ON THE SUNNY, WINDY BUT BLEEDING EDGE

If there is a future, it will be green. ~ Petra Kelly 

Yesterday it was reported that Santa Barbara, California (SB) is joining 29 other US cities by committing to using 100% renewable energy. SB’s aggressive, completely renewable goal is to be met by 2030, with a 50% renewable commitment by 2020 (that’s only 2 ½ years away). The article stated that SB currently uses about 30% renewable energy; its principle energy suppliers are Southern California Edison and Southern California Gas. Other California cities that have similar 100% renewable energy goals (but not necessarily the same attainment year) include San Francisco, Palo Alto and San Diego.

Santa Barbara doesn’t now have a specific plan for getting to 100% renewable energy; its work plan won’t be completed until December 2018. Not having any plan likely makes the SB City Council’s decision about getting to 100% renewables far more straightforward, not being burdened with knowledge about the potential costs and consequences. 

Nevertheless, by New Year’s Day 2019 the city and its citizens will presumably need to be especially focused on very short-term mechanisms for increasing their renewable usage by something close to 10% in just 12 months to meet the 30% goal by 2020. Unfortunately, there aren’t many of those procedures. They’ll also need to implement their plan to figure out how they’re getting to the remaining 70% (to reach 100% renewable) in just 10 more years.

Can other very green-oriented cities like Berkeley be far behind in similarly committing to 100% renewable energy by 2030 (or maybe even 2025 just to be more committed to being on the solidly green but bleeding edge)? Of course not. Such public pledges appear worthy, but involve a fair amount of fantasy. They’re feel-good, no apparent strings-attached political statements that are indeed in way too short supply these days.

As I mentioned in a recent blog, I’m all in for increasing green energy (GE) usage. I spent the majority of my professional career advocating for energy-efficiency and conservation programs. Solar thermal and photovoltaic (PV) panels occupy much of our roof using time-of-use (TOU) prices. But even though these imposed, absolute (100%) promises like SB’s may serve doctrinaire political and genuine environmental purposes, they are divorced from important attributes of real-world energy supply, demand and technology. They are easy to state, especially without delineating expenses, and will be very challenging and pricy to implement.

Such vows fail to recognize any cost consequences that can be substantial and often require public subsidies to entice people to change energy sources and switch to more expensive GE technologies. The vows also don’t acknowledge any need for widespread behavioral changes on the part of every one of the affected constituents. Santa Barbara is apparently thinking about establishing its own renewable energy sources to meet its 100% renewable goal. That’s a very expensive proposition that will take some time. Getting to completely green will not simply happen by public diktat. Total reliance on renewable energy would require a major expansion of electric storage and transmission capacity for those times when the wind dies down and the sun fades, as happens every night. This is illustrated with the Duck chart in my earlier blog.

Elon Musk will be very happy to sell Santa Barbara and its citizens PV panels and battery storage capacity, and it’s more expensive than SCE’s electricity or SCG’s natural gas. This is despite decades of erstwhile R&D efforts to improve performance and cost-effectiveness of solar, wind and battery storage technologies. One knowledgeable energy systems engineer stated that “Lithium batteries [that Musk’s Powerwall 2 system uses] offer good potential, but they’re still not there.” Offering good potential probably won’t help Santa Barbarans in 2020. How expensive is current battery storage? Quite costly. If one uses solar PV power with TOU rates for daytime battery charging, the payback period is 31 years for storage. Only 1% of US residential customers now use TOU rates. Without a TOU PV solar system, it’s 38 years until payback. Mr. Musk’s Powerwall 2 battery system comes with a 10 year limited warrantee.

The city’s 100% pledge also will require all its vehicles to stop using nasty nonrenewable gasoline or diesel fuel and switch to electric vehicles (that would have to be charged all renewable electricity). The electric vehicle “premium” can often be recouped after about 50,000 miles of driving (a little over 4 years). The city’s public works department trucks would likely need to be converted to biodiesel. Biodiesel is 21% more expensive than diesel. Biogas is about 3 times more expensive than natural gas.

Will renewable energy prices decline? Very likely, but how content will Santa Barbara’s 91,000 citizens be when they start have to pay higher taxes for getting to 100% green, especially if our brown-energy president somehow actually cuts or removes the federal subsidies associated with solar, wind, storage and other renewable energy systems. Getting to 100% green in just 13 years will cost a lot of (green) dollars. Is it worth it? Possibly, but allowing a longer time to get there and setting a more realistic goal of say 75% or 85% will be more attainable, less expensive and still greatly benefit the environment. 
The appropriate geographic scope for such policies isn't municipalities, it needs to be much broader given the nature of the energy system. Optimally, strong renewable energy policies should be national, but at this point  that's not going to happen until (hopefully) 2020. So realistic state-wide green energy policies are where it's at now. But as I've mentioned previously, setting a short-term state-wide 100% renewable goal can suffer the same problems on a grander scale that Santa Barbara will soon be facing. 

