Monday, August 31, 2009

The Disaster of Collapsed Electricity Pricing in NY

In 2008, average New York statewide DELIVERED electricity prices were close to 16.4 c/kw-hr - composed of 8.3 c/kw-hr for NYISO (generated) prices and 8.1 c/kw-hr for transmission and delivered (T&D), which has many components (connection fee, transmission, sales taxes, Systems Benefit Charge (NYSERDA funding), as well as demand charges). In general, T&D charges tend to be fixed, while the NYISO price can fluctuate wildly. The NYISO price is often a mix of the intersection of the demand for electricity (weather, day and time dependent) and price of fossil fuels, especially fuel oil and natural gas, and to some extent, how much electricity wind turbines are dumping into the system (can be up to 8% of NY's supply, but 20% in certain NYISO zones). And those fossil fuel prices tend to be priced based on factors that NY customers have little control of, either individually or collectively, though over time, the only way to keep prices of these fossil fuels (the US imports about 2/3 of its oil, 1/6 of its natural gas) reasonable is to not use them.

As a result of the collapse in 2008 of manufacturing in NY and in general, throughout the U.S. (partly a result of the high prices charged for oil and natural gas in the 2007 to 2008 time period), electricity demand has dropped to unexpectedly low levels. Demand for electricity nationwide has SHRUNK, not expanded at the average of 1 to 2% per year. This means that more electricity supply is chasing after fewer customers, and this small drop in demand has resulted in huge drops in price. For most of NY State, NYISO prices have been averaging less than 3 c/kw-hr, and in Western NY, (Zone A), prices have averaged less than 2.5 c/kw-hr. This is a regional phenomena - Ontario has even cheaper prices. One related factor is the collapse in natural gas (Ngas) prices to levels less than 50% of the price needed to justify new drilling, even in existing gas fields. Ngas is used to make 20% of the U.S. electricity (from about 28% of the US usage of 23 trillion cubic feet (tcf) per year), but in NY, that can be up to 60% of the electricity supply. However, in Western NY (and NYISO Zone A), most electricity is supplied by coal made in fully paid off/depreciated facilities.

But, prices are now far below the replacement costs. That is, no new power plants (wind, hydroelectric, run-of-river, tidal, Ngas, coal, Ngas, nuke or biomass) can be constructed and break even, let alone be profitable at current electricity prices. Thus, hopes to replace existing polluting facilities can never be realized until something changes - either a Feed-In Law, a decision by NY State to go into the electricity generating business (again), massively increased subsidies or higher prices.

Cheap electricity prices are supposed to be wonderful events. After all, the cost of living/everyday expenses are supposed to drop as NYSIO prices drop, right? Actually, this tends to happen to an insignificant extent for most customers. For example, last month, my electricity bill was 18% NYISO power and 82% other - a whole $9/month would have been saved if the generated electricity was too cheap to meter (a claim used by nuke proponents eons ago). And there is a downside - no new employment in the manufacture and installation of newer, less polluting power plants can take place. Thus, existing employment in many industries is actually threatened, making a dreadfully high real unemployment (and not just the phoney "official" value known as the U3 number) level even worse, and perhaps permanent unless some real changes in the rules takes place......

For example, lets take the wind industry. Let's say that the wind farm under consideration uses GE 1.5 MW turbines, and each turbine in this array makes about 4,000 MW-hr/yr. If the value of the fixed costs (land lease, PILOT fees, insurance, warranty, technicians wages, other business expenses - the O & M value) is about $80,000/yr, this amounts to about 2 c/kw-hr for the wind operation. That leaves a whole 0.5 c/kw-hr to retire the capital investment and pay the investors some return on their investment. The 0.5 c/kw-hr works out to $20,000 per year. Since one of these units costs about $3,000,000 installed, the net income would be 0.067% of the capital investment. However, at minimum, just to cover principal and interest, 8% per year of 70% of that $3 million investment (or $168,000/yr) would be needed - leaving the investors with zip. That trend is just not sustainable.

Well, lets make it a little less glum, and we'll stipulate that the windfarm owners won a portion of the RPS auction, at 1.5 c/kw-hr. This gives them another $60,000 in income (done in a Feed-In Law like manner by charging all customers in the state a smidgen based on the amount of electricity consumed). So, adding in the other $20K, they only lose $108,000 per year, in addition to getting a zero return for the investors. Obviously, those investors could not be deemed as happy campers about that situation. They put down $900,000 per turbine, and some of that money could have been borrowed or otherwise leveraged. And they are not likely to repeat such an investment given that experience. Odds are, they were promised between 10% to 15% returns, or up to $150,000/yr, and that does not appear to be happening.

Of course, in the U.S. arrangement, there are subsidies offered to try and equalize the subsidies offered traditional electricity generation (military protection to foreign oil suppliers, free CO2 pollution service to fossil fuel combustors, free catastrophic insurance to nuke owners, and essentially a pass on nuke rad-waste disposal - especially the spent fuel rods). The U.S. subsidies range from the NYS Renewable Portfolio incentive (RPS via NYSERDA auction, last worth about 1.5 c/kw-hr) to the federal incentives of rapid depreciation (MACRS), worth about 3 c/kw-hr for the initial 10 years), and the Production Tax Credit (PTC), now worth 2.1 c/kw-hr. These last two incentives assume that the wind turbine owners or "psuedo-owners" - owners for a ten year period of time - have other income sources, whether active or passive income. The incentives are based on allowing the wind turbine owners to rack up huge paper losses or credits, and then the losses/credits are redeemed in the form of less taxes paid on those other income streams. In effect, if done correctly, the Federal government will "buy" about 2/3 of the wind turbine in the form of tax deductions (MACRS) and tax credits (PTC) over the initial decade of operation in the form of taxes on other income not paid.

However, the "Black Swan" question is whether or not that external income exists. After all, wind turbine project owners have to anticipate things up to a decade in advance. And stuff happens, like recessions and psuedo-depressions. So one way around that problem is to hedge that future income stream, but that also comes at a price (as in yearly "insurance" payments to the "hedgee" from the hedger). When times are good, and the possibility of financial calamity is deemed small, hedge payments will be chump change. However, hedge contracts in 2007 versus hedge contracts in 2009 are like a tale of two different worlds. It may not even be economically possible to hedge future income streams at affordable prices any more.

