Tweening Around the Tworld!

One SolarAustin Board Member’s View…

SolarAustin recently hosted our City Council candidates to lunch for a briefing on the energy issues facing Austin.

We proposed multiple methods to manage the emerging energy crisis and preserve our environment. Yet, all of our advice can be distilled into a simple proposition: invest early in renewable energy to reduce our long term energy costs and preserve our quality of life.

In detail, we proposed that Austin needs to honor Mayor Wynn’s acceptance of the Energy Freedom Challenge to get Austin using renewable energy sources for 50% of its energy needs by 2025. In the face of rising oil and gas prices, this is the economically prudent thing to do. To reach this goal while Austin is growing requires a major shift in thinking, we need to shift all of our energy investments into renewable sources. We already have enough coal, gas and nuclear power till 2025 and beyond.

Furthermore, like many of the large companies that have made the ‘Green Choice’ for prudent economic reasons, Austin city government needs to make the ‘Green Choice’ too. While Austin has been a leader in procuring renewable energy, the City, itself, has been a laggard user of that energy. In particular, Austin’s Water Utility uses close to 60% of all energy purchased by city government. Clean, potable water takes significant amounts of energy to deliver to citizens. While Austin Water will push back and complain that ‘Green Choice’ is ’sold out’, we citizens need to understand that they chose not to buy ‘Green Choice’ energy when they had the chance. What did other large businesses in Austin understand that Austin’s city government did not? That renewable energy provides price stability in an uncertain world. Our city government should be managing our costs much better than they are.

Finally, the Texas Gas Service franchise is up for renewal this year. Many of our citizens are caught in the ‘gas trap’. The ‘trap’ is that prices are going up and they cannot afford the up front investments in insulation and solar water heating to escape the trap. Solar water heating can reduce upwards of 50% of your annual natural gas bill. The franchise agreement used to contain a conservation fee. If that fee was still in effect, it would have produced a conservation fund of over $2,000,000 dollars a year. Because energy conservation hurts Texas Gas Service revenues, we are not surprised that they renegotiated the 1986 franchise agreement to basically eliminate conservation efforts. (TGS spent $257,000 last year versus $2,000,000 on conservation.) SolarAustin wants the conservation fee reinstated and to have the proceeds directed towards low income individuals for insulation and solar water heating. (Citizens of higher economic means can take advantage of a Federal solar water heating tax credit.)

SolarAustin wants to encourage responsible, prudent renewable energy investments. We encourage you to ask City Council candidates how they intend to invest your tax dollars in our long term energy future.

The below link is a good overview of how our elected representatives mislead American citizens.

The Politics of Oil: The Discourse Must Change

We have an energy crisis. The last time we had such a crisis, America rose to the challenge.

What about this time?

America is a hostage to middle eastern politics. Our troops are buying us some time to re-engineer our infrastructure. Are we rising to this challenge?

Are we supporting our troops and their sacrifices by actually changing our behavior?

Are we making the investments in coal to oil conversion plants to wean us off of middle eastern oil?

Are we ‘hardening’ our economy against outside energy manipulation? Al-Qaeda has already tried to stop Saudi Oil deliveries. They will keep trying. They may succeed. Are we ready?

Are we ready when the next Katrina roars through the Gulf of Mexico sometime in the next ten years?

Are we fully examining all of the alternative energy technologies available? Or just those, like hydrogen, that are a Detroit-lead masquerade pretending to actually developing new transportation fuels? That delay the U.S. from slipping the economic noose that is middle eastern oil.

Unfortunately, I think the answer to all of the above questions is no.

The conventional wisdom says some choices facing our society are between:

• Competition versus Regulation;
• Private Interests versus Public Interests;
• Exploitation versus Conservation;

But isn’t the real issue incentives? Getting the balance right?

• Short Term Incentives versus Long Term Incentives;

It appears to me that every conflict in our society boils down to this choice.

For example: Municipal energy and water utilities (munis) versus private utilities.

The private utility has a short term focus - quarterly or annual return on investment. These organizations have, in fact, a fiduciary responsibility to their owners to maximize profit each and every quarter. Traditional business methods discount future profits (a net present value calculation) in favor of current profits. Here is the capitalist system in the face of an uncertain future in a nutshell - a bird in the hand is worth two in the bush.

The fact that the muni’s owners are also its customers forces a long term view on the muni. Their job is to stay profitable but to also manage the financial load on its citizens. A private utility, with its non-local ownership, frequently has an adversarial relationship with its customers.

In other words, the muni does not have an incentive to charge what the market will bear. Because of its longer term focus, it wants to manage the financial load on its citizens. It has a vested interest in diverting some of its cash flow towards conservation efforts. In other words, the best energy bill for consumers is the one they no longer need to pay. The muni, because it depends upon municipal bonds approved and guaranteed by voters, also has a more difficult path to making large capital investments. In other words, the muni has a strong incentive to avoid capital investments. Conservation and modest physical plant paid for out of cash flow are, hence, easier for a muni.

The muni has an incentive to choose energy fuels that support the long term health of their owner-customers. They manage emissions because they cannot just file bankruptcy to avoid pollution expenses and sneak away with the cash.

The muni has an incentive to make fuel choices that bring long term certainty to energy costs. For example, business interests in Austin are the largest consumers of ‘Green Choice’ energy.

Munis serve the long term interests of their owners who are also their customers.

Another example: Poverty.

Poverty is a long term problem. In fact, it has been the norm of existence for most of the human population for all of recorded history. It is only in these relatively affluent times that we even notice poverty. Before now, everyone was poor. How do we solve this? Isn’t education the most effective path out of poverty for both individuals and our society? Isn’t that why we don’t allow child labor?

Education in all of society’s children - the longest term investment we humans can make with, coincidentally, the highest return.

Summary:

The balance between long term choices and the short term will be a recurrent theme on this blog. We always need to be mindful of Keynes - “In the long run, we’re all dead.”

Oil closed today at $73.73. The first Arab Oil Embargo took place in 1973. Coincidence?

America faces a challenge - how to muster the political will to develop alternative energy sources on the scale needed to maintain our quality of life. Providing our military youth to Iraq to build Middle Eastern stability will buy our society time to reinvest out of oil but will we? Our President tells us we are ‘addicted to oil’ and then does little about it. In my public service role, I watched a natural gas distribution company tell me last night that converting vehicles to natural gas was a gas conservation program. Substituting one middle eastern derived fuel for another is not conservation.

Both oil and natural gas are insecurity fuels.

Does anyone in the energy business pursue America’s interests?
Does anyone in Congress pursue America’s interests?

What are America’s interests, anyway?
    Life, Liberty and the Pursuit of Happiness?

Do we have Life when we lose a whole city to a hurricane?
Do we have Liberty when we are shackled by petroleum handcuffs to pre-modern societies that mean us ill?
Can we pursue happiness in the face of terrorism? Energy shortages? Population growth?

Any solution to these problems takes time.

For example, my wife and I have totally re-engineered our home for maximal energy efficiency. We replaced a mid-1950s home with a newly designed passive solar home. It has the long eaves, the low energy emissivity windows, the solar water heat and, recently, the solar photo-voltaic array. We purchase the energy that we don’t create from West Texas wind farms.

This process took us more than six years of planning, building and installing. We have sacrificed significant sums of money to be prepared for the energy crisis we are entering. Many more people are going to have to start making these kinds of investments for America to reclaim her Liberty.

Alternative Energy: Reclaiming America’s Liberty.