Green Energy and Rail Get an F

Election politics are behind us so it is a good time to post the economic report card for President Obama's first term issued by The Economist on September 1, 2012.

I am pleased to see that for the two areas of "green energy" and "rail passenger transportation" The Economist gives the President an F. These are indeed the two areas that I completely disagree with both the President, Hawaii's Governor, most of Hawaii's current political establishment, and with the environmentalists of Sierra Club.

Indeed, biased taxpayer black holes deserve this.

It is my hope that this F along with today's sad news of the death of US Senator Inouye along with the retirement of US Senator Akaka (this is a 1-2 knockout punch for Hawaii to the very bottom of US Senate seniority combined with Hawaii's rock bottom seniority in the US House) will infuse sanity and restraint into the brains of local decision makers.

Cuts are painful, but cutting wasteful projects* is productive and necessary to avoid a nosedive.

(*) The rail, transit oriented development, wind farms, limitless solar subsidies, inter-island cable, government solar farms, cookie-cutter housing on prime agricultural land, North Shore mega-developments along a single, jammed 2-lane country road, ...

The World in 2030: World Preeminence for China, Energy Independence for USA

The Verge: The US National Intelligence Council, representing the 17 intelligence agencies of the US government, says that "we are at a critical juncture in human history" in its fifth Global Trends report. The report details the challenges facing the species in the coming decades; the council says that many positive developments in health, education, and governance will propel human civilization, but that the threat of conflict could emerge as supplies of food and water become more scarce.

The Diplomatic News: The American Century is drawing to a close, and the US Defense Department will have to be more flexible in dealing with a faster-paced multipolar world, according to the Global Trends 2030 report

NY Times: A new intelligence assessment of global trends projects that China will outstrip the United States as the leading economic power before 2030, but that America will remain an indispensable world leader, bolstered in part by an era of energy independence.

London Financial Times:

• Pax Americana ‘winding down’
• China will be the world’s largest economy by 2030 but the US will still remain “first among equals” in the international system
• Europe, Japan and Russia will continue to experience relative decline
• Asia will come to dwarf the rest of the world in terms of its economic and military power
• The wave of Islamist terrorism is likely to have ended by 2030
• The US will be energy independent and could be a significant exporter of energy
• Advances in manufacturing technologies could reduce the need for outsourcing

Here is what the report says about renewable energy. It makes Hawaii look like a fool by wasting millions of taxpayer dollars to produce Kilo-Watts instead of Mega-Watts (1 MW = 1,000 KW):

"With shale gas, the US will have sufficient natural gas to meet domestic needs and generate potential global exports for decades to come. Increased oil production from difficult-to-access oil deposits would result in a substantial reduction in the US net trade balance and faster economic expansion. Global spare capacity may exceed over 8 million barrels, at which point OPEC would lose price control and crude oil prices would collapse, causing a major negative impact on oil-export economies."

"The IEA’s baseline scenario shows the share of renewables rising just 4 percent during the 2007-2050 period. Hydropower accounts for the overwhelming majority of renewables in this scenario, with wind and solar energy providing 5 and 2 percent contributions in 2050 respectively. Their contributions in 2030 would be even less."The 170 page report can be downloaded here: National Intelligence Council, Global Trends 2030

Godfather of Global Warming Is Less Alarmed Now

Professor James Lovelock is a world-renowned scientist and environmentalist who had a major impact on the development of global warming theory. As the Toronto Sun describes him: Unlike many “environmentalists,” who have degrees in political science, Lovelock, until his recent retirement at age 92, was a much-honored working scientist and academic.


In recent interviews Lovelock has made these rather starling declarations:

1. He had been unduly “alarmist” about climate change.
2. He's been a long-time supporter of nuclear power as a way to lower greenhouse gas emissions.
3. He is in favor of natural gas fracking extraction because natural gas is a low-polluting alternative to coal.
4. He believes that ‘sustainable development’ is meaningless drivel.
5. He "can’t stand windmills at any price."
6. He "blasted greens for treating global warming like a religion."

I am truly humbled to be in agreement with him, 5 for 5, with first five arguments: climate change, nuclear power, fracking, sustainable development and windmills. I have not yet written an article blasting greens (although I often refer to them as pseudo-greens) because I've been rather busy countering the railigious.

Sources

• Green ‘drivel’ exposed: The godfather of global warming lowers the boom on climate change hysteria
• 'Gaia' scientist James Lovelock: I was 'alarmist' about climate change
• James Lovelock: The UK should be going mad for fracking

Electric Vehicles: Another Government Bet, Another Taxpayer Loss

I quote below a summary by Robert W. Poole, Jr., Director of Transportation Studies, Reason Foundation that he originally titled What's Wrong with Electric Cars?
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Several years ago in this newsletter (prior to the debut of the Chevy Volt), I celebrated the vision of a future of zero-tailpipe emission cars, powered by breakthrough battery technology. Articles on advanced batteries were appearing in respectable places like MIT's Technology Review, and Silicon Valley venture capitalists were ramping up funding of electric vehicle (EV) and advanced-battery startups. With the coming of practical, zero-emission vehicles, I hoped, a lot of the anti-car, anti-highway ideas that I disagree with could be dismissed as irrelevant.

Alas, several years later, things don't look so bright for EVs. Canadian columnist Margaret Wente, writing in The Globe and Mail last fall, summed it up as follows: "As Dennis DesRosiers, a leading auto consultant points out, consumers simply won't pay a $20,000 premium for a vehicle that doesn't go very far, isn't very convenient, and runs out of juice as soon as you turn on the air conditioner." And that, I think, neatly explains why:

• sales of the highly touted Chevy Volt totaled just 7,671 last year, and
  
• the Nissan Leaf did only marginally better at 9,674.
  
• The Daily Mail in London reported that only 2,149 EVs have been sold in Britain since 2006.

Wall Street Journal auto industry analyst Joseph White in February penned a detailed comparison of the Chevy Volt and the conventionally powered Chevy Cruz, about the same size but selling for half the Volt's $40,000 price. The Cruz is breaking sales records, while the Volt is a dud. The underlying problem is simply that despite lithium-ion batteries being far superior to the lead-acid batteries that powered GM's previous electric car (the EV-1), they are still heavy, costly, and vastly less efficient at storing energy than that miracle fuel, petroleum.

For EVs like the Volt, Leaf, and Ford's Focus, the battery pack costs $12-15,000, about one-third the cost of the vehicle. And that is despite $1.26 billion in federal subsidies to battery producers over the last several years. There may be some future battery technology that will represent a breakthrough in energy storage, but lithium-ion clearly is not it.But that has not stopped the government's multi-front program of jump-starting an EV industry based on flawed technology.

Besides grants and loans to battery companies, the Department of Energy and the Administration's stimulus program have put some $9 billion for EV production into major auto companies like GM and Nissan as well as a whole raft of start-ups such as Tesla, Fisker, Bright Automotive, Think, and even truck-maker Navistar, which got $2.4 billion to jump-start production of an electric truck called eStar that has found few buyers. (A number of the smaller start-ups have already filed for bankruptcy.) In addition, of course, buyers of EVs get a $7,500 tax credit (which the Administration's current budget proposal would increase to $10,000). That credit applies not just to the low-end Leaf and Volt but also to the $100,000 Fisker Karma and Tesla roadster.

The average household income of Volt buyers is around $170,000, and I'm sure those who have put down deposits for Fisker and Tesla EVs are in far higher brackets. What kind of public policy sense does it make to subsidize playthings for the rich?

The whole federal push to jump-start an EV industry is misguided. As former Treasury Secretary Larry Summers has said, "The government is a crappy venture capitalist." In a field where true breakthroughs are needed if a practical, cost-effective EV is ever to emerge, government funding of basic research and development might be justified. But the attempt to shape and micro-manage the development of an industry is a recipe for massive wasting of resources. As former chairman of the Council of Economic Advisers Michael Boskin put it in a Wall Street Journal op-ed in February, "Industrial policy failed in the 1970s and 1980s. Letting governments, rather than marketplace competition, pick winners and losers is just as bad an idea today.
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I should add that while in South Korea last month I read "China's dream of electric car leadership elusive" and I quote:
In 2009, [China] announced bold plans to cash in on demand for clean vehicles by making China a global power in electric car manufacturing. They pledged billions of dollars for research and called for annual sales of 500,000 cars by 2015. Today, Beijing is scaling back its ambitions, chastened by technological hurdles and lack of buyer interest. Developers have yet to achieve breakthroughs and will be lucky to sell 2,000 cars this year, mostly taxis.

Energy Challenge: Options for Power Generation and Hawaii’s Path Forward

Excerpt of my article in the Civil Beat:

Hawaii has several special and severe problems:

1. Extreme electric power price gauging which international oil markets and proposed EPA regulations for oil and coal burning power plants will make increasingly intolerable.
2. U.S. mainland solutions such as natural gas and nuclear are less promising for Hawaii.
3. The Jones Act governing US marine transportation restricts Hawaii’s fuel supply.
4. Absence of a plan for fuel shortages and local fuel production.
5. Utopian views and policies about clean energy in which cost effectiveness is not even a factor.
6. Land and development plans intertwined with energy solutions.
7. Extreme political influence on what is fundamentally a technical problem.
8. One power monopoly with Gordian tentacles.
9. Regulators with questionable expertise and motivation.
10. Hawaii’s extreme NIMBYism due to its natural beauty, cultural resources and strict environmental laws.

What does the future hold for Hawaii? Hawaii with its mandates and high feed-in tariffs is moving in the direction of scarce and expensive energy by incentivizing increasingly larger deployments of costly, intermittent and ineffective power plants which are also too wimpy to affect the oil-based monopoly.

Read a brief backgrounder on Energy and Power, and Hawaii's options for reducing its severe energy dependency on oil in the full article.

Keep a 9 y.o. Car or Replace it with a Hybrid?

I own a sporty 4 door sedan with almost 70,000 miles on it. It's a good car that will likely serve me well for another 6 to 10 years with proper maintenance. It does require premium gas and its average real world 20 miles-per-gallon (mpg) is decent. Could a high efficiency hybrid car be a less expensive choice in the long term?

The general question is: What is the total cost of a new and a used car and how can one estimate it? Each person's choice will vary so I use my case to illustrate the approach.

The only high-mpg alternatives to my car are the 2012 Toyota Camry LE Hybrid and the 2012 Hyundai Sonata Hybrid. The remainder of the hybrids are too "sleepy", too large or too expensive for me.

I chose to make comparisons with the Camry. It is less sporty that my current car but various magazine tests praise it for its good acceleration and good fuel efficiency. It is rated at 43 mpg city so I assumed a 40 mpg for my estimations. Having used a rented Prius for a few days I confirmed that its city mpg is as good as advertised at 51 mpg. I excluded the Sonata despite the fact that it is $4,000 less expensive than the Camry because tests have shown that its real world mpg is worse than its EPA rating of 35 mpg city. [1] According to Edmunds.com both have a similar 5 year total cost to own. [2]

Real world mpg is important and EPA has revised the rules because of large deviations. For example, I did complain to Honda in 2000 because my 1999 Accord LX rated at 24 mpg city never did any better than 20 mpg even with a bit of freeway use thrown in the mix. In 2011 Honda had bigger problems with its Civic Hybrid (lawsuits about the claimed mpg) which stresses the importance of the real world mpg rating in different areas by different users.

