Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

25 February 2012

New Energy Series: Why Cars and Trucks Should Switch to Natural Gas Now


Introduction: A Series of Essays on Energy

The defining issue of our time is not immigration, so-called “Islamo-Fascism,” the deficit, or big versus small government. The defining issue of our time is energy. If the recent leap in gasoline prices makes you nervous, you ain’t seen nothin’ yet!

The issue will come to a head this year and next, when global market forces will force us to choose. For the near term, we will have to choose between natural gas and oil/gasoline. For the medium and long term, we will have to choose among solar power, wind energy, nuclear power and coal. We will make these choices partly as consumers, partly with our business decisions, and partly with our votes.

Nothing we do in the next two years will have a greater effect on our future and our prospects for maintaining our present standard of living, let alone improving it. And nothing we do in the next five to ten years will affect our children’s lives more. If we make a big mistake, they will pay for it their entire lives, literally (in dollars and reduced income) and figuratively (in a lower standard of living, poorer health and quality of life, and a declining society).

In recognition of these facts, today’s post inaugurates a series of essays on energy. It’s not—by far—my first post in that series. But it’s the first to be designated as such. And I’m starting with this post because it offers vital practical advice to anyone who manages a fleet of cars or trucks, plus many consumers.

Readers who want background on current hot energy topics should see the following recent posts:

Graphical Extrapolation of Gasoline Prices: Six or Seven Dollars a Gallon in Ten Years
The Big Lie about Wind and Solar Power
Possible International “Trade” in Wind and Solar Power
How to Make Solar Power Seem Expensive When it Isn’t

Readers who want more general theoretical background should consult the following:

Energy Economics
“Daddy! Mommy! I Want More Oil!”
Innumeracy, Economics and the Great Accommodation
Coal versus Nuclear Power: Do You Like to Breathe?
The Dangerous Illusion of “Clean Coal”
Energy Policy: Good Batteries and How to Get Them
Liquid Fluoride Thorium Reactors
Lack of Imagination III: Selling Engineering, for a Change

Readers who want some insight into why gasoline prices are slowly and steadily increasing might like the following:

Update on Oil and Gasoline Price Projections [January 2011]
Four Dollars a Gallon by Next Summer [2011, correct prediction]
Assertions of a Speculative Bubble in Oil Prices

Today’s post follows:

Energy economics is a complex subject. When you drill down to regional price differentials and monthly fluctuations, it gets even more complex. And it’s easy to confuse temporary trends—due to things like pipeline shutdowns and refinery capacity—with longer-term trends like the secular (and daily growing!) global supply crunch in oil.

But once in a while, it’s possible to draw a clear and useful conclusion from existing data and news. Now is one of those times. That conclusion leads to simple and useful advice for any consumer, business or governmental agency (large or small) that owns or leases one or more cars or trucks.

The advice is as follows: run, do not walk, to your nearest conversion shop and have every car and truck you run converted to burn natural gas. If your fleet is up for replacement, in whole or in part, buy natural-gas replacements.

If you follow this advice, you will save yourself oodles of money, enormous headaches, and many sleepless nights.

There are only two caveats. First, if your operations require long-range hauls—i.e., long runs on a single tank of fuel—you should first investigate where natural-gas stations are and what the range of your vehicles will be after conversion. Natural-gas vehicles tend to have shorter single-tank ranges than those burning gasoline or diesel fuel. Second, you should make sure that natural-gas stations in your area are conveniently located for your operations.

But apart from those caveats, converting from gasoline to natural gas will win big. Here’s why.

Let’s start with the present. As of February 20, 2012, the average price of gasoline in our nation, for all grades, was $3.65 per gallon. Gasoline is made from oil, which cost about $105 per barrel on that same day. The energy equivalent of a barrel of oil—5.8 million BTU—you can get from a quantity of natural gas that, at last week’s price, cost 5.8 x $ 2.6 = $15.08. So if you had bought natural gas to run your vehicles last week, rather than gasoline, your cost of fuel would have been seven times cheaper.

Let’s put that in simple terms. Just last week, the natural-gas energy-equivalent of a gallon of gasoline cost $3.65 x 15.08/105 = 52.4 cents. That’s a saving of $ 3.65 − 0.524 = $3.13. If you’d converted earlier, you’d now be saving more money per gallon than you spent on gasoline a few years ago!

I know, I know. Crude oil is not gasoline, so this arithmetic is not exact. But it costs additional money to refine crude oil into gasoline (which cost appears in its price). In fact, refinery bottlenecks are largely responsible for the recent rises of and severe fluctuations in the price of gasoline, especially in the Midwest. So the arithmetic energy-equivalence calculation above actually understates the huge price advantage of natural gas.

How much does it cost to convert a vehicle? Well, according to the popular radio show CarTalk, you can pay more, but you can get the job done for $3,500. Or you can buy a brand new natural-gas car for about that much additional cost.

The following table, based on simple arithmetic, shows how quickly you can recover this capital investment, depending on your current gasoline vehicle’s fuel efficiency (miles per gallon) and the number of miles it runs per year:

Time to Recover $3,500 Investment in Converting
Vehicle to Natural Gas

Miles Driven Per YearVehicle’s Gasoline Mileage (MPG)Conversion-Cost Recovery Time (Months)
15,000108.9
15,0002017.8
15,0003026.8
  20,000106.7
  20,0002013.4
  20,0003016.8
    30,000104.5
    30,000208.9
    30,0003013.4

So unless your vehicles don’t run much (less than 15,000 miles per year) and/or you already get much better mileage than 20 miles per gallon, you’ll recover your investment in converting to natural gas in less than 18 months.

That’s not just good. It’s stupendous, especially if your vehicles run up a lot of miles and get poor mileage! And after that break-even point for conversion, you’ll save at least $3.13 with every gasoline-gallon-equivalent that your fleet burns. The savings will go directly to your bottom line, like money from heaven.

But what about the future? Well, as I’ve written at length (1, 2 and 3), in the long run the price of oil is only going to go up. (It may go down temporarily in economic downturns, as it did in 2009-2010 and at the onset of the Greek debt crisis. But in economic downturns you have less money to spend on gasoline, too.)

In contrast, the current gas “fracking” craze is likely to drive the price of natural gas down, at least in the near term, by increasing supply. Some day natural-gas prices will start to rise as more and more smart people switch to natural gas from oil and global demand for natural gas increases, as it is doing now with oil.

But by then you will have long since paid for your fleet conversion. And how high can natural gas prices rise? Even if they triple, you’ll still be saving at least $2 a gallon-equivalent for every mile your fleet drives.

The clincher is what’s going to happen this summer. In June, an obscure oil pipeline called “Seaway” from the US Gulf Coast to Cushing, Oklahoma, will reverse direction, sending US crude to the Gulf for export. The purposes of the switch will be: (1) to relieve a glut of crude (but not gasoline, due to refinery bottlenecks) in the Midwest and (2) to bring the two global benchmarks for crude oil prices (West Texas Intermediate (WTI) and Brent) closer together, so that the so-called “global” market looks more uniform. (For a good review of the excruciating details, read this.)

According to Goldman Sachs, this change will raise the price of crude in the US, and consequently the price of gasoline (refiners are not charities and are hard-pressed now), by about 7 percent by next August. Based on the February 20 price of gasoline, $3.65 per gallon, it will also increase the price of every gallon that you buy by 25.5 cents.

That amount—25.5 cents, multiplied by every vehicle you manage and every mile it runs, will come directly off your bottom line. And it won’t wait until June to do so, because futures markets are raising prices right now.

So shouldn’t you get started converting your fleet yesterday?

Footnote: I know, I know. I don’t much like Goldman Sachs either. But no one ever questioned their brains, just their morals and their ability to destroy the global economy with absolutely no accountability.

Update (2/27/12):

Indirect “mainstream” confirmation of this blog’s advice came even more quickly than usual today. In an article about Warren Buffet’s utility-investment mistake, Bloomberg.com reported what experts think future natural-gas prices will be. Hsulin Peng, an analyst at Robert W. Baird & Co., believes prices per million BTU won’t reach $5 until 2015. Another analyst, Andy DeVries at CreditSights Inc. (New York), thinks they won’t hit $6.15 until 2022.

If the DeVries projection is right, and if you convert to natural gas a gasoline-burning car or small truck now running 30,000 miles per year at 20 MPG, you’ll save at least $33,687 in ten years, even accounting for your investment-recovery time.

That’s enough to buy a new vehicle. The arithmetic is irresistible and offers a clear path to energy-independence in transportation, too.

Update II (2/29/12):

I don’t think Bloomberg.com’s reporters are working to confirm this blog, but sometimes it looks that way. Today they reported that, in 2011, and for the first time since 1949, the US exported more oil products than it imported.

Read that quickly and you’ll miss the point. The story is not about crude oil, but about oil products, principally gasoline and so-called “distillates” like diesel fuel and heating oil. Demand for those products inside the US has fallen, due both to a weak economy and conservation efforts, including higher mileage cars.

As domestic demand for those products decreases, prices threaten to fall. Refineries, which usually operate on small margins anyway, don’t want to waste their capacity and lose money. So they turn to Europe and Latin America for sales. That’s exactly what the story reports.

The result is globalization not just of the crude oil market, but of the markets for oil products refined in the US. Our refineries are importing foreign crude oil only to export their refined products.

What does that mean for consumers? Even as independence in oil for our own needs in the US increases, domestic prices of gasoline and diesel fuel won’t fall because the US is now part of an international market for them. This is just one more example of globalization making life more “competitive,” i.e., harder, for the American consumer.

There is really only one way you can fight back: convert your car or small truck to natural gas ASAP and hope that: (1) globalizing the natural-gas market through international shipments of liquified natural gas (which have been planned for some time) takes a while; and (2) the “fracking” craze keeps natural-gas prices here low for as long as the reports of futures experts mentioned above predict.

On Friday, I’m going to post a table showing per-mile energy costs for various sources of energy capable of propelling cars and small trucks. The results might surprise you.

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22 February 2012

Graphical Extrapolation of Gasoline Prices: Six or Seven Dollars a Gallon in Ten Years




Click on graph to see it full scale


Introduction
The 1973-1986 Peak
The Current Leap
The Likely Future: Graphical Extrapolation
Conclusion: Can “Fracked” Gas or Tar Sands Save Us?

[For an explanation how fossil fuel companies’ PR hacks delude consumers about the comparative cost of solar power, click here. I don’t mean to upstage my new essay on wind and solar power, which are equally vital subjects in the longer term. But this essay is ready, and gasoline prices are a hot political issue right now.]

Introduction

There is theory, and there are facts. If you fudge your facts to match your theory, you are an ideologue or religious fundamentalist. If you match your theory to the facts, you are a scientist or engineer.

Over the last 400 years (since Galileo), most of the world has downplayed ideology and religious fundamentalism in favor of science, engineering and technology. That trend has led us from a life that was once “nasty, brutish and short” to our present, relatively happy state.

So let’s apply some theory to the facts of gasoline prices since 1949. Fortunately, we don’t have to dig very hard to find the facts. Our own Energy Information Administration (EIA) has posted exhaustive records of the retail prices of gasoline for the last 63 years.

The graph at the head of this post derives mostly from the EIA’s historical data from 1949 through 2010. Data for last year (2011) appear here and for the first six weeks of 2012 here.

The prices shown in the graph above are averages, in cents per gallon, over all grades of gasoline and all parts of the US. Except for the last two data points (2011 and early 2012), they are “real” prices, adjusted for inflation. Hence the numbers are lower than the prices you would have seen at the pump (and those I remember from the sixties), because the dollar’s purchasing power was stronger the further back in time you go. And there’s a slight nuance for 1976 and 1977, explained here.

Now let’s make two important assumptions. First, lets assume we are scientists or engineers, not ideologues or true believers. So we will fit our theories to the facts, i.e., the graph shown. We will try to explain the graph with history.

Second, let’s assume we want to explain the facts with mainstream theory, not exotic ideas. If you’re a medical doctor, have one in your family, or know one well, you may have heard a rule for diagnosis that most doctors learn in medical school: “If you hear hoofbeats, think horses, not zebras.”

What this rule means is that you should, when possible, make diagnoses or explain things in the simplest, most straightforward way, not the most exotic. Another common metaphor for this common-sense thinking is Occam’s Razor.

So let’s try that approach with our graph. Let’s try to explain its major features not with demons (aka speculators), and not with angels (anomalous results of “Drill, baby, drill” in a nation with less than 3% of known oil reserves, while OPEC has 75%). Let’s think horses, not zebras.

In economics, that means applying the most basic, uncontroversial, and well-accepted law: the law of supply and demand. When the supply of oil gets shorter or demand increases, prices go up. When supply increases or demand drops, prices go down. No economist or business person doubts these well-tested theories.

As you look closely at the graph, you can see three major features. (You might want to open another instance of this post in an adjacent tab or window, so you can look at the graph and read this analysis at the same time.)

First, the graph starts to rise steadily in 2002. It seems to be heading off the scale in 2011. But it drops back considerably n 2009 and 2010, and again a bit in the first few weeks of this year.

Second, the graph’s central feature is a big peak from 1973 to 1986. It jumps up in 1974, reaches a small plateau from 1974-1978, then leaps much further in 1979 through 1981, only to drop down back to near the long-term trend in 1986.

The graph’s third main feature is remarkable price stability over nearly half a century, if we exclude the 1973-1986 peak. Without that peak, from 1949 until 1997 the retail price of gasoline stayed roughly even. Over the period from 1949 until 1972, the inflation-adjusted pump price of a gallon of gas actually dropped 27%, from 185 to 135 cents.

Can we explain these major features with simple, basic economics? I think so. We’ll look for historical events that relate to the global supply of and demand for oil, the commodity from which all gasoline is made.

The 1973-1986 Peak

The 1973-1986 peak is by far the graph’s most dramatic feature before the year 2000. Several historical facts explain it nicely. The first was the Arab Oil Embargo of 1973-1974.

The Arab Oil Embargo was the first successful attempt to play global politics with oil. Upset with the West’s military support for Israel in the Yom Kippur War, Arab oil suppliers boycotted Israel’s major supporters, including the US and the UK. As a result, the price of oil jumped about four times. (See graph here.) This jump became known as the “oil shock” of the 1970s.

The Arab Oil Embargo was very short. It lasted only about five months, from October 1973 to March 1974, until the last Israeli troops pulled out of Egypt. You can see its effects above in the leap in gasoline prices in 1974, leading to the low plateau from 1974 to 1978. The downward slope in that plateau is probably due to relatively radical (for the time) conservation efforts in the US, couple with drastic efforts to increase production from remaining US mainland reserves.

But the much bigger part of the 1973-86 peak came after the Arab Oil Embargo. What was going on then?

What happened then was economics, not politics. The Arab Oil Embargo’s dramatic effect on prices taught the Arabs—especially the Saudis—the economic power of their virtual monopoly of global oil reserves.

OPEC had formed in late 1960, in response to global domination of oil production and prices by the major Western multinational oil companies, which were then known as the “seven sisters.” At first OPEC was weak and disorganized. Its members were few and squabbled among themselves. (They were, after all, mostly in the Middle East.) But the Oil Embargo sent the Arabs to economics school. It showed them forcefully what their control over global oil supplies could do.

They had ample motivation. Oil was (and still is) priced in dollars. But the Arabs had to pay for food and manufactures, most of which they imported, in their own currencies. While the “seven sisters” controlled oil prices in dollars and kept them low, prices for food and manufactures imported into the Arab world rose dramatically, threatening political unrest.

The Arabs’ obvious solution was to control (and raise) the price of oil, the vast majority of reserves of which were on their land. So, during the next few years, OPEC members: (1) strengthened and disciplined OPEC, (2) taught themselves economics, and (3) nationalized oil reserves and production facilities within their national boundaries, including those belonging to the “seven sisters.” The result was today’s state of affairs, in which OPEC controls 75% of all global oil reserves and—if its members stick together—has near-absolute control over global oil pricing.

These events were the cause of the biggest part of the 1973-86 peak in US gasoline prices, from 1978 to 1981. You can see the same effect on oil prices in this graph on Wikipedia.

What caused the decline from 1981 to 1986 was also economics. The West didn’t have to go to school; it already knew economics. So it could use the law of supply and demand, too. It made drastic efforts to reduce demand for oil and increase non-OPEC supply. Like the Arabs, it also had ample motivation: the rising price of oil, which affected the prices of almost everything else, caused massive inflation in the eighties, with interest rates in the double digits.

The three major efforts to fight back economically were well-known cultural artifacts of the eighties. First, Congress established the Corporate Average Fuel Efficiency (CAFE) standards for cars in 1975. It mandated roughly doubling cars’ average miles per gallon by model year 1985.

Second, the Japanese helped by choosing fuel efficiency as their major competitive advantage in penetrating the American automobile market. Many American consumers cooperated. They bought Japan’s small, fuel efficient cars to save money and because (after a brief trial period) they found those cars more maneuverable and of better quality than competing American gas-guzzlers. The Japanese car makers were so successful that many pundits then predicted eventual Japanese domination of the global auto market, a feat they have come near to achieving today.

Third was a simple rule of economics and capitalism. When prices of a commodity go up, people not only use less. They also find substitutes and new sources of supply. The late seventies and early eighties was when new deep-sea oil-drilling technology first took off. A Yankee entrepreneur brought the first North Sea oil to Britain in 1975. By the early 1980s Britain was a net exporter of oil, for the first time in its history.

Together, these three trends reduced US demand for oil and gasoline and increased the global supply outside of OPEC’s control. The result was the dramatic fall in gasoline prices from 1981 to 1986, back to the earlier trend line and a level that remained stable until the turn of the century.

So basic economics explains the graph’s most dramatic feature in the whole twentieth century. No zebras. No speculators or other demons. Just good ol’ supply and demand.

The Current Leap

The graph’s current leap—since 2000—is much more dramatic still. The price levels greatly beat, and the slope of the increase matches, anything in the twentieth century, including the dramatic peak of 1973-86. Can supply and demand explain them, too?

I think so. Whether or not you use the loaded term “Peak Oil,” the supply of non-OPEC oil is tapped out. It took a few years for Exxon Mobil, the world’s biggest and most competent oil company, to admit the point. But in 2010 it did. It did so not just in words, but by deeds.

In 2010, Exxon bought XTO, a natural-gas company with enormous natural gas reserves. Exxon’s managers explained the purchase to the business press. Good oil was getting harder and harder to find and more and more expensive to extract. Untapped deep-sea resources were getting deeper and deeper, requiring more expensive and more dangerous technology to exploit them. One result (later) was the Great BP Oil Spill.

While Exxon once had a climate-change denier for a CEO, the folks who run it now are mostly good energy engineers. They understand energy; they understand drilling; and they understand economics. When they bought XTO, they understood that natural gas was much cheaper than oil on an energy-equivalent basis.

That’s even true today, in the midst of the gas “fracking” craze and controversy over possible water table pollution. Last week’s market price for natural gas was around $2.6 per million BTU, and a barrel of oil provides 5.8 million BTU. So natural gas with energy equivalent to a barrel of oil would cost 5.8 x $2.6 = $15.08. In comparison, last week’s price for an actual barrel of oil on the West Texas Intermediate market was about $105. Exxon Mobil’s energy engineers are not stupid, are they?

