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No calling in sick or waiting for a nice day – The grid has to perform on the worst of them

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From the Frontier Centre for Public Policy

By Terry Etam

Saturday night, the middle of the cold snap, was something to be endured

Saturday night, the middle of the cold snap, was something to be endured. Things break at -36 degrees. A quick run to the grocery store was rerouted by a fleet of city vehicles tearing up the street in a considerable manner, most likely chasing a broken water main or some such. Imagine being without water on a night like that.

Half an hour later it got worse – the provincial grid operator issued an alert for people to “immediately limit their electrical use to essential needs only.”

Keep in mind the staggering circumstance, and location, of that alert: Alberta. Even the province’s biggest naysayer would have to admit that the province is an energy juggernaut, blessed with resources most of the world can only dream of, including and especially energy.

If power consumption levels were not reduced, there could have been rolling blackouts. Anyone care to imagine what that would have been like at -35 degree temperatures?

Hopefully every single voter in Canada, and the US for that matter, is paying attention. The false prophecies of utopian energy transitions visions are, quite clearly, dangerously false.

The media feeds you dumbed-down pablum; don’t take it at face value. Instead of listening to blathering about “new installed capacity”, pay attention to actual output. In extreme cold, wind and solar output fall to zero, or very close. It doesn’t matter if there are a billion gigawatts of ‘capacity’ installed.

Everyone needs to understand the fundamental issue that was best described by Nassim Taleb via his turkey analogy. A turkey has 364 days of a very good life, followed by one very bad day come Thanksgiving. It is the bad day that matters, not 364 good ones. A deadly day is a deadly day.

It’s the same with renewables penetration, and how it makes the news ‘on the good days’. Activists and simplistic policymakers (but I repeat myself) tout how a particular jurisdiction may have at such and such a time sourced “xx percent” of power from renewables. Yay, look at the progress, marching ever higher. But it’s not what it sounds like. It doesn’t matter if a country or state or province gets 80% of its power from solar at the peak of a good sunny day, nor if 80% comes from wind on a particularly windy day. Those are misleading numbers, because the system must be fully capable of meeting peak demand every day, and not just ‘on a good day’.

According to AESO, the provincial grid operator, Alberta has 4,481 MW of wind power capacity. At the peak of last weekend’s deepfreeze, it was producing about 1/3 of one percent of that total. Not just useless, but far worse: useless when needed exactly the most.

What matters is: how does the system perform at peak times – what is going to show up on demand?

Just like everyone else that’s trying to bring rationality to this conversation, I need also point out that wind and solar are welcome additions, in moderate amounts, sited where they do the least damage, and as supplements to a grid.

But that’s where the conversation needs to get serious. The real danger out there are people that want an energy transition so badly, or are employed as ‘climate architects’ such that their career depends on it, who sweep some mighty big things under the rug.

“We just need more storage, then wind and solar will be able to carry the load.” Not possible, not if batteries are the vision. Imagine a day’s worth of battery power supply for the entire province. Or two days. The cost would be off the charts, and, then after two days of ‘usage’, how would the batteries get recharged if the cold spell persisted more than a few days? Is that the kind of backup anyone would accept? We’ll have power again if the wind picks up strongly and consistently for the next week, if not, well, good luck?

“Sure we can handle an all-EV world because users can charge at night.” I’ve seen this argument now and then, based on some simplistic studies that show, correctly, that financial enticements can get people to charge EVs at off peak hours. But that’s a red herring in the world we are headed for, “electrify everything”. If we do electrify even half of what we could, then peak demand will still go way up, as will our life-perched dependency on it. More EVs just mean more load. And not all EVs will shift to night charging; it is some pretty weak thinking to imagine that all EV owners will have that optionality, or live in a place that allows it, or won’t be travelling, etc. And remember that the feds’ plan is for all vehicles to be electrified. So maybe J. Consumer in suburbia can shift his EV to night charging, but what about a fleet of city buses, or Uber drivers, or forklifts, or taxis, or…the list is endless.

“We can switch to heat pumps.” This one takes the cake. Heat pumps will exacerbate the problem at the exact worst time – when it is coldest, and when power demand is highest, and when the grid is maxed out. It is the opposite of proponents who say EVs can charge at off peak hours – heat pumps will be called into full service precisely at peak hours. Taleb’s turkey again: a mass-heat-pump system will be wonderful on many days, but on the very worst day, all goes black. And cold. 

