By WAYNE LUSVARDI

With the swagger of a boxer before a match, on July 24 Gov. Jerry Brown said he would “crush” any efforts to block renewable energy projects in California.

Brown apparently was referring to efforts by environmentalists to stop a planned gargantuan 968 Megawatt solar energy project called Solar Millennium to be located in the Mojave Desert.  This is a pet project of President Obama and is backed by a $2.1 billion federal loan guarantee to build the first half of the project.

With Brown’s use of his bully pulpit and the threat of legal action against any opposition to large solar power plants in the Mojave Desert and elsewhere, what are Californians left to conclude  — so much for the natural environment, the rule of law and democracy?

But markets will eventually crush renewable energy if it is ever exposed to an open and competitive energy market instead of the government-protected and heavily subsidized energy “market” in California.

And the bond market may eventually react to Brown’s 2011-12 state budget gimmickry. The bond market could impose a higher interest rate premium for the greater risk of default of state general obligation and revenue bonds. Or the higher cost could come from greater risk of default in providing sufficient funds to meet mandated state services such as Medi-Cal and K-12 public education.

Moreover, the Government Accounting Standards Board (GASB) has just issued rules that require public pension funds to “mark-to-market” the amount of unfunded pension liabilities of CalPERS, CalSTRS and other public pension funds in California. This rule change will finally reveal that CalPERS is only perhaps 50 percent funded, instead of 70 percent funded as it claims.

Let’s take a quick look at the scorecard of how Jerry Brown has fared with markets in relation to environmental-energy issues in his three terms as governor of California.

Bottle Rock Geothermal Plant Failure

When Brown formerly was governor in the mid-1970s, the state Legislature approved whopping 55 percent tax credit for wind, solar and biomass energy plants. President Jimmy Carter signed a 1978 federal law called the Public Utility Regulatory Policies Act (PURPA). It encouraged states to enact their own green-power tax incentives and helped launch renewable energy. Brown claims he pioneered tax credits for renewable energy in California.

In July of 1979, the state Department of Water Resources filed an application for construction of two geothermal energy plants in Northern California, the Bottle Rock and South Geysers Geothermal Plants, to carry out Brown’s plans for an environmental legacy.  The Bottle Rock Plant was finally built in 1985, after Brown left office in 1983. To make a long story short, by 1990 the Bottle Rock Geothermal Plant was shut down because it couldn’t generate enough electricity to pay off the revenue bonds that financed the construction of the plant.  The South Geysers Plant was never built.  State government should never have built the plant, as it was financially infeasible in the market from the get-go.

In December 1990, the Metropolitan Water District of Southern California ended up having to pay off the $283 million in bonded indebtedness on the plants.  The bonds won’t be paid off until 2024.  So Southern California water ratepayers ended up having to pay off the bonds on a Northern California power plant that has since been re-opened and now ironically generates power exclusively for Northern California cities.

Strike one against Brown.

Score: Markets 1. Brown 0.

Abandoned Wind Farms in Town of Mojave

To make another long story short, by 1998 ugly old wind machines in the Tehachapi Gorge near the desert town of Mojave in Kern County were abandoned in place. The reason: dropping natural gas prices made over-market-priced wind energy uncompetitive.   To view the photographs of the visual blight and nuisance of the abandoned wind farms, go to this link.

The tax credits under PURPA ended up a tax scam as wind developers just collected their credits and abandoned the wind turbines without restoring the land to its original condition.

Most counties and cities now require the removal of unsightly wind turbines if wind farm operations are ever shut down. But the sheer size of the proposed solar project near the Blythe would raise questions of who would remove the solar mirrors if the project went bankrupt?  Without a costly demolition bond paid up front, who would pay for such removal of 11 square miles of mirrors?  This has probably crossed the minds of those in Riverside County where the Blythe Solar Project — referred to by Gov. Brown and encompassing some 7,000-acres — is to be developed.

This does not even consider that solar thermal-power technology, as planned at the Solar Millennium Project in Blythe, is typically 4.7 times the price of low-polluting natural gas power, 3.6 times the price of clean hydropower and 2.2 times the average retail price of electricity for residential use in California in 2011 (see table below).

Comparative Price of Energy

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Not only is solar thermal power way over the market price of every other source of power. It doesn’t even reduce pollution because it is located in the remote desert instead of in an urban-air basin that traps smog.

