Guilt By Association with PIIGS
Bankrupt Europe has a lesson for Congress about wind power.
The sound floats on the winds of Ka Le, this southernmost tip of Hawaii's Big Island, where Polynesian colonists first landed some 1,500 years ago.
Some say that Ka Le is haunted -- and it is. But it's haunted not by Hawaii's legendary night marchers. The mysterious sounds are "Na leo o Kamaoa"-- the disembodied voices of 37 skeletal wind turbines abandoned to rust on the hundred-acre site of the former Kamaoa Wind Farm.
The voices of Kamaoa cry out their warning as a new batch of colonists, having looted the taxpayers of Spain, Portugal, and Greece, seeks to expand upon their multi-billion-dollar foothold half a world away on the shores of the distant Potomac River. European wind developers are fleeing the EU's expiring wind subsidies, shuttering factories, laying off workers, and leaving billions of Euros of sovereign debt and a continent-wide financial crisis in their wake. But their game is not over. Already they are tapping a new vein of lucre from the taxpayers and ratepayers of the United States.
Anyone with knowledge of the facts has their bullshit alarm going off already.
What are the examples of "typical" European countries? Spain, Portugal and Greece: three of the so-called "PIIGS" (Portugal, Italy, Ireland, Greece, Spain), which were in the news as facing serious finance constraints because of their inability to float bonds on international bond markets sufficient to cover expected budget deficits.
Of course, this is selecting examples of European countries pursuing expanded wind power based on which ones are having macroeconomic problems, not based on which European countries are most aggressively pursuing wind power. If you line up European countries by wind power penetration at the end of 2007, the list is:
- Denmark 21.7%
- Spain, 11.8%
- Portugal, 9.3%
- Ireland, 8.4%
- Germany 7.0%
That is, in fact, the list of the countries that are raising the EU-wide average of 3.8%. So the list of three examples ignores both the nation with the greatest wind power share and the largest economy in the EU, and includes Greece, which is below the EU-wide average.
The logical fallacy here is the Biased Sample fallacy. From the Nizkor Project
This fallacy is committed when a person draws a conclusion about a population based on a sample that is biased or prejudiced in some manner. It has the following form:
Sample S, which is biased, is taken from population P.
Conclusion C is drawn about Population P based on S.
The sample bias works in both directions, excluding the two Eurozone nations with above average wind power penetration that face no pressing fiscal constraint in international bond markets, while including a Eurozone nation among the PIIGS with below average wind power penetration. That was the country in the headlines, of course, so it needed to be included to generate guilt by association between support for wind power and economic instability.
There is, however, a common energy thread that does tie these countries together, but its not wind power penetration in electric markets. As Luis de Sousa reported in The European Tribune in April, in What makes them PIIGS:
In orange, all lined up to the left, are found the PIIGS, the most Oil reliant states in the Union. Coincidence? Certainly not. The riddle is now understanding if they are PIIGS due to their Oil reliance or are Oil reliant because they are PIIGS.
This is what happens when you start from the facts to try to find conclusions, instead of starting from conclusions and looking for facts that seem to back them up: you discover new, sometimes surprising, relationships. And from those relationships, generate new questions to explore and even, maybe, start to see what are the problems facing a country that need to be addressed:
These observations also show where the PIIGS have to work to become competitive economies. Energy Policy cannot target solely the Electricity sector, a serious Programme is needed to reform - revolutionize - the Transport Sector. Road transport has to be re-equated at large: either true alternatives to the present internal combustion engine show up or it simply has to be phased out. Starting with freight (where the impact on daily life is minimal), governments could concentrate on promoting rail and maritime modes, instead of putting up ever more tax and toll cuts to hauliers. PIIGS have also to reconsider their Industrial fabric, that may be too leaning on the Service sector. The Manufacturing Industry has to regain its proper role, perhaps taking advantage of business opportunities in alternative energy and efficiency, and together with Agriculture, increase the overall value per freight-km travelled.
