compensation earnable" in the pension formula to do away with these perceived abuses, in the process lowering the "final average pay," and thereby lowering the pensions that would be payable to employees who were planning to take advantage of the spiking games.  

So, is this OK or no?  It would not pass the test of the "California rule" as I articulated it above.  But this court parses the pre-existing California law at great length, and comes to a very different result.  The court expresses its holding through quotes from prior California Supreme Court cases, most notably this one:

[A] public pension system is subject to the implied qualification that the governing body may make reasonable modifications and changes before the pension becomes payable and that until that time the employee does not have a right to any fixed or definite benefits but only to a substantial or reasonable pension.

On that basis it upholds the actions of the Marin pension board.  Note that the modification to the definition was not prospective-only, so this opinion would give the legislature flexibility -- within very vaguely-defined boundaries -- to make changes even to already-accrued benefits.

Needless to say, the case is on the way to the California Supreme Court.  That court can of course do what it wants with this subject, and is certainly not bound by the decision of the Court of Appeals, let alone by its own prior decisions.  

Meanwhile, back in New York, nobody has had the guts to take on these issues yet.  As I pointed out in this post from January 2014, we have two old cases from our Court of Appeals, one from 1958 and the other from 1972, that would appear to hold that any changes to pension accruals that are adverse to a public employee, even one who has only worked for one day, violate a provision of our state constitution.  The 1972 opinion actually specifically addresses an attempt to change the way unused vacation days are counted in final average pay.  Sooner or later these issues will have to be addressed, but meanwhile we have the benefit -- or maybe it's the curse -- of having funded our pension plans much more honestly than places like California and Illinois (and New Jersey and Connecticut).  That just means that the crisis will hit later, not that we can avoid it forever.    

On University Grades As A Qualification For President

In the last couple of days, multiple people have sent me an article that seems to be making the rounds.  It purports to be from a recent issue of Newsweek, written by a guy named Matt Patterson, and titled "Hit The Road Barack.  Why we need a new President."  The article characterizes Obama as "our first affirmative action President," and questions whether his seemingly top Ivy League education credentials can really be trusted.  

On reviewing the article, all I can think of is the famous quote attributed to William F. Buckley, Jr.: "I'd rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard University."  The reason I have that thought is that I wouldn't be particularly troubled if Obama's Ivy League credentials were phony, because plenty of people with real top Ivy League credentials are also airheads.  But what's scary is that I actually think that Obama's credentials are real.  Looking at such evidence as I can find, here are my conclusions:

• The article I was sent is not what it purports to be.  It is not from Newsweek and not recent.  Also, the version I was sent has been significantly altered from the original.
• Obama really does have top or near-top educational credentials, at least at the law school level.
• The fact that Obama has top law school credentials tells you all you need to know about what those credentials are worth as a qualification for President.  The answer is: not much. 

It didn't take me more than a minute of Googling to identify the original source of the article in question as a post from the American Thinker of August 18, 2011 titled "Obama: The Affirmative Action President."   The original of the article does suggest, fairly gently, that Obama may owe his educational credentials substantially to affirmative action.  However, the version I was sent contains some additions not in the original, which turn out to be the most inflammatory parts of the altered article.  For example, this:

There is no evidence that he ever attended or worked for any university or that he ever sat for the Illinois bar.  We have no documentation for any of his claims.

Well, but there is rather strong evidence that Obama:  attended Harvard Law School, was accepted onto the Law Review, became the President of the Law Review, and graduated with magna cum laude honors.  OK, there may have been some affirmative action in his initial admission to Harvard Law (he did not graduate with honors from Columbia), but his performance at the law school would be rather hard to fake.  The linked article from the Blaze says that HLS grades at Obama's time (class of 1991) had been subject to dramatic inflation, such that the magna cum laude credential went to about one-sixth of the students.  (In my day -- class of 1975 -- the comparable figure was around 5%).  Still, top 16% of a very competitive class is nothing to sneeze at.  And the credential was awarded strictly on the basis of grades.  If you think that top grades from a top college or graduate school are an important qualification for President, then this is pretty damn good.  As to why Obama has never released a transcript, I can't say.  My best guess is that his college grades at Columbia were rather poor.

