Notes

¹ Robert L. Bradley, Jr. is president of the Institute for Energy Research in Houston, the author of the two-volume Oil, Gas, and Government: The U.S. Experience, and an adjunct scholar of the Cato Institute. Except for material on green pricing and the glossary, this study presents a modified version of a forthcoming paper published by the Cato Institute.

² Although a public-policy evaluation of these issues is beyond the scope of this paper, a "worst case" and "best case" can be assumed for externality adders (i.e., penalties assessed for assumed externalities) to compare different fuels on an economic and environmental basis. See the dicussion later in this paper.

³ Preferential taxation is not a government intervention into the marketplace or a net economic loss. While nonneutral taxation can be criticized for misallocating resources away from other alternatives to the area of tax preference, less taxation per se allows the private sector to retain earnings and increase activity. This reduction of government takings is differentiable from "corporate welfare." See, for example, the argument of Stephen Moore and Dean Stansel, "Ending Corporate Welfare as We Know It," Cato Policy Analysis, May 12, 1995, p. 10.

⁴ Department of Energy, Office of Chief Financial Officer, Appropriations History Table, FY 1978-FY 1995, File: Approp (jjg), Updated printout of 2/6/95. The nominal dollars in this DOE-supplied Excel spreadsheet were restated in 1995 dollars using the Consumer Price Index. (Hereafter referred to as DOE Budget Study.)

⁵ Richard Cowart, "Restructuring and the Public Good: Creating a National Benefits Trust," The Electricity Journal, April 1997, p. 57. Adding energy efficiency programs, low-income support, and research and development costs funded by government at all levels, the annual total is estimated to be between $4 billion and $8 billion annually (p. 55).

⁶ For a market-based evaluation of mainstream environmentalism, see Jonathan Adler, Environmentalism at the Crossroads (Washington, DC: Capital Research Center, 1995).

⁷ Combined-cycle technology, developed in the 1960s from jet engine research, captures waste heat created from primary generation to produce additional electricity. It is the most efficient technology for electric generation today. See Walter Vergara et al., Natural Gas: Its Role and Potential in Economic Development (Boulder: Westview Press, 1990), pp. 55-57.

⁸ Wind does have operating costs after capital costs become sunk. See the discussion below.

⁹ California Energy Commission, Wind Project Performance: 1994 Summary (Sacramento, CEC, August 1995), p. 1. Total operating capacity of 1,609 megawatts produced 3.2 gigawatt hours of power in 1994 (ibid., p. 25). (Hereafter cited as Wind Project Performance.) An average capacity factor is a broader measure than dependable on-peak capacity since off-peak performance is measured as well.

¹⁰ Energy Information Administration, Annual Energy Review 1995, July 1996, p. 261; Resource Data International, Energy Choices in a Competitive Era (Alexandria, Va..: The Center for Energy and Economic Development, 1995), p. 6 (hereafter CEED Study); and Enron Corp., The Natural Gas Advantage: Strategies for Electric Utilities in the 1990s (Houston, TX: Enron Corp., 1992), p. 11.

¹¹ Christopher Flavin and Nicholas Lenssen, Power Surge: Guide to the Coming Energy Revolution (New York: W.W. Norton & Company, 1994), p. 125.

¹² San Diego Gas & Electric, "Response to CEERT's Additional Testimony on Resource Case Analysis," ER92 Proceedings, California Energy Commission, August 28, 1992, p. 5.

¹³ California Energy Commission, 1994 Electricity Report, November 1995, pp. 94, 97.

¹⁴ Secretary of Energy Advisory Board, Task Force on Strategic Energy Research and Development (Washington, DC: Department of Energy, June 1995), Annexes 2-4, p. 184. (Hereafter DOE Task Force Study.) A DOE study similarly estimated that wind costs had fallen from 50 cents per kwh in 1980 to 5 to 7 cents by 1993. Julie Doherty, "U.S. Wind Energy Potential: The Effect of the Proximity of Wind Resources to Transmission Lines," Energy Information Administration, Monthly Energy Review, February 1995, p. viii. Also see "Statement of George Preston," Electric Power Research Institute, Hearing of U.S. Senate Committee on Energy and Natural Resources on the Department of Energy FY 1995 Budget, March 8, 1994, p. 3.

¹⁵ Conversation with Randall Swisher, executive director of the American Wind Energy Association, March 22, 1996.

¹⁶ Joseph Romm and Charles Curtis, "Mideast Oil Forever?" The Atlantic Monthly, April 1996, p. 64.

¹⁷ Total oil and gas tax incentives at the wellhead are estimated to be around $1 billion for 1996. Office of Management and Budget, Analytical Perspectives, Budget of the United States (Washington, DC: Government Printing Office, 1996), p. 62. With natural gas accounting for approximately 60 percent of total U.S. oil and gas production on a BTU basis, the tax allocation is $0.03 per Mcf [Thousand Cubic Feet] of 1995 production, under 2 percent of the 1995 wellhead price of $1.59 per MMBtu [Million Bitumous Thermal Units] Energy Information Administration, Monthly Energy Review, March 1996, p. 125.

¹⁸ See Independent Petroleum Association of America, The Oil & Gas Producing Industry in Your State (Washington, DC: IPAA, 1996), p. 103.

¹⁹ "Wind-driven electricity generating facilities must be located at specific sites to maximize the amount of wind energy captured and electricity generated. However, many good wind energy sites are on ridges or mountain passes, where siting and permitting difficulties, land restrictions, aesthetic objections, the potential for bird kills, and harsh weather conditions often constrain development." Julie Doherty, "U.S. Wind Energy Potential," p. x.

²⁰ CEED Study, p. 14. This generic estimate is applicable for a high voltage (230-KV) line from a wind farm in California, and with substation expenses it would be more. Conversation with Don Kondoleon, Supervisor, Transmission System Evaluation Unit, California Energy Commission, February 13, 1996. A lower estimate of $286,000 per mile, based on a study using information prior to 1993, is made in J.P. Doherty, "Wind," in Energy Information Administration, Renewable Energy Annual, 1995, December 1995, p. 88.

²¹ The half-cent estimate was stated as typical by Randall Swisher, and is an actual cost for the 35-MW West Texas wind project of the Lower Colorado River Authority. Conversation with Tom Foreman, Manager of Marketing and Energy Services, Lower Colorado River Authority, October 4, 1995.

²² "Wind resources cannot yet be predicted with precision for a specific hour 24 hours in advance." Comments submitted by the American Wind Energy Association to the Federal Energy Regulatory Commission, quoted in "Various Parties Protest California IOU's ISO and Power Exchange Proposals Filed in Response to CPUC Restructuring Order," Foster Electric Report, June 26, 1996, p. 5.

²³ At the California-Oregon border (COB) pricing point, the most actively traded point for spot electricity in the country where futures trading takes place, one hour firm (where the seller can cancel the power with an hour notice to the buyer) has a value of approximately a half-cent per kwh compared to interruptible, and full firm (without an interruption provision) has a one-cent value compared to interruptible. "Conversation with Patrick O'Neill," Energy Market Report, April 10, 1997.

²⁴ Julie Doherty, "U.S. Wind Energy Potential," pp. ix-x.

²⁵ The material requirements for wind turbines could be 50 times greater than for gas power plants, creating additional electricity consumption and air emissions. This rough estimate is made by comparing the materials used to construct the 1,875 megawatt Teesside gas project to the recently announced 112.5 megawatt Zond project in Iowa.

²⁶ For a comparison of externality estimates between natural gas and renewables, particularly wind and solar energy, and for an estimate of the social cost of renewable subsidies, see the later discussion in this paper.

²⁷ Artificially low estimates for wind power can also result from substituting a real for nominal price (where future prices are discounted to the present) and hidden benefits such as utility financing or free land usage.

²⁸ "Comments of San Diego Gas & Electric on Proposed Policies Governing Restructuring Electric Service Industry and Reforming Regulation," Submitted to the California Public Utilities Commission, June 8, 1994, p. 35.

²⁹ Conversation with Marino Monardi, Supervising Resource Planner, Sacramento Municipal Utility District, January 30, 1996.

³⁰ Northwest Energy System, "Toward a Competitive Electric Power Industry for the 21st Century," Portland, Oregon, December 12, 1996, p. 20. The new-capacity gas cost was 2.93 cents per kwh for 3,356 megawatts; the new-capacity wind cost was 4.1 cents per kwh for 117 megawatts and 4.94 cents per kwh for the next 116 megawatts. Conversation with Jeff King, Northwest Power Planning Council, March 6, 1997.

³¹ Paul Gipe, Wind Energy Comes of Age (New York: John Wiley & Sons, Inc., 1995), pp. 238-39.

³² FERC, "Promoting Wholesale Competition Through Open Access Nondiscriminatory Transmission Services by Public Utilities, Recovery of Stranded Costs by Public Utilities and Transmitting Utilities; Proposed Rulemaking and Supplemental Notice of Proposed Rulemaking," 60 Federal Register 17662 at 17669-70 (April 7, 1995). Another recent estimate -- between $0.028 and $0.045 per kwh -- is made by Henry Lee and Negeen Darani, "Electric Restructuring and the Environment," Harvard University, Environment and Natural Resources Program Study 95-13, December 1995, p. 65.

