The following from Don Parsons on the dramatic changes in the peak oil assessment:

The IEA, for the first time, has done a comprehensive survey of 800 oil fields covering three-quarters of the world’s existing production. Note their new estimate of the global decline rate of 6.7%, nearly double their previous estimate. This is truly an alarming rate of depletion, equal to 5.5 million bopd, which must be replaced each year just to keep production stable. This amounts to new discoveries of the magnitude of 15 billion bbls per year. We haven’t found that much oil in a single year in the last quarter century. In the last 15 years, discoveries have averaged less than half that amount. As the aging super giant fields, most of which were discovered pre-1970, go into decline, the global decline rate is likely to worsen.

Here’s the report, Warning: Oil supplies are running out fast.

Alex Alexiev’s article, “Obama’s Green Delusions,” in today’s NRO brings some untold reality to the alternative energy discussion. Were it not for subsidies green would not be economically viable until traditional sources reached a sustainable price point that justified the green costs. Subsidies are simply taxpayer assumption of differential costs; most of those taxpayers being non-users do not otherwise benefit. The issue then becomes the role of government versus the marketplace in bridging the conversion gap, the time it takes to transition from traditional to green.

Since green technologies are known, there is no steep, long-duration learning curve in development. Thus, I would argue that the marketplace is a better, more efficient transitioning agent. Obama, Gore, the green industry and the liberals that follow them would argue otherwise and since in their minds the subsidies are free, that is come from the taxpayers now and future, they will proceed with the green agenda. So we will have an inefficient transitioning agent taking investment capital out of the marketplace. The opportunity costs lost on government inefficiencies and lost investment in other fields will be a steep price to pay.

Standing in front of an array of photovoltaic solar panels at Nellis Air Force Base last Wednesday, President Obama gave us to understand that his vision for an America powered by clean, renewable energy and awash in green jobs is becoming a reality faster than anyone could have imagined. Nellis, near Las Vegas, is the home of the largest solar-energy plant in the Western Hemisphere and, in the president’s words, a “shining example” of what renewable energy can do to put our economy on a “firmer foundation for economic growth.” It is a success story that needs to be replicated “in cities and states across America,” Obama said, and he announced a “solar energy technology program” to do just that.

The figures do indeed look impressive at first sight. The $100-million plant was built without a penny of government money, we are told, yet it provides the base with electric power costing 2.2 cents per kilowatt/hour, which is less than one-fourth of the 9 cents that Nevada Power charges its other customers. The annual savings will amount to $1 million, guaranteed for 20 years. Proof positive, it seems, that our green future is now. Or is it?

Beyond these numbers, uncritically reported by the mainstream media, is the reality of a make-believe industry touted by environmental zealots, corporate freeloaders parading as entrepreneurs, and a president capable of staggering disingenuousness. If the Nellis solar project is a “shining example,” it is a shining example of everything that’s wrong with Obama’s green delusions. The project makes no economic sense on its own merits and, like all renewable-energy projects, was made possible only by a combination of government coercion and state and federal handouts at the expense of utility customers and the American taxpayer. The coercion in this case came in the form of a state mandate that Nevada utilities must obtain 20 percent of their power from hugely expensive renewable sources by 2015; the handouts came in the form of a 30 percent federal tax credit, accelerated depreciation rates, “solar energy credits,” and similar goodies. It is such government largesse — and the promise of more to come — that convinces the renewable-energy industry’s corporate welfare queens to line up behind dubious projects like Nellis.

In his speech at Nellis, President Obama asserted that he wants “everybody to know what we’re doing here in Vegas,” and he pointed to Germany as an example to follow in the solar business. He should have followed his own advice and looked more closely at the German example. After Germany guaranteed solar producers a rate seven times as high as the market rate, the country’s electric bill jumped by 38 percent in one year.

Obama also should have mentioned what happens to investors who fall for Washington’s green hype. For the two private companies involved in the Nellis project, it has not been a success story. SunPower Corp., the builder of the solar plant, has lost 75 percent of its market value in just the past year and is facing an uncertain future (to put it mildly). MMA Renewable Ventures, a San Francisco–based firm, which financed the project, was recently sold to the Spanish company Fotowatio for the fire-sale price of $19.7 million, after losing more than half of its business between 2007 and 2008.

The Spanish purchase of the dying MMA made no business sense except in one critical area: It allowed Fotowatio to establish a beachhead in the United States, which, with $20 billion of green-energy tax incentives in 2010 alone, increasingly looks like the world’s last refuge for solar freeloaders. Most European countries have seen the damage that green energy can do to their economies and are rapidly (if quietly) scaling back their support. This is especially true in the countries that have been leaders on solar and wind power. Both Germany and Spain have dramatically slashed their subsidies for renewables, and Spain has reduced its commitment to green power from 2400 megawatts in 2008 to 500 megawatts or less in 2009.

There is yet another lesson from Spain that Obama prefers not to discuss. The $100-million Nellis project created 200 jobs at a cost of $500,000 per job. The longer Spanish experience, according to a recent study from Juan Carlos University, shows a cost of $774,000 for each government-subsidized green job created since 2000. More disturbingly, for each of these jobs, 2.2 jobs in other industries were destroyed because of higher energy prices, not counting manufacturers who vote with their feet. This is surely a success story that Americans can do without.

via Obama’s Green Delusions by Alex Alexiev on National Review Online.

