A just released Charles Rivers Associates International and Coalition for Affordable American Energy report demonstrates that the proposed climate provisions within the Obama Administration's proposed FY 2010 budget will have profound negative impacts on energy availability, energy costs, and overal economic health of the country.

The Coalition for Affordable American Energy (CAAE) is made up of over 200 American businesses, industry associations, and Chambers of Commerce. Specifically, the report notes,

Impact on the Economy of the Climate Provision in the Obama Administration FY 2010 Budget Proposal

•  The planned carbon caps will reduce carbon emissions by restricting the use of conventional energy. CO₂ prices are expected to raise from $29/tonne in 2015 to as high as $116/tonne in 2030.
• RisingCO₂ costs will force energy costs to rise precipitously. Natural gas costs are forecast to rise by 39% ($4.70) by 2020 and then by 56% ($7.20 per MMBtu) by 2025 relative to the EIAs Annual Energy Outlook reference case. Motor fuels will rise by 48 cents per gallon in 2020 and then by 74 cents per gallon relative to baseline levels. Electricity costs will increase by 27% (3.6 cents/kWh) in 2020 and by 44% (5.8 cents/kWh) in 2025.
• Net job losses -- inclusive of those jobs created by increased funding of renewable energy -- will rise to 800,000 in 2015, then more than double by 2020, to 1.9 million, and rocket to approximately 3.2 million by 2025.
• Annual household purchasing power will decline rapidly by $1,020 in 2015, by $1,381 in 2020, and then plummet to $2,127 by 2030 (after accounting for promised rebates from the sale of carbon credits).

The report continues by noting that the U.S. energy sector will suffer substantial setbacks as it is reorganized to meet legislative and regulatory requirements.

• Natural gas demand will expand by 3.0 Tcf relative to baseline levels, driving costs of gas up by 56% (7.20/MMBtu) by 2025. Demand will then drop to 1.5 Tcf by 2030 to account for increasingly stringent emissions caps.
• Domestic gas production will be heavily impacted by increased costs  and strict regulations. Therefore, growing demand will need to be primarily met by a 160% (2.0 Tcf) rise in gas imports. 
• Increased domestic costs will place U.S.-based refineries at a competitive disadvantage and energy production will be driven offshore.

Impact on the Economy of the Climate Provision in the Obama Administration's FY 2010 Budget Proposal

Readers can download the full report on the U.S. Chamber of Commerce website.

GAO Report on DOE Restructuring of FutureGenA February 2009 GAO report on the Department of Energy, FutureGen project describes how the decision to restructure the project in 2008 was based on inaccurate cost estimates.

While the initial $950 million estimated price was based in constant 2004 dollars, the later $1.8 billion estimate was a life cycle cost out to 2017 with inflation accounted for

If the same estimate process were used, the increased cost of the project would be $1.3 billion (not $1.8 billion), an increase of 370 million (+39%). Given the rising costs of steel, cement, labor, and the faltering economic conditions, the 39% price increase appears far more reasonable.

From the "Results in Brief" section of the report,

DOE did not use sufficient information to support its decision to restructure FutureGen. According to our recent work and best practices, a decision to terminate or significantly restructure an ongoing program should be informed by timely and sufficient information on the costs, benefits, and risks of such a decision. DOE did not prepare a comprehensive analysis of the costs, benefits, and risks of its decision to replace the original FutureGen with the restructured program. DOE made its decision based, in large part, on its conclusion that construction and material costs for the original program would continue escalating substantially in the indefinite future and that life-cycle costs were likely to double. However, according to economic forecasting organizations, such as DOE’s Energy Information Administration, significant cost escalations for building power plants, in general, do not typically continue in the long run. Also, DOE reached this conclusion by comparing its cost estimate for the original FutureGen ($950 million in constant 2004 dollars) with the Alliance’s 2006 estimated life-cycle costs for the program through 2017 (about $1.8 billion, considering inflation). In explaining his decision to restructure FutureGen, the Secretary of Energy noted that the projected program cost had “nearly doubled,” from $950 million to $1.8 billion. However, that assertion did not take into account a major difference between the two estimates: one was based on constant dollars and the other on inflated dollars. Our analysis indicates that the Alliance’s estimate in constant 2005 dollars would be approximately $1.3 billion—an increase of about $370 million, or about 39 percent, over DOE’s estimate, not a near doubling of costs. As DOE’s restructuring decision was not based on a comprehensive analysis of the associated costs, benefits, and risks, DOE has no assurance that the restructured program is the best option to accomplish the goal of promoting the accelerated and widespread commercial advancement of CCS. In contrast to the restructuring decision, FE identified and analyzed 13 other options for incremental, cost-saving changes to the original program, such as reducing the CO2 capture requirement. While FE did not consider all of these options to be viable, it either recommended or noted several of them for consideration, each with potential savings from $30 million to $55 million.