³³ Conversation with Marino Monardi.

³⁴ The backwardation curve is a result of such market knowledge as major pipeline capacity additions from Canada, where surplus gas is selling at a significant discount to U.S. lower-48 gas, expected in late 1998. See DOE, Natural Gas Imports and Exports, Second Quarter Report, 1996, pp. iii-v.

³⁵ For example, ten-year fixed-priced gas in December 1996, when the front month was selling at $4.575 per MMBtu, was $2.635 per MMBtu. Ten-year, fixed-price gas in January 1997, when the front month price fell nearly 50 percent, was $2.555 per MMBtu, only a $0.08 per MMBtu difference. Translated into electric rates, this 3 percent increase in gas prices equates to less than one mill per kwh.

³⁶ Energy Information Administration, Natural Gas Monthly, March 1996, p. 11. These statistics have been restated in 1995 dollars using the Consumer Price Index. Higher wellhead prices that began in late 1995 and are continuing in early 1997 are expected to be reversed with new deliverability (increased oil flows) from the lower-48 and Canada, explaining the aforementioned backwardation curve.

³⁷ Wolfgang Gajewski, "Using Gas for Power Generation," in Fundamentals of the Natural Gas Industry (London: The Petroleum Economist and Gas World International, October 1995), p. 110. Coal plants have also improved, with a one-half decline in coal input prices and a one-third fall in installed capacity costs in the last ten to fifteen years. CEED Study, pp. 3-9 to 3-10.

³⁸ Energy Information Administration, Annual Energy Outlook, 1996 (Washington, DC: U.S. Department of Energy, January 1996), p. 32.

³⁹ Joseph Schuler, "Generation: Big or Small?," Public Utilities Fortnightly, September 15, 1996, p. 30.

⁴⁰ Surplus capacity means that all electricity-related air emissions associated with building the wind farm is incremental and must be subtracted from later air-emission displacement.

⁴¹ "California grew to dominate worldwide wind development during the early 1980's because the state has some of the most energetic winds in North America, and where these occur, low-cost land was abundant; at the time California had the most favorable purchase power rates and the most cooperative utilities in the nation; it had an abundance of wealth; it had a favorable investment climate; and California offered lucrative incentives to match those of the federal government." Paul Gipe, Wind Energy Comes of Age, p. 30.

⁴² "Our marginal generation cost for oil in the 1970s and early '80s was six cents per kwh. Today it is two cents per kwh using natural gas." Vikram Budhraja, "Generation as a Business -- Fact, Fumbles, Fictions and the Future," The Electricity Journal, July 1995, p. 37.

⁴³ See Southern California Edison Company, Application for Off-System Power Sales Incentive Mechanism, Application 93-08-006, August 2, 1993, p. 2.

⁴⁴ "[The California Energy Commission's Electricity Report 94] demonstrated that there is a sufficient reserve margin within the PG&E service territory [northern California] through 2003." Letter from PG&E to the California Energy Commission, Re: Docket 95-ER-96, January 9, 1996. "Edison agrees with conclusions reached by the CEC in ER 94 that no new resource additions are needed in the Edison system until 2005." Southern California Edison, "Testimony on Submittal of Supply-Side Data," CEC Docket No. 95-ER-96, May 15, 1996, p. 2.

⁴⁵ "Comments of the Institute for Energy Research to the California Energy Commission in the Matter of Preparation of the 1994 Energy Efficiency Report and 1994 Electricity Report," April 4, 1995, p. 13.

⁴⁶ A new wind power contract between Zond Corporation (Enron Corp.) and MidAmerican Energy, despite being the lowest bid, was forced on the unwilling utility by a 1983 set-aside law. Staff Report, "Iowa Utilities Finally Comply With Long-Dormant Renewables Law," March 26, 1997, p. 30. This suggests that either the power is surplus to the needs of the area (and thus backs out cheap surplus power) or was more expensive than conventional new capacity options.

⁴⁷ American Wind Energy Association, "Is a Residential Wind System for You?" May 1995, p. 1. The up-front costs of a home wind system range from $6,000 to $22,000, with an estimated payout from displaced utility electricity between six and fifteen years.

⁴⁸ Ibid.

⁴⁹ Energy Information Administration, Electric Power Annual, 1994, vol. 1, p. 46. California (9.8 cents) and Maine (9.7 cents) were near the 10 cent threshold.

⁵⁰ Ibid.

⁵¹ AWEA, "The U.S. Wind Industry," February 1995, p. 4. The jobs argument is used to support subsidization of other favored renewable energies. Stated the Union of Concerned Scientists on California's proposal to restructure California's electric industry: "Investments within California for geothermal development have totaled about $5 billion, wind development about $3 billion, biomass-electric development about $2 billion, solar thermal-electric development about $1.5 billion, and solar domestic and pool heating about $1.5 billion, totaling somewhere around $13 billion, or more than a 2:1 ratio in favor of capital investment in California's economy vs. ratepayer subsidies." "Comments of the Union of Concerned Scientists on the Commission's Proposal Governing Electric Services Industry Restructuring," June 18, 1994, p. 17.

⁵² Percy Greaves, Mises Made Easier (Dobbs Ferry, NY: Free Market Books, 1974), p. 37. For an explanation of "opportunity cost," see, generally, Henry Hazlitt, Economics in One Lesson (New York: Arlington House, 1979 [1949]).

⁵³ "European countries are maintaining or increasing government-sponsored funding and continue to dominate wind energy research, development, and demonstration, which totals about $140 million annually worldwide." DOE Task Force Study: Annex 1, p. 61.

⁵⁴ Christopher Flavin, "Wind Power Soars," in Vital Signs, 1995, Lester Brown, Nicholas Lenssen, and Hal Kane, eds. (New York: W.W. Norton, 1995), p. 54.

⁵⁵ DOE Task Force Study: Annex 1, p. 61.

⁵⁶ Ibid., Annexes 2-4, p. 183.

⁵⁷ "After spending 15 years and investing millions of dollars, America's alternative-energy industry is selling out to Japanese and European concerns -- just as some experts believe alternative technologies may be about to pay off." Bill Paul, "U.S. Falls Behind in Alternative Energy," Wall Street Journal, August 15, 1989, p. A6.

⁵⁸ The Energy Daily, January 31, 1996, p. 4.

⁵⁹ Total U.S. exports in 1994 were approximately $833 billion. Department of Commerce, Statistical Abstract of the United States, 1995 (Washington, DC: U.S. Department of Commerce, 1995), p. 802. Solar exports are currently estimated to be $300 million per year. Julie Halpert, "Harnessing the Sun and Selling It Abroad," New York Times, June 5, 1996, p. C1.

⁶⁰ "AWEA's growth reflects the fairly broad interest of American industry in a technology which a 1976 Department of Energy study estimated could supply nearly one-fifth of all U.S. electric power demand by the year 1995." Hearings before the Subcommittee on Energy Conservation and Power and the Subcommittee on Fossil And Synthetic Fuels of the Committee on Energy and Commerce, House of Representatives, 98th Cong., 2nd Sess., DOE's Fiscal Year 1985 Budget (Washington, DC: Government Printing Office, 1984), p. 810. More recently, an estimate was made that wind could supply 20 percent of world electricity demand "even when environmental, land use, and systems constraints are taken into account." Michael Grubb and Niels Meyer, "Wind Energy," p. 157.

⁶¹ Wind Project Performance, p. 1.

⁶² Quoted in James Bruggers, "Stirring Ill Winds," p. 1.

⁶³ CEC, Wind Project Performance, p. 1.

⁶⁴ The concern over retirements suggests that operating cost estimates of only one cent per kwh (Paul Gipe, Wind Energy Comes of Age, p. 233) are too low. In addition to periodic maintenance and repair, landowner royalties between 2 and 5 percent of revenue (ibid., p. 403) and property taxes are paid.

⁶⁵ Cyril Penn, "Kenetech's Altamont Pass Repower May Be Blown Away as Congress Threatens Renewable Tax Credit Wipe Out," California Energy Markets, September 22, 1995, pp. 11-12; Charles McCoy, "Kenetech Chooses Saunders as CEO, Explored Options to Increase Its Value," Wall Street Journal (December 13, 1995), p. B6.

⁶⁶ Wall Street Journal, May 30, 1996, p. B4.

⁶⁷ Llana DeBare, "Twisting in the Wind," The Sacramento Bee, February 18, 1996, pp. ??.; Arthur O'Donnell, "Heads Roll at Kenetech: Annual Report Delayed by Red Ink," California Energy Markets, April 5, 1996, p. 2; Arthur O'Donnell, "Kenetech Still Bleeding," California Energy Markets, May 17, 1996, p. 3.

⁶⁸ The $45 million, 45-MW project, expanding a 5-MW project that became operational in 1994, was terminated due to "gearbox oil leakage and blade delamination." Ted Rieger, "SMUD Cancels SEPCO Cogen Project and Kenetech Wind Expansion," California Energy Markets, May 17, 1996, p. 12.

