Common Tragedies

Thoughts on Environmental Economics

Are you sitting down? I’m going to defend W.

Posted by Rich Sweeney on December 8, 2007

Today on NYTimes’ The Board, the editorial board derides President Bush’s opposition to a 15% Renewable Portfolio Standard (RPS) as flip flopping. This is because as Governor of Texas, Bush implemented a very forward looking and successful statewide RPS. Therefore, clearly his opposition to a national RPS can only be the result of Cheney, Rove, and industry “getting to him”. However, while it is certainly possible that some undesirable influence got to Bush, the premise that what’s right for Texas’ electricity market is necessarily right for the country as a whole is far from true. Texas is unique for two important reasons. The first received only cursory mention from the Board, while the second was ignored entirely.

Texas has by far and away the largest amount of available wind resources. I’m not talking about turbines, I’m talking about wind itself. The article notes that “Texas actually accounted for more than half the new wind energy installed nationwide this year,” implying that this was simply the result of the RPS and had nothing at all to do with resource avialability. The following paragraph acknowledges that Texas has a lot of wind, but implies that there are a wide range of other options available to the rest of the nation. As someone who models the the US electricity market, I’d really love to know what these options are in, for example, the southeast. The bill includes provisions for trading, but this could potentially lead to a large transfer to states like Texas that just happen to have a lot of renewable capacity.

The other reason Texas is unique is that it constitutes the only self-contained NERC (North American Energy Reliability Corporation) region in the country. This alleviates an enormous amount of regulatory red tape and politicking, and gives the state unparalleled freedom to regulate and expand its grid. One of the benefits of this is “postage stamp” transmission rates, which effectively subsidize costly, remote locations. When, it comes to renewables, transmission is often the single biggest barrier to entry.

None of this is to say that I necessarily agree with Bush, or that I’m definitely opposed to the bill in question. I just wanted to note that the White House’s position wasn’t obviously disingenuous. A lot of Congressman from the southeastern states, on both sides of the aisle, have voiced similar concerns. With that being said, I am become increasingly concerned about the short run societal costs of an RPS. Hell, you can’t even buy a wind turbine these days. I obviously like the idea of clean energy, but am instinctively apprehensive about any attempt for the government to pick winners. More to come on this soon.

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