There is no joy in this silly debate we seem to be in with ideologues, particularly when the threat of rolling blackouts is announced by the grid operator. But there is also no time to waste indulging people who want to rewire the grid with “well academic studies say this should work.” Set up your own commune somewhere and experiment for a few years and at least one winter cold snap, then let us know how it goes.

Wishful thinking doesn’t turn many wrenches, nor does it heat homes. Wishful thinking is not what an energy system can or should be built on. Energy is life or death in extreme weather. Ideology is the last thing that should be involved in energy supply, and yet we are up to our ears in it, a situation that is becoming dangerous.

People can see this. They may not understand how grids (and energy) work, but they know when something smells bad. That’s why federal government support is at such lows, and why distrust in the media is at such highs. Political scientists telling you “Don’t worry, we know how to design a new grid” are no match for the likes of, for example, real-world experiences such as this relayed by a gentleman named John Wright on LinkedIn: “Currently out at our cabin trying to help out our heat pumps (we run three geothermal units and they are running full out with auxiliary/ supplemental heating coils engaged). We have two propane fireplaces burning full time in addition to all the firewood that we’re also splitting and burning, and all of the burners on the cooktop are on. It’s probably about +12.5° C inside here vs -36°C outside…Everyone seems to ignore the fact that heat pumps are a huge draw on the power grid. Our power bill could easily be $1500.00 to $2000.00 for January…By the way, the power consumption and poor performance is the same in the summer when it is +36°C here.”

And finally, it is important to note that the gradual but persistent undermining of the hydrocarbon industry will have massive consequences, because hydrocarbons underpin everything we use and do. Governmental and media animosity will drive away capital (don’t wonder why dividends are such a popular thing in the oil and gas sector – capital flight in full view) and ultimately weaken a pillar of our economy. Until nuclear energy is ubiquitous, or some technological breakthrough happens, we need reliable, baseload power, which at this time in history means hydrocarbons, here and around the world. That baseload is not guaranteed, it is not a right, it is not going to be sustained if capital is chased away from it.

Voters, it’s up to you. Demand more from your politicians, but also demand better conversations from the entire energy industry as well. We owe you that.

Terry Etam is a columnist with the BOE Report, a leading energy industry newsletter based in Calgary.  He is the author of The End of Fossil Fuel Insanity.  You can watch his Policy on the Frontier session from May 5, 2022 here.

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Energy notes from the edge: Coal trains vs high speed rail

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From the Frontier Centre for Public Policy

Author Terry Etam is a columnist with the BOE Report

They are accusing you of murdering people by producing fuel the world requires for survival. It’s silly; they (the NDP) have things precisely backwards – they are confused by the role of hydrocarbons in our life. So you need to address that first and foremost, because they are writing policy based on such faulty reasoning.

They are NOT asking you to produce your product better. They are saying you are killing the planet and its people and making a fortune while doing so.

Ah, you couldn’t make this stuff up, as we find ourselves saying on a daily basis.

Here’s a look at two ambitious infrastructure projects involving rail construction, separated by a few years and also by about everything else two projects could be separated on. One of the train stories dates way back to 2019; let me take you back to that era for all the readers less than five years old (not quite but close; last week I met a delightful family, a mother and two young daughters that are fascinated by pump jacks, love taking pictures of them, and are planning to launch an apparel line adorned by nodding donkeys. I’ll take five.) 2019 was the zenith of anti-hydrocarbon frenzy. It remains alive in small pockets of guilt-ridden billionaire inheritors and various political types that don’t understand energy and don’t want to learn, but 2019 was something else; hundreds of thousands of brainwashed children taking to the streets behind a strange Swedish kid that was treated like a messiah by confused adults. Canada’s prime minister jauntily joined one of her protests, standing proudly in front of signs explaining in emotional gobbledygook that the hydrocarbons that were keeping the sign-holders alive now and for the foreseeable future had to be eradicated immediately via some demand or magic or else the world will simply explode into flames a few decades hence.

Anyway, it was all surreal in one sense, but back to the railways: a few interesting milestones were hit around then that, when viewed alongside the climate hysteria of the era, prove without a doubt just how challenging it will be to transition to a new energy system.

But before getting to the 2019 story, we’ll check in on one that began long before then and continues to this day. It hails from sunny California, spiritual leader of the Movement To Use Extreme Wealth To Do Wacko Things. In 2008, voters approved a high-speed rail connection between Los Angeles and San Francisco, to be completed by 2020, at a cost of some $33 billion. Big numbers, both on the timescale and in the $ department. That’s reality these days though; nothing is easy or cheap, part of which is the price of going green. US energy transition advocates have reliably pointed out that high speed rail was a necessity all over the US, and the world for that matter. Nature website ran an article stating “…the role of high-speed railways in fostering a transition towards sustainable energy sources has gained prominence… these findings highlight the environmentally friendly attributes of high-speed railways and underscore the pressing need for effective policy measures to facilitate a global transition towards renewable energy, both in China and worldwide.”

