Climate Technology

South Carolina misses an opportunity for energy efficiency with Duke's Save-A-Watt program

I recently interviewed a guy who explained his approach to long-term contracting to me as follows: "always structure your contracts to ensure that your counter-party makes money, and you'll never have a bad contract negotiation." It's a great point, too often lost by those who are convinced that all negotiations are zero-sum games.

Lest one think that hard-nosed, selfish negotiating is limited to greedy financial types, I bring you this story from South Carolina, where a change in utility regulation to incentivize energy efficiency was blocked by environmentalists and consumer advocates on the grounds that it would give too much money to utilities. It seems to me that they have made a big mistake.

Regulated utilities have no incentive to invest in energy conservation or generation efficiency. Moreover, they have no incentive to encourage their customers to make investments that would save them money, since the standard guaranteed-return + cost-pass-through pricing model doesn't let them keep the gain.

This doesn't make utility managers bad guys; it just means that they are responding to a bad set of signals. If your parents give your big brother a cookie every time he punches you, your big brother is not entirely to blame for the welts on your arm.

Jim Rogers knows this, and proposed his Save-A-Watt program to give his company, Duke Energy, a financial incentive to encourage their customers to conserve. Consumer advocates and environmentalists opposed, broadly on the basis that we shouldn't pay utilities to do things they're supposed to do anyway. The South Carolina utility commission agreed:

... they objected specifically to the heart of the plan: Duke's request to get a financial return for power plants it doesn't have to build.

To be quite clear, Duke has many flaws. They like expensive coal plants. They've tried to do some things that look an awful lot like gaming carbon markets. And they are a card-carrying, dues-paying member of the BS-machine that is ACCCE.

But that doesn't mean we can't give them credit for trying to reform the rules, so that they can sever (however partially) the disconnect between the interests of their shareholders and their customers (not to mention the environment). It seems a shame to me that those efforts were blocked in the name of the environment and consumer.

Ultimately, this issue is much bigger than Save-a-Watt, Duke, and South Carolina. Our regulatory system desperately needs reform, and effective reform will necessarily create massive wealth transfers away from those who benefit from the status quo. It was ever thus, and is why vested interests are always so conservative. Those who seek reform therefore have four choices:

No particular policy instrument is appropriate for all environmental problems

I introduced my previous post by noting that there are several prevalent myths regarding how economists think about the environment, and I addressed the "myth of the universal market" ­-- the notion that economists believe that the market solves all problems. In response, I noted that economists recognize that in the environmental domain, perfectly functioning markets are the exception, not the rule. Governments can try to correct such market failures, for example by restricting pollutant emissions. It is to these government interventions that I turn this time.

A second common myth is that economists always recommend simple market solutions for market problems. Indeed, in a variety of contexts, economists tend to search for instruments of public policy that can fix one market by introducing another. If pollution imposes large external costs, the government can establish a market for rights to emit a limited amount of that pollutant under a so-called cap-and-trade system. Such a market for tradable allowances can be expected to work well if there are many buyers and sellers, all are well informed, and the other conditions I discussed in my last posting are met.

The government's role is then to enforce the rights and responsibilities of permit ownership, so that each unit of emissions is matched by the ownership of one permit. Equivalently, producers can be required to pay a tax on their emissions. Either way, the result -- in theory -- will be cost-effective pollution abatement, that is, overall abatement achieved at minimum aggregate cost.

The cap-and-trade approach has much to recommend it, and can be just the right solution in some cases, but it is still a market.

Electronics industry takes own temperature at Greener Gadgets

Hm. Where are all the gadgets at the Greener Gadgets conference, a one-day acronym festival -- EPEAT, ROHS, LCA, anyone? -- covering topics from e-waste recycling to the economic benefits of going green. I was expecting to see cell phones crafted of discarded water bottles or a smog-powered BlackBerry. At least they've got the photovoltaic backpacks.

Mostly, the exhibitors' hall and panels include an odd amalgam of entrepreneurs and industry analysts, makers and regulators, who are far less focused on the gadget itself than on where it comes from and where it goes on its cradle-to-cradle journey through the world. "We need to focus on the system, and not just on the gadget," said Intel's Director of Environment and Energy Policy Stephen Harper.

They're just as focused on where the gadget goes to die, an integral part of said system. As keynote speaker Saul Griffith, co-founder of Squid Labs and Makani Power, told us, "There's no 'away' to throw something anymore -- we know where everything goes."

