Government Job Creation

We often hear that government can't pick winners and losers. History tells us that the government has been picking winners ever since the early days of the Republic.

In 1791, Alexander Hamilton proposed fostering our 'infant industries' in his Report on Manufactures. Over the years, a variety of methods has been used but the policy of support has remained. Hamilton recommended that our manufacturers be encouraged by a combination of subsidies and tariffs. In the nineteenth century, the new railroads were given large land grants. Early in the twentieth century the new airlines received lucrative air-mail contracts and the oil companies were given generous tax reductions.

A more recent example is the story of the Mitchell Energy Company. According to their former Vice President, Dan Steward, they developed the method for extracting gas and oil from shale with the aid of government research and government subsidies*. Without this government help we would not be anticipating a gas and oil boom in Appalachian Ohio.

The last two examples show some problems with subsidies. The oil industry still enjoys their tax break long after they have became mature and shale drilling is believed to cause threats to public health and safety.

* http://thebreakthrough.org/blog/2011/12/interview_with_dan_steward_for.shtml

Where Most Energy is Wasted

The United States is very wasteful of energy. Overall, we are 42% efficient, meaning that 58% of the energy that we generate is wasted. The major sources are electric power plants, which are 32% efficient and transportation (cars, planes, trains, etc.), which are 25% efficient. Together these two sectors account for 85% of all wasted energy and 70% of all CO₂ emissions. Here is where we should focus our efforts.

Data from Lawrence Livermore Lab 'Estimated U.S. Energy Use' and 'Estimated U.S. Carbon Dioxide Emissions'.

Wind Energy Now Competitive with Fossil Fuels

There have been alarming forecasts that renewable energy will cause skyrocketing electric rates. This Spring one opponent of wind farms stated that the cost of generation by wind was about half again as high as that by coal or by natural gas [1]. But generation is only a fraction of your electric bill, and renewables (mostly wind) are only a small fraction of that fraction. As a result, even this large cost difference in the generation phase of electricity production would lead to only a small single-digit increase in your electric bill (Table 1). but, in fact, while gas and coal were cheaper this Spring, wind was cheaper last fall [2]. Since today's natural gas prices are about as low as they ever get [3], today's cost difference can't be expected to last.

It is difficult to make predictions of utility prices because prices of natural gas vary wildly and unpredictably over time [3]. For this reason, the Presidents of both AEP [4] and Duke Energy [5] have expressed concern about the rushing too fast into natural gas.

In contrast, the price of wind is almost entirely fixed by the cost of construction of the wind farm. So, the owner of the wind farm can, and does, offer long-term contracts at a fixed price. Since the cost of turbines has continually decreased [6], today's new wind farms can offer electricity considerably cheaper than even a few years ago. Since Ohio has gotten a late start into renewalbes, we are fortunate, since we will have the newer, more economical wind farms.

Because of these different characteristics of wind and gas costs, a utility executive planning for the next twenty years has a dilemma:

If he chooses gas (or coal) he knows how much electricity he will generate, but doesn't know how much the fuel will cost.

If he chooses wind he knows how much electricity generation will cost, but not how much he will get.

It is these two imponderables, that make predictions of electricity costs problematic.

Some guidance for the future is available from actual experience in other states on the effect of renewables on electric rates. Indirect evidence comes from six of our sister states (Illinois, Indiana, Iowa, Minnesota, Missouri, and West Virginia), who have more renewable energy than Ohio, but whose utility rates are lower (Table 2). The Public Service Commission of Wisconsin [7] reports that renewables in that state add one percent to electricity bills. But most of their wind turbines are older and produce electricity more expensively. While electricity providers in Michigan are allowed to charge a premium of up to a three percent premium to allow for the extra cost due to renewables, very few do so, and most even charge nothing [6].

In conclusion, wind energy has become a viable economic alternative to fossil fuels and is a great improvement environmentally.

References

[1] Sen. William Seitz quoted in “Senate Energy & Public Utilities”, Hannah Capitol Connection, 24 April, 2012

[2] “NW Ohio, SE Michigan wind power is churning up cash”, toledoBlade.com, 17 Oct, 2011

[3] http://www.tradingeconomics.com/commodity/natural-gas

[4] “AEP chief: U.S. Needs flexible energy plan” Columbus Dispatch, 27 April 2012

[5] “At forum, energy experts say natural gas plays mixed role in America's energy future” San Jose Mercury News, 13 June 2012

[6] “Report on the Implementation of the P.A. 285 Renewable Energy Standard and the Cost-Effectiveness of the Energy Standards” Michigan Public Service Commission, 15 Feb. 2012

[7] “Report on the Rate and Revenue Impacts of the Wisconsin Renewable Portfolio Standard, Docket 5-GF-220” Public Service Commission of Wisconsin, 15 June 2012

TABLE 1. Worst Case Scenario of Increased Electric Rates due to Renewables

Price Component	Actual Bill (1)	Full Renewables Bill (2)
Generation	11.46	12.18 (3)
Transmission	1.89	1.89
Distribution	9.20	9.20
Tax	4.52	4.65
Total	27.07	27.92 (+ 3 %)

1. Our residential electric bill for May, 2012

2. Assuming that the maximum target for renewables in Ohio by 2024 had been achieved and that renewables cost fifty percent more than fossil fuels (ratio used by Ohio State Senator William Seitz during Committee meeting, 24 April 2012)
3. Assuming 1/8 of electricity comes from renewables (Ohio goal for 2024)

Table 2. Most States in our Region Have More Renewable Energy and Lower Electric Rates

A. Total Renewables as of Dec. 2010

(latest comparable data available)

State	Industrial Rate, Cents/kWh	Renewable Electricity, %	Unemployment, %
Illinois	6.2	2.6	9.8
Indiana	6.4	3.0	9.0
Iowa	4.9	17.9	5.6
Kentucky	5.3	3.1	9.1
Michigan	7.2	3.7	9.3
Minnesota	6.3	13.9	5.7
Missouri	5.3	2.7	8.0
Ohio	6.2	0.8	8.1
West Virginia	6.2	2.9	7.9
Wisconsin	7.1	7.1	7.1

Sources

Bureau of Labor Statistics: Local Area Unemployment Statistics, December, 2011; US Energy Information Administration: Average Retail Price of Electricity to Ultimate Customers by End-Use Sector by State, January 2012 and 2011; US Energy Information Administration: State Renewable Electricity Profiles 2010

B. Wind Capacity as of March 2012

State	Wind Power, MW	Electric Rates, Cents/kWh
Illinois	2852	9.01
Indiana	1342	8.04
Iowa	4419	7.59
Kentucky	0	7.11
Michigan	377	10.37
Minnesota	2718	8.68
Missouri	459	8.35
Ohio	115	9.05
West Virginia	583	7.88
Wisconsin	631	10.23

Sources: American Wind Energy Association, U.S. Wind Power Capacity Installations by State, March 2012; U.S. Energy Information Administration, Electricity Data Browser (2011 data)

Science and Religion

My contribution to a family e-mail discussion:

I would like to get back to the question of how to prevent Religion from bugging Science. These disciplines have different ground rules:

    * The Constitution guarantees Freedom of Religion; it does not guarantee Freedom of Science.

    * Religion is funded by its adherents; Science is funded by the public, either through taxes or through the profits on the goods and services that they buy.

The relation between the two is asymmetric. Religion can claim an influence on Science while Science has no offsetting claim.

Compounded on this is the fact that people believe what they want to believe, regardless of the facts – psychologists call this phenomenon cognitive dissonance (think of the Birthers, who believe that Pres. Obama was born in Kenya).

In sum, Religion can claim a right, as well as a duty, to root out evil (as they see it) in the practice and teaching of Science. For example, the campaign against stem-cell research.

One final point: almost all of the areas of Science that religion objects to have public policy implications, such as climate change, fetal development, homosexuality. Evolution is, I think, unique in that the only argument is on its teaching. Here a compromise could be reached. Just as astronomy could not be taught without Copernicus (which the Church once forbid), biology cannot be taught without Darwin.

Text of Testimony on Ohio Fracking Bill

Testimony on SB315

Mid-term budget review—energy & natural resources laws & programs

Before the House Public Utilities Committee

Presented by Alan R. Rosenfield, ScD, FASM

on behalf of the League of Women Voters of Ohio

May 17, 2012

The League of Women Voters of Ohio believes that SB315 provides a good starting framework for Ohio's energy policy under rapidly-changing conditions. We believe, however, that there are several parts of the legislation that need improvement. This testimony is in two sections – those sections that apply to ODNR responsibilities and those that apply to PUCO responsibilities.