Hedging future taxable income is not the only possibility - hedging future electricity prices also used to be possible. This would be a bet between the wind farm operator and the bookie (such as Goldman Sachs or JP Morgan, two major investment banks/gambling houses). In this way, the wind farm operator pays a small annual fee to assure an adequate income stream, and the bookie stands to gain big if electricity prices rise, or lose money if electricity prices fall below a set agreed upon price. For the late 2008 to 2010 period, it looks like some of these "bookies" are going to be major money losers, unless they too hedged their bets. Ad infinitum...and each hedge takes another bit of money from someone to pay the fees to set up such contracts, as well as to pay the financial insurance. And then there are the bets taken out as to whether the hedge deal will fail....also more "golden crumbs" for someone (a "Bonfire of the Vanities" reference), which will eventiually translate into higher electricity prices for customers, or bankruptcies and/or government bailouts for others.

Let's say that all of NY's wind farms used such hedges, set at 6 c/kw-hr (this is just an example, and the extent of these/value of these may be impossible to find out, as they are private deals, and often unregulated). With current prices averaging 3 c/kw-hr, that means a net loss of 3 c/kw-hr. There is about 1290 MW of wind turbines operating in NY, and on average, they should produce about 30% of their rated capacity, which translates into an average of 387 MW, or 3,392,442 MW-hr/yr. The 3 c/kw-hr is the same as $30/MW-hr, so the loss to SOMEONE is about $101 million/yr. Just how long can the $2.5 billion of wind turbine investments in NY lose at least $101 million per year before Wall St renders a "no dice" verdict on further wind turbine investments in NY State?

Not long. After all, it's a short term view that tends to rule Wall Street, especially among the gambling class who rule such Gaming Houses such as Goldman and JP Morgan. Those firms do not exist to lose money, and they are very clever at not losing money/extracting money from others so that they do not lose money. A great example of this is how the CEO of Chesapeake Gas lost $2.1 billion in some hedge bets on Ngas in the summer of 2008 with JP Morgan when Ngas prices collapsed. Oops.

As for now, try and hedge future income streams (the ones needed to make the MACRS/PTC work) these days. Or hedge future electricity prices at 6 c/kw-hr set prices. No way is that going to happen except at prohibitive fees, which would render such investments meaningless. Thus, the NY State electricity Market Casino (NYISO spot price) has spoken. No more wind turbine projects for some time. And that translates into no Green Jobs in manufacturing these systems, components for these systems, or installation jobs. As for those who don't have the income streams any more (for example, the landlords of the Bear Stearns and Lehman Brothers office buildings in NY City, of former big time stock owners/bond holders of General Motors....GM will always pay dividends, right....?), and who were counting on offsetting the taxes paid on those income streams to pay off the wind turbine investments....oops, too. Some appreciable fraction of the 5 c/kw-hr of MACRS + PTC subsidy is at stake, worth up to $160 million/yr.

In retrospect, basing wind turbine financing on such a house of cards/sand castle on the beach arrangements seems quite foolish. Who could foresee such a confluence of events similar to the sub-prime mortgages? Actually, a lot of progressive economists (Paul Krugman, Joseph Stiglitz for starts) and bloggers who comment on Peak Oil and/or economics/class warfare/income disparities did. But, getting the attention of "The Village" (idiots?) - another term for the Main Stream Media, alias MSM - requires something like compromising pictures of the corporate leaders of the companies that own "The Village" with, say, cuddly farm animals. Not all of them are that dumb or wretched, and the rulers of the Village have, up till now, made a lot of money for now, so there is that explanation for their control of much of what we see, hear and read. And even the nefarious Rupert Murdoch is now losing money, though that still pales as a punishment for "all the wrong that he done". But while times were good, lots of wealthy people were making lots of money setting up the ultra-complicated business structures and financing arrangements for such deals, and this was deemed good, as it kept the prices of wind derived electricity lower to the tune of 5 c/kw-hr for a while. It was like "money for nothing", in this case, "energy for nothing", as it was based on the "kindness" of some of those in the top marginal income tax brackets. But, just like in Thermodynamics, there is no free lunch (in Thermo, it's referred to as "no such thing as perpetual motion devices").

Now, wind turbines are not the only form of energy production affected by the currently depressed prices. In fact, no new electricity manufacturing facility is profitable at a selling price for the product - electricity - at 2.5 to 3 c/kw-hr. For example, the favorite of financeers until recently, combined cycle Ngas burning plants, are also in the same boat, even with Ngas prices in the septic tank (alias "honey pit" for those in the hauling business). The cost to make electricity at such a facility in cents per kw-hr is about 1.5 c/kw-hr plus 0.68 times the price of Ngas in $/MBtu. The Ngas price is roughly equal to the Henry Hub price (select the Ngas option) plus $1.30/MBtu (that is the pipeline transport cost). So, if Ngas is listed as $2.70/MBtu, the delivered price would be about $4/MBtu. The cost to make electricity would be about 4.2 c/kw-hr, and that just avoids LOSING money, not making a profit. Who would invest $80 million to $800 million just to NOT make money? Anyway, no financeer/banker is going to loan money for that kind of stupid. And then there is the replacement cost for that Ngas....currently about $8.20/MBtu, unless expensive gas shale operations are considered, where it is even higher. New gas based electricity costs at the Ngas replacement price would now be 8.3 c/kw-hr, and more like 10 c/kw-hr once a profit and Ngas price buffer/hedge is added in. That's a far cry from 2.5 c/kw-hr....

As for nukes, the going capital cost for a pair of 1 GW ones in Ontario this year was $10.8 billion each, which translates into $12 billion per delivered GW operating 90% of the time at full rated capacity. Offshore wind is a better investment than that.....electricity prices greater than 20 c/kw-hr would be needed to justify such investments. Even coal burners, which now average around $3 billion/GW for the plant, are bad investments. Then, add in the cost of stashing the CO2 trash, or the so-far miniscule CO2 pollution fees (cap and trade, RGGI), and the uncertain nature of coal prices ($40/ton or $160/ton? who knows...). At least 11 c/kw-hr would be needed.

In fact, any kind of capital outlay renders a new electricity generating facility as overpriced in NY's NYISO Casino, at present. Only those facilities with essentially no capital costs (either they get paid off by governments, or else they are so old the capital has been at least paid off - often paid off several times) can hope to remain economically viable with collapsed electricity prices. And it will take a considerable bit of time at high electricity prices before such investments are considered low enough risk to even be considered for financing. That means those whose jobs are based or hoped on new power plant installations or manufacturing of such components will have to look elsewhere for a while, or until NY develops a price stable electricity market. The NYISO system - a Milton Friedman "free market" intellectual wet dream if there ever was one - has killed the goose that lays the golden eggs. So, installers and manufacturers will need to look to Ontario and Quebec for a while, until the wreckage of variable pricing is cleared away. Variable electricity pricing is made for variable fossil fuel (which makes the electricity) prices/fossil fuel based electricity production. If we move to a system where such obsolete and climatologically ruinous approaches are no longer used, we won't need the variable pricing to any significant extent. One advantage of going to renewable sources is that we can get away from such undependable prices. And Peak Oil virtually guarantees significant variability in fossil fuel prices as we near or stay atop the maximum production rate of oil - in fact, increasingly variable pricing - peaks and crashes, and not much in between. Once the inevitable production rate declines set in, we really won't have to worry much about variability in oil prices - only whether we can afford the stuff.