NERC: Electricity Industry Concerns on the Reliability Impacts of Climate Change InitiativesFrom the report Introduction,

The NERC Planning Committee (PC) has identified initiatives currently underway to address climate
change and reduce greenhouse gas emissions as among the most important emerging issues facing the eliability of the bulk power system over the coming years.2 Provisions and requirements implemented through state/provincial-level Renewable Portfolio Standards, regional initiatives, and federal and provincial legislation and regulations, have the potential to influence nearly every aspect of electric industry system planning, design and operation.

...

Taken individually, state, provincial, and regional initiatives may not significantly affect bulk power system reliability. However, as more and more state, provincial, and regional initiatives begin to take effect and federal climate change initiatives are considered in the U.S., there is an increasing need to review the collective impact of these initiatives on the bulk power system and identify effective means to help the electric industry meet these climate change initiatives without degrading system reliability.

The objective of this summary report is to document reliability concerns raised by NERC’s stakeholders and identify important objectives that, if met, could help the electric power industry meet the goals of climate change initiatives while maintaining bulk power system reliability. Further, this summary report aims to highlight the potential bulk power system reliability issues associated with the implementation of the climate change initiatives.

Download the full report.

Lessons from the Spanish Renewables Bubble

This study, sub-titled "Lessons from the Spanish Renewables Bubble" is a first critical look into the actual economic outcomes of broad government support of so-called green jobs.

While "green jobs," or "green collar jobs" are promoted as a means of lifting the country out of economic doldrums and the Spanish example has been promoted by the Obama administration as a "reference for the establishment of government aid to renewable energy," this research suggests that the Spanish -- and broader European -- support of this policy has proven "to be terribly economically counerproductive."

Study findings indicate,

• For every green job that the state finances, there are "at least 2.2 jobs ... lost." Overall, Spain lost nearly 113,000 jobs while creating their green jobs. Those jobs were lost mainly in "metallurgy, non-metallic mining, and food processing ..."
• Despite a vigorous support of the green jobs policy, Spain has actually created "a surprisingly low number of jobs." Additionally, the majority (two-thirds) of the jobs created came in short-term construction, fabrication, and installation positions. A further one quarter came in administrative and marketing. Only one in ten of the jobs created were permanent positions in operation and maintenance.
• Spain spent €571,138 for each green job created, including subsidies of more than €1 million per wind industry job.
• Each" 'green' megawatt installed destroys 5.28 jobs elsewhere in the economy. 8.99 by photovoltaics, 4.27 by wind energy, 5.05 by mini-hydro."
• These costs are "inherent in schemes to promote renewable energy sources."
• Comprehensive energy rates would need to be increased by 31% to repay the debt generated by subsidies to renewable energy.
• The only way for the renewables sector to be "countercyclical" in the current economic crisis is through the provision of government subsidies. Once those subsidies are removed, the industry finds itself in a classic "bubble" condition and facing collapse.
• The renewable sector in Spain consumes "enormous taxpayer resources. The average annuity payable to renewables is equivalent to 4.35% of all VAT collected, 3.45% of the household income tax, or 5.6% of the corporate income tax for 2007."

Interestingly, this Universidad Rey Juan Carlos study mirrors the findings of the University of Illinois Law & Economics Research Paper (No. LE09-001), titled "Green Jobs Myths." The "Green Jobs Myths" study abstract indicates that,

• No standard definition of a green job exists.
• Green jobs estimates include huge numbers of clerical, bureaucratic, and administrative positions that do not produce goods and services for consumption.
• The green jobs studies made estimates using poor economic models based on dubious assumptions.
• By promoting more jobs instead of more productivity, the green jobs described in the literature encourage low-paying jobs in less desirable conditions.
• Companies react more swiftly and efficiently to the demands of their customers and markets, than to cumbersome government mandates.
• Some technologies preferred by the green jobs studies are not capable of efficiently reaching the scale necessary to meet today's demands and could be counterproductive to environmental quality.

