One legislative victim of the Republican victory in the recent elections is the long languishing bill for “cap and trade” rules to control green house emissions. A bit complex this new law seeks to “cap”amounts of emissions various actors, basically industry, electric generation, and transportation, emit. The “trade” part comes when an actor uses less than his allowance, he can sell the unused part to another actor, which is consistent with the overall goal to reduce the total amount of emissions.
While this system is designed to reduce, or control, emissions, it will add to costs, since many actors will have to buy surplus allowances.
Until now, the Republicans in the Congress have opposed this law that would increase costs for basic goods and services at a time the economy is still battling massive unemployment. The new comers from the party are even more adament about opposing cap and trade.
Thus the “good” war to save the planet has lost another battle. No real news here since the campaign has been moribund since the Copenhagen Conference collapsed some time ago.
But those committed to developing alternative energies that do not produce green house emissions still carry on. My current business partner in the wine business also owns a quarry producing slate and granite. In still another endeavor he erected a large field of solar panels to provide all the electricity used at the quarry. From this experience he is now engaged with the the maker of the solar panels in Germany in selling large photovoltaic installations to major users.
Before going to New Mexico recently to speak with Governor Bill Richardson about erecting some installations there, I talked to him about the project. I urged him to keep his attention on two key factors. First, subsidies that will be available for such projects and second, price guarantees for the electricity produced.
You see, the main hurdle facing alternative energies is not a cabal of petroleum companies stiffling their development but the plain truth that there is enough petroleum that can be produced at less than $10 a barrel to supply the world’s current and anticipated energy needs for the next 100 years. This is way below the current price of oil circa $75 a barrel which makes alternative energies price competitive. The problem is that the producing countries can lower their price by substantial amounts and still make money, thus rendering alternative energies non-competitive.
To avoid this all suppliers of alternaive sources of electricity exact a price guarantee from the regulatory authorities, usually the state, before they put a shovel in the ground. The danger here is that, if after the alternative electricity comes on line, the price of petroleum goes down, the consumer will still have to pay the higher cost of the alternative electricity. And while everyone seems to want to climb on board the alternative energy bandwagon, they may not want to continue to ride when the price is much higher than using petroleum based electricity.
My wine partner now tells me that Governor Richardson confirmed that there would be state subsidies and guaranteed prices for the contemplated photovoltaic installations. Let’s hope the major oil producers continue to charge 7-8 times the cost of production for their oil.