So Brown lost again.

Score: Markets 2. Brown 0.

The Energy Crisis of 2001

PURPA allowed non-public energy producers to sell electricity to utilities for the first time.  PURPA led to the accounting schemes of Enron. Enron did not cause the California Energy Crisis of 2001. But PURPA did lead to the notion that energy deregulation might be able to pay off the bonds on old polluting power plants. The plants had to be mothballed to meet stricter EPA air quality standards in California in 2001, or risk forfeiting federal highway, education, and Medicaid funding.

Energy deregulation failed in California because a heavily Democratic majority ih the state Legislature and Democratic Gov. Gray Davis pulled the plug on it. But electricity deregulation may have failed anyway as long as it was based on PURPA tax credit schemes instead of market price competition.

But the California Democrats’ own plan to contrive a pricing fever — or bubble — to pay off the bonds on the old polluting power plants also failed. The result: rolling blackouts, the 2003 recall of Gov. Gray Davis and the rolling of the bond debt on mothballed dirty power plants into a $42 billion general-obligation bond that will be paid off in 2012.

When the $42 billion in bonds are paid off next year, the long-term energy contracts that paid off those bonds will come under SB 2, which Brown signed on April 12. SB 2 mandates that one-third of California’s electricity must come from renewable sources by 2020.

The Energy Crisis of 2001 morphed into 33 percent permanently over-market-priced Green Power to begin in 2012.

So Brown lost for a third time.

Score: Markets 3. Brown 0. Three strikes and he’s out.

Three Strikes, You’re Out — Except in Politics

In baseball, three strikes and you are out.  In California politics, three policy failures and you are enshrined as the guru of renewable energy.  California Gov. Jerry Brown has repeatedly failed each time an environmental project or policy of his has been exposed to the market.

Brown vows to “crush” any opposition to the gigantic Millennium Solar Project in the remote Mohave Desert.  But NIMBY’s — Not-In-My-Back-Yarders — are not very concerned about huge solar projects that may harm the desert ecology as long as it doesn’t affect their home values or beautiful mountain views.

What Brown likely will end up crushing is the middle class that will eventually be sandwiched between higher energy prices and mass unemployment.

By WAYNE LUSVARDI

Remember Pol Pot, the Cambodian dictator and head of the Khmer Rouge? According to Wikipedia, “During his time in power, Pol Pot imposed a version of agrarian socialism, forcing urban dwellers to relocate to the countryside to work in collective farms and forced labor projects, toward a goal of ‘restarting civilization’ in a ‘Year Zero.’ The combined effects of forced labour, malnutrition, poor medical care and executions resulted in the deaths of approximately 21 percent of the Cambodian population” — 2.5 million people.

Something similar must have been on the minds of the California Council on Science and Technology when it issued its new report, “California’s Energy Future — the View to 2050.” It provides “portraits” of what, under a regime that could be called the Khmer Green, they hope the next state energy system will look like in California’s Year Zero — 2050

About 60 percent of California’s future energy system would be based on shifting the entire state population into electric vehicles. It would eliminate natural gas heating and cooking in all homes, replacing it with electric-powered stoves, water heaters and space heaters with power supplied from green power sources.  All buildings in the state would have to be retrofitted or replaced.

Another 20 percent would be based on costly low-tech energy storage in salt domes and air compressor batteries or in speculative technological breakthroughs that do not exist today and that would impose huge costs on electricity consumers. 

And a final 20 percent would be based on behavioral changes, such as changing diets to eat less red meat and controlling home thermostats and electric meters to make people wear warm clothing instead.

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While most of the nation is rapidly catching on to the emerging revolution in the natural gas fracking (hydraulic fracturing of rock formations) and expanding hydropower, California’s energy future is to be based on a post-modern ideology that seems to want California to trash its entire modern energy system.  In its place would be a modernized version of medieval windmills, sophisticated solar-powered magnifying glasses, water wheels, and heat from subterranean geysers, all transmitted to energy conserving consumers via a Rube Goldberg contraption-like energy grid that would be prone to brown outs, black outs, and rapid physical deterioration.

