Only the US Government Would Call a Tax a Subsidy
Dec24

Only the US Government Would Call a Tax a Subsidy

Podcast Episode 115 – Download the mp3 file Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.  Play the Podcast My first reaction was “Wow! Did I just read that correctly?!” It was one of those “ah-ha moments” when a seemingly mundane statement leapt out of the page and whacked me on the forehead.  This time the catalyst was a twitter reply from Chris Pragman (@ChrisPragman) who describes himself as an “Avid Podcast listener, Engineer, Nuclear Power, Fire Protection, and beer geek with a long commute!” You see, I had posted a tweet earlier in the day about the cost to taxpayers of some “green energy” jobs.  There’s a new wind farm in Oregon called Shepherds Flat that received federal cash grants totaling $490 million under the guise of job creation.  For that grand sum the Shepherds Flat project will create 35 new jobs.  The math is easy; $14 million per “green energy” job. Our tax dollars at work! This tidbit about Shepherds Flat was part of a larger report by the Energy Tribune that among other things compared the relative size of US government subsidies to various energy industries.  The report by Robert Bryce calculated subsidy dollars per unit energy produced and concluded the renewable energy industry receives 6.5 times more federal government subsidies than the nuclear industry, and 12 times more than the oil and gas industry.  That fact really didn’t surprise me considering the billions of dollars in grants, production tax credits, and favorable depreciation rules the government lavishes upon anything branded with the “renewable” label.  Then Chris asked a great question, “What do they consider nuclear subsidies?” When I dug into that question I learned the Congressional Budget Office is tasked with tracking the amount the government spends subsidizing various industries, and they publish their findings periodically.  There it was on page 3: $900 million in “subsidies” for the “favorable tax treatment of nuclear decommissioning funds.”  Hmmm. What could that be? You see, every nuclear plant owner is required by federal law to set aside funds to ensure there’ll be enough money to pay for decommissioning the plant when the time comes.  Typically plant operators add to the fund each year and over time the fund grows until it’s used. The NRC monitors each fund and will require plant owners to make additional payments if they think they’re behind.  These funds are essentially forced savings accounts that add to each nuclear plants annual operating expenses. So what’s the “favorable tax treatment?”  It turns out Title 26...

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Irrational Pro-Renewable Policies, Nuclear Energy Tax Hikes Harm Spain’s Economic Recovery
Dec19

Irrational Pro-Renewable Policies, Nuclear Energy Tax Hikes Harm Spain’s Economic Recovery

Spain’s electrical supply industry is caught in a decade long death spiral of failed energy policy, over-reliance on imported fuels, and massive debt. Their new taxes on nuclear energy, an attempt to reduce utility debt, are likely to worsen their economy. Spain imports fuel for about 51 % of their electricity production in the form of coal and natural gas. Payments for these imported commodities contribute to a debilitating trade imbalance. Nuclear energy makes up the lion’s share (47%) of Spain’s domestic energy production. Their eight nuclear energy facilities add tens of thousands of jobs and billions of euros per year to the national economy while reducing the need for imported coal or gas.  At the same time Spain’s nuclear plants provide reliable, predictable energy without greenhouse gas emissions. The amount of renewable energy generated in Spain has increased considerably over the last several years.  In fact, in 2012 wind energy production exceeded nuclear energy production for brief periods when demand was low, some nuclear plants were out of service, and wind conditions were nearly optimal.  Unfortunately, Spain’s methods of encouraging investment in renewables have contributed to their current financial crises. The Spanish electricity industry is carrying $32 billion of debt, putting serious strain on an already faltering economy. Spain began deregulating their electricity supply system in the late 1990’s.  Their approach was eerily similar to the failed California experiment; they removed price controls to allow power generators to compete among themselves, but they limited rates paid by customers. As wholesale energy prices rose utilities were unable to recover the higher costs through higher rates to customers.  The result was predictable: electric utilities began loosing money on a grand scale.  Since 2005 annual “energy deficits” have been in the billions of euros per year.  With slight-of-hand economics, the Spanish government allowed utilities to “bank” their annual deficits against future earnings.  Unfortunately those future earnings never materialized and deficits ballooned. A the same time Spain (like California) began a heavily subsidized renewable energy program that included “feed-in tariffs” which guaranteed wind and solar generators above market prices for all of the energy they could produce.  Consequently utilities were forced to buy wind and solar energy at inflated rates, but were not allowed to recover the costs because of those same price controls.  Solar and wind energy investors raked in billions of euros per year while the utility deficit grew even faster.  By some accounts electric utility debt in Spain now stands at $32 billion. These out-of-whack energy policies cost Spanish workers dearly; for every renewable energy job created more than five existing jobs were lost and unemployment soared to over 20%....