A few interesting tidbits emerge out of this scenario. The first and most peculiar is that a scientific article on the scientific website Nature would assert that high-speed rail is important in “fostering a transition towards sustainable energy sources” – the statement has no logical basis, it flows from nothing, and is incoherent. HSR is wonderful, and makes efficient use of time, and possibly could replace air travel in some circumstances, and, as the paper rightly asks, HSR may well contribute to ‘nationwide energy savings and emissions reductions’. But none of these virtues foster a transition towards sustainable energy sources and to state it does is an oddly dumb non sequitur to feature as the anchor statement for an academic paper.

But anyways, whatever, the paper analyzes China’s experiences with HSR, which brings up a far more interesting point about the energy transition that is in the realm of That Which Must Not Be Discussed: the fact that in the west, major infrastructure projects are incredibly difficult to construct, whether green or not, and that initial cost estimates often turn out to be laughably low.

California did indeed set out to build an HSR in 2008, to be completed (as you may recall) some twelve years hence. But, as this California news website notes, “the blueprint is fraying”, which is some beautiful understatement. In 2020, the year the project was to be completed, Governor Newsom unveiled an updated plan, that California would settle for building a 171 mile initial segment – about a third of the distance of the original – at a cost of $35 billion, a number that exceeds the initial estimate for the entire 500 mile line. And the in-service date for the shortened version is now penciled in as 2030. As for an end date for the entire project, they haven’t a clue, don’t even bother taking a guess at it, but they have bravely provided an updated budget of, brace yourself, $128 billion. That’s almost four times the original estimate.

And even that number is scoffed at by engineers that have worked on HSRs. Bill Ibbs, a retired UC Berkeley engineer, says he is concerned about the lack of attention to engineering risks – that proponents don’t even address significant engineering challenges in the latest cost estimate, such as challenges likely to arise in the 38 miles of mountain tunnels required. (Per the article linked above: “Democratic leaders have declined or did not respond to requests for interviews.” Who saw that coming.)

That is what we are in store for in the western world. Keep this example in mind the next time you hear about net-zero 2050 visions based on almost any large scale infrastructure construction. You would have to be the world’s most naïve person to believe initial cost and time estimates.

Now, on the other hand, countries such as China have indeed made great progress though, as we’ll see in a second, the choice of China as an example is fairly ironic. The Nature academic paper notes that hundreds of Chinese cities already operate HSR networks. China has stunned the world with the pace at which it has developed infrastructure over the past 40 years; however, it is an authoritarian state that sweeps aside the sort of issues that bog down western democracies like a bear sweeps aside a hiker.

And if we’re going to marvel at the speed at which China has constructed these HSRs, then we should look at this one too. In 2019, China opened a brand new, 1,813 mile railroad, completed on schedule at a cost of $28 billion. It took 4 years to construct, and faced multiple significant challenges such as “crossing both the Yangtze and Yellow Rivers twice” and includes 770 bridges and 229 tunnels totalling 469 kilometres or 291 miles, some 8 times as many tunnel miles as California. This new rail line is dedicated to carrying… coal. It was created for no other reason. It was built entirely to handle coal.

That’s how they do it folks. An authoritarian state that removes any obstacles instantly, all to build a supply line for a fuel that the west is cleansing itself from as fast as it can. China realizes what it takes to build things. The West does not. Further, while China is the largest installer of renewable energy, it is fairly transparent about its appetite for any fuel. That’s how the world works, folks, except for some…

“How do you sleep at night?” Or… how to win a debate with extremist loons – hand them a microphone.

An NDP committee that hates things dragged a bunch of “Big Oil” (or “Big Canadian Oil”, anyway) CEOs onto the carpet to, literally, blame them for forest fires and floods. Their argument went about where you’d think it would, when your philosophical underpinnings are of that grade: Not only do you mooks create a lot of bad weather, but you line your pockets by doing so, gleefully so, and thus we want to know just how you can sleep at night.

The CEOs responded decently enough in their polished way, but I think it’s important when addressing an interrogation of that sort to firmly call out the lay of the land.