The problem, of course, is that most cars and trucks don’t yet run on natural gas. To take advantage of natural gas’ more-than-six-fold price advantage, we’d have to convert our fleet of vehicles, or a significant part of it, from gasoline (petrol) to natural gas. So we continue to pay over six times more for fuel than we could. And we’ll pay even more as gasoline prices continue to rise. (More on this point later.)

If you insist on looking for demons, you can blame OPEC, which absolutely controls global prices for oil. But OPEC has every incentive to keep prices down. Now that Exxon Mobil has made its move, OPEC knows that there are alternative fuels out there. Not only is there natural gas—over six times cheaper than oil right now. There is also electricity made from wind or sun, nuclear power, and coal. The first real electric cars—the Chevy Volt and Nissan Leaf—are in showrooms right now.

OPEC’s members have learned a lot about economics in the last half-century. The lessons of the great drop in oil and gasoline prices from 1981 to 1986 are not lost on them. They know that keeping prices for oil too high for too long will only cause customers to look for substitutes and alternative sources of supply. For the last two decades, they have been very skillful in keeping oil prices “just right”—for them.

For a long time OPEC’s members have skimmed the cream of the global economy while keeping prices low enough to avoid stalling it. That’s their game, and they are getting quite good at it. What they can’t do is produce more oil than they have, or extract it too quickly for their own, internal economic good.

The Likely Future: Graphical Extrapolation

Now look closely at the part of our graph after year 2000, where the current great leap begins. Except for 2009, 2010, and early 2012, the graph goes straight up.

The dip for 2009-2010 has obvious causes. The Crash of [late] 2008 and the Great Recession that followed it killed the global economy and, with it, demand for oil. The data point for 2011 corroborates this point. As global recovery from the Great Recession began, it fell roughly on the same dramatically upward trajectory as the data points for 2002-2008.

The dip in early 2012 has a similarly obvious cause: the slowdown in Europe and now even China resulting from the Greek debt crisis. But suppose the EU solves that crisis, as it is even now promising to do? What will happen then?

Well, the graph will likely continue on its trajectory from 2002-2008. So you can get a good idea of what gasoline prices will be like in the next few years (if, as everyone hopes, we get by the Greek debt crisis) simply by extrapolating. Just extend the trajectory of the data points for 2002-2008 and 2011 forward, while ignoring the Crash-caused drop back in 2009 and 2010, as well as the short Greek-crisis-caused drop back in the first weeks of this year.

You can extrapolate mathematically, using a least-squares technique to fit the best straight line to the data points for 2002-2008 and 2011. Or you can extrapolate graphically, eyeballing a straight line on an extended graph.

When you do so, you will get a real gasoline pump price for 2022, ten years ahead, somewhere between $5.00 and $5.75 per gallon.

But that’s not the price you’ll see at the pump. Remember, our graph shows “real,” i.e., inflation-adjusted prices. They’re all expressed in terms of the dollar’s current purchasing power. So to find the numbers you’ll actually see posted outside gas stations in 2022, you’ll have to increase the “real” prices to adjust for future inflation.

Let’s say that Ben Bernanke (or his successor) is entirely successful, for the next ten years, in limiting inflation to the Fed’s nominal target of 2%. That in itself would be quite a feat, but let’s assume he can do it. Then prices would increase by a factor of (1.02)**10 = 1.22 (Google or your scientific or business calculator will do the math for you). That works out to an average posted pump price between $6 and $7 per gallon in ten years.

Conclusion: Can “Fracked” Gas or Tar Sands Save Us?

It doesn’t much matter whether you believe that we’ve long passed Peak Oil or that OPEC is slowly and cleverly twisting the screws to squeeze the rest of the world dry. In either case, that graph will likely continue on its 2002-2008, 2011 trajectory. It will regardless of how much we “drill, baby, drill” in the US for oil, because we have less than 3% of global oil reserves, while OPEC has 75%.

Only a few things could stop the current, rapidly rising trend in gasoline prices. Another great recession could, just as the Great Recession of 2008-2009 did and the slowdown caused by the Greek debt crisis is starting to do right now. In the long run, a surprise breakthrough in energy technology might, but there’s no such surprise on the horizon. Even the sudden discovery of nuclear fusion in a bottle, which scientists have been chasing hard for half a century, would take a decade or two to roll out.

A few things might make the extrapolation even worse. In the short term, Iran could block the Straits of Hormuz, or there could be yet another war in the oil-rich Middle East. Or OPEC could decide to abandon the path of economic rationalism and use oil to play politics again. More likely, OPEC’s projections of the extractability and extraction rates of its oil could prove optimistic, supply could fail to match rapidly increasing global demand, and the graph’s slope could turn even further up. This latter risk is the most likely one.

Only two things might put a cap on US gasoline prices in the short or medium term (ten years or less). The first is converting our vehicle fleet to natural gas, and later electricity. A serious effort toward these ends would contain national demand for oil and increase the supply of alternative power for transportation. Electrified high-speed intercity rail would also reduce the demand for jet fuel, which also comes from oil. Let’s call this the “demand-side solution.”

A second possible solution would work on the supply side. If Exxon Mobil and other big oil companies could exploit Canada’s tar sands cheaply enough and quickly enough, the resulting supply increase so close to our borders might contain price rises for a time.

There are four problems with the tar-sands solution. First, we just don’t know yet how expensive large-scale extraction and refinement of tar sands will be. Making oil from tar sands requires heating them up, extracting something resembling oil by mechanical and chemical processes not yet fully developed at commercial scale, and (in the process) wasting a huge amount of energy. It stands to reason that these additional steps—making an oil simulacrum before refining it into gasoline—are likely to make gasoline more expensive, not less, at least in the short run.

Second, converting tar sands into something resembling oil produces tremendous pollution, including carbon compounds that cause smog and will accelerate climate change. Although Canadians want the jobs, the process is likely to lay waste large areas of pristine wilderness in Alberta. Then transporting the resulting faux oil into the US, probably by pipeline, would create oil-spill threats to additional Canadian wilderness and all the US wilderness en route. (That, in a nutshell, is the reason for the Keystone Pipeline controversy.)

Third, once you have extracted something resembling oil, you still have to refine it into gasoline, with all the energy loss, pollution and expense that that process usually entails. And when you’re done, what you have is another gallon of gasoline, competing on a global market with flat or dwindling supplies and rapidly increasing demand. Tar-sands exploitation is unlikely to offer much, if any, price relief to consumers.

Finally—and most important—reconstructing the industrial infrastructure of Alberta and building a new continental-scale pipeline would take time. The necessary environmental reviews alone might take several years. Tar sands are hardly a short-term solution.

In contrast, auto makers are making natural-gas vehicles right now, and drilling companies are already in a frenzy of expanding our supplies of natural gas. The demand-side or natural-gas solution has a huge start-up advantage over tar sands.

The natural-gas approach would also be much better, much sooner, for drivers. Recall that greater-than-factor-of-six advantage of natural gas over gasoline in price per energy-equivalent.

As our head graph shows, the real cost of gasoline in the first few weeks of 2012 was $3.49 a gallon. Based on the relative prices of natural gas and oil shown above, the price of an energy-equivalent amount of natural gas is $3.49 x $15.08/$105 = $ 0.50. (This comparison ignores the additional cost of refining the oil into gasoline. Natural gas doesn’t need refining.)

That’s about fifty cents per gallon equivalent—less than half the real price of any gallon of gasoline at any time since 1949.

According to the popular radio show “Car Talk,” it costs $3,000 to $5,000 to convert a gasoline car to run on natural gas, and $3,500 to $7,000 more to buy a new natural-gas car than a gasoline car. If both cars got 30 miles per gallon (or gallon equilvaent) and ran a relatively modest 15,000 miles per year, the fuel cost savings ($2.99 a gallon equivalent) would let the natural-gas driver recover a $3,500 additional capital investment in $3,500 / ($2.99 x 500) = 2.34 years. And that’s even before auto makers climb the mass-production curve and begin to compete seriously in making natural-gas cars cheap.

Exxon Mobil and its lobbyists are pushing the supply-side “solution” because oil refining and maketing is what they do. But the demand-side solution appears simpler, cheaper, quicker and less environmentally damaging. We could work harder to convert our vehicle fleet away from oil, emphasizing natural gas in the short term and electricity in the medium and long terms. We might even provide incentives or mandates for selling natural-gas-ready vehicles and building natural gas stations in populated areas.

Exxon Mobil and other drilling energy companies can do their parts in the demand-side solution, too. They can extract the natural gas and build natural gas stations. But they can’t build cars to burn natural gas or convert existing cars to that fuel. And they will have little business incentive to build natural gas stations until there are enough natural-gas cars on the road to create reasonable demand.

As natural-gas production increases to meet demand, there is also the danger of water pollution from “fracking” wells. Not every reservoir of gas for “fracking,“ or every “fracked“” well, is close enough to drinking-water supplies to do them damage. Rather than invest millions in lawyers and PR hacks to prove there is no problem at all—when that does not appear to be the case—drilling companies should invest in taking inventory geologically, in order to estimate how much “fracked” gas could be recovered far from drinking-water aquifers, with little or no threat to drinking water. That would be an important number to know, and a crucial one for energy policy. (Our national US Geological Survey might help produce that number.)

More generally, we need a coherent national energy policy as oil prices inexorably rise globally. The decision to favor the demand side (converting vehicles to natural gas first and later electricity) or the supply side (with tar sands) will be one of the most consequential in the history of our nation’s transportation infrastructure and use of energy.

