An excellent article by Joshua Green. Some excerpts:
But the [wind farm] industry encountered serious quality-control issues, and one reason was the nature of the government’s support. A tax credit on investment created an incentive to put up turbines quickly and plentifully and collect a check. But the tax code had nothing to say about how those turbines performed. And many of them did not. “If you look at Palm Springs,” Zaelke said, “the turbines are set one alongside the other in corn rows because you got paid by how many you installed, not by how well they produced. ...
Plotted on a graph, the history of clean-energy production in the United States resembles the blade of a saw, rising and falling each time subsidies came and went. Japan, Germany, Spain, and Denmark show smooth, upward-sloping yield curves, a reflection of consistent government policy. ...
The nut of the problem traces all the way back to Jimmy Carter’s choice of tax credits as the vehicle for subsidizing renewable energy. Direct grants would have been simpler. But Congress had recently changed the federal-budget process to keep closer track of how much money was being spent. It suddenly became easier to spend indirectly, by manipulating the tax code. Although no one realized it at the time, Carter’s decision to use tax credits lit the very long fuse on a bomb that detonated last fall and nearly took down the entire renewable-energy industry in America.
The trouble with tax credits is that in order to make use of them, you must owe taxes, and most start-ups struggling toward profitability do not. So while a company looking to build a wind or solar facility would qualify for valuable benefits, it had no means of realizing this “tax equity.” The work-around was to partner with someone who did, someone large enough to finance a $500 million facility and profitable enough to incur a large tax bill. Having witnessed two decades of busts and bankruptcies, traditional U.S. banks wanted no part of this. European banks, going by their more positive experience, were comfortable funding large renewable projects, but didn’t qualify for U.S. tax credits. The perversity of the government’s incentives demanded a big balance sheet, huge profits, and an indifference to risk. Enter Wall Street.
Investment banks and hedge funds stepped in to fill the void, engineering tax-equity vehicles with suspiciously complicated-sounding names, like “partnership flip structure” and “inverted passthrough lease,” to exploit the tax benefits. These deals amounted to financing agreements for large infrastructure projects, given in exchange for tax credits, often worth hundreds of millions of dollars, that could be applied against profits earned primarily on other investments (like mortgage-backed securities). For renewable-energy companies, tax-equity deals meant life or death: the combination of credits could offset two-thirds of the capital cost of a project. Companies like Lehman Brothers, Wachovia, and AIG became an integral part—even the integral part—of the renewables industry, because the utility-scale projects they financed produce the overwhelming majority of clean energy in the United States.
Basing the entire system of federal incentives on tax equity had two weaknesses, one that has always been clear and another that became clear only recently. Forcing renewables companies to route government support through Wall Street, thereby sacrificing a portion of it, was needless and inefficient. But it also tied the industry’s fate to that of the financial world’s most aggressive players. Just as Wall Street bankers bet that housing prices could never fall and got wiped out when proved wrong, Congress seems never to have imagined that Wall Street might someday have no profits and need no tax equity.
Thursday, October 1, 2009
Return of climate engineering
An old post referred to this but Graeme Wood updates us:
Roger Angel, an astronomy and optics professor at the University of Arizona, would block the sun by building a giant visor in space. He proposes constructing 20 electromagnetic guns, each more than a mile long and positioned at high altitudes, that would shoot Frisbee-size ceramic disks. Each gun would launch 800,000 disks every five minutes—day and night, weekends and holidays—for 10 years. The guns would aim at the gravitational midpoint between the Earth and the sun, so that the disks would hang in space, providing a huge array of sunshades that would block and scatter sunlight and put the Earth in a permanent state of annular eclipse. Angel’s scheme relies on launch technology that doesn’t yet exist (no one has ever wanted to shoot Frisbees at the sun before), and would cost several trillion dollars. “I know it sounds like mad science,” he says. “But unfortunately we have a mad planet.”