Rich Kruger, CEO of Suncor, said “I could praise the transformational virtues of hydrocarbons over the past century, convey the world’s dependence on oil and gas for decades to come, recite economic contributions to Canada’s prosperity and, yes, discuss the concerning effects of climate change and GHG emissions… however, today, I plan to dispel a series to myths. And paint a picture of opportunity.” The myths: oil & gas prosperity comes at the expense of the planet; Canadian companies are resisting the energy transition/decarbonization; and that Canada can demonstrate global leadership by restricting its oil & gas sector.

He’s not wrong, but there’s a significant subtlety that gets swept under the rug here, one that can cause grave danger to a lot of people.

First, y’all need to understand the battlefield. Kruger is right; it is to generate headlines, but consider the headlines carefully when selecting which myths to bust. They (the NDP) are literally accusing the hydrocarbon industry of murder – not with a gun, but via creating the emissions that cause weather disasters that kill people. They and their fellow warriors have created a lazy but sellable chain of causality there.

Mythbusting is important, but first, it is critical to take aim at the cornerstones of their argument, and not capitulate on those. In other words:

  • If someone accuses you of killing a bunch of people, might I suggest that saying “Yeah, well, we pay a lot of taxes…” is a losing strategy?
  • If someone accuses you of killing a bunch of people, might I suggest that saying “Don’t worry, I’m taking measures to mitigate how many people I kill.” is also a losing strategy?
  • Absolutely speak of emissions reduction improvements and any efforts made towards an energy transition – but don’t ignore the emotional point they use, when it undercuts everything else you say.

They are accusing you of murdering people by producing fuel the world requires for survival. It’s silly; they (the NDP) have things precisely backwards – they are confused by the role of hydrocarbons in our life. So you need to address that first and foremost, because they are writing policy based on such faulty reasoning.

They are NOT asking you to produce your product better. They are saying you are killing the planet and its people and making a fortune while doing so.

Their army of lawyers, with literally nothing better to do (hello, Sierra Club/Environmental Defense/EcoJustice/ad infinitum) are running circles around your lawyers. You are facing an army of extremely well-funded legal guerillas. You need to recognize their weapons. You are fighting against rifles with a diorama of your decarbonization efforts.

Here is the answer that addresses the inanity of the question in a simple and fool-proof way, which will do the trick, because they will have no answer: Hydrocarbon production enables life as we know it. Without hydrocarbon production, most of the earth’s 8 billion people will not survive a year. Hydrocarbon production feeds those people in a way that nothing else can. Hydrocarbon production keeps countless people from freezing to death, every year, like nothing else at present can. Hydrocarbon production provides the building blocks for our modern medical system, our transportation system, and almost any other thing within arm’s length.

Hydrocarbon production enables life, and it will do so for decades until a suitable replacement arrives on the scene that can not just match, but beat hydrocarbons for energy density, reliability, and cost. That will most likely happen some day. But to attempt to strangle today’s fuel system without a replacement is a clearer path to willfully causing human death than is the production of the fuel that keeps us alive.

There are multiple excellent pathways a hydrocarbon company can go down to show the public they are validly concerned about the environment, such as eliminating spills, eliminating pollution of all sorts, or respecting and revitalizing natural habitats.

But when you tell them how eagerly you are ‘decarbonizing’, you forfeit the match. Your product is carbon. That is literally the murder weapon they place in your hands.

The impact on humanity from more carbon in the air, whatever the consequences may be, pales in comparison – by an astounding degree – to what the impact on humanity would be if oil and gas production were to cease.

Mr. Kruger touched on the most important part, but then skipped right over it: the “transformational virtues of hydrocarbons over the past century”, as a phrase, skips right over the entire arc of the human benefits brought through the industrial revolution, treating them as secondary aspect that needs to take a back seat to convincing the world that Canadian companies really are trying to decarbonize.

And let’s be clear about that whole idea: anyone that places decarbonization as the number one priority should drop whatever they’re doing to get out and make nuclear energy happen here, there, and everywhere, because that’s the only game in town as far as a global, achievable solution goes. I don’t have a problem with that. I love cheap, clean energy, available reliably and in abundance. And almost every global citizen would agree with those four, but more importantly would prefer all four, of those characteristics. People don’t love oil & gas. They love what it can do. Want to replace them? Then it has to be better in every functional way.

While the fate of oil/gas on the global stage will be determined by billions who know how much they need it, the emotional messaging of the NDP et al nevertheless has the power to shape legislation, for example to sneakily introduce climate reporting requirements into financial statements and thereby open the door to countless lawsuits – lawsuits which the industry will be forced to defend. And those singular-function activist-lawyers will eat you alive if you are sitting at the table agreeing about the need to rapidly decarbonize.

