Texas Wind Rips off Taxpayers and Rate Payers, Money to Flow to China

In 2006, the Electrical Reliability Council of Texas (ERCOT) published a study that showed that while West Texas Wind resources were considered among the best in the United States, they were poorly matched to the needs of Texas Electrical consumers. The ERCOT staff reported:

These data indicate that the representative areas in West Texas have their highest monthly capacity factors in the spring months and in late fall. . . . None of these patterns has a high correlation with the typical ERCOT monthly energy demand pattern, with maximum electric demand occurring in July and August.

Not only did the ERCOT staff find that West Texas wind was the most productive during seasons of slack consumer demand, but that the West Texas Wind blew blew was the most productive during the hours of the day when consumer demand was low.

during the month of April, typical wind resources in West Texas have significantly higher average output in the early morning hours in April than during the afternoon. . . . for July, . . . typical wind generation in West Texas peaks in the early morning hours.

These findings pointed to an inescapable fact, West Texas wind would be least available when electricity in the ERCOT system would be most in demand, on hot summer afternoons. Other ERCoT studies showed that based on a review of historical data of actual wind turbine generation during ERCOT system peaks (from 4 p.m. to 6 p.m. in July and August), the average output for wind turbines was 16.8% of capacity. However, the data also showed that for any hour during these months, the output of the wind turbines could range from 0% of installed capacity to 49% of installed capacity. Because of wind's intermittency, the ERCOT Technical Advisory Committee, considered recommending a wind capacity value of 2%. This problem was by no means localized to Texas, and has been observed for New England Off shore wind, the upper Great planes, Tennessee, California, and Canada.

Last year T. Boone Pickens was interviewed by Fast Complany.com's David Case. Pickens was candid

Pickens: "I'm not going to have the windmills on my ranch. They're ugly. . . ."

Question: "So whose land is it going on?"

Pickens: "My neighbors', . . ."

Question: "What happens if Congress doesn't extend the $20-per-megawatt-hour Production Tax Credit for wind -- set to expire December 31? On a project this size, that's an $80,000 deduction every hour at full capacity."

Pickens: "Then you've got a dead duck. It would be hard to go without a subsidy."

Question: "What about when the wind doesn't blow?"

Pickens:"That's the problem with wind generation. You've got to supplement it with a gas-fired or coal-fired source so whoever buys it gets continuous 24-7 generation."

So West Texas Wind is not about meeting consumer demand, it is about subsidies. This was amply illustrated by Michael Giberson, who discovered that during the first six monthsof 2008, West Texas Wind

prices were below zero nearly 20 percent of the time. During March, when negative prices were most frequent, prices were below zero about 33 percent of the time.

Giberson observed,

ven if the market value of the power is zero or negative, the subsidies encourage wind power producers to keep churning the megawatts out.

Evidence from market data suggests that wind power producers will accept prices down to about negative $35 MWh before they shut down, since marginal operating costs are very low for wind power we can conclude that the subsidies are worth about $35 – $40 for each MWh of wind output.

Giberson in another post noted,

Unfortunately for wind power producers in the region, their output was higher during times that the price was low and their output was lower during times that the price was high.

Well of course. Wind generation is not about making money from the market, it is about subsidies as T. Boone Pickens admitted.

So do the tax payers get good value in terms of the dollars they spend on C02 mitigation by wind? Not according to Australian engineer Peter Lang, who has researched cost and benefits of wind generation. Lang found that the cost of wind generated electricity, with natural gas back up was 224% higher than the cost of natural gas generated electricity alone, Thus not only does wind electricity at the wrong time, and thus the heavy lifting of electrical production with wind has to be performed by fossil fuels, but electricity generated by wind and fossil fuels costs far more than electricity generated by fossil fuels alone. But how much CO2 does the use of wind save us? The answer is very little. Lang looked at three estimates, the first, suggested by Lang himself, suggested with a wind and gas combination CO2 savings would be in the order of 0.058 tons of CO2 per MWh id electricity generated. A second estimate from an Australian government report determined that wind without considering back up, would lower CO2 emissions by 0.5 tins of CO2 for every MWh of electricity generated. Finally Lang turned to a Royal Academy of Engineering report that found wind with fossil fuel backup lowered CO2 emissions by 0.09 tons per MWh generated.