Of all the ideas circulating for blocking solar heat, however, sulfur-aerosol injection—the Blade Runner scenario—may actually be the least mad. And it provides an illustrative example of the trade-offs that all geo-engineering projects of its scale must confront. The approach is already known to work. When Mount Tambora erupted in Indonesia in 1815 and spewed sulfur dioxide into the stratosphere, farmers in New England recorded a summer so chilly that their fields frosted over in July. The Mount Pinatubo eruption in the Philippines in 1991 cooled global temperatures by about half a degree Celsius for the next few years. A sulfur-aerosol project could produce a Pinatubo of sulfur dioxide every four years.
The aerosol plan is also cheap—so cheap that it completely overturns conventional analysis of how to mitigate climate change. Thomas C. Schelling, who won the 2005 Nobel Prize in economics, has pointed out how difficult it is to get vast international agreements—such as the Kyoto Protocol—to stick. But a geo-engineering strategy like sulfur aerosol “changes everything,” he says. Suddenly, instead of a situation where any one country can foil efforts to curb global warming, any one country can curb global warming all on its own. Pumping sulfur into the atmosphere is a lot easier than trying to orchestrate the actions of 200 countries—or, for that matter, 7 billion individuals—each of whom has strong incentives to cheat. ...
The scariest thing about geo-engineering, as it happens, is also the thing that makes it such a game-changer in the global-warming debate: it’s incredibly cheap. Many scientists, in fact, prefer not to mention just how cheap it is. ... a single rogue nation could have the resources to change the climate. Most of Bangladesh’s population lives in low-elevation coastal zones that would wash away if sea levels rose. For a fraction of its GDP, Bangladesh could refreeze the ice caps using sulfur aerosols (though, in a typical trade-off, this might affect its monsoons). If refreezing them would save the lives of millions of Bangladeshis, who could blame their government for acting? Such a scenario is unlikely; most countries would hesitate to violate international law and become a pariah. But it illustrates the political and regulatory complications that large-scale climate-changing schemes would trigger.
Roger Angel, an astronomy and optics professor at the University of Arizona, would block the sun by building a giant visor in space. He proposes constructing 20 electromagnetic guns, each more than a mile long and positioned at high altitudes, that would shoot Frisbee-size ceramic disks. Each gun would launch 800,000 disks every five minutes—day and night, weekends and holidays—for 10 years. The guns would aim at the gravitational midpoint between the Earth and the sun, so that the disks would hang in space, providing a huge array of sunshades that would block and scatter sunlight and put the Earth in a permanent state of annular eclipse. Angel’s scheme relies on launch technology that doesn’t yet exist (no one has ever wanted to shoot Frisbees at the sun before), and would cost several trillion dollars. “I know it sounds like mad science,” he says. “But unfortunately we have a mad planet.”
Of all the ideas circulating for blocking solar heat, however, sulfur-aerosol injection—the Blade Runner scenario—may actually be the least mad. And it provides an illustrative example of the trade-offs that all geo-engineering projects of its scale must confront. The approach is already known to work. When Mount Tambora erupted in Indonesia in 1815 and spewed sulfur dioxide into the stratosphere, farmers in New England recorded a summer so chilly that their fields frosted over in July. The Mount Pinatubo eruption in the Philippines in 1991 cooled global temperatures by about half a degree Celsius for the next few years. A sulfur-aerosol project could produce a Pinatubo of sulfur dioxide every four years.
The aerosol plan is also cheap—so cheap that it completely overturns conventional analysis of how to mitigate climate change. Thomas C. Schelling, who won the 2005 Nobel Prize in economics, has pointed out how difficult it is to get vast international agreements—such as the Kyoto Protocol—to stick. But a geo-engineering strategy like sulfur aerosol “changes everything,” he says. Suddenly, instead of a situation where any one country can foil efforts to curb global warming, any one country can curb global warming all on its own. Pumping sulfur into the atmosphere is a lot easier than trying to orchestrate the actions of 200 countries—or, for that matter, 7 billion individuals—each of whom has strong incentives to cheat. ...
The scariest thing about geo-engineering, as it happens, is also the thing that makes it such a game-changer in the global-warming debate: it’s incredibly cheap. Many scientists, in fact, prefer not to mention just how cheap it is. ... a single rogue nation could have the resources to change the climate. Most of Bangladesh’s population lives in low-elevation coastal zones that would wash away if sea levels rose. For a fraction of its GDP, Bangladesh could refreeze the ice caps using sulfur aerosols (though, in a typical trade-off, this might affect its monsoons). If refreezing them would save the lives of millions of Bangladeshis, who could blame their government for acting? Such a scenario is unlikely; most countries would hesitate to violate international law and become a pariah. But it illustrates the political and regulatory complications that large-scale climate-changing schemes would trigger.
