06 July, 2018

The Economics of Solar Power

Interesting article outlining the faulty economics behind rooftop solar for homes. 

Solar as an energy source should stand on its own merit or lose to cheaper, more effective sources of energy.  Market-distorting subsidies and regulations should not be competitive advantages.

The Incredible Scam of Rooftop Solar
By Norman Rogers

A modest proposal:

We've all heard about "shop local" and "get your food from local farmers, not distant corporate farms." Lots of people have apple trees in their backyards. Often they can't begin to eat or give away all the apples. In the meantime, big supermarkets sell corporate apples for one dollar a pound and up. I propose that people with backyard apples be able to take them to the supermarket and sell them to the supermarket for the same price at which the supermarket is selling apples. Furthermore, they should be able to take them at any time and receive payment. If the store gets too many local apples, it can reduce its purchase of corporate apples.

My apple proposal may seem ill advised, but that is exactly how rooftop solar power works. The homeowner gets to displace power from the power company, and if the homeowner has more power than he needs, the power company is obligated to purchase it, often for the same retail price at which it sells electricity. That policy is called net metering. In order to accommodate the homeowner's electric power, the utility has to throttle down some other power plant that produces power at a lower wholesale price.

The exact arrangements for accepting rooftop solar vary by jurisdiction. In some places, net metering is restricted in one way or another.

A large-scale natural gas-generating plant can supply electricity for around 6 cents per kilowatt-hour. Rooftop solar electricity costs, without subsidies, around 30 cents per kilowatt-hour, or five times as much. Average retail rates for electricity in most places are between 8 cents and 16 cents per kilowatt-hour. Yet, paradoxically, the homeowner can often reduce this electric bill by installing rooftop solar.

It is actually worse than forcing the power company to take 30-cent electricity that it could get from a natural gas plant for 6 cents. When the company throttles down a natural gas plant to make room for rooftop electricity, it is not saving six cents, because it already has paid for the gas plant. All it saves is the marginal fuel that is saved when the plant is throttled down to make room for the rooftop electricity. The saving in fuel is about 2 cents per kilowatt-hour. So 30-cent electricity displaces grid electricity and saves two cents.

But where does the other 28 cents come from? Who pays for that? Part is paid for by the federal 30% subsidy for solar energy construction cost. That takes care of about nine cents per kilowatt-hour. That leaves the homeowner with electricity costing him 21 cents per kilowatt-hour. The cost comes from his monthly payments on the loan to build the solar system divided by the number of kilowatt-hours generated that month. If he pays cash for the solar system, then the monthly cost is his lost investment return on the cash he paid. If he lives in a jurisdiction where electricity costs 11 cents, then he is losing 10 cents for each kilowatt-hour generated (21 cents minus 11 cents). But if he lives in California, where larger home users of electricity pay 53 cents per kilowatt-hour if they consume beyond a baseline limit, he saves 32 cents for each kilowatt-hour of solar electricity generated. In that case, the power company is losing kilowatt-hours it could have sold for 53 cents. Other customers have to pay more to make up the lost revenue.

From the standpoint of society, rooftop solar substitutes 30-cent electricity in order to save two cents. If the homeowner is at least breaking even, as he usually is, he hasn't lost anything due to the substitution. The money to pay for the 30-cent electricity comes from the taxpayer-provided subsidy and revenue that is no longer paid to the power company. The taxpayers and power company pay for 30-cent electricity that could have been obtained for two cents by burning a little more natural gas. If the homeowner makes a profit on the solar power, then the burden on everyone else is even greater. Since the power company is guaranteed a rate of return, or at least has to break even, rates have to be raised enough to pay for the overpriced rooftop electricity. The burden falls on society to pay for the scheme. The purveyors of rooftop solar, crackpot environmentalists and rooftop solar-owners, are happy. Everyone else is screwed.