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New US Backed Wind Energy Project Costs Twice as Much As the Same Amount of Nuclear Energy

The US Department of Energy issued a press release today announcing a new $102 Million loan guarantee for a 50.6 MW wind farm near Roxbury, Maine and an 8 mile transmission line to connect it to the grid.  Before we join hands in carbon-free jubilation let’s do the math: $102 Million for 50.6 MW that will operate (best case) at 30% capacity = $6.72 million per megawatt (MW) of delivered electricity Well now, that’s an interesting number, but what does it mean in the real world?  Let’s see how it compares to building other forms of large scale carbon-free energy like a nuclear power plant. A Westinghouse AP-1000 reactor produces 1,154 MW at about a 90% capacity factor, thus delivering  a virtually consistant 1,040 MW.  The reported “all in” cost for two such rectors like the ones currently under construction at the Vogtle station in Georgia is about $8 Billion (or $4 Billion for 1040 MW). How much would it cost to build the same energy delivery capacity with wind power (as shown above)?  Let’s find out: Wind costs $6.72 million per MW * 1040 MW = $7.75 Billion So this simple example of two current real world projects demonstrates wind generated electricity costs twice as much to build as the same quantity of nuclear generated electricity.  By the way, I’ve been very kind to wind in my analysis because the worldwide average capacity factor is more like 19.6%, not the 30% I’ve used in my comparison.  That difference would increase the cost of wind by another 50% to more than $10 Billion (2.5 times the cost of nuclear). So would someone please tell me why the United States is squandering precious limited financial resources on intermittent wind energy projects that cost twice as much as an equivalent amount of reliable nuclear energy? Dr. Chu, you should be ashamed! Edit on March 8, 2011: I failed to consider generous state and federal subsidies that typically cover 30% to 50% of the cost of new wind energy installations, and the accelerated depreciation that assures investors get a rapid return on their investment even if the project produces little electricity.  These add further to the true cost of wind...

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Clean, Green Energy Jobs

  Fast Fission Podcast # 18 – mp3 file Duke Energy is one of the largest power producers in the Western Hemisphere.  They produce 35,000 MW of electricity in the USA, plus 4,000 in Latin America.  They have virtually every type of power plant: nuclear, coal, gas, hydro, wind, and solar. They also run natural gas distribution systems in two states. Duke knows energy, and Jim Rogers, their CEO, knows Duke.  When Jim Rogers speaks about energy people listen.  Last week Mr. Rogers was talking energy and jobs.   Jim says Duke’s experience has shown that nuclear energy provides more jobs and higher paying jobs than wind or solar power plants. “In an operation of a nuclear plant, there [are] .64 jobs per megawatt. The wind business–and we have a very large wind business – is .3 jobs per megawatt. In the solar business – and we’re installing solar panels – it’s about .1. But the difference in the jobs is quite different, because if you’re wiping off a solar panel, it’s sort of a minimum wage type of job, [with] much higher compensation for nuclear engineers and nuclear operators.  If our goal is to rebuild the middle class, nuclear plays a key role there, particularly if coal is out of the equation.” Mr. Roger’s comments made me wonder how many jobs might be created if we were to build new power plants of each type to meet our energy demands.  I started with the most recent Energy Outlook provided by the US Government at the Energy Information Administration web site.  This report states that 259 GW of new plants will be needed by 2030.  The number includes 30 GW to replace aging plants and the rest is for modest energy demand growth. Multiplying that 259,000 MW times the Duke estimates for the number of people per MW, we get the result (rounded to the nearest 1000): New Nuclear: 166,000 jobs New Wind: 78,000 jobs New Solar: 26,000 jobs                                 These numbers ignore the 2,000 to 3,000 jobs created building each new nuclear plant during the four year construction process.  Building wind and soar would also provide temporary construction jobs.  I also did not adjust for the lower capacity factors associated with wind and solar generation. We’ll assume smart grid technologies will enable improvements in wind and solar energy capacity and existing reserve capacity will back up wind and solar.  After all, these are the kinds of assumptions that wind and solar proponents make all the time. In Episode 60 of “This Week in Nuclear” I discussed...

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Was it Lots of Wind or Lots of Hot Air in Spain Last Sunday Night?

 Fast Fission Podcast #16 – mp3 file Renewable energy supporters were spreading the word today that this past Sunday wind energy in Spain produced 53% of the country’s electrical demand. The Spanish wind power industry broke a record on Sunday morning, when turbines nationwide met 53% of the nation’s demand for electricity with production of around 10,170 megawatts (MW), according to La Asociacion Empresarial Eolica (AEE), the Spanish wind industry alliance. This was certainly an achievement, but before we get too excited we need to read carefully and consider the situation. This was an intermittent peak in wind energy output that happened to achieve 53% of the electricity demand when the total demand was very low.   This occurred during a 5 ½ hour window in the early morning hours of a Sunday morning in November. Everyone was asleep, there virtually no lighting load, no cooking, few factories were running, no air conditioning, and probably very little heat.  As a result, total demand was relatively low. Before we declare renewables a resounding success, take a look at a more telling statistic:  the 11.5% overall contribution of wind to Spain’s grid during all of 2008. That means that day in and day out 88.5% of Spain’s electricity came from nuclear, gas, oil, and coal. Of that, the only carbon-free source was nuclear. John...

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