The much more important point is that the ranks of people who get the top grades at the top universities are filled with fools and airheads.  Meanwhile the ranks of our recent candidates for President and Vice President contain as many people with mediocre or even terrible grades as people from the tops of their classes.  And it's not a partisan issue.

Among top grade-getters, we have, for example, Hillary Clinton.  She doesn't seem to have ever released a transcript of her grades at Wellesley, but she graduated "with honors," and more importantly, got into Yale Law, which probably means she was in the top 5% or her college class or higher.  As I have repeatedly pointed out, she also has no idea whatsoever how the economy works, thinks that all wealth comes from government spending, and repeatedly uses the phrase "I believe in science" to mean that she trusts whatever the corrupt government-funded people calling themselves "scientists" tell her without ever checking the underlying evidence.  In short, a fool and an airhead.

Also in the top grade category we have my law school classmate Mitt Romney.  This long New York Times article from 2011 says that Romney was a "Baker Scholar" at the Harvard Business School (where he got a joint degree) and also graduated "with honors" from the Law School.  (With honors is actually a notch lower than magna cum laude, but remember that our class only had about 5% mcl versus 16% in Obama's class.)  I think that Romney is fairly solid intellectually; however, in the one speech I ever heard him deliver live, he made it clear that he had completely fallen for the climate scam.

OK, now let's consider some of the mediocre to terrible students who nonetheless find themselves running for President or Vice President.  The magazine Mental Floss compiled a round-up:

• Joe Biden was number 506 out of 688 in his class at the University of Delaware, followed by number 76 out of 85 at Syracuse Law.
• John McCain was number 894 out of 899 in his class at Annapolis.  Hard to get much lower than that!
• Al Gore was in the "bottom fifth" of his class at Harvard.  Among his grades were two C-plusses, two Cs, a C-minus and a D.  The D was in a course called "Natural Sciences 6 (Man's Place in Nature)."  Can't say I'm surprised by that.
• In John Kerry's freshman year at Yale, he got four Ds -- in Geology, two History courses, and Political Science.  I didn't think it was even possible to get a D at Yale.
• George H.W. Bush never released a transcript, but George W. Bush had a GPA of 77 at Yale, which would put him somewhere below the middle of his class.

As I said, the ranks of terrible students includes both Democrats and Republicans.  Trump?  I can't find anything about his grades at Wharton.  Does it matter?

But anyway, consider who some of the very "smartest" people are, as measured by top grades from top institutions of higher learning, and you will find it very frightening.  Paul Krugman?  Top Ph.D. from MIT, Princeton professor, Nobel Prize winner -- and a complete dupe for every economic fallacy that has ever been promulgated.  Olivier Blanchard?  Krugman's MIT Ph.D. buddy, who spent a career at the IMF peddling economic fallacies to low income countries to keep the poor poor.  Stephen Breyer?  Ruth Bader Ginsburg?  Wouldn't you think that Supreme Court justices with the academic credentials of this pair would be capable of having at least one independent thought in twenty years on the bench that was not fed to them by the editors of the New York Times?  Obviously, I could go on for days with this.  And don't get me started on the Harvard faculty.  Really, it's enough to give you the idea that rule of the people by highly-credentialed "experts" just might not work very well. 

Two Hypotheses On Why Basket Case Cities Are Failing

From time to time I have used the term "basket case cities" to refer to those urban areas in the United States that are falling apart on literally any measure you might select.  The cities in question are characterized by such things as high crime rates (including startlingly high murder rates in most instances), falling population, high rates of poverty, high unemployment, and lack of business investment.  In every case the problems of high crime, high poverty, and high unemployment are particularly acute in the African American communities in these cities.  Among the larger U.S. cities that clearly qualify as "basket cases" by these measures are Detroit, Cleveland, St. Louis, and Baltimore.  Chicago and Philadelphia are somewhat different in having large prosperous areas, but both also contain significant swaths that would fall in the "basket case" category if considered separately.  And with the recent rioting, we have good reason to add Milwaukee to the "basket case" list.