Here is an example of rooftop solar that costs 30 cents a kilowatt-hour. A 5-kilowatt rooftop system costs about $21,000 installed. It will generate 7,000 kilowatt-hours per year. If it is financed over 20 years at 8% interest, the annual payment will be $2,139. The cost per kilowatt-hour is $2,139/7,000 = $0.306, or 30.6 cents per kilowatt-hour. Of course, costs and interest rates vary, as does sunshine. If you think 8% is too high for the interest rate, ask yourself if you would loan your neighbor $21,000 for 20 years for less. Rooftop solar is expensive compared to utility-scale solar, because it is a small custom installation. The orientation and slope of the house roof may be less than ideal. Large-scale utility solar, in contrast, can be as cheap as seven cents per kilowatt-hour.

An increasing problem, already present in California, is too much solar. The electric grid has a combination of base load power and additional peaking loads. The base load runs 24 hours a day and is not easy to throttle down. Solar power peaks around midday. If there is so much solar as to threaten the base generation, solar has to be curtailed. In California, this happens in the spring, when sunshine is plentiful but the air-conditioning load is not yet large. When solar dies, in the hour before sunset, peak power consumption is often being reached. In that case, solar aggravates the rate at which the rest of the grid has to increase power output to handle the early evening peak. If the homeowner is at least breaking even, he is probably generating surplus electricity during the middle of the day, adding more solar during the critical midday period and increasing the size of the sudden surge in power demand when the sun fades.

Utility-scale solar costing seven cents is a big waste of money. Rooftop solar costing 30 cents is insane. Special interests – the solar industry and environmentalist crackpots – have convinced legislatures and public utility commissions to stack the deck with net metering and absurdly high tiered electric rates. The result is to make it profitable for homeowners to invest in what otherwise would be very expensive electricity. Society as a whole pays for the economic waste, amounting typically to 28 cents per kilowatt-hour of rooftop electricity.

It is foolish to justify rooftop solar on the grounds of reducing CO2 emissions, because if you work the numbers, it costs about $800 to avoid emitting a metric ton of CO2 using rooftop solar. You can buy a carbon offset that does the same thing for $10. Reducing CO2 emissions is dubious in any case. Global warming-climate change ideology is struggling because warming is not remotely meeting expectations. Believers are starting to lose their faith in global warming. It is dawning on them that global warming is another scary disaster in a long parade of scary disasters that never materialize but make money for interested parties. Fewer people want to waste billions on a quixotic quest for renewable power.

The most prominent remaining global warming believers are now advocating nuclear power as the best means of reducing CO2 emissions. CO2 is plant food that makes plants grow better with less water. It greens deserts and increases agricultural productivity. Bring it on.

10 April, 2018

'Equal Pay' - The Myth that Just Won't Die

Equal Pay Day Celebrates a Tiresome Myth That Just Won't Die

By Andrew Biggs & Mark Perry
April 10, 2018

Equal Pay Day falls on April 10 this year, and supposedly represents how far into 2018 women must continue working to earn what their male counterparts earned last year. The National Center for Pay Equity promotes Equal Pay Day annually to bring attention to the so-called “gender pay gap,” which claims that women receive 20% lower pay on average for doing the same work as men. But the 20% gender wage gap is actually a tiresome statistical myth that persists in the face of overwhelming evidence to the contrary.

The reality is that men and women make very different career and work choices, and frequently play very different family roles, especially for families with children. While gender discrimination undoubtedly occurs, it is individuals’ choice – not discrimination – which accounts for the vast majority of gender differences in earnings.

Labor economists have conducted numerous studies over many decades to explain differences in earnings among all types of workers. Economists believe that two main factors influence the earnings received by a given worker.

The most important factor is the skills and productivity that an employee brings to the job. This can include both formal education, skills learned on the job through work experience and the sheer amount of time that a person works. Data show that male employees tend to have more years of work experience than females, and also work more hours per week on average than women.

Men also tend to gravitate toward college majors with greater market value than women. For instance, roughly 80% of engineering and computer science majors are male while two-thirds of liberal arts, drama, dance, education and fine arts majors are female. There is nothing wrong with these choices, but it’s also reasonable to expect these choices to translate into wide variations in earnings after graduation, since market forces in the labor market determine salaries for different educational specialties.