One of the hoped for situations among environmentalists was that non-polluting electricity production could be installed at a decent pace to replace the old polluting sources - coal, oil and natural gas in particular. Or, if electricity demands kept increasing, that all the newly installed capacity was renewable - gradually increasing the percentage of renewables. In NY, the NYISO pricing system was thought to be capable of sustaining this transition. It was a nice wish, only possible during an economic expansion. And so painless - all subsidized by letting some rich people avoid paying some of their taxes, so long as they invested in renewable energy projects.

But, not so fast, Bunky. We've had a reality intervention, since the NY State economy was based on the Wall Street Casino, which was basically screwing lower and middle class homeowners, as well as investors from around the world with unsustainable debt, bogus financial instruments based on that debt and then more hedging on whether those debts could be paid (that cost AIG --> U.S. taxpayers $180 billion just for AIG), with fees used to pay those humongous Wall St bonuses ($33 billion in 2009 alone.....!!!). As a result of this, and even dumber things like the IraqNam war of choice, there is no money available to subsidize electricity prices for renewable energy investments, now that economic collapse has led to electricity demand drops and electricity price collapses.

A Green Energy strategy to re-power NY, and to stimulate manufacturing in the state IS possible, but will not happen by accident. It must be deliberately crafted, and the money for the renewable investments must come from electricity users, amortized over an extended period of time, not the less than broke state and federal governments. But such investments can only be affordable if the financial risk is minimal (it never goes away, but it can be minimized), as otherwise the loan payments on such investments become so onerous that the investments just won't happen. There is over $130 billion of investments needed to replace the Ngas, oil, coal and nuke based electricity generation in NY alone, and that translates into hundreds of thousands of direct and indirect jobs. Or zero jobs if we just float along with NYISO variable prices, just constantly spinning that roulette wheel hoping Red 19 comes up.....

So, it's not just the economics that look ugly. All that CO2 pollution that could have been prevented by installing wind turbines and shutting down Ngas, coal and oil burners will also not happen. A two-fer of tragedy, so to speak. And something that needs to be rectified.


Thursday, August 20, 2009

Renewable Energy on UB Main Street Campus

Through an unfortunate (and according to my State Assemblyperson, quite racist) set of circumstances, the State University at Buffalo (UB) more or less went into split personality mode when it started building the Amherst campus (the Res), which is now the major part of UB in terms of people attending, and also political and economic power. The Main St campus in the NE corner of Buffalo is often referred to as the "legacy campus" (a direct quote) by UB management/administration officials. It is drastically underused, mostly empty space, has far too many parking lots in its 117 acres, and will be largely redundant if the recent ~ $500 million invested in the Medical School/Dental School is tossed down the drain and shipped to the downtown part of Buffalo, next to Buffalo General/Roswell Park. Needless to say, the neighborhood around it, whose main industry is now student housing/rental housing will evolve towards a different class of renters (Section 8 perhaps) should this redundant construction project (downtown) proceed, and that is not necessarily a pleasant prospect. Skepticism abounds with respect to the plans touted to replace the medical/dental school, as there is much distrust of UB in the surrounding area for a variety of reasons - for example, NY State might run out of money as the effects of Peak Oil trash the state budgets in the years following the next estimated oil price spike (1010 to 2011) - see this. Oil price shocks are usually destabilizing to an economy, driving up deficits and degrading tax revenues, and in the musical chairs type budget negotiations needed to balance the budget, things get brutal.

Energy-wise, the two campus sites are very different. UB Main St has a central heating plant (now natural gas fired) and local chillers for buildings, while the Amherst campus has a mix of small building boilers/electrical heating, a central cooling plant (not heating.....), and a huge electricity appetite, with a 230 kv feedline. Both campuses have undertaken numerous efficiency upgrades, and when in session, the two have a combined usage of about 30 MW. The electricity consumption tends to mirror the wind resource of the region - most in fall-winter-spring, and not so much in the summer. Most electrical power seems to originate from the Huntley coal burning plant (just trace the 230 kv line to its source), but the real sources tend to be accounting derived abased upon the electricity procured via NYISO Zone A auction mechanisms.

At present there is no serious co-generation or self generation on either campus, but the Amherst Res now has one photovoltaic (PV) system (~ 75 kw) operating (roof of the Science and Engineering Library), which was largely paid for by NYSERDA (= NY State electricity consumers, via a tiny portion of the transmission and distribution charges = Systems Benefit Charges), at approximately $750,000. The outputs can be monitored via a campus website link; average annual output is about 11.2% of its capacity. Recently, a 1.1 MW field installed system, priced at $7.5 million, was announced for the Res. This one would be paid by NYPA via the profits made by selling electricity formerly used by industries in WNY at NYISO market rates, and not the cost of production (about 0.25 c/kw-hr). But, who can argue when a Sugar Daddy is paying - convinced/coerced, or trying to gin up some decent PR in a region that has been devastated by de-industrialization, and which is unlikely to significantly benefit form "academicization" as the alternative to obliterating manufacturing jobs and enterprises?

So, if the Amherst Res of UB is receiving lots of PV investment (especially since any commercial scale wind turbines would be bitterly fought by the wealthy sub-urban neighors of the Res in that parts of Amherst), what would be appropriate for the Main Street Campus? How about a commercial scale wind turbine?

The Main St Campus is located several miles from Buffalo's best wind resources, which would be its coastline from the Buffalo River/Niagara River junction and south to Lackawanna. However, the Main St facility is located at 209 meters above sea level (asl), whereas lake Erie is 173 meters (on average) asl, and the wind tends to flow in the direction of Main Street - from WSW towards ENE. So, while there is considerable surface roughness (trees and buildings), it does benefit from the hill effect of the 36 meters (118 feet) above the Lake Erie surface. Plus, the SE part of the campus is largely empty space (an abandoned nuke, lots of grassy fields and buildings along the edge of the property.