Reading this, you probably say to yourself that this is yet another utopian scheme by a couple of academics that will get a lot of media attention but go nowhere. Nope. This Khmer Green report was funded by the California Energy Commission, the California Air Resources Board, and the S.D. Bechtel Corporation. And it was endorsed by the California Council on Science and Technology.  This is apparently the template for California’s future energy system in our Year Zero.  And as important as the report is, it hasn’t received much scrutiny in the uncritical newspaper or broadcast media, or even on the Internet. It is apparently being taken for granted that this utopian energy scheme is a fait accompli. 

Deconstructing California’s Energy System

The justification for a Pol Pot-style rapid deconstruction of the modern energy system is population growth and the much ballyhooed increase in “greenhouse gases.”  According to the Council’s report, state population is expected to double by 2050. To combat the effects of population growth and air pollution, the state must intervene to reduce greenhouse gas emissions to 80 percent below 1990 levels by 2050.  

Reducing today’s California pollution by 80 percent would mean the air pollution must drop to about that of 1935, when the population of California was about 6 million.  Given an assumed 40-year technological lag time to implement a whole new de-modernized energy system, California must start right now with a massive program to re-engineer everything in society. And as it is presumed only the government — not private markets — can do this, it implies totalitarian control of everything including life styles of Californians. Veganism would replace fracking; draconian regulation would suppress freedom of choice. Pol Pot, call your office.

Criticism of this new energy plan is not another conspiracy theory about Big Government.  This is the undeniable template for California’s energy future crafted by California’s ruling cognitive elites.

Khmer Green Ideology

What is driving this mad rush to dismantle the present-day modernized energy system is not science but a countermodern ideology.  The California Council on Science and Technology is only being used to put a patina of science on what is ideological.

In California there are ideologies that endorse energy modernization such as shifting to nuclear power, as recently proposed by in the City of Fresno.

And there are ideologies that seek to control, contain, or mitigate air pollution from modern energy plants, such as catalytic converters on cars, natural gas fracking and the expansion of hydropower. 

But what the new template of the state’s energy future reflects is a full-blown countermodern ideology that proposes to dismantle many of the state’s power plants and make the electric grid into a precarious system of dubious reliability. 

A forerunner of this radical ideology is the State Water Resources Control Board’s order to forbid all coastal power plants, especially nuke plants, from using ocean water for cooling systems.  This entails shuttering all the nuke plants in the state, or running costly new water pipelines to the plants or using expensive air-cooling systems.  Even if costly fresh water or air cooling systems are installed, this would raise the price of nuclear power so high that costly green power could finally compete with it.  The rationale for making nuke plants uncompetitive is not to eliminate pollution, because nuclear technology is clean.  The rationale reflects a countermodern ideology.

Instead of a repeat California Gold Rush, the Great California Green Energy Race is about to be kick-started in 2012 to find the highest priced clean technologies for new forms of energy.  To do this, markets must be highly regulated to control prices.  Markets must be short-circuited because they are mechanisms for producing the lowest-priced goods and services.  This is why California is on the cusp of shifting from market Capitalism to state capitalism. California’s political elites want to pick winners and losers in the economy, and want political exactions in return.  The apparent cover for doing this is environmentalism. 

Unfortunately, many in academia and the media believe that state capitalism is the morally superior system, when there is no effective reduction in air pollution from Green Power. Green Power and Cap and Trade Emission Regulations will not result in replacing dirty imported coal power with clean green power, because wind and solar farms are located in remote areas far away from California’s urban air traps.

Ironically, as postmodern cognitive elites fear the complexity of modern energy technologies, as seen in the recent nuclear plant disaster in Japan, they nonetheless believe the energy grid can be fine tuned to accommodate unpredictable surges of power from wind and solar plants without sacrificing reliability, breakdown, or the rapid deterioration of electric lines that would require their frequent replacement.  Alternatively, they believe costly and unproven new battery systems can be integrated along the electric transmission grid to balance out the surges.

Damning Modernization

At the core of this Khmer Green counter-modern ideology we find the quasi-religious idea that modernization is tantamount to damnation. Everything that is wrong with modern society is reflexively tracked back to monopolistic oppression by big energy corporations.   In California, this ideology goes back to the influence of the Southern Pacific Railroad and the rise of Progressive politics to counter not merely economic monopolies but modernization itself.

