The week of March 25, 2024: Net zero’s power problem, housing, fiscal policy, and much, much more.
The week of March 25, 2024: Net zero’s power problem, housing, fiscal policy, and much, much more.
“Communism,” Vladimir Lenin said, “is Soviet power plus the electrification of the whole country.” Net zero is electrification of the whole country and not enough power.
It’s no secret that the reliability of the electric grid is threatened by the reckless rush to decarbonize it. And the attempt to electrify everything, from cars to ovens, at the heart of the “race” to net zero will, by definition, add to the pressure on that same stressed grid.
Meanwhile, those setting the pace in that race (a race in which the winners lose) press on. While much of the net zero news recently has concerned the electrification of autos and light trucks, heavy trucks have not escaped the EPA’s attention, and on March 29, it set final (for now) rules for heavy-duty trucks, buses and other large vehicles. As for cars and light trucks, the rules apply for between 2027 and 2032. It’s fair to say that they have not been well received.
CBS:
Industry groups… lambasted the new standards as unreachable with current electric-vehicle technology and complained about a lack of EV charging stations and power grid capacity limits.
To repeat a point I have made before (!) when looking at the race to net zero (of which the coerced switch to EVs is just one part), this race is in essence an example of central planning. And all too often one of the characteristics of central planning is that b does not follow a, and c does not follow b.
Among the groups objecting to the new rules are the American Trucking Associations (ATA) and the Owner-Operator Independent Drivers Association, but what do they know about trucking? Chris Spear, CEO of the ATA, was quoted by CBS as saying that “the post-2030 targets remain entirely unachievable… Any regulation that fails to account for the operational realities of trucking will set the industry and America’s supply chain up for failure.”
What does he know?
Unsurprisingly there are fears about what this will mean for small operators. Small businesses tend not to do well when central planners are on the march (something, incidentally, that small gas station operators know will be true for them too), but, as always, Kulaks will just have to get with the program. And, as so often with regulation, larger players can see an opportunity to squeeze out smaller fry.
NPR:
[S]ome large public companies that operate large fleets of trucks, like Amazon and DHL, have publicly embraced zero-emission trucks as part of their climate targets. Those two companies are part of a group that actually pushed for the rules to be even more stringent.
Equally, large companies, as a result of government pressure, are now pouring money into the production of electric trucks. They have a clear interest in buyers being forced to go electric. Indeed, as NPR notes, Ford “pushed for even stronger emissions regulations to promote those vehicles.”
As with the revisions to the EPA’s proposed rules for light vehicles, the agency has (marginally) relaxed what will be required and changed the pace at which they will be tightened. More of the obligations it imposes will be backloaded closer to 2032.
The final rule calls for less-stringent emissions limits during its early years and allows for a broader range of technologies than last year’s draft would have done.
Some of those technologies aren’t widely used yet, including engines powered by natural gas and hybrids that use both electric and internal combustion engines.
Tweaks to the final rule could influence the mix of heavy-duty trucks in use eight years from now, when the EPA mandates have taken full effect.
The draft rule projected that a quarter of the largest long-distance trucks would be powered by batteries or fuel cells by model year 2032.
The final version projects that 17 percent of those vehicles will be fully emissions-free, while 15 percent will be powered by natural gas or battery-electric hybrids.
The final rule also projects that state programs by California and others will drive additional emissions cuts over and above what the federal standards achieve, a senior administration official said…
Ah yes, California, state of sensibility.
Dominic Pino writing in Capital Matters at the end of last year:
Instead of allowing private companies to help lower emissions by making it easier to use trains instead of trucks, California is mandating that railroads develop zero-emission green trains that don’t exist yet. Central planning is going as it usually goes.
So far as the federal heavy trucks mandate goes, it (for now) leaves room for non-electric vehicles, but this article in the Daily Telegraph by David Blackmon from early March (so before the publication of the final rule) gives an indication of the possible impact of what electrifying them all might ultimately be:
It still boggles my mind,” says Jeffrey Short, Vice President of the American Transport Research Institute.
Mr. Short was talking about the findings of a study conducted by ATRI recently, which quantifies how much additional power generation capacity would have to be added to America’s existing electric grid to convert the nation’s entire heavy truck fleet to battery electric vehicles…
First, ATRI finds that US nationwide power generation would need to increase 40 per cent over the coming years just to accommodate the additional load placed on the various regional grids to recharge all the new heavy truck batteries.
For now, this is academic, but it’s a number worth keeping in mind.
And, speaking of numbers, how much do electric trucks cost?
Blackmon:
Currently, a brand new diesel-powered 18-wheeler is priced at between $150,000 – $180,000, but ATRI says a new electric model goes for almost triple that, at between $400,00 – $500,000.
Another problem? The batteries needed for an EV heavy truck are so large (at least given the current state of technology) that they will reduce the size of the loads that can be carried. That too will come with a cost.
Greenflation, it’s a thing.
But, to ask the inevitable question, what about charging? I touched on this in February:
Makers of heavy trucks — scoundrels, allegedly — have come under fire from environmentalist groups for not doing more to sell electric heavy trucks, of which there are only about a thousand on the road at the moment.
