So, our government just placed a tariff on low cost Chinese solar panels, making them not so low cost. I thought our energy policy was, in part, to encourage the use of alternative energy sources, particularly wind and solar. Government has certainly spent enough money funding alt.energy projects that experienced technology developers found too impractical. Adding tariffs/taxes to raise the cost of solar, making it less cost effective, seems at odds with our policy goals. Right wing partisans might think that there is some deeper sinister plot at work. Perhaps there is, but our government seems to be so big and complex that the right hand destroys what the left hand creates. Ineptitude and inefficiency may be baked into the cake. Would we be farther down the solar path if government had just done nothing?
Archive for the ‘Energy’ Category
It’s not every day that Minnesota makes the editorial page of the Wall Street Journal, but today is such a day.
The editorial questions the wisdom of Minnesota’s renewable energy mandate. The author notes (correctly) that the mandate increases the cost of electricity and that the burden of the cost increase falls mainly on the poor and middle class. They also claim that the environmental benefits are almost zero. Whatever the benefits, they certainly have direct costs to households.
The Journal fails to mention the indirect costs. The high cost of electricity in Minnesota makes it less appealing to businesses, especially those that are heavy users of electricity. This used to mean big manufacturing operations or aluminum smelters, but it increasingly includes outfits with big server farms such as Google, Microsoft, and Amazon. Discouraging both traditional and high tech industries from locating here seems like a dubious economic development strategy.
This strikes me as another attempt to make things better that actually make things worse.
You might think it would be a “no brainer” to reverse course, but I doubt it. There is such a thing as institutional inertia and every bad idea has a core of supporters. For some, environmental concerns trump everything else and they won’t retreat from victories, no matter how small the benefit or how great the cost.
Minnesotans will continue to be gouged by the wind.
Alex T has some interesting things to say about innovation and regulation:
There are good regulations and bad regulations and lots of debate over which is which. From an innovation perspective, however, this debate misses a key point. Let’s assume that all regulations are good. The problem is that even if each regulation is good, the net effect of all the regulations combined may be bad. A single pebble in a big stream doesn’t do much, but throw enough pebbles and the stream of innovation is dammed.
Building in the United States today, for example, requires navigating a thicket of environmental, zoning and aesthetic regulations that vary not only state by state but county by county. If building a house is difficult, try building an airport. Passenger travel has more than tripled since deregulation in 1978, but in that time only one major new airport has been built: Denver’s. That airport is now the fourth busiest in the world. Indeed the top seven busiest airports are all in the United States, not so much because we are big but because without new construction we are forced to overcrowd our existing infrastructure. The result is delays and inefficiency. Meanwhile, China is building 50 to 100 new airports over the next 10 years.
It would appear that regulations intended to keep life from getting worse might also keep life from getting better. I wonder if someone has suggested a way of prudently judging the regulation/innovation trade offs.
There must be some idea more nuanced than “all regulation is good” or “all regulation is bad”. Today, it looks like we’re flying by the seat of our pants.
I have no idea what our foreign policy toward Libya should be, nor do I know enough about nuclear power plants to know whether the Japanese or Americans are right about safety precautions. But I do know about laundry, and How Washington Ruined Your Washing Machine resonates with me. Due to bonehead regulation, inexpensive washing machines no longer get clothes clean. This is just another Washington assault on the poor and middle classes, as well as their laundry. A person ought to think twice about advocates for the “common good” – this seems to be the code phrase for taking you to the cleaners. Maybe the Republicans can clean up the mess the Democrats have made, but I doubt it. All I know is this: if you screw up the little things, you’ll probably screw up the big things.
As if the Gulf oil spill wasn’t bad enough, we now learn that the EPA is thwarting the cleanup activity. I’m sure political pundits have already started questioning the motives and competence of the Obama administration, or at least the EPA. I have no special insight into that. But I do know that large complex bureaucracies tend to be rigid and inflexible, often do stupid things, and often work against their own goals. That’s the nature of the beast, a variation of Hayek’s “distributed knowledge” problem. That’s why we see such wasteful activity as one unit of government taking another another unit of government to court, all paid for with taxpayer dollars.
I understand the desire for a regulatory technocracy to address common problems such as pollution. But there are limits on what such an approach can accomplish. When we try to push past these limits, we make matters worse rather than better. We can’t achieve Woodrow Wilson’s dream.
I’m no organizational theorist, but it seems to me that the regulatory activity we need should be pushed down and distributed. The federal role should be decreased and the state (or even county) role increased. Centralized planning, command, and control simply doesn’t work very well (except for the military – but that’s another story).
Some economists speak of time preference as a measure of how much we prefer gratification today instead of gratification tomorrow. In the ordinary world, people learn that delayed gratification can be a good thing. But we all seem guilty, to some degree or other, of short term thinking. It’s the result of cognitive bias.
I believe that what is true for individuals is often true of institutions. And I’m quite certain that most institutions are afflicted with a short term bias. This includes businesses, charities, political parties, unions, and governmental bodies. When you look at a mess such as we’re having the Gulf, it’s easy to speculate about a host of short term biases lining up to create a horrible black (oil-coated) swan. It’s amazing that this kind of thing doesn’t happen more often.
By promising to double our supply of renewables, Mr. Obama is only trying to keep pace with his predecessor. Yes, that’s right: From 2005 to 2007, the former Texas oil man oversaw a near-doubling of the electrical output from solar and wind power. And between 2007 and 2008, output from those sources grew by another 30%.
Mr. Bush’s record aside, the key problem facing Mr. Obama, and anyone else advocating a rapid transition away from the hydrocarbons that have dominated the world’s energy mix since the dawn of the Industrial Age, is the same issue that dogs every alternative energy idea: scale.
Mr. Bryce explains why even the most ambitious “green energy” effort won’t come close to making us “energy independent”. It’s not complicated – it’s just math. Of course, politicians don’t appear to have much aptitude for math. If they do, they keep it well hidden, at least if there are votes at stake.
Nixon started the push for “energy independence” and it’s had strong bi-partisan support ever since. I’ve always thought that any idea that has bi-partisan support is a real stinker. It’s sad to another administration follow in Nixon’s footsteps.