California’s insular turn away from the Tea Party trend of the rest of the nation is not merely political, but a revulsion against capitalism, open markets, and modernity itself.  For example, California opposes the Obama Administration’s proposal to open all the Western states up to a new regional green power grid where those states with cheap natural gas or hydropower can ship electricity into the California, which is the region’s largest energy market. California’s future energy template calls for embargoing imported power.

California believes that the solution to its structural state budget deficit is to eliminate reliance on imported sources of energy.  With the enactment of air pollution regulations in the 1970’s, California’s only option for reducing air pollution in its urban air traps was to shut down old fossil fuel power plants in urban areas and rely on imported coal power from surrounding states.  

But why undertake such a radical transformation of the state’s energy systems as proposed by the Council, when you can continue to import cheap energy from states that are rapidly shifting to the natural gas fracking revolution that would entail no increase in pollution in California?  Even liberal Michael Lind, writing in the left-of-center New Republic magazine, says: “Everything You’ve Heard About Fossil Fuels (natural gas fracking) May Be Wrong.”  Lind asks:

“Are we living at the beginning of the Age of Fossil Fuels, not its final decades? The very thought goes against everything that politicians and the educated public have been taught to believe in the past generation. According to the conventional wisdom, the U.S. and other industrial nations must undertake a rapid and expensive transition from fossil fuels to renewable energy for three reasons: The imminent depletion of fossil fuels, national security and the danger of global warming. What if the conventional wisdom about the energy future of America and the world has been completely wrong?”

Rejecting Natural Gas

While much of the rest of the nation is turning toward energy policies that favor of natural gas fracking and hydropower, California is determined to reject it on ideological grounds.  The problem is that the retail price of electricity is regulated by the California Public Utilities Commission (CPUC), but not fuels or wholesale hydropower, where prices are set by markets.  As long as California is dependent on imported natural gas shipped through the Golden Gate Center in Northern California, and the California Energy Hub in Southern California, the state energy system will be exposed to market energy prices. The same goes with cheap hydropower shipped from, say, the Hoover Dam to run the gigantic pumps on the Colorado River Aqueduct for a meager two cents a kilowatt-hour.  As long as California’s energy system is open to market prices, Green Power is in jeopardy.

There are a number of hydropower projects for California being pushed by California Rep. Tom McClintock, who is on the powerful House Committee on Natural Resources.  The U.S. Bureau of Reclamation has recently released a report, “Hydropower Resource Assessment at Existing Reclamation Facilities” (March 2011), of the increased hydropower potential of existing dams and rivers the United States that would involve only modest impacts on the environment.  Seventy potential hydropower project sites were identified, with five of them in California that could produce 15,256 megawatt-hours of electricity. (See table below – the threshold for considering a project as practical is 0.75). 

Potential California Hydropower Projects

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Development of added hydropower at the John Franchi Dam on the Fresno River, for example, would take only $3.6 million with $108,000 in yearly operations and management costs.  While this may be drop in the bucket of California’s total energy needs, many of the other hydropower project sites in the Western region identified by the Bureau of Reclamation could end up shipping additional electrons to California through the regional power grid. It is the impact that cheap hydropower would have on all wholesale energy prices that is critical.

But California’s Green Power Law — AB 32 — forbids hydropower from qualifying as “green,” even though it emits no air pollution.  The reasons for this are more ideological and political than economic or environmental.

Those who would not for a moment believe whatever the U.S. Secretary of Defense or the head of Occidental Petroleum said would take whatever the California Council on Science and Technology says as gospel truth.  The Energy Future report is not a rational response to a body of vetted evidence.  It is supported by a belief system and an economic ideology — the Khmer Green ideology.  Government in California does not always follow what is in the state’s rational interest.  It does what is consistent with other things it believes in. 

There are powerful vested interests for the continued modernization of the energy policy via nuclear power.  There are similar vested interests, albeit diminishing, for centrist energy policies that would entail continued modernization of the energy system and grid but with mitigating measures such as fracking and hydropower.  And there are nearly insurmountable vested interests for scrapping modernized energy policy and the energy system in favor of highly risky and costly countermodern energy policies. 

Vested Ideology

There are powerful interests, money, political power and status at stake on all sides.  Yet right now it is not vested interests, but the vested Khmer Green ideology of countermodernization that is driving future energy policy in California with some possible influence being made by the federal government for fracking and hydropower. 