Why the Economist and The Atlantic can sometimes be similar
I did not get much out of Michael Hirschorn's article on why The Economist is thriving against Time and Newsweek but perhaps this is his point. After all he says the following of the Economist:
At its worst, the writing can be shoddy, thin research supporting smug hypotheses. ... Pieces like these tend to support the Economist-haters, who believe the magazine is simply conventional-wisdom-spewing crack for Anglophiles.
At its worst, the writing can be shoddy, thin research supporting smug hypotheses. ... Pieces like these tend to support the Economist-haters, who believe the magazine is simply conventional-wisdom-spewing crack for Anglophiles.
Rating the future
Rich Barton believes in ratings but with the current financial crisis, it is hard to believe that ratings are the future. Personally, an up or down rating doesn't convey all that much information. I was looking for a luggage repair shop around our neighborhood and did not find much in the way of ratings in a sense that the up or down (or number of stars) really did not tell me all that much. Most of the information is in the comments. This is also true with TripAdvisor. So in the spirit of conveying some content:
I went to the Bethesda Shoe and Luggage Repair on Old Georgetown Road. There were 2 things I needed done.
1. Replace a zipper for a suit bag. Estimated cost $70. We declined to do this and the owner of the store agreed that it was not worth the price.
2. Replace a handle on a hardsided luggage bag (approx 3' x 2'). Estimated cost $38. We went ahead with this and without having really tested it fully loaded I can't say whether it was a good job or not. We'll know on our next vacation.
We're also looking for a contractor for a remodeling project and star votes really don't convey much information at all. It needs to be placed in the context of the size, scale and complexity of the project which commenters don't seem to understand when all they do is assign a star.
I went to the Bethesda Shoe and Luggage Repair on Old Georgetown Road. There were 2 things I needed done.
1. Replace a zipper for a suit bag. Estimated cost $70. We declined to do this and the owner of the store agreed that it was not worth the price.
2. Replace a handle on a hardsided luggage bag (approx 3' x 2'). Estimated cost $38. We went ahead with this and without having really tested it fully loaded I can't say whether it was a good job or not. We'll know on our next vacation.
We're also looking for a contractor for a remodeling project and star votes really don't convey much information at all. It needs to be placed in the context of the size, scale and complexity of the project which commenters don't seem to understand when all they do is assign a star.
Saving the earth in hotel rooms
Everywhere we've gone, despite hanging up our towels (indicating that we do not need new towels), we always get new towels. So much for saving the Earth. Thus I was surprised to read the following:
A few years ago, Cialdini, a professor at Arizona State University, conducted a study in several Phoenix hotels comparing the effects of those ubiquitous hotel-bathroom placards that ask guests to reuse towels, testing four slightly different messages. The first sign had the traditional message, asking guests to “do it for the environment.” The second asked guests to “cooperate with the hotel” and “be our partner in this cause” (12 percent less effective than the first). The third stated that the majority of guests in the hotel reused towels at least once during their stay (18 percent more effective). The last message was even more specific: it said that the majority of guests “in this room” had reused their towels. It produced a 33 percent increase in response behavior over the traditional message.
It must be because the hotel staff knew they were being experimented upon. In any case, an interesting application of this was:
Now Cialdini is applying that concept to energy consumption, with promising results. Positive Energy, a company that has drawn on his work (he’s the chief scientist), has created software that assesses energy usage by neighborhood. Results are sent to consumers on behalf of their local utility, praising you with a row of smiley faces (you’ve used 58 percent less electricity than your neighbors this month!) or damning you with none (you used 39 percent more electricity than your neighbors in the past 12 months, and it cost you $741 extra). ...