One good wind turbine site might be adjacent (to the east of) the new Pharmacy (ex Atchison Hall) building, and to the north of the now thankfully abandoned nuke 2 MW (thermal - no electricity generation occurred) R & D facility. There is a small substation that could tie the turbine output into the campus grid, and no neighbors (more about them later) next to the potential turbine site. And as for the ground/soils - these are excellent for building things on, as it is a limestone bedrock right on the surface. Per some PSC rulings, National Grid can no longer charge transmission and distribution (T&D) fees on the initial 2 MW (of capacity) for an on site generator. Thus, on site electricity (under 2 MW anyway) can be less expensive than offsite generation due to the avoidance of the T&D prices, which nowadays are greater than the generation price....(mostly because generation prices are currently (August 2009) so depressed with respect to replacement prices or 2008 average prices).

As a first pass, the wind resource can be estimated by the NY State Wind map, which can be found at (your tax dollars at work). When one zooms into this spot, an estimate of the wind resource can be obtained. So, for the location of 42:57:03.6 North x -78:49:04.8, the following estimates at different heights are provided:

Height (meters above ground) Wind Speed (m/s)

24................................................ 4.81
30................................................ 5.08
37................................................. 5.35
50................................................ 5.76
70................................................ 6.36
100.............................................. 7.06

The NYSWM gives a surface roughness length (RL) of 0.02 meters but that is an absurd value (more like open water, and way too low), and besides, the RL is easily computed by rearranging the wind shear equation, which is:

U2 = U1[Ln(h2/z0)]/[Ln(h1/z0)] where U1 and U2 are the wind speeds at heights h1 and h2 respectively, and z0 is the roughness length. to find z0, just do a bit of rearranging:

z0 = Exp[Ln[(h1^R)/h2]/(R-1)] where R is the ratio of the wind speed (U2/U1) at heights h2 and h1, respectively, and Exp is the exponential function (e to the power of a number, where e is Euler's constant (2.71828)).

Doing this for the 50 to 70 meter, 70 to 100 meter and 50 to 100 meter heights, one obtains:

50-70 m RL = 1.474 meters
50-100 m RL = 2.318 meters
70-100 m RL = 3.4 meters

Anyway, these don't square with a RL of 0.02 meters, and in general, as one goes up from the ground, the RL drops. And they also don't line up with each other, so Plan B would be to use a graphical method/least squares approach, which averages the RL values. Since this is a tree "infested", urban area, a high RL value would be expected. The rough surface degrades the wind resource near the surface to a much greater extent than would be the case for a smooth surface. It also leads to more conservative wind speed values.

In this method, the value of z0 is obtained from the y intercept of the linear graph (= .206), where the wind speed drops to zero (in theory). Since this is the natural log of z0, the actual value is Exp[0.206], or about 1.23 meters

The wind speeds estimated for this site are considered low to moderate for the US Northeast, low by midwest, and definitely commercial grade by German onshore standards. However, since the electricity would largely be consumed on-site, lower wind speeds at this location may be of higher value to the People of New York State (owner of the site, as UB is a part of NY State, despite rumors and wishes of some in UB management) than would be the case if this unit were located in a windier spot, but off-campus. Those T&D fees can ranges from 2.5 to 4 c/kw-hr for a major bulk customer like the NY State government (UB). Nevertheless, the type of wind turbine selected should be keyed to the site wind resource.

Wind turbines come in a variety of makes and sizes, and numerous manufacturers of them are in the business of trying to sell their machines. They have found it necessary to make certain wind turbines for differing wind regimes - fast, moderate and slow are three possible classes. For fast winds, turbines with smaller rotor areas and shorter towers can make more power than bigger rotor area units placed on taller towers located at less windy site. In general, wind speed increases with height, so a common approach in Germany is to build (by North American standards) very tall towers (113, 120, 135 and in one case, 160 meters). Most commercial scale U.S. and Canadian turbines have an 80 meter tall tower. The taller tower tends to add costs, and installed turbines in low wind speed sites tend to have greater costs per MW-hr of electricity delivered than for fast wind sites. However, for turbines located near or at the point of usage, the transmission costs/line construction costs can be avoided. Like many engineering and business problems, there are a series of trade-offs than must be considered.

Recently, wind turbine manufacturers have been targeting the low to moderate wind speed market. Ultimately, they will sell more of these turbines than the fast wind speed ones (such as the offshore units), simply because so much more land falls into the low to moderate range. For example, according to Archer and Jacobson, only about 13% of the world land mass has average wind speeds greater than 6.9 m/s at an 80 meter height, which means that 87% of the land has less than that optimal speed. And since the power output is proportional to the cube of the wind speed, small changes in wind speed mean big changes in output.

One such foray into moderate wind speed turbines is made by Vestas, though other companies (GE, Siemens, Nordex, Clipper, Fuhrlaender, REPower, Enercon for example) are doing such activity. The Vestas V-100 is a 1.8 MW rated turbine with a 100 meter rotor diameter, and it has a very high area to rated output ratio compared to most machines. It also has a taller tower option (95 meters) than the typical 80 meter tower height. For example, at the UB Main St location, a V100 with a 95 meter tower would experience average winds at the hub height of 6.84 m/s and have a calculated gross output of 6630 MW-hr/yr. In contrast the V-90 x 3 MW unit (designed for really fast winds, especially offshore) at this site with an 80 meter tower would have hub height winds averaging 6.57 m/s, and it would have an output of 5240 MW-hr/yr. As you can see, the V90 has less than 83% of the output of the V100 for this site, even though it is rated for 167% of the V100 under ideal wind conditions. The famous "use the right tool for the right job" saying holds for the particular type of wind turbine.

So, let's say a V100 gets installed by NY State at the Main St campus, and its actual output is 92.5% of the predicted (for various reasons), so it averages 6133 MW-hr/yr, or 700 kw (38.9% of rated output). This would be about 4.49 times the estimated output of the 1.1 MW planned PV array on the Res. Odds are, it would cost approximately $4 million, a bit more than half of the PV array. This is about 8.4 times the energy output for a given dollar invested....

However, commercial scale wind turbines never get it that easy, and are rarely donated to anyone or any institution - these need to show economic justification. For that, one needs the cost of money....Right now, bond prices in NY state are farily low, and a 4.66% bond for 20 years could be used. Since bonds floated by NY state are tax exempt, and these tend to be snapped up by those in the top income tax bracket (now ~ 6.85% marginal rate for the uber-rich), that works out to an average of 5% over 20 years. A value called the Fixed Charge Factor (FCF) can be used to determine annual payments (the PMT function in an Excel spreadsheet), which works out to be 0.08024 for a 5%/20 year loan/bond. For a $4 million investment, annual payments would be about $321,000/yr. The turbine also hase Operations and Maintenace (O&M) expenses which would average 1.5 c/kw-hr. Thus, a first pass estimate (no subsidy basis) would be 5.2 c/kw-hr plus 1.5 c/kw-hr, or about 6.7 c/kw-hr total production cost.

