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May 20, 2013

California’s anti-coal agenda is adverse to human health and welfare

“Excessive energy costs have helped obliterate the state’s manufacturing base” Wall Street Journal, 03/ 29/ 2013

Coal based energy is a key factor in global socio-economic development, transforming agrarian societies to modern industrial ones. This societal transformation, driven by the accumulation of income and wealth, eliminates many contagious diseases, reduces child mortality, and lengthens adult life expectancy. Throughout the world, rapid emergence from poverty has proceeded as countries develop electricity networks based on coal. These systems are capable of achieving massive economies of scale that provide large amounts of power at low cost, stimulating technological change, spurring productivity growth and raising living standards. It is no coincidence that coal provides over 40% of the world's electricity. Consumers prefer low-cost and reliable power. Proponents of so-called “carbon-free” energy (e.g. wind) argue that their low market shares are the result of market distortions, such as the absence of a market price for environmental externalities. The fundamental reason for these low market shares, however, is that such intermittent sources are considerably more expensive than coal. To promote inherently uncompetitive technologies, some governments have resorted to subsidies and production mandates. These policies not only increase government spending but also impose hidden efficiency costs on the economy that silently erode our standard of living. Consumers pay more for energy and get less. Spending that once went for education and housing is diverted to energy expenditures. Manufacturers also pay more for energy and they pass these higher costs on to consumers who end up paying even more for goods and services. Consumers are then forced to cut back again. The result is a compounding of efficiency losses throughout the entire economy.

California is the poster child of how an extreme anti-coal agenda is adverse to human health and welfare. California has disdained the nation’s most affordable and reliable source of electric power in favor of unreliable and expensive non-dispatchable sources such as wind and solar. Not surprisingly, California's baseload electricity supply is now at risk and costs are dramatically on the rise. The urban legend that California’s energy policies are somehow superior to those of other states is being unmasked as the social and economic predicament of the state’s families and businesses becomes ever more apparent.

The Rhetoric	The Reality of California
“Energy policies in the state of California are very advanced compared to the rest of the nation,” California Council on Science and Technology, 2012
	Electric rates 40% above the national average 12 million people eligible for LIHEAP 700,000 manufacturing jobs lost since 2000 Budget deficit of $25 billion in 2011 Negative net worth of $127 billion in 2013 More children in poverty than Nebraska has people

Electricity Prices: California vs. the U.S.
“… (an) important factor that is pushing manufacturing jobs out of California is the rising cost of electricity, caused by the states ill-conceived energy policies…. What is already unreasonable will only become more so with the new mandates” POWER Magazine

Based on a set of speculative computer models and despite rising electricity prices, one of the nation’s highest unemployment levels and severe questions about grid reliability, California has nevertheless has proceeded with AB 32, the so-called “Global Warming Solutions Act”. This cap and trade program seeks to reduce greenhouse gas emissions to 1990 levels by the end of this decade -- that is in just seven years. While the impact of this excessive legislation has yet to be determined, the California Manufacturing and Technology Association has estimated that AB 32 will cost consumers $135 billion by 2020 – almost two-and-a-half times the annual funds spent on K-12 education. AB 32 will lower the state’s 2020 GSP by $153 billion – a loss of 5.6%. California will have 262,000 fewer jobs in 2020 because of AB 32 and energy expenses for the average family will increase $2,500 per year. AB 32 will reduce state and local tax revenues by over $7.4 billion annually – an amount exceeding 10 years of funding for the Children’s Medical Services Program. The energy facts of life are catching up to the "Golden State".

California’s Electricity Rates in Perspective
“CPUC has approved nearly every renewable contract filed by the utilities, even when they rate poorly on least-cost, best-fit criteria.” California Division of Ratepayer Advocates

“The ‘Rate Impact Bomb’ is lingering on the horizon”
CPUC Commissioner Michel Florio

California’s Electricity Rates and Manufacturing Jobs
“Manufacturing jobs provide benefits to workers with higher overall compensation than other sectors, and to the economy through innovation that boosts our nation’s standard of living,” U.S. Department of Commerce, 2012

In a departure from historical reality, California’s political agenda views energy as a social problem. Policymakers are implementing an energy plan that is adverse to human health and welfare. Reliance on untested, unverified and idealized computer models is steadily destroying the future of the state-- raising rates, driving industry away, increasing unemployment, putting more families into poverty and placing both energy security and reliability at risk. After the deregulation debacle in the mid-90s they should know better. That earlier academic exercise cost consumers hundreds of billions of dollars, destroyed jobs and ousted Gov. Gray Davis through voter recall. In a critique of the state’s latest experimental foray into energy, California’s Independent Oversight Agency-- the “Little Hoover Commission” concluded the state has not done a legitimate cost-benefit analysis and warned of a “rate impact bomb” by 2016. That’s when consumers will have to start fully paying for the massive array of costly renewable projects the CPUC so cavalierly approved over the last few years. And this time, reifying the results of esoteric computerized scenarios is taking an even greater human toll. The impacts of the drastically escalating rates associated with these ill conceived anti-coal policies are real, not hypothetical abstractions. Over 1.7 million Californians are unemployed. And the problem is not going away -- California is regarded as the worst state in the Union for business -- a reputation that may haunt for decades:

Best and Worst States for Business 2012

	“California's climate change regulations will discourage energy intensive industries from locating in the state, and existing industry will have an incentive to relocate outside of the state” Boston Consulting Group, 6/21/2012

Californians will pay a heavy price for ignoring our most abundant and affordable energy resource. Clean coal technologies work and are continually evolving. In many other states, and in other parts of the world, emissions have steadily declined, while electricity from coal generation has significantly increased. Rhetoric and political posturing do not produce one kWh of electricity. Clean coal does and California should recognize this fact before it’s too late.

“...millions of Californians could soon experience power outages. As the state derives more of its electricity from renewables, it needs more "peak" gas-fired plants that can ramp up to meet demand when the sun isn't shining and wind isn't blowing”. The Wall Street Journal, 03/29/2013

References: available from author.