ODNR Responsibilities

Composition of Fracking Liquids We believe that all chemicals used in fracking liquids be made part of the public record. The argument about preserving proprietary secrets is not persuasive for two reasons:

• It is argued that Coke doesn't tell Pepsi. These are two companies targeting the same customer. Competition in oil and gas drilling is for land to obtain mineral rights, which has nothing to do with the composition of fracking liquids.

• The nature of engineering is that everyone knows what everyone else is doing, even competitors. The only people being kept in the dark by non-disclosure are those whose air and water is being polluted.

In addition, we believe that suitable precautions need to be taken to account for radioactive materials in the fracking waste. In order to obtain the best science on this issue we are in the process of consulting with the U.S. Nuclear Regulatory Commission on their view of this problem. At a minimum, SB315 should require a radioactive analysis of all such waste.

Siting of Wells In January of this year, we wrote ODNR requesting that injection wells be located away from population centers and critical infrastructure (e. g. pipelines). Our concern arose from the earthquakes in Youngstown, the third cluster of earthquakes in Northeastern Ohio widely believed to be caused by injection wells during the last thirty years. While the new ODNR rules may go a long way towards preventing earthquakes, we feel that added precaution needs to be taken because of the incomplete knowledge of geological faults in Ohio.

We are also concerned that the proposed ODNR regulations for State Parks allow wells as little as 300 feet from campsites and sensitive areas. In addition, SB315 allows drilling within urbanized areas. Considering the potential for air and water pollution, as well as documented cases of excessive noise and explosions, we recommend that a 1500 foot distance be kept from population concentrations and critical infrastructure.

PUCO Responsibilities

Reporting The cost of renewable energy is believed by many to be excessive. At the end of 2010 (latest multi- state data available), Ohio produced the least amount of renewable energy of any state in our region. As shown in the Attachment to this testimony, almost all of the other states in our region have managed to increase their amounts of renewable energy with rates lower or comparable to those in Ohio. The reason for this result is that renewables are a small part of the cost of generation, which is only one of many factors that affect utility rates. The Attachment also shows that the high-renewable-energy states have lower unemployment than Ohio. There is no evidence that increased renewable energy levels cost jobs.

127-SB221 requires a report on progress in fulfilling its goals, including job creation and economic impact. We support the idea of a report, but were disappointed to see that the recent PUCO report (Draft Report by the Staff of the Public Utilities Commission of Ohio; Alternative Energy Portfolio Standard Report, April 2012) did not include the amount of investment in Ohio for renewable energy or the number of jobs created. We recommend that SB315 add a requirement for an analysis of the effects of 127-SB221 on utility rates. We are confident that a report including this information will illustrate great benefits from 127-SB221.

Thank you for your attention; I will be happy to answer any questions

ATTACHMENT: DATA AND SOURCES

League of Women Voters of Ohio Testimony on SB315

State	Industrial Rate, Cents/kWh	Renewable Electricity, %	Unemployment, %
Illinois	6.2	2.6	9.8
Indiana	6.4	3.0	9.0
Iowa	4.9	17.9	5.6
Kentucky	5.3	3.1	9.1
Michigan	7.2	3.7	9.3
Minnesota	6.3	13.9	5.7
Missouri	5.3	2.7	8.0
Ohio	6.2	0.8	8.1
West Virginia	6.2	2.9	7.9
Wisconsin	7.1	7.1	7.1

States included are Illinois, Indiana, Iowa, Kentucky (no renewable law), Michigan, Minnesota, Missouri, Ohio, West Virginia, and Wisconsin.

Sources

Bureau of Labor Statistics: Local Area Unemployment Statistics, December, 2011

US Energy Information Administration: Average Retail Price of Electricity to Ultimate Customers by End-Use Sector by State, January 2012 and 2011

US Energy Information Administration: State Renewable Electricity Profiles 2010

On Job Creation

If politicians created all of the jobs that they claim, the country would have a labor shortage. Let's say a company moves its headquarters from Alabama to Idaho, Idaho politicians will claim to have created 500 jobs. Good for Idaho, but bad for Alabama, which has lost 500 jobs. All that has happened is that the furniture has been moved.

It's the same thing in the private sector. A company wants to increase market share. Management has an idea, it hires a fancy consultant, whatever. The idea works, they increase market share, they hire new workers to handle the increased business. But their competitors have lost business and have to lay off workers. Then net result is a wash.

People who develop new products and services create jobs. Thomas Edison and Steve Jobs created jobs. Warren Buffet and Mitt Romney are merely interior decorators.