⁶⁹ "[Environmental organization] hesitancy [to endorse natural gas] is reinforced by the beating some took when they mistakenly endorsed nuclear power in the 1960s." Christopher Flavin, "The Bridge to Clean Energy," p. 17.

⁷⁰ Arthur O'Donnell, "Enron Acquires Zond, Forms Renewables Unit," California Energy Markets, January 10, 1997, p. 13.

⁷¹ Wind Project Performance, p. 1.

⁷² Public Law 95-617, 92 Stat. 3117 (1978). "Avoided Cost" is the cost that the utility avoids incurring by purchasing electricity from external suppliers rather than building the generating capacity themselves.

⁷³ CEED Study, pp. 1-7.

⁷⁴ Ibid., pp. 2-3.

⁷⁵ Ibid. Also see Paul Gipe, Wind Energy Comes of Age, pp. 33-34.

⁷⁶ CEED Study, pp. 2-3.

⁷⁷ Testimony of Sharon Pollard, secretary, Office of Energy and Natural Resources, Solar Development Initiative Act of 1987 and the Renewable Energy and Energy Conservation Competitiveness Act of 1987, Hearing before the Subcommittee on Energy Research and Development of the Committee on Energy and Natural Resources, United States Senate, 100th Cong., 1st sess. (Washington, DC: Government Printing Office, 1987), p. 88. For a history of federal subsidies to renewables, which began on a large scale with the Energy Tax Act of 1978, see Robert L. Bradley, Jr., "The Rise and Coming Fall of Political Electricity," manuscript dated January 1996, pp. 90-99.

⁷⁸ Michael Lotker, "Solar Generation Flowers, Fades," Forum for Applied Research and Public Policy, Summer 1992, pp. 90-91.

⁷⁹ "The rush to build wind turbines brought many poorly designed machines to market which failed miserably in the field. The reputation of the wind industry was further damaged by naive and sometimes dishonest operators who oversold their products. These problems left a legacy of public scorn and skepticism about wind power that has only recently begun to fade." Michael Brower and Michael Tennis, "Catching a Steady Breeze: Putting Wind Power to Work on Electric Utility Systems," The Electricity Journal, March 1995, p. 33. Also see Murray Silverman and Susan Worthman, "The Future of Renewable Energy Industries," The Electricity Journal, March 1995, pp. 15-16.

⁸⁰ Alfred Cavallo et al., "Wind Energy: Technology and Economics," in Thomas Johanson et al., Renewable Energy: Sources for Fuels and Electricity (Washington, DC: Island Press, 1993), p. 150.

⁸¹ Michael Grubb and Niels Meyer, "Wind Energy: Resources, Systems, and Regional Strategies," ibid., p. 173.

⁸² Public Law 102-486, 102 Stat. 2776 at 3021-22 (1992).

⁸³ Ibid.

⁸⁴ Ibid., p. 3022.

⁸⁵ Ibid., pp. 2969-70.

⁸⁶ The EPAct also made permanent a 10 percent energy investment tax credit for solar and geothermal, and under separate IRS rules, wind investments received accelerated depreciation. Ibid., p. 3024.

⁸⁷ DOE Budget Study.

⁸⁸ ETAP has granted over $20 million to various renewable energy programs alone. California Energy Markets, May 19, 1995, p. 3.

⁸⁹ Paul Gipe estimates the total expenditure on wind energy development by world governments (in nominal dollars) at over $2 billion, $1.4 billion in the U.S. Gipe, Wind Energy Comes of Age, p. 73.

⁹⁰ CEC, 1994 Electricity Report, p. 104.

⁹¹ ICF Kaiser Study, prepared for Enron Corp., September 1995.

⁹² Statement of Angus Duncan, American Wind Energy Association, Renewable Energy Incentives, Hearing before the Subcommittee on Energy Conservation and Power, Committee on Energy and Commerce, House of Representatives, 99th Cong., 2nd sess. (Washington, DC: Government Printing Office, 1985), pp. 189-90.

⁹³ Business Council on Sustainable Development, Changing Tide: Tomorrow's Clean Energy -- Today, November 1996, p. 8.

⁹⁴ An electricity surplus developed for several reasons including: the replacement by new relatively energy efficient technologies and appliances of older technologies; overcapacity developed because (a) publicly regulated monopolies utilities operated under cost-plus rate of return system whereby the higher capital cost meant higher rates of return and (b) they did not have accurate estimates of future demands and prices; and firms that were not vertically integrated (both producers and suppliers of energy) had to have excess generating capacity available in reserve for emergencies.

⁹⁵ The chairman of the DOE-appointed task force was Daniel Yergin, president of the industry consulting firm Cambridge Energy Research Associates and co-editor (Energy Future, 1979) and author (The Prize, 1991) of books allied to the eco-energy planning perspective. The 32-member task force was dominated by a prorenewable group of academics, industry executives, trade group heads, and environmental representatives; freemarket, fuel-neutral representatives were absent.

⁹⁶ DOE Task Force Study, Annex 1, p. 61.

⁹⁷ Paul Gipe, Wind Energy Comes of Age, p. 93.

⁹⁸ Ibid., pp. 71-72. He adds (p. 96): "Centrally directed R&D's most spectacular failure was in the ultimately unsuccessful attempt to build the giants of the wind turbine world: the multimegawatt machines."

⁹⁹ Ibid., pp. 89-90.

¹⁰⁰ This estimate is composed of 6 cents per kwh for direct ratepayer costs and 4 cents per kwh for DOE subsidies. The DOE "social cost" of wind is calculated below.

¹⁰¹ Representative of high-cost nuclear power, PG&E's 2,160-MW Diablo Canyon nuclear units cost ratepayers between 11 cents and 12 cents per kwh in 1993-95. Pacific Gas and Electric Company, 1995 Annual Report, p. 39. The market value of these two units under competitive pricing is estimated by PG&E to be a negative $10 billion (ibid., p. 15).

¹⁰² This was the variable cost of producing coal oil at the Parachute Creek (Colorado) plant before it closed in early 1992. Robert L. Bradley, Jr., (Houston: Institute for Energy Research, 1993), p. 17. Up-front capacity costs would make this estimate substantially higher.

¹⁰³ The total cost of the SPR, primarily consisting of crude oil acquisition, is around $22 billion. Restated in 1995 dollars, that is over $36 billion, which, divided by total inventory of 591 million barrels, is over $60 per barrel. DOE Budget Study.

¹⁰⁴ This range was taken from the contract prices of gas produced at the Great Plains coal gasification project, which began at $6.75 per MMBtu and more recently had a commodity charge of $3.70 per MMBtu. Foster NatuReport, February 8, 1996, pp. 3-4. Operating costs alone were estimated to be around $3 per MMBtu in 1988. (Paul Duke, "U.S. Finds Buyer for Big Synfuels Plant but Won't Recoup Its Initial Investment," Wall Street Journal, August 8, 1988, p. 36.)

¹⁰⁵ Killing endangered species, including golden eagles, prohibited under two federal acts, is a felony punishable by two years in jail and a fine of up to $250,000. Paul Gipe, Wind Energy Comes of Age, p. 344.

¹⁰⁶ "The impacts of major oil and gas development in the Arctic environment are significant, chronic, cumulative, and difficult or impossible to mitigate and prevent. . . . [A U.S. Fish and Wildlife Service] report documented extensive loss of vegetation, and concluded that most bird species in the area have declined in population, as have bears, wolves and other predators." Testimony of Lisa Speer, Natural Resources Defense Council before the Committee on Energy and Natural Resources, Arctic Coastal Plain Competitive Oil and Gas Leasing Act, U.S. Senate, 101st Cong., 1st Sess. (Washington, DC: Government Printing Office, 1989), pp. 116, 121.

¹⁰⁷ Paul Gipe, Wind Energy Comes of Age, p. 450.

¹⁰⁸ All are from Amy Linn, "Whirly Birds," SF Weekly, March 29-April 4, 1995, pp. 11-12, 14.

¹⁰⁹ Ibid., p. 15.

¹¹⁰ CEED Study, p. 2-15.

¹¹¹ This estimate is based on estimated bird deaths at Altamont Pass alone of 7,000 through 1991 (California Energy Markets, May 8, 1992, pp. 16-17).

¹¹² Biosystems Analysis, Inc., Wind Turbine Effects on Avian Activity, Habitat Use, and Mortality in Altamont Pass and Solano County Wind Resource Areas: 1989-91 (Sacramento: California Energy Commission, 1992), p. xi; Elissa Wolfson, "Who Owns the Wind?," E Magazine, May/June 1993, p. 19.

¹¹³ The Valdez kill was estimated to be 200 out of a total bald eagle population of 40,000, a percentage of 0.5. Alexander Volokh, "Punitive Damages and Environmental Law," Reason Foundation, Policy Study No. 213, September 1996, p. 52.

¹¹⁴ Jan Beyea, "Birds, Windpower & Energy Futures," Presentation to Audubon's Asilomar Conference, March 27, 1994, p. 1. Copy of speech in files.