Either solution might lead to much-needed energy independence in transportation. But the two solutions’ cost, time frames, industrial and commercial consequences and impact on the environment are likely to be starkly different. As long as the drinking-water problem is manageable, the demand-side solution (natural gas) is likely to work sooner and better, with lower prices for drivers and less environmental damage.

Lacking adult supervision, our oil companies will continue to do what they do best: drilling, extracting and refining. They’ll continue to give us oil, somehow and anyhow, without much regard to long-term or even medium-term consequences. If we let private companies, in their own short-term self interest, make the critical engineering, economic, environmental and security tradoffs between natural gas and tar sands, we’ll have no assurance that they or we will get those tradeoffs right. And there’s plenty of reason to believe they’ll tilt unreasonably toward oil, because oil is what they’ve favored for a over century.

So don’t look for zebras, demons or angels. Just apply basic economics and simple mathematical methods. If you do so, you come to an inescapable conclusion. Unless we start converting our national vehicle fleet to natural gas right away, or unless we begin the massive industrial infrastructure projects needed to convert Canadian tar sands into oil and gasoline, the price of gasoline at the pump, in then-current dollars, will be at least $6 to $7 per gallon in ten years. And you can think of a lot of quite realistic scenarios in which it might go even higher.

Isn’t it time we started working harder on the best alternative sources of energy for our cars and trucks, namely, natural gas now and electricity later?

Footnote

For 1976 and 1977, unleaded gasoline was just getting started. It was on the market but not yet required. For those two years, the EIA’s numbers don’t provide an all-fuel average, probably because unleaded gas was just a small part of the picture. And without volume figures, I can’t calculate one. So I took the lowest prices, which were for leaded gas, probably because it was still the volume leader.

Personal Disclosure: I’ve invested substantial amounts (for a consumer) in naked long-term call options on Exxon Mobil stock (symbol XOM). No matter which way we go—natural gas and electricity or tar sands—Exxon Mobil will profit in the short or medium term. Unless the global economy tanks, I expect oil and gasoline prices to increase substantially during the next few years, raising Exxon Mobil’s revenue and profits without much additional effort on its part.

I’m afraid that, as a nation, we’re going to dither and dally in bringing them down. I fear that clueless politicians will continue to make absurd one-liner arguments and propose thoughtless “solutions,” like building the Keystone Pipeline without proper environmental review (as if it could be built overnight in any event!) and with no assurance that the rest of the tar-sands infrastructure will even exist. If that happens, we’ll miss the proper starting times either for investing in natural-gas and electric vehicles, or for the massive projects needed to exploit Canadian tar sands.

I would be delighted to earn less on my options and be proven wrong. But that’s going to require politicians and business executives to get much more serious, think longer term, and hire more engineers and scientists and fewer lawyers, marketers and PR hacks. The prospects for that happening anytime soon are not particularly encouraging.

How to Make Solar Power Seem Expensive When it Isn’t

In a recent post, I explained why coal companies’ cost comparisons with solar and wind power are meaningless at best, fraudulent at worst. But an important question still remains: why do so many people believe otherwise?

As I was redrafting my explanations again and again, trying to make them simpler and clearer, it hit me. My puzzlement grew out of my own over-education. With a Ph.D. in physics and an “Accounting for Lawyers” course at Harvard Law School under my belt, I knew (and still know) exactly how to calculate the real cost of solar energy. But most people don’t. Apparently they compare apples and oranges, and coal companies’ PR hacks encourage them to do so by the words they use and the numbers they repeat ad infinitum, ad nauseum.

From the point of view of physics, engineering and basic accounting, it’s all a gigantic fraud. From the point of view of “public relations” and political “consulting,” it’s sheer genius. But, whichever side of that line you fall on, I’m sure that, once you see it in its full glory, you’ll think it one of the most clever, thorough and diabolical deceptions in American political or business history.

Here’s how it works:

The source of the confusion is the use of seemingly similar terms with wildly different meanings for solar and conventional power. Coal companies’ PR hacks use this confusion to make solar power sound as if it’s ten times more expensive than conventional power to produce.

But as engineers do the calculation—correctly this time!—the result is just the opposite. Solar photovoltaic power is at least six times cheaper than conventional power, right now, today.

[Note: this post does not discuss the so-called cost “comparison” that confronts consumers when they install solar roof arrays in their homes. That’s a whole different kettle of fish. There the power company tells you both what you must pay per watt of output to install the solar arrays on your roof and what it’s willing to pay you (or deduct from your bill) for the power that the arrays generate. It controls, if not dictates, both sides of the equation, in a “tails I win, heads you lose” approach. This post is about what it actually costs the power company to generate solar photovoltaic electricity.]

The PR Hack’s Method

Energy-policy buffs like to quote the cost of photovoltaic solar cells in terms of dollars per watt. That’s the number of dollars it costs to manufacture a photovoltaic solar cell that, in good, strong sunlight, can produce a watt of electrical power. The solar industry reduced this production-cost parameter to about a dollar a watt in 2009. Half that value (fifty cents) is expected soon, at least in China.

Coal advocates love this measure of cost because ignorant consumers often confuse it with the cost of generating electrical power itself. But it’s not the same. It’s the cost of making the generator—a single tiny solar cell. There are thousands or tens of thousands of those cells in a rooftop array, and millions in a serious commercial photovoltaic power plant.

In contrast, your power company charges you for the electricity it produces, not for the cost of building the power plant. And the unit it uses to bill you is kilowatt-hours, not watts.

Today, the national average cost of a kilowatt-hour of electrical power is about eleven cents. So the average rube, comparing the two numbers and ignoring what they represent, might say, “See, the power we get from coal now is five to ten times cheaper!”

Allowing and encouraging consumers to make this completely bogus comparison has been an enormously effective propaganda strategy.


The Error! The Error!

To an engineer or scientist, as distinguished from a PR hack, this comparison is absolutely absurd in several respects. First of all, it compares apples and oranges. The solar-cell cost is the cost of manufacturing the cell, which later generates electricity. The cost of power on your electricity bill is the cost of using an already-built plant to produce electricity. They are completely different numbers in concept, meaning, units and common sense.

Second, there’s basic high-school physics. The watt is a measure of power. The kilowatt-hour is a measure of energy, i.e., the ability of power, over time, to do useful work. To an engineer or scientist, comparing them is like comparing feet and pounds, or pounds and fluid-ounces. The comparison is utterly meaningless.

Third, there’s accounting. The cost of producing the solar cell is a capital cost, not even amortized. The cost of electricity on your bill is the operating cost of a conventional power plant, with perhaps a small fraction derived from amortized capital cost. (My earlier post explains how plant cost is amortized, or averaged, of a plant’s useful productive lifespan to derive a meaningful adder to the cost of power. It also explains why, for renewable energy, but not for conventional power, amortized capital cost is the dominant term in power cost.) Any accountant or economist who seriously compared the two would be fired.

Coal companies’ PR hacks never make this comparison in so many words. They could be sued. Instead, they encourage ignorant consumers and Fox commentators, who are dumb as boards and protected by the First Amendment, to do so. They just assert—over and over again!—that coal is so much cheaper and let ignorant consumers draw their own conclusions from numbers they read in the popular press.

How an Engineer or Accountant would Make the Comparison

The two numbers—plant cost and electricity cost—are completely different in theory, practice, economics and accounting. But it’s possible, with some arithmetic and common sense, to compare them. Here’s how an engineer or physicist with some knowledge of accounting would do it.

Suppose a photovoltaic solar cell that can produce a watt of electrical power continuously in sunlight costs one dollar to make. How can we calculate the cost of the power it produces?

As discussed in my previous essay, that dollar is the capital cost of building the solar cell. In order to calculate the cost of the power it produces, you have to amortize (i.e., average) that capital cost over the entire lifetime of the plant—all the power it produces during its useful life, until you have to invest in a new plant.

Let’s be very generous to solar power’s detractors. Let’s suppose that the cost of building the rest of the plant—apart from the cell itself—doubles the cost of the solar cell, to two dollars per watt output. (The “installed” cost of rooftop solar arrays for homes may be higher—as much as three times the cell’s cost by itself—because home installations lack the economies of scale of large power plants.)

Remember there are millions of such cells in a commercial solar plant. There are also wires and equipment to transmit the power out, instruments to monitor and control the plant’s operation, and machines to keep the cells facing the sun. So let’s assume that the cost of this other equipment doubles the cost (per watt) of each of the millions of cells in the plant.

With this assumption, the cost of building the solar power plant as a whole becomes two dollars per solar-cell per watt of power output.

But how much does the plant cost per unit of energy produced, namely, a kilowatt-hour?

As its name suggests, a kilowatt is a thousand watts. So a kilowatt-hour is a thousand watts running for an hour. Every year has 24 x 365 = 8,760 hours, but the sun only shines (in sunny climes) for about eight hours per day. So let’s take a third of that, i.e., 2,920 hours. During every year in which that little solar cell (of which a whole power plant has millions) chugs along producing its tiny watt of power, it ends up generating 2.92 kilowatt-hours of power, all for two dollars total capital cost.

But that’s not all. No engineer in his or her right mind builds any power plant, let alone a solar plant, to last just one year. Let’s suppose that the solar power plant lasts only as long as most nuclear power plants in business today, which are still running after about forty years. Then, over the lifetime of that solar plant, the little chugging solar cell will produce 2.92 x 40 = 116.8 kilowatt-hours of power, all for a manufactured price of two dollars.

So what’s the total cost of power, per kilowatt-hour, generated by that little solar cell over the forty-year lifetime of the plant? It’s $ 2 divided by 116.8, or $ 0.017; it’s 1.7 cents. At this cost, the little solar cell beats conventional power plants by a factor of 11/1.7 = 6.4.

