Author: bill

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Solar Subsidy Sinkhole :: Re-Evaluating Germany’s Blind Faith in the Sun

From the Spiegel Online we get this update on solar power and subsidies in Germany. For people who have done the solar power calculations for northern latitudes the findings in this article are not surprising. The math is pretty easy. What is newsworthy is that it took €8 billion ($10.2 billion) in subsidies in 2011 before someone in Germany finally spoke up.

The Baedeker travel guide is now available in an environmentally-friendly version. The 200-page book, entitled "Germany РDiscover Renewable Energy," lists the sights of the solar age: the solar caf̩ in Kirchzarten, the solar golf course in Bad Saulgau, the light tower in Solingen and the "Alster Sun" in Hamburg, possibly the largest solar boat in the world.

The only thing that’s missing at the moment is sunshine. For weeks now, the 1.1 million solar power systems in Germany have generated almost no electricity. The days are short, the weather is bad and the sky is overcast.

As is so often the case in winter, all solar panels more or less stopped generating electricity at the same time. To avert power shortages, Germany currently has to import large amounts of electricity generated at nuclear power plants in France and the Czech Republic. To offset the temporary loss of solar power, grid operator Tennet resorted to an emergency backup plan, powering up an old oil-fired plant in the Austrian city of Graz.

Solar energy has gone from being the great white hope, to an impediment, to a reliable energy supply. Solar farm operators and homeowners with solar panels on their roofs collected more than €8 billion ($10.2 billion) in subsidies in 2011, but the electricity they generated made up only about 3 percent of the total power supply, and that at unpredictable times.

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Constitution 101

Last week I signed up for the Hillsdale online course called Constitution 101 and purchased a copy of the The U.S. Constitution: A Reader. One of the commenters on the Powerline Blog mentioned the course and considering my recent fascination with our founders arguments in the process of writing the Constitution. Over the last two years this curiosity has led me to listen to audiobooks on the Anti-Federalist and Federalist papers and to purchase a pocket copy of the Declaration of Independence and the Constitution. What I found so fascinating about these documents and their authors is that the language and the factions may have changed but the problems they faced are very similar to the problems we face today. We are still arguing over the definition of equality, what is the scope of federal power, and how to a form of government that works for the people. To further my understanding of our Constitution, I am hoping to stretch myself mentally and try to imagine what the constitution writers in Iraq and Egypt are facing.

Here is the comment I made on the Powerline Blog called Liberals and the Constitution.

Since I recently finished listening to the audio-book version of "The Original Argument: The Federalists’ Case for the Constitution, Adapted for the 21st Century", I was surprised with Justice Ginsburg’s comments. She starts out her interview congratulating Egypt on deposing Hosni Mubarak and then she immediately jumps to promoting human rights in the new Egyptian constitution. Since I doubt Egyptians and Justice Ginsburg agree on the definition of human rights, this was a curious effort on her part.
I was also surprised that she so quickly wrote off the constitutional efforts of our founding fathers at forming a stable government and balancing the political powers. Alexander Hamilton and James Madison tried to incorporate the best parts of existing governments at that time when they put together the Constitution. They also tried to balance the expectations of the various political factions. I expect the Egyptians will do the same  unless they suddenly have a change of heart toward Mubarak and the competing political interests. Egypt does not need to follow our constitutional model but they absolutely must find an appropriate balance of political power and safeguards to prevent the next dictator from attaining power. If they can show the world that they have a stable, workable government then they can start making some progress knocking down the unemployment and defusing the widespread distrust. Human rights issues are important but like the United States, this balance of power issue must be solved or there will blood in the streets.

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How to Cut the Cost of Contraceptives by Regulating Less, David Henderson | EconLog | Library of Economics and Liberty

Here is an interesting solution to the contraceptive debate. You change the policy to allow pharmacists to determine whether a female can purchase contraceptives. This policy could be extended to several drugs that presently require prescriptions such as Viagra. Increased access typically results in lower costs. This could  lower health care costs without lowering health care outcomes.

What is the regulation? It’s the one that requires contraceptive pills to be prescription drugs. If, instead, drug companies were allowed to sell contraceptives over the counter, access would rise and cost would fall.

But let’s say that you think that’s a little too much freedom for women to have. I don’t think that, but it’s not unusual that I’m in the minority here. I think women should be much freer than most people think. I think they should be free to buy foreign trucks without paying a tariff and should be free to buy goods from Cuba and Iran, to take two examples.

But, OK. Let’s say I can’t convince you. So how about this? Have the government keep insisting that contraceptives be prescription drugs–can’t trust those women, don’t you know–but let pharmacists decide whether to sell them to women who ask for them. In other words, cut the high-priced doctor out of the loop. This is done in many countries and, in fact, was done in the United States before 1938. Pharmacists often have more information about drugs than doctors do: fancy that.