Now, what is it about these cities that gets them into the "basket case" category and keeps them there for decade after decade?  In accordance with my "two ways of looking at the world" meme, I'll put out the two leading hypotheses:

(1) Hypothesis 1:  The plight of the "basket case" cities is the result of decades of progressive Democratic governance and policies.  All of the "basket case" cities have been governed by progressive Democrats since beyond human memory.  (According to a recent list published by National Review, the most recent Republican mayors of basket case cities included -- Chicago, 1927; Baltimore, 1963; St. Louis, 1943; Detroit, 1957; Philadelphia, 1947.  In Milwaukee it was 1908.)  The progressives have put in place massive government anti-poverty and welfare programs supposedly designed to alleviate the problems of crime, poverty and unemployment, but none of those programs have worked, and in fact they have only made the problems worse.

(2) Or alternatively, there is hypothesis 2:  All of the existing programs are just a charade, and there is some other government program that has been put forward by good progressive Democrats, but has somehow been blocked by evil Republicans and Conservatives.  And if only that one additional program had been implemented, it would have turned everything around.

For a particularly ridiculous example of someone arguing for hypothesis 2, I give you Derrick Jackson, writing in the Boston Globe of August 17.  Jackson writes about his home town of Milwaukee in the aftermath of the recent riots.  He notes Milwaukee's population decline from 741,000 in 1960 to 597,000 in 2000; and its loss of manufacturing jobs, from 120,000 in 1960 to 27,000 in 2009.  And to what does Mr. Jackson attribute the problems of Milwaukee's African American community?

I [have taken] particular note as the city’s white suburbs built an invisible but impregnable cage around a majority African-American and Latino city.  The bars of that cage: the lack of public transportation.

Aha!  So it was not the century plus of progressive governance in the city itself that drove Milwaukee into the ground, but instead the evil Republicans in the suburban counties surrounding it:

Efforts in the 1990s to connect Milwaukee to the new economy in the suburbs by light rail were derailed by [suburban county] politicians and business opponents, often using racially coded language. One warned that rail would have a “dramatic effect on our neighborhoods and area residents.” Another spoke ominously of “strangers who are not only a threat to your property but to your children.” Conservative talk radio kept up a drumbeat of opposition. Wisconsin Governor Tommy Thompson said he wouldn’t spend a nickel of state money on light rail. In the face of all that, there was no chance that public transit could be viewed as an economic bridge-builder. To the contrary, the bridge was burned before it could be built.

Does anybody actually believe that this is the cause of Milwaukee's woes?  Funny thing is, among the basket case cities, Cleveland, St. Louis and Baltimore all built light rail systems in recent decades, not to mention that Chicago and Philadelphia have all along had extensive mass transit infrastructure.  So, Derrick, why aren't those places any better off than Milwaukee?

It doesn't take much looking to figure out that a couple of streetcar lines going out to the suburbs, for very large cost, would have at most an extremely marginal effect on Milwaukee's situation.  For example, the St. Louis system averaged about 47,000 daily riders in 2015.  As rules of thumb, about two-thirds of those riders are likely to be commuting to jobs, but there will be about a 4:1 ratio between people commuting from outlying areas to jobs downtown against those commuting from the inner city to jobs in the outlying areas.  And each commuter to a job is counted twice in the daily ridership figures.  That would put a number of about 3000 people per day commuting from the city to suburban jobs.  That's less than 1% of the population of the City of St. Louis, and less than 0.3% of the population of St. Louis County (which is the service area of the rail system.)  Baltimore has somewhat higher ridership, at about 66,000 per day when you combine its light and heavy rail components.  That would mean perhaps as many as 4500 people per day commuting to jobs in the suburban areas.  But Baltimore is almost twice as big a city as St. Louis, so it's again well less than 1% of the population.

Really, Derrick, if you're going to come up with the mythical program that could have turned everything around, you'll have to do better than this.  Meanwhile, could you kindly address why the hundreds of billions of dollars of annual government programs currently in place have not improved the situation of the basket case cities, nor reduced poverty in the slightest in 50 years?    

How Much Do The Climate Crusaders Plan To Increase Your Costs Of Electricity? -- Part II

In the last post, we discovered that, in attempting to get all or most of their electric power from "renewables," the residents of Gapa Island, South Korea had constructed a system that was able to supply only 42% of their power from renewables, yet had costs which, if allocated to them through their electricity bills, would lead to monthly bills of $1100 or more per household.  That $1100 is approximately ten times the average monthly electricity bills paid by Americans.  There are lessons here to be applied to much of the nonsense that you read about the economics of various forms of energy.  A good deal of that nonsense comes from official government sources.