In contrast, the PV system has much greater production costs. That money NYPA "donated" to NY State for UB could have been used to pay down debt on expensive bonds. So that money also has a similar cost (actually, this would be higher, as the most expensive NY State bond should be used to cqlculate the FCF). The $7.5 million PV array will also have some O&M/insurance warranty costs (PV panels actually break/malfunction, according to Bill Hudson of the Audubon Society per their experience in North Java), but let's ignore that. For an optimal 154 kw average output (14% of rated capacity), the production cost would be $602,000/yr, or about 1355 MW-hr/yr, or 44.4 c/kw-hr. And if output is similar to the Capen Hall units (11.2%), the production cost rises to 55.5 c/kw-hr.

Finally, there are a pair of subsidies available for NY State on a wind turbine project - known as REPI and CREBs. REPI stands for Renewable Energy Production Incentive, and it is worth 2.1 c/kw-hr for 10 years. CREBs is short for Clean Renewable Energy Bonds, where the bond interest to the bond holder is obtained in the form of passive income tax credits (i.e. lease/rental income tax credits), so the state/municipal entity only has to pay back the principal over (at present) a 16 year term. For example, a CREBs bond would save NY State 1.2 c/kw-hr ($71,000) per year for 16 years, at which time the bond is paid off, and then the 5.2 c/kw-hr for the last 2 years out of the 20 on a regular NY State 20 year bond.

But what about the neighbors? Well, it may be a cliche, but NE Buffalo and NE Amherst may as well be two different nations. For example, check out this handy online site. Average income in the 14214 district (UB Main St) at $38,669 (2007 Adjusted Gross Income, or AGI) is much smaller than in the 14051 (East Amherst) zone, with an AGI of $95, 460. UB Main St also borders the 14215 zipcode, where the AGI was $25,558 in 2007, when times were relatively good. Both the 14214 and 14215 zones have taken quite a hit due to the Bu$h2 end of term recession/depression.

In general, rich people think they own the view - the most aggregious example of this being the Oyster Bay Yachting Club in Cape Cod, as led by that under-taxed descendant of robber barron wealth, Bunny Mellon. In general, they (wealthy types) have been among the staunchest opponents to wind turbine installations, mostly on the view issue (but being both clever and able to hire even cleverer but expensive attorneys, that view issue tends to be obscured and obfuscated). Buffalo also tends to have a favorable view of manufacturing and machines, even though Amherst is more dependent on automobiles for its very existence (and the same for the Res). Of course, no large group of people will be of one mind on this topic, but if the experience of Lackawanna is any indication, it may be the UB faculty and management (who mostly live in Amherst and Clarence (AGI = $93,296 in 2007)) that may do the most objecting. Sometimes noise is brought up as an issue, but in the University Heights, given recent history, wind turbines would be considered to be an exemplary neighbor in terms of noise, drunk driving, fighting (mostly ethanol related), family disputes, quarreling intimates, burglary, armed robbery and the occasional murder. The Vestas V100 is one of the quietest units on the market, largely because of placing a relatively small 1.8 MW generator (an approximately 2500 hp motor) 95 meters up in the air (sound intensity decreases quadratically with distance). And given the traffic, sirens and people crowded into this region, plus the trees (wind going through trees also generates noise), well, the noise issue is up for debate.

Plus, there is the cool factor. Many nearby neighbors of the Main St campus are UB students or ex-students, and university students tend to be supporters of renewable energy to a greater extent than, say, Republican sub-urban voters. Besides, no self respecting University that claims to be "green" and climate friendly should be without a commercial scale wind turbine. For example; or another one across town.

What say you, New York State? Care to do the right thing (finally) by the University Heights Community in Buffalo, as well as by the City of Buffalo? After all, if the little colleges of Carleton and St Olaf can get real with respect to renewable energy, why can't UB? And odds are, it will tend to be cheaper than buying power from some coal burner or nuke in NY State on a 20 year scale.


Thursday, August 13, 2009

NY's Energy Plan - Comment Time

New York State has been working on a new energy plan for a while (the New York State Energy Plan or NYSEP)- the last one was done in 2002, and lots have things have changed since then. You can submit comments online here, or use the tried and true snail mail technique. Otherwise, here is the details of how to do that. What ever route you choose, please comment!! There is also a public comment session scheduled for Monday, August 24 (10 am to 2 pm at UB's Amherst Campus (Center for Tomorrow). After all, its only your future that is being contemplated....

Submit a Comment

The deadline for submitting a comment on the Draft 2009 State Energy Plan is October 9, 2009.
To submit written comments, please send to :
SEP Comments
17 Columbia Circle
Albany, NY 12203-6399

Please include your name, title, organization, and email address, if any, with your submittal.

To submit electronic documents and comments longer than 1,000 characters , please complete the required fields and check the box and click submit. You will receive an email with instructions on how additional materials can be sent through email.

To submit comments of 1,000 characters or less, please complete the required fields below and enter your comments in the box. Please click submit to send your comment.


Since the 2002 endeavor (that old NY Energy Plan had a Republican flavor to it), we've had a strong taste of Peak Oil ($147/bbl) and Peak Ngas ($14+/MBtu), as well as average electricity prices composed of the sum of generation (8.3 c/kw-hr) and distribution (and a lot of etc in that category) of 8.1 c/kw-hr, for a combined statewide average 16.4 c/kw-hr in 2008 (but, generation costs in upstate NY were around 6 c/kw-hr). In 2006, the customers in the NYISO zone of Long Island got nailed with prices of 99.5 c/kw-hr for just the generation part for a couple of hours in 2006's heat wave. The 2007 to 2008 price spikes in all energy supplies led to a phenomena called demand destruction - where some customers could no longer pay the high prices, and either "dropped out" of the market (or dropped dead, in the case of a lot of third and fourth world countries) or lowered their demand. Hopefully dying of heat stress or freezing to death are not a "future growth trend" for NY State's millions of poor people...since the general rule of capitalism is, "No money, no honey" (that may apply to other things, too...).