Keeping up with the Joneses may be cliché, but it seems to work: in Sacramento, where Positive Energy began its pilot program with the Sacramento Municipal Utility District in 2008, people who received personalized “compared with your neighbors” data on their statements reduced their energy use by more than 2 percent over the course of a year. In energyspeak, a 2 percent reduction is huge; with the pilot sample of 35,000 homes, it’s the equivalent of taking 700 homes off the grid. And the cost to the utility is minor: for every dollar a utility spends on a solar power plant, it produces 3 to 4 kilowatt-hours; for every dollar a utility spends on the energy reports, it saves 10 times that.
A few years ago, Cialdini, a professor at Arizona State University, conducted a study in several Phoenix hotels comparing the effects of those ubiquitous hotel-bathroom placards that ask guests to reuse towels, testing four slightly different messages. The first sign had the traditional message, asking guests to “do it for the environment.” The second asked guests to “cooperate with the hotel” and “be our partner in this cause” (12 percent less effective than the first). The third stated that the majority of guests in the hotel reused towels at least once during their stay (18 percent more effective). The last message was even more specific: it said that the majority of guests “in this room” had reused their towels. It produced a 33 percent increase in response behavior over the traditional message.
It must be because the hotel staff knew they were being experimented upon. In any case, an interesting application of this was:
Now Cialdini is applying that concept to energy consumption, with promising results. Positive Energy, a company that has drawn on his work (he’s the chief scientist), has created software that assesses energy usage by neighborhood. Results are sent to consumers on behalf of their local utility, praising you with a row of smiley faces (you’ve used 58 percent less electricity than your neighbors this month!) or damning you with none (you used 39 percent more electricity than your neighbors in the past 12 months, and it cost you $741 extra). ...
Keeping up with the Joneses may be cliché, but it seems to work: in Sacramento, where Positive Energy began its pilot program with the Sacramento Municipal Utility District in 2008, people who received personalized “compared with your neighbors” data on their statements reduced their energy use by more than 2 percent over the course of a year. In energyspeak, a 2 percent reduction is huge; with the pilot sample of 35,000 homes, it’s the equivalent of taking 700 homes off the grid. And the cost to the utility is minor: for every dollar a utility spends on a solar power plant, it produces 3 to 4 kilowatt-hours; for every dollar a utility spends on the energy reports, it saves 10 times that.
Overconfidence or over optimistic?
I'm still having some trouble wrapping my head around these two concepts - how different are they? For instance, do people accept risky assignments because they are confident or optimistic?
All of the pilots knew that the Cessna Caravans, aircraft designed to carry about 10 passengers but modified for surveillance work, were ill-suited for the task at hand. El Dorado airport itself is more than 8,300 feet above sea level, where the air is so thin that the Caravan pilots could not take off with the extra weight of full fuel tanks. They typically left Bogotá with only enough gas to fly down to the Colombian military base at Larandia, where they topped up before setting off on missions that kept them airborne for four to five hours.
With precious few spots for emergency landings in the Andes, the pilots felt vulnerable flying with only one engine. “In a two-engine aircraft, you lose one and you shut it down, start troubleshooting, and have time to consider your options,” said Hooper.
But as veterans with long records of service, the pilots felt capable of safely flying the aircraft beyond what others considered its limits. “It’s called pushing your luck,” Hooper said. “We were stupid but lucky, and we knew it, but experience counts for a lot in these situations. We were comfortable doing it, at first.” ...
More and more often, the small unit was asked to fly higher and higher, and deeper and deeper into dangerous country. In the summer of 2002, after flying for more than a year, Cockes, then the unit’s lead pilot, stood up at a company all-hands meeting in Bogotá and expressed concern about this “mission creep,” warning that the single-engine Cessnas were no longer safe. He and the other pilots were willing to keep flying, he said, but wanted a commitment from the company that they would transition to twin-engine planes, which the aircraft supplier was willing to offer at no extra cost.
The company said no and the rest is history:
Those pilots, Paul Hooper and Doug Cockes, predicted that the single-engine Caravan would be unsafe for high-tempo missions over the Andes Mountains. After program managers on site in Bogotá dismissed their warnings, the pilots wrote letters in the fall of 2002 detailing their concerns to company officials, including Kent Kresa, then the chairman and CEO of Northrop Grumman. For their pains they were demoted, reprimanded, threatened with lawsuits, and, in their words, “pushed out” of the program shortly before their predictions came tragically true. They consider themselves fortunate. “The only reason those three Americans were captive on the ground for five years, and the reason why five of their colleagues are now dead, is the greed and incompetence of California Microwave and Northrop Grumman,” Hooper told me.