The problem, of course, is the intermittency of the wind and solar power.  Because of intermittency, the usual metrics used to compare costs of different forms of energy just don't make sense when applied to wind and solar, at least if wind and solar are to become principal sources of energy.  The usual metrics for comparing costs of various forms of energy are either dollars per megawatt (of generating capacity) or of cents per kilowatt hour (of energy supplied).  Those metrics make sense for comparing against each other the various forms of energy generation that work all the time as needed; but the same metrics do not make sense at all for making a comparison between, on the one hand, forms of energy that work when needed, as against, on the other hand, sources that only work intermittently and cannot be called upon when needed.  The reason is that when intermittent sources like wind and solar are involved on a large scale, you can't build a working system using just these sources.  Instead, building a working system relying principally on wind and solar requires constructing large amounts of additional generation capacity (to cover conditions of light wind for wind systems, or cloudiness for solar systems), plus constructing additional backup capacity from conventional fossil fuel sources (to cover times when the wind is calm or the sun not shining at all), plus having yet additional storage capacity in the form of batteries or something else.  These additional requirements hugely increase the overall costs of a working system, but are almost always omitted by renewable energy advocates from discussions of comparative costs.  

For a base for comparison, consider the current situation of New York State, and compare it to what the Gapa Islanders in South Korea have created.  According to our Independent System Operator here, in 2015 we New Yorkers had 39,015 MW of generating capacity, against a peak usage of 33,567 MW.  That left a cushion of about 5,500 MW, or about 17% of peak demand.  Wind capacity was 1,746 MW -- so, the total wind capacity was just a minority part of the 5,500 MW of excess capacity.  We never actually needed any of the wind power, so if a given day was calm, no big deal.  With wind power at about 4.5% of total capacity, basically a rounding error, the system works acceptably with a 17% capacity cushion.

Now compare that to Gapa Island.  In their desperate effort to get most of their power from wind and solar, they built a system of wind turbines and solar panels with a capacity not 117% of peak usage, but 300%.  That massive additional capacity would cover them for days of light wind and/or heavy clouds.  But of course, there also could be times of no wind at all (aka, calm) and no sun at all (aka, night), so they also had to acquire backup diesel generators to supply the entire peak demand of the community yet again, presumably also with a cushion of around 15 - 20%.  So they ended up acquiring generating capacity not of 117% of peak usage like we have in New York, but 417% of peak usage.  And of course, in that price, batteries are not included!  They also had to buy about a third of a Tesla's worth of batteries per family, to have some eight hours of backup capacity -- which still was not nearly enough battery capacity to obviate the need for the diesel generators.  All of this to get up to 42% of electricity generation from wind and solar.  Building four times the capacity you need (instead of 1.17 times), plus buying the massive batteries is what gets you to an electricity bill of $1100 per month instead of $110. 

After considering this comparison, you can now look with a critical eye at some of the baloney about energy costs that you will see out there from promoters of renewable energy.  The game is always to compare only cost per MW capacity, or per KWh generated, without ever mentioning that if you want a system where wind and solar are more than a few percent, you can't just build a system of comparable capacity to your functioning fossil fuel system; instead, you will need to build triple the capacity for starters, plus you will also need full fossil fuel backup capacity, plus you must acquire enormous batteries.  

So let us consider how renewable energy advocates and government sources treat these issues.  To begin, here is a February 2015 piece from energyinnovation.org titled "Comparing The Costs Of Renewable And Conventional Energy Sources."   They use a late-2014 study by Lazard on what they call the "levelized cost of energy," a concept that includes capital cost, operations and maintenance, and fuel.  (Notice anything missing?)  And the results?

Onshore wind has the lowest average levelized cost in this analysis at $59 per megawatt-hour, and utility-scale photovoltaic plants weren’t far behind at $79. By comparison, the lowest cost conventional technologies were gas combined cycle technologies, averaging $74 per megawatt-hour, and coal plants, averaging $109.

Wind is the cheapest!  As you had undoubtedly suspected, there is not a word in the piece about the problems of trying to make a system that works all the time out of nothing but wind and solar; nor is there any mention of the cost of things like additional spare capacity, or backup generators, or massive batteries, that you will need if you want to have a predominantly wind/solar system that actually works. 