I guess I’ve become a stick-in-the-mud realist GE guy who remembers several things related to achieving renewable energy commitments. First, how difficult and time-consuming it is to attain 100% of any personal or collective goal, especially for intrinsically-complex systems like energy production and consumption. Second, how slowly government and people change habitual behaviors, like using energy in its myriad of forms. Third, how “concerned” many people can become when their taxes, energy bills or living expenses rise. This characterization of me doesn’t please me 100%; so it goes with realism. Onward towards a needed, but realistic greener future. 

IT MAY BE THE ECONOMY (stupid), BUT IT'S NOT ECONOMICS

If I am a legend, then why am I so lonely? ~ Judy Garland

It's not hard to understand why economists may now be among the loneliest professionals. All too often, we suggest that a beneficial, economically-appropriate solution for some public problem (e.g., environmental degradation, decaying infrastructure, budget deficit) is to increase the price of some good, or to remove nasty subsidies or tax credits that the government provides some industry or consumer group (that when purged would have the same effect – increasing goods or services prices). Like virtually all economies, the US government has long provided a multitude of direct and indirect subsidies to a broad array of producers and consumers. Economists, imbued with theory that places a premium on attaining economic efficiency[1] and societal welfare maximization, argue that such subsidies and too-low prices are inapt because society's economic optimum won't be achieved. Economists of varying political persuasions have offered such policy prescriptions for decades.

Unsurprisingly, few consumers are willing to consider paying higher prices a preferred outcome for themselves. After all, who among us personally wants to have our gasoline, food or electricity cost more, or our mortgage or health-care payments rise? The status quo of continued subsidized, low prices rules. In other words, culture trumps economics.

In this regard, a principal difference between economists on the left and right is which prices need to be raised. For example, neocon economists seem far less troubled by government-subsidized fossil energy prices; liberal economists often can rationalize subsidized food stamp programs and Pell grants.

For a long time consumers and producers have been coddled into thinking that not only prices for "necessities" (an ever-expanding term of reference) should remain low, but that they're entitled to them staying low, come hell or high deficits. In a sense, this is the flip side of the Far Right's obsession (one of many) with lowering or eliminating taxes. Logic and economics really don't enter into the argument, only judgment that taxes are bad since they fund government programs that don't work or, worse, are "collectivist" (to use Paul Ryan's description of Social Security). More specifically, conservatives object to such government programs because they don't really help me. This attitude is particularly frustrating when we hear statements from Tea Partiers and their ilk that they would be better off if only the government would get out of Medicare and Social Security – or other government benefit/subsidy programs they participate in.

Mitten's purloined remarks given at a fundraiser stating that 47% of citizens don't pay taxes and are freeloaders receiving government largesse prompted a wave of critical discussion and response. The New York Times posted a blog asking readers to identify which of 21 listed Federal government support programs (e.g., Head Start, unemployment insurance, Pell grants, Medicare, veterans' benefits, employer-subsidized health insurance) they have benefited from. The blog states that 96% of Americans have taken part in and benefited from such programs at one time or another, including folks like Mittens' and Ryan's family members.

No matter who wins the presidential election next week, our economy is likely to continue slowly gaining strength over the coming year. Our GDP growth – measured last week at 2% for the 3^rd quarter of 2012 – is still not high enough to quickly reduce our stubbornly-high unemployment, but it's higher than before.

What's less certain is what Democrats and Republicans will do about the "fiscal cliff" that overhangs the government in December. I am quite certain their economic advisors will ultimately feel fairly lonely and ignored.

Suggestions from economists to public decision-makers to increase tax revenues and/or reduce subsidy and entitlement expenditures will once again fall on politicians' deaf ears. Well-founded economic suggestions that include increasing tax revenues, decreasing tax expenditures, making Medicare, Medicaid and Social Security benefits means-based (the higher one's income or wealth, the lower your benefits) and increasing the qualifying age  for receiving benefits (make it higher than 65) – changes that other nations with structural deficits have already done – will fall to the storms of protest by well-financed interest groups. The so-called "grand compromise" to resolve our unsustainable structural deficit will be thrown in a ditch far from the path of economic progress for all citizens in favor of some partial political "solution" that once again temporizes with a kick of the can down the road.

Perhaps we economists are always to be relegated to the lonely crowd. So it goes…

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[1] Economic efficiency describes a market or economy that is producing what people want at least possible cost – or in plainer English, performing a task (like providing some good) right. By contrast, effectiveness is doing the right thing.