Now we are faced with the recession/depression of 2009, of which a major factor in kicking off that economic tailspin was those high energy prices - because customers had to divert money from other intentions to pay the energy tab. And as is typical for an energy price spike, economic downturn was the subsequent result. In this case, the demand destruction led to an excess of supply, and prices crashed and burned as nationwide electricity use in 2009 is 7% less than in 2008. The same goes for gasoline consumption, and there are similar trends in coal and Ngas markets. Ngas is now selling on the wholesale market for less than $4/MBtu, which is 50% of the price needed ($8.15/MBtu) for new gas to be produced, at least according to Credit Suisse, which finances Ngas exploration and production (E&P) efforts. Meanwhile oil prices have recently recovered (from $35/bbl) to near $70/bbl, which is close to the marginal cost needed to find/extract/produce new supplies (especially from the tar sands in Alberta, where it may now be even higher) - about $65/bbl. Meanwhile, spot coal prices have dropped from near $150/ton to near $40/ton for Appalachian coal.

All these dismal prices (from a producer and production standpoint) lead to the concept of supply destruction - the investments needed to extract new supplies (renewable or non-renewable) get squelched, and for non-renewables like oil and Ngas, existing well depletion and well shut-ins (the same for mines for coal) remove supplies from the market, and eventually, supply and demand get more or less balanced. For example, in less than a year, more than 50% of natural gas drilling rigs that were operating in the 2007-2008 period have been mothballed or shipped out of the country. And since a normal gas well depletes at about 40%/yr, and a "non-conventional" well (such as gas shale wells) depletes at 80%/yr, this matters with regards to the future supplies and future prices. This sets up the price roller coaster once again....once diminishing supplies collide with stagnant and/or increasing demand (maybe the economic activity will pick up form current dismal levels...that would be nice), up goes prices. It takes some time to get gas flowing, mines reactivated, new oil fields producing, and since resumed activity won't resume until the prices is assured to be at levels justifying these investments, well, there is bound to be some price "overshoot", to use industrial controller terminology.

This also affects renewables, and especially wind turbines, in a big way. In 2008, wind turbine installations were proceding at a decent pace in NY State, but then the bottom fell out of the NYISO electricity prices (the generated prices). Prices are averaging 2.5 c/kw-hr or less in Western NY - but those distribution costs are now slightly higher than they were in 2008 (less electricity distributed but at the same overall cost), so you might not see much benefit. However, what you definitely won't see for a while is new installations of wind turbines in NY State. The 2.5 c/kw-hr average prices are a prescription for bankruptcy as long as this electricity is marketed in "merchant mode" on the NYISO markets. Prices for onshore wind need to be in the 5.5 to 7.5 c/kw-hr range to justify these investments - and this is with the many tax based Federal Government subsidies (MACRS, PTC, etc) factored into account. Unfortunately, the dismal economy also has severely degraded the usefulness of these subsidies (no profits from other operations means no useful tax deductions or tax credits, since you have to pay taxes to gets credits and deductions, usually). NY State also has an RPS incentive that averaged 1.475 c/kw-hr last year, but the bid for this in 2009 may actually DECREASE as more bidders compete for the given quantity of electricity.

Of course, there are other approaches to electricity pricing, like Quebec's province wide winner take all RFP awards - 4 to date - (1 GW + 2 x 1 GW + 0.5 GW) or Ontario's Green Energy Act. The need for wildly varying electricity prices on renewable electricity - which has as one of its dominant characteristics completely predictable and stable prices for over 20 years following system installation - well, that's highly dubious. And pretty much beyond my ability to fathom any usefulness for it (other than to make rich people richer, and (maybe) crumbs for the rest - and that does not really seem very useful - see this on why rich people getting richer seems superfluous these days). In fact, one of the best ways to degrade the value of wind derived electricity is to provide variable (and unknowable) prices to future electricity supplies. This drops the marketable (and thus loanable) value of this electricity to the marginal production cost of wind, such as 2 c/kw-hr, instead of 6 to 10 c/kw-hr. Those varying prices seem totally useless for all except those who like to gamble on electricity prices, or on the prices of fossil fuels that get used to make electricity. Call it NY's "Vegas Curse"....or just plain stupid, but that is why NY's renewable energy installation rate is now moribound. Those variable prices are required for fossil fuel based electricity, since those fuels vary a lot in prices, and the price of electricity made from them is largely a function of that fuel price. However, supposedly fossil fuels are going the way of the sources for those fossil fuels (fossils, dinosaurs, paleolithic bacteria, algae and plants) - in short, obsolete...

So, what about the NY Energy Plan? On the website, there are numerous supplementary explanatory sections, and going through them is informative. They've even put some effort into describing future energy prices might be - especially for oil, Ngas and coal. Well, the NYSEP is not a done deal yet, and there is still room for comments, so here are a few:

1. Peak Oil, and Peak Natural Gas (Ngas) is poorly addressed, to say the least. Oil is mostly used for transportation (cars, truck, plains and trains), but oil and gas prices get connected via heating oil for residences, boiler fuel, chemical feedstocks and electricity. Since 2005, world oil production has remained essentially stagnant despite much higher prices, and a number of the world's biggest oil fields (megaprojects) - such as the Burgan field in Kuwait and the Cantarell offshore field in Mexico - have peaked with respect to the rate at which oil can be extracted. About half of the world's oil comes from big fields, so this matters. In addition, about 4.5 to 6 mbd of "new oil" needs to be found each year to make up for depletion from existing wells, and that is simply not being found/developed at $70/bbl. This sets the stage for oil price spikes in the near future. These price spikes will have significant feedbacks into the economy (and not good, either), as well as increase the demand for Ngas. Finally there is the so-called Export Land Model, which will mean that there will be much less oil available FOR EXPORT from countries that produce more than they consume (the US now imports about 13 mbd of oil and oil products) as countries like Mexico and Russia begin using more oil they produce and also have depleting oil fields with lower production rates. World oil production rate is not as important as in the amount available for export.....this graph shows who has been exporting.

There are many Casandra's with regards to future oil production, and the future is not known until it happens. However, here is one warning by the very conservative (not necessarily in a political aspect but more a technical one) Faith Birol, chief economist of the International Energy Agency - he predicts demand exceeding supply in late 2010. Another person with an excellent track record is Dave Cohen, one of the founders of "The Oil Drum" website - his estimate for the next oil spike (where demand exceeds supply) is 2011. If oil prices go up at a fast rate (similar to 2007-2008), prices for natural gas and coal will also spike, as large consumers rush to substitute Ngas and coal for oil, where possible - especially for heating, chemical manufacture and electricity production.

NY State has essentially no oil production, only one operating ethanol facility (50 million gallons/yr), and a large population/large sub-urban (and hence petroleum addicted) infrastructure. Thus, the potential downside to oil price spikes is huge, and this report does not address any likely solutions (even partial) to this dire situation. Two approaches would be more mass transit (except between UB Amherts and Buffalo, which seems to be deemed verbotten by UB management/administrators and planners of UB2020...) and more biofuels - ethanol, biodiesel, ammonia - production. In addition, a higher gasoline tax that is raised gradually but consistently would also help to behavior modify the public from buying the personification of idiocy that are SUV's. But, the NYSEP sidesteps these points by never stressing the economic calamity of petroleum price spikes, and the inevitability of these spikes as the downward part of the Hubbert oil curve is experienced world-wide. NY's only solution to Peak Oil is to use less oil in a significant manner, and soon...

2. Ngas is a bit more problematic - most of this will be domestically obtained in the US and Canada. While huge new finds in "tight shale formations" (unconventional gas) have been found, this will not be cheap gas, despite claims to the contrary. This will be expensive gas to develop, and will also require huge capital expenditures, and huge continuing expenditures. This will evolve into a competition for money between wind turbines and gas shale (about $75 billion/yr to supply the required amounts of Ngas, a result of the rapid depletion of tight shale gas extraction). And there is the water pollution problem associated with hydrofracturing (fracking) - water table pollution, fracking fluids, producer water (high in salt content, and with troublesome poisonous impurities like benzene and metals like cadmium, selenium, vanadium and arsenic) as well as sediments. Combined with depletion of conventional Ngas fields and decreasing supplies of oil, it seems that high prices for this "difficult gas" will be required to make gas shale projects profitable.

This is VERY important for NY's energy future, as plentiful Ngas in North America will depend on on "unconventional gas" to an increasingly large extent - check out Figure 5 in this article, or an updated summary of the official US government estimate here. As can be seen, onshore "unconventional gas" (tight sands, tight shales, coal bed metahne) will comprise about half of the US Ngas supply in the at present, and is projected to be almost 60% by 2030. If this turns out to be an overestimate because such gas is pricier and more difficult to extract than can be profitably obtained, the US Ngas market will be characterized by very high prices, when demand in greater than can be supplied domestically. In addition, the NYSEP assumes increasing production from within the state, all via the Marcellus Shale fields. About 60% of NY's electricity is made from Ngas - and higher percentages when demand goes above the average of 16 GW.

Unfortunately, the track record for gas shales is not good. One such region where intense drilling activity has taken place is near Dallas, in the Barnett Shale play. In an article for ASPO, Arthur Berman describes how the 12,000 gas wells in the last few years have performed. His analysis - less than 31% would break even or be profitable if "netback" gas prices (market price less transportation and marketing) were $8/MBtu, in a region with minimal pollution law enforcement (Texas) and a huge petroleum infrastructure. He determined that the Estimated Ultimate Recovery (EUR) for wells in the Barnett field will be about 0.6 billion cubic feet (or 600,000 MBtu). If the well costs $10 million to drill/connect to pipelines, the required cost before various subsidies would be $16.7/MBtu. At $3.3 million per well, breakeven happens at $5.6/MBtu netback. However, with prices at near $4/MBtu...this is an unsustainable situation. With regards to the actual economics of Ngas E & P (very capital and energy intensive), low cost financing is essential. This in turn gets based on low financial risk, but if the Barnett experience applies to other Gas Shale developments, these are in fact HIGH risk. High (financial) risk means high financing costs, which further increases E & P costs, and which mandates higher netback Ngas prices. He also describes how initial production rates (IP) were poorly correlated with EUR (IP's are used to justify further investments/bank loans). In NY State, prices would need to be higher than for those in Texas, due to (presumably) better pollution law enforcement and higher land leasing costs, for starts.

At $8/MBtu wellhead , delivered gas prices will be approximately $10/MBtu. The breakeven electricity price for a combined cycle unit (50% thermal efficiency) would be near 8.3 c/kw-hr, and for a single cycle "peaker" unit (35% efficient), prices near 11 c/kw-hr would be needed. And since these are operated in order to make a profit, still higher prices would be required. However, if the Barnett experience is applicable to the Marcellus situation (very similar geology), more than 2/3 of all gas wells would be money losers at $8/MBtu "netback price", and as time goes along, well yields would be expected to drop/production costs rise as the "sweet spots" get tapped preferentially. To use this Ngas for electricity, prices above 11 c/kw-hr would be needed for peaking facilities, and 8.3 c/kw-hr for "stand-alone major baseload plants", just to break even. If higher well profitabilities were required by financiers/bankers, and also higher likelihoods of breakeven wells than historical 31%, prices would need to be higher. And at netback prices of $12/MBtu, electricity from completely UNSUBSIDIZED (as in, Feed-In Laws) would be a cheaper way to make electricity than using such expensive Ngas.

Note: in the article, there is reference to exponential decline and hyperboilc decline rates. So here is a graph describing this phenomena. You can see that if the IP is extrapolated using hyperbolic decline, large production volumes will be envisioned, especially initially. But if the reality is an exponential decline, the projection based on the IP will be wildly off the mark. Most gas wells (not field; there are typically many wells in a field, and wells are constantly being drilled in a given gas field as they run dry) tend to be modeled on hyperbolic models, but shale gas wells tend to follow exponential models after a small initial period of time.

Here is the money quote:
"I am disturbed that public companies and investment analysts make fantastic claims about the rates and reserves for new shale plays without calibrating them to the only play that has significant production history. Almost every assumption used by the industry to support predictions about the Haynesville or Marcellus Shale plays is questionable based on well performance in the Barnett Shale. While it is true that every play is different and the Barnett Shale does not perfectly predict what will happen in other plays, it seems reasonable to temper and calibrate our uncertainty with what is known. There are many lessons we can learn from the Barnett Shale, and they all suggest a cautious approach to developing new shale plays."

To date, the Barnett Shale region has produced 5.3 trillion cubic feet (tcf) of Ngas. He estimates that the EUR for all of the 12,000 wells in the 15,000 square mile region (122 miles x 122 miles) will be about 8.8 tcf. The USGS estimated quantity of extractable gas in the Barnett Shale zone is estimated to be 26 tcf (US consumption is 23 tcf/yr), and this would require more than $75 billion investment in wells, pipelines, etc to tap this potential gas from $23,000 new wells. That $75 billion is more than 4 times the total invested in wind turbines in 2008 in the US. And the 26 tcf would be spread out over a decade, even though that quantity of Ngas corresponds to a bit more than one year's US consumption (2008).