Next, try this one from windustry.org on the cost of wind generating capacity:

The costs for a utility scale wind turbine range from about $1.3 million to $2.2 million per MW of nameplate capacity installed. Most of the commercial-scale turbines installed today are 2 MW in size and cost roughly $3-$4 million installed.

Coal and gas plants cost in the range of $1 - 3 million per MW of generating capacity.  So wind sounds rather competitive, doesn't it?  It does until you understand what they are leaving out.

At its website, the American Wind Energy Association has a chart comparing the cost of generation from various sources.  They choose a metric they call "Levelized Cost of Energy ($/MWh)."  In their chart, onshore wind looks competitive on this metric with combined-cycle natural gas, and considerably cheaper than coal or nuclear.  (Solar looks ridiculously expensive in this chart, but remember, the chart comes from the AWEA.)

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Why would any dope build coal or nuclear?  You'll never find out from these guys!

Are the official government sources any better?  The answer is, not really.  A couple of weeks ago the government's Energy Information Administration came out with its big annual report on comparative costs of generating electricity by various means.  The title is "Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Energy Outlook 2016."  As indicated, the report compares the alternative means of generating electricity by two measures, "levelized cost" and "levelized avoided cost," which are slightly different, but not for these purposes.  Basically, both measures compare the various generation methods on a basis of cost per MW capacity, or cost per KWh production, without ever getting into the subject of how to make a full-blown system work when the generation comes predominantly from intermittent sources like solar and wind.  The bottom line is that, in all the charts, onshore wind power appears about equal in cost if not cheaper than the cheapest fossil fuel alternative, which is combined cycle natural gas.  Coal and nuclear get barely any mention at all in the whole report.  To the government's very slight credit, they do include this brief caveat in the introduction:

Since load must be balanced on a continuous basis, units whose output can be varied to follow demand (dispatchable technologies) generally have more value to a system than less flexible units (non-dispatchable technologies), or those whose operation is tied to the availability of an intermittent resource. The LCOE values for dispatchable and nondispatchable technologies are listed separately in the tables, because caution should be used when comparing them to one another. 

While we appreciate the caveat, it would be nice if you would tell us how much difference this dispatchable/non-dispatchable thing makes quantitatively.  So, guys, if we want to have a system made up predominantly of the "non-dispatchable" sort of sources like wind and solar, how much additional will it cost for the extra capacity and the backup and the batteries to get ourselves to a fully-functioning 24/7 system?  Sorry, but the government is just not going to be troubled to make that kind of inconvenient calculation.  They have elaborate and complicated and sophisticated models and calculations to inform you that the Levelized Cost of Energy for a conventional combined-cycle natural gas-fired power plant expected to come online in 2022 is $56.40 per MWh, while the LCOE for an "advanced" combined-cycle natural gas-fired power plant coming online in the same year is $55.80 per MWh, and the LCOE for a wind-turbine system coming online in the same year is $50.90 per MWh.  Wow, the wind system is the cheapest!  And by a very-precise $4.70 per MWh!  But this business of "dispatchable" versus "non-dispatchable" -- how much difference does that make?  Is it 2%, or 5%?  Or, if we try to make a system predominantly out of wind and solar that actually works for everybody 24/7, will we be increasing costs by an entire order of magnitude, a factor of 10 or more?  Sorry, they can't be bothered to give you any quantitative information about that.  If you want to find out, you'll just have to read some obscure Korean news source, or maybe the Manhattan Contrarian.

How Much Do The Climate Crusaders Plan To Increase Your Cost Of Electricity?

In yesterday's post, I gave a rough estimate that it would take an increase in the price of fossil-fuel-derived energy of at least a multiple of three to five to achieve the kind of usage reductions that climate crusaders are seeking.  (And of course in the process the poor would get priced out of air conditioning, not to mention air travel and lots of other things.)  Today I find a report of some real world experience indicating that actual price increases could be far higher than that.  

Paul Homewood is a British guy with a blog called Not a Lot of People Know That (notalotofpeopleknowthat.wordpress.com) that chronicles various sorts of climate craziness.  I recommend the blog to you.  A few days ago Homewood had a post titled "One small island's dream of energy self-sufficiency."    The post comments on an enthusiastic story from the Korean news site Hankyoreh, reporting on the efforts of the people on the very small (0.85 sq.km.) Korean island of Gapa to make their energy sources 100% renewable.  The Hankyoreh article quotes glowing reviews of the project from some of the island's residents.  Homewood then drily  comments that he thinks he has spotted "one tiny little problem that our Korean friends seem to have overlooked."  In other words, looked at with a touch of realism, the project is an unmitigated disaster.  The problem is cost.  See whether you agree with the residents or with Homewood.