But there’s a second component of earnings, which labor economists call “compensating wage differentials” that also explains gender variation in salaries. Compensating wage differentials are differences in pay that are designed to attract employees to jobs that otherwise would be undesirable. As Adam Smith said in The Wealth of Nations, “The wages of labor vary with the ease and hardship … of the occupation.”

The undesirable aspects of certain jobs can range from the mundane to the gruesome. For instance, men have longer average commute times to their jobs than women. In the U.S., the average male spends 33 more hours commuting to work each year. How much extra pay would you demand to spend the equivalent of four additional eight-hour days sitting in traffic or on a bus riding to work?

While a long commute is an inconvenience, men are also much more likely to be injured or killed on the job. Economists have long found that, all else equal, more dangerous jobs pay higher average wages than safer jobs. And the 20 jobs with the highest occupational fatality rates are on average 94% male and 92.5% of workplace fatalities overall are men. Relatively safe occupations such as office and administrative support and education, training, and library occupations are roughly three-quarters female. If you think it’s reasonable for dangerous jobs to pay higher salaries, then you should also conclude that men on average should earn more than women.

But there are positive factors as well. For instance, employees might willingly accept a lower salary if their job is rewarding or focuses on issues the employees believe in, be it helping children, protecting the environment, or fighting cancer. This is the realm of non-profits, and 7-in-10 employees of non-profit organizations are female. The typical claim that women are underpaid relative to men accounts for none of these factors.

Proponents of the gender pay gap myth would have you believe that any difference in earnings between men and women is the result of gender pay discrimination. The reality is that men and women are different – they gravitate to different college majors, they have different levels of work experiences, they play different family roles, and they often work in very different types of jobs.

It is bizarre to imagine that men and women would earn precisely the same on average despite those differences. It would also be completely unrealistic to suggest that the 20% difference in annual earnings is exclusively or even largely the result of gender discrimination. But to celebrate Equal Pay Day, those are some of the statistical fairy tales that you have to accept.

16 March, 2018

Stossel - Worry About Budget Deficits, Not Trade Deficits

Worry About Budget Deficits, Not Trade Deficits

Next year's $1 trillion federal government budget deficit will bankrupt us. Trade deficits are trivial.

Maybe Donald Trump is such a powerful communicator and pot-stirrer that other countries, embarrassed by their own trade barriers, will eliminate them. Then I will thank the president for the wonderful thing he did. Genuine free trade will be a recipe for wonderful economic growth.

But I fear the opposite: a trade war and stagnation—because much of what Trump and his followers say is economically absurd.

"(If) you don't have steel, you don't have a country!" announced the president.

Lots of things are essential to America—and international trade is the best way to make sure we have them. When a storm blocks roads in the Midwest, we get supplies from Canada, Mexico, even China. Why add roadblocks?

Steel is important, but "the choice isn't between producing 100 percent of our steel (and having a country) or producing no steel (and presumably losing our country)," writes Veronique De Rugy of the Mercatus Center.

Today, most steel we use is made in America. Imports come from friendly places like Canada and Europe. Just 3 percent come from China.

Still, insists the president, "Nearly two-thirds of American raw steel companies have gone out of business!"

There's been consolidation. But so what? For 30 years, American steel production has stayed about the same. Profits rose from $714 million in 2016 to $2.8 billion last year. And the industry added nearly 8,000 jobs.

Trump says, "Our factories were left to rot and to rust all over the place. Thriving communities turned into ghost towns. You guys know that, right?"

No. Few American communities became ghost towns. More boomed because of cheap imports.

It's sad when a steelworker loses work, but for every steelworker, 40 Americans work in industries that use steel. They, and we, benefit from lower prices.

Trump touts the handful of companies benefiting from his tariffs: "Century Aluminum in Kentucky—Century is a great company—will be investing over $100 million."

Great. But now we'll get a feeding frenzy of businesses competing to catch Trump's ear. Century Aluminum got his attention. Your company better pay lobbyists. Countries, too.