For more information on shale gas drilling and fracking, see

And lastly, there is the value of the dollar relative to the Euro and Canadian Dollar (now at par with the US dollar - a swing of 18% in 2 months...). As the dollar continues to devalue with respect to stable currencies, the cost of imported oil will rise even more. And ditto for imported Ngas, or Ngas derivatives like methanol and ammonia.

In summary, world oil production will, at best, remain constant for the next couple years before invariably tracking downward after 2011. This will collide with an increasing demand (more people, improved economies), resulting in another spat of high prices, which will also tank the US and/or world economy. And there is little probability of using Ngas to fill in for oil - in fact, once the current oversupply/lack of demand for gas is rectified in the near future, Ngas prices will also spike, probably in concert with oil prices. The best way to deal with this is a combination of renewables and energy efficiency, as this will lower the demand for fossil fuel energy. Until the spikes hit, prices, especially of Ngas, are likely to remain below the cost of replacing this Ngas with new gas. That will also help keep electricity prices in the dregs, and thus trashing most renewable energy projects in the US aimed at making electricity, at least until the spikes occur. Projects will then have a very limited period of time to be installed during the high price period; at the conclusion of the spike, electricity prices will once again crash. Repeat, rinse and lather...

3. Electricity prices - Due to a combination of greater efficiency and (supposedly) greater renewable energy production, generated electricity prices are.......predicted to decline! As electricity prices decline, the ability of new renewable energy installations to be profitable (now already very unprofitable, even with significant subsidies) will become even less profitable, and/or more of a money losing prospect. This is a nasty viscious circle, which can be cured in two ways. One is even greater subsidies for renewables (requiring higher taxes, mostly on non-rich people), or the other is a Feed-In Law arrangement. Neither approach is stressed.

4. Renewable Electricity Potential - especially for wind. When translated into average delivered GW (divide GWh by 8766), not even the very low AWEA figure (~ 7 GW) is obtained. The main problem is that the renewable energy potential of NY State is strongly dependent upon the price that can be obtained for this electricity, and for all practical purposes, the only way to lower the production cost is to lower the cost of money for commercial scale (and all others, for that matter) wind turbine installations. However, that only goes so far, and the financial risk for developers in NY is severely exacerbated by the variable nature of future electricity prices as well as the high development costs for projects. A low NYISO price for electricity (such as less than 4 c/kw-hr) will mean that essentially NO wind, tidal and run-of river electricity projects can be profitably developed, and thus NY's non-hydro renewable potential A high price, such as 90% of that required for a new nuke plant, would give NY more than enough wind potential to power up the entire state. If electricity prices such as those experienced on average for 2008 in the NY City-Long Island region were to be in effect for the next generation, the 2 GW tidal energy potential of Long Island Sound could be developed, along with a considerable portion of NY's Atlantic coastline /offshore potential energy.

Try this as a mental experiment. NY has a land area of 47,213 sq miles, and 7,342 sq miles of water surface (~ 2500 sq miles for Lake Ontario, ~ 560 sq miles for Lake Erie, ~ 4000 sq miles for the Atlantic Ocean/Long Island Sound). Let's assume that only half of the state land could be wind turbine usable (the windward side of the hill), or about 23,000 sq miles. Assume that 1 x 1.8 MW moderate resource oriented wind turbine per sq mile could be installed, which is 41.4 GW of capacity. At 30% efficiency (for a Vestas V-100 unit, very feasible - requires a hub ht wind speed of 6.3 m/s at 95 meters ht)), this gives a delivered energy output of 12.4 GW. Add in expected hydroelectric capacity ~ 3 GW, and essentially all of NY's electricity could be supplied. However, there is the ~ 7000 sq miles of usable water surface. Again, lets assume that only half of it can be tapped (3500 sq miles). At ~ 4 MW delivered per sq mile (10 MW capacity per sq mile), this is 14 GW of delivered electricity - again, roughly equal to the current and projected electricity demand (~ 16 GW) in the Plan. Add in both the offshore and onshore wind capacity, and this is twice the current supply/demand for the state. Add in run of river hydro and tidal (2 GW), and there is NO NEED for nukes, oil, coal or gas burners on a baseload basis - only for "peaker power". The peaking power could be largely supplied by pumped hydro and some biomass sourced fuels (wood, ethanol, ammonia, methanol, methane) to take care of those differences between short term supply and demand...

But unfortunately, the NY Energy Plan seems to opt for "Wimp Scenario", still burdened by fossil fuels and nukes as the primary suppliers of the state's electricity. And electricity prices are both unrealistically stable and on average, low for this largely fossil fuel derived product. For example, Ngas prices have spiked and crashed 4 times in the past 9 years, and the damage due to these spikes is probably worse than if a high steady price was maintained over that same time:

5. Then there is the supposed new nuke (1.6 GW) near 20 c/kw-hr WITH subsidies (no garbage disposal (spend rods) or catastrophic insurance), this is almost twice the cost of onshore Why go with nukes? Anyway, on the plus side, NYSEP assumes that the Indian Point nukes are shutdown (no discussion of the Ginna "old geezer" nuke near Rochester, the states oldest operating unit...).

6. Coal usage is projected to remain essentially constant for the next 20 years. As would CO2 pollution from such power plants...

7. As for the photovoltaic potential, without a Feed-In Law, only enhanced state subsidies added on to federal subsidies will produce meaningful amounts of new PV derived energy. It is simply too expensive, and is likely to remain so. After all, the PV material in such systems is only 10% of the total cost to produce such materials, so even getting the photosensitive material for free will do little to decrease the overall cost. At current real, unsubsidized costs near 60 c/kw-hr for large scale systems, there is no way PV can compete with other NYISO marketed electricity at 2.5 c/kw-hr.....

Finally, one more interaction to consider. Energy price spikes are enormously disruptive to the national and state economy, as that represents a huge removal of money from NY residents to...elsewhere, with no corresponding increase in demand for NY goods or services. These tend to depress the NY State tax revenues and increase expenses to significant extents (lower tax revenues, higher expenses like unemployment insurance, increased crime, increased prison costs, more welfare expenses, etc...). Thus, the ability to deal with the detrimental aspects of hydrocarbon energy price spikes will DECREASE over time, not get better; each spike makes surviving the next one that much more difficult. So, the sooner peak Oil and Peak Ngas is faced and dealt with via more renewables and more efficiency, the better off we in NY will be.

Oh well, that's my take on this. What's yours?



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