NMA Fact Sheets on the Coal Industry and Mining in the U.S.The National Mining Association has put together a group of useful and easy to understand fact sheets that provide information on the American coal and mining industries.

Be sure to check them out for extra information on,

• Economic Contributions of Mining
• Environmental Stewardship
• Coal, America's Power
• Clean Coal Technologies
• Coal Ash
• Minerals
• Carbon Capture and Storage
• Mining Safety
• Safety Technologies

NMA - Economic Contributions of U.S. Mining 2007From the report's Executive Summary,

Mining supports the very foundation of our economy. From the stone and gravel used to build roads and lay foundations for homes and buildings, to coal and uranium used to generate more than half of the nation’s electricity, to the copper wire that connects billions of computers to a global social and commercial network, our economy and way of life depend on the vital resources provided by mining.

While the societal value of the products generated by mining is almost immeasurable, U.S. mining also provides tangible economic contributions through its business activity. These contributions include wages paid to employees, taxes paid by industry and charitable contributions. Mining also generates economic activity in other industries through the purchases it makes and the wages those vendors and suppliers pay their employees. Combined, the total value of U.S. mining from its business activity, alone, is more than $240 billion.

Read the rest of the report as well as statistics for each state on the NMAs website. 

Fraser Institute: Survey of Mining Companies 2008/2009From the Fraser Institute website (fraseramerica.org)

The global economic slowdown has cast a pall over the mining industry with the vast majority of mining executives saying they expect a severe pull back in exploration activity and at least 30 percent of exploration companies going out of business, according to the Survey of Mining Companies 2008/2009, released today by independent research organization the Fraser Institute.

“Survey responses indicate this year that the mining sector expects dramatically decreased investment and exploration along with a large number of companies either reducing activity or going out of business all together,” said Fred McMahon, coordinator of the survey and the Institute’s Director of Trade and Globalization Studies.

Power Plants: Characteristics and CostsFrom the opening portion of the report summary, Kaplan points out that the future of new generation capacity construction in the U.S. will be predicated largely on government picking winners and losers across the industry.

This report analyzes the factors that determine the cost of electricity from new power plants. These factors — including construction costs, fuel expense, environmental regulations, and financing costs — can all be affected by government energy, environmental, and economic policies. Government decisions to influence, or not influence, these factors can largely determine the kind of power plants that are built in the future. For example, government policies aimed at reducing the cost of constructing power plants could especially benefit nuclear plants, which are costly to build. Policies that reduce the cost of fossil fuels could benefit natural gas plants, which are inexpensive to build but rely on an expensive fuel.

Download the full report from the Congressional Research Service

Analysis of Federal Expenditures for Energy Development This report investigates the levels of federal government investment into research and development of energy resources from 1950-2006.

From the report Executive Summary

... below, the findings indicate that the largest beneficiaries of federal energy incentives have been oil and gas, receiving more than half of all incentives provided since 1950. The federal government’s primary support for nuclear energy development has been in the form of research and development (R&D) programs, one of the more visible types of incentives identified. Over the last decade (since 1997), federal spending on R&D for coal and renewables has exceeded spending on
nuclear energy R&D.

Nextgen: Lights Out in 2009

This report, published by the Nextgen Energy Council, discusses the looming challenges our energy generation and transmission is currently facing. As experts within the energy industry describe, our excess capacity -- the amount of generation capacity left in reserve when peak demand is occuring -- has dwindled to the lowest level seen in decades. We are now to the point where maintaining basic system stability is going to require the construction of almost every type of generation capacity that is proposed. The costs of scrambling for every scrap of available generation capacity, rather than employing long-term planning methods, could be astronomical.

"The threat to the U.S. electricity grid a threat that goes to the heart of social stability, economic security and national security — is real and imminent. Yet few national and state elected officials seem aware of it."