Tom Motherway, tom@renohayek.com

John Dunn presented an intriguing proposal for Yucca Mountain at the Hayek Dinner May 19^th, a refreshing new way to think about our nuclear waste storage.  The background presentation included a review of the legislation, studies and administrative actions. The Nuclear Waste Policy Act of 1982 set up the process for siting, construction and operation of one or more national repositories of our spent nuclear fuel and high-level radioactive waste.  In 1987 after a DOE study of nine sites the act was amended to limit further study to Yucca Mountain, which was selected by Congress in 2002 and included a 70,000 MTHM storage limit. In June 2008, the DOE applied to the Nuclear Regulatory Commission for a license to build the Yucca Mountain repository. In December of 2008 the DOE report to Congress and the President that the Yucca Mountain storage limit could be expanded to at least 210,000 MTHM obviating the need to seek additional storage sites. Currently approximately 60,000 MTHM of spent fuel is stored throughout the country at 121 nuclear facilities in 39 states.

Funding for the project has been generated by a federal tax on the consumers of nuclear generated electricity of one mil per KWH. The tax revenue goes into the Nuclear Waste Fund which at December 31, 2008 had a balance of $29.6 B. The DOE receives money for the fund through Congressional appropriations. Large taxpaying states included IL, PA, SC and CA. $9B has already been spent on Yucca Mountain.

The Obama administration has cut the Yucca Mountain budget by $100M to an all time low of $197M.  There is no current alternative to Yucca, which is by law the national repository. Obama did appoint a former Reid aide as chairman of the NRC; while working for Reid Gregory Jaczko worked to kill Yucca.

So we have now spent  $9B of taxpayer money and statutorily designated Yucca as the national repository. Yet we have environmentally motivated scare tactics to convince Nevadans that Yucca should be killed, this despite the money and jobs that would be brought to the state. John suggests that if the people of Nevada benefited directly and economically they would applaud the decision to commission Yucca. Since Yucca was first designated as the repository Nevada politicians have refused to have meaningful discussions with the federal agencies, thus removing any viable opportunity to explore and then publish a truly unbiased look at the tremendous economic opportunity for Nevadans.

So John proposes an annual rebate to NV ratepayers. First, the citizens would be informed of the status of all the engineering studies and conclusions concerning the safety of the Yucca site. Next, the public will be honestly informed of the economic benefits, research and industry coming to the state because of the Yucca location. Finally, since Nevada will be entitled to negotiate access fees from the federal government through its nuclear tax and its Nuclear Waste Fund, the bulk of those fees will go to Nevada ratepayers in the form of annual payments. There is ample precedent for this with the Alaska drilling and pipeline. John proposes 80% of the payments to ratepayers and 20% to the state coffers. There would be specific rules to preserve the economic effect of these annual payments to the ratepayers intact and to avoid adverse effects of inflation. With good voter information on safety and economic incentive to ratepayers Yucca Mountain would be the nation’s nuclear repository and the federal money heretofore spent would not go to waste.

In summary, John Dunn gave an excellent presentation of a new way to look at and gain from the Yucca Mountain political football. It was widely endorsed by those in attendance with an agreed follow up discussions with state politicians and opinion makers.

Another left-coast leftist apostle of Al Gore is having his day of fame. Henry Waxman and ilk will command physics and economics to accomplish impossible goals. Americans will pay the price while China et al laugh all the way to the bank.

Cap-and-trade theologians love to invoke markets: Merely put a price on carbon, they say, and the invisible hand will shoo us toward an eco-friendly future. Of course Congress has its own ideas.

Take the climate bill just offered by House powers Henry Waxman of California and Ed Markey of Massachusetts. The 648-page “discussion draft” ducks the most important policy questions about what Democrat Ben Cardin calls “the most significant revenue-generating proposal of our time” — namely, how the tax will be levied and the proceeds spent. But it does find space to impose thousands of new environmental regulations on the entire economy, all separate from cap and trade.

Right off, the bill mandates that 25% of U.S. electricity come from wind, solar, geothermal or biomass by 2025. Sorry, nuclear doesn’t count. This kind of renewable portfolio standard directly contradicts the putative flexibility of cap and trade, which is supposed to allow businesses to reduce CO2 how and where it is least expensive. But Democrats aren’t about to let the details of their own policies stand in the way of magical thinking.

Despite political favoritism and billions in subsidies, wind still only accounts for about 1% of U.S. net electric generation, and solar all of one-hundredth of 1%. So now the liberal solution is simply to force people to buy them, a la the ethanol mandate. Yet it will be difficult for renewables to ever reach 25%, given their inherent limitations (intermittency) and, ironically, green opposition (no new power lines). That won’t stop Congress from punishing utilities that fail to meet an impossible goal.

via Henry Waxman’s Climate Bill Imposes Environmental Regulations on the Entire Economy – WSJ.com.

Our upcoming discussions of the science of alternative energy will necessarily encompass economics.

Tom Motherway, tom@renohayek.com

What a broad topic we have on the table for the upcoming discussion. As with all of our topics, our discussions will be updated and ongoing from dinner to dinner. Below I offer a few links for reference:

A very comprehensive site is available from the Energy Information Administration which publishes the official energy statistics from the US government. 2006 is the last published edition. Charts galore, here!

The ubiquitous Wikipedia serves up a good page which as with some of their topics is a work in progress. Here you get excellent graphics which are worth a thousand words. Check it out.

Back to the government for the third reference, at National Atlas. This is a fairly good descriptive article on US renewable energy sources.

The issues are economic, environmental, political, international in nature and all with national security aspects.