Cheat-Seeking Missles

Monday, September 25, 2006

Government Can't Solve Energy Crisis

Here in California, voters will decide in a few weeks whether to impose a $4 billion tax on oil in order to fund a new state alternative energy push. Proponents think raising oil prices will create a disincentive to use oil, which in turn will make new energy sources more feasible.

Before they vote on Prop 87, they should consider California's current state-sponsored push for alternative energy, the Renewable Portfolio Standard (RPS), which has been in effect for four years, has raised $319 million from consumers thus far, spent none of it, and created only 241 megawatts of new power.

The state needs 8,000 megawatts of new power sources to meet the RPS goal of 20% of California's energy from renewable power sources by 2010.

In a SF Chronicle story that's ideally timed to discourage votes for Prop 87, the RPS program is portrayed as a bureaucratic, over-regulated nightmare that does more to suppress innovation than encourage it.

Big surprise -- government not being as effective as the private sector!

What is surprising, however, is the forcefulness with which the usually green-sympathizing Chronicle lays out the story. For example, the article talks about a 100-turbine wind farm in Solano County that's generating enough electricity for 75,000 homes:
"We like to say this project was built in spite of the RPS, not because of it," said Jim Caldwell, director of regulatory affairs for PPM Energy, which owns the new Solano County wind project. The company bypassed the state's regulatory process and simply built the project without a guarantee that any utility would buy the power.

"If we would have gone through the process, we thought we'd never get the damn thing built," Caldwell said.

Skipping the process lost them guarantees their energy would be purchases -- a big risk, but they're selling all they can produce.

Part of the problem is that the bureaucracy-crazy Cal Legislature required these projects to win approval of both the California Energy Commission and the Public Utility Commission -- twice as much regulation as most states require -- and of course they have to run through the diabolic California Environmental Quality Act process as well. The result:
Despite good intentions, the result is that renewable-power projects take several years to complete in California. Compare California's 241 new megawatts of renewable power to Texas' more than 2,200 megawatts of wind energy since it adapted renewable targets in 1999.

Texas' legislation enacting the renewable requirement was 10 paragraphs long. California's legislation was 13 pages.

The world's largest wind developer, FPL Energy in Florida, announced earlier this year that it would not propose new wind projects in California during the next two years, even as it invests $2 billion around the country. The company won a bid through the California RPS process in 2004 to add 30 megawatts of wind power to an existing project, but a company official pointed to the project's estimated completion date -- April 2008, four years later -- as an example of why investing in California is difficult.

"We are committed to California, but we look at where we can actually move forward and build projects," said Diane Fellman, director of regulatory affairs for FPL Energy.
Could there be a more compelling "No on 87" argument? Leave energy to the free market, reduce environmental regulations for energy projects, disincentivize enviro litigation, nuke the energy bureaucracies ... then we'll get somewhere.

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