With that little step, access would rise and cost would fall.

How to Cut the Cost of Contraceptives by Regulating Less, David Henderson | EconLog | Library of Economics and Liberty

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Why Isn’t Contraception part of the Gold Plan?

I do not have a problem with other people using contraception or getting it paid as part of their health plan. I do have a problem with me paying part of it. The simple solution is for contraception to be a benefit of the Affordable Care Act’s “Gold” plan or as an extra cost item for the Essential Benefit’s option. Sex is a choice not an “Essential Benefit”. As part of my health insurance I can pay extra for dental coverage. I think benefits like dental coverage and contraception should be extra cost options.  Our policy wonks seem to be locked into thinking that health care must be locked into a fairly rigid structure. The plans must be follow a “Bronze”, “Silver”, and “Gold” structure with no exceptions. A “cafeteria” style plan is a more flexible and logical alternative and is the more typical offering in the real world. It would at least show that the policy wonks were not asleep in Marketing 101. This is a pretty common practice in the insurance industry.

The fundamental question is whether society is better served with heath care under the tax model or the insurance model. Since most of our health care is paid for by a third party system, it works and feels like a tax. For people purchasing health care insurance directly it works and feels like an insurance policy. The interesting irony is that ACA realizes that the third party payment system is not affordable or sustainable and their first act is to make individual health care insurance unaffordable and not sustainable. This is not a strategy to lower health care costs. In a previous post I compared Ohio health care insurance to Massachusetts. The cost of “Essential Benefits” in Ohio was $305 per month and the cost in Massachusetts was $1,296. To put this in perspective I purchased a two year old car last year for what I would have paid for “Essential Benefits” health insurance premiums in Massachusetts. I could have bought a new car with the cost of a “Gold” plan. In my entire 35 years of paying health care costs for my family, we have not spent what the average Massachusetts person pays in one year for their “Gold” plan. Our health care costs do not make sense so our first attempt at fixing the health cost problem is to model a national system after Massachusetts! With Massachusetts as our model why do we expect health care costs will slow down? It is a sign of insanity when you keep doing the same thing and expect different results.

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Lightened Seven-Layer Taco Dip: A Super Bowl OF FLAVOR

The wife gave me the look when I made this dish for the Super Bowl. She was still giving me a suspicious look even after I told her how the dish was made with low fat and fat-free cheeses. It is good and it took us several days to finish it off.

Lightened Seven Layer Taco Dip
56 servings (seriously)
Adapted from All Recipes.
1-oz. package taco seasoning mix (or make your own )
16-oz. can fat-free refried beans
8-oz. package fat-free cream cheese, softened
16-oz. container fat-free sour cream
16-oz. jar salsa
1 large tomato, chopped
1 green bell pepper, chopped
1 bunch chopped green onions
1 small head iceberg lettuce, shredded
6-oz. can sliced black olives, drained
2 cups reduced-fat shredded Cheddar cheese (or shred your own 8-oz bar)
1) In a medium bowl, mix taco seasoning thoroughly with refried beans. Transfer it to a large platter or bowl, spreading it out on the bottom
2) In a separate medium bowl, mix sour cream and cream cheese. Pour it over refried beans and spread.
3) Pour salsa over sour cream/cream cheese mixture. Spread out. Then, layer with: tomato, bell pepper, onions and lettuce. Finish with cheese and sprinkle olives over everything.
Approximate Calories, Fat, and Price per Serving
36 calories, 1 g fat, $0.25
Calculations
1 (1 ounce) package taco seasoning mix: 45 calories, 0 g fat, $0.25
1 (16 ounce) can fat-free refried beans: 385 calories, 0 g fat, $0.89
1 (8 ounce) package fat-free cream cheese, softened: 218 calories, 3.1 g fat, $2.69
1 (16 ounce) container fat-free sour cream: 336 calories, 0 g fat, $1.20
1 (16 ounce) jar salsa: 123 calories, 0.7 g fat, $1.50
1 large tomato: 22 calories, 0.2 g fat, $1.00
1 green bell pepper: 24 calories, 0.2 g fat, $0.50
1 bunch chopped green onions: 32 calories, 0.2 g fat, $0.79
1 small head iceberg lettuce: 45 calories, 0.5 g fat, $0.99
1 (6 ounce) can sliced black olives: 80 calories, 6 g fat, $1.49
2 cups reduced-fat shredded Cheddar cheese: 720 calories, 48 g fat, $2.50
TOTAL: 2030 calories, 58.8 g fat, $13.80
PER SERVING (TOTAL/56): 36 calories, 1 g fat, $0.25

Lightened Seven-Layer Taco Dip: A Super Bowl OF FLAVOR

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Another Follow up on Green Technology that pays for itself

Last month I wrote a follow up, Follow up on Green Technology that pays for itself, in which I said that the additional insulation I put in the ceiling resulted in a 10.2% drop in kilowatt hours and a $29.78 drop in the total bill. Another month has passed and I was hopeful that the January bill would show an even larger drop. The January bill has arrived and I am disappointed. The bill came in much lower, $63.92, but most of the lower cost can attributed to a warmer January. The amount of money I can attribute to the insulation is only $7. I have a couple ideas on how we used more electricity. Oh well!