Given this data Lang calculated that given his assumptions, using wind to mitigate CO2 emissions cost $1,149 per ton of CO2 eliminated, while using the Royal Academy of Engineering's estimate using wind backed by natural gas would cost $830 per ton. The United States Energy Information Agency estimates that the levelized cost of nuclear power will be 107 in 2016. That would yielded a cost of around $100 per ton of CO2 saved. (Lang reported a lower estimate for nuclear based on older Australian studies. Lang concludes

Only nuclear and the fossil fuel technologies with carbon capture and storage can make substantial reductions in emissions.

Well there you have it. Earlier this week, I reported on an absurd scheme to build windmills in West Texas, using wind generators made in Chinese factories and 30% paid for by U.S. stimulus funding. Electricity produced by the turbines would be heavily subsidized. Most of the jobs created by this project would go to Chinese workers, and profits created by tax payer subsidies would flow to Chinese investments. Is anyone else outraged?

Energy Subsidies Again

In 1999 the Federal Energy Information Administration (EIA) undertook a comprehensive study of Federal energy interventions during that year. EIA undertook a second study in 2007. Remarkably the EIA study foind that no growth in energy consumption had occurred during the previous 8 years.

The 1999 and 2007 EIA studies actually compliment and amend the 2008 MISI study I discussed in my last post. The MISI study did contain a summery of estimated subsidies from all sources for various segments of the Energy Industry from 1950 to 2006, there is no break down by year, except for R&D expenditures. There are discrepancies between the two reports. Thus The EIA found that nuclear R&D expenditures for 1999 to be $740 million, while the MISI estimated the 1999 nuclear R&D subsidy to be only $125 million. The EIA qualifies its R&D budgeting by describing the 1999 funding as being for "applied" R%D. Thus the entire $740 Million is the DOE budget for applied research, and not every research project is directed toward research that would qualify as a subsidy for the "civilian nuclear power industry".

A further breakout of the 1999 DOE expenditures demonstrates some of the issues.

New Nuclear Plants (Nuclear Energy Research Initiative) 36
Waste/Fuel/Safety (Environmental Management) 530
Other Allocated (Termination Costs and Program Direction) 173

Is any of this a real subsidy for the Civilian nuclear industry? The first line would be, but it would it really be a subsidy unless energy utilities got some benefit from it. Thus if the New Energy Research Initiative produces something that actually benefits the nuclear power industry, it is a subsidy. If not it might be considered a dead end science project. The first line looks like a subsidy, however.

The second line, I have argued, cannot be considered a subsidy, In the DOE Budget the term Environmental Management, refers to the cleanup of old Cold War and WWII AEC sites, that were either being shut down, or in the process of being shut down. The cleanup problems were predominately a legacy of military uses of nuclear power. Most of the civilian research programs that were involved in the subsequent cleanup were not involved with LWR research, and hence the cleanup is not a LWR subsidy,

Finally the third line refers to the shut down of a Cold War Era production plant. The facility in question was involved in weapons related work and its clean up thus was not a subsidy for the civilian power industry.

There are a few items mentioned for the year 1999 in the MISI study of nuclear subsides, that do not seem to be subsidies for the nuclear power industry. Other items might be seen as not real subsidies at the present, but possibly they might have a future subsidizing effect. Thus for example, DOe' grants for University Reactor Infrastructure and Education Assistance, benefit the civilian power industry? The answer is probably yes, and in several ways, But it could also benefit research programs that are unrelated to the nuclear power industry. It could also benefit the United States Navy, since the Navy might recruit naval reactor operators from such programs. The program might also be a source of earmark funds, that were far more about local politics, thn serving th interest of the nuclear power industry. Although the issue demonstrates how problematic determining a subsidy is, I would be inclined to think that the $10 million is a subsidy for the civilian power industry, even if it were not intended to be so.

In order to resolve some issues raised by the Energy Information Administration 2007 study of Nuclear Federal energy interventions, I reviewed the 2009 Federal Budget request for nuclear power, in order to identify 2008 appropriations.

