Perpetual Innovation

Category: energy policy

  • California Becomes First State to Mandate Solar on New Homes – Bloomberg

    California Becomes First State to Mandate Solar on New Homes – Bloomberg:

    California is 1/3 of the US economy and probably 1/3 of the US housing market. So, when California voted today to have mandatory solar on most new construction houses, this blows the top off of the non-solar rooftop.

    Headlines read that the CA house will now cost about an additional $10,000 to build with the energy efficiency and solar roof mandates. This Bloomberg article says that the savings will be about twice the increase in building costs.

    True, it costs more to build, but the operating costs are dramatically less.

    This is related to new houses, so the decision is easier than for an existing house.

    However, that decision should be really simple as well for a house with good sun exposure. There are tax credits and ways to finance that will allow the homeowner to pay for the solar system out of the savings in power, until the whole solar system is paid off in 15-20 years and then it is a perpetuity of savings!…

    So, a $40,000 system in Florida is $28,000 after a 30% federal tax credit. The payment on the loan would be equal to, or less than the payments for electricity, on average. And, after you pay off the system in, say, 15 years, you have about $250 worth of net savings per month for a long, long time. That’s $3,000 per year in year 15; as a perpetuity, at 5% interest, the net present value is about $29,000 positive.

    Wait a minute. That is more, net present value-wise, then the entire out-of-pocket cost of the system if you had paid cash up front (less the tax credit). But you may not have paid any cash up front for it and paid all loan/lease payments from the savings on the electric bill!

    So, if the same math applies for a $300,000 home in California (cause everything’s far more expensive in California), which is now increased to $310,000. The additionally $10k can be separately financed; probably, with terms of nothing down and loan payments that are less than the electric bill. That is, from day one, the cash flows from operations are as good or better than paying full electric bills.

    Once you pay off the PV loan, you now have free electricity, for a long time.

    Plus, it is good for the environment and reduces CO2 emissions, and significantly reduces the reliance on centralized energy production form your favorite power utility.

    The net present value of the cash flows may be $10-$20,000 positive.

    A couple important factors: Power companies have traditionally increased costs by more than the level of inflation (inflation at about 2% and rising). Inflation and interest rates should rise significantly with full employment. PV technology reduces very slightly over time (0.5% per year).

    The private PV power system protects against the rising costs of power.
    ….
    So, the headlines might more accurately read:

    New CA Solar Mandate will increase home costs by about $10,000 but offset by about twice from the reduced of operating costs. 


    Another win, win, win of sustainability.

    This should not be a hard decision to make, in any sunny state. The mandate should not be necessary. Consumers should be making this decision as a smart decision, not just a green decision.
    Being Green, and making Green too.

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  • Finally, a great GOP plan to address climate change. Who’s Who

    The unbelievable list of Who’s-Who from the GOP world have joined together (Climate Leadership Council) to come up with a very workable, market-based, approach to address climate change. Schultz and Baker have been around since the Reagan era. One of their crowning achievements was related to getting the world to reduce all of fluorocarbons (like Freon) which was wiping out the protective ozone layer of our atmosphere. You rarely hear the discuss on the ozone layer, right? Schultz and Baker are a big part of the reason why. The world-wide agreement on fluorocarbons is know as the Montreal Protocol.

    Here is a great article by Schultz and Baker, both from Ronald Reagan era Republicans. A Conservative Answer to Climate Change.

    First, to address climate change, has some scary implications. It really is unnerving if there is no energy policy in the US. In this report, we may have the only energy policy forming since the attempt by President Carter to have an energy policy. Obama tried to use the EPA to regulate fossil fuels and more, which is no substitute for an actual energy policy that is congress/legislative based.

    For decades, economists have linked a market based approach to address the non-sustainable use of energy in the US and globally. One approach is to build a more complicated approach for putting a price on carbon, cap and trade (Emissions trading). A simple tax is so much more straight forward. In this case, they want to take the carbon tax and rebate it back to the population in the form of dividend rebates. The estimate is that the bottom 70% of the population, income-wise, will have a net benefit from this plan. Revenue neutral.

    From an international security issue, it reduces the money we send to other countries in order to use more fossil fuels ($1T over every couple years). The large producers of the world are not necessarily friendly to us: Russia, Venezuela, Saudi, Iran. Much of the terrorism of the world is also paid from from oil moneys (ISIS and the renegades in Nigeria).

    The beauty of this approach — above and beyond environmental benefits — is that people can take that dividend money and pay even more for gas and gas-guzzling vehicles. Or, even better, use if for something they value more.

    I’ve been very disappointed in the GOP; they have let the deniers drown out the engagement of addressing such the critical issue of the non-sustainability of fossil fuels. A smart market approach will work nicely and solve lots of problems simultaneously. This approach will apparently reduce carbon emissions by 2x from  Obama’s EPA approach to “clean energy”, and 3x what dumping the plan an reverting to business as usual (BAU).  As one of the authors and economist Greg Mankiw says, “this is pretty close to a panacea in the way that it solves lots of problems as once”. No need to subsidize renewable; let the best solutions rise and the worst dwindle.

    Consider this dividend-tax as insurance. You buy insurance to reduce future risks and costs. This plan starts to steadily reduce carbon emissions.

    Everyone wins with this plan. Well, except maybe coal, oil and gas companies and countries.

    Now these guys need to go convince Pres Trump and his merry band of fossil burners. Surprisingly, it might just work.

    Also see Amy Harder Feb 8 blog on the topic in WSJ. She discusses the meeting of the Climate Leadership Council with Pres Trump where they voiced that they were “cautiously optimistic”.

  • Inside the war on coal

    Inside the war on coal:

    Wow, this is a very thoughtful and well presented article on Coal.

    The real demise of coal is too fold: raising costs of trying to make coal a little cleaner (less dirty); and the increase of cheaper alternatives.

    Number 1 in all of this is the dirty cheap costs of NatGas which is a by-product of much oil production. We in the US flair about half of the NatGas we produce because it gets in the way of the valuable oil production process.

    NatGas is soooo much cleaner to burn and produces only half the CO2 emissions.

    As people and communities realize the real costs of burning (dirty) coal, the political will to back coal simply because it is cheap is seriously waning. As the externality costs start to mount, people are less inclined to have the plants in their back yard.

    But, the Sierra club can not take that much of the credit. Basic economics is ruling. The EPA wants cleaner coal, which makes it more expansive at the same time that NatGas, wind and solar are all getting better and cheaper.

    ‘via Blog this’

  • New Look at Oil Reserves, Renewables and Climate Change

    New Look at Oil Reserves, Renewables and Climate Change

    There is a long term energy competition battle ahead between renewables and fossil fuels.  Just as the prices for renewable energy sources, mainly solar and wind, have fallen markedly, our irrepressable technolgy advances have enabled us to find vast new oil reserves under our feet.  Check this out to see what we have in billions of barrels:  http://www.usnews.com/news/blogs/data-mine/2014/12/04/us-oil-reserves-hit-38-year-high

    So, this likely means the prices of gasoline and home heating oil will stay low for some time and it is also likely that Congress will get around to lifting the ban on exporting oil.  Good for the consumer? Yes and very much ‘no.’  From an out-of-pocket perspective, lower costs, more disposable income.  From the standpoint of the environment, more oil means more carbon emissions for a longer period of time even considering the ongoing sustainability efforts of large companies and many cities around the world.
    It seems we have our feet planted firmly in mid-air on the dilemma of climate change, human activity causation and the profit motive.

  • A Shrinking U.S. Trade Deficit—Brought to You by Fracking – Businessweek

    A Shrinking U.S. Trade Deficit—Brought to You by Fracking – Businessweek:

    US trade deficit is shrinking. Rapidly.


    The reason is the import of oil is a very expensive commodity. By the end of this decade, North America should be trade neutral on energy and then move to a surplus thereafter. At peak, the US trade deficit was about 6% of GDP. That is, our GDP would be reduced by the oil that is not produced domestically, but produced afar.


    For a country such as Saudi Arabia, with only about $30 to $40 costs associated with producing a barrel of oil, that leaves about $60 of profits. All of that money per barrel leaves the US and goes to foreign governments and foreign companies (or Multi-national companies).


    With all the new found oil at home, the GDP jumps by a couple percent. The trade deficit — as it pertains to energy — will shift form a percent or two deficit to  becoming a surplus within 10 years.


    Economically, this is a beautiful think. If the US were a developing country this would be called economic development utilizing import substitution. Here is a blog on US Energy  that discusses the US Energy Outlook Report for 2013. Want to look at forecasts of the future, go to US Energy Information Administration Annual Energy Outlook 2013.


    As we drop from 10M barrels per day of oil-type imports to zero we will drop more than $300B in trade deficits (more than 2% of GDP). (See http://www.eia.gov/.)

    National security improves.


    Of course there is one small caveat. Oil, gas, coal and Nat Gas are non-renewable resources. That means that they must be phased out, sooner or later.


    Beautiful thing economically, but with a few clouds surrounding it.

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