For kicks I decided to run the 2011 data(minus the air conditioner months of June through September) through a linear regression. A polynomial equation fits the data better, but the linear equation gives me a nice multiplier to work with. Here is my graph.

2011 Goshen Heating Regression

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Another #greenfail – energy efficiency incentives meet Occam’s razor

A few weeks ago I made a comment on an article, Energy Efficiency: Cheapest Power Around, but Getting More Expensive, about my belief that we were wasting money on some of the energy efficiency initiatives sponsored by electric utilities. In the article they state,

IEE’s report didn’t get at how each dollar of utility energy efficiency money was spent, though it’s clear that the majority is still coming from simple steps like replacing lights and appliances with newer, more efficient models, as well as encouraging people to change behavior in energy-saving ways, Wood said.

In my comment I pointed out that when our heat pump broke down in 2010, we were going to buy a high efficiency heat pump regardless of the rebate. Although the rebate was appreciated it was not very important in our decision. The other major energy efficient effort by our utility was to give away compact fluorescent lights(CFL). Since I already had extra CFLs on my shelf I will probably not use these new CFLs for a couple of years. From my experience rate reduction was a better use of money that more people can take advantage of.

In a subsequent comment I was surprised to find that this comment offended someone and he attempted to defend the policy by claiming that he knew what I would really do. Here is the quote,

How can you really say you would have purchased the high efficiency model? What people say is often not what they do – despite what classic economic theory says about rational behavior.

So I went back and reviewed the marketing brochures, cost estimates, and the decisions made by my wife and myself in replacing the heat pump. My conclusion is unchanged except I am now convinced that the energy efficiency experts slept through their Marketing 101 class. The most important reason my wife and I were going to buy a high efficiency model is that buying a low cost, inefficient model was not an option. Using the 2010 Bryant brochure as an example we were offered three different models that varied from the less expensive model with a 13+ SEER and  9 HSPF to the most expensive model with a 16+ SEER and 9 HSPF. It is interesting to note that all of the brochures talked primarily about performance, warranty, and special additions available on the more expensive models.  None of the brochures used the rebate as a selling point. By chance one of the brochures mentioned  that the Energy Department had decided in 2006 that all new AC units or heat pumps would have a minimum of 13  SEER. When I look at various 2010 brochures it appears that all of the manufacturers complied. From a general viewpoint it is easy to conclude that the 2006 Energy Department decision was primarily responsible for the energy efficiency gains. It is this simple stuff that "green" investment advocates cannot get a handle on.

Even if we delve into more specifics, the argument for energy efficiency rebates does not get any better. At our house we consume half of our annual electric power in the three coldest months. Naturally the most important energy efficiency specification is the heating system performance(HSPF). Since our old heat pump had a 9.2 SEER and an unknown but undoubtedly low HSPF, I was happy with all of the models offered by Bryant. All of the specifications were much better but the heating system performance had improved dramatically for heat pumps in the last ten years. My wife had an additional requirement, she wanted a heat pump with a good warranty. She wanted the moderately expensive model since it had a good warranty. It was nice that it qualified for the energy rebate but as you can see it was not an important factor in our decision making. Since the HSPF numbers for the different models were the same, our annual kilowatt usage was going to be about the same regardless of the model we selected.

Whichever way I looked at energy efficiency rebates, it was primarily a political idea that was not going to change our behavior. I suspect other people replacing AC and heat pumps came to the same conclusions. The rebate was 3% of the total bill. Since the rebate is no longer being offered in 2012, I have to conclude that the saner minds in government agree that this an incentive we can live without. I chalk this up as another #greenfail like the bankrupt firms of Solyndra and Ener1. Much ado about nothing!

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What I Learned from This Time Is Different–Sovereign debt is forever until ok…whatever!?