There are many variables in this long term calculation, some more important than others:

• Length of analysis: 6 years and 10 years.
• Out the door cost of the new car: $29,160.
• Current value of the 9 y.o. car: $9,500.
• Insurance and registration: I called my insurer to find out today's premium for the 2012 Camry Hybrid: 5% higher than my current car. Registration is the same at $300 per year.
• Usage: this is hugely important in comparing a high mpg to a low mpg car because high use makes the high mpg car cheaper in the long term. My scenario was for 6,000 miles per year which is what I averaged in the past three years. I also run the numbers for 10,000 miles per year.
• Tires: New set of tires costing $800 every 30,000 miles.
• Maintenance: annual average cost of $900 for the 9 y.o. car and $300 for the new car based on past experience. In other words, in the next 10 years it’ll take $9,000 to keep the 9 y.o. car in very good shape and $3,000 to do the same with the new car.
• Cost of fuel: this is another critical variable because fossil fuel pricing will be quite uncertain in the future. There is no doubt that the price of fuel will fluctuate a lot between 2012 and 2022. Some argue that new large deposits will be found, Libya’s production will come up to normal soon and China’s thirst for oil will be leveling off. Others point to the diminishing reserves (they are good for up to 100 years more) and the large unrest likely in the Arab peninsula, like Syria or worse. So I run three scenarios of average annual price change of -4%, +2%, and +5%. I explain each scenario below.
  

Today's oil price is about $105 per barrel. When President Obama took office the price was $35 per barrel. Many analysts expect that in the next decade the price of oil will average $50 to $80 per barrel, so gas may be cheaper than it is today. This is represented by the -4% scenario. In this scenario, today’s unleaded gas is $4.35 per gallon and the average price in the next 10 years will be $3.65/gln. (All prices mentioned are in today’s dollars.)

The 2% scenario assumes that the current level of oil price per barrel is high, that it will drop some time after the 2012 elections and then begin to grow again resulting in a mild average increase. In this scenario, today’s unleaded gas is $4.35 per gallon and the average price in the next 10 years will be $4.76/gln.

The 5% scenario assumes major unrest in Saudi Arabia or another calamitous event that affects oil prices. In this scenario, today’s unleaded gas is $4.35 per gallon and the average price in the next 10 years will be $5.47/gln.

The estimation of total costs takes quite a bit of analysis. The figure below shows the calculation for one car, one mileage scenario and one gas price scenario. The final results require 12 estimations like this.


The results are summarized in the table below. The obvious result is that regardless of gasoline pricing scenario, the car with 40 mpg city is a good choice for high annual mileage users. In my case, staying with what I've got is the smart choice.



[1] http://www.edmunds.com/hyundai/sonata-hybrid/2012/

[2] Hyundai: True Cost to Own®: $42,406 -- Toyota: True Cost to Own®: $42,915 (both are 5 year estimates) from [1]

Sustainable Development is an Oxymoron

On March 2, 1972, a team of experts from MIT presented a groundbreaking report called The Limits to Growth. Read more in the Smithsonian Magazine.

More recently, Australian physicist Graham Turner of CSIRO Sustainable Ecosystems shows how actual data from 1970 to 2000 almost exactly matches predictions set forth in the “business-as-usual” scenario presented in The Limits to Growth.


Looking at the thick line updates of the 1972 trends, I find the energy trend alarming. The rest of the trends do no seem to be as alarming as originally forecast in 1972. Significantly, the population growth in China is under substantial control. But growth in China, Brazil and Nigeria counterbalance the population reduction of China.

The retired MIT professor who led the original study had this to say:

• Sustainable development: I consider to be an oxymoron actually...
• Predicting a global collapse ... is like being in San Francisco and knowing that there is going to be an earthquake and that it is going to cause buildings to fall down. Which buildings are going to fall down, and where are they going to fall? We just don’t have any way of understanding that.
• You can for a brief period spend more out of your bank account than you save, if you have come through a long period of thrift. But eventually, of course, you bring your bank account back down to zero and you’re stuck. That is exactly what is happening to us on the globe. We are living off the savings of biodiversity, fossil fuel accumulation, agricultural soil buildup and groundwater accumulation, and when we have spent them, we will be back down to the annual income.
• In 1998 we had the dot-com bubble bust. In 2008 we had the housing bubble bust. Both illustrated what incredibly primitive understanding and capacities we have for dealing with bubbles. We are now forming a bubble in population, and in material and energy consumption.

$10 Gas? Not Really!

Gas at $10 is a myth. China's big boom is over. Their cities are so congested and polluted that they can't absorb more cars so their demand for gasoline should level off.

Similar story for Brazil where Sao Paolo just exceeded 19 million people. In such vast and growing cities rail systems are an obvious need. The explosive growth in demand for oil distillates from the BRICs (Brazil, Russia, India and China) will subside significantly soon. Most of the problem in gas prices is actually created by the restrictions of the EPA and the President.