Then again, via the New York Times:
Only nine [public] fast charging stations in the United States are capable of serving heavy trucks, according to data from the Department of Energy.
Oh.
NPR:
“We cannot afford a scenario where manufacturers must sell zero-emission vehicles, but fleets won’t purchase them because there’s no infrastructure in place to operate them,” Jed Mandel of the Engine Manufacturers Association told the EPA last year. “That is a recipe for disaster.”
Blackmon:
Current electric heavy trucks need to charge for an hour or more for every few hours they spend on the move, which means that a lot more forecourt space will be needed as well as many more chargers: and these will need to be very powerful chargers. Long-haul, interstate trucking isn’t even regarded as feasible for current electric trucks and current public chargers: they can only manage “return-to-base” tasks.
Implicit in Blackmon’s repeated references to the inadequacies of “current” technologies and infrastructure is the need for massive “investment,” but as I noted in an article on net zero for the latest issue of the magazine, investment is a rather too generous word for what this type of net zero driven spending really is:
Much of the money to be invested would be spent replacing assets that are performing well but, from a climate-policy perspective, are now viewed as flawed. Such “investments” are little more than spending on glorified repair work…Repeated on a sufficient scale, this diversion of capital from more productive use will lead to lower economic growth than might otherwise have been the case.
The 19th century French economist Frédéric Bastiat previewed this problem in his parable of the broken window. In it, he writes of a shopkeeper who has to pay six francs to replace a windowpane broken by his young son. Hasn’t that payment put money into the economy, benefited the glazier, and so on? Yes, this is, as Bastiat puts it, “seen,” but what about that which it is “not seen”:
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.
It’s worth thinking about that parable when reading about climate-policy-driven “investment.” which is, as I noted in that National Review article, might be better seen as a kind of insurance policy. Whether it is, as currently (I’ll use that word too) organized, over-priced (spoiler: yes), and misdirected (spoiler: yes) is a topic for another time.
Oh yes, Blackmon adds this:
Currently, a new 18-wheeler with an internal combustion engine averages a little more than 18,000 pounds. New battery electric trucks average 32,000 lbs, give or take.
The weight issue brings with it another major cost category: The increased impacts to roads, bridges, and related infrastructure like guardrails. America’s existing infrastructure was designed to withstand the lighter weights of internal combustion cars and trucks – all this added weight will require all transportation infrastructure to be upgraded to handle the bigger loads.
As I asked in my magazine article on net zero, how is this going to be paid for? Blackmon has questions about that too…
And to return to another question that will not go away, but which climate policymakers seem unwilling to address — honestly, at least — an article in the Wall Street Journal on March 28 makes bracing reading. Its authors note that projections of U.S. electricity demand over the next five years have doubled in the past year thanks to Artificial Intelligence data centers, government-subsidized chip manufacturing, and, of course, the switch to electric vehicles. In some regions, it reports, the numbers are far higher. Georgia Power is forecasting a 17-fold increase in winter power needs, citing EVs and EV battery production.
New York, writes the WSJ, is “marching toward a power shortage as it shuts down nuclear and fossil-fuel power in favor of wind and solar.” Leaving aside the human and financial costs of prolonged or repeated power cuts in a New York winter, an unreliable power supply is bound to hit job creation. And how long people will stay in a state where they cannot rely on the lights — and the heating — remaining on? New York is already losing people. Its climate policies will send more to the exit.
The WSJ notes that “a new Micron chip factory in upstate New York is expected to require as much power by the 2040s as the states of New Hampshire and Vermont combined.” Will, I wonder, Micron stick with that bet on the Empire State.
Elsewhere, the construction of new data centers is being delayed by, on some estimates, 2-6 years because of power concerns.
The WSJ:
Data centers—like manufacturing plants—require reliable power around the clock year-round, which wind and solar don’t provide. Businesses can’t afford to wait for batteries to become cost-effective. Building transmission lines to connect distant renewables to the grid typically takes 10 to 12 years.
Climate policymakers like to talk about green jobs — and those jobs certainly exist — but they are likely to be more than canceled out by green joblessness. That they will be is something that ought to concern labor unions and the Left far more than it does. It says something about their priorities that it does not.
The WSJ quotes president Barack Obama’s former Energy Secretary, Ernesto Moniz, saying that we will have to rely more on gas, coal, and nuclear power to cope with this surge in demand: “We’re not going to build 100 gigawatts of new renewables in a few years.” No we are not, but the problem is, as Federal Energy Regulatory Commissioner Mark Christie has (the WSJ notes) warned, that we are retiring fossil-fuel powered plants at a pace that cannot be sustained, and “we can’t build dispatchable resources to replace the dispatchable [fossil fuel] resources we’re shutting down.”
The WSJ’s dismal litany continues. The Inflation Reduction Act’s hefty subsidies to renewables hamper the ability of nuclear and fossil-fuel sourced power to compete. And baseload plants (essential if we are to rely primarily on renewables — the sun does not always shine, the wind does not always blow) won’t be profitable if their only function is to back up renewables. Who will pay to keep them open?