Yes, you read that right: not only is the little solar cell not five to tens times more expensive per kilowatt-hour of power; it’s actually 6.4 times cheaper. And that’s right now, today, when solar power is confined largely to China and Germany, and we still have a long learning curve to climb. Maybe those Chinese and Germans know something the dolts on Fox don’t.

And recall we have made a very generous assumption for the cost of the rest of the solar plant, besides the solar cell itself, which has the most exotic technology and is the most critical part.

For comparing solar power with conventional power plants, we needn’t add anything to this amortized capital cost. Solar power has no fuel costs at all. It’s plant-maintenance costs are much lower than those for coal or even natural gas. And because it produces no effluent it has no external costs either.

If we made the comparison more realistic, coal would come off even worse, for two reasons. First, we have every reason to believe that solar-power plants will last much longer than nuclear-power plants, which suffer massive radiation of operating components, have many more moving parts, operate at incomparably higher temperatures, and are infinitely more complicated, sensitive and delicate. Second, this calculation entirely neglects coal’s humongous external costs, for things like smog, acid rain, mercury pollution of lakes, seas and fish, particulate induced asthma, and climate change. Our little solar cell produces none of those costly effects.

So right now, today, with our generous allowance for building the rest of the plant, our little solar cell produces electricity 6.4 times more cheaply than conventional power plants. Do you begin to ken why coal and even natural-gas companies hire lawyers and public relations hacks, rather than engineers, to “explain” their cost calculations?

P.S. Some readers may object that this calculation ignores the time value of money. There are two responses to that objection. The short answer is that energy companies are rolling in money and needn’t borrow to build new solar plants. The longer answer is that, at current interest rates, borrowing the money to build the plant would about double the cost of solar power, still leaving it more than three times cheaper than conventional power.

You can verify that result using a standard mortgage calculator, such as this one. If the plant has one million solar cells, and so (according to our hypothesis) costs $2 million, the power company can borrow that money at 4% interest for forty years for a monthly level payment of $8,359, or $100,308 annually. On a per-cell basis, that’s 10 cents per year. Since the solar cell produces 2.92 kilowatt hours per year, the cost of that power is 10 cents/2.92 or 3.42 cents per killowatt-hour. No conventional power plant can match that low cost today.

Even this calculation is overly generous to solar power’s detractors. The reason? Nothing requires a power company to borrow money for the entire actual working life of the plant. The two variables—loan payoff period and actual plant lifetime—are completely unrelated. By paying off the loan more quickly, the power company can reduce its effective cost of capital, just as you can reduce your mortgage payments by taking out a fifteen-year mortgage rather than a thirty-year one.

The same result applies if you worry about inflation. The dollars a power company receives in payment for its power become less valuable as time goes on. But the calculation above expresses that difference, if you consider the 4% an annual inflation rate, rather than an interest rate. That rate is quite conservative—twice the Fed’s maximum target rate 2%.

So, any way you look at it, the cost of solar photovoltaic power is at least three times cheaper than its conventional counterparts. And that’s right now, today, without us Yanks having climbed the learning curve (like the Chinese and Germans) and gotten experience in using solar power and building plants cheaply. It also assumes a very conservative lifetime for solar photovoltaic plants: the same forty years that incomparably more complex nuclear power plants have already enjoyed.

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19 February 2012

The Big Lie about Wind and Solar Power


[For a brief comment on possible international trade in wind and solar energy, click here.]

Introduction
A Little Algebra
Comparing Coal
The Coal Industry’s Opposition to Subsidies
The Subsidiary Lie: Intermittency
Conclusion

Introduction

For about two years now, the so-called “mainstream” media have endlessly propagated a popular meme about wind and solar power. The meme is simple and powerful.

Wind and solar power, it says, are uneconomic. They can’t compete now with conventional means of generating electricity, such as coal. And maybe they never will. So forget about them and get back to the serious business of burning fossil fuels.

Many people believe this meme. But in fact there is no credible evidence to support it. There is none for a simple and powerful reason: the key variable—the working lifetime of large, commercial wind farms and solar arrays—is still unknown.

But that doesn’t stop the lie. It is undoubtedly the most successful weapon in the coal-industry’s public-relations assault on reason. It’s been even more successful than the myth of “clean coal.”

This essay debunks the lie analytically. Then it analyzes why many Americans, who have never abandoned any new technology without trying it first, are ready to do so with free power from the wind and sun.

A Little Algebra

The following formula states the cost of any form of electricity:

C = F + M + E +AC

Here C is the total cost of electricity, F is the cost of the fuel to generate it, M the cost of maintaining the plant that generates it, and E the cost of pollution and other “externalities” involved in generating it. AC stands for “amortized capital cost,” which we’ll explain in a moment.

F, M and E are all what economists call “variable” or “marginal” costs. They are easy to express in dollars per kilowatt-hour. It takes so much fuel (such as coal) to generate a kilowatt-hour and so much maintenance to keep the plant running meanwhile. Each kilowatt-hour’s worth of burning fossil fuels fills the air with so much carbon dioxide (which causes climate change), sulfur dioxide (which causes acid rain) and organic mercury compounds (which poison seas and fish). E is the cost of preventing or remediating those harms, per kilowatt-hour of fuel burned and consequent pollution produced.

AC is the amortized capital cost of the plant. That sounds complicated, but it’s really not. In order to calculate the full cost of generating electric power, you have to include the cost of building the plant that makes it. Economists call this a “fixed cost” because, once the plant is built, that cost is sunk and done.

In order to calculate the amount the plant’s cost adds to the cost of power per kilowatt-hour, you have to know how many kilowatt-hours the plant will generate over its entire useful life. Then you simply divide the cost of building the plant by the total number of kilowatt-hours the plant is expected to provide.

The result is just a lifetime average. But accountants and economists use the term “amortized cost,” so that’s what we’ll call it.

With this formula in hand, we can now explore why today’s cost comparisons between coal and renewables are based on nothing more than wild guesses about amortized capital costs and/or ignoring externalities.

Comparing Coal

The foregoing formula works for any form of energy, from hydrogen fusion to rats spinning treadmills (to run generators) in a cage. The problem is not the formula or the theory. It’s practice.

High-priced lawyers in Gucci shoes spend whole careers arguing about each of the formula’s variables (F, M, E and AC) in “rate-making” proceedings, where regulators set the fees that public utilities can legally charge to produce our electricity. So it’s not as if you can look these numbers up (on the Web or anywhere else) and just plug them in. You have to know what you’re doing and watch the sleight of hand.

To make our analysis simple, let’s just compare one other source of electricity, coal, with wind and sun. That’s fair, because the coal industry is ultimately responsible for the popular meme that wind and sun are uneconomic.

We won’t get into actual numbers because (1) they vary from plant to plant, region to region and technology to technology and (2) they’re hard to find. Instead we’ll content ourselves with rough quantitive comparisons that derive from the nature of the different technologies.

    Fuel Cost: Wind and Solar Power Have None
We start with F, the cost of fuel. For coal-fired power plants, it’s the cost of coal needed to generate a kilowatt-hour of electricity.

But for both wind and solar power, there is no fuel. The wind and sun are free. (That’s their key advantage over all competitive means of generating electricity, including nuclear power.)

So for renewables, F drops out, and the formula becomes

C = M + E + AC

    Maintenance Cost: Harder to Know, but Coal Probably Loses
Next is maintenance cost, M. Coal plants must maintain a huge mechanical apparatus that: (1) conveys the coal to the burning spot, (2) pulverizes or atomizes it and otherwise prepares it for burning, (3) burns it in the furnace to heat gases or water, (4) uses that heated medium to turn an internal combustion engine or turbine, (5) and uses that mechanical motion to drive a mechanical generator, which spins rapidly at high torque to generate electricity. All these systems require periodic maintenance and occasional repair.

For renewables, the precise type of plant makes a difference. Solar thermal arrays concentrate the sun’s heat directly into a heat engine (or a liquid or gaseous medium that drives it), eliminating steps (1) through (3). Steps (4) and (5) are similar to those for coal power.

Windmills eliminate even more of the steps. The wind drives the mechanical electric generators directly, usually through a gearbox. About the only things that need repair are the bearings and mechanisms for the windmill (and those that keep the windmill pointed into the wind), the gearbox for the generator, and the generator itself. So, as compared to coal, windmills eliminate all the steps but (5).

Solar photovoltaic arrays require the least maintenance, because the solar cells that actually make the electricity have no moving parts. The only moving parts in a solar photovoltaic array are the systems that—very slowly!—keep the solar cells facing the sun as it moves across the sky during the day.

You don’t have to be an engineer or energy economist to understand that the maintenance costs for these four forms of generation (coal, solar thermal, windmills, and solar voltaic) will rank in the order listed. The reason: the coal plant’s systems are far more complex, involve more steps, and operate in part (the coal furnace and boiler, for example) at higher temperatures.

There is yet one more reason why coal loses to the sun and wind in terms of maintenance cost, and it’s a clincher. All those smokestack “scrubbers,” which regulators require coal plants to run in order to reduce acid rain and other pollution, have expensive active absorbing elements that must be replaced periodically. Because the cost of replacing them is a routine part of maintaining the plant in legal operation, it is properly charged to maintenance, not the cost of externalities discussed below. Yet as we shall see, those external costs are far greater for coal than for renewables.

    External Cost: Coal Loses Big
Next is the variable E, externalities. Coal produces much more than wind or sun because power from the wind and sun produce no effluent, no pollution at all.