¹¹⁵ Jan Beyea, "Avian Issues in Wind Development," Presented to the 1995 Annual Meeting of the American Wind Energy Association, March 1995, p. 2. Copy of speech in files.

¹¹⁶ Ibid., p. 5.

¹¹⁷ From the Editor, "Never Again," Windpower Monthly (February 1994), p. 4. The editorial from the organ of the windpower community added: "The situation should never have arisen and the industry ought to be kicking itself."

¹¹⁸ Ibid., p. 14.

¹¹⁹ Ibid., p. 4. For a revealing look at the internal debate among the prowind community over whether to expose the Tarifa bird death problem, see Arthur O'Donnell, "Wind Turbines, Dead Birds and Bad News," California Energy Markets, February 18, 1994, p. 5.

¹²⁰ For a history of bird research at wind farms, see LGL Ltd., Proceedings of National Avian-Wind Power Planning Meeting (Washington, DC: LGL, 1995), pp. 33-52. See also Jonathan Weisman, "Two Dead Eagles Fuel Altamont Debate," Tri-Valley Herald, September 12, 1995, p. A1, and "CEC Awards Grant Money for Bird Research," California Energy Markets, December 19, 1996, p. 2.

¹²¹ Quoted in Arthur O'Donnell, "Energy Commission Studies Bird Deaths at Wind Farms," California Energy Markets, May 8, 1992, p. 16. For claimed progress with the problem, see Colleen Wilder, "Kenetech Reports Bird Progress," California Energy Markets, June 2, 1995, p. 2.

¹²² Directorate-General XII, Externalities of Energy, vol. 6, Wind and Hydro (Belgium: European Commission, 1995), pp. 90-91.

¹²³ "Opening Comments of the Natural Resources Defense Council and Comments on Balancing Public Policy Objectives in a Competitive Environment," California Public Utilities Commission Hearings on Restructuring California's Electric Services Industry and Reforming Regulation, June 7, 1994, p. 14.

¹²⁴ Christopher Flavin, "The Bridge to Clean Energy," World Watch, July/August 1992, p. 12. Flavin on the same page mentions that "no energy source is ecologically pure" but provides no follow-up analysis of the environmental problems of wind and solar, much less a possible monetary value.

¹²⁵ "To some who drive through the Alameda Country, California site, Altamont is a visual blight. Acre after acre of 100-foot tall turbines in long curved rows line the softly rolling hills. . . . Altamont is where neighbors complain -- loudly and with media coverage -- that the noise from the turbines is unbearable." Carlotta Collette, "Wind's Eastern Front," Northwest Energy News, July/August 1992, p. 14.

¹²⁶ Quoted in Paul Gipe, Wind Energy Comes of Age, p. 258.

¹²⁷ This has been called the "machines in the garden" problem. Ibid., p. 255.

¹²⁸ "When heavy rains struck, runoff surged along roadcuts to cascade down steep slopes, gouging deep gullies into the mountain sides and leaving some wind turbines standing precariously on exposed foundations." Ibid., p. 414. Also see p. 317.

¹²⁹ Ibid., p. 417.

¹³⁰ "Such flashing lights are particularly annoying at night, as is the bright 'security' lighting common at wind plant substations in California." Ibid., p. 320.

¹³¹ "California wind developers say wide roads speed construction by enabling two-way traffic of heavy vehicles to move at high speed. These roads met the need of the frantic yearend construction schedules typical of California's tax-credit era." Ibid., p. 411. Also see pp. 322-23.

¹³² Ibid., p. 342.

¹³³ Ibid., p. 444.

¹³⁴ "Unfortunately, there are hundreds, if not thousands, of wind turbines in California that are less reliable, less well maintained, and less well sited. . . . Some simply do not work." Ibid., p. 302.

¹³⁵ Ibid., p. 324.

¹³⁶ Paul Gipe, letter to Charles Imbrecht, Chairman, California Energy Commission, document file 96-RDD-1890, October 15, 1996. ¹³⁷137 Paul Gipe, Wind Energy Comes of Age, p. 454.

¹³⁸ Proceedings of National Avian-Wind Power Planning Meeting, p. 5. The aforementioned West Texas wind-power project evoked this reaction from an official of the Guadalupe Mountains National Park: "I've got a lot of mixed feelings. I understand that wind power is supposed to be clean, yet I don't look just at the visual intrusion. We're tearing up a lot of country putting up those wind towers." Quoted in Diane Jennings, "Wind Power Gets a Turn," The Dallas Morning News, September 24, 1995, p. 49A.

¹³⁹ James Bruggers, "Stirring Ill Winds," San Ramon Valley Times, May 14, 1995, p. A1. Explains Paul Gipe: "There are many ways in which a wind turbine can ignite a wildfire. Electrical short circuits, an overheated bearing, downed electrical cables, welding splatter from technicians servicing the turbines, or even the catalytic converter on service vehicles can start a conflagration." Gipe, Wind Energy Comes of Age, p. 370.

¹⁴⁰ Christopher Flavin and Nicholas Lenssen, Power Surge, p. 294.

¹⁴¹ Paul Gipe, Wind Energy Comes of Age, p. 396.

¹⁴² CEED Study, pp. 2-12. A land-use estimate by EPRI is near the low end of this range. Proceedings of National Avian-Wind Power Planning Meeting, p. 11.

¹⁴³ Christopher Flavin, "Power Shock: The Next Energy Revolution," World Watch, January/February 1996, p. 15. A more recent estimate of world capacity is 6,200 megawatts.

¹⁴⁴ Michael Grubb and Niels Meyer, "Wind Energy: Resources, Systems, and Regional Strategies," p. 173.

¹⁴⁵ The "footprint" argument for ANWR drilling was made against the Sierra Club to no avail by the Bush Administration's Department of Energy. Stated DOE: "Full development in the Arctic National Wildlife Refuge (ANWR) would directly impact only 13,000 acres, an extremely small portion (less than 1 percent) of the 1.5 million acre coastal plain where leasing would occur. The coastal plain, in turn, is a small portion of ANWR itself, which totals 19 million acres." Letter from the Department of Energy to the Sierra Club, reprinted in Committee on Energy and Natural Resources, Legislative History of the Energy Policy Act of 1992, 6 vols. (Washington, DC: Government Printing Office, November 1994), vol. 2, p. 1459.

¹⁴⁶ Michael Grubb and Niels Meyer, "Wind Energy: Resources, Systems, and Regional Strategies," p. 174.

¹⁴⁷ Daniel Kaplan, "Is The Green Promise of Hydro Fading to Brown?" The Energy Daily, December 7, 1992, p. 1.

¹⁴⁸ Hydroelectric Relicensing, Hearings Before the Subcommittee on Energy Conservation and Power, Committee on Energy and Commerce, House of Representatives, 99th Cong., 1st Sess. (Washington, DC: Government Printing Office, 1985), p. 124.

¹⁴⁹ "Approximately 2 to 3 percent of the power capacity of small power-producing projects and cogenerators that is represented by new dams on natural water courses is responsible for at least 90 percent of the environmental problems and environmental controversies associated with that whole range of [PURPA] projects." Ibid.

¹⁵⁰ Public Law 99-495, 100 Stat. 1243 (1987).

¹⁵¹ Margaret Kriz, "Dueling Over Dams," National Journal, December 11, 1993, pp. 2935-37; "Environmentalists Fault Clinton Promotion of Hydropower," Water Policy Report, October 27, 1993, p. 30.

¹⁵² "[Hydro] would grow in the next few decades in our sustainable future, but . . . growth would be constrained by resource limitations." Christopher Flavin and Nicholas Lenssen, Power Surge, p. 286. Elsewhere (p. 41) they characterize hydro as "essentially static."

¹⁵³ The Alliance to Save Energy, American Gas Association, Solar Energy Industries Association, An Alternative Energy Future, April 1992, p. 3:5. For a summary of environmental concerns with hydropower, see Thomas Johansson et al., Renewable Energy: Sources for Fuels and Electricity (Washington, DC: Island Press, 1993), pp. 94-107.

¹⁵⁴ Energy Information Administration, Electric Power Annual 1995, vol. 1, table 10.

¹⁵⁵ DOE Task Force: Annexes 2-4, p. 183 (emphasis added).

¹⁵⁶ Ibid., Annex 1, p. 68.

¹⁵⁷ Energy Information Administration, Annual Energy Outlook, 1996, p. 31.

¹⁵⁸ CEC, 1994 Electricity Report, p. 104. AB 1890 in 1996, however, defined hydro under 30 megawatts as one of seven renewable energies eligible for subsidies. See CEC, Policy Report on AB 1890 Renewables Funding, Docket No. 96-REN-1890, March 1997, pp. ES-11 to ES-12.

