POWER PLAYS – Subsidies and water utilities


So what does this mean for water and sewer utilities. First, we’d love to stay out of the fray. Water and sewer utilities recognize that they are the “peak” power supply for electric utilities. The means to expand power supplies is made difficult by the rules for capital recovery for power utilities that penalizes peak and redundant power supply construction. It must be used and useful to qualify for a return. Hence NextEra builds inexpensive, small increment renewable wind systems to be made whole and encourages residents to reduce demands so they do not need to build more large scale capacity. That works as long as access to renewables or increases in efficiency are available. The use of federal subsidies encourages the used of new technology but without the subsidies, expect the construction to slow.

The European Union is looking to phase out renewable power subsidies by 2017, which may have fairly significant consequences for the European renewable market. The Koch brothers and the Tea Party operatives they fund through many organizations like the Institute for Energy Research, Americans for Prosperity and the Heritage Foundation, are fighting federal tax credits for wind, while backing tax credits for oil and gas. Why do the Koch brothers keep showing up? Because as we noted in a prior blog – they stand to lose profits if the US depends less on oil and gas IT si a problem with big money interests using that money for self preservation as opposed to progression of technology and ideas.

Think what would have happened 100 years ago if big money was allowed to control progress. And I have just the perfect scenario pitting two sides of my family. My mother’s great uncle made Concord coaches. As long as horse drawn carriages and coaches were the primary transportation options, they made money. OF course many cities and towns found that they spend much of their tax money cleaning up after the horses, one of the all-time yuckiest jobs. Tons of horse poop was cleaned up nightly on the streets on many cities. Images are available on line. Of course there was also the stench, disease, vectors, etc associated with all that poop.

Then came Henry Ford. My Dad’s side of the family were Detroiters. They got jobs in the Ford factories, and made money from services to autoworkers as well. The cities loved having cars – less poop. In fact Henry’s cars worked so well, that very quickly cities didn’t have to pick up poop. And the stench and disease decreased. Of course back then, my mothers’ family did not have the same means to buy influence to prevent Henry Ford from producing cars. My uncle went broke, but America and my father’s family in Detroit, benefitted greatly as a result of the new technology. I think we all benefitted from the automobile. Thankfully the coachmakers didn’t have money.

Using politics and influence to resist new technology seems unAmerican. Using subsidies to encourage is seems far more beneficial to society as long as those subsidies actually benefit society. Subsidies have long been a means for governments to alter consumer and corporate behavior and encourage new technologies. Subsidies for recycling steel, aluminum, glass, paper and other materials remained in place until the technology was cost effective to compete with new materials. Now recovered steel is cheaper than new steel materials. The subsidies had their effect. The same is true with aluminum and glass. Subsidies in the form of grants encouraged water and sewer utilities to upgrade treatment and install pipes to serve new customers. Now those are low interest loans because most of the cost effective connections have been made. It benefitted society.

Subsides have been used for years in the US and Europe to encourage renewable power use. The result is a reduction in renewable costs as more people invested in the technology. Greater supply means lower costs (economy of scale, and, theory of economic supply and demand), and subsides are designed to reduce purchase prices sooner than the market might otherwise. Otherwise most of these industries never get off the ground because they cannot get to cost effective production levels. Stay tuned.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: