Sean Casten’s Posts

• The $9 Billion Man

  Clean energy opportunities 0

  Posted 23 hours, 39 minutes agoEarlier this month, the Department of Energy announced $155 million worth of grants to clean energy projects -- specifically targeted to CHP, waste heat recovery, and district energy. There's an even better backstory.

• Hunting with Fishing Poles

  Can perfect markets induce capital investment? 0

  Posted 1 week ago

  Question: are there any examples of a completely free market inducing investment in mature, capital-intensive industries? I’m not sure there are. More problematically, I’m not sure that economists and policy makers appreciate this reality. The result is that we continue to create markets -- from electricity to CO2 -- that by design are incapable of rewarding or encouraging capital investment. In electricity markets, this has created a situation in which the wholesale prices are insufficient to encourage new investment and -- if left unchecked -- could lead to serious power supply shortfalls. In CO2 markets, this has the potential to… Read More

• Still fallacious

  The perfect market fallacy 9

  Posted 1 month, 4 weeks agoA "market" is nothing more than a description of our collective allocation of resources. Economists refer to markets as being efficient only when they meet a specific set of conditions, at which point the benefits that accrue from Adam Smith's invisible hand are realized through the independent actions of profit-seeking actors. But most markets are inefficient--often woefully so.

• Hayward J'Buzzoff

  The problem with unspoken assumptions 1

  Posted 1 month, 4 weeks agoSteven Hayward's OpEd in the Wall St. Journal yesterday ("No: Alternatives Simply Too Expensive") really annoyed me the first time I read it.

• How much energy does the U.S. waste? 14

  Posted 2 months, 1 week ago

  Any increase in our efficiency of energy conversion is implicitly a reduction in our energy waste.

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Sean Casten’s Recent Comments

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  Ghostlly: Your comment that "Transmission line cost are no more for a wind farm than for a new coal or nuclear plant" is true only in a narrow, and not especially relevant sense. True in the sense that the cost of the wires is not appreciably different. But not that relevant because the cost of power is a function not just of construction cost, but also utilization factor. Wind, by running ~40% - 50% as often as nuclear or coal has to recover all construction costs (generation and transmission) roughly twice as fast to achieve cost-parity, before consideration of fuel costs. Thus, if I have a $20 million transmission line and need to recover my capital in 5 years (=$4M/year) it's going to cost me twice as much per MWh from a 40% capacity factor wind farm as from an 80% capacity factor nuke/coal plant. To be sure, some of those transmission resources can be shared between other assets, and the name of the game in cost-effective transmission/distribution planning is figuring out how to get a maximally diverse generation mix upstream and consumption mix downstream. But in the narrow case of a line section that is dedicated to a baseload generator vs. a line section that is dedicated to an intermittent generator, the cost per MWh will be lower for the baseloaded asset.On Do we need nuclear and coal plants for baseload power? posted 3 days, 21 hours ago 144 Responses

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  Points to keep in mind: 1. Coal plants even without carbon sequestration are lousy investments (at least in the US given environmental considerations: the only way coal is a good investment is if you don't have to spend all the $ on Clean Air Act compliance.) 2. Coal with CCS is even worse, as it has higher capital costs of the plant and increasing the operating cost due to higher parasitic loads. 3. Every other approach to CO2 reduction at least saves operating costs (by burning less fuel). As such, I think one can safely conclude that CCS will never happen, for the simple reason that any carbon pricing regime will never clear at a high enough level to justify investments in CCS until every other option is exhausted. It's an R&D boondoggle - nothing more.On Is "we're going to burn the coal anyway" an argument for carbon sequestration? posted 1 week ago 40 Responses

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  Careful, John. If you're suggesting that we make massive capital investments that completely bypass the private sector, you better explain how to deal with the resulting deficits. Where an opportunity exists to earn competitive returns on investment (say, 15%+), the private sector will rush in, put money at risk and you and I will benefit regardless of whether or not they earn those returns. (Witness Calpine's bankruptcy: they didn't earn the returns they were looking for when they built all those gas plants, but the assets are still there, and providing electricity for many today in spite of the fact that their investors lost their shirts; in essence, we got the benefit of the asset without the cost of the liability. Ditto for many of the nuke plants that were built in the 60s/70s and never delivered on their anticipated returns.) By contrast, if government is going to step in and put that $ up at risk, you and I - and our kids - bear the costs if those investments don't deliver as promised. (In financial speak, returns are meaningless independent of risk, and there is no such thing as a risk-free investment. 6% is the number in the spreadsheet if there are no capital cost overruns, the wind delivers as promised, maintenance schedules keep the system on line for 20 years, etc. Many ways to miss that target.) This matters because the numbers here are massive, well in excess of government's ability to provide. We have about 1000 GW of generation in this country. How much do we want to replace with wind (or whatever other technology you favor)? 20%? 50%? Let's say 30%, just for illustrative purposes. That's 300 GW, or 300,000,000 kW. At $2000/kW, that's a $600 billion investment. That's a big number, even for the government. Yeah, we just dropped that much on bank bailouts, but not without understandable concern about the impact on deficits, and as far as I can tell, there's no appetite to regularly commit government resources of that size, for pretty good reasons.On Do we need nuclear and coal plants for baseload power? posted 1 week, 1 day ago 144 Responses

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  Bob, I think you're confusing costs vs. what it takes to build. I don't dispute that the cost of wind is $0.05/kWh, or maybe even less. But that doesn't matter if it's insufficient to build it. I know of no examples where anyone built a new wind turbine in response to a 5 c/kWh electric contract. (At $2000/kW and a pretty generous 40% annual capacity factor, 5 c/kWh revenue pays $175/kW/year, or a 6% return over 20 years. No one builds new generation for that kind of money, wind or otherwise.) To be sure, no one builds nuke for that kind of money either, coming back to my larger point: we are building wind right now not because of some holistic evaluation of fundamental value, but because you can earn revenues of $0.12 or higher once RECs and PTCs are factored in, getting to the kind of returns that are necessary to pull the investment forward, effectively getting rates that are above US retail rates ($0.095/kWh), but without having to bear the transmission and other grid support costs. The key isn't that I'm disputing your 5 cent number - simply that no one builds assets of any type for cost recovery alone; they also want capital recovery and profit. Wind, somewhat uniquely, and due to a lot of wind-friendly regulation, is able to get rates high enough to cover costs and give investors a healthy return on their investment. Not so for many other technologies, for reasons that have as much or more to do with regulation than inherent economics.On Do we need nuclear and coal plants for baseload power? posted 1 week, 2 days ago 144 Responses

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  Bob: Probably not, but it's close. Nuke has higher capex, but also much higher capacity factor, and nearly comparable fuel costs (that is to say, near zero). Setting aside questions of externalities, that suggests that they ought to be pretty comparable. That said, nuclear has a pretty robust history of cost overruns while wind is much more predictable, so my guess is that on a completely level playing field, nuke would still lose out. I want to be clear though that my point in all this is not to favor nuke over wind; it's simply to avoid us drawing conclusions about market preference based on current investment preferences. (After all, if we applied that same logic 30 years ago, we'd conclude that nuclear was unbeatable, right?)On Do we need nuclear and coal plants for baseload power? posted 1 week, 2 days ago 144 Responses