¹⁵⁹ The hydro system of the Bonneville Power Administration (BPA) was derated from 9,918 MW to 9,258 MW in 1995, a 660 MW (7 percent) decline, to account for increased environmental (nonpower) management of river flows. Conversation with Perry Gruber, BPA spokesperson, February 12, 1996. BPA has charged its ratepayers an estimated $450 million per year for its fish programs. Lon Peters, "Power, Politics, and Salmon -- Restructuring the Northwest Power Industry," Cascade Policy Institute, February 1996, p. 6. Under a new federal arrangement, salmon recovery will be capped at $435 million annually, but BPA is obligated to spend $1.5 billion on river restoration over six years and set aside another $352 million in a contingency fund. Portland Oregonian, September 13, 1996, p. 1. Meanwhile, a glut of salmon in Alaska has reduced its wholesale price to five cents per pound. Bill Richards, "Fishermen in Alaska, Awash in Salmon, Strive to Stay Afloat," Wall Street Journal, September 4, 1996, p. A1.

¹⁶⁰ John Cushman, "Ex-Im Bank Refuses to Back Big China Dam," New York Times, May 31, 1996, pp. C1, C6; Helene Cooper, "Ex-Im Bank Snubs Chinese Dam Project," Wall Street Journal, May 31, 1996, p. A3.

¹⁶¹ The DOE estimate of between $1,850 and $2,180 per kilowatt (1991 dollars) was provided by Perry Lindstrom, economist with the EIA's Office of Integrated Analysis and Forecasting, conversation of February 7, 1996. The estimate from the California Energy Commission (1991 dollars) of between $1,700 and $3,400 million per kilowatt was provided by Tom Tanton, Advisor to Commissioner David Rohy, communication of February 7, 1996. The dated estimates reflect the absence of new projects for actual data information.

¹⁶² In 1987 congressional hearings an executive with the nation's largest solar firm testified: "Increasing the size of solar facilities . . . to 80 megawatts . . . is the key to making solar thermal electric generation competitive in the immediate future." Testimony of Patrick Francois, executive vice-president, LUZ International Limited, Solar Power, Hearing before the Subcommittee on Energy and Power of the Committee on Energy and Commerce, House of Representatives, 100th Cong., 1st sess. (Washington, DC: Government Printing Office, 1988), p. 12.

¹⁶³ "The consensus as far as I can see it is after the year 2000, somewhere between 10 and 20 percent of our energy could come from solar technologies quite easily." Statement of Scott Sklar, executive director, Solar Energy Industries Association, p. 26.

¹⁶⁴ Scott Sklar, "Solar Industry Appears Poised to Contribute," Forum for Applied Research and Public Policy, Summer 1992, p. 84.

¹⁶⁵ Also see Nevada Power Company, 1995 Annual Report, pp. 3, 6, 10.

¹⁶⁶ Black & Veach, Assessment of New Utility Power Plants: Final Report, September 1986, pp. 15-5, 19-3. The aforementioned 1,875 megawatt Teesside project in the United Kingdom was built on 23 acres.

¹⁶⁷ DOE Task Force Study: Annex 1, pp. 57-61.

¹⁶⁸ Referring to a 1978 study by K.A. Lawrence of the Solar Research Institute, Beckmann states: "To construct a 1,000 MW solar plant needs an excessive amount of materials: 35,000 tons of aluminum, 2 million tons of concrete, 7,500 tons of copper, 600,000 tons of steel, 75,000 tons of glass, 1,500 tons of chromium and titanium, and other materials. . . . The energy that goes into the construction of a solar thermal-electric plant is, in fact, so large that it raises serious questions of whether the energy will ever be paid back." Petr Beckmann, Why "Soft" Technology Will Not Be America's Energy Salvation (Boulder, CO: The Golem Press, 1979), p. 6.

¹⁶⁹ For a methodological overview of total fuel cycle environmental impacts, see National Renewable Energy Laboratory, Summary and Recommendation: Total Fuel Cycle Assessment Workshop (Golden, CO: NREL, 1995). The "upstream" environmental problems of solar would presumably have to be revealed and addressed in the "extended product responsibility" proposal of the President's Council on Sustainable Development. See PCSD, Sustainable America: A New Consensus (Washington, DC: Government Printing Office, 1996), pp. 38-43.

¹⁷⁰ Communication from Tom Tanton to Robert L. Bradley, Jr., December 29, 1995. Another source of incremental CO2 emissions concerns the production of soda glass for mirrors, according to Tanton, although this was not quantified by him.

¹⁷¹ Conversation with Mark Skowronski, former project director, Solar One Project, Southern California Edison, January 19, 1996.

¹⁷² Paul Gipe, Wind Energy Comes of Age, p. 351.

¹⁷³ Linda Kanamine, "Experimental California Solar Plant `Bottles' Energy for Later Use," USA Today, June 4, 1996, p. 2A.

¹⁷⁴ Murray Silverman and Susan Worthman, "The Future of Renewable Energy Industries," p. 25.

¹⁷⁵ Linda Kanamine, "Experimental California Solar Plant," p. 2A.

¹⁷⁶ Christopher Flavin and Nicholas Lenssen, Power Surge, p. 143.

¹⁷⁷ Michael Lotker, "Solar Generation Flowers, Fades," Forum for Applied Research and Public Policy, Summer 1992, p. 94. Luz's bankruptcy has left Southern California Edison ratepayers with a $5.8 million liability for an unfinished transmission project. See J.A. Savage, "CPUC Lets CalEnergy Off Kramer Substation Hook," California Energy Markets, September 6, 1996, p. 11.

¹⁷⁸ Elaine Fletcher, "Can Solar Shine Again?," San Francisco Examiner, February 21, 1996.

¹⁷⁹ Energy Information Administration, Annual Energy Outlook, 1996, p. 32.

¹⁸⁰ DOE Task Force Study: Annex 1, p. 60.

¹⁸¹ Allen Myerson, "Solar Power, for Earthly Prices," New York Times, November 15, 1994, pp. C1-C2. For a review of the special tax and subsidy treatment under consideration for the Nevada Solar Enterprise Zone, see Libby Brydolf, "Solar Power Proponents to Form Independent Power Authority in Solar-Energy Effort," California Energy Markets, December 9, 1994, pp. 17-18.

¹⁸² Myerson, "Solar Power, for Earthly Prices."

¹⁸³ DOE Task Force Study: Annex 1, p. 58.

¹⁸⁴ Ibid. The California Energy Commission puts the estimate at nine acres per megawatt. Paul Gipe, Wind Energy Comes of Age, p. 406.

¹⁸⁵ Communication from Ray Bransfield, Wildlife Biologist, U.S. Fish & Wildlife Service, Ventura, California Branch, January 29, 1996.

¹⁸⁶ Deroy Murdock, "Eco-Dilemmas: How `Green' Policies Hurt Mother Nature," National Minority Politics, October 1995, p. 27.

¹⁸⁷ Prepared Statement of Karin Sheldon, president, The Wilderness Society, California Desert Protection Act of 1993, Hearings Before the Subcommittee on Public Lands, National Parks, and Forests of the Committee on Energy and Natural Resources, United States Senate, 103rd Cong., 1st sess. (Washington, DC: Government Printing Office, 1993), p. 208. An extreme position of nonuse has been forwarded by Paul Ehrlich: "In a country like the United States, there is not the slightest excuse for developing one more square inch of undisturbed land." Quoted in Jonathan Adler, Environmentalism at the Crossroads (Washington, DC: Capital Research Center, 1995), p. 116.

¹⁸⁸ Roderick Nash, quoted in Paul Gipe, Wind Energy Comes of Age, p. 257. Also see ibid., p. 444.

¹⁸⁹ DOE Task Force Study: Annex 1, p. 57.

¹⁹⁰ Ibid.

¹⁹¹ Robert L. Bradley, Jr., Energy Choices and Market Decision Making, pp. 19-20.

¹⁹² DOE Task Force Study: Annex 1, p. 73.

¹⁹³ Utility PhotoVoltaic Group, "Solarex & Utilities Unite to Bring Solar Electric Power into the Mainstream," Press Release, February 27, 1997.

¹⁹⁴ Ibid. For a range of PV system costs without the subsidies, falling between $5.27 and $11.76 per watt, see "Return on Federal Cost Share in Team-Up Exceeds Expectation," PV Vision, Winter 1997.

¹⁹⁵ Utility PhotoVoltaic Group, Program Summary, April 1997.

¹⁹⁶ Ibid.

¹⁹⁷ CEC, Policy Report on AB 1890 Renewables Funding, p. 5.

¹⁹⁸ DOE Task Force Study: Annex 1, p. 63.

¹⁹⁹ Christopher Flavin and Nicholas Lenssen, Power Surge, p. 180.

²⁰⁰ Christopher Flavin, Slowing Global Warming: A Worldwide Strategy (Washington, DC: Worldwatch Institute, October 1989), p. 41.

²⁰¹ Christopher Flavin and Nicholas Lenssen, Power Surge, pp. 176-77.

²⁰² DOE Task Force Study: Annex 1, p. 63.

²⁰³ In the early 1970s the National Petroleum Council ("U.S. Energy Outlook: An Interim Report," November 1971) predicted that U.S. geothermal capacity would be between 3,500 and 19,000 megawatts by 1985. Actual capacity in that year would be 1,580 megawatts (Energy Information Administration, Annual Energy Review, 1994, p. 279) In 1989 Christopher Flavin (Slowing Global Warming, p. 39) predicted that year-2000 geothermal capacity in the U.S. would be between 4,200 MW to 18,700 MW; capacity today is around 3,000 MW with little growth anticipated.

²⁰⁴ Energy Information Administration, Electric Power Annual, Vol. I, Table 10; Vol. II, Table 58.

²⁰⁵ Pacific Gas and Electric, Form 10-K for the Year Ended December 31, 1994, p. 21.

²⁰⁶ Pacific Gas and Electric, Form 10-K for the Year Ended December 31, 1995, p. 28.

²⁰⁷ "Many of the most promising geothermal resources are located in or near protected areas such as national parks, national monuments, and wilderness, recreation, and scenic areas." EIA, Renewable Energy Annual, 1995, p. 79.

²⁰⁸ "The steam-powered Coldwater Creek Geothermal Plant, hailed as 'inexhaustible' clean energy at its opening eight years ago, may soon be shut down." Kimberly May, "SMUD Plans to Shut Down Steam Plant," Sacramento Bee, June 21, 1996, p. 1B.

²⁰⁹ "In a 'stunning blow' to supporters of geothermal energy, California Energy Co. has 'mothballed' drilling operations at the Newberry National Volcanic Monument in Oregon, because it did not find enough superheated water at shallow depths." Mike Freeman, "Failure to Find Geothermal Hot Spot Puts 'Green' Energy Project at Risk," Seattle Daily Journal of Commerce Online, October 22, 1996.

²¹⁰ See, generally, DOE Task Force Study: Annex 1, p. 70. Dennis Wamsted, "GAO Throws Cold Water on Geothermal Industry," The Energy Daily, p. 3; Energy Information Administration, "Geothermal Energy in the Western U.S. and Hawaii: Resources and Projected Generation Supplies," September 1991; Murray Silverman and Susan Worthman, "The Future of Renewable Energy Industries," pp. 17-20.

²¹¹ "LADWP and Calpine Terminate Contract to Develop Geothermal Plant at Coso," Electric Power Daily, February 19, 1997, p. 10.

²¹² Arthur O'Donnell, "A Geyser of Ill Will, Part II," California Energy Markets, November 3, 1995, p. 8.

²¹³ Christopher Flavin and Rick Piltz, Sustainable Energy (New York: Renew America, 1989), p. 30.

²¹⁴ Christopher Flavin and Nicholas Lenssen, Power Surge, p. 191.

²¹⁵ "Carbon dioxide is released in direct steam and flash systems at a typical rate of 55.5 metric tons per gigawatt hour, or at approximately 11 percent of the rate for gas-fired steam electric plants." EIA, Renewable Energy Annual, 1995, p. 78.

²¹⁶ Ibid.

²¹⁷ Ibid., p. 79.

²¹⁸ Ibid.

²¹⁹ Complained one senator to a representative of the Natural Resources Defense Council in congressional hearings in 1989, "Now we have environmental concerns about geothermal energy. In other words, just about the time we want to use them, somebody comes along and says well, do not change the pattern of everything under the ground. And so we have to leave that alone." Arctic Coastal Plain Competitive Oil and Gas Leasing Act, p. 140.

²²⁰ Daniel Yergin, "Conservation: The Key Energy Resource," in Robert Stobaugh and Daniel Yergin, eds., Energy Future: Report of the Energy Project at the Harvard Business School (New York: Random House, 1979), p. 136.

²²¹ Ibid. The father of modern energy conservation is Amory Lovins, whose article "Energy Strategy: The Road Not Taken," (Foreign Affairs, October 1976, pp. 65-96)popularized "soft energy" (conservation) as an alternative to "hard energy" (new megawatt capacity).

²²² Quoted in Ralph Cavanagh, The Great `Retail Wheeling' Illusion -- and More Productive Energy Futures (Boulder, CO: E Source, Inc., 1994), p. 8.

²²³ CEC, 1994 Electricity Report, p. 40.

²²⁴ Energy Information Administration, Electric Power Annual, 1994, vol. 2, p. 82.

²²⁵ Energy Information Administration, Electric Power Annual 1993 (Washington, DC: Government Printing Office, 1994), p. 108; Energy Information Administration, Electric Power Annual 1994, vol. 2, p. 77. DSM expenditures for 1995 are conservatively estimated at one-half of 1994 levels or $1.36 billion. Pre-1989 data for the U.S. are not available, but California's 1980-88 expenditure of $1.5 billion is included in this estimate. All estimates are restated in 1995 dollars.

²²⁶ DOE Budget Study. See Appendix B.

²²⁷ PG&E, Form 10-K For the Fiscal Year Ending December 31, 1994, p. 14.

²²⁸ Two principals of the consulting firm Barakat & Chamberlin, who were instrumental in the analytical framework used to implement California's record DSM commitment, recently stated: "It is now clear that the industry led itself astray regarding the value and appropriateness of DSM activities; the erroneous views that developed regarding the source of the value of DSM came about at least in part because of the way in which the standard tests were applied." John Chamberlin and Patricia Herman, "The Energy Efficiency Challenge: Save the Baby, Throw Out the Bathwater," The Electricity Journal, December 1995, p. 39. While these authors estimate the loss from understated costs and overstated benefits in the "millions of dollars" (p. 45), Herman elsewhere has estimated the national cost in the "hundreds of millions of dollars." Patricia Herman, "Reforming Demand-Side Management for the Competitive Power Era," paper delivered at the conference New Horizons in Electric Power Deregulation, Cato Institute, March 2, 1995.

²²⁹ For a discussion of the CPUC reversal of April 1994, see Robert L. Bradley, Jr., "The Electric Restructuring Debate in California," in Robert Michaels, Restructuring California's Electric Industry: Lessons for the Other Forty-Nine States, pp. 11-15.

²³⁰ The source of this "inside joke" at his company wished to remain anonymous.

²³¹ Seymour Goldstein, "California Utility DSM at the Crossroads," California Energy Commission, January 1995, p. 3.

²³² Both studies were brought to the author's attention by the manuscript of Paul Ballonoff's forthcoming Shock Therapy: Ending the Never-Ending Energy Crisis (Washington, DC: Cato Institute) 1997.

²³³ From personal communication between Illinois Commerce Commissioner Ruth Kretschmer and Paul Ballonoff, 1995. Reference found in Ballonoff, ibid.

²³⁴ Energy Information Administration, Electric Power Annual 1995, Volume II, November 1996; Table 43, p. 77 for DSM program costs and savings; table 13, p. 35 for the relative costs of the fuel presumably avoided.

²³⁵ For different criticisms of DSM from academic and professional economists, see Alfred Kahn, "An Economically Rational Approach to Least-Cost Planning," Electricity Journal, June 1991, pp. 11-20; Paul Joskow and Donald Marron, "What Does a Negawatt Really Cost: Evidence from Utility Conservation Programs," Energy Journal, vol. 13, no. 4 (1992): 47-74; Albert Nichols, "How Much Energy Do DSM Programs Save? Engineering Estimates and Free Riders" (Cambridge, MA: National Economic Research Associates, 1993), "Estimating the Net Benefits of Demand-Side Management Programs Based on Limited Information," (Cambridge, MA: National Economic Research Associates, 1993), and "How Well Do Market Failures Support the Need For Demand Side Management?" (Cambridge, MA: National Economic Research Associates, 1992); Ronald Sutherland, "Market Barriers to Energy Efficiency Investments," Energy Journal, vol. 12, no. 3 (1991): 15-33, "Income Distribution Effects of Electric Utility DSM Programs," Energy Journal, vol. 15, no. 4 (1994): 1-15, and "Economic Efficiency, IRPs, and Long Term Contracts," presentation before the Western Economics Association, June 12, 1993; Larry Ruff, "Equity vs. Efficiency: Getting DSM Pricing Right," Electricity Journal, November 1992, pp. 24-35; Douglas Houston, Demand-Side Management: Ratepayers Beware (Houston, TX: Institute for Energy Research, 1993); Bernard Black and Richard Pierce, Jr., "The Choice Between Markets and Central Planning in Regulating the U.S. Electricity Industry," Columbia Law Review, October 1993, pp. 1381-84; and Andrew Rudin, "DSM: An Exorbitant Free Ride Into an Unsustainable Future," paper submitted at the Great Lakes Conference of Public Utility Commissioners, July 13, 1992.

²³⁶ On these points, see Robert L. Bradley, Jr., "California DSM: A Pyrrhic Victory for Energy Efficiency?" Public Utilities Fortnightly, October 1, 1995, p. 44.

²³⁷ David Lapp, "The Demanding Side of Utility Conservation Programs," Environmental Action, Summer 1994, p. 27.

²³⁸ "The regulated monopoly structure [of] . . . utilities . . . has more often than not led to an exacerbation rather than diminution of environmental problems. Investors need to be free to succeed or fail in the marketplace without recourse to the safety net of cost recovery if we are to efficiently match energy investments with demand." Statement of Environmental Defense Fund before the House Subcommittee on Energy and Power Resources concerning Electric Regulation: A Vision for the Future, May 15, 1996, p. 1.

²³⁹ For a discussion of some of these issues, see Lee and Darani, "Electric Restructuring and the Environment," pp. II, 12-15, 24-25.

²⁴⁰ Ned Ford, "What Role for DSM Now?," The Electricity Journal, March 1996, p. 87.

²⁴¹ For a brief review of the early industry's drive to trade franchise protection for rate regulation, see Marvin Olasky, Corporate Public Relations: A New Historical Perspective (Hillsdale, NJ: Lawrence Erlbaum Associates, 1987), pp. 33-43. For a longer review, see Robert L. Bradley, Jr., "The Origins of Political Electricity: Market Failure or Political Opportunism?" Energy Law Journal, vol. 17, no. 1 (1996): 59-102.

²⁴² Statement of Edison Electric Institute before the House Subcommittee on Energy and Power Resources concerning Electricity Regulation: A Vision for the Future, May 15, 1995.

²⁴³ Michael Maloney and Robert McCormick, Customer Choice, Consumer Value: An Analysis of Retail Competition in America's Electric Industry (Washington, DC: Citizens for a Sound Economy, 1996) and Robert Crandall and Jerry Ellig, Economic Deregulation and Customer Choice: Lessons for the Electric Industry (Fairfax, VA: Center for Market Processes, 1997).

²⁴⁴ This directly led to the political pressure to suspend PURPA auctions, described elsewhere.

²⁴⁵ Wind, for example, often peaks in the early evening versus the demand peak of midafternoon. See Alfred Cavallo et al., "Wind Energy: Technology and Economics," in Thomas Johansson et al., eds., Renewable Energy: Sources for Fuels and Electricity (Washington, DC: Island Press, 1993), p. 151.

²⁴⁶ The declaration and signatories are reprinted in Ralph Cavanagh, The Great `Retail Wheeling' Illusion--and More Productive Energy Futures, pp. 25-28.

²⁴⁷ Ibid., p. 3. Also see "Electricity Shopping Can Be a Bad Deal," New York Times, June 12, 1994, p. 11. A study by the Worldwatch Institute similarly complained that the "mirage" of retail wheeling "would severely undermine the long-term planning that has been so vital to the evolution of an efficient, environmentally sound electricity market." Christopher Flavin and Nicholas Lenssen, Powering the Future: Blueprint for a Sustainable Electricity Industry, p. 46.

²⁴⁸ One report states that environmentalists have conceded as much, finding solace in the fact that competitive restructuring could hasten the phaseout of the nuclear industry and accelerate "green pricing" to help renewables compete. James Ridgeway, "The Green Movement's Shock Treatment," The Village Voice, May 28, 1996, p. 22.

²⁴⁹ Statement of James Rhodes on Behalf on behalf of the Edison Electric Institute, Hearing before the Committee on Energy and Power, May 15, 1996, p. 10.

²⁵⁰ For a summary of the first year of the "Blue Book" debate, see Michaels, Restructuring California's Electric Industry.

²⁵¹ CEC, Policy Report on AB 1890 Renewables Funding, p. 4; Energy Information Administration, Annual Energy Review 1995, July 1996, pp. 245, 281. The California capacities are estimated for 1996; the national capacities are for 1995.

²⁵² Ibid.

²⁵³ Ibid.

²⁵⁴ Ibid.

²⁵⁵ Energy Information Administration, Electric Power Annual 1994, vol. 2, p. 77; CEC, 1994 Electricity Report, p. 86. These numbers are cumulative through 1994.

²⁵⁶ See generally, Bradley in Michaels, ibid., and Bradley, "California DSM: A Pyrrhic Victory for Energy Efficiency?" pp. 41-47. A sign of the times is that a leading architect of California's central-planning failure with electricity, Ralph Cavanagh of the NRDC, received the 1996 Heinz Award in Public Policy as "the most influential figure in Western energy policy." "Cavanagh Wins Congratulations and Cash for Bringing People Together," California Energy Markets, December 13, 1996, p. 2.

²⁵⁷ The Edison Electric Institute has estimated above-market PURPA related costs at "at least" $38 billion. Statement of Edison Electric Institute, p. 11.

²⁵⁸ California Energy Commission, QF-Self Generation LTBA Database," no date, copy in files (hereafter California Energy Commission QF Database).

²⁵⁹ FERC, "Order on Petitions for Enforcement Action Pursuant to Section 210(h) of PURPA," 70 FERC 61666 at 61667, 61672 (1995).

²⁶⁰ Ibid., at 61676.

²⁶¹ "Order on Requests for Reconsideration," 71 FERC 62074 at 62079.

²⁶² Quoted in Craig Cano, "IPPs Stunned, State Miffed -- Just Another Day on the PURPA Front," Inside F.E.R.C., February 27, 1995, p. 14.

²⁶³ Energy Information Administration, Annual Energy Outlook, 1996, p. 36. DOE also mentioned the "further uncertainty" of Congress's proposed elimination of the 1.5 cents per kwh tax credit (ibid.).

²⁶⁴ "NERA Energy Outlook," December 21, 1995, p. 1.

²⁶⁵ See, for example, Arthur O'Donnell, "Edison Files QF Buyout Pact, Seeks Confidentiality of Provisions," California Energy Markets, September 1, 1995, p. 11.

²⁶⁶ The debate over "green" garment labeling brought the following marketing reminder: "It's unclear whether consumers would pay more for garments labeled sweatshop-free, should companies raise prices to maintain better working conditions. The 1980s brought a similar reaction against environmentally unsound products. Companies rushed to make products 'green,' and consumers jumped on the bandwagon to buy them. But as product prices rose, many jumped off again." Wendy Bounds and Hilary Stout, "Sweatshop Pact: Good Fit or Threadbare?" Wall Street Journal (April 10, 1987), p. A2.

²⁶⁷ David Moskovitch, "Green Pricing: Why Not Customer Choice?," The Electricity Journal, October 1993, pp. 42-50; Letter from David Moskovitch to the California Public Utilities Commission, April 27, 1994.

²⁶⁸ For six examples of green pricing programs by investor-owned utilities or public power, see Michael Zucchet, "Renewable Resource Electricity in the Changing Regulatory Environment," Renewable Energy Annual, 1995.

²⁶⁹ Daniel Kaplan, "SCE, Kenetech Announce Wind Power Deal, Green Pricing Plan," The Energy Daily, March 17, 1994, p. 1. Also see Robin Walther, "Green Pricing For Renewable Resource Development: An Idea Whose Time is Coming?" Southern California Edison Company, June 1993.

²⁷⁰ "Our proposal . . . does not require consumers to pay more for generation services provided by renewable service providers. Rather, the price paid is determined through negotiations in the competitive marketplace between the seller and the buyer of `green services'." CPUC, "OIR/OII Governing Restructuring California's Electric Services Industry and Reforming Regulation," April 20, 1994, p. 53.

²⁷¹ Ralph Cavanagh, "Opening Comments of the Natural Resources Defense Council and Comments on Balancing Public Policy Objectives in a Competitive Environment," OII/OIR on Restructuring California's Electric Services Industry and Reforming Regulation, June 7, 1994, p. 12.

²⁷² Edward Holt in early 1997 counted "at least fourteen programs." Holt, "Disclosure and Certification: Truth and Labeling for Electric Power," p. 3.

²⁷³ David Moskovitz et al., "Full Environmental Disclosure for Electricity: Tracking and Reporting Key Information," (Gardiner, MA: The Regulatory Assistance Project, 1997), p. 6, 23.

²⁷⁴ Green pricing for resources that already are part of the utility's portfolio creates a potential double-counting problem. Edward Holt ("Disclosure and Certification: Truth and Labeling for Electric Power," p. 5) calls this "green washing and green scams."

²⁷⁵ "Green Mountain Energy Partners offers predominantly hydro electricity from a partnership with Hydro-Quebec and states that its emissions are 97.5 percent free of greenhouse gases. . . . Hydro-Quebec projects, however, have been criticized for destroying Canada's First Nation (Native American) lands." Edward Holt, "Disclosure and Certification: Truth and Labeling for Electric Power," p. 2.

²⁷⁶ "The implied claim that pumped storage hydro is 100 percent hydropower is probably false, given that pumped storage facilities require energy from other power plants for pumping." David Moskovitz et al., "Full Environmental Disclosure for Electricity: Tracking and Reporting Key Information," p. 4. Adds Edward Holt ("Disclosure and Certification: Truth and Labeling for Electric Power," p. 2), "The company does not mention that the pumped storage may rely on controversial nuclear power to pump the water to the top of the hill."

²⁷⁷ For example, avian mortality is greater at Altamont Pass than Tehachapi Pass. See "CEC Awards Grant Money for Bird Research," California Energy Markets, December 19, 1996, p. 2.

²⁷⁸ Wisconsin Energy's "Energy for Tomorrow" program uses pre-existing surplus hydro and biomass generation to keep the price premium for its 100 percent renewable offering at only around 18 percent. These two resources also allow around-the-clock availability. Conversation with Mike Struebing, Wisconsin Electric, February 6, 1997.