The Mysterious End of the 1970's / 1980's wind power boom
The piece in The American Thinker tells us what happened in the Hawaiian wind farm, but not why:
Built in 1985, at the end of the boom, Kamaoa soon suffered from lack of maintenance. In 1994, the site lease was purchased by Redwood City, CA-based Apollo Energy.
And why did the "boom" end: because of the on-again, off-again US policy. With our reliance on tax subsidies instead of feed-in tariffs to promote wind power, the wind industry in the US is subject to a massive political business cycle effect. As described in Ups and downs in the land of the pioneers in New Energy:
President Reagan ended wind energy promotion
A devastating crash happened in the late 80s. The error rate of the turbines used in California had increasingly driven away investors. And so in 1987 the state government scrapped all subsidies. At the same time, the new Republican president, Ronald Reagan, axed renewable energies research funding from $1.9 billion to $269 million. All the tax breaks Jimmy Carter had introduced were scrapped.
It plunged the wind market into insignificance. While in the late 80s Californian turbines produced 79% of the world's wind power, the share then declined rapidly. Until the end of the 90s the wind energy capacity installed in the USA stagnated while long-term government promotion funding in Europe drove the technology to its breakthrough.
The American wind energy producers had to cope with ups and downs of promotion funding only ever available for short periods. These boom and bust cycles continue.
Thus the 1992 Energy Policy Act for the first time provided a tax break of 1.5 cents per kilowatt-hour of wind power. But the industry could not benefit from it because in times of market liberalisation many US power sellers invested only cautiously in new generation capacities and generally preferred coal and gas. Meaningful wind growth only resumed in 1998 and 1999. But the tax break running out in June 1999 pushed the project developers to hurry. That year 732 MW went on the grid, substantially topping the previous biggest increase of 442 MW in 1985.
Subsidies come in waves
In subsequent years the US Congress extended the tax break for wind power plants, but in 2000, 2002 and 2004 the promotion gaps were particularly long each time. The market collapsed every time, reviving after the Production Tax Credit (PTC) was reinstated (see chart). The installation figures fluctuated accordingly. The present subsidy is available until 31 December 2007. Many operating in the market firmly expect the next extension to come in good time.
So the US launched the modern utility grade wind turbine technology, but it became a political football, and so the benefit of our early experience was reaped elsewhere. A very similar story to the hybrid gas-electric car, which was promoted under Clinton, forcing the Japanese to pursue catch-up policies, but the abandoned under Bush, so that it was the Japanese who brought it to market and today Ford licenses hybrid power train technology from the Japanese who originally launched their development efforts to avoid falling behind the US.
And Then There Was Altamont
The American Bird Conservancy makes this chilling statement: "Wind farms ... kill birds and bats." Therefore, they support development of wind farms.
Hey wait: what? Well, to put that statement in context:
ABC believes that wind energy is a valuable, non-polluting, renewable power source, capable of reducing our reliance on fossil-fuel burning power-plants that damage the environment through greenhouse gas emissions, pollution, and other environmental hazards. Wind farms, however, kill birds and bats, thereby raising concerns of a different kind. We all want clean, renewable energy, but we cannot sacrifice large numbers of birds and still consider wind power "green."
Despite the fast pace of development of wind power and its great potential to provide green energy, we must not be in a hurry to get it wrong. Continued close collaboration with industry and strong federal regulation that uses tax breaks for doing the right thing and meaningful fines for doing the wrong thing will be the carrot and stick approach that will ensure the next fifty years are positive for birds at wind farms.
Bans for sites that threaten endangered species and threaten critical migratory paths, fines for sites that engage in practices that cause unecessary bird kills, tax credits for sites that adopt best practice to minimize and mitigate bid kills.
Why not just ban? If wind farms kill birds, why not just ban them entirely? Lets put this in an even broader context. In Deconstructing the wind farm bird-kill story (Providence Journal, 20 October 2005, Jack Coleman reports:
In June, two Danish researchers with the Environmental Research Institute announced the results of a six-year radar study of avian impacts from offshore wind turbines -- the first such research. The researchers, Mark Desholm and Johnny Kahlert, focused on a specific wind farm, the 72 turbines off Nysted, in southern Denmark.
Desholm and Kahlert began their work in 1999, while the Nysted project was still in the planning stage; the 360-foot turbines became fully operational in December of 2003. The four years between the start of the research and the wind farm's going online provided the researchers with abundant time to study migrating birds. Their conclusion? "Overall, less than 1 percent of the ducks and geese fly close enough to the turbines to be at any risk of collision."
Their report continues: "The analyses also show that birds remain at a greater distance [from] the turbines during the night, while flying inside the wind farm. Thus, these birds reduce their collision risk.
"In total, less than 1 percent of the waterbirds migrated close enough to the turbines to be at any risk of colliding."
A U.S. Government Accountability Office report of Sept. 19 urged federal officials to take a more active role in siting wind farms to avoid bird kill. But the report also pointed out that millions of birds are killed by collisions with buildings and towers, pesticides, and attacks by feral and domestic cats. "In the context of other sources of avian mortalities," said the report, "it does not appear that wind power is responsible for a significant number of dead birds."
And, lest we forget, birds along our coastline are genuinely threatened by the heavy oil that's hauled in barges, which has an unfortunate habit of spilling into the ocean and killing terns, gulls and other birds by the hundreds.
Cats kill birds. Tall buildings kill builds. Transmission towers kill birds. Cars kills birds. And these are not just randomly selected examples: these are more serious risks to birds than wind turbines.
And of course, Mountain Top Removal Coal Mining kills birds, oil spills kill birds (and while the BP oil spill is a massive news story, there are small spills every single year in the Gulf of Mexico).
Some of the problem at Altamont was location, but most of the problem was the now-obsolete design of the wind turbines and towers. The towers were open framework towers - no longer used, because of the loss of efficiency from tower wind turbulance - encouraging raptors to perch on the towers themselves. Because of their relatively small cross section, so the towers were lower, the bottom sweep of the blade much closer to the ground, and the blades spun far more rapidly than modern turbines, make it far harder for a raptor to avoid, especially in mid-stoop.
Add the fact that the cleared ground around the base of the turbines are attractive for rabbit warrens and ground squirrel burrows, so there was a strong incentive for raptors to perch in wind turbine towers and stoop for prey right in the potential path of a wind turbine blade, and the obsolete 1970's era wind turbines at the Altamont Pass are deadly to raptors. 1300 raptors are still killed each year at Altamont Pass, about one raptor kill per year for every four wind turbines.
The current windfarm at Altamont pass has a 576MW capacity with about 4900 wind turbines, for an average capacity of 117kW per turbine. Since modern turbines have capacity in the range of 2MW, that means that about 17 of the obsolete Altamont Pass turbines are required to match the capacity of a single modern wind turbine. So start with the fact that not only is each of the 1970's era wind turbines a much more serious bird killer than each modern wind turbine ... but These capacities are obtained with much broader cross section blades, placed much higher, on closed towers to minimize tower wind turbulence.
Using the thousands of obsolete, bird killing turbines at the Altamont Pass windfarm and similer 1970's and 1980's era wind farms to argue about whether or not modern wind turbines should be promoted is like using the Model T to argue about whether or not the current massive subsidies for driving are justified.
And so ... that's just what the American Thinker does. Six paragraphs, a picture of what are quite clearly small obsolete turbines replaced by modern units (not showing the modern replacements, of course), five block quotes, all presenting evidence that establish quite clearly that if the 1970's era wind turbines were the best we could hope for, wind power would be a not-ready-for-prime-time technology.
Of course, written as if this is represents 21st century wind turbine technology, which makes this an example of the Straw Man fallacy:
Description of Straw Man
The Straw Man fallacy is committed when a person simply ignores a person's actual position and substitutes a distorted, exaggerated or misrepresented version of that position. This sort of "reasoning" has the following pattern:
Person A has position X.