After speaking to Prime Minister Malcolm Turnbull of Australia, Trump tweeted: "We don't have to impose steel or aluminum tariffs on our ally, the great nation of Australia!"

Economies thrive when there are clear rules that everyone understands. Now we've got "The Art of the Deal," one company and country at a time.

I understand that Trump the developer liked to make special deals, but when presidents do that, it's crony capitalism—crapitalism. You get the deal if you know the right people. That's what kept most of Africa and South America poor.

But Trump thinks trade itself makes us poorer: "We lose ... on trade. Every year $800 billion."

Actually, last year's trade deficit with China was $375 billion. But even if it were $800 billion, who cares? All a trade deficit shows is that a country sells us more than we sell them. We get the better of that deal. They get excess dollar bills, but we get stuff.

05 December, 2017

Cake Baker's POV

Do you find Jack's perspective compelling?  I do.  Not sure anyone (artist or otherwise) should be compelled to apply their skills against their will, even if this frustrates or insults others.

If a business owner is willing to sacrifice that business (and risk the reputational impact), they should be free to do so.

Here's why I can’t custom-design cakes for same-sex weddings

What I didn’t say was that I wouldn’t sell them a cake.

I’m happy to sell a cake to anyone, whatever his or her sexual identity. People should be free to make their own moral choices. I don’t have to agree with them.

But I am responsible for my own choices. And it was that responsibility that led me to decline when two gentlemen came into my shop and invited me to create a wedding cake for their same-sex ceremony.

Designing a wedding cake is a very different thing from, say, baking a brownie. When people commission such a cake, they’re requesting something that’s designed to express something about the event and about the couple.

What I design is not just a tower of flour and sugar, but a message tailored to a specific couple and a specific event — a message telling all who see it that this event is a wedding and that it is an occasion for celebration.

In this case, I couldn’t. What a cake celebrating this event would communicate was a message that contradicts my deepest religious convictions, and as an artist, that’s just not something I’m able to do, so I politely declined.

But this wasn’t just a business decision. More than anything else, it was a reflection of my commitment to my faith. My religious convictions on this are grounded in the biblical teaching that God designed marriage as the union of one man and one woman.

Obviously, not everyone shares those convictions. I don’t expect them to. Each of us makes our own choices; each of us decides how closely we will hold to, defend and live out those choices.

The two men who came into my shop that day were living out their beliefs. All I did was attempt to live out mine. I respect their right to choose and hoped they would respect mine.

They did not. And, considering all of the hate mail, obscene calls and death threats my family has received since I was sued, a lot of other people don’t see tolerance as a two-way street, either.

But the Constitution does. The First Amendment defends my right to create custom cake art that is consistent with my faith, while declining requests that ask me to celebrate events or messages that conflict with my faith. As a cake artist, I can live out my faith in my day-to-day life, and make that faith the basis for my creative decisions.

We live in a big, diverse nation. We don’t all have to agree on religion. We don’t have to agree on questions of sexual morality. We don’t even have to agree on the meaning of marriage.

What we should be able to agree on is our mutual freedom, as Americans, to live out the ideals that are most important to us.

Just as I shouldn’t be able to use the law to force others to design something that promotes my beliefs, others shouldn’t be able to force me to design a cake that celebrates theirs.

That, for me and those at Alliance Defending Freedom who are defending me, is what this case is about. I hope the U.S. Supreme Court affirms that basic freedom.

And if those who oppose me would grant me a certain measure of respect — not as someone they agree with, but as a fellow citizen free to stand by my own moral choices, well … that would be icing on the cake.

Jack Phillips is the owner of Masterpiece Cakeshop in Lakewood, Colo. Oral arguments for Masterpiece Cakeshop v. Colorado Civil Rights Commission will be heard Tuesday.

20 October, 2017

Taxes and 'Fair Share'

How exactly are the rich not paying their 'fair share' again?  

Any why is it inappropriate that tax reform reduces income taxes for the people who actually pay the tax?