²⁷⁹ "Fuel cells produce practically no pollution, are quiet, highly efficient, and require little maintenance." Business Council for Sustainable Energy, Changing Tide: Tomorrow's Clean Energy - Today, p. 14.

²⁸⁰ See the discussion of product labeling in this paper.

²⁸¹ Edward Holt, "Disclosure and Certification: Truth and Labeling for Electric Power," p. 16.

²⁸² Ibid., p. 14.

²⁸³ The spot electricity can be short term if green pricing is short term and interruptible if the renewables are intermittent.

²⁸⁴ This applies to wind and solar if these intermittent resources are being offered to green purchasers on a firm basis. (Hydro and biomass programs, in contrast, may not need to be "firmed up.")

²⁸⁵ Thirty-year contracts appear to be common. See, for example, two recent contracts by Zond and Northern Alternative Energy reported in Allen Myerson, "Enron Wins Pact to Supply Power from Wind Turbines," New York Times, March 20, 1997, p. C2; "Northern Alternative Energy Signs Two Wind Energy Contracts with NSP," Electric Utility Business, April 7, 1997, p. 9.

²⁸⁶ The resolution is reprinted in David Moskovitz et al., "Full Environmental Disclosure for Electricity: Tracking and Reporting Key Information," p. 27.

²⁸⁷ Edward Holt, "Disclosure and Certification: Truth and Labeling for Electric Power," p. 15. He goes on to state: "Recognizing that there is no natural monopoly in the certification market, an umbrella organization also could be created, a kind of certifier of certifiers." Yet this superarbitrator would create the very natural monopoly that Holt says does not exist.

²⁸⁸ "The mix of one seller depends on the mix of one or more other sellers, so computing the values for the label requires the solution of several simultaneous equations. As the number of participants and transactions between participants grows, the mathematical complexity increases." David Moskovitz et al., "Full Environmental Disclosure for Electricity: Tracking and Reporting Key Information," p. 12. An appendix (p. 28) specifying the "equations for attributing emissions and fuel mix to retail sales" lists twelve variables and five subscripts.

²⁸⁹ See Robert L. Bradley, Jr., Oil, Gas, and Government: The U.S. Experience (Lanham, MD: Rowman & Littlefield, 1996), pp. 687-710.

²⁹⁰ For an overview of the problems of environmental labeling in general, see Julian Morris, "ISO14000: Environmental Regulation by Any Other Name?" Competitive Enterprise Institute, January 1997.

²⁹¹ The repoliticization of electricity is already likely with other aspects of mandatory openaccess. For proposals to completely deregulate electricity, see Jerry Taylor, "Electric Utility Reform: Shock Therapy or Managed Competition," Regulation, No. 3, 1996, pp. 63-76.

²⁹² Staff Report, "The Price is Right," Rural Electrification, December 1996, p. 10.

²⁹³ Quoted in California Energy Markets, June 7, 1991, p. 14. The Energy Foundation, 1995 Annual Report, pp. 1, 17.

²⁹⁴ The case for abolishing the DOE includes two public policy issues not addressed in this essay: renouncing the agency's "energy security" role and privatizing the DOE's power marketing administrations.

²⁹⁵ DOE Task Force Study, p. 3.

²⁹⁶ Ibid. Joseph Romm and Charles Curtis ["Mideast Oil Forever?," p. 74] similarly warn of a diminished federal research and development role with energy and related technologies as "a blunder of . . . potentially historic proportions."

²⁹⁷ DOE Budget Study.

²⁹⁸ Paul Gipe, Wind Energy Comes of Age, p. 90.

²⁹⁹ Public Law 102-486, 106 Stat. 2776 at 2795-96, 2803-05.

³⁰⁰ Section 701.3 states: "Until the [CPUC] completes an electric generation procurement methodology that values the environmental and diversity costs associated with various technologies, the [CPUC] shall direct that a specific portion of future electrical generating capacity needed for California be reserved or set aside for renewable resources." Quoted in CEC, 1994 Electricity Report, p. 48.

³⁰¹ "Portland General, Enron Turn Around Opponents to Mega-Merger," Electric Power Alert, January 15, 1997, p. 18.

³⁰² John Barry, "How to Close Down the Department of Energy," Heritage Foundation Backgrounder, November 9, 1995, p. 6.

³⁰³ Both the majority and minority decisions of the December 1995 reversal stated: "We are committed to establishing restructuring policies which maintain California's resource diversity for existing resources as well as encourage development of new renewable resources." OIR/OII on the Commission's Proposed Policies Governing Restructuring California's Electric Services Industry and Reforming Regulation," December 20, 1995, Majority Decision, p. 146; Minority Decision, p. 143.

³⁰⁴ "The Commission supports a policy of maintaining the current benefits from renewable resources to the state's electricity system. . . . The [California] Legislature should allow customers more options toward managing their own risk. The modifications should also expand emphasis beyond renewables alone to include other opportunity technologies . . . as well as financial instruments." CEC, 1994 Electricity Report, pp. 48; CEC, Final Adoption Order, November 1, 1995 (amending p. 119 that erroneously had "the Commission supports a policy of maintaining the current contribution of renewable resources" [emphasis added]).

³⁰⁵ The law [Section 381(h)] is curiously specific: "'Emerging renewable technology' means a new renewable technology, including, but not limited to, photovoltaic technology, that is determined . . . to be emerging from research and development and that has significant commercial potential."

³⁰⁶ For a summary of AB 1890, signed by Governor Wilson on September 23, 1996, see Aldyn Hoekstra and Gary Simon, Sweetening the Deal: The California Legislature Takes on Electric Restructuring, Cambridge Energy Research Associates, November 1996; and Dan Richard and Melissa Lavinson, "Something for Everyone: The Politics of California's New Law on Electric Restructuring," Public Utilities Fortnightly, November 15, 1996, pp. 37-41.

³⁰⁷ CEC, Policy Report on AB 1890 Renewables Funding, p. ES-4. For an allocation by year, see p. ES-5.

³⁰⁸ Ibid., p. A-2.

³⁰⁹ Ibid.

³¹⁰ Ibid., p. 36.

³¹¹ For an example of the tension between renewable and energy efficiency proponents in California, see Testimony of Geothermal Resources Association before the California Energy Commission, In the Matter of: 1992 Electricity Report (ER 92), "Demand-Side Management Uncertainty," February 3, 1992.

³¹² "Texas choice bill may not have consumers' support," Megawatt Daily, January 30, 1997, pp. 1-2.

³¹³ New England Governors' Conference, "Sustainable Electricity for New England," January 1997. The report was coauthored by the U.S. Environmental Protection Agency, the Massachusetts Division of Energy Resources, and other New England state groups. See "New England Governors Back Renewables, Energy Efficiency," Wind Energy Weekly, February 17, 1997, p. 5.

³¹⁴ "State of Texas launches campaign promoting 'Renewable Energy in Texas,'" Business Wire, March 26, 1997.

³¹⁵ The bill is reprinted in Electric Power Alert, July 17, 1996.

³¹⁶ CEC, 1994 Electricity Report, p. 41. However, a draft CEC study supported a "nonbypassable public goods charge to fund public goods RD&D and energy efficiency activities" of 1.4 percent or 2 percent of total investor-owned utility revenue. Mike Messenger, "Alternative Funding Mechanisms for Public Policy Programs: The Non-Bypassable Public Goods Charge," RE-Draft of May 31, 1996, Executive Summary.

³¹⁷ Lew Sichelman, "Energy-Improvement Programs Losing Some of Their Steam," Chicago Tribune, December 15, 1996, p. 2.

³¹⁸ Robert L. Bradley, Jr., "California DSM: A Pyrrhic Victory for Energy Efficiency?," p. 46.

³¹⁹ Peter Miller, "Comments of the Natural Resources Defense Council for the 1994 Energy Efficiency Report and 1994 Electricity Report," Workshop on the Future of DSM, California Energy Commission, February 27, 1995, p. 2.

³²⁰ EIA, Annual Energy Outlook, 1996, p. 39.

³²¹ A hypothesis can be made that the attraction of high-cost renewables to some eco-energy planners (particularly those who are against economic growth) is due to their being very expensive. The goal for them is to bring the cost of all energy sources up to the price level of high-cost renewables, not bring renewable energy prices down to the level of fossil fuels. This mentality is reflected in a statement by Paul Ehrlich in 1991 that "giving society cheap abundant energy at this point would be equivalent to giving an idiot child a machine gun." Quoted in Julian Simon, The Ultimate Resource (Princeton, NJ: Princeton University Press, 1996), p. 182.

³²² See, generally, Robert L. Bradley, Jr., Oil, Gas, and Government: The U.S. Experience.

³²³ Shell International, "The Evolution of the World's Energy System: 1860-2060," December 1995, p. 11. For a view that natural gas will be the "bridge" or "transition" fuel to a renewables future, see Christopher Flavin and Nicholas Lenssen, Power Surge, chapter 5.

³²⁴ Joseph Stanislaw, "Emerging Global Energy Companies: Eye on the 21st Century," Cambridge Energy Research Associates, 1995, p. 6. Stanislaw's study presents a different world view from that of the Yergin Task Force report, described above.