In 2008 Congress appropriated for the Nuclear Power 2010 program, $133,771,000
For the Generation IV Nuclear Energy Systems Initiative $114,917.000
The Advanced Fuel Cycle Initiative received a 179,353,000

These programs at present cannot be described as nuclear power subsidies, unless or until research leads to a product or concept that benefits the nuclear industry.

In addition to research appropriations, other facilities which might been seen as a subsidy for civilian nuclear power would be the $278,789,000 appropriation for the Mixed Oxide Fuel Fabrication Facilities. However, the MOX Program is part of an ongoing nuclear disarmament/anti-proliferation effort. The long term goal of the MOX program is the lowering of stocks of Plutonium by using it as reactor fuel. The MOX facility is designed to manufacture reactor fuel containing plutonium and uranium. I believe that it would be extremely cynical for supporters of nuclear disarmament to describe a disarmament program as a subsidy to the civilian power industry.

Thus the current Federal budget contains few if any real subsides for the nuclear power Industry. Critics of nuclear power charge that the nuclear industry cannot live without subsidies, My review of the current Federal support roe nuclear power related research suggests that far from being subsidized by the government of the United States, the nuclear power industry is paying money to the Government but not receiving promised services. Relatively small long range DOE funded nuclear research programs have yet to produce any positive benefits for the civilian nuclear power industry, and may not produce any benefits for some time, if ever, Thus it is very inaccurate to speak of the current nuclear industry as being dependent on subsidies.

A note on the meaning of the word "subsidy":
The EIA defines subsidy as"the transfer of wealth from the federal government to the beneficiaries [of the subsidies]". Thus for there to be a subsidy, wealth must leave the government's hands, go directly into the hands of the subsidized. Many functions of government may enhance the wealth of some citizens but not others, and still be a subsidy. Thus a reliable, rational and trustworthy system of civil law may enhance the wealth of the American business community, without its cost constituting a government subsidy of business interests. Government financed collection of information and the creation of knowledge may be financially useful to some businesses, but still is not be seen as a subsidy. What then is a subsidy?

If the government asks a aircraft manufacturer to design and construct an aircraft for military purposes, and the manufacturer subsequently adapts the air craft for civilian purposes, did the government subsidize the manufacturer of the civilian aircraft? Now let us consider a variant of this case. After completing the design of the military aircraft, and its civilian variant, the design team is hired to design another aircraft by another aircraft company. The air craft turns out to be almost an exact copy of the first company's civilian aircraft. Is this a case of government subsidy? Now the design team produces almost exact duplicates of the aircraft design for every aircraft manufacturer that wants one. Is this a gonernment subsidy of the aircraft industry?

It is not always clear that a process in which money leaves government hands and as a consequence money enters the hands of a business is a subsidy. The definition speaks of a transfer, but does not address qualifiers. We can have direct transfers, and indirect transfers. But determining what an indirect transfer is is a real humdinger.

We do have some help from the definition. If the government does not transfer money, it would not seem to be a subsidy. Thus a promise to transfer money under certain circumstances is not a subsidy. If the alleged beneficiary does not receive money as a consequence of the government program, it is not a subsidy.

Energy Subsidies

A new study. titled Analysis of Federal Expenditures for Energy Development challenges the assertion that nuclear power receives large subsidies from the Federal Government. The study, by About Management Information Services, Inc. ( MISI), demonstrates that much of that the Federal investment in nuclear research included a broad spectrum of projects, and was not simply confined to civilian reactor research. MISI has a long history of research of energy and economics issues for the National Academy of Sciences, the U.S. Department of Energy and others.

MISI looked at Federal energy related expenditures between 1950 and 2006. It demonstrates that Federal spending on Nuclear power research peaked during the 1950's and dropped significantly after. The study finds that among energy sources oil, natural gas, coal, and Hydro-electric generation have received larger federal subsidies than nuclear during the time frame.

A review of MISI data, however, reveals that much of the "Federal research and development subsidy" did not in fact benefit the civilian power industry.  The study also reveals that most of the so called research subsidy to the "nuclear industry", was not focused on conventional power reactor technologies. Only $5.8 billion, was spent on Light Water Reactors, the only civilian nuclear technology used to generate power in the United States. In contrast various research projects related to the breeder reactor received $23.78 Billion and more that $38 Billion dollars were spent on other reactor research projects that were unrelated to the light water reactor. Only Light Water Reactor research benefited the civilian nuclear power Industry, and thus could be considered a subsidy.