$10 per gallon of gas is called ... Greece, Italy and several other countries where most people drive 40+ mpg cars instead of 20 mpg cars. In this way, their relative cost for fuel is roughly the same as ours. People find a way to assure themselves independent, flexible transportation. See more in this post: Gasoline Price Comparisons: Taxes not Octanes Matter

People in Hawaii can adjust should gas prices "explode." I am still amazed at the $30K to $50K trucks people buy when a hybrid family sedan is much safer and less than $30K to buy -- let alone the sub-$20K and over 35 mpg compact cars available in the market. There is a lot of room for downsizing in Hawaii.

Solar Paint

It is understood that by the end of the century the use of fossil fuels will be substantially reduced either because we have largely exhausted them or because we regulated their use to a minimum.

What's next is unclear because at the present time, other than nuclear energy, nothing comes close to the energy density and portability of fossil fuels.

However, disruptive technologies are in the horizon that may change the way we make power. One such technology that recently crossed my radar screen is solar paint developed at the University of Notre Dame in Indiana.

Called “Sun-Believable,” the paint is still a ways from being commercially available. But its development could ultimately lead to a new generation of inexpensive power generation.

Once able to be produced at a reasonable cost this paint would combine well with neighborhood large battery storage for 24 hour power supply.

Hawaii's 2nd Energy Update... or Waste Update?

DBEDT has just issued the 2nd edition of Hawaii's Energy Update. See it here:
http://energy.hawaii.gov/wp-content/uploads/2011/08/DBEDT-Energy-Update-Edition-2-March-2012.pdf

When a government glossy brochure is 99% about benefits and 1% about costs, and when the (suspect) jobs created, may of them part-time, cost the taxpayer $92,000 per year each, then it's easy to realize what kind of green they are really talking about...

Spending taxpayer money to apply expensive, inferior solutions for "creating jobs" is ineffective and unsustainable. The ARRA taught us this lesson recently. Fewer than expected jobs were created, the nation now co-owns car manufacturers and collectively we owe $6 Trillion of added debt.

Take a look at this "Hawaii Energy" brochure. It's all about jobs and expenditures. How much of the electricity used daily in Hawaii did we get for all this? About 1% if there's stiff wind and no clouds. How does this agree with the opening sentence of the brochure? Clean energy is a matter of energy security... Not!

Germany's Solar Failure is a Big Lesson for Hawaii

Bjørn Lomborg recently exposed Germany’s Sunshine Daydream. It's the same daydream that Governor Abercrombie, PUC Chair Mina Morita and the local pseudo-greens have put in motion for Hawaii.

Like Germany, our results will be pathetic and the costs will be very high. Here are some highlights of Germany's failed solar initiative:

• Despite the massive investment of $130 Billion, solar power accounts for only about 0.3% of Germany’s total energy.
• Germany is paying about $1,000 per ton of CO2 reduced. The current CO2 price in Europe is $8.
• Defenders of Germany’s solar subsidies also claim that they have helped to create “green jobs”. In China where the panels are made.
• German citizens now pay the second-highest price for electricity in the developed world.
• Denmark citizens now pay the highest price for electricity because they are the “world wind-energy champion.”

Hawaii's energy plan is focused on solar and wind, so we clearly know what the energy supply and cost future will be for Hawaii.

Hawaii citizens pay the same rate as Germany now, three (3) times the US average and if the current plan continues, Hawaii's price for electricity will be five (5) times higher that mainland US.

However, this may be the least of Hawaii's problem. Since wind and solar are intermittent, we will need to maintain archaic, oil burning generators for ever. In contrast, Denmark import electricity from the hydroelectric plants of Scandinavia when wind dies down and Germany imports electricity from France's nuclear power plants. Hawaii has no such options so the outcome will be brown outs and explosive KWh cost. A true lose-lose plan is now in the works.

If you doubt me, just read this: Keahole Solar Power, HECO sign power-purchase agreement and compare it with this (same company): Solar Power Plant on Oahu Does not Pass Muster.

If you thought that Hawaii has perfectly sunny conditions for solar, you'd be wrong. It has good conditions but far from perfect due to frequent cloudiness. Compare the Nevada desert clean solar pattern with Keahole Point on Oahu cloudy profile.

Let's not forget that at best we get 8 to 10 hours of solar power per day, so with solar we need oil 60% to 70% of the time on a clear sunny day. For this reason, solar energy has a capacity factor of 25%. This means that a 100 MW solar photovoltaic plant is equivalent to a 25 MW oil or hydroelectric plant. A similar "capacity factor" applies to wind.

Solar thermal like the Keahole Solar Power that HECO agreed to buy energy from (and PUC is likely to rubber stamp) is defunct technology abandoned in Spain and by Google. (There is also a HECO-Sopogy link: HECO's past CEO is now a Sopogy board member.)

Google cans solar energy project

Even when you have all the money of Google, you should spend it wisely. The search giant, which invests heavily in renewable energy initiatives, backed off of at least one of them yesterday.

Google said it is dropping development of “solar thermal” electricity because solar thermal cannot keep pace with the rapid price decline of another solar technology – photovoltaics.

On November 29, 2011, I sent the article about Google's decision to PUC chair Mina Morita, Governor and State Legislature. Apparently, unlike Google, they did not care to spend money wisely.

HECO is in a position of technological and cost-effectiveness indifference caused by mandates. It agreed to a power purchase at 33.5 cents per KWh from hyper-expensive and under-performing Sopogy technology. Note that's 33.5 cents at the production site. It will reach residences at over 50 cents per KWh, or five times US mainland average. So the exorbitant pricing future I was talking about before... is here already!