The bottom line for 2012 is that for advanced economies who are unwilling to devalue their currency, allow high interest rates, encourage high inflation rates,  or default on their debt, the only solution is for these countries to pay down their debt. Without a financial calamity to motivate legislators to break the gridlock, this scenario sounds like a script for Mission Impossible. Does no pain translate to no gain? Sovereign debt investors would like these countries to grow and pay down their debt as part of the increased tax revenue but regardless of the economic growth or the pain, they will be paid or else that advanced economy and it’s sovereign debt degrades into “something else”. This “something else” position is assumed to be something similar to but not as bad as that experienced by Argentina in their 2002 default. It is generally assumed that a “default” should be avoided at all costs. Greece is teetering between “default” and something folks have started to call a “managed default”. “Managed default” is supposed to be a better situation than “default”. Regardless of which name you use to describe the situation, the sovereign debt investors are not getting their money back and they will unlikely make this mistake again. The primary attraction of the “managed default” plan to the European Union is that it will inflict less economic pain on Greece and as a result the Greece’s economy will fall less and recover faster than in a “default” scenario. The unanswered question is how much economic pain is required in Greece for necessary economic reforms to occur. That is probably why the European Union is asking Greece for budget veto power over the Greece budget. Considering the situations in Ireland, Portugal, Spain, and Italy are not far behind, maybe the authors will have enough material to write their next book about this never-never land for advanced economies, its pitfalls, and its benefits.

Yes, I know the authors collected a lot of valuable economic history but unless you get excited over lots of charts, it is a very dry read.

This Time Is Different: Eight Centuries of Financial Folly
by Carmen M. Reinhart & Kenneth S. Rogoff

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m c k i n s e y g l o b a l i n s t i t u t e :: Working out of debt

In his January 23rd newsletter John Mauldin used the McKinsey report, Working out of debt, to examine the probable plan that countries like the United States will use to reduce their debt level. If you follow John Mauldin and the McKinsey report’s reasoning then government deleveraging is inevitable and economic success depends on how well these countries will manage the process. The McKinsey report draws insight from history and the deleveraging examples of Finland, Sweden, and South Korea. The report goes on to describe how one the primary methods used by these countries was to grow their economies and lower their debt level was by increasing exports. For the sake of argument let us assume that using these historical examples are appropriate for the United States, then we must also assume that a 30% to 50% currency devaluation is a necessary sacrifice to stimulate exports. So here is where I am stuck. Who is going to buy our stuff and why? At the top of the list has to be China and Japan. So let’s follow this logic to its logical conclusion. We devalue the dollar by 30% and China and Japan will start buying our products! As Carmen M. Reinhart & Kenneth S. Rogoff pointed out in This Time Is Different: Eight Centuries of Financial Folly, high inflation and interest rates occur frequently with currency devaluation. It is far more likely that China and Japan will decide to dramatically reduce their dollar position in response to a deteriorating financial situation in the United States. This would likely trigger a financial panic. If China and Japan starts purchasing goods they do not normally purchase and ship them out of the United States for resale would a financial panic. In both situations currency devaluations will likely lead to a financial panic. Regardless of the reason if Chinese and Japanese treasury bond holdings go down by 30%, the Chinese and Japanese will assuredly demand changes. A likely demand will be to replace the dollar as the world’s reserve currency with a basket of currencies. This is not a new demand but it is the beginning of the end of United States deficit spending. Without the Chinese and Japanese supporting the United States treasury market and by extension the United States policy of deficit spending, legislators in the United States will be forced to deal with higher interest rates and a declining financial situation. As an advanced economy the United States is unwilling to default on its debt, allow massive currency deflation, or allow high inflation rates. This leaves only one solution. The United States must start reducing its debt level and addressing its entitlement spending. Unlike a conventional war where there is a “war dividend” when it ends, entitlement spending is a never ending war. This will require the United States to unwind its final financial bubble, the government spending bubble. Unwinding the government spending bubble will force our legislators to support an “almost” balanced budget solution involving some small tax increases, many budget cuts, and the ability to run a temporary, short term budget deficit. This is balanced budget will probably be similar to the balanced budget used by Switzerland. Unfortunately a disproportionate share of balancing our budget will fall on budget cuts including some painful and unpopular cuts to entitlement programs. In this case it is the invisible hand of the financial market enforcing same financial responsibility on the United States that it is enforcing on the rest of the world. The impaired financial stature of the United States implies that China will assume the world leadership position for world economic health sooner rather than later.

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How Thick Is Your Bubble?

Charles Murray has a new book, Coming Apart: The State of White America, 1960-2010. The Powerline blog had a nice bit about the book and a link to the quiz. I was curious so I took the quiz. Here are my results.

How Thick Is Your Bubble?
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Score » 13 out of 20  (65% ) 
Result 

On a scale from 0 to 20 points, where 20 signifies full engagement with mainstream American culture and 0 signifies deep cultural isolation within the new upper class bubble, you scored between 13 and 16.

In other words, you don’t even have a bubble.
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