But fracking is being demonized by the Environmental Left to render it illegitimate. The media have already spread the urban myth of fire coming out of water faucets in the vicinity of fracking operations. And California’s Green Power Law has already made hydropower legally illegitimate.  Energy in California is not a policy for rational problem solving but ideological warfare.

It is the power of ideology, not necessarily economic interests, that will likely determine California’s future energy policies.  Here, a vigorous case needs to be made for markets and moderated modernization of the energy system, including relatively less-polluting natural gas fracking and clean and cheap hydropower. 

There is need in California for a middle ground energy policy that is somewhere between the radical Year Zero utopian vision of the California Council on Science and Technology and the impacts of a nonexistent bogeyman of unregulated energy markets. 

Without competition from cheaper natural gas and hydropower to contain prices, the price of Green Power will likely go through the roof.  This was demonstrated during the California Energy Crisis of 2000-01, when cheap imported hydropower from the Northwest was unavailable due to a drought, and the price of natural gas spiked when Caltrans ordered a shutdown an interstate natural gas line, purportedly to do freeway repairs right in the middle of the crisis. At the same time, price controls on retail electricity imposed by California’s Legislature — on top of everything else — created a “perfect storm” for an energy price “bubble” in wholesale energy markets that was erroneously blamed on Enron to avoid the political consequences. The experience of the California Energy Crisis of 2000-01 teaches that the Law of Unintended Consequences is much more likely to raise its ugly head without open markets than with them. 

Postmodern policies are a way to cope and mitigate the impacts of modern energy technologies. But they are not any way to “run a railroad” or an economy.  California’s cognitive elites don’t seem to understand the difference to the detriment of it structural state budget deficit and high unemployment rate.

California needs an ideologically centrist and open market energy policy, not a radical, Pol Pot-inspired countermodern energy plan for the future based on an ideology that can only succeed by closing off markets and the regional grid to California. As long as Gov. Jerry “Moonbeam” Brown is in office, like Cambodia under Pol Pot and the Khmer Rouge, California may be poised to suffer another socialist assault on reality.

MAY 24, 2011

By K. LLOYD BILLINGSLEY

California politicians want to draw 33 percent of the state’s energy needs from “renewable” sources such as wind and solar by 2020, fewer than 10 years away. That plan will be hard to pull off for many reasons, including those outlined by energy expert Merwin Brown, Electric Grid Program Director at the California Institute for Energy and the Environment (CIEE).

“Renewables exhibit behavior for which the grid was not designed, and for which operators are not equipped,” said Brown on Thursday at the University of California’s Sacramento Center, in a lecture on “New Smart Grid Technologies for Renewable Generation Deployment.”

Brown admitted to pulling a “bait and switch” because he wanted to concentrate on “the problems we are trying to solve.” Power outages, he said, were a threat to health and security, and also expensive. He pegged the cost of the 2001 blackouts at $10 billion.

Electrical grids are “the world’s largest machine,” multi-state and even multi-country networks that present “quite a challenge” to renewable sources such as wind, a “variable” source by which he meant “intermittent.”

“Wind is not there when the loads occur,” Brown said. “Wind is abundant when loads are low.”

Such variability calls for backup power measures, but could also result in a situation where “the grid has more electricity than it can sell.” The existing power grid, he said, was not designed for such “back feed,” when generation exceeds load.

Multiple Agencies

Merwin Brown earned a Ph.D. in nuclear engineering from Kansas State University and boasts 40 years of experience in energy, including a stint as Solar Energy Commissioner of Arizona. He noted that the wind blows hardest “far from urban centers,” which calls for “expensive” new transmission lines.

“The biggest impact is approval to build from multiple agencies,” which he said might not approve, along with residents who object to new towers and lines on aesthetic grounds. Brown also cited planning and recovery costs, and raised the question, “Who pays?”

Brown returned to his intermittent theme, noting that “solar has the same problem” as wind, and the obvious reality that “at night the sun does not shine.” He showed charts demonstrating that wind and solar power “do not complement each other.” Together they could “make worse” the increasing demand cycle he called “ramping.” And they could also make worse the “instability” of the grid, which was designed on the basis of “inherent inertia.”