Tips for landing a green job

Ah, the daily grind: An endless progression of dreary days with that pathetic guy in the next cubicle who spends half his time complaining and the other half in loud personal conversations for which the phrase “too much information” was invented. And that boss of yours? One shudders. But fear not. You can remake your […]

Survey finds Americans still want earth-friendly products during recession

A survey released Wednesday confirms that Americans remain interested in buying environmentally responsible products even during the recession. Conducted by Boston communications firm Cone Inc., the finding is the latest in a string of surveys drawing cheery conclusions about green spending. According to Cone, about 34 percent of 1,087 adult consumers said they are more […]

Farmers take the hit as the CAFO model comes under pressure

In Meat Wagon, we round up the latest outrages from the meat and livestock industries.

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The industrial meat giants have entered a crisis phase.

As I've reported before, the world's biggest chicken packer, Pilgrim's Pride, is languishing in bankruptcy, squeezed by high feed costs, its own addiction to cheap capital from Wall Street, now dried up, and ruthless competition from rival Tyson. Facing a similar situation, Smithfield Foods, the globe's biggest pork packer and hog producer, announced it's shuttering six plants and hacking away 1,800 jobs.

Pilgrim's Pride has deftly used its bankruptcy to shunt much if the pain onto the backs of its farmer-suppliers, The Wall Street Journal reports (see extremely interesting related video). The article shows the massive risks required of the farmers who supply the nation with meat. Get this:

An interview with Mia MacDonald on China's growing appetite for U.S.-style meat production

Old MacDonald had a farm -- one resounding with oinks and moos and squawks. By today's standards, the old man's farm would count as a model of biodiversity. Researcher Mia MacDonald points out that across the planet, old ways of farming are giving way to the environmentally devastating factory farms we've pioneered in the West -- typically housing a single species of animal, confined by the thousands in conditions that would be alien to Old MacDonald's pigs and cows and chickens. For modern industrial-scale animal farms, the proper literary form is the scathing environmental report, not the children's ditty.

At Brighter Green, an action think tank that helps advocacy groups take informed action through research and analysis, MacDonald is currently at work on a series of case studies on the spread of factory-style farming across the globe. She's cutting straight to the chase: China, the world's biggest nation, is the subject of the first case study.

I caught up with Mia to discuss Brighter Green's new report, "Skillful Means: The Challenges of China's Encounter with Factory Farming" [PDF], which delves into China, meat, and the connection with our climate.

A zero-emission bus tours California, Toyota flirts with ethanol, and more green auto news

Thursday in San Francisco, it was easier to get an electric bus than an electric car. Proterra, a commercial hybrid- and electric-vehicle manufacturer in Golden, Colo., finished its weeklong California clean bus tour in the city by the bay. The sleek EcoRide BE35 climbed the hills of San Francisco, flaunting its environmental and fiscal charms […]

Computer maker expands recycling efforts

PC giant Dell today continues its campaign to be the world’s greenest technology company by rolling out a pair of new recycling programs. The company is adding six states to its partnership with Goodwill Industries that lets customers drop off unwanted electronic devices for recycling at Goodwill retail stories. The network of 1,100-some collection points […]

ITC to build $12B in wind farm power lines, JCSP study finds $50B savings from wind

Wind power is coming of age as the U.S. becomes the global wind leader and probably the biggest source of new jobs in the energy industry.

ITC Holdings announced Monday plans to build a $10 to $12 billion power transmission network to move 12,000 megawatts of electricity from the Dakotas, Minnesota, and Iowa to the Chicago area.

ITC called the plan, depicted above, the Green Power Express, saying it could:

result in a reduction of up to 34 million metric tons of carbon emissions, which is equivalent to the annual emissions of about seven to nine 600 MW coal plants.

ITC made its announcement the same day a major study, the Joint Coordinated System Plan, was released by the Midwest grid operator and other U.S. regional grid managers was released. It concluded that to increase wind power to 20 percent of electricity production by 2024 (requiring some 230 GW of wind) would require some 15,000 miles of new transmission costing $80 billion. The total cost of the wind would be some $1 trillion.

The WSJ reports this as "New Grid for Renewable Energy Could Be Costly." But in fact the study found that "increasing wind's share to 20 percent of U.S. power production would yield annual net savings of $12 billion annually by 2024 based on wind's low production cost compared to the fossil plants the turbines would replace," as Energy Daily (sub. req'd) explained.

Moreover, JCSP projects that the 20 percent scenario would save 3 billion tons of carbon over the next 16 years, which would generate in 2024 an annual value of some $40 billion a year at carbon prices comparable to that which the European Union has seen over the past year -- and several times that if the price of carbon to reaches levels needed to stabilize at 450 ppm.

One reason I say wind power has come of age is because the announcement and the study don't come from your traditional pro-wind trade groups or think tanks. Far from it.