Some effluent arises in the process of manufacturing the plants, but the same is true of coal. And anyway it’s easier to consider that effluent as part of AC, the amortized capital cost of the plant. It only occurs once, and so is properly considered part of fixed costs, while a coal plant produces new effluent every day it runs.

It doesn’t take a genius or an engineer to understand that E is much larger for coal than for any wind or solar plant. Coal’s external costs are huge. I’ve discussed their many and various sources in another post, which I won’t repeat here. They are both very high and very hard to estimate precisely, because (in the case of climate change, acid rain and mercury pollution) they affect large geographic regions or the whole Earth.

But in accordance with the Basic Law of Economics (there’s no such thing as a free lunch), someone has to pay for them, either in dollars, reduced health, or reduced quality of life, or (in the case of the Maldives) maybe even a loss of homeland. So far, the coal industry has gotten away with forcing the rest of society to pick up (and breathe!) its garbage. But that doesn’t mean that policy makers can ignore its real costs, or that investors can ignore the risk that eventually those costs will be charged where they belong.

The coal industry’s highly-paid lawyers and lobbyists have striven mightily to find some sort of compensating external cost on the ledgers of wind and solar power. Because neither form of alternative energy produces any effluent whatsoever in normal operation, the most they have been able to devise is a claim that windmills kill birds.

Yet careful analysis shows that rate of bird kills caused by windmills is at least an order of magnitude lower than caused by the widespread use of cars and trucks. And engineers can avoid most of it by siting wind farms away from birds’s migratory paths, which are stable and predictable. The attempt to compare a tiny amount of avicide with regional acid rain, massive poisoning of lakes, seas and fish and global climate change is laughable. Has anyone calculated the number of birds that climate change will kill, or the number of whole bird species that it will extinguish?

    Amortized Capital Cost: The Key Unknown
So far, coal loses hands down. Unlike coal, wind and solar have no fuel cost. Their maintenance expense promises to be lower than coal’s, and their external costs are much lower than coal’s. So the cost comparison boils down to the last term: amortized cost of capital.

But here’s the rub. AC itself consists of two variables, the actual cost of the plant (which you can get from the accountants, if it’s already built), and the plant’s expected lifetime, in kilowatt-hours generated. Here’s the formula:

AC = P/L,


where P is the total cost of building the plant, and L its useful lifetime, expressed in kilowatt-hours.

Renewables’ detractors would have you believe that these variables are well known. But they’re not.

Even the total cost of the plant is unknown. Why? Because wind and solar technology are still in their rapid development phase.

Already there have been three generations of windmills. Large-scale solar arrays, both thermal and photovoltaic, have just started to be built. Although some are at commercial scale (especially in Germany and China), no one knows how much they’ll cost in real mass production. The whole industry is just beginning to hit the exponential part of its growth phase.

If the plant’s cost is still unknown, think about its lifetime. For wind and solar plants, no one has any real idea what it will be.

We do know that many nuclear power plants—which have infinitely more numerous, complicated and critical systems—are still in use forty years after their construction. Wind and solar power plants have far fewer moving parts, need far less complex instrumentation, and operate at much lower temperatures and without radiation, which can damage materials as well as living organisms. So it is not inconceivable that solar power plants, if not windmills, could operate for a century or more with proper maintenance.

No one knows. Why? Because large-scale wind arrays have existed for less than a decade, and large-scale solar-power plants have existed for only a few years.

How important is this plant-life variable in estimating electricity costs? Consider this example. Suppose my guesstimate above is right, and that a photovoltaic solar plant could produce power for 100 years with proper maintenance. Then suppose you’re a coal-company PR hack trying to estimate the lifetime of a competitive plant that will take away part of your business. You might say, “Well, nuclear plants last forty years, but they’ve got a long history of operation, and solar plants are new. So we’ll take half that for our guesstimate, which seems reasonable to me.“

Your twenty-year plant-life estimate would be off by a factor of five. Because the plant-life appears in the denominator of the cost equation, your estimate of the amortized capital cost of solar power would be five times too high. And because the amortized capital cost (AC) is by far the dominant term for renewables, so would your estimate of solar electricity cost.

Of course these numbers are hypothetical. But that’s precisely the point. In the absence of real, reliable data, the coal barons, their PR hacks, or anyone else can “derive” cost-comparison numbers to reach any desired result. The numbers are meaningless because real data to compute them don’t yet exist. Garbage in, garbage out.

For determining things like plant lifetimes and mean times between failures, theory and projections are practically useless. Experience is the only true guide. That’s why the FAA keeps exhaustive track of every critical part of every airplane. And that’s why you buy cars with a warranty.

We simply don’t yet have the experience with wind and solar power to accurately fix their plant lifetimes and therefore their cost of power. And this truth holds regardless of how much coal advocates ignore the very real—and also hard to estimate—external costs of burning coal.

So when coal advocates tell you wind and sun are uneconomic, they are doing one or more of the following: (1) making their numbers up, (2) making wild guesses as to competitive plants’ lifetimes, for which there are no real data yet, or (3) ignoring the gargantuan external cost of burning coal.

Good data for cost comparison will come in time. But for three reasons their precise determination may take decades. First, wind and solar power plants should last at least as long as first-generation nuclear plants, i.e., forty years, because they are far less complicated and involve less exotic materials and technology. So we will have to wait at least forty years to gain real experience with fully-depreciated renewable-energy arrays.

Second, wind and solar plants are still under rapid development. Their technology and its durability and longevity are moving targets. So estimates of plant lifetimes with today’s technology are useless for future plants.

Finally, wind and solar power plants are far less dangerous than nuclear technology and even coal. Therefore their siting and construction incur less political opposition and take less time. So we can expect far more rapid progress in wind and solar plants in general, and in particular in plant longevity, than in any other field of power generation. (In comparison, fear of nuclear power after the meltdown at Three Mile Island has precluded any new US nuclear plants for over thirty years, although at least two are now on the drawing boards.)

Some day we will have the data to compare the full cost of coal, wind and solar power. We don’t now. The numbers that you see today (if you see numbers at all, not just unfounded qualitative claims) have no solid basis. They can’t have, because the sole factor that might favor coal—amortized capital cost—is based on nothing more than unfounded guesses.

The Coal Industry’s Opposition to Subsidies

When you think about it, the coal industry’s public-relations assault on renewable energy seems extraordinary. When else in American history has one industry tried to strangle another in its crib not through competition in the marketplace, but through advertising and public relations?

I can’t think of another example. The closest analogy is the battle between railroad and trucking for the freight market during the last century. That contest produced a lot of jockeying in state regulatory bodies, which in turn produced some interesting antitrust decisions in our federal courts (holding that lobbying is protected by the First Amendment). But never, to my knowledge, has one industry tried to influence the public (including investors) about future prices of its competitors by lobbying and public relations, rather than by real sales or advertising to real customers.

That fact alone ought to tell us something. If the coal industry were really confident of its numbers, why would it try so hard to influence the public and legislators? Why not just let wind and solar entrepreneurs try and fail? After a few expensive failures, customers and capital for wind and solar power would dry up, and the threat of competition against the coal industry would disappear.

Could it be that the coal barons don’t want the experiments to run because their own secret analyses suggest that the sun and wind will win?

Of course there is the issue of subsidies. No one likes to see one’s competitors get a hand up from government.

But every energy industry has enjoyed government subsidies. Energy is part of our national industrial infrastructure and a legitimate object of government help.

The fossil fuel industries themselves have enjoyed enormous subsidies, in the form of land grants (or sweetheart leases) and tax breaks. These indirect subsidies were highest in the last century. But there are still sweet leasing deals (especially offshore) and tax relief in the form of depletion allowances.

The nuclear industry enjoys vast, largely hidden subsidies today. The most important is a legislative limitation on liability for accidents. That indirect subsidy not only lowers insurance costs but also makes private insurance possible. Another indirect subsidy is the loan guarantees for massive capital costs that even now are making new nuclear plants possible in the South.

Why should wind and solar be any different? Because they are less dangerous and involve less exotic technologies? But shouldn’t that argument work the other way? Shouldn’t government bet heavily on something less exotic and less dangerous, which involves no cost for fuel at all, no noxious effluent, and no risk of fuel ever running out?

With present information, we just can’t know whether the coal barons might be right. But, to the extent useful, present data actually suggest the opposite: when fully and rationally costed, coal appears the loser, not the wind and sun. So when coal barons object to the government picking losers as winners, they ought to be objecting to the very subsidies and preferences that they themselves still enjoy.

The Subsidiary Lie: Intermittency

The absence of reliable data on cost comparison raises an important question. Why is anyone paying any attention to the coal industry’s propaganda even before competitive plants are built?

The answer involves a second lie about renewables: intermittency. The lie isn’t the fact of intermittency. That’s true. The wind doesn’t blow all the time, and the sun doesn’t shine at night or when clouds intervene. The lie is that these obvious facts preclude practical or economical use of wind and solar power.

Before discussing solutions, I should note one peculiar aspect of the intermittency issue. How you think about the sun’s and wind’s intermittency depends on where you live.

I laughed out loud when one of my commenters [scroll to comments] linked to a screed entitled “Atomic Insights: Wind & solar are not ‘intermittent’; they are unreliable, unpredictable, uncontrollable and worthless.” That commenter lives in England, and I suppose the screed’s author does, too.

I spent most of a year in England (Cambridge) on fellowship in 1971-72. If I had lived there most of my life, I might feel the same way. I still remember coming outside in my T-shirt on a frigid March day (along with other students) to enjoy the sun’s rare cameo appearance through scattered clouds.

But now I live most of the year in the American Southwest. The wind blows so hard and so much in my mountain valley that it’s a nuisance. And the sun shines almost every day, so much so that, although a sun lover, I look forward to the rare overcast or rainy day, just for variety.