From Flight Risk by Mark Bowden.
All of the pilots knew that the Cessna Caravans, aircraft designed to carry about 10 passengers but modified for surveillance work, were ill-suited for the task at hand. El Dorado airport itself is more than 8,300 feet above sea level, where the air is so thin that the Caravan pilots could not take off with the extra weight of full fuel tanks. They typically left Bogotá with only enough gas to fly down to the Colombian military base at Larandia, where they topped up before setting off on missions that kept them airborne for four to five hours.
With precious few spots for emergency landings in the Andes, the pilots felt vulnerable flying with only one engine. “In a two-engine aircraft, you lose one and you shut it down, start troubleshooting, and have time to consider your options,” said Hooper.
But as veterans with long records of service, the pilots felt capable of safely flying the aircraft beyond what others considered its limits. “It’s called pushing your luck,” Hooper said. “We were stupid but lucky, and we knew it, but experience counts for a lot in these situations. We were comfortable doing it, at first.” ...
More and more often, the small unit was asked to fly higher and higher, and deeper and deeper into dangerous country. In the summer of 2002, after flying for more than a year, Cockes, then the unit’s lead pilot, stood up at a company all-hands meeting in Bogotá and expressed concern about this “mission creep,” warning that the single-engine Cessnas were no longer safe. He and the other pilots were willing to keep flying, he said, but wanted a commitment from the company that they would transition to twin-engine planes, which the aircraft supplier was willing to offer at no extra cost.
The company said no and the rest is history:
Those pilots, Paul Hooper and Doug Cockes, predicted that the single-engine Caravan would be unsafe for high-tempo missions over the Andes Mountains. After program managers on site in Bogotá dismissed their warnings, the pilots wrote letters in the fall of 2002 detailing their concerns to company officials, including Kent Kresa, then the chairman and CEO of Northrop Grumman. For their pains they were demoted, reprimanded, threatened with lawsuits, and, in their words, “pushed out” of the program shortly before their predictions came tragically true. They consider themselves fortunate. “The only reason those three Americans were captive on the ground for five years, and the reason why five of their colleagues are now dead, is the greed and incompetence of California Microwave and Northrop Grumman,” Hooper told me.
From Flight Risk by Mark Bowden.
Do we really wish we were Moldovans?
Since Moldova escaped the recent crisis Jeffrey Tayler concludes:
“I feel sorry for people in the West,” he said. “Their financial system worked well for decades, and now it’s collapsed. You know, I feel blessed to have been born here.”
Blessed to have been born in Moldova? Few would have uttered such words a year ago. Now, sadly, they make sense.
Really? Why not Sudanese or Maldivians?
But Moldovans are not without resource:
“We never think of going to the bank for a loan or using a credit card,” Roman told me. “We operate on a cash-only system here.” ... “I keep all the money I have in a drawer. What I have is mine. We spend only what we have. And so I sleep well at night.”
And perhaps here is the seed for the next Moldovan crisis:
The one speculative operation most people engage in involves buying dollars and euros as hedges against the anemic local tender, the Moldovan leu. On almost every street corner in the city center stands a booth marked Schimb Valutar (currency exchange).
“I feel sorry for people in the West,” he said. “Their financial system worked well for decades, and now it’s collapsed. You know, I feel blessed to have been born here.”
Blessed to have been born in Moldova? Few would have uttered such words a year ago. Now, sadly, they make sense.
Really? Why not Sudanese or Maldivians?
But Moldovans are not without resource:
“We never think of going to the bank for a loan or using a credit card,” Roman told me. “We operate on a cash-only system here.” ... “I keep all the money I have in a drawer. What I have is mine. We spend only what we have. And so I sleep well at night.”
And perhaps here is the seed for the next Moldovan crisis:
The one speculative operation most people engage in involves buying dollars and euros as hedges against the anemic local tender, the Moldovan leu. On almost every street corner in the city center stands a booth marked Schimb Valutar (currency exchange).
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