Person B presents position Y (which is a distorted version of X).
Person B attacks position Y.
Therefore X is false/incorrect/flawed.
This sort of "reasoning" is fallacious because attacking a distorted version of a position simply does not constitute an attack on the position itself. One might as well expect an attack on a poor drawing of a person to hurt the person.
Before using Altamont Pass to attack policies promoting utility scale wind power, one has to find a policy promoting utility scale wind power that will lead to adoption of the obsolete and far more expensive per MW, Altamont Pass wind turbine technology instead of modern, and less expensive per MW, wind turbines. But no such policy exists.
Attack The Tax Credits
And then finally, after the irrelevant example of Altamont Pass, the piece ends with an attack on tax credits.
But of course, the link was forwarded to me in response to my circulating a link to a piece on feed in tariffs and the Merit Order Effect.
Recall that in the 1980's, the US went through a wave of deregulation in the power generation industry. We built up our 20th century world class electricity generating and transmission system on the back of heavily regulated monopolies, supplemented by direct public provision. Then, as covered in The Oil Drum in The US Electric Grid: Will it be Our Undoing? - Revisited we deregulated, to allow "the market" to work its wonders. And now, because in a deregulated system there is no single stakeholder with deep pockets and a strong incentive to maintain and upgrade the transmission, we now have a system approaching third world status.
When a utility's primary role is taking care of its own customers, there is a strong incentive to carefully maintain its transmission and distribution system. Once the system is divided into many competing entities, many of whom do not have financial ownership of the transmission system, the situation changes significantly. Some of the impacts include:
- Declining investment. There is less incentive to maintain transmission lines, since under a fractured system, no one has real responsibility for the lines. Also, profits are higher if equipment is allowed to run until it fails, rather than replacing parts as they approach the ends of their useful lives.
- Overuse of lines between systems. Prior to deregulation, transmission lines between utilities were designed for use primarily in emergencies. Once widespread trading of electricity began, lines between utilities are put into much heavier use than they had been designed to handle.
- More rapid deterioration. After deregulation, there is much more cycling on and off of power plants and the structures involved in transmission, to maximize profits by selling electrical power from the plant that can produce it most cheaply. This results in metal parts being heated and cooled repeatedly, causing the metal parts to deteriorate more quickly than they normally would.
- Unplanned additions to grid. Wind and solar are added to the grid, with the expectation that the grid will accommodate them. "Merchant" (investor owned) natural gas power plants are also added to the grid, sometimes without adequate consideration as to whether sufficient grid capacity exists to accommodate the additional production.
- Difficulty in assigning costs back. Since the industry is more fragmented, if any transmission lines are added, the cost must somehow be allocated back to the many participants who will benefit. Ultimately, the cost must be paid by a consumer. These consumer rates may in fact be regulated, so it may be difficult to recover the additional cost.
- Increased line congestion. There is a need for more long distance transmission lines, because of all of the energy trading. There is a great deal of NIMBYism, so approval for placement of new lines is very difficult to obtain. The result is fewer transmission lines than would be preferred, resulting in more and more line congestion.
- No overall plan. There is a need for an overall plan for an improved system, but with so many players, and so much difficulty in assigning costs to players, very little happens.
- Little incentive to add generating capacity. As long as there is a possibility of purchasing power elsewhere, there is little incentive to add productive capacity. Profits will be maximized by keeping the system running at as close to capacity as possible, whether or not this causes occasional blackouts.
Long time readers will be aware that I have long pushed for establishment of a Steel Interstate system to provide "border to border" transcontinental electric freight rail, including 100mph Rapid Freight Rail paths. However, to place even the relatively modest power demands of this system on our aging, declining patchwork quilt of a national electric system is asking for trouble. So the proposal also includes using the Steel Interstates to provide Ultra High Voltage Direct Current power transmission lines, which can carry power over 1,000 miles with less than 10% transmission losses.