The messaging should be that humanity requires oil and gas and will for decades, and that role of industry is to do this as cleanly and efficiently as possible. That might sound like a subtle distinction compared to a pledge to decarbonize asap, but it’s not – it’s the difference between a bullet missing you by an inch and not.

The reason you need to think this way is because hydrocarbons will remain standing for a very long time as a fundamental source of energy, as is witnessed by the sheer global force of increasing consumption of every type of energy (see: New Zealand completely backtracking on an oil & gas exploration ban once it dawned on them that existing fields deplete – coming soon to governments everywhere)… But Western energy leaders may get seriously wounded by the sheer legal might of the enemies faced at such panels, and by the minions they inspire, as bombastically comical as it might appear on the surface.

Terry Etam is a columnist with the BOE Report, a leading energy industry newsletter based in Calgary.  He is the author of The End of Fossil Fuel Insanity.  You can watch his Policy on the Frontier session from May 5, 2022 here.

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New York and Vermont Seek to Impose a Retroactive Climate Tax

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From Heartland Daily News

By Joshua Loucks for the Cato Institute.

Energy producers will be subject to retroactive taxes in New York if the state assembly passes Senate Bill S2129A, known as the “Climate Change Superfund Act.” The superfund legislation seeks to impose a retroactive tax on energy companies that have emitted greenhouse gases (GHGs) and operated within the state over the last seventy years.

If passed, the new law will impose $75 billion in repayment fees for “historical polluters,” who lawmakers assert are primarily responsible for climate change damages within the state. The state will “assign liability to and require compensation from companies commensurate with their emissions” over the last “70 years or more.” The bill would establish a standard of strict liability, stating that “companies are required to pay into the fund because the use of their products caused the pollution. No finding of wrongdoing is required.”

New York is not alone in this effort. Superfunds built on retroactive taxes on GHG emissions are becoming increasingly popular. Vermont recently enacted similar legislation, S.259 (Act 122), titled the “Climate Superfund Act,” in which the state also retroactively taxes energy producers for historic emissions. Similar bills have also been introduced in Maryland and Massachusetts.

Climate superfund legislation seems to have one purpose: to raise revenue by taxing a politically unpopular industry. Under the New York law, fossil fuel‐​producing energy companies would be taxed billions of dollars retroactively for engaging in legal and necessary behavior. For example, the seventy‐​year retroactive tax would conceivably apply to any company—going back to 1954—that used fossil fuels to generate electricity or produced fuel for New York drivers.

The typical “economic efficiency” arguments for taxing an externality go out the window with the New York and Vermont approach, for at least two reasons. First, the goal of a blackboard or textbook approach to a carbon tax is to internalize the GHG externality. To apply such a tax accurately, the government would need to calculate the social cost of carbon (SCC).

Unfortunately, estimating the SCC is methodologically complex and open to wide ranges of estimates. As a result, the SCC is theoretically very useful but practically impossible to calculate with any reasonable degree of precision.

Second, the retroactive nature of these climate superfunds undermines the very incentives a textbook tax on externalities  would promote. A carbon tax’s central feature is that it is intended to reduce externalities from current and future activity by changing incentives. However, by imposing retroactive taxes, the New York and Vermont legislation will not impact emitters’ future behavior in a way that mimics a textbook carbon tax or improves economic outcomes.

Arbitrary and retroactive taxes can, however, raise prices for consumers by increasing policy uncertainty, affecting firm profitability, and reducing investment (or causing investors to flee GHG‐​emitting industries in the state altogether). Residents in both New York and Vermont already pay over 30 percent more than the US average in residential electricity prices, and this legislation will not lower these costs to consumers.

Climate superfunds are not a serious attempt to solve environmental challenges but rather a way to raise government revenue while unfairly punishing an entire industry (one whose actions the New York legislation claims “have been unconscionable, closely reflecting the strategy of denial, deflection, and delay used by the tobacco industry”).

Fossil fuel companies enabled GHG emissions, of course, but they also empowered significant growth, mobility, and prosperity. The punitive nature of the policy is laid bare by the fact that neither New York nor Vermont used a generic SCC or an evidentiary proceeding to calculate precise damages.

Finally, establishing a standard in which “no finding of wrongdoing is required” to levy fines against historical actions that were (and still are) legally permitted sets a dangerous precedent for what governments can do, not only to businesses that have produced fossil fuels but also to individuals who have consumed them.

Cato research associate Joshua Loucks contributed to this post.

Originally published by the Cato Institute. Republished with permission under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

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