There are many different climate zones on Earth, and their normal weather varies enormously. Some are sunny and windy. Some, like the rain belt from Seattle through Akron, Ohio, and most of England and Germany, are not. Yet Germany is investing in windmills and solar panels for use in places that have wind and sun.

People who live in climates like England’s (or in cloistered Manhattan) are just going to have to trust the geographers and engineers and understand that the whole Earth is not like their homes. There are huge regions of Earth, including the American Southwest and most of the interior of Australia, where the absence of both sun (during the day) and wind are extremely rare occurrences.

By and large, those places are also places where land is empty and cheap—where the sole inhabitants are brush and cattle, which don’t vote and don’t know what “NIMBY” means. They are where large wind and solar arrays will be built.

Anyone who doubts that these places exist should spend a couple of weeks in West Texas and New Mexico, or fly over the Australian interior. They are among the places where competent engineers will build massive wind and solar arrays, and are doing so right now. Other good sites include the tropics, where the sun shines most of the time, and so-called “trade” winds blow continuously, year round.

As for practical solutions to intermittency, there are three good ones right now. The first is tying wind and solar generators together in a large regional or national grid.

Wind and sun can die temporarily in many local places, but there are seldom times when both disappear for long periods over a large region, let alone the whole US. Designing power grids to average intermittent wind and sun over a large region can smooth out microclimates and make the grid system as a whole quite reliable.

The second solution to intermittency is longer term. High-power lithium battery packs, like those being marketed right now in the Chevy Volt and Nissan Leaf, can supply the average household’s needs, apart from space heating, for several days. Spreading them around and connecting them in a smart grid would take some time, some capital investment, and perhaps some cultural changes in households. But, in the end, electric power would be more widely distributed, and therefore more robust and less prone to disruption. Consumers might never again lose a refrigerator full of spoiled food to power outages.

But the third solution, which is already in operation, is the clincher: the coal industry itself. Over half of all electricity in our nation comes from coal. So until wind and solar power reach that level—half of all our electric power—the easiest way to accommodate their intermittency is to dial coal plants up and down to take up the slack. Doing so would not only reduce the enormous external costs of burning coal; if my suspicions about comparative costs are right, it would also reduce the cost of power.

The coal industry says it can’t dial plants up and down that fast. But that’s nonsense, at least with a smart regional or national grid. Weather.com predicts both sunshine and wind speed and direction ten days out for every hamlet and weather station in the United States. Surely a well-designed computer system, using the same underlying weather data, could predict total wind and solar power over a local, regional or national grid far enough in advanced to dial coal plants up and down.

The real reason the coal barons and utilities object is that they just don’t want to do it. They don’t want their ancient (and nearly obsolete) industry playing second fiddle to the wind and sun, supplementing the power that comes from free but intermittent sources to make it more reliable.

When that happens, every kilowatt-hour of electricity from the wind and sun will directly replace a kilowatt-hour derived from burning coal, thereby reducing the coal barons’ sales. And they (or the government) will have to invest in more predictive and grid technology, with no direct return, in order to help the process run smoothly. They are being asked to finance their own obsolescence; so naturally they object.

The coal barons have every rational and selfish reason to resist these trends, whether or not progress ultimately reduces the cost of power to consumers, as well as acid rain, mercury poisoning and climate change. (Might some financial incentives reduce their understandable source of opposition?) And the barons are indeed resisting mightily, with all the considerable means at their disposal. The question is whether policy makers wish to put their well-being above that of public, the nation and the Earth, and whether investors wish to ignore a better mousetrap just to protect them.

Conclusion

In our heyday, we Americans weren’t a nation of naysayers. We laughed at people who said things couldn’t be done. And we certainly didn’t argue or decide, in the abstract, that something couldn’t be done before even trying it.

That’s, in essence, what the coal barons want us to do. For the last two years, they have mounted an extraordinary (and extraordinarily expensive) public-relations and lobbying campaign, which has enjoyed considerable success. They have convinced a significant part of the public, investors and politicians that wind and solar power are intrinsic losers—even before we give them a fair trial—so they shouldn’t receive the very same start-up support that every other form of energy in our nation’s history has had.

The coal barons don’t have the data, but they have lots of money. So they persist in trying to persuade business, investors and the American public not even to try wind or solar power on any large commercial scale.

T. Boone Pickens, for one, isn’t listening. The old oil buccaneer is hardly an environmentalist, visionary or tree-hugger. Yet as early as four years ago, he wanted to invest a trillion dollars in wind farms in Texas. “I have the same feelings about wind,” he said, “as I had about the best oil field I ever found.”

Why? Because the wind is free. Like the sun, it needn’t be dug up or drilled for, let alone refined and transported to its place of use. Once you build the power lines, electrons transport themselves, for free. And, unlike the sun, the wind often runs at night.

The octogenarian Pickens can see past the long shadows of coal-industry propaganda to the lights that can shine forever, without burning geologically limited fossil fuels, and without polluting our Home. He can even foresee the day when we have real data and will know the cost advantages of fuel-free power. When will the rest of us wise up?

Possible International “Trade” in Wind and Solar Power

Wind and sun are unevenly distributed over the Earth. Some places, like England and Germany, have little sun and not too much wind. Some places, like West Texas and New Mexico, or the tropics with their “trade winds,” have lots of both. Some places, like the central “Outback” of Australia, have such reliable sun and such rare freezing as to make them ideal for solar thermal and photovoltaic arrays, if not windmills.

So is there a way to deliver wind and solar power from places that have lots of wind and/or sun to places that don’t?

If the places of generation and receipt are close together, one answer is obvious. Normal power lines can “transport” electricity from the wind and sun from one place to another. Once the power lines have been built, the transportation itself is costless, except for maintenance, because electrons “transport” themselves with Coulomb forces.

If the places that rely on transported energy also rely heavily on coal for electric power—as nearly every nation on Earth but France does now—the renewable power can reduce the use of coal, with its enormous external costs, and perhaps even lower the price of electricity. Once the level of renewable power exceeds the level of coal-power generation, however, there must be some means to transmit and store the renewable power reliably.

The question is perhaps most acute for Australia. It’s huge interior has enough empty space and sun to power the whole of human civilization many times over. But how to get power from isolated Australia to the rest of the world? Laying undersea power power cables would be difficult and expensive, even to nearby places like New Zealand and New Caledonia.

There is, however, another method for both transport and storage of renewable energy. The very same method works for both.

Electric power can electrolyze water into its atomic components, hydrogen and oxygen. We can then store those components for later use in internal combustion engines or turbines to generate electricity, with virtually no harmful effluent. (The only product of burning hydrogen in oxygen is water.)

Since oxygen exists everywhere in the Earth’s atmosphere, you don’t need to transport it. You can save the pure oxygen resulting from wind- or sun-driven electrolysis for local medical and industrial use. All you need to transport is the hydrogen, which stores the energy.

Hydrogen is lighter and more dangerous than natural gas and is harder to condense into a liquid. But we already have intercontinental transport of liquified natural gas (LNG) in special container ships. Plans are now on the drawing boards to do much more of that. We could do the very same thing with liquified or compressed hydrogen.

Ships for that purpose are hardly and off-the-shelf technology, but transports for LNG are. There is no reason in theory why we we could not build similar ships to transport liquified hydrogen, or hydrogen in the form of compressed gas.

The crux of the matter is that, where they exist, wind and solar energy are practically limitless. If you need more power from them, you just build bigger arrays.

Since wind and sun themselves are free and produce no effluent, the cost of doing so depends on the cost of building and maintaining the necessary equipment. As discussed above, maintenance is a variable or marginal cost. The cost of building the plant is a fixed cost, which must be amortized over its useful lifetime (expressed in energy generated) to determine the resulting cost of energy.

So it should be possible for countries and regions with lots of sun and wind to transport the energy from those sources to other countries with less, in the form of liquified or compressed hydrogen. Because hydrogen burns cleanly and electrolysis powered by the sun or wind produces no effluent or pollution, the entire process of power generation, transport and use would be free of pollution and would not contribute to the Earth’s carbon load that we believe is even now causing climate change. We could use part of the hydrogen that a ship transports to power the ship itself, including its electrical generators.

At the moment, all this is theory. But LNG is already an object of international trade, with a lot more planned. Those facts suggest that this vision could become real, without great leaps in technology or increases in cost.

If so, international “trade” in energy, in the form of liquified or compressed hydrogen gas, could allow energy from the wind and sun to power the whole world, without intermittency. For the tropics, that trade might even supersede trade in tropical fruit, sugar, rum and tobacco, putting the sun-drenched South more on an industrial par with the North.

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15 February 2012

Vice President Huntsman?


[For a brief comment on how Xi Jinping’s visit highlights our national weakness, click here.]



Anthony Shadid, R.I.P.

Amidst our decline, there is one thing we Americans still do well. We take immigrants from all corners of the globe, hold them to our bosom, and give them a new home.

That’s what we did with Anthony Shadid’s Lebanese grandparents. Two generations later they produced one of the world’s best foreign correspondents. To see just how good he was, read the encomiums from his fellow journalists.

Shadid died yesterday, while covering the revolt in Syria. Apparently he died of an acute asthma attack. He was allergic to the horses that were carrying him from the field of battle.

I didn’t know Shadid personally. But my eyes and ears always perked up when I saw his name, face or byline. I knew I was going to get a dose of unvarnished reality, seen through the eyes of a poet.

When Shadid reported from the Middle East, he gave us the penetrating view of someone who spoke the language and understood and respected the culture. He showed us how sympathy breeds empathy and understanding—commodities in very short supply.