What might trigger the long overdue pushback against the race to net zero? In the National Review article, I identified several candidates. A Chinese takeover of much of the car sector is one of them, and the ending of reliable, attractively priced energy is another, but there are plenty of others to choose from.
They would all, of course, be best avoided, but the only way to do so is to walk away from that reckless “race” now.
The Capital Record
We released the latest of our series of podcasts, the Capital Record. Follow the link to see how to subscribe (it’s free!). The Capital Record, which appears weekly, is designed to make use of another medium to deliver Capital Matters’ defense of free markets. Financier and National Review Institute trustee, David L. Bahnsen hosts discussions on economics and finance in this National Review Capital Matters podcast, sponsored by the National Review Institute. Episodes feature interviews with the nation’s top business leaders, entrepreneurs, investment professionals, and financial commentators.
In the 163rd episode, David is joined once again by supply-side legend Dr. Art Laffer, who points out that property tax is a wealth tax by another name, demonstrates that transfer payments can only work perfectly by bringing income to zero, suggests a commission system for how Congress gets paid, and insinuates that sound money and fiscal sanity matter. A fun conversation, as always!
The Capital Matters week that was . . .
Housing
The Biden administration often seems to forget some of the basic principles of economics. In Biden’s world, the market is no longer a place where supply and demand meet. It is a strange morality play in which greed and goodness fight for supremacy, and only the government’s generosity or its firm hand can ensure that Americans get their full bag of chips.
This economic confusion was nowhere better illustrated than in Biden’s speech in Las Vegas last week, during which he reiterated several proposals for lowering housing costs that he had previewed in his State of the Union address.
Today’s editorial lambasting the Biden administration’s calls for tax credits related to housing is spot-on. There’s just one thing I’d like to add: It would probably be one of those “tax cuts for the rich” that Biden likes to say he abhors…
Electric Vehicles
It’s not only in the U.S. that electric-vehicle (EV) mandates are threatening to cause havoc. The problems of the German economy, a legacy, primarily, of the neglect and negligence of the Merkel years, are no secret. There are now increasing worries that the EU’s industrial powerhouse is beginning to deindustrialize, not least because of the way that that the high energy prices that (in part) are the consequences of its climate policies are making it worthwhile for some of Germany’s more energy-intensive companies to relocate production abroad.
But the climate cull won’t end there…
Labor
Remember the American Rescue Plan Act, the $1.9 trillion spending bill passed by Democrats supposedly for Covid relief? It included $86 billion to bail out multiemployer pension funds that union members draw from. The bailouts are being distributed on a case-by-case basis by the Pension Benefit Guaranty Corporation (PBGC), a government agency that oversees multiemployer pension plans.
The bailouts come with no requirements to reform the plans to make them solvent. Apparently they also come with no requirements that recipients have to be alive…
Internet
The Affordable Connectivity Program (ACP) began as an “emergency” Covid program and has since expanded to become a welfare program subsidizing the internet bills of 20 million households. It provides up to $30 per month for broadband internet service to eligible households. The ACP is set to run out of money within the next two months if Congress does not give it more. The Federal Communications Commission, which administers the program, stopped accepting new applications in February.
The Biden administration and a bipartisan group of lawmakers want the ACP to be expanded, but the new budget proposal from the Republican Study Committee (RSC) would allow it to expire…
Spending
The Government Accountability Office’s report on improper payments by the federal government, released on Tuesday, showed $236 billion worth of errors made by federal agencies last year. Improper payments are defined as “those that should not have been made or were made in the incorrect amount.” The GAO’s findings are an underestimate since not all federal agencies provided information on improper payments…
China
Apple’s holier-than-thou CEO Tim Cook likes to promote himself as one of the enlightened. Here he is in the company’s 85-page ESG report, a waste of shareholder funds if I ever saw one:
“[W]e want to leave the world better than we found it in everything we do. By leading with our values, we hope to be a ripple in the pond that inspires a far greater change.”
So here’s some coverage of Cook’s recent trip to China, a country run by an authoritarian regime with a taste for genocide, in Bloomberg News, an organization that can at times reflecting Mike Bloomberg’s own, uh, nuanced views on Beijing’s rulers.
The article (from March 25) is headlined: “Tim Cook’s Love for China Helps Xi Fight Fears of Economic Slump.” …
Infrastructure
This incident had nothing to do with infrastructure funding. Ships had been safely passing under the Francis Scott Key Bridge for 47 years before yesterday. The bridge was well maintained by Maryland, earning satisfactory ratings across the board from the Federal Highway Administration. A container ship malfunctioned and crashed into the bridge. There is no possible bridge you could build that would withstand a direct hit from a container ship going the speed it was going…
Inflation
We live in an era of inflation revisionism. Commentators blame recent inflation on everything except loose money, and they credit recent disinflation to everything except tight money. According to the new thinking, supply-chain improvements explain why inflation moderated. And explosive fiscal policy, rather than monetary policy, is why it shot up in the first place.
Both of these stories have serious problems…
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