Gapa has a total of 178 residents in 97 families.  According to Hankyoreh, it has average daily electricity usage of 142 kW, and maximum peak usage of 230 kW.  To supply that demand with "renewables," the Gapans acquired for themselves two big wind turbines, each with a rated capacity of 250 kW, plus they installed solar panels on 49 of the 97 homes, with a total rated capacity of 174 kW.  That would be a total capacity of 674 kW, against maximum peak usage of 230 kW, so nearly triple the peak demand and well over four times the average demand.  And finally, the Gapans were fully aware that wind and solar don't work all the time, so they also got themselves a gigantic battery with a capacity to store 3.86 MWh of electricity, which should theoretically be enough to go more than a full 24 hours at their usage level with the wind and solar not functioning.  (The battery pack of a Tesla Model S supposedly has a capacity of 85 KWh, meaning that Gapa's battery is equivalent in storage capacity to about 35 Teslas.)

So with all that the Gapans should have way more than sufficient capacity to supply all their electricity needs with just the renewables -- right?  Actually, not even close.  According to Hankyoreh, in the most recent measuring period of April 23 to July 12, the renewable resources supplied just 42% of Gapa's power -- 32% from the wind, and 10% from the solar.  And where did they get the rest?  From backup diesel generators, of course!

Between Apr. 23 and July 12 of this year, Gapa Island had a cumulative energy self-sufficiency rate of 42%. The island is meeting 32% of its energy needs from wind power and 10% from solar power. The rate climbed above 50% in May, but fell again in the monsoon season. The other 58% of energy is still supplied by diesel generators.

Oh, and the renewables-based electricity system, even with the diesel backup, only produced enough power to supply just four (!) electric cars.  So it seems that the large majority of the Gapans must also continue to drive gasoline-powered vehicles.  That means that the renewable contribution to Gapa's total energy usage is likely to be less than 20%.   

Now, can we please get an idea how much has been spent to get the Gapans all the way up to generating 42% of their electricity (and perhaps 20% of their total energy usage) from renewables.  Hankyoreh has the figures:

A total of 14.3 billion won (US$12.49 million) was invested in the project. Two 250kW wind turbines were installed, along with 174kW solar panels in 49 locations. Other installations included an energy storage device, a system control center, power conversion equipment and remotely controlled power meters.

That's $12.49 million for 97 households -- $128,000 per household.  Homewood points out that, assuming a 15 year useful life for the system and zero return on the invested capital, that would mean $8000 per year per household, or about $670 per month per household.  (By contrast, 2014 data from the U.S. EIA here show average monthly household electricity bills in the continental U.S. ranging from a low of $84 in Maine to a high of $145 in Alabama.)  But wait a minute: add a 4% rate of return on invested capital, and the cost per household goes up to more like $13,000 per year, or close to $1100 per month.  That's close to ten times what the average American currently pays for electricity -- and this is to get up to maybe 20% or so of energy usage from renewables!

So how do the Gapans feel about their wildly expensive energy system?  

“At first, we weren’t satisfied with the results of renewable energy. Now, though, it’s benefiting us in two ways: our electricity bills are lower and the number of tourists is higher,” said Jin Myeong-hwan, the 55-year-old mayor of Gapa Island.

"Our electricity bills are lower"?  How did that happen?  Oh, it seems that this whole wildly expensive renewable system was supplied to Gapa Island gratis by the utility company.  As Homewood puts it:

It is little wonder the islanders’ electricity bills have come down, because the capital cost of the project has been paid for by Santa Claus.   

I would have said the tooth fairy, rather than Santa Claus, but whatever.

So what exactly is the climate crusader's vision of how the United States is going to get up to say 50% of total energy usage from renewables?  If getting to 20% requires multiplying average utility bills by around 10, will getting to 50% require multiplying average bills by 20, or maybe 30?  I've never seen one of these people even remotely attempt to present honest numbers.  If any reader is aware of any such presentation, I would be glad to look at it.