Articles by Sean Casten

Feds note electric rate increases and high construction costs for nuclear and coal

An interesting new report [PDF] from the Federal Energy Regulatory Commission seeks to explain why electric prices are currently increasing so dramatically.

They lay most of the blame on rising fuel costs and rising commodity costs (copper, steel, etc.), which is certainly contributory, but in my opinion deceptive, since it suggests that -- but for commodity volatility -- things could be hunky-dory again. This implicitly diminishes the fact that we're entering a build-cycle in the power fleet, and thus fails to understand all the chickens now coming home to roost in the power sector.

That said, it still makes for an interesting read -- even if one disagrees with the causes. The reality of rising power prices and even higher prices on forward markets is something that we must understand -- and for which we must start thinking through the consequences.

A simple regulatory fix to the coming power crisis

Our electric regulatory model is broken. It preferentially deploys expensive power sources before cheap ones. It compares the variable costs of dirty fuels to the all-in costs of clean fuels and deludes itself into thinking that the dirty, expensive power is economically advantaged. It places the interests of utility shareholders above the interests of other potential investors in our power grid, massively skewing capital allocation, even while it insulates utility investors from the disciplines imposed by a competitive market.

These problems arise fundamentally from the over-regulation of our electric sector, which has created stable utilities, but virtually no opportunities for the kind of economic "upside" necessary to attract entrepreneurs into the sector. This ought to be good news; after all, we Americans are really good at taking risks, deploying our prodigious entrepreneurial talents and making big financial bets. The problems we face all play to our strengths. Unfortunately, any positive change to our system is by definition deregulatory -- a word that has been politically poisoned by the botched restructuring (don't call it dereg!) in California and Enron's machinations. As factually irrelevant as those bogeymen may be to any discussion of deregulation, they present formidable political obstacles to reform -- and only the most quixotic windmill-tilter chases reforms that are politically untenable to both sides of the aisle.

Houston, we have a solution.

New white paper provides more details on output-based standards

For those of a policy-wonk bent. For those who simply loved my earlier post on output-based standards for greenhouse gas control and have been thirsting ever since for more details (I know you're out there!). For those who wait eagerly at their mailbox waiting for the current issues of electricity policy magazines to arrive ...

Yea, verily, I bring you this [PDF].

A white paper just published in The Electricity Journal, providing much more detail than was appropriate for a blog post on the concept of output-based CO2 standards, and hopefully clarifying some of the details.

A brief primer on variable vs. fixed costs

For those of us in the power industry, media discussions of the economics of power generation reveal an almost complete misunderstanding of how power is priced. Depending on our vested interests, we may find this either frustrating or beneficial -- but in all cases, it's false.

Herewith I attempt to explain from whence the confusion arises -- and why it is so critical for the clean energy community to understand this math and its consequences ... and to more accurately articulate the economics of those options we prefer.