At one point an attendee, who did not identify herself, interrupted Brown and charged that his presentation was “biased” against renewables.  Brown paused to note that renewables do not pollute and are “indigenous,” with no need for importation. Then he continued with the problems to the grid, which include electric cars.

Electric Cars

“Electric cars are an unprecedented challenge,” he said. “Each electric car equals one house” in demands for electricity, and “the system was not designed to meet that demand.” Charging of cars at night was also an issue. “Utilities are not convinced it will be easy,” to adapt for electric cars, Brown said.

California Gov. Jerry Brown recently signed SB 2X by state Sen. Joe Simitian, D-Palo Alto, mandating that 33 percent of the state’s energy come from renewable sources by 2020, an increase of 13 percentage points from the previous mandate of 20 percent.

“It’s about California leading the country,” Gov. Brown told reporters at the signing ceremony. “It’s America potentially leading the world.” At the same event, Simitian said that his new law “will stimulate the economy and improve the environment, while protecting ratepayers from excessive costs.”

Wind and solar power require conventional backup and are also two to four times as costly as conventional power, according to estimates from the U.S. Energy Information Administration (EIA).

Lobbyist Bernadette Del Chiaro of Environment California hailed Simitian’s measure as a huge victory for the environment and said, “California can power itself entirely on clean energy resources like wind, geothermal and solar power.”

Importing Electrons

California has never been able to create enough electricity to meet its needs and now buys 20 to 30 percent of its energy from out-of-state sources.

“Renewable integration adds complexity,” Dr. Brown said Thursday. “Maybe we can build our way out,” but “it will take new technology to make renewable energy less costly and easier.”

The UC announcement for Brown’s lecture also used the future tense for such technologies. “New grid technologies will be needed” it said, “to make renewable generation deployment easier and less costly, especially technologies that make the grid smarter.”

It’s too bad their editorial page still is clueless, but the L.A. Times’ news section has been running some great stuff about the vast waste in California governments at all levels. They’ve been printing a six-part series on the fathomless waste from a $5.7 billion L.A. Community College bond.

I recommend reading all six, which are listed here. (For each, click on the “Single Page” tab to avoid the annoying division of the stories into numerous pages.)

The last in the series, Part 6, ran today and was a doozy. A “green energy plan” from the bond proved to be a waste of $10 million. They would have generated more “green” energy by just burning the taxpayers’ money, like the Joker did in that last Batman movie (picture above).

The Times writes:

As head of a $5.7-billion, taxpayer-funded program to rebuild the college campuses, [Larry] Eisenberg commanded attention. But his plan for energy independence was seriously flawed.

He overestimated how much power the colleges could generate. He underestimated the cost. And he poured millions of dollars into designs for projects that proved so impractical or unpopular they were never built….

lans for large-scale wind power collided with the reality that prevailing winds at nearly all the campuses are too weak to generate much electricity. To date, a single wind turbine has been installed, as a demonstration project. It spins too slowly in average winds to power a 60-watt light bulb.

Well, at least it’s not killing birds, as eco-windmills do, which in turn generates a rat problem.

Eisenberg, the district’s executive director of facilities planning and development, conceded some mistakes but voiced no regrets. He cast himself as an environmental visionary and predicted that the college system would eventually achieve energy independence. “Somebody needs to be first,” he said. “If the great explorers really had a map and knew where they were going, maybe we wouldn’t have the result we have today.”

Explorers? What?

Anyway, the project certainly benefited one person: Eisenberg himself. He’s the director of facilities planning and development. Although the Times article noted that he filed for personal bankruptcy in 1995, it didn’t mention his salary.

I found it on the LACCD Web site. (Search for “director, facilities plan & dev”). It’s from $10,790.24 to $13,367.22 a month. That’s 129482.88 to $160,406.64 a year. This is his eighth year at LACCD, so he’s probably toward the higher end of that scale.

And he’ll be getting one of those nice, fat pensions of more than $100,000 a year, plus a hefty medical care package.

The other district bosses who blew millions also get similar pay-and-benefits packages.

This, in microcosm, is the reason why government at all levels is bankrupt: federal, state and local.

We don’t need a $12 billion tax increase to close California budget’s gap, as Gov. Brown is insisting. We need to cut waste at all levels.

And let’s stop enacting bonds — of any kind. Pay-as-you go is the way to go. No more debt. No more deficits. No more tax increases.

March 7, 2011