Libertarians will, of course, complain that financing this as a small fraction of a two and a half cent per gallon tariff on imported crude is a "statist solution". But they have had thirty years of deregulated power market policy to arrive at some "market based" solution that will build up transmission capacity rather than exploit existing capacity while it decays, and have failed miserably.
But, on the question of whether feed-in tariffs are superior to current US policy based on production tax credits: how do attacks on the production tax credits system address that argument. If anything, libertarian attacks focusing on production tax credits support the argument that feed-in tariffs are better.
Under the so-called deregulated system, the government has dictated that power generating be divided into multiple companies, and that power distribution networks bid for power on formal markets. The producers bid what they are willing to sell power for, the grid selects the producers in order from cheapest to most expensive, until all required demand is covered. The price is the bid of the most expensive producer.
All generators have a mix of overhead costs and costs of providing power to the grid. For a peaker merchant gas generator, the overhead is dominated by the turbine, and the cost of providing power is dominated by the cost of the natural gas. At the other extreme, almost all the cost of the wind turbine is overhead, with very low incremental cost of each kW it puts onto the grid.
So the system set up by the government since the 1980's is tilted in favor of gas generators and against wind turbines. Peaker gas plants can dictate the price required to start operating, so when peak demand brings the peaker gas plants online, they cover their costs, even if they only run 5% or 10% of the time. On the other hand, if a large amount of wind capacity is online, then when it is generating, it pulls the wholesale price of power down, and often pulls the price down so far that it cannot cover its overheads.
The feed-in tariff allows a power market to tap the benefit of reduced average cost by fixing a rate that the power company must pay to the wind producer. If set correctly, then when wind power is being produced off-peak, this increases the total cost of power, and when wind power is being produced on-peak, this reduces the total cost of power.
Obviously, this is a question of "discount+premium=???" ... that is, whether a particular feed-in tariff regime delivers a net rate reduction or rate increase to power consumers depends, first, on the level of the feed-in tariff and, second, the pattern of power costs from existing sources. However, the evidence from Europe is that there are feed-in tariff levels that both encourage installation of new windfarms, and also reduce the cost of to consumers. From Wind's latest problem: it ... makes power too cheap ... pulling the buried lede out of a Bloomberg piece:
windmills (...) operators in Europe may have become their own worst enemy, reducing the total price paid for electricity in Germany, Europe's biggest power market, by as much as 5 billion euros some years
The wind-energy boom in Europe and parts of Texas has begun to reduce bills for consumers.
Spanish power prices fell an annual 26 percent in the first quarter because of the surge in supplies from wind and hydroelectric production
That's the empirical observation. Its doing it. What is the point of engaging in endless hypothetical arguments about whether it can when it already is?
So the response to the critique of production tax credits subsidy is straightforward: if you think that policy sucks, adopt feed-in tariffs for wind power, set at levels where a boom in wind power generation will lead to a drop in the cost of power.
Indeed, if the topic under discussion is feed-in tariffs, then an attack on tax subsidies would seem to be a case of a Red Herring logical fallacy:
Description of Red Herring
A Red Herring is a fallacy in which an irrelevant topic is presented in order to divert attention from the original issue. The basic idea is to "win" an argument by leading attention away from the argument and to another topic. This sort of "reasoning" has the following form:
Topic A is under discussion.
Topic B is introduced under the guise of being relevant to topic A (when topic B is actually not relevant to topic A).
Topic A is abandoned.
This sort of "reasoning" is fallacious because merely changing the topic of discussion hardly counts as an argument against a claim.
Empirically, it is too soon to say, because this is just one observation, but I would hypothesize that if you wish to be popular in the conservative echo chamber, building your argument on three logical fallacies in succession could just be the road to success.
Midnight Oil ~ Kosciosko
Older than Kosciusko
Driven back to Alice Springs
Endless storm and struggle
Marks the spirit of the age
High up in the homelands
Celebration 'cross the land
Builds up like a cyclone
Now the fires begin to rage