Shadid was a rare human being who always had time and energy to mentor younger colleagues. I hope his example will encourage more hyphenated Americans to learn his trade, and to retain their legacy of language and culture as they do so. More reporters like Shadid may help humanize us and teach us the real cost of war.

It’s a sad day when a good man falls, and Shadid was one of the best. Let us remember him and try to keep his legacy of truth and empathy.

My wife recently had a great idea. Like many great ideas, it’s idealistic and attractive, even seductive. Maybe it’s also impractical and unrealistic, but I can’t get it out of my head.

What if the President picked Jon Huntsman as his running mate this summer? And what if Huntsman accepted?

Joe Biden has been a good vice president. In private, he’s offered experienced foreign-policy advice, which sometimes has leaked. His push for a counter-terrorism strategy in Afghanistan, opposing General Petraeus’ counter-“insurgency” move, turns out to have been precisely right. And Biden had always had the President’s political back. Among many other things, he’s offered a working-class background and good Catholic credentials to back up the President’s Harvard elitism and weak Protestantism.

But Biden has never professed presidential ambitions. Having fared miserably on his own in 2008, he is probably a realist. He simply does not, in my view, have the rhetorical or political skill to become president, and he probably knows it. He’s a good public servant, doing what he can for our nation with what skills and experience he has. But he’s simply not in the President’s league.

John Huntsman is. If you want proof, watch last night’s interview by Charlie Rose. Here, at last, is a Republican you can respect as intelligent, articulate, honest, forthright and—most of all—knowledgeable.

No one within shouting distance of the White House today has as much knowledge of and practical experience with China and its leaders as Huntsman. And China has, by far, our most important bilateral relationship, utterly eclipsing our “special relationship” with our Mother Country. The future of our species depends on our two nations and how we get along, and Huntsman knows China better than any current public figure.

But the kickers are intelligence and character. Besides the President, there is no one else in public life whom I can watch on TV today and say, “there’s a person who would have made a good leader even back in the sixties.”

Under proper circumstances, including a complete reformation of his Party of Extremists, Huntsman might even induce me to vote for a Republican for president for the first time in my life. Not now, of course, but maybe in 2016. Many thinking people I talk to react to him similarly. We are starved to death for highly qualified people who respect reality and can think and solve real problems, not just read from an obsolete playbook of ideological dogma.

The sad thing is that I know of no similar rising star on the Democratic side. There is no young person of Obama’s caliber waiting in the wings.

Maybe the President will introduce someone like that this summer, just as he introduced himself to the nation in his keynote speech at the Democratic National Convention in 2004. But if such a person exists, I think I would at least know his or her name by now. (Elizabeth Warren might be ready after four years as junior senator from Massachusetts. But as much as I like and admire her, I think it’s a little early to talk about the White House, when she so far has had no experience in elected office whatsoever.)

So, unless you think Warren will be ready in four years, you are looking at a Democratic party with no real plans for post-Obama succession. Besides the President himself, the top echelon of presidential contenders, in both parties, has a single entry: Jon Huntsman.

Add to that the nation’s palpable hunger for bipartisan cooperation, in order to right our ship of state and arrest our national decline. Then the notion of a bipartisan White House no longer seems so outlandish. After all, Huntsman already has worked with and for the President as our ambassador to China, apparently with considerable success. Maybe his presidential bid had the President’s secret approval, as a way of introducing Huntsman to the public for just such a move.

How would the public react? Huntsman’s nomination would catch it absolutely flat-footed, just as John McCain’s picking Sarah Palin caught the Democrats and public by surprise. But there would be huge a difference. Whereas Sarah Palin was and is one of the least intelligent and least qualified candidates ever to seek higher office, Huntsman—alone among the current crop of presidential candidates—is of the same caliber as the President himself.

I’m not a political analyst. Nor would I make a good political consultant. But I know three things. First, an Obama-Huntsman ticket would seduce every serious person who craves substantive governance by competent, qualified people. It would suck the oxygen out of Mitt Romney’s campaign, let alone one by Santorum, leaving nothing but desultory support by anti-abortion fanatics, American Taliban, immigrant bashers, and radical libertarians holding their noses and voting reluctantly for an investment banker.

Second, a successful bipartisan presidential ticket would begin the long overdue reformation of the Republican party. Huntsman would have shown that Republicans can win higher office only if they are qualified for it and can work seriously to solve the nation’s many real problems. Unqualified buffoons, ideologues, obstructionists and political chameleons—the Ricks (Perry and Santorum), Sarah Palin, Ron Paul, John Boehner, Mitch McConnell and Mitt Romney—need not apply.

Although only vice president, Huntsman would become the party’s de facto leader, should he decide to remain a Republican. By sheer force of competence and brains, not to mention good work in office, he might bring it back from the abyss of dogma into practical governance again.

Third, more than any act, such a ticket would symbolize a commitment to bipartisan governance and real problem solving at the highest level, when nothing is more crucial to our national survival. At a single stroke, the President could demonstrate how cooperation among qualified leaders of good will can work.

As far as I can determine from a quick Internet search, the White House has been bipartisan only twice in our history. In 1796, Thomas Jefferson was elected VP as a Democratic-Republican, to serve with President John Adams, a Federalist. This outcome was not a matter of choice, but the unintended consequence of a peculiar election procedure that shortly afterward we changed.

The only intentionally bipartisan White House arose in 1864, after Lincoln, the first Republican, picked pro-war Democrat Andrew Johnson to serve as VP. With the Civil War’s end already in sight, the candidates obscured their differences by claiming to run under a “Unity” party banner.

That choice didn’t work out so well. After Lincoln’s assassination, Johnson’s harsh post-war policies replaced Lincoln’s plea for “malice toward none and charity for all.” The result was our Reconstruction, hardly our high point as a nation.

Based on these historical facts, you might fear that Huntsman’s selection would increase the risk of an attempt on the President’s life. But the threat has been there ever since the Supreme Court decided that small arms proliferation is more important than public order. Our democracy hangs on our President’s caution and our Secret Service’s vigilance. A bipartisan White House wouldn’t change that sad fact much.

It’s clear from Huntsman’s post-concession public appearances that he’s positioning himself for something. As a fluent speaker of Mandarin and a former ambassador to China, he’s definitely a long-term thinker.

Maybe he’s positioning himself for a real run in 2016, when his party might have wised up. Maybe he’s jockeying for a position as Secretary of State in the next Obama Administration—for which he would be superbly qualified. (He’s far too smart to think that Mitt has a real chance of winning and appointing him.) But maybe, just maybe, he and the President have something more in mind.

We surely could use a positive surprise like that to shake us out of our lethargy and despond. We’ll just have to wait and see.

Coda: Succession and Selection of Leaders

Xi Jinping’s visit here highlights one respect in which China’s political system beats ours hands down: succession.

Everyone knows right now, in early 2012, that he will assume the top leadership post in China in 2013. We know because he’s been groomed for that job for several years.

By the time Xi gets there he will have served for five years on the nine-member body that makes all key decisions in China. He has experience, political skill, and the apparent support of the top people in China’s government. So when he takes the top job, he will be ready to govern.

Think about that. The benefits for stability, continuity of policy and predictability are obvious. But there’s even more: selection and quality.

China didn’t pick Xi in a mud-wrestling contest judged by an ignorant public and controlled by the most amoral hustlers from Madison Avenue. The pols who really know him picked him—those who have worked with him for decades as he and they rose through a huge party hierarchy.

We don’t know precisely how. Not all the process is written as in our Constitution, and some of it is secret. But we do know one thing: it’s a meritocracy in which competing and cooperating experts pick their best.

Now compare that system with our farce of a Republican primary season. The contrast would be hysterically funny if it weren’t so ominous. China is looking forward to a leader whom the best of a party of 80 million members apparently all respect. We are still suffering a gut-wrenchingly embarrassing process that eliminated the only qualified candidate, Jon Huntsman. In China’s system, the buffoons (including Mitt Romney) who remain wouldn’t even have been in the room where top leaders are picked.

The scene is not much brighter on the Democratic side. We have a good president, probably the best since Jack Kennedy. But it’s four years out from the time he must step down, and neither he nor his party has any visible plan for succession. Is he doesn’t make one soon, we will be looking at an equally gut-wrenchingly embarrassing spectacle on the Democratic side in four years.

In these spectacles, the most ignorant and uninformed part of our public—so-called “independents” or undecided voters—pick our leaders based on utterly irrelevant single issues like abortion, gay marriage, individual gun rights, and legalizing marijuana. They do so inundated by a putrid tide of the most misleading advertising that our professional liars can produce. And the money men (nearly all of them are men) have outlandish influence because they can afford to buy those lying ads. Is there any wonder that our ship of state is sinking?

We can’t change this sorry state through law, because the law has us hog-tied. Our Supreme Court has made corporations people and interpreted our First Amendment as giving them plenary power to propagandize. Fox has no restraints in lying.

But maybe we can change our system by culture and practice. It was pretty good two generations ago, when party elders—not donors—picked the candidates for election to high office, or at least a short list for public scrutiny. We can return to that sort of system without the Supreme Court’s approval because our parties make their own rules.

As I have discussed at greater length, our switch from party succession to direct primaries began our downfall. We can switch back at any time.

Don’t look for getting the money out of politics anytime soon. It’s too deeply entrenched. Our Supreme Court takes decades to admit error (remember Plessey v. Ferguson?), and we don’t have that kind of time. We can change our system to be more like China’s—and more like our own in better times—in four years through our party systems.

Will we do it? I don’t know. But that’s the only potentially effective cure for our national disease that I can see. Expecting some lawyer, judge or law to take the money out of politics is a fool’s dream. We need to put selection by expert peers and intelligent succession back in.

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