PUC chair Mina Morita, Governor and State Legislature received this article on March 16, 2012.
----------
March 19 Addendum. Hawaii's current renewables plan relies heavily on wind power, which I oppose when applied in large numbers as expensive, unreliable and intrusive. The following passage's from Washington Post's United Technologies to sell wind businesses article are relevant:

• Chief Financial Officer Greg Hayes that selling Clipper was not a difficult decision because the alternative energy business has stalled. “We’ve gone into this business with the thought that there was going be a renewable energy mandate in this country and there has not been one.”
• Alternative energy has stagnated with booming natural gas exploration. The nation’s supplies are bulging and natural gas is cheap. By comparison wind power is less economical than many thought it would be two years ago, he said.
  

Energy, Power, Storage, Distribution, Management

These five words, Energy, Power, Storage, Distribution, Management encapsulate almost all of what's involved with powering up our daily life, production and industry.

First, we need to make an important distinction between Energy and Power. We’ve got lots of Energy. We are getting short on Power.

Roughly speaking, if we could capture 100% of one day of sunlight energy, store it and distribute it as electric power, this would cover the entire needs of today’s world for a full year.

On the other hand, Bill Gates on GatesNotes on Energy states that "All the batteries on Earth can store 10 minutes of the world's electric needs." We are very short on storage.

We’ve got enough geothermal energy in Hawaii to make us self sufficient for centuries including the production of fuels for transportation.

Two big problems are: (1) We do not have sufficient infrastructure to take Energy and make Power, and (2) once we make power, we have no means to store it for later use. The second problem makes wind, solar and other intermittent power generation methods tertiary in terms of power production.

Smart grid distribution with connected electric car batteries, capacitors and intelligent management make the incorporation of renewable intermittent power more possible, but the existing capability in terms of storage and management is limited.

Unfortunately modern high capacity batteries in hybrid and plug-in vehicles require "exotic" materials in their composition. These make them very expensive and the potential for large price reductions and very high production numbers is limited.

A fairly recent development is large liquid batteries: "MIT team makes progress toward goal of inexpensive grid-scale batteries that could help make intermittent renewable energy sources viable." The resultant spinoff company, Liquid Metal Battery Corp. has benefited from funding from the Gates Foundation.

These batteries depend on molten metal at temperatures higher than 500 C (930 F), so I was a little sceptical that large amounts of energy would be wasted in keeping the metals molten. However the authors have accounted for this in their journal publication*: "At some larger scale, the action of electric current flowing through the electrolyte could generate enough Joule heat to keep the components molten, thereby obviating the need for external heaters, as is the case with electrolytic cells producing aluminum on a commercial scale"

(*) Magnesium−Antimony Liquid Metal Battery for Stationary, Energy Storage, David J. Bradwell, Hojong Kim, Aislinn H. C. Sirk, and Donald R. Sadoway, J.Am.Chem.Soc. 2012, 134, 1895−1897.

Jobs. Jobs. Jobs.

Seth Godin, marketing guru, ex-VP at Yahoo! and author of 13 books, believes that “the current recession is a forever recession” because the industrial age has ended and this means that the days when people were able to get above average pay for average work are over. Self-improvement, continuous learning and investment on oneself are key to employment otherwise “never mind the race to the top, you'll be racing to the bottom.”

While this is useful advice for those currently employed, the pressing problem is unemployment and under-employment. The Bureau of Labor Statistics (BLS) calculates the official unemployment rate by looking at those who are employed or who have actively looked for work within the last four weeks. As a result, the official rate excludes workers who have decided to drop out of the labor market altogether. The official rate also ignores those who settle for part-time work since they are unable to find a full-time job.

Recognizing this shortcoming, the BLS also reports the U-6 rate, which includes those who have sought a job sometime in the last 12 months and those who have accepted part-time jobs but would prefer full time. The U-6 rate is a better representation of the ability of the economy to provide jobs. Let's take a look at the numbers as summarized in NCPA's Tracking the Unreported Unemployed:

• The 1948-2007 unemployment average is 5.6%.
• The unemployment rate moved from 5% in January 2008 to a high of 10.1% in October 2009, and a current rate of 8.6%.
• The U-6 rate moved from 8.8% in December 2007 to 17.4% in October 2009 and 15.6% in November 2011.
• U-6 rate is almost twice as high as the official unemployment rate. It explains the increasing pressure for economic improvement and jobs.
  
• By the end of 2011, 43% of all unemployed have been unemployed for more than 27 weeks. Besides being jobless, their skills deteriorate, which worsens their employment prospects.
  

Without doubt the unemployment challenge is serious. What causes a high unemployment rate? There are several causes. Here is a big one: The disconnect between supply and demand for jobs. There is a glut of low skill laborer supply. There is demand for high skill, specialized jobs. Unemployed carpenters. Engineers wanted.

The problem of turning 500 unemployed carpenters to 500 engineers is impossible to legislate. In general, turning thousands of low skilled workers to thousands of high skilled workers is very difficult to solve. We need to understand and address the root causes of the problem some of which have deep cultural roots such as over-emphasis in sports instead of scholarly achievement, under-performing public education systems, and stereotypes based on race and gender. Another part of the problem is government regulations and union rules. I’ll cover most of these in a series of articles.

Instead of addressing the root causes of unemployment, politicians in the recent past responded to the cries for “jobs, jobs, jobs!” in two wrong ways: (1) They approved “make work” projects for low skill and construction labor, and (2) they “incentivized” new high tech industries.

“Make work” projects is the use of taxpayer funds to develop unnecessary or low effectiveness infrastructure projects, typically show-off projects or transit projects. These provide some jobs for low skill labor but in reality the unemployment problem is postponed for a few years while the tax hole becomes bigger. “Make work” policies are unsustainable. They develop dangerous dependencies for thousands of low skill laborers instead of providing opportunities for advancement and job diversification.

The current genre of “high tech incentives” is the green industry. Incentives are typically taxpayer handouts to targeted groups, e.g., relating to solar panels and electric cars. People and industry respond to incentives. While accounting in Hawaii is poor, it is much better in the UK where the conclusion in Worth The Candle? The Economic Impact of Renewable Energy Policy the UK was that “for every job created in the UK in renewable energy, 3.7 jobs are lost.” In Hawaii, misguided policies will likely result in more solar guys than nurses per 1,000 people; and a deeper tax hole. Such outcomes are unsustainable and undesirable.

Politically expedient solutions to unemployment are both costly and ineffective. We can’t talk about solutions until we are able to wrap our brain around the issue of “jobs.” What are some of the many facets of employment and unemployment?

Unemployment varies widely by level of education. The Chronicle of Higher Education reports this: The overall unemployment rate for recent Bachelors degree recipients is 8.9%, compared with 22.9% for recent high-school graduates and 31.5% for recent high-school dropouts. It also varies by fields: Unemployment is higher among recent graduates with nontechnical fields of study, such as the arts (11.1%) and humanities and liberal arts (9.4%), but it is only 5.4% for graduates who studied health or education.

College pays off: The Los Angeles Times reports that the average take-home pay of college graduates is $38,950, compared with $21,500 for high school graduates. A college graduate's earnings would exceed a high school graduate's by more than $1 million over 40 years.

Gender makes a difference. The Economist published detailed analysis which I’ll summarize elsewhere but the bottom line of "The Cashier and The Carpenter" is that men and women do different work for different pay. For example, by working shorter paid hours, women are managing to achieve a reasonable balance in their lives. The Economist cites results that show that work-life balance dissatisfaction is about 18% for women and 27% for men in Europe.

The New York Times reports that in the two and a half years since the recovery officially began, men age 16 to 24 have gained 178,000 jobs, and women have lost 255,000 positions. “Apparently discouraged by scant openings, 412,000 young women have dropped out of the labor force entirely in the last two and a half years, meaning they are not looking for work. Young women in their late teens and early 20’s view today’s economic lull as an opportunity to upgrade their skills, their male counterparts are more likely to take whatever job they can find.” As a result, the next generation of women may have a significant advantage over their male counterparts in the near future.

The NYT article continues to say that many of the occupations expected to have the most growth, like nurses, home health aides and dental hygienists, have traditionally been filled by women. Jobs in male-dominated industries such as manufacturing and construction have been in decline. Manual labor careers can also be hard to maintain indefinitely because youthful strength eventually fades. The pension coverage of construction and manufacturing workers is also lagging which presents a challenge for males as they age.

Knowledge and understanding of the true causes of a problem are the right foundation for crafting solutions. My series of summary articles on “jobs” throws light onto the employment and unemployment challenges. Stay tuned!



1. Jobs. Jobs. Jobs. This article.

2. Jobs: Fundamental Trends – 2000 to 2050. How Did We Get Here and What’s in Store?

3. Jobs Hawaii: Outlook for Jobs in Education, Government, Military and Tourism

4. Jobs: The Young and Unskilled

5. Jobs: What Women Want

6. Top Jobs: 10 Hot Careers for 2012

7. The Right Job: Sustainable, Desirable Employment

JOBS: 10 Hot Careers for 2012

At the end of 2011 CNN-Money posted 10 hot careers for 2012 - and beyond.

Of course nobody should be surprised that IT experts, engineers and health professionals dominate the list. They have been in top-10 spots for two decades and despite the relatively high unemployment in the U.S., college enrollment in demanding technical and professional fields has been relatively stable when adjusted for population growth and GDP fluctuations. The U.S. Congress is considering expedited immigration procedures for retaining foreigners who obtain advanced degrees in the U.S., many of which are lured back to China, India and to developing members of the EU.

This list contains one big surprise for me. No mention at all of "green jobs" or "renewable energy." This is because this list is sane, as opposed to less-than-sane proposals, incentives and "renewable portfolios" setup by legislatures attentive to zealous environmentalists. The result of these as manifest by Spain and other "green energy pioneers" is the substantial squandering of public funds with minimal impact on oil dependence or advancement of the state-of-the-art (e.g., Solyndra, Spopogy, etc.)

US: Gas v. Wind -- Hawaii: Geothermal v. Wind

Matt Ridley concludes his article Gas Against Wind as follows:

To persist with a policy of pursuing subsidized renewable energy in the midst of a terrible recession, at a time when vast reserves of cheap low-carbon gas have suddenly become available is so perverse it borders on the insane. Nothing but bureaucratic inertia and vested interest can explain it.

Like the U.S. mainland has abundant gas Hawaii has abundant geothermal energy. Tapping into geothermal power can be more expensive than hydraulic fracturing or fracking for natural gas but geothermal power in Hawaii is less exhaustible than natural gas on the mainland, and once developed its use does not produce greenhouse gasses.

Like in the U.S. natural gas is in shale hundreds of miles away from big metropolitan areas, but a national grid makes electric power transmission feasible, although billions need to be spent to the existing grid if gigawatts are to be transmitted efficiently and reliably.

In Hawaii a cable to connect Oahu, Maui and the Big island may be too expensive, but there are alternatives: Hydrogen, and Ammonia (as a carrier of Hydrogen.) Hawaii can utilize abundant geothermal energy to transform into a hydrogen/electric economy for long term sustainability, instead of blowing Billions in the wind.