Most Federal spending on reactor research occurred before 1975. Between 1998 and 2003 Federal spending on all reactor research was only about 10% of federal Reactor research levels in the 1970's and 1970's research levels were far lower than during the 1950's. Since 1976 over 50% ($14.5 billion) of Federal reactor research expenditures have been devoted to the LMFRB. In contrast, only 6% ($1.68 Billion) of Federal nuclear research dollars since 1976 have been spent on Light Water Reactor research, despite the fact thatr Light Water Reactors provide 20% of power in the United States. Another $3 Billion was spent on reactor waste management research, but most of that money cannot be considered as a subsidy for the Civilian nuclear industry, because that industry continues to manage and store its own waste in temporary local storage facilities at its own own facilities.

Unlike all other energy sources there has never been a tax based subsidy for the nuclear industry. In contrast, renewables as well as oil, gas, and other energy forms receive heavy tax subsidies. Most of the cost of hydro construction is paid for by the Federal government with no return to the tax payers. Most energy forms have received more money from the Federal Government than they have paid to it. The one exception is the civilian nuclear industry, which has paid $14 billion more to the Government that it has received. The imbalance came about because the Federal Government has failed to provide waste management services to the nuclear industry, which nuclear plants owners are paying for. Thus fat from receiving subsidy from the Federal Government, the civilian nuclear industry has in fact subsidized the Federal Government, and the net value of that subsidy is far greater than the value of all of the benefits that the civilian power industry has received through the Federal Government. If we subtract the $5.8 of R & D expenditures on Light Water Reactors paid by the Federal Government, we find that the Civilian Power Reactor Industry has given the government a net subsidy of $8.2 Billion. In addition unlike other energy technologies including renewables, the civilian nuclear power industry pays 100% of its tax obligations.

Payments into the the nuclear waste fund, have not had their value adjusted for inflation, nor is interest paid on the fund's balance. The inflation adjusted value of the of the fund, the value of the
interest on the fund the fund and the value of future contributions on the fund, makes the nuclear electrical industries contribution much bigger than is stated by nuclear critics. Add to this the fact that the Federal government is obliged to pay for the one third of the storage at Yucca Mountain that is used for nuclear waste from government facilities, and the supposed government subsidy disappears.
A note on Price-Anderson: Critics of nuclear power consider the Price-Anderson Act to be subsidy. This is a conceptual error. In fact the primary function of the Price-Anderson Act is to create a form of self-insurance for the civilian nuclear power Industry. Under Price-Anderson, the primary insurance obligation falls on the reactor owner. Reactor owners must obtain the largest accident insurance protection available on the insurance market. Beyond that all reactor owners have a joint obligation to pay at least $9.5 Billion into a compensation pool, in the event of a large accident. It is possible that the Federal government could impose an even larger obligation on reactor owners. Only in the event of a larger payout would the Federal Government be under any obligation. Since Government has never paid a cent in accident compensation, and and given the safety features of Light Water Reactors, it is virtually impossible that the Government every will pay out a cent under the Price-Anderson Act, and pays no insurance premium, the Price Anderson Act ought to be considered a potential subsidy, rather than an actual subsidy. The value of Price-Anderson cannot be determined, since it is very unlikely that any compensation will every be paid out by the government under Price-Anderson. In the absence of a Government payout, the Price-Anderson acts that the primary obligation for all claims payments up to $10 Billion rests with the Nuclear Industry.

We ought to compare the Nuclear Industry's obligation under the Price Anderson Act with the insurance of the hydro electric industry. Serious accidents involving large scale damage to property and loss of human life are far more likely with hydro electric dams than a catastrophic failure of a a nuclear plant. Typically nuclear plants have highly redundant safety systems, and place at least 5 levels of protection between radioisotopes trapped in nuclear fuel, and the civilian population. In contrast, dames typically have only one layer of defense between impounded waters and down stream populations and property. The failure of a dangerous dam like the Cedar Creek Dam on the Cumberland could kills thousands of people, and cause billions of dollars in damage. There is no Price-Anderson Act for the hydro-electric industry, perhaps because the Federal Government owns most of the dams.