Midwest Renewable Energy Survey, Rev.03/10/12

Over three-quarters of the States currently have laws promoting renewable energy. In order to find out how Ohio ranks regionally, a survey was made of ten Midwestern and Appalachian states*. The survey examined two questions:

1. Does renewable energy cost jobs?
2. Does renewable energy raise electricity rates?

We found the following results:

Iowa has both the highest percentage of renewables and the lowest unemployment rate of the ten states surveyed.

In contrast, Ohio has the smallest amount of renewable energy. We are about average for electricity rates and unemployment.

For the ten states surveyed, electricity rates do not depend on the percentage of renewables.

In contrast, the states, like Iowa, with the most renewables have the lowest unemployment rates.

The Michigan Public Service Commission has tabulated costs for renewables (Report on the implementation of the P.A. 295 renewable energy standard and the cost-effectiveness of the energy standards) . These range from  zero to $3 per month, a tiny fraction of consumers' bills and of the state-to-state differences. In summary, the data do not support the contention that renewable energy destroys jobs and raises electric rates.

Detailed results of the survey are posted at alanpeg@blogspot.com

…...............

* States included are Illinois, Indiana, Iowa, Kentucky (no renewable law), Michigan, Minnesota, Missouri, Ohio, West Virginia, and Wisconsin.

Survey Details

The latest data were obtained from reliable web sites. The survey can be criticized, since the renewable data are for the end of 2010. An approximation of more recent data can be obtained from wind energy as of the end of 2011 (AWEA Market Report), since wind comprises most of the renewable energy in the region. The 2011 wind data move Ohio to next-to-last.

List of Displays

1 Rates and Renewables

2. Green Energy Can Reduce Unemployment

3. Green Energy Ratings

4. Best and worst States (in preparation)

5. Preliminary 2011 Results (in preparation)

Display 1: Rates and Renewables

The data below show that there is no relation between the percent of renewables and the cost of electricity for industry.

State	Industrial Rate, Cents/kWh (a)	Renewable Electricity, % (b)
Illinois	6.5	2.7
Indiana	6.2	3.0
Iowa	4.9	17.9
Kentucky	5.1	3.0
Michigan	6.9	3.6
Minnesota	6.0	14.0
Missouri	5.3	2.8
Ohio	6.3	0.8
West Virginia	6.2	2.9
Wisconsin	7.2	7.1

(a) US Energy Information Administration: Average Retail Price of Electricity to Ultimate Customers by End-Use Sector, November 2011 and 2010 (2011 is reported in Table above)

(b) US Energy Information Administration; State Electricity Profiles 2010

Display 2. Green Energy Can Reduce Unemployment

The Midwestern states with the most renewable electricity (Iowa, Minnesota, and Wisconsin) also have the lowest unemployment rates in the region.

State	Unemployment, % (a)	Renewable Electricity, % (b)
Illinois	9.8	2.7
Indiana	9.0	3.0
Iowa	5.6	17.9
Kentucky	9.1	3.0
Michigan	9.3	3.6
Minnesota	5.7	14.0
Missouri	8.0	2.8
Ohio	8.1	0.8
West Virginia	7.9	2.9
Wisconsin	7.1	7.1

(a) Bureau of Labor Statistics; Local Area Unemployment Statistics, December, 2011

(b) US Energy Information Administration; State Electricity Profiles 2010

Display 3. Green Energy Ratings

Ohio's green economy ranks about in the middle of all states by 




several measures. The chart 

compares us with comparable states with respect to the use of 




alternative energy (Column a), 

energy conservation (column b), and green jobs (column c).

National Ranking of Green Energy Programs

in Midwestern States

State	Clean Energy Ranking (a)	Energy Conservation Ranking (b)	Green Jobs Ranking (c)
Illinois	12	17	33
Indiana	33	32	32
Iowa	19	11	25
Kentucky	39	37	26
Michigan	14	17	27
Minnesota	8	8	16
Missouri	37	44	22
Ohio	30	24	21
West Virginia	50	44	43
Wisconsin	15	16	8

a) Clean Edge: CA, OR, MA, NY, & CO Top Nation in Clean Energy Leadership, 18 May 2011; includes electricity and transportation.

b) ACEEE: 2011 State Energy Efficiency Scorecard Rankingc)


c)  Brookings Institute: Sizing the Green Economy, 13 July 2011. According to this report Ohio has over 105 thousand green jobs, with an average pay of $39 thousand per year. About 70 percent of these jobs are blue collar.