In addition to blowing Billions on unreliable power production, I quote from Ridley's article: The wind farm requires eight tonnes of an element called neodymium, which is produced only in Inner Mongolia, by boiling ores in acid leaving lakes of radioactive tailings so toxic no creature goes near them.

Honolulu Heavy Rail Is an Energy Black Hole

Energy and Honolulu rail is an angle that I did not have time to look at in detail, until last week when my students did some energy analysis of Honolulu’s proposed rail. They discovered this June 2008 article by Sean Hao: Rail's use of energy subject of debate in the Honolulu Advertiser.

Of note is that the rail will consume about 20 MW of energy which is about 20% of the capacity of HECO’s new palm oil plant. Unfortunately peak rail travel coincides with peak demand for electricity around 6 PM, which means that rail will stress HECO’s generators.

Now if you believe the city’s numbers which are based on incredible ridership projections and substantial bus route eliminations, Table 4-21 of the Final EIS shows that the rail project will save 2,440 million British thermal units (BTU) of energy each day, or about 610,000 million BTU per year.

Hao correctly added that: “Any evaluation of the energy savings generated by rail also needs to consider the massive amount of energy required during construction. For example, construction of the fixed guideway will require between 3.7 trillion and 4.9 trillion BTU of energy, according to Parsons Brinckerhoff.”

This quote reveals two startling facts:

First the unnamed Parsons Brinkerhoff source clearly lied to Hao by stating roughly half the correct amount of BTU. The 2008 Draft EIS, Table 4-34 on page 4-159, shows that the rail’s Airport alignment will require 7,480,000 MBTU. That’s 7.5 trillion BTU, not 3.7 trillion.

Second, by dividing 7,480,000 by 610,000 we get 12.2. That’s how many years it will take to make up the construction energy loss by the purported energy savings. But in reality these 12 years are an understatement because Hawaii's vehicle fleet is much smaller in engine size (more economical) than mainland fleet and the adoption of hybrid and electric vehicles is vastly bigger on Oahu. In addition the national averages are based on low vehicle occupancy, whereas Oahu has among the highest transit and carpooling rates, so BTU per passenger mile is way lower than mainland.

The City's BTU savings estimate may be wrong by a factor of 3 or larger, so it will take so many years for rail to "make up" its construction energy waste that before break-even is reached, rail will need multiple component replacements, repairs and refurbishments. So an energy black hole it is!

On the other hand, our 2008 simulation estimates using the DEIS traffic numbers show that rail is a net energy loser without even counting the huge energy consumption during construction. In comparison, a properly designed and operated HOT lane system will save energy (motor fuel and oil.)

Fuel Consumption for One Peak Hour (in US gallons) Change from Base of ~97,000 gallons
ALTERNATIVE	Motor Fuel	Motor Fuel plus Diesel at HECO for Rail
Rail: 6.5% traffic reduction	-2.6%	-0.3%
Rail: 3.25% traffic reduction	-0.4%	1.9%
HOT Lanes and Four Underpasses	-40.5%	-40.5%

Volt, Prius or CRV? Numbers Make the Choice Obvious.

The fully worded question is: How does the extended-range GM Volt Electric Vehicle compare with Toyota’s fourth generation hybrid Prius and Honda’s popular compact SUV the CRV?

I was not inclined to immediately dismiss the GM Volt as an expensive failure, (e.g., Chevy Volt is Automotive Version of Solyndra) and the October 2011 issue of Consumer Reports (CR) encouraged me to look into this different car.

Although CR did not award the Volt its coveted Recommended status, some of its critique is excellent for a compact car with unconventional technology:

• “Responsive steering makes the Volt feel fairly nimble in turns.”
• “The Volt was secure at its handling limits.”
• “The ride feels solid and firm yet compliant.”
• “Braking distance was very good overall.” And this one:
• “The Volt is amazingly inexpensive to run on short trips.”

The last one has twice the significance for Honolulu. Because of the compactness of the land, we make many more short trips in Honolulu than motorists in spread out mainland cities with about one million population. But our electricity cost is roughly three times higher than mainland US.

Does a Volt make a good choice? We can arrive at an answer by comparing it to two popular choices in Honolulu like the Toyota Prius and the Honda CRV. (1)

CR compared their $43,000 Volt to a $26,500 Toyota Prius and a $18,500 Hyundai Elantra. It excluded the purchase cost. Based on gasoline and kilowatt-hour costs, CR found that Volt is cheapest for 30 mile trips, is similar to hybrids for 70 mile trips, and loses its advantage as trips get longer.

To get to a better answer I used both Honolulu and US mainland prices for fuel and electricity, 30 mile and 70 mile trips, an 8 year/100,000 mile horizon (that’s when Volt's battery warranty expires), US and Hawaii tax incentives, and resale value at the end of 8 years. One component that remains uncertain in these half life-cycle cost estimations is maintenance.

In 8 years, Prius and CRV will make extensive use of their internal combustion engine. They would need about 20 oil changes and a few component replacements which should cost $1,000 to $2,000. Also both of them may require transmission repairs which are not applicable to the Volt. Both Volt and Prius have regenerative braking so they may not need brake pads before 100,000 miles but the CRV will likely need two sets of front brake pads and rotor resurfacing. Brake costs for the CRV for 8 years and 100,000 miles may come close to $1,000. Maintenance and repairs play a role in life cycle cost.

Insurance, finance charges, license, annual registration and safety inspections were not included because they are similar for all three cars for the same driver at a given location, e.g., registration and insurance rates vary widely by state. (As of this writing I am not certain that Volt is subject to Smog Test where applicable.) These costs do not affect the bottom line choice.

Discounted parking and other perks for EVs were not included. Currently EV perks in Hawaii are as follows:

• Special electric vehicle license plates.
• Free parking at State and County facilities including meters.
• Free parking at UH parking structure.
• Exemptions from high occupancy vehicle lanes.

For some users these perks may amount to more than $1,000 per year, at taxpayer expense (e.g., a stall occupied by an EV cannot be occupied by a fee-paying vehicle, so EV user gains amount X and taxpayer loses parking revenue X.)

A big unknown is the durability and replacement cost of Volt's battery. GM's warranty is for 8 years and 100,000 miles. Note that California requires 10 years/150,000 miles. As a result, Volt buyers will not receive California's $5,000 incentive. This limitation is not applicable to Hawaii.

The Prius' entire hybrid system (which includes the hybrid battery pack) is warranted for 8 years/100,000 miles. A battery replacement with a new one at a dealership costs roughly $4,000. There are lower cost options such as Re-Involt Technologies in North Carolina: “...batteries for the Prius 2001-2010 are $1675.00 plus shipping and your old battery.”

The table above details my estimates for the usage of these three cars in Honolulu using monthly gasoline prices and my own electricity bills to determine the actual bottom line cost of HECO’s price to the household. This price was then reduced by 6 cents, a discount that HECO offers if the EV is charged at home overnight. I assumed that this preferential treatment will last for the 8 year horizon in my analysis. HECO installation of a appropriate meter, purchase and installation of a 240V charger add over $2,500. There is a $750 incentive for the 240V charger.

Despite Honolulu’s expensive electricity, use of the Volt exclusively for short trips is much cheaper than its competitors. Honolulu Volt owner’s running cost comes to $595; the same cost at an average U.S. mainland city is $283.

Then I used a mix of 5 trips of 30 miles each and 2 trips of 70 miles each, per week, to arrive at my bottom line estimates. With such usage, the Volt, Prius and CRV will cost $1,150, $992 and $2,044, respectively, to run for 12,500 miles per year in Honolulu, and $698, $843 and $1,738, respectively, to run for 12,500 miles per year at an average mainland city.

Volt is the cheapest to operate on short and medium trips on the mainland, and Prius is the cheapest to operate on short and medium trips in Honolulu; about $150 cheaper than the Volt and more than $1,000 cheaper than the CRV. HECO’s high price per kilowatt-hour takes a toll on Volt.

Using Edmunds.com’s True Market Value(2), a flat documentation fee, 4.5% tax (GET in Hawaii, 8% sales tax on mainland) and applicable incentives, I arrived at the following cost estimates:

CRV has a purchase price of about $26,000 and Prius is about $29,500. Volt is $31,500 after $7,500 in federal incentives and $4,500 in Hawaii incentives have been deducted. These prices include destination charges and regional adjustments of about $750 (an add-on to car cost in Hawaii.) Due to lower state incentives and higher sales taxes, the Volt is about $3,000 more expensive on the US mainland. The other two are about the same as in Hawaii.

The bottom half of the table above is the bottom line. I arrived there by estimating today’s resale value of the three vehicles for 8 years in the future, using Edmunds.com. Both CRV and Prius have an over 10 year history on the market so their used car value is reliable. There are no estimates for the year-old Volt, so I assumed that it will have a resale value equal to the Prius.

Bottom line is that in Honolulu over 8 years and 100,000 miles the CRV will have a total cost of $33,775, the Prius will cost $27,888 and Volt comes in the middle with a total cost of $31,080. Mainland estimates are in the same order with only the CRV costing about $1,500 less than Hawaii due to the cheaper gasoline price.

With analysis like this, one can run “what if” scenarios quickly. What if average gasoline price for the next 8 years increases by a whopping 50% over the 18-month average I used? This would take Honolulu’s average gas price to $5.43 per gallon. In this case, the bottom line for the three cars will be as follows: the CRV will have a total cost of $41,963, the Prius will cost $31,861 and Volt would come in the middle at $32,589 (... plus registration, insurance, maintenance, parking and other applicable fees ... and the charger for the Volt.)

But over 75% of Oahu’s electricity comes from oil and this is not likely to change by much in the next 8 years. So if gasoline goes up by 50%, then electricity will go up by at least 30%. This increases Volt’s bottom line cost to $34,394. So even with very expensive gasoline Prius is cheaper than the Volt by $2,500.

All estimates indicate that Volt is a losing proposition to its buyer and it is certainly a losing proposition to the taxpayer because tax incentives of $12,000 are involved in the sale of every Volt in Hawaii. A Volt buyer could have gotten a much lower priced hybrid car and $12,000 of taxpayer monies could have gone to far more worthy causes. Parking incentives and the tax credit for the home charger may also add several thousand dollars of taxpayer subsidies.

Even the most extreme of “green” advocates cannot argue that the environmental benefits of each Volt over a Prius are worth $10,000 to $20,000 depending on location and taxpayer subsidized perks.

The Volt is a huge “miss” for GM, a manufacturer that could least afford a costly “miss,” and the total financial blunder from this vehicle is attributable to misguided policies (of the familiar liberal type.) Billions more will be spent on mandated EV chargers at parking lots, and on government fleet purchases of Volts.

Postcripts: (1) What about the all electric Nissan Leaf? Look for my updated coverage that will include the Leaf once reliable data become available, most likely early next year. (2) Edmunds.com is a reliable publication that I also used in my doctorate dissertation to determine car values in the late 1980s. It includes a “True Cost to Own” estimator that takes into account most of the life-cycle categories